Vietnam, ambitious in its economic pursuits, is placing another major bet on infrastructure development.
Recently, the Vietnamese government announced the launch and completion of 250 large-scale infrastructure construction projects nationwide, with total investment reaching 1.28 quadrillion Vietnamese dong (approximately $50 billion USD).
Investment represents one of the "three driving forces" of economic growth, and large-scale infrastructure investment is clearly significant for achieving high-speed growth targets. However, Vietnam's ambitions extend beyond this immediate goal. Analysis suggests that Vietnam's recent launch of massive infrastructure development marks the beginning of economic development and social modernization for the next 10 to 20 years.
However, infrastructure development in Vietnam often faces significant gaps between planning and reality, with numerous projects taking a decade or more to complete. For instance, Ho Chi Minh City's Line 1, Vietnam's first subway line, was included in planning in 2007, began construction in 2012, and took 12 years to complete. Hanoi's only operational urban light rail, the Cat Linh-Ha Dong line, also took 10 years to build. Long Thanh Airport, positioned as "Vietnam's largest airport," was announced in 2005 but remains incomplete.
Now, as Vietnam once again outlines ambitious infrastructure blueprints, Chinese enterprises are actively participating in Vietnamese railway, highway, telecommunications, and energy projects. How should these companies identify opportunities and risks?
**Transportation and Power Infrastructure Lag Behind**
On December 22 last year, Vietnam's first subway line, Ho Chi Minh City's Line 1, officially opened. However, several days earlier on Thursday (December 19, 2024), hundreds of Vietnamese people had already gathered at Saigon Metro Station, waiting for free trial rides. When trains arrived at the platform, both the platform and the entire station were packed—a moment Vietnamese people had waited 17 years for.
The anticipation for subway service stems partly from Vietnam's poor road quality. In major cities like Ho Chi Minh City and Hanoi, many travel bloggers understand the "traffic code." They point their cameras at busy streets where waves of motorbikes speed past, with traffic lights seeming merely decorative. How bloggers cross the street amid speeding traffic has become a major adventure.
According to the latest data from economic platform The Global Economy, Vietnam ranked 109th globally in road quality in 2019, placing last among ASEAN countries. While Vietnam's road density and mileage rank relatively well in Southeast Asia, most roads lack upgrades. Only 60% of national highways are paved, 70% of roads have only two-way, two-lane configurations, and potholes and uneven surfaces are commonplace.
Railway transportation faces similar challenges. Many describe riding trains in Vietnam as experiencing "a journey back to the Victorian era." Most of Vietnam's operational railways remain "meter gauge" tracks from the French colonial period. With a gauge of only 1,000 millimeters, far narrower than the international standard of 1,435 millimeters, these tracks severely limit cargo capacity and speed. These meter gauge railways average only about 50 kilometers per hour.
Beyond poor transportation experiences, Vietnam's power supply situation is less than ideal. In 2023, heat waves caused nationwide blackouts, with power shortages disrupting many companies' production. Leading manufacturers including Foxconn, Samsung, and Luxshare reportedly lost $1.4 billion during this period. Power shortages persist this year, with Vietnam implementing nationwide rolling blackouts in August.
Wang Qin, Professor at Xiamen University's School of International Relations/Institute of Southeast Asian Studies, explains that while many major foreign investment projects have landed in Vietnam in recent years, power shortages remain a significant problem, with each outage causing substantial losses to enterprises. To retain companies, Vietnam has begun purchasing electricity from neighboring Guangxi and building dedicated power plants near major manufacturers like Samsung. However, only leading large enterprises receive such special treatment, while general small and medium enterprises continue facing power shortage troubles.
**Can Infrastructure Ambitions Be Realized?**
In recent years, Vietnam has recognized its infrastructure shortcomings and is aggressively addressing these gaps.
Liang Yutian, Associate Dean of the Institute for Area and Country Studies at Sun Yat-sen University, led teams conducting extensive research in northern and southern Vietnam in 2019 and 2023. He explains that Vietnam's economic landscape is often described as "carrying two loads on a shoulder pole"—one end being northern Hanoi, the other southern Ho Chi Minh City, with these two core regions driving Vietnam's overall development. While infrastructure remains a weakness, development around these areas has been rapid in recent years. First, regarding highways, port-to-major-city roads serve as arteries supporting Vietnam's export-oriented economy. Around 2017-2018, few highways connected to ports existed, but they've gradually increased in recent years. Additionally, highways connecting major cities to surrounding industrial parks have had their basic frameworks established.
Second, regarding railways, Liang adds that Vietnam is accelerating integration with China's "Two Corridors and One Belt" initiative, planning to build multiple cross-border railways to establish overland passages. For example, the Lao Cai-Hanoi-Hai Phong railway connecting China and Vietnam aims to begin construction by year-end.
Third, regarding airports, civil aviation routes between Hanoi and Ho Chi Minh City are currently saturated, with both cities proposing second airport construction plans.
However, Vietnam still has far to go in addressing infrastructure deficiencies. The Vietnam Chamber of Commerce and Industry's (VCCI) annual Provincial Competitiveness Index (PCI) report shows that despite considerable infrastructure improvements recently, surveyed foreign investors find Vietnam lacks any infrastructure advantages when compared to other countries. In investors' eyes, Vietnam's infrastructure provides no competitive edge.
Therefore, Vietnam's decision to pin economic takeoff hopes on infrastructure development this year is understandable.
