Under the newly released decree that amends articles of Decree 92/2016 on business conditions in the civil aviation sector, which takes effect on January 1, 2020, the foreign ownership ratio in aviation enterprises must not be higher than 34 percent of charter capital, or 4 percent higher than the old regulation.

The transfer of shares and domestic contributed capital to foreign investors can only be implemented after two years of licensing. The plan to sell shares to foreign investors must be approved by the Ministry of Transport (MOT).

The 'room’ for foreign investors in Vietnam’s aviation enterprises was first put into discussion when Vietnam joined the WTO in 2007 and low-cost carriers began developing strongly all over the globe.

At that time, the government released a decree allowing foreign investors to hold up to 49 percent of chartered capital in Vietnam’s aviation enterprises.

With the open regulation, a series of foreign investors rushed to join forces with Vietnamese partners to set up airlines, including AirAsia and Lion Air. Even Vinashin, a shipping line, also wanted to set up an airline.

At present, 30 percent of Jetstar Pacific’s shares are held by Qatar. More than 24 percent of Vietjet’s shares were held by foreign investors as of the end of 2018. As for Vietnam Airlines, 8.7 percent of shares are held by ANA Holdings.

Later, the government decided to reduce the maximum foreign ownership ratio from 49 percent to 30 percent in an effort to create favorable conditions for domestic enterprises to grow.

And in the latest move, the ceiling waslifted to 34 percent.

Establishing airlines just to sell shares

When drafting the decree to amend Decree 92, MOT wanted to lift the ceiling to 49 percent, saying that this would help mobilize all possible capital sources, domestic and foreign, for the development of the civil aviation sector.

Meanwhile, Vietnam Airlines, the national flag air carrier, and Jetstar Pacific wanted to maintain the 30 percent ceiling as stipulated in Decree 92.

They argued that if foreign investors hold more than 35 percent of capital, they will have the right to veto decisions to be made by the shareholders’ meeting in accordance with the Enterprise Law, thus causing difficulties for the management and operation of Vietnamese airlines.

They also warned that if foreign investors hold 49 percent of capital, investors may establish airlines on paper just to sell shares.

Therefore, the 34 percent ceiling was chosen.

At present, 30 percent of Jetstar Pacific’s shares are held by Qantas. More than 24 percent of Vietjet’s shares were held by foreign investors as of the end of 2018. As for Vietnam Airlines, 8.7 percent of shares are held by ANA Holdings.

Chi Mai 

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