Doing Business

PPP in aviation: Private-sector resources mobilization to invest in aviation infrastructure

Trường Lăng

July 26, 2022

Doing Business

PPP in aviation: Private-sector resources mobilization to invest in aviation infrastructure

Trường Lăng

July 26, 2022

In the next ten years, Vietnam’s aviation will require more than 17.1 billion USD in infrastructure investment. Private investors will have a plethora of investment opportunities in this industry, which has traditionally been the domain of state-owned enterprises. Private investors have the possibility to invest in three new airports through a public-private partnership (PPP).

Allow private businesses to invest in aviation infrastructure – Enhancing PPP in aviation

The Ministry of Transport (MOT) recently issued Report No. 14075/TTr – BGTVT, which was submitted to the Prime Minister for approval of the Project “Orientation to mobilize social capital for investment in aviation infrastructure”.

The Airports Corporation of Vietnam (ACV), which is said to be exclusively exploiting the airport infrastructure investment sector, is also divesting capital in several projects. According to a report by ACV, the Covid-19 epidemic has drastically reduced ACV’s predicted revenue and profit in the 2020-2025 period. With a nearly 50% shortfall in resources, ACV only prioritizes resources for Long Thanh airport phase I and airports that have been investing in, such as Tan Son Nhat, Noi Bai, Phu Bai, and Dien Bien.

This project is attracting a tremendous amount of attention from domestic and foreign investors because the scale of investment capital in the priority list of aviation infrastructure within ten years amounted to VND 479,606 billion. Also, it is an opportunity to invest in passenger and cargo terminals with very high profitability through public-private partnerships (PPP).

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Furthermore, the state management agencies in charge of transportation recommended categorizing 28 airports in the national airport planning for 2021- 2030 into five groups to serve as the foundation for mobilizing social capital for investment.

Group 1 has six international airports, and the expected operating capacity by 2030 is more than 25 million passengers per year, including airports: Noi Bai, Da Nang, Tan Son Nhat, Cam Ranh, Phu Quoc, and Long Thanh (under construction).

Group 2 includes airports with military activities, regular military training, assets, and land in airfields managed by the Ministry of Defense, such as Tho Xuan, Chu Lai, Phu Cat, and Tuy Hoa airports.

Group 3 includes airports in remote, mountainous, and island areas, with a planned capacity of fewer than 5 million passengers per year by 2030. Those are the airports: Dien Bien, Na San, Dong Hoi, Pleiku, Buon Ma Thuot, Rach Gia, Ca Mau and Con Dao.

Group 4 includes airports with potential for development, capable of attracting investors, without regular military activities, and a planned capacity of more than 5 million passengers/year by 2030, including airports: Cat Bi, Vinh, Phu Bai, Lien Khuong, Can Tho.

Group 5 includes new airports such as Sa Pa, Quang Tri, Lai Chau, and potential airports such as Cao Bang, Hai Phong (Tien Lang).

The classification of airports into five sections will make it easier for investors to select appropriate segments to participate in.

The case of raising PPP capital for Na San Airport after ACV withdrew

Son La Provincial People’s Committee sent an official dispatch in mid-March 2022, requesting the Prime Minister and the Ministry of Transport to approve the investment policy of the Na San Airport Project in the form of PPP, worth approximately 85.6 million USD. Currently, socialization of investment is the only option for Son La province to start the Na San Airport project early.

According to the Son La People’s Committee, Na San Airport is an essential part of the Northwest region’s primary airport network and the main airport in the national military airport network. Furthermore, this airport has been regarded as a critical driving force project that will significantly foster the province’s socio-economic growth. 

“To ensure feasibility, the People’s Committee will allocate approximately 12.8 million USD from the local budget to promote investment attraction and accelerate project implementation,” affirmed Mr. Hoang Quoc Khanh, Chairman of the Son La People’s Committee.

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Photo by the Airports Corporation of Vietnam

In July 2019, the Airports Corporation of Vietnam (ACV) submitted a study report for the Na San – Son La Airport Construction Project to the regulatory authorities for approval. With an estimated total investment of 98.3 million USD, this project will be entirely funded by ACV using corporate resources and will be implemented between 2020 and 2025.

However, by March 2022, ACV had reported to the Ministry of Transport on the review and possibilities of distributing development investment resources for airports managed by ACV for 2021-2025. In particular, for the Na San Airport Construction Project, due to the decline in profit caused by the Covid-19 pandemic, ACV has not yet planned to invest during this period and proposes to the MOT to offer and call for appropriate investment according to regulations.

Conclusion

Currently, PPP in aviation is an appropriate form of investment for accelerating the construction of critical airport projects. Private investors will also have various investment opportunities in the airport infrastructure sector, which state-owned enterprises have dominated. Some typical projects include Na San airport (Son La), Dong Hoi airport (Quang Binh), Quang Tri airport, etc.

If you are looking to invest in Vietnam airport infrastructure through a public-private partnership, contact Viettonkin for the most up-to-date and reliable information. Viettonkin and our team of specialists have over 12 years of expertise in the sectors of investment and business consulting. Contact us now.

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