Vietnam parliament approves $8 billion rail link to China

by Alice Philipson and Lam Nguyen

Vietnam's parliament approved plans on Wednesday for an $8 billion rail link from its largest northern port city to the border with China, boosting links between the two communist-ruled countries and making trade easier.

The new rail line will run through some of Vietnam's key manufacturing hubs, home to Samsung, Foxconn, Pegatron and other global giants, many of whom rely on a regular flow of components from China.

The route will stretch 390 kilometers (240 miles) from the port city of Haiphong to the mountainous city of Lao Cai, which borders China's Yunnan province, and will also run through the capital Hanoi.

Construction of the railway was backed in a vote by 95 percent of parliamentarians in Vietnam's rubber-stamp National Assembly, an AFP journalist in the chamber said.

China will provide some funding through loans for the project, which is expected to cost more than $8 billion.

It is one of two railway lines to China that Vietnam plans as part of its "Two Corridors, One Belt" initiative, which connects to Beijing's Belt and Road global infrastructure program.

A spokesperson for China's foreign ministry said on Wednesday the two countries were "working to expedite the construction of the connection line" between Lao Cai and the Chinese border city of Hekou.

Both sides had "held multiple discussions on advancing railway connectivity", Guo Jiakun told a regular news briefing but referred reporters to "relevant authorities" for details.

The approval comes just over a year after the neighbors pledged during a visit to Vietnam by President Xi Jinping to deepen ties as Beijing sought to counter growing U.S. influence with Hanoi.

Vietnam's transport infrastructure is considered relatively weak, with a road network struggling to keep up with demand and an underdeveloped rail system.

The country is an increasingly favored destination for foreign businesses looking for an alternative to China, but low-quality infrastructure is seen as holding back surging investment.

Dan Martin, international business adviser of Dezan Shira & Associates, said the new rail link could help smooth out bumps in international supply chains caused by the current reliance on slow and costly trucks that are "prone to border bottlenecks".

"China supplies much of the raw material that fuels Vietnam's manufacturing sector, and keeping that pipeline steady is critical," he told AFP.

"A modern rail link cuts through... inefficiencies, ensuring goods move smoothly whether they're flowing into Vietnam's factories or heading to global markets via Haiphong's port," he said.

- 2030 deadline -

Vietnam says a feasibility study for the Haiphong-Lao Cai railway will begin this year and it wants the line finished by 2030, although the country has a history of overruns on major infrastructure projects.

The line, spanning nine provinces and cities, will follow roughly the route of an existing rail track built during the French colonial period.

Trains can currently run on that rail at just 50 kilometers an hour (30 mph), but Vietnam says the new line will accommodate both passenger and freight cars with speeds of up to 160 kph.

Pham Thu Hang, spokesperson for the ministry of foreign affairs, said last week the rail link would "promote economic, trade, investment and tourism cooperation between the two countries as well as in the region".

It comes just three months after Vietnam approved plans for a $67 billion high-speed railway from Hanoi to Ho Chi Minh City, another much-needed boost to infrastructure that is expected to drive growth.

That railway, which will stretch more than 1,500 kilometers (930 miles) from the capital in the north to Vietnam's business hub in the south, will reduce the current journey time by rail from 30 hours to around five.

The other line to China, which has not yet been approved by parliament, will connect Hanoi to Lang Son province, which borders China's Guangxi region, traveling through another area packed with global manufacturing facilities.

The two countries signed more than 30 agreements, including a pledge to develop rail links, during Xi's visit to Hanoi.

Vietnam has long pursued a "bamboo diplomacy" approach, striving to stay on good terms with both China and the United States.

It shares US concerns about Beijing's increasing assertiveness in the contested South China Sea but also has close economic ties with China.

© Agence France-Presse