VinaCapital, Vietnam's largest foreign fund, reports that public investment spending surged 40% year-over-year in the first half of this year, primarily driven by government acceleration of major projects. The report defines public investment as a "pillar" supporting Vietnam's 2025 growth prospects. According to Vietnam's Ministry of Finance, public investment spending reached 268.1 trillion Vietnamese dong ($10.3 billion USD) by June 30, representing 32.5% of the approved 2025 budget, far exceeding last year's 28.2%.
Gao Zhendong, Secretary-General of the China-Vietnam Industrial Alliance, analyzes that Vietnam's large-scale infrastructure project launch this year primarily addresses two major challenges. First, US tariff increases have significantly impacted Vietnam's economy. Under the latest trade agreement, the US imposes 20% tariffs on Vietnam, slightly higher than the 19% rate generally applied to ASEAN countries, and dramatically increased from Vietnam's previous zero-tariff exports to the US. Second, Vietnam achieved 7.52% GDP growth in the first half, the fastest pace since 2011, but faces pressure meeting the full-year target of 8.3%-8.5% growth. Therefore, Vietnam views infrastructure as an important economic driver.
However, judging by Vietnam's past infrastructure improvement efficiency, most project construction typically spans decades. The World Bank has studied Vietnamese infrastructure projects, finding 15 projects lagged five years behind schedule, requiring twice the initially estimated investment capital. Can this series of intensively launched infrastructure projects escape similar constraints?
Current planning shows Vietnam is working to address funding shortages. Among the recently launched 250 projects, the Vietnamese government funds 129 projects with total investment of approximately 478 trillion Vietnamese dong (about $18 billion USD), while another 121 projects receive private and foreign capital support totaling approximately $30.5 billion USD. Private and foreign direct investment accounts for 63% of total investment.
Wang Qin notes that such large-scale investment severely tests government financial capacity. From announced projects, Vietnam focuses infrastructure improvements on transportation and urbanization, but these projects typically require large investments with long payback periods. In many countries, large-scale infrastructure is government-led. Vietnam's attempt to use PPP models to ease fiscal pressure raises practical questions about private capital and international investor willingness to participate.
Capital willing to enter the market may be betting on Vietnam's future. Gao Zhendong believes Vietnam's fiscal funds are extremely limited due to economic scale determining fiscal fund ceilings and Vietnam's "three plus one supplement" economic structure with numerous tax incentive policies limiting government tax revenue. Therefore, Vietnam hopes private sectors will fill infrastructure funding gaps. Market funds show some motivation to invest partly due to optimism about Vietnam's broad urbanization space and infrastructure dividends, with private capital gaining project operating rights and profit returns through equity participation.
**How Chinese Enterprises Judge Opportunities**
Late last year, Vietnam's first subway line opened in Ho Chi Minh City, built by Japan's Sumitomo consortium. However, as early as 2021, the nearly simultaneously started Hanoi light rail Cat Linh-Ha Dong line had already opened, becoming Vietnam's first completed light rail system, with China's Shenzhen Metro as the contractor.
Recently, Chinese-branded metro systems are again "exported" to Vietnam. On September 9, Guangzhou Metro Design & Research Institute Co., Ltd. announced that its led international consortium successfully signed the "Ho Chi Minh City Urban Rail Transit Binh Thanh-Thu Thiem Section Adjusted Feasibility Study Report Preparation, Front-End Engineering Design and Procurement Services Project" contract worth 175.4 billion Vietnamese dong (approximately 47 million RMB), marking the company's successful entry into the Vietnamese market.
Chinese enterprises have participated in Vietnamese bridge, highway, railway, energy, and telecommunications infrastructure projects in recent years. This May, Vietnam's Central Group and China Power Construction Corporation Vietnam announced cooperation to jointly research and develop wind power tower and steel structure factory projects in Ca Na. Vietnam's first high-standard highway also involves Chinese enterprises—the Hanoi-Hai Phong expressway with Shandong Hi-Speed Group participation received a quality excellence award from Vietnam's Ministry of Transport. The company subsequently undertook Da Nang-Quang Ngai expressway, An Duong Industrial Zone municipal road projects, and factory construction within the zone.
These projects partly reflect changing patterns in Chinese infrastructure overseas expansion. Wang Qin explains that large infrastructure projects overseas carry relatively high risks and face uncertain cost recovery, so Chinese participation in "Belt and Road Initiative" partner countries' infrastructure construction now focuses more on smaller, refined projects. Additionally, Chinese direct investment projects are more cautious, increasingly adopting contracting models for "going out," which better helps Chinese enterprises control risks.
This year, as Vietnam launches large-scale infrastructure development, how can Chinese enterprises capture spillover infrastructure dividends while guarding against underlying risks?
Many interviewed experts believe that for Chinese capital competing in Vietnam's infrastructure market, forming alliances and avoiding internal competition remains crucial. "Too many Chinese enterprises have entered Vietnam, including central state-owned enterprises, local state-owned enterprises, and numerous private companies. If everyone competes for the same targets through price reductions, this creates the least desired scenario. Therefore, Chinese enterprises participating in Vietnamese infrastructure projects should form strategic alliances to avoid internal competition," Liang Yutian states.
As the infrastructure overseas expansion track becomes increasingly crowded, turning attention to new infrastructure's "open territory" becomes increasingly urgent. However, Gao Zhendong reminds that overseas expansion now tests ability to identify new opportunities in saturated markets. "In traditional infrastructure areas like real estate and transportation, Vietnam has many large local players, so project bidding processes inevitably encounter protectionist barriers. In comparison, Chinese capital should choose sectors with certain technical advantages for entry, such as new energy, electricity, and telecommunications."