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Vingroup to invest $4bn in Hanoi metro

Authorities turn to PPPs for capital's transport infrastructure

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Construction progresses on an elevated train station in Hanoi.   © Reuters

HO CHI MINH CITY -- Leading property developer Vingroup signed a memorandum of understanding on Sunday for part of the Hanoi metro system worth 100 trillion dong (over $4 billion).

As part of the capital's overall development plan for 2030, Hanoi has is building an integrated metro system with elevated and underground sections. Eight routes will be spread over 318km at an estimated cost of $40 billion.

In an effort to alleviate serious traffic congestion, Hanoi is particularly keen to use private-public partnerships (PPPs) for basic public infrastructure. Last year, the city administration announced plans to raise 150 trillion dong for four of the metro routes in the 2016-2020 period.

The invitation to private to speed matters up follows heavy losses incurred by state enterprises in an already stretched economy. Local and foreign capital must be found as international donors cut back support for Vietnam, where incomes have been rising steadily.

Vingroup will be the first private company to invest in a public transport system in Vietnam, where only state-owned enterprises have operated previously.

Earlier in the year, local media reported that three Vietnamese construction and real estate conglomerates -- Vingroup, and the Xuan Thanh and Lung Lo groups -- had pitched for the rail projects. Vingroup came through with a proven record on more than 10 major real estate projects in Hanoi.

Of the eight routes planned, construction has already begun on four but with slower than expected progress due to ballooning costs. The first two routes -- the Cat Lin-Ha Dong and Nhon-Hanoi Station lines -- are being funded using official development assistance and contractors from China and South Korea. The rescheduled opening dates for the two lines are 2018 and 2021 -- two and four years behind schedule respectively.

The Hanoi metro will be Vingroup's largest infrastructure investment to date. Following shareholder approval in April, the company is targeting 39% revenue growth this year to reach 80 trillion dong, with net profit down 15% to 3 trillion dong.

(Nikkei)

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