PPP model found suitable for small airports in remote areas

After years of waiting for a green light to develop an airport, Nguyen Trong Hai, Deputy Chairman of Lao Cai People’s Committee, feels at ease as the authorities are going to select a capable investor in November.

The Sapa project costing VND7 trillion ($304.35 million) is the second airport project in Vietnam to get the government’s approval under the public-private partnership (PPP) format, after Van Don International Airport in the northern province of Quang Ninh.

VIR’s roundtable emphasised the importance of the government’s decisions in small airport development

Hai said at VIR’s roundtable on airport development on October 11 that the project is expected to make a big breakthrough in transport development in the province and northern midland and mountainous regions. It will also be a driving force for socioeconomic development, tourism, investment attraction, and job creation.

He added that along with the airport, the province has been preparing for the development of transport infrastructure connecting the airport to other local developing areas like Sapa, Y Ty, Bac Ha, and border gate areas to create favourable conditions for investment attraction.

“We have also built development planning along the Red River Delta. And the surroundings of the airport will be an urban area, trade centre, service area, and logistics services among others to facilitate economic growth,” Hai said.

Before Sapa, Van Don International Airport developed by Sun Group is considered as a successful example of PPP venture in the aviation sector.

This airport is evidence of how efficient a privately-invested project is with shorter development time and operational efficiency, and creates a premise for other private investors and localities to do the same.

According to Nguyen Van Vinh, deputy director of the Vietnam Institute for Development Strategies under the Ministry of Planning and Investment, air transport is one of the modes of transport witnessing the strongest development in recent decades. “This has resulted in strong development of aviation infrastructure and the need for airports in cities and provinces which bet on new opportunities from the facility,” Vinh said.

Together with Sapa, the government has approved in principle the building of Quang Tri Airport in the central province of Quang Tri as a PPP project.

And an expansion at Can Tho seems to have been added to the plan. However, Bac Giang, Ninh Binh, Binh Phuoc, and Ha Tinh provinces have had new airport proposals rejected.

Concerns related to the funding of the development costs, market demand, population, and distance have been raised because it can be substantial amid state budget constraints. Experts, including Tran Dinh Thien, former head of the Vietnam Institute of Economics, and Phan Duc Hieu, standing member of the National Assembly Economic Committee, at the roundtable agreed that it is necessary to build airports in cities and provinces to meet their development demands.

Many countries in the world successfully developed their small airports. For example, Alicante and Murcia in Spain are located in close proximity but both serve separate markets and have different functions.

In Columbia, three airports are in proximity but have rather long driving times that separate their markets. Meanwhile, in the Netherlands, multiple airports in a metropolitan area are competing but each has a function in the market.

Other ventures also recognise the contribution of the private sector in airport development and operations through the PPP model.

This takes a lot of the cost burden away from local authorities and puts it into the hands of the private sector, which is usually better equipped to ensure the efficiency of construction and the commercialisation of different services. This, in turn, reduces costs and maximises investment return over a shorter period.