Vietnam Should Heed The Risks Of High-Speed Rail Losses

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Vietnam need not look abroad for cautionary tales; its own domestic urban rail projects have already suffered from the same issues plaguing HSR globally.

Both the Cat Linh–Ha Dong line in Hanoi and Metro Line 1 in Ho Chi Minh City have been marred by severe cost overruns, prolonged delays and continue to operate at a loss.

What is particularly concerning is that these are relatively modest urban projects, far less complex than the proposed North–South HSR system.

The Cat Linh–Ha Dong line serves as a stark case study. Contracted to a Chinese builder, its budget ballooned from an initial $552.8 million to $886 million. The construction timeline stretched to nearly 10 years (2011–2021) for a railway that runs only 13 kilometers at a top speed of 80 km/h.

Financially, the project is unsustainable. In 2024, it reported a post-tax profit of just $600,000-a mere 0.07% return on the original investment-and remains dependent on heavy government subsidies.

Current estimates suggest a staggering 6:1 subsidy ratio, meaning for every $1 in ticket revenue, the government provides $6 in support.

Centuries to break even on ticket sales alone

The financial unsustainability of the Cat Linh–Ha Dong project is apparent. Based on ticket revenue alone, the line would need 247 years to recover its $886 million investment.

Factoring in its 2024 net profit of just $600,000, the payback period stretches to an astonishing 1,438 years. This calculation does not even account for its annual operating cost of over $24 million.

Despite this sobering precedent, Vietnam is now undertaking its largest-ever public investment: the North–South High-Speed Railway.

Approved by the 15th National Assembly in November 2024, with a budget of $67.34 billion for a 1,541-kilomater route, the project's projected cost has already increased by over $35 billion from its initial concept.

To mitigate the immense financial risk, the government is shifting its strategy. A revised Law on Railways, along with new resolutions, now allows domestic enterprises to participate as primary investors.

As experts like Associate Professor Tran Dinh Thien and Associate Professor Bui Quang Tuan argue,“The mindset that only the state can build national infrastructure is outdated,” suggesting the project could catalyze the growth of Vietnamese industries.

However, this new public-private approach is already facing public anxiety, particularly over the decision to allow VinSpeed-a recently established company with a charter capital of just $230 million-to register for the $67.34 billion project.

VinSpeed accepts losses, seeks to“Serve the Nation”

VinSpeed, a key potential investor, has publicly stated it will“accept potential losses” and is participating not for land but“to serve the nation.”

The company acknowledged that 98% of global high-speed rail projects are unprofitable but did not clarify whether these expected losses would be borne by its own capital or through state-supported loans, raising concerns about the project's financial transparency.

This lack of clarity has been compounded by domestic media coverage that has largely focused on the project's potential, leaving little room for critical discussion of its risks.

Procedurally, the project deviates sharply from international best practices. Core assessments for ridership, financial modeling and technology sourcing have yet to be finalized.

Even more troubling is the timeline: the official feasibility study is not due until the fourth quarter of 2026, just months before the scheduled groundbreaking in December. This means companies are registering to invest in a multi-billion-dollar project before a formal feasibility report even exists.