Airport infrastructure investment needs private involvement: insiders

November 14, 2022 | 14:30
(0) user say
Public investment alone is insufficient to finance new airport infrastructure, exposing the need for more favourable policies to draw in private investment.

Nguyen Anh Dung, deputy director of the Department of Planning and Investment, Ministry of Transport (MoT), estimated total investment in airport infrastructure between 2011 and 2022 at roughly 95 trillion VND (3.8 billion USD).

Airport infrastructure investment needs private involvement: insiders
Van Don International Airport (Photo: VNA)

The investment, of which 12.5 percent came from the State budget and 87.5 percent from other sources, fell short of the actual capital needs during the period by nearly 40 percent.

"Public investment insufficient to meet the capital needs has led to the overstretching of facilities in many airports. Tan Son Nhat Airport had to serve 41 million passengers in 2019 against its capacity of 28 million," Dung said.

The deputy director revealed that some local authorities had been given the go-ahead to build new airports under Public-Private Partnership (PPP) schemes.

However, he was concerned that the PPP projects would be unappealing to investors for reasons of a long payback period (up to 50 years), unless favourable policies are put in place to support the investors.

For the 2021-2030 period, total capital needs for airport infrastructure are projected to top 403 trillion VND (16.2 billion USD). As the Airports Corporation of Vietnam (ACV) has planned to contribute 265 trillion VND and the MoT 9.8 trillion VND to the sum, about 128 trillion VND is expected to be raised from the private sector.

Le Do Muoi, head of the Transport Development and Strategy Institute, remarked that airport infrastructure worldwide is financed through eight types of schemes, of which PPP and franchising are the most recommended for Vietnam.

"Under the two schemes, either the State grants private investors the permission to fully finance, own and operate an airport, or the State owns the airfield and private investors operate the terminal, taxiway and car park," he said.

He strongly disapproved of equitisation scheme for reasons of legal conflicts and said the scheme would pose difficulties for investors.

Pham Ngoc Sau, director of Van Don International Airport, said the airport was built in two years with an investment of roughly 7.5 trillion VND, of which 735 billion VND delivered by the State Budget and 6.75 trillion VND by investors.

The director called for more favourable policies for airport operators, which, he believed, would act as an incentive for investors to put their money into airport infrastructure.

Specifically, he called for the operators to be permitted to use commercials to promote their airports and be granted more leeway in airport operations. He also called on the authorities to support new airports in staff training and through airport slot allocation.

Trinh Xuan Truong, chairman of the People's Committee of Lao Cai province, underscored PPP as the best scheme for airport infrastructure investment.

He said his province needed around 6.9 trillion VND to fund new airports, of which 2.7 trillion VND was expected to fall to the provincial budget and roughly 4 trillion VND to private investors.

"We need favourable policies to help investors recoup their investments in a shorter period of time as airports normally have long payback periods," he said.

He took Sa Pa Airport as an example, which is expected to not pay back in 46 years. He said the capital need of 4 trillion VND would be easy to raise if favourable policies are introduced.

Trinh Duc Trong, deputy director of the Infrastructure and Urban Affairs Department, Ministry of Planning and Investment, suggested different schemes for different airports.

He said ACV should fully finance the upgrade of group 1 airports. Regarding the upgrade of other types of airports, ACV could use share transfer to involve other investors in the job.

For the construction of new airports, he suggested PPP schemes to attract private investors.

New flight routes stress airport infrastructure New flight routes stress airport infrastructure

Vietnamese airlines continue to open more lines connect to tourist destinations even in the low season, but airport infrastructure needs to be upgraded to ensure flight quality.

Airport plans depend on investment Airport plans depend on investment

Vietnam’s ambitions to transform its airport infrastructure will have to deal with various challenges in attempting to attract private investment.

PPPs driving small airport investment PPPs driving small airport investment

Vietnam wants to increase investment in domestic airports and establish better infrastructure, but capital will only increase when the institutional conditions are further improved.


What the stars mean:

★ Poor ★ ★ Promising ★★★ Good ★★★★ Very good ★★★★★ Exceptional