North-South High-Speed Rail from Dream to Dilemma: Why Vietnam Has Become an Island in Business Negotiations

Vingroup’s series of actions before and after Christmas played out a classic tragedy of international business cooperation. On December 17, when Vietnam’s richest man Pham Nhat Vuong signed a strategic framework agreement with Siemens Germany, public opinion in Vietnam was boiling. Less than ten days later, the cooperation agreement turned to dust—on December 25, Vingroup suddenly announced the withdrawal of its investment application for the North-South high-speed rail project, causing its stock price to evaporate by $1.8 billion in a single day.

$67.3 Billion Deal Falls Short

The core issue of this project lies in the unsustainability of its financial model. Vingroup proposed a plan where the company would self-finance 20%, with the remaining 80% financed by national financial institutions through zero-interest loans over 30 years, totaling $67.3 billion. On the surface, it appeared to be a win-win cooperation between the state and the enterprise, but in reality, it was an inherently incompatible business concept.

According to internal calculations by VinSpeed, the projected average annual revenue over the next 30 years is $5.6 billion, while daily operating costs reach as high as $4.2 billion. This means that the project’s net income each year would have to be used to repay the principal of the loans, creating an unbreakable dead cycle. Without profits to support it, even the strongest national backing cannot attract genuine investors.

Siemens’ Test Waters and the Absence of Investors

Siemens’ role is worth noting. This German industrial giant, through cooperation agreements on two short-line railways, was essentially testing the feasibility of the North-South high-speed rail mega-project. Both sides had their own motives: Siemens aimed to leverage a small deal for a bigger gain, while Vingroup hoped to use the backing of an international giant to persuade the Vietnamese government to approve its aggressive financing plan.

However, the absence of investors best illustrates the problem. The U.S. investment partner Vietnam had high hopes for not only failed to attend key meetings, but also had a registered address that turned out to be fake. This is not an isolated case—previous fundraising attempts claimed “no government backing needed,” yet all ultimately withdrew. When no external investors are willing to put real money into the project, it directly reflects the lack of commercial value in the project itself.

Technical Islands and Geopolitical Dilemmas

From a technical perspective, although the “Hanoi to Guangning” short line is close to the Chinese border, it was designed according to German standards, with track gauge and signaling systems incompatible with Chinese railways. This means that even if the short line is built, it would be difficult to realize cross-border logistics synergy, ultimately turning it into an isolated island, unable to connect organically with regional transportation networks.

The combined constraints of geopolitics, logistics, finance, and technology ultimately pushed the high-speed rail project into its opposite—what should have been infrastructure to promote economic development became a symbol of disconnection due to design flaws and financial infeasibility.

Why China Did Not Enter the Market Back Then

As early as 2022, during a visit to China, Vietnam proactively mentioned the high-speed rail project, hoping that China would contribute funds, effort, and technology. From China’s perspective, initial overseas projects usually set the most favorable conditions, with companies willing to incur losses to gain long-term market access. But Vietnam seemed to misunderstand this deep logic of goodwill.

In fact, China and Vietnam had engaged in substantive negotiations on the project, but ultimately failed due to inability to reach key agreements. Looking at the outcome, China’s restraint and conservatism turned out to be the wisest decision. When Vietnam faced investor withdrawals and project stagnation, China avoided a potential huge pitfall, saving not only funds but also time and management effort.

Credit Crisis and Business Logic

Pham Nhat Vuong’s last-minute withdrawal appears to be a betrayal of a national-level project on the surface, but in essence, it is a clear recognition of business survival logic. He chose not to maintain political face but to make a responsible business judgment—this project could not sustain the enterprise.

This withdrawal has caused substantial damage to Vietnam’s national credit. When the government insisted that investment and financing methods be finalized before January with a tough tone like a military order, the main investor announced withdrawal just two days later. This stark contrast signals a huge gap between government promises and actual feasibility.

Lessons from Twenty Years of Turmoil

Vietnam’s high-speed rail plan has been entangled for twenty years. During this process, Vietnam tried to involve China, Japan, South Korea, Germany, France, and others in competition, hoping to reduce costs and improve efficiency through international bidding. But overthinking and overcomplicating ultimately led to the highest costs.

Business relies on integrity and transparency; infrastructure projects focus on long-term economic benefits. When a national-level project’s financial model is unsustainable, technical standards cannot be aligned, and financing schemes are unrecognized, even the most sophisticated diplomatic tricks cannot change the fate of failure. Vietnam’s tactics of orchestrating and requesting have long been seen through by truly capable business players.

And China did not compete for this project; instead, it became the biggest winner.