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Vietnam Railways proposes over US$202.4 million investment in modernization

Vietnam Railways has proposed an investment of over VND4.6 trillion (US$202.4 million) in order to buy new locomotives and carriages by 2020, with 70% of the total amount to be borrowed from the State-owned Vietnam Development Bank.

Vietnam Railways new wagons

According to the document sent to the Ministry of Transport, Vietnam Railways intends to gradually replace technologically backward locomotives, coaches, and wagons with modern ones by 2020 in a bid to reduce costs, improve efficiency and increase the competitiveness of rail transportation.

Specifically, Vietnam Railways will buy 100 new locomotives worth over VND2.1 trillion, 150 passenger coaches worth over VND1.6 trillion, 300 container wagons worth VND270 billion, and 500 wagons, with speeds below 60km per hour, worth VND550 billion.

Approximately 70% of the total investment (VND3.2 trillion) is proposed to be borrowed from Vietnam Development Bank, while 30% of the investment will be counterpart funded from the Vietnam Railways, Hanoi Railway and Saigon Railway.

Vietnam Railways said that it wants to receive the loan from the State-owned Vietnam Development Bank, as the interest rate for investment projects is stable and the borrowing period is lengthy, while enterprises can use assets formed from loans as collateral assets. Meanwhile, loans from commercial banks will bear higher rates in addition to a shorter borrowing period, resulting in low business efficiency, Vietnam Railways noted.

However, it is difficult for Vietnam Railways to gain access to loans from the Vietnam Development Bank as Vietnam Railways’ projects are not subject to loans from the bank.

Based on the provisions of Articles 5 and 6 of the amended Railways Law 2017, the Vietnam Railways will be provided with preferential credit from the State’s investment credit or provided with loans guaranteed by the Government. But, the Railways Law 2017 will not begin to come into force until July 1, 2018.

Therefore, Vietnam Railways has asked the Ministry of Transport to report to the Government for approval of the loans from the Vietnam Development Bank in order to timely meet the investment requirements in infrastructure development.

Vietnam Railways pledged to fully comply with the loan procedures and to perform the obligation to pay principal and interest in accordance with the terms of the loan agreement.


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