Thiên Lương wrote this article in Vietnamese and published it in Luat Khoa Magazine on July 11, 2025.
As Việt Nam embarks on building its first high-speed rail (HSR) system, the financial struggles and failures of similar projects worldwide offer important lessons and insights.
While Việt Nam has only recently moved toward implementation, many countries have operated advanced HSR systems for decades. The experiences of these early adopters provide a valuable roadmap of potential pitfalls to avoid.
A Vicious Cycle of Debt and Losses
The financial unsustainability of high-speed rail is a global phenomenon. According to the OECD, most HSR projects worldwide operate at a loss. This is supported by a World Bank study of 258 transport infrastructure projects across 20 countries, which found that nine out of ten exceeded their initial budgets and 84% had inaccurate revenue forecasts.
The study’s author, Professor Bent Flyvbjerg, noted that a mere 0.5% of all projects were completed on time, within budget, and delivered their anticipated benefits, often because governments rushed approval before conducting thorough feasibility studies.
Even the most celebrated HSR systems are not immune. Japan’s Shinkansen, the pioneer of high-speed rail, required the government to cover nearly 100% of its ¥380 billion construction cost (roughly 17 billion USD today) and had lost around 100 million USD by 1972. Similarly, China operates the world’s most extensive HSR network but faces mounting debt nearing 900 billion USD, with only 6% of its 45,000-kilometer network reportedly profitable.
More recent projects highlight specific modern challenges. Indonesia’s Jakarta–Bandung high-speed rail, a joint project with China, saw its budget balloon from 5.5 billion USD to 7.3 billion USD. Reliant on Chinese loans, the line was already reporting 200 million USD in annual losses upon opening in 2024.
In Taiwan, a 15 billion USD HSR project launched in 2007 suffered continuous losses for years, with deficits reaching 1.73 billion USD by 2014. This was largely due to fierce competition from low-cost airlines and passenger volumes falling to nearly half of projections.
These cases underscore the importance of cautious planning, realistic financial projections, and a thorough assessment of long-term viability. Failure to account for these factors can lead to HSR projects becoming unsustainable financial burdens.
Table of profitability and capital recovery time of a high-speed railway project in the world.
Lessons Unlearned at Home in Việt Nam
Việt Nam need not look abroad for cautionary tales; its own domestic urban rail projects have already suffered from the same issues plaguing high-speed rail (HSR) globally.
Both the Cát Linh–Hà Đông line in Hà Nội and Metro Line 1 in Hồ Chí Minh City have been marred by severe cost overruns, prolonged delays, and continue to operate at a loss. What is particularly concerning is that these are relatively modest urban projects, far less complex than the proposed North–South HSR system.
The Cát Linh–Hà Đông line serves as a stark case study. Contracted to a Chinese builder, its budget ballooned from an initial 552.8 million USD to 886 million USD. The construction timeline stretched to nearly 10 years (2011–2021) for a railway that runs only 13 kilometers at a top speed of 80 km/h.
Financially, the project is unsustainable. In 2024, it reported a post-tax profit of just 0.6 million USD—a mere 0.07% return on the original investment—and remains dependent on heavy government subsidies. Current estimates suggest a staggering 6:1 subsidy ratio, meaning for every 1 USD in ticket revenue, the government provides 6 USD in support.
Centuries to Break Even on Ticket Sales Alone
The financial unsustainability of the Cát Linh–Hà Đông project is apparent. Based on ticket revenue alone, the line would need 247 years to recover its 886 million USD investment. Factoring in its 2024 net profit of just 0.6 million USD, the payback period stretches to an astonishing 1,438 years. This calculation does not even account for its annual operating cost of over 24 million USD.
Despite this sobering precedent, Việt Nam is now undertaking its largest-ever public investment: the North–South High-Speed Railway. Approved by the 15th National Assembly in November 2024, with a budget of 67.34 billion USD for a 1,541 km route, the project’s projected cost has already increased by over 35 billion USD from its initial concept.
To mitigate the immense financial risk, the government is shifting its strategy. A revised Law on Railways, along with new resolutions, now allows domestic enterprises to participate as primary investors. As experts like Assoc. Prof. Trần Đình Thiên and Assoc. Prof. Bùi Quang Tuấn argue, “The mindset that only the state can build national infrastructure is outdated,” suggesting the project could catalyze the growth of Vietnamese industries.
However, this new public-private approach is already facing public anxiety, particularly over the decision to allow VinSpeed—a recently established company with a charter capital of just 230 million USD—to register for the 67.34 billion dollar project.
VinSpeed Accepts Losses, Seeks to “Serve the Nation”
VinSpeed, a key potential investor, has publicly stated it will “accept potential losses” and is participating not for land but “to serve the nation.”
The company acknowledged that 98% of global high-speed rail projects are unprofitable but did not clarify whether these expected losses would be borne by its own capital or through state-supported loans, raising concerns about the project’s financial transparency.
This lack of clarity is compounded by domestic media coverage that has largely focused on the project’s potential, leaving little room for critical discussion of its risks.
Procedurally, the project deviates sharply from international best practices. Core assessments for ridership, financial modeling, and technology sourcing have yet to be finalized.
Even more troubling is the timeline: the official feasibility study is not due until the fourth quarter of 2026, just months before the scheduled groundbreaking in December. This means companies are registering to invest in a multi-billion-dollar project before a formal feasibility report even exists.
Financially, the project’s costs are already an outlier. Prime Minister Phạm Minh Chính has explained that extensive use of elevated tracks and tunnels will push the estimated cost to around 43.6 million USD/km—more than double the World Bank’s global average of 17–21 million USD/km.
Despite all these unanswered questions, planning deficits, and alarming cost projections, irreversible actions like land clearance and resident relocation are already underway in many provinces.
A “Golden” Exception in the World of High-Speed Rail
The era of high-speed rail (HSR) began in October 1964 with Japan’s Tokaido Shinkansen, a project that laid the groundwork for a global wave of HSR development. Yet, in the decades since, only one project is widely regarded as a true financial success: the Train à Grande Vitesse (TGV) line connecting Paris and Lyon in France.
Inaugurated in 1981, the Paris-Lyon TGV was built for a then-record low of just 4 million USD per kilometer for a total length of 417 km, and was financed without direct government subsidies. This technical and commercial success was proven almost immediately. The line transported 10 million passengers in its first year, a number that quickly doubled, leading to an internal rate of return (IRR) of 12%—allowing the project to recover its initial investment in just 12 years.
This success has endured to this day. By 2023, the TGV network carried 122 million passengers and generated €9.7 billion in revenue (approx. 11.3 billion USD), solidifying its status as one of the few HSR models in the world to achieve long-term commercial viability.