Vietnam Railways (VNR) is continuing to work with consulting units on the merger of two Hanoi Railway Transport JSC (Haraco) and Saigon Railway Transport JSC (Saratrans) following a previous approval by the prime minister for the merger of some units.

Top transport groups speed up restructure, Illustrative photo (Source: VNA)

VNR general director Dang Sy Manh told VIR, “The merger of locomotive units and railway project management boards will be completed this year, but that of the two railway transport firms will take a longer time.”

Under the plan for restructuring VNR’s units, five locomotive units will be merged into three, while three railway project management boards will be merged into one.

The approval is expected to help VNR improve its operational efficiency. In 2021, it reported a loss after tax of $25.4 million, down from a loss of $56.5 million in 2020. Among its units, the two railway transport firms reported the biggest loss.

VNR is struggling to seek authorised agencies’ approval with its restructuring plan. The group has wanted to carry out the restructuring plan since 2017. However, postponement of the approval forced it to delay the plan to the period of 2021-2025.

Despite the recent approval, the track for the ailing group to prosperity remains steep. VNR is now still waiting for more specific approval for its proposal to hand over 297 railway stations to the giant to own, use, and develop with assets to be recorded as state capital contribution to the operator to be included.

At present, the Ministry of Transport has yet to reach a consensus with the Ministry of Justice, the Ministry of Planning and Investment, the Ministry of Finance, the Commission for the Management of State Capital at Enterprises, and VNR about some contents in the master scheme governing the management and use of railway infrastructure assets, with the handover of the railway stations being one, thus hindering VNR from making the next steps with its cooperation plans with its partners.

Meanwhile, Vietnam Expressway Corporation (VEC), which has struggled with financial sources for years, heard in June that the National Assembly had approved its investment capital restructuring plan. VEC chairman Truong Viet Dong said that there are many important expressways to be built in the next five years, but it is regrettable that VEC has not been able to join any ventures. The corporation is planning to soon solve all the problems facing the Danang-Quang Ngai and Ben Luc-Long Thanh expressway projects in order to complete them.

“VEC will increase capital to VND25 trillion ($1.08 billion) in 2022, and to VND50 trillion ($2.17 billion) by 2025. Also, the corporation will be allowed to increase capital mobilisation which triples its capital to enlarge existing expressways and join new ones,” he added.

VEC has been waiting since 2013 for the approval for the restructuring plan for five expressways. According to the plan, all the funds for the projects through official development assistance would be treated as state direct investment.

The five expressways are Cau Gie-Ninh Binh, Noi Bai-Lao Cai, Danang-Quang Ngai, Ho Chi Minh City-Long Thanh-Dau Giay, and Ben Luc-Long Thanh, which cover a total investment of over $5 billion. However, VEC’s sources of revenue are not enough for its investment return. Thus, the developer has suffered financial imbalance, while its capital mobilisation was infeasible.

VEC’s investment and construction activities have been stagnant for years. Sluggish projects include the Ben Luc-Long Thanh expressway, which has had construction suspended since 2019, and the Danang-Quang Ngai expressway, which suffers from some uncompleted works and additional issues.

In aviation, Vietnam Airlines is similarly restructuring its assets, investment portfolio, and divestment in a move to improve cash flows.

A leader of Vietnam Airlines said that although the master restructuring plan is still waiting for approval from authorised agencies, the carrier has merged some units and branches; completed the transfer of a 35 per cent stake in Cambodia’s Angkor Air; and is seeking an investor for shareholder restructuring at Pacific Airlines.

However, the master restructuring plan for 2021-2025 can only be carried out in a comprehensive manner when it gets the green light from the state – the biggest stakeholder of Vietnam Airlines, with 86.3 per cent of its chartered capital.

The airline incurred accumulative losses of over $1 billion in the past two years. By the end of 2021, Vietnam Airlines’ short-term and long-term debt reached over $2.26 billion.

According to Dr. Dang Dinh Dao, former head of the Institute for Economics and Development Studies at Hanoi National Economics University, the pandemic showed weaknesses in business performance among state-owned enterprises. The ailing railway industry is still fumbling around the current impasse and dealing with out-of-date infrastructure. Meanwhile, VEC is still trying to complete unfinished projects.

“Restructuring in the transport sector involves increasing efficiency, with a focus on reducing the number of intermediate units to save costs. Moreover, policies should be more flexible to enable them to better adapt to any changes and risks,” he noted.