Vietnam Railways proposes over VND4.6 trillion investment in modernisation

Tuesday, 2017-09-12 11:40:57
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VNR intends to replace technologically backward locomotives, coaches, and waggons with modern ones
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NDO - Vietnam Railways (VNR) 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.

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

Specifically, VNR will buy 100 new locomotives worth over VND2.1 trillion, 150 passenger coaches worth over VND1.6 trillion, 300 container waggons worth VND270 billion, and 500 waggons, 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 VNR, Hanoi Railway and Saigon Railway.

VNR 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, VNR noted.

However, it is difficult for VNR to gain access to loans from the Vietnam Development Bank as VNR's 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 VNR 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, VNR 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.

VNR 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.