Vietnam deputy minister says Long Thanh airport to cost over $18bn

October 12, 2014 | 19:43
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It is estimated that the megaproject to build an international airport in the southern province of Dong Nai to share the overloading burden with Tan Son Nhat International Airport in Ho Chi Minh City will cost more than US$18 billion for all three phases, Vietnam’s deputy transport minister said Friday.

The money generated from selling the land plot where Tan Son Nhat – Vietnam’s largest airport – currently sits, as proposed by an economic expert, thus would not be enough to cover the enormous investment for the project, Nguyen Hong Truong told reporters in Hanoi.

Truong addressed a media meeting after Nguyen Xuan Thanh, director of the Fulbright Economics Teaching Program in Ho Chi Minh City, suggested shutting down Tan Son Nhat airport to help finance the construction of the Long Thanh terminal in Dong Nai.

The 800 hectare land plot that would be left if the airport were closed could fetch no less than $8 billion, the Harvard Kennedy School senior fellow said in an op-ed published the same day in Tuoi Tre (Youth) newspaper.

Thanh proposed that the government should consider closing down Tan Son Nhat and making use of its land plot after 2025 – three years after Long Thanh is expected to be put into use – instead of operating the two airports at the same time, as originally planned.

The Ho Chi Minh City-based newspaper questioned the deputy transport minister over the possibility that the new, costly airport investment will increase Vietnam’s public debt at a time when less than 30 percent of the state budget is earmarked for investment and debt clearance.

Truong said that the government will contribute around VND84.62 trillion ($3.98 billion), funded by government bonds and official development assistance (ODA) loans, to the total investment for the first phase of the megaproject, estimated to cost some VND164.57 trillion ($7.83 billion).

“The transport ministry has stated clearly in the report submitted to the National Assembly Standing Committee that borrowing ODA loans would only result in a 0.029 percent increase in public debt,” Truong said, underlining that it is “a low ratio.”

“The ODA loans to fund the Long Thanh airport account for only 0.1 percent out of the total such loans for other infrastructure projects,” he added.

The transport official said the Ministry of Finance, which is the National Assembly’s public debt consultancy, will develop a debt payment plan on an annual basis.

Truong said the government capital in the project will be allocated to site clearance and compensation, as well as basic infrastructure construction, including traffic systems and the airport’s taxiways and aprons.

“These construction units need to be funded by the government as we cannot call for private investment in facilities that do not make a profit,” he explained.

The transport ministry has said it is essential that Long Thanh airport, located in the eponymous district in Dong Nai, be built to ease pressure on Tan Son Nhat, which is expected to become overloaded by 2017.

Long Thanh is about 50km away from Ho Chi Minh City.

The Ho Chi Minh City terminal now handles around 20 million passengers a year.

The 5,000-hectare Long Thanh airport is forecast to receive 25 million passengers a year during its first phase, ending by 2025.

While the overloading of Tan Son Nhat could be solved by expanding the terminal, the deputy transport minister said it would cost as much as $9.1 billion to take the capacity of the airport to 50 million passengers a year.

Part of the money needed for this expansion is to compensate 500,000 people from 140,000 households that will have to relocate, Truong elaborated.

“The investment is far bigger than building a new airport,” he said, adding that Tan Son Nhat airport must be kept to serve domestic or military services.

Meanwhile, the Airports Corporation of Vietnam (ACV), one of the investors of the Long Thanh project, is upbeat about resolving the funding issue of the costly terminal.

“We will borrow ODA loans from the government, and will repay the debts by ourselves,” ACV chairman Nguyen Nguyen Hung told reporters.

Hung said the investors demand that the government earmark VND18.5 trillion ($870.75 million) for site clearance and compensation, and they will cover the remaining investment.

“We have in fact succeeded in building the Tan Son Nhat terminal and the T2 terminal at Hanoi’s Noi Bai airport through this method,” he asserted.

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