Airport infrastructure investment needs private involvement: insiders

November 14, 2022 - 09:12
Public money alone is not enough to finance airport ungrade and new airport construction, exposing the need for more favourable policies for private involvement.


Vân Đồn International Airport was built in two years with an investment of roughly VNĐ7.5 trillion. VNA/VNS Photo

HÀ NỘI — Public investment alone is insufficient to finance new airport infrastructure, exposing the need for more favourable policies to draw in private investment.

Nguyễn Anh Dũng, 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 VNĐ95 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. Tân Sơn Nhất Airport had to serve 41 million passengers in 2019 against its capacity of 28 million," Dũng 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 VNĐ403 trillion ($16.2 billion). As the Airports Corporation of Việt Nam (ACV) has planned to contribute VNĐ265 trillion and MOT VNĐ9.8 trillion to the sum, about VNĐ128 trillion is expected to be raised from the private sector.

Lê Đỗ Mười, 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 Việt 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.

Phạm Ngọc Sáu, director of the Vân Đồn International Airport, said the airport was built in two years with an investment of roughly VNĐ7.5 trillion, of which VNĐ735 billion delivered by the State Budget and VNĐ6.75 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.

Trịnh Xuân Trường, chairman of Lào Cai Province's People's Committee, underscored PPP as the best scheme for airport infrastructure investment.

He said his province needed around VNĐ6.9 trillion to fund new airports, of which VNĐ2.7 trillion was expected to fall to the provincial budget and roughly VNĐ4 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 VNĐ4 trillion would be easy to raise if favourable policies are introduced.

Trịnh Đức Trọng, 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