The use of foreign aids for the construction of a new major airport in souther Vietnam will raise the public debt by 0.029 percent, a transport official said Friday.
"The increase is very small," Deputy Minister of Transport Nguyen Hong Truong told a press briefing in Hanoi as he tried to ease concerns about the extent to which the airport will burden the nation's finances.
About 30 percent of the national budget is set aside for public investment and debt repayment, he noted.
The first stage of the project will unfold between 2023 and 2025 at a cost of some VND165 trillion (over $7.8 billion). The state is expected to contribute to over VND84.6 trillion toward that goal.
The rest will be raised through government bonds and ODA loans.
The first stage of the project will only involve site clearance and the construction of a main runway and parking lot which aren't suitable for private investment because, Truong explained, it won't generate any profit.
The rest of the project’s funding will come from enterprises like the Airports Corporation of Vietnam (ACV), which will draw funds from Official Development Assistance loans. The enterprises will then be responsible for repaying those loans at a later date, said ACV chairman Nguyen Nguyen Hung.
He said the ACV applied the investment model used to fund the expansion of Tan Son Nhat and the Noi Bai airports since all of the investors in those projects have managed to pay back the ODA (foreign official development assistance) loans.
Many foreign investors have expressed interest in the Long Thanh project--because it's highly feasible, investors feel confident they'll recoup their capital, Hung said.
The ACV has proposed seeking ODA from the World Bank, the Asian Development Bank and Japan, the US, France and South Korea.
A number of investors have reportedly offered a public-private partnership (PPP) including Aéroports de Paris, Samsung, South Korea's Incheon Airport and a group of Japanese corporations.
The Ministry of Transport also plans to partly privatize the ACV, which manages Vietnam’s 22 civil airports, next year to mobilize more funds for the project.
Aviation expert La Ngoc Khue sought to allay concerns about the project's funding by stressing that the Long Thanh airport will become a major regional transit point at a time when the aviation market is booming.
Furthermore, Ho Chi Minh City's centrally-located Tan Son Nhat airport is becoming increasingly overloaded, Khue said.
Vietnam will pay a huge economic price for lacking a major transit airport should the project falter, he warned.
The country's lack of international transit seaports has doubled shipping costs for Vietnamese enterprises and hampered the competitiveness of their exports.
He sought to convince lawmakers that the planned airport will also facilitate the development of Vietnam’s key economic zones and the region as a whole. “I affirm that this is a worthy investment project,” he said.
At a recent conference, International Air Transport Association CEO Tony Tyler said Vietnam still has a chance to succeed with the Long Thanh Airport, despite the presence of multiple major transit airports in the region.
Vietnam is located in the Asia Pacific region which sees up to 37 percent of international flight routes, he said.
To shut (or not to shut) Tan Son Nhat
During the press briefing, representatives from the Ministry of Transport and experts debated the wisdom of a proposal to sell off the 800-hectare Tan Son Nhat Airport to fund the construction of the Long Thanh airport some 40 kilometers (25 miles) to its northeast.
The sale would only generate around $8 billion according to an estimate an economist put forward to Tuoi Tre newspaper.
Deputy Minister Truong said the sum pales in comparison to the more than $18 billion required to build for the 3-stage Long Thanh airport.
In addition, Tan Son Nhat airport will continue to ensure effective aviation services, he said. Once it is approved by the National Assembly, Long Thanh airport will help reduce the overload at Tan Son Nhat airport.
After Long Thanh opens in 2023, shares in Tan Son Nhat could be sold to both foreign and local investors, he noted.
Long Thanh airport is expected to serve 17 million passengers by 2023, and increase its capacity to 25 million passengers in 2025.
With around 20 million passengers each year, Tan Son Nhat is currently Vietnam’s largest airport and is expected to exceed its capacity of 25 million passengers some time after 2017, said Hung of ACV.