Paving the Way for Private Capital in Aviation
Vietnam’s Government Standing Committee has embarked on a pivotal legal reform, reviewing draft amendments to the Law on Civil Aviation that are poised to create significant opportunities for private investment in the nation’s aviation sector. These proposed changes are a direct response to existing limitations that have previously discouraged private participation, and the new framework is designed to address those barriers head-on. The core of the new legislation is a strategic shift in approach, aiming to mobilize investment from all economic sectors for developing crucial aviation infrastructure. This includes a provision that the state will now focus its limited budget only on projects that are not commercially attractive to the private sector, while also working to simplify the administrative procedures that have historically been a source of frustration for potential investors. Legal experts have widely hailed these amendments as a positive and timely development for the business community and the broader market, as the current law was last amended over a decade ago and was in dire need of modernization to adapt to the country’s modern socioeconomic needs.
Addressing the Hurdles to Public-Private Partnerships
Despite the positive regulatory momentum, attracting and securing private capital for aviation projects remains a significant challenge, one that has not been fully overcome by the public-private partnership (PPP) model. While the PPP model for airports has consistently generated considerable private sector interest, previous barriers have stalled successful implementation. A clear example of this is the fact that over seven years after the successful completion of Van Don International Airport, the country’s first PPP airport, no other similar projects have been brought to completion. Several high-profile proposals have stalled, and ongoing projects like Sapa Airport and Phan Thiet Airport have been hit with significant delays or even contract terminations. Experts emphasize that the key to success and building investor confidence lies in implementing a consistent and clear legal framework, demonstrating a strong political determination to see projects through, and continuously improving the state sector’s capacity to participate effectively and efficiently in complex PPP initiatives.
Recommendations for Attracting Critical Investment
To overcome these enduring hurdles and meet the nation’s ambitious infrastructure goals, experts suggest that the government must take a proactive role in making aviation projects more financially appealing to private capital. This could be achieved by offering more attractive financial incentives designed to mitigate investor risk. Measures such as tax exemptions, preferential financial programs, and creative revenue-sharing models could significantly increase the appeal of aviation infrastructure projects. Additionally, the government should consider a crucial policy change by raising the foreign ownership cap in these projects to 49 percent, a move that would bring Vietnam’s regulations in line with those of its key regional competitors, such as Thailand and Indonesia. These changes are essential for attracting the substantial private capital needed to meet the country’s ambitious goal of raising total airport capacity to 275.9 million passengers by 2030, a target that the state budget simply cannot fully fund on its own.
