Vietnam’s Railway Renaissance: Unlocking New Frontiers

Vietnamese businesses have ventured into diverse sectors, including manufacturing train carriages and locomotives and installing railway equipment. (Photo: baodautu)

Vietnam’s railway industry is on the cusp of a significant transformation with the upcoming Lao Cai – Hanoi – Hai Phong railway project, valued at nearly 8.37 billion USD. The project, approved by the National Assembly, is set to commence construction in late 2025.

A Stepping Stone

“The Lao Cai – Hanoi – Hai Phong railway project opens a window of opportunity for Vietnamese enterprises to adapt and lay the groundwork for a modern railway industry,” shared a senior leader of the Vietnam Railways Corporation (VNR) after the National Assembly’s endorsement of the investment policy on February 19. This project is envisioned as a catalyst for more ambitious endeavors, including high-speed North-South and urban rail initiatives.

Preceding the approval, the government submitted Report No. 109/BC-CP, emphasizing the acquisition, transfer, and mastery of railway technology as pivotal aspects of the project’s investment policy. The Politburo has already greenlit a development plan for the entire railway sector, as outlined in Official Dispatch No. 11376-CV/VPTW in September 2024, pertaining to the high-speed North-South railway investment strategy.

The overarching goal, as per this plan, is for Vietnam’s railway industry to attain complete autonomy in construction engineering and local assembly by 2045. Additionally, there are plans for the gradual localization of vehicles and components for national and urban rail systems.

The vision extends to encompass the domestic production and localization of hardware and software for information, signaling, and power supply systems, complemented by a mastery of operation and maintenance capabilities.

In the context of the Lao Cai – Hanoi – Hai Phong railway project, the pre-feasibility study report identifies key areas for technology transfer. These encompass the procurement of machinery and equipment essential for producing locomotives and carriages for the national railway, operating below 200 km per hour. Moreover, designs for urban railway production are also within the scope of this initiative. To facilitate production and assembly technology transfer, the government intends to forge joint ventures between qualified domestic enterprises and foreign partners.

With the investment policy approval and the subsequent funding for factory development and technology transfer, the VNR will be poised to manufacture vehicles for both national and urban railways. This will pave the way for the gradual production of components and spare parts for high-speed rail, marking a significant milestone.

Pham Huu Son, General Director of the Transport Engineering Design Inc. (TEDI), the lead consultant for the pre-feasibility study report, underscored the alignment of the project’s planned 160 km/h rail technology with Vietnam’s conditions. This presents an opportunity for domestic construction and railway engineering firms to deepen their involvement and ultimately master the technology, building upon the foundation laid by the North-South high-speed railway project.

Proactive Initiatives

As of January 2025, Vietnam’s railway landscape comprises 35 domestic facilities dedicated to manufacturing, maintenance, repair, and production of locomotives, carriages, and railway equipment, as per the Vietnam Railway Authority. Despite this infrastructure, the industry faces challenges due to its underdeveloped nature, with a significant reliance on imports for equipment and components, coupled with limited production capacity constrained by outdated and fragmented technology.

Tran Thien Canh, Director of the Vietnam Railway Authority, highlighted the sector’s modest annual production value of 343 billion VND (13.7 USD million), underscoring the need for improvement in the era of Industry 4.0.

In anticipation of the Lao Cai – Hanoi – Hai Phong railway project, strategic steps have been taken to bolster technological capabilities. Notably, in February 2025, the Ministry of Industry and Trade established a drafting committee tasked with formulating a support industry plan. This plan aims to modernize railway manufacturing and foster integration with other industrial sectors.

Additionally, the VNR has proposed the formation of joint ventures between domestic and international partners, with local companies retaining controlling stakes. To ensure the success of these ventures, the VNR has recommended three special mechanisms: preferential pricing for domestic railway enterprises, designation of railway industrial products as key mechanical products, and revisions to land and asset valuation policies to enhance capital and competitiveness.

Dang Sy Manh, Chairman of the VNR’s Board of Members, emphasized the significance of these steps, stating, “We are positioning ourselves to become a key supplier of materials and components for landmark projects, including the Lao Cai – Hanoi – Hai Phong railway, the North-South high-speed railway, and urban rail systems in Vietnam’s prominent cities.”

Global Insights for Railway Development

Vietnam’s railway industry can glean valuable insights from nations that have successfully cultivated their domestic railway sectors. Countries like China, Spain, and Poland have incrementally increased localization rates through strategic joint ventures with prominent global integrators such as Kawasaki (Japan), Siemens (Germany), Alstom (France), and Bombardier (Canada).

By progressing from procurement to full system operation, domestic enterprises in these countries have honed their expertise in system design, train assembly, and the production of hardware and software integral to railway operations.

Initial government investment in infrastructure and comprehensive procurement, coupled with tax incentives, played a pivotal role in fostering industry development. The establishment of specialized research centers, equipped with cutting-edge experimental tools and software for economic, technical, and environmental analysis, has provided a robust foundation for innovation.

Lastly, ensuring infrastructure compatibility across domestic and international rail networks has catalyzed broader industrial growth, encompassing mechanics, electronics, and information technology. Vietnam’s railway industry stands to benefit from emulating these successful models as it charts its path toward modernization and self-reliance.