Vietnam Railways (VNR) is set to receive a government contract under the instruction of Prime Minister Pham Minh Chinh to maintain the country’s railway network for this year.

Railway worker at Hanoi Station. Photo: Pham Hung

The move is seen as an effective solution to clear hurdles in disbursing state fund for maintaining the railway network and paying salaries of over 11,000 workers of VNR.

Under the PM’s decision, the VNR would be responsible to keep  smooth operation of railway system in accordance with the law.

“The PM’s message is to create the utmost conditions for the railway sector to grow,” said VNR’s Chairman Vu Anh Minh.

Given the serious degradation of the railway infrastructure over 100 years of operation, former Deputy Minister of Transport La Ngoc Khue argued it is appropriate to hand the job of railway infrastructure development to the VNR, the state-owned operator of all railways in the country.

“Only those directly operate and supervise the system everyday can understand what should be done,” Khue said.

In April, the VNR sent a letter to the PM calling for the government support as the state firm is on the brink of bankruptcy.

According to the VNR, the railway operator was expected to receive VND2.8 trillion (US$121 million) in 2021 from state fund to repair the railway system and pay the salaries of over 11,300 workers.

But, four months on, the firm has not received the fund to cover its expenses.Under the State Budget Law, state budget recipient, in this case the Ministry of Transport (MoT), is only allowed to allocate funds for its subordinate units.

The situaiton became complicated when the VNR was transferred to the Committee for State Capital Management (CSCM) in 2019, meaning the ministry would have to disburse the capital for VNR via the Vietnam Railway Authority (VNRA).

But the main problem is that the VNRA does not have the capability to draft the estimate for the maintenance works as well as supervising the whole process.

Tip of an iceberg

While this remains an issue for the VNR, transportation expert Nguyen Xuan Thuy told Hanoitimes it is the old mindset and obsolete business approach of the railway sector that is making them dependent on state budget for operation.

“In the current market mechanism, other transportation modes by air, road and water have been transforming to enhance their competitiveness, the railway continues to stand still,” Thuy said.

“The railway sector keeps relying on state budget for operation but do not have any plan to move on in case the fund runs out,” he continued.

Sharing Thuy’s view, economist Ngo Tri Long noted it is the huge apparatus of the railway sector that is causing the problem.

“With over 11,000 workers, funds required to pay their salary is already a major issue, not to mention upgrading the infrastructure or revising business models,” Long told Hanoitimes.

“It is time for the sector to look at a comprehensive solution to revise its governance and business models, as they have to stand on their own feet,” he stressed.