The Vietnamese government is planning to open up more opportunities for foreign investors in the aviation industry with an aim to improve the country’s air transportation services and meet the rapidly growing demand.
Vietnam is forecast to be the world's fifth fastest-growing aviation market by 2035
Under a draft decree, which revises Decree No.92/2016/ND-CP on aviation transport business, the investment ceiling for foreign investment in an air carriage business will be raised to 34 percent from the current 30 percent of the share capital.
The draft also proposes that there will no longer be a distinction between international and domestic-only carriers in minimum capital requirements. According to experts, the elimination of the differentiation in capital requirements between foreign and local airlines puts Vietnamese law comparable to that of Thailand, which also makes no distinction.
In addition, it also reduces the minimum capital required to establish and maintain the airliners’ operation. As proposed by the transport ministry, an airline operating up to 10 aircraft will need a minimum of VND300 billion (US$12.82 million), from 11 to 30 aircraft will need VND600 billion (US$25.64 million), and 30 aircraft and more will need VND700 billion (US$29.91 million).
Other proposed amendments will also help liberalize investment. For example, the requirement that the licensing of new airlines must be consistent with government master plans for the airline industry may be abolished. This change should reduce the steps in the application process and is one fewer regulatory hurdle.
It is also hoped that the new amendments can reduce the number of steps involved in the approval process, for example by eliminating initial pre-approval by the prime minister on an investment project. Other improvements in the draft decree may simplify processes for share transfers as only registration with authorities will be required.
The proposed amendments to Decree 92 are also geared towards encouraging private investment in airports, which are often overloaded, especially in big cities like Ho Chi Minh and Hanoi.
According to Tom Treutler from regional law firm Tilleke & Gibbins, the draft amendments show that the government is seeking to encourage more foreign investment to meet the country’s rapidly growing air transportation demand.
Besides, Minister of Transport Nguyen Van The said the new proposals are also aimed to enhance aviation services including aviation transport businesses, airports and aviation service supply.
New entrants expected
The Transport Ministry hopes the new regulations will help Vietnam meet the national aviation transport development plan till 2020 with a vision to 2030 ratified by the prime minister early this year, which makes the industry more attractive to private investors.
Under the plan, the number of aircrafts in the country will grow to more than 220 by 2020 and 400 by 2030, increasing by 70-100 compared to the previous plan. The aviation industry will also have 23 airports with a combined annual handling capacity of 144 million passengers by 2020 and 28 airports with annual traffic of 308 million passengers by 2030.
The International Air Transport Association also estimated that between now and 2020, passenger transportation in Vietnam is expected to rise by 16 percent, and from 2020 to 2030, by 8 percent. Cargo transportation will increase by around 18 percent until 2020, and 12 percent between 2020 and 2030. The growth will make Vietnam the world's fifth fastest-growing aviation market by 2035.
Under the estimates, Vietnam will need at least 10 additional new airlines to meet the growing demand. The country has so far licensed five airliners namely Vietnam Airlines, Jetstar Pacific Airlines, Vietjet, Vietnam Air Services Company (VASCO) and Bamboo Airways.