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Vietnam: Statement On The World Bank And The High-Speed Train Project

June 5, 2010

On June 5, 2010 -VN Express published an article on the World Bank’s views about Vietnam’s high-speed train project. The article was based on the press conference for the mid-term Consultative Group meeting, where two questions were asked in this connection. Because it focused on only partial aspects of the answers, the VN Express article could convey a distorted impression of what was actually said at the press conference.

The World Bank would like to confirm that at this point in time, it has not been involved in the high speed train project in Vietnam, and that it has no objections to high speed train.

As the content of the article was partially reproduced by numerous Vietnamese and international media, the World Bank prefers to put in the public domain the full transcript of the answers related to the high-speed project. It is hoped that this will help dispel possible misunderstandings, in preparation for the National Assembly debate on the project.

 Journalist from Tien Phong newspaper:

Tôi xin có một câu hỏi liên quan đến các siêu dự án, liệu các siêu dự án này sẽ làm tăng nợ công của Việt nam hay không và WB có khuyến cáo gì cho chính phủ Việt nam trong việc thực hiện những siêu dự án này. Một ý nữa liên quan đến dự án đường sắt cao tốc quốc gia bắc nam hiện đang được thảo luận tại quốc hội hiện nay… Những dự án như thế này đòi hỏi số vốn lớn và thời gian hồi vốn lâu, vậy ông có đánh giá như thế nào về việc Việt nam dự định thực hiện dự án với số vốn lớn như vậy và nguồn vay chưa được rõ ràng.

[I have a question on the implementation of mega projects, will they put a weight on the government debt, and what would be WB’s recommendations on these projects. And with regard to the north-south high speed train project that is being debated at the National Assembly .These projects require big investment and long investment recovery period, so what is your assessment on Vietnam’s intention to implement the project with such huge investment and the funding source s are not clear at this moment.]

 Martin Rama - WB Lead Economist in Hanoi

On the megaprojects, that is a more difficult question.

Let me start by ODA and high-speed trains. We don’t have anything against high-speed trains. If you look at the history of the World Bank, one of our initial borrowers was Japan, which is now an industrial country. The World Bank financed the high-speed train of Japan. That was part of World Bank lending. These days the World Bank is considering options for the high-speed train in Brazil. Now, this is not to say that the high-speed train of Vietnam is a good idea. But there is nothing in principle against it. Like for any other project, one should consider the costs and the benefits.

In the case of Vietnam, the high-speed train is part of a drive towards, as you said, megaprojects. And I think that when we were talking about “economic restructuring” that is one of the main questions that Vietnam has to meet ahead. Vietnam is thinking big, and that has advantages and has risks. Vietnam is focusing on Economic Groups, which are big entities, which could become very important players. But when you have something that is too big it also brings risks with it.

If you look at the international crisis, in a way, it started because there were financial entities which were “too big to fail”, and they played that to their advantage. So, you are bringing risk when you have big players. When you have big players they also tend to be very powerful. So, you can have something that in governance is called “state capture”: when they are so powerful that they can influence government policy. Then, the government may be at the service of groups more than at the service of the population. Countries like Korea chose the way of the large groups, the chaebols. But the East Asian crisis was in part a crisis on how to handle them.

And it is the same with big investment projects. For sure Vietnam needs a lot of infrastructure and needs big projects. But it cannot do everything and it has to choose.

I am not an expert in transport and, more generally, there is a very big uncertainty, which is very difficult for economists to handle, with big projects like this. When you build a high-speed train in Europe, you are dealing already with a developed economy. You are adding something at the margin. When you do a megaproject in Vietnam, you don’t know very well what will happen.

Think of Dung Quat. Dung Quat was conceived as a development pole. Dung Quat was not the “right” place to put the refinery. It should have been in Ba Ria - Vung Tao. It was in Dung Quat because there was a deliberate decision to create a pole of development. And these things, you never know whether they will work or not. It is very difficult to tell in advance.

The history of development economics is full of “white elephants”, of attempts to create capitals in the middle of nowhere, as they would create development in the hinterland of a country. Some of them have not led to anything. Think of Yamoussoukro, in the Ivory Coast. You have never heard about Yamoussoukro as a pole of development. That was the original idea.

Others may function well. And it is very difficult to think in the case of Vietnam, about this kind of megaprojects, what will happen. Because until you can connect to more trains, more highways and all that… you will be very far from the optimal traffic. And so, it is very difficult to tell with some certainty, that twenty years down the road this will be a good investment.

My sense is that there is room for train in Vietnam. Because it is a congested country, a densely populated country… But that doesn’t necessarily mean high-speed train and passenger train. At present, there are problems having more than 25 trains a day between Hanoi and HCMC. Taking freight out of the roads could be a good idea.

So, there may be a lot of things to do on railways. Is that high-speed trains? I am not a specialist… But I am glad to see that there is a lively debate at the National Assembly. I think that is a very good sign of how things should be decided.

Now, it doesn’t mean that if Vietnam goes ahead with the high-speed train, from today to tomorrow it will issue 56 billion dollars in debt. I don’t think that will happen. Part of what the five-year plan and the Party Congress have to decide, and MOF needs to implement, is a debt strategy. Up to which percentage of GDP should debt grow? At which point you should not borrow anymore? What kind of mixture of long-term, short-term…? What kind of mixture of currencies? And that will determine the concepts.

I was asked about the financing, but then a separate issue is the quality of investments. It becomes a very difficult question and one for which there are no easy or straightforward answers.


(question is not audible)

 Martin Rama:

Let me start by the last one, because it is easy. For the time being we are not involved in the high-speed train, in any way. Of course, we are interested. We follow with interest, like anything that concerns the development of Vietnam. But in general, we don’t have much of a working relationship with railways. We have been more involved in other areas of transport: multi-modal transport and roads.