Airport infrastructure investment needs private involvement: insiders

Monday, Nov 14, 2022 09:12

Van Don International Airport was built in two years with an investment of roughly VND7.5 trillion. — VNA/VNS Photo

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 VND95 trillion (US$3.8 billion).

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

"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 VND403 trillion ($16.2 billion). As the Airports Corporation of Viet Nam (ACV) has planned to contribute VND265 trillion and MOT VND9.8 trillion to the sum, about VND128 trillion 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 Viet Nam.

"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 the Van Don International Airport, said the airport was built in two years with an investment of roughly VND7.5 trillion, of which VND735 billion delivered by the State Budget and VND6.75 trillion 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 Lao Cai Province's People's Committee, underscored PPP as the best scheme for airport infrastructure investment.

He said his province needed around VND6.9 trillion to fund new airports, of which VND2.7 trillion was expected to fall to the provincial budget and roughly VND4 trillion 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 VND4 trillion 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. — VNS

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