Airport concessions can be a win-win affair: official

Thursday, Jul 02, 2015 08:43

Deputy Transport Minister Nguyen Hong Truong

Overcrowding and resultant wear and tear on airport infrastructure has marked strong growth of the domestic aviation industry.

Infrastructure upgrades as well as service improvements need large investments that exert great pressure on the State Budget as well as State-owned enterprises managing the airports.

Early this year, some large private firms proposed that they are given concessions to invest in airport services. The Government has accepted this in principle. Deputy Transport Minister Nguyen Hong Truong spoke to Vietnam News Agency about these issues.

Can you tell us the highlights of the plan that the transport ministry has proposed to the Government for raising funds needed to upgrade airport infrastructure in the country?

The transport ministry has submitted the plan and the Prime Minister has asked other ministries and agencies to study it. The ministry will collect the feedback and forward it to the PM as soon as possible.

Aviation infrastructure needs huge amounts of capital. However, every year, the State Budget has only been able to fund maintenance of existing infrastructure and investment in non-basic constructions.

To develop the aviation sector further, airports need investment from private enterprises as well as capital from the State budget and Official Development Assistance (ODA).

Under the proposed plan, the ministry will take several measures to attract investment from within and outside the country for aviation infrastructure development. It will also establish mechanisms that protect the interest of investors as well as State management of concessions awarded for providing various services.

Several investors have suggested that the Government offers concessions allowing private firms to provide services at airports and seaports.

For airports, this measure can allow the State to collect funds and use it to build infrastructure. The funds can also be used to invest in other airports. With the concessions, the private sector can improve the quality of services at the airports to attract more customers and recoup their investment.

This is the first time that Viet Nam is considering airport concessions. What are the standards for investors to get these concessions? And how much equity can private investors hold in an airport?

After an airport is evaluated, the ministry will invite investors to negotiate the concessions. The eligible investors will have the financial and management capability, experience as well as ability to increase investments in the services they provide.

If there are many eligible investors, the ministry will open bids to choose the best one.

Regarding the equity that private investors can have in airports, the current equitisation plan is to allow them a maximum of 51 per cent in an enterprise, while a strategic investor can own 20 per cent.

This is said to be unattractive, so the ministry will propose that the percentage of shares sold to investors depends on specific locations, with the allowed rate ranging from 51 per cent upwards. This is a new development.

For airports that are important for national security and defence, the percentage of private holdings will be kept a minimum, but this can be increased for other airports.

The ministry has proposed to the Government the percentage of concession granted to private investors be limited to a maximum of 70-75 per cent.

After granting the concessions, how will the State supervise the airports?

Under the airport concessions, the State permits private enterprises to provide specific services on air, sea and land at the airports and seaports. However, the State will still manage many key services, prices and fees, as well as entry and exit procedures.

For evaluation of assets, the transport ministry will ask the Ministry of Finance to introduce an evaluation agency. Only after this is done will the private investors be invited to join the concession process.

The State will collect its investment from the airport concession and use the capital to make other investments.

As said earlier, the concessions will create favourable conditions for private enterprises to improve the quality of services at airports. The State will also collect more taxes from these businesses. — VNS

Comments (0)