Public-Private Partnerships for Underground Construction in Ho Chi Minh City

[VnEconomy, August 25, 2021]

The Ho Chi Minh City Metro is planned to serve the business and financial hub of its respective city in Vietnam. Line 1 is regarded as the most important section of the project, and its construction is being prioritized. The City People’s Committee has just approved a contest titled, Design ideas for an urban underground space in Ben Thanh Station area”, to select an idea for the construction.

3D concept of Ben Thanh Central Station (Line 1) – Source: MAUR

To understand how underground space is planned in HCMC, VnEconomy spoke with an expert in transportation and planning from enCity: Mr. Pham Hoang Hai – Head of Planning & Design Department.

Q: HCMC is planning for the urban design of the underground spaces of its metro stations. How should the underground space be used to achieve optimum efficiency and to cater to the context of HCMC?

A: Our strategy for investing in underground space in metro stations is based on Land Value Capture strategies in Public–Private Partnerships (PPP). Private investors invest to build underground infrastructures then receive investment incentives in return from the city for the land around the stations.

When the metro line is operational, the real estate value increases. It is followed by a re-zoning process in the area. This leads to benefits for the investors. Another policy tool that should be considered is levying a tax on the increased value of nearby plots after the underground space comes into operation. This paid tax is to offset the initial investment costs spent by the city.

Q: It is known that the cost of underground construction is 10-20 times more expensive than on ground level. Is it economically feasible to construct underground projects?

A: In my opinion, sourcing your capital and figuring out the various investment vehicles should come before considering investment costs. It is also necessary to estimate the profit potential.

Choosing the location for the stations is a key step in the planning process. Planners should implement an efficient land use plan for chosen areas and take advantage of new development to attract investors.

Q: Connecting the underground space with nearby high-rise buildings is still an unanswered question. If we plan to do so in HCMC, will there be any difficulties?

A: The first challenge is choosing locations for stations that would be placed in previously developed zones. It will be very difficult to persuade building owners to pay extra costs for the connection between their buildings and the metro stations. This is due to them not yet realizing the potential benefits from the project. This needs to be solved during the planning process.

The second challenge is about construction progress. Currently in Vietnam, railway construction progress moves slower than the construction of its surrounding areas. Hence, co-building, co-connecting and co-operating synchronously in the same neighborhood will also face certain difficulties. In addition, Vietnam has not published detailed standards and policies for planning and designing for underground construction. This makes it more difficult to develop projects connecting metro stations to other buildings.

Q: It is not easy to develop a green system in underground spaces. From your perspective, is it necessary to have trees in those spaces?

A: People only go to underground spaces for travelling purposes. Therefore, in my opinion, having a green system is not mandatory. Trees and plants would be more useful for urban landscape design as we can see from the image below which is taken at Atocha Station (Madrid, Spain).

Atocha Station (Madrid, Spain) – Source: Interesting Engineering

Q: Building up underground spaces aims to commercialize development by taking advantage of the metro lines. So is it true that commercial efficiency comes after transportation efficiency?

A: It is important to have a well-designed transportation system connecting underground spaces and stations with other infrastructures on ground level. At the same time, planners should consider other commercial services. It is possible to make sure that people always pass by stores or kiosks in underground spaces. As I mentioned, increasing value for nearby land needs to be guaranteed and both commercial and transportation efficiencies should come at the same time.

Mr. Nguyen Ngoc An, Senior Transportation expert from enCity:

“I completely support the city’s planning for underground spaces as HCMC has embarked on a metro program in the city center, even though Vietnam does not have detailed standards for planning underground urban spaces.

Based on the implementation of successful underground developments from other countries such as Hong Kong and Singapore, there are three main factors that need to be considered during the planning and design process to promote the efficient operation of the metro line and encourage development of the surrounding areas:

  • to ensure convenient connections between the metro line and other public transport services such as bus, taxi, etc. and also nearby buildings. Then the railway service can become more attractive to citizens, increasing the number of passengers. This helps to improve the revenue and reduce subsidy costs from the government.
  • direct traffic to catalyse development for neighboring areas such as new office buildings, apartment buildings, and shopping malls connected to the stations. The connectivity between underground spaces and other construction helps to attract more users and to boost the value of those buildings.
  • generate commercial and community activities within the underground space to generate revenue from space rental and advertising. Business enterprises also benefit by having more customers who are passengers using railway services.

We believe that underground stations are not only “Transport Hubs” but also “Activity Hubs”.

Building up commercial activities and community events for the post-covid period is necessary for urban development, and transportation systems play a crucial role in the process. This contributes to the railway system’s long-term operation and reduces the burden of subsidies from the state for public transport services.”

Linh Lan (VnEconomy)