Vietnam’s Vingroup to withdraw bid for US$67 billion North-South high-speed railway

[HANOI] Vietnam’s largest conglomerate, Vingroup, said on Thursday (Dec 25) that it would withdraw its investment proposal for the nation’s US$67-billion North-South high-speed railway project to concentrate on its other projects.

The decision on the registration, which was submitted in May, followed a reassessment of resources after Vingroup was awarded major national projects, including an Olympic-standard stadium and rail lines connecting key locations, the company said in a statement.

Shares of Vingroup and its units, including developers Vinhomes and Vincom Retail, fell 7 per cent and hospitality firm Vinpearl was down 3 per cent after the announcement, dragging the benchmark index down 2.24 per cent.

In May, Vinspeed, a subsidiary founded by Vingroup chairman Pham Nhat Vuong, proposed the bid for the 1,540-km railway linking Hanoi and Ho Chi Minh City, promising to self-fund 20 per cent of the project while seeking an 80 per cent state-funded loan at zero interest over 35 years.

However, the central bank expressed concerns over Vingroup’s high leverage and lack of experience in rail infrastructure, warning that the loan request and required guarantees could pose risks to banking stability. A May 19 opinion reviewed by Reuters indicated the proposal would need “special state guarantees”.

The finance ministry also flagged the proposal’s zero-interest terms and 30-year debt repayment schedule, servicing only at maturity, as equivalent to a state subsidy that could impact Vietnam’s credit ratings.

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In addition to Vingroup, investors including auto industry company Thaco, Vietnam Railways and Vietnam Investment and Development Group have shown interest in the high-speed rail project.

Vingroup said its withdrawal would not impede the project’s progress and would allow the company to focus on delivering other large-scale initiatives.

The government has said the winner of the North-South railway will be announced in January. REUTERS