Vietnam makes back-to-back cuts to largest airport project, but budget concerns remain

By Truong Son, Thanh Nien News

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A digital rendering of the planned Long Thanh Airport in the southern province of Dong Nai, around 40 kilometers to the northeast of Ho Chi Minh City. File photo A digital rendering of the planned Long Thanh Airport in the southern province of Dong Nai, around 40 kilometers to the northeast of Ho Chi Minh City. File photo


In an unexpected move, the Vietnamese government on Thursday made another cut to the cost estimate for Long Thanh, slated to be the country's biggest airport, to around US$5.2 billion, down 33 percent from the original calculation. 
The second adjustment within only two days has been proposed to the National Assembly’s standing committee, which will continue to discuss the controversial project before legislators can make their final decision later this year. 
Construction costs were originally pegged at US$7.8 billion, then cut to $6.6 billion on Tuesday. 
Under the latest proposal, the government said it will cover 11 percent of the cost.
Loans from international partners will make up more than 26.5 percent while the rest will come from other sources, including private investors.
The first stage of Long Thanh, to be built in the southern province of Dong Nai, is scheduled to start next year.
The airport is designed to serve 38 million passengers annually at maximum when it goes into operation in 2025.
After that it will be expanded in two more stages until its capacity reaches 100 million passengers a year, after 2050.
While the budgets for the second and third stages have not been revealed, the transport ministry estimated the project’s total cost at $15.8 billion.
Ongoing concerns
The latest cut to the estimated cost has not allayed concerns among many lawmakers, who say they are still worried about how the government will fund the costly project. 
Some have warned that drawing too much from the state budget will further raise the country's debt burden. The state should only fund projects that cannot attract private investment, they say. 
And while the new cut has been welcomed, some legislators fear that actual costs may soar once construction begins, urging the government to continue reviewing its plan carefully. 
Phung Quoc Hien, chairman of the National Assembly's finance committee, said under the current plan, most of the project will be funded by the government because foreign loans will have to be repaid by the state in the end, not to mention public-private investment schemes also require capital contributions from the state. 
He feared that Long Thanh Airport will affect Vietnam’s public debt in a long term, as the country has borrowed quite a lot for other big projects.
According to official statistics, Vietnam’s public debt was equal to 60.3 percent of its gross domestic product last year, and expected to climb to 64 percent this year.
Hien quoted experts’ analysis as saying that Long Thanh is designed to become a transit hub, serving connecting flights to and from regional countries including Australia, Indonesia and the Philippines. However, he said Southeast Asian countries are quite close to one another, making this goal quite impractical. 
In the meantime, only 20 percent of its capacity is assigned for domestic passengers.
“So, will it be possible to achieve the annual capacity of 100 million passengers as expected?” the assemblyman said, casting doubt on the supposedly “urgent” role of the airport.
Although the National Assembly prioritizes transport, priorities need to be considered within the sector itself, he said.
In fact, the north-south highway is still under repair, and the country’s railway system has been operational for decades without being upgraded, according to Hien.
Problematic expansion
Not only were they concerned about the new project, but lawmakers also saw the expansion of Tan Son Nhat Airport in Ho Chi Minh City just as difficult.
As the country’s largest airport at the moment, Tan Son Nhat already reached its designed capacity of 20 million passengers a year at the end of 2013, and is expected to be replaced by Long Thanh.
While the new project has faced relentless opposition from critics who dismiss it as wasteful and say it would be better to expand the current airport, last year the Airports Corporation of Vietnam proposed to also expand the Ho Chi Minh City airport.
It said the expansion is necessary either way, because it will be years until Long Thanh becomes operational.
The country’s sole airport manager expected Tan Son Nhat to achieve its maximum capacity of 26 million passengers annually, following the expansion.
However, the National Assembly’s economic committee pointed out at Thursday's meeting that the upgrade will be too costly in comparison to the construction of Long Thanh.
It cited a government report as saying that a total fund of around $9.1 billion will be needed.
Tan Son Nhat is located within a crowded residential area, thus failing to meet regulations on flight safety once expanded, it said.
The airport is also situated near military stations that require space for accompanying equipment and services, so it is impossible to give all the space to the airport’s civil operations, according to the committee. 

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