Aviation spreads wings towards far-flung goals

Deputy Minister of Transport Nguyen Ngoc Dong told VIR’s Bich Thuy about the mechanisms to leverage private investments in the sector and plans to develop aviation logistics in the future.

Could you give an overview of international co-operation in aviation, and the scheme to open direct flights to key destinations to promote business and investment?

During 2006-2016, Vietnam’s aviation sector witnessed 15.9 per cent growth in the passenger segment and 13.1 per cent growth in the cargo segment, making it one of the three markets with the highest growth in the Asia-Pacific region.

In 2017, the country welcomed over 94 million air passengers, up 16 per cent on-year, while cargo volume rose 19 per cent to 1.34 million tonnes.

The country has signed 67 bilateral agreements and nine multilateral international treaties on air transportation with countries and territories.

Amid deepening global integration, Vietnam has completed a scheme to open direct flights to foreign countries and submitted it to the prime minister for approval. The scheme covers detailed requirements and targets for opening international air routes between Vietnam and each market.

In the scheme, 12 key markets – China, Japan, South Korea, Thailand, Malaysia, Australia, Russia, the UK, France, Germany, the US, and India – were selected as candidates for specific policies for the next five years. In addition, high-potential markets for trade, investment, and tourism co-operation like South Africa and the Middle East were named. The scheme is also among the basic steps in the country’s policies to promote the development of the tourism industry.

At present, the flag carrier Vietnam Airlines (VNA), Jetstar Pacific Airlines, Vietjet Air, and VASCO are operating 53 international air routes to 17 countries and territories, with a total fleet of 160 aircraft. More than 50 foreign airlines from 28 countries and territories are also operating 78 air routes to 21 Vietnamese airports.

More international groups are interested in projects in aviation. What are the incentive policies to encourage private investment in the sector?

The Ministry of Transport (MoT) has devised several tactics to attract domestic and foreign investment in the development of aviation infrastructure amid state budget constraints. They include the scheme to attract private investment in aviation infrastructure, especially service-related infrastructure.

At present, MoT is working with the Ministry of Finance to complete a draft decree on management and operation of aviation infrastructure assets, which will then be submitted to the government for approval.

In addition, to make the sector more attractive to foreign investors, MoT has been working with the Ministry of Planning and Investment (MPI) to amend Decree No.15/2015/ND-CP and Decree No.30/2015/ND-CP governing the public-private partnership (PPP) investment model. These amended decrees have been appraised by the Ministry of Justice and are expected to be approved by the government soon. The MPI is also preparing to build a law on PPP Investment.

Currently, the expansion project of Tan Son Nhat International Airport in Ho Chi Minh City and the $16 billion Long Thanh International Airport project in the southern province of Dong Nai are attracting great interest among international groups, including those from South Korea, Japan, China, and the US.

The Civil Aviation Administration of Vietnam has selected foreign consultants and submitted the expansion plan to the prime minister last month. When approved, MoT will call on private investment for specific parts.

For Long Thanh, the country might try to attract private investments in terminals and hangars related to service areas.

VNA and Airports Corporation of Vietnam (ACV) will divest state stake next year. What do you think about the possibilities of attracting influential international groups?

ACV will have to divest 20 per cent of its state stake in 2018 and 10.4 per cent in 2019 under the newly-issued Decision No.1232/QD-TTg. Meanwhile, VNA aims to cut its state holdings to 51 per cent of charter capital in the next three years, down from the current 86 per cent.

Foreign investors often target large-scale firms and those that have operations related to foreign firms and international markets. ACV and VNA are among their targets.

In 2016, ANA Holdings, Japan’s largest airline group, became VNA’s strategic partner with an 8.77 per cent stake buy-in. Meanwhile, the stake sales by ACV attracted great interest among multinational corporations, including France’s Groupe ADP (formerly Aéroports de Paris), Singapore’s Changi Airport International, and Japanese investors Taisei and JATCO.

Aviation has still drawn the most attention among foreign investors thanks to its huge development potential. The country’s passenger-population ratio is less than 1:1, compared to 4:1 or 5:1 in many more developed places, including Singapore, Hong Kong, and the US. Thus, there is much more room for potential investors.

Amid growing demand, what are the plans to develop the sector and aviation logistics in the future?

Despite the strong growth, the scale of the aviation sector remains small and has yet to convince many international carriers to open direct flights. In addition, only a small amount of private investments has been poured into aviation infrastructure.

Under the adjustments to aviation development planning by 2020, with a vision towards 2030, a network of modern airports will be developed.

We also aim to develop logistics service centres at Noi Bai, Danang, and Tan Son Nhat international airports by 2020, and others, such as Chu Lai and Long Thanh, by 2030.