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Railway network aims to turn tide against low-cost airlines, cars with improved service

The railway industry is striving to regain its past glory after decades of struggling to compete with low-cost airlines and flexible car transport.
The railway industry is planning to reduce losses and then turn a profit focusing on improving infrastructure and service quality. — Photo courtesy of VNR

Switching the focus to freight transport to cope with the decline in passenger transport since the pandemic helped Vietnam Railway Corporation (VNR) see improvements in 2022 after many years of suffering huge losses.

The neglect of investment in infrastructure coupled with poor and outdated services have made the railway lose out in the competition with low-cost airlines and flexible car transport.

VNR reported a total revenue of more than VND7.7 trillion last year, 15.8 per cent higher than the plan and 14 per cent higher than the same period last year, with the accumulated loss reduced by VND407 billion to VND130 billion. The proportion of freight transport increased to 55 per cent from 35 per cent.

However, the railway’s market share was narrowed down in the harsh competition with low-cost airlines and flexible car transport.

Before the COVID-19 pandemic, the market shares of the railway in 2019 did not reach the target set in the master plan for the railway development for 2020, with the share of passenger transport at only 0.17 and cargo at 0.24 per cent, compared to the target of 1-2 per cent and 1-3 per cent, respectively.

In 2022, when things returned to normal after the pandemic, the railway industry handled 4.52 million passengers, equivalent to 310 per cent against the same period of the previous year, but the market share fell to 0.12 per cent.

It saw a slight expansion in the share of freight transport to 0.28 per cent, handling 5.7 million tonnes of goods, equivalent to 100.8 per cent of the same period of the previous year, after moving the focus to freight transport.

According to the Vietnam Railway Authority, the railway industry could not make breakthrough developments due to the slow renovation of technology and infrastructure and failure to attract investment – a problem that persists despite undergoing five times of restructurings in the past two decades.

Statistics show the transport system comprises 282 locomotives, 4,222 freight cars and 1,030 passenger cars. However, a majority were outdated and degraded, which caused inefficiencies in operation. VNR estimated that around VND8 trillion was needed to replace expired locomotives and cars.

Casting on the construction of North-South high-speed rail and comprehensive innovation to cope with the difficulty, the upgradation of the infrastructure system, technology and equipment has become vital for the railway industry. However, State investment in the railway industry was limited while there was a lack of mechanism to call on private investment.

Under the railway network planning for the 2021-30 period, it is estimated that the railway industry would need about VND240 trillion, but the State budget could allocate just VND14 trillion for the railway infrastructure in 2021-25 period, or 5.8 per cent of the demand.

Step by step

As a result, VNR aims to reduce losses gradually and then turn a profit.

VNR General Director Dang Sy Manh said that the transportation business had not fully recovered in 2023, and the railway sector still faces high competition pressure from air and road transport in the segment of passenger transport. Cargo transport by train would also be affected by the decrease in the maritime shipping fees to pre-pandemic levels after high volatility.

VNR expected not to incur losses from its main business activities this year and achieve an on-time departure rate of 99 per cent and arrival rate of 77 per cent or higher. The corporation planned to run at a profit in the next two years, Manh said.

In addition to developing a suitable train schedule compatible with the infrastructure and vehicle capacity, VNR would also invest in improving vehicle quality and services and offering promotion programmes to compete with other means of transport.

The focus will also be on strengthening container transport, international intermodal transport and actively participating in logistics chains. As freight transport is becoming the main source of revenue for VNR, contributing 70 per cent of its revenue, the upgradation and renovation of cargo terminals were important, which had been included in the mid-term public investment plan of the 2021-26 period of the Ministry of Transport.

Besides improving services, VNR will strengthen linkages with tourism companies and localities to launch tourism products which promote passenger transportation.

Minister of Transport Nguyen Danh Huy said that the railway industry should focus on three pillars to increase competitiveness, which was infrastructure, transportation services and the railway engineering industry. 

Source: Vietnam News


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