NA Economic Committee says Long Thanh Int’l airport project unfeasible

Transport Minister Dinh La Thang on behalf of the Government yesterday reported to the National Assembly (NA) the policy of building Long Thanh International Airport in the southern province of Dong Nai. However, the NA Economic Committee argued  that the project was unclear and unfeasible.

Transport Minister Dinh La Thang (black suit) talks with NA delegates about Long Thanh International Airport project

Government: Long Thanh Airport necessary

According to the report by Minister Thang, construction of the Long Thanh International Airport is necessary to create a large international transit airport in the region because it is impossible to broaden Tan Son Nhat International Airport to reach a capacity of 40-50 million passengers per year by 2025-2030.

The Long Thanh project will have three phases. Investment capital will be VND164,589 billion (US$7.84 billion) in the first phase. Of these, VND118,910 billion (US$5.66 billion) will be spent on phase 1A.

Of the total capital, VND84,624 billion will come from the state budget, VND79,965 billion from private sector and Private Public Partnership (PPP). Capital mobilization methods will include Official Development Assistance (ODA) and Build Operate Transfer (BOT) projects.

Several foreign investors have paid attention to the project and been willing to invest in items of the airport in PPP and BOT forms such as the French ADPi Group, the South Korean Samsung Group and Incheon International Airport Corporation and some Japanese groups, said Mr. Thang.

According to additional reports by the ministry, the project’s second phase will cost US$3.82 billion and increase the airport capacity to 50 million passengers and 1.5 million ton cargo a year. The third phase will require US$ 7.06 billion to raise the capacity to 100 million passengers and five million ton goods per year.

Investment capital in the three phases totals US$18.7 billion (VND397,365 billion).

The state budget will spend a total of VND24,082 billion on the project. Of these, VND20,800 billion will be for site clearance and resettlement accounting for 14.6 percent of the first phase capital.

The ministry proposed to permit the national flag carrier Vietnam Airlines to use the fund from equitization of the company and its subsidiaries for site clearance, compensation and resettlement with an expected amount of VND5 trillion in the phase 1A. Therefore, the state budget spending will approximate VND6 trillion.

The Economic Internal Rate of Return (EIRR) of the project is 22.1 percent, higher than the average rate of public works in Vietnam which swings from 10 to 12 percent. As a result, Long Thanh project is feasible, according to Mr. Thang.

On that basis, the Government proposed the NA 8th session to approve the project, he said.

NA Economic Committee: unfeasible project

After examining and verifying the report, the NA Economic Committee said that most delegates in the committee agreed with the policy of building a modern international airport to meet airway transportation demand, and ensure socioeconomic development, national defense and security.

However, some delegates proposed the Government to clarify the necessity of building  Long Thanh International Airport. Several said that if the project aims to reduce pressure for Tan Son Nhat Airport and develop the aviation industry without transit purpose, the current airport system with seven international airports can meet that demand.

The Government should estimate the ability of expanding Tan Son Nhat Airport while reducing the number of households in need of evacuation compared to the Government's project, said the committee.

The Government reported that if Tan Son Nhat Airport is enlarged, as many as 140,000 households will have to remove with a total cost of US$9.1 billion.

According to the committee, area planned for the Tan Son Nhat Airport is 1,500 hectares, which only 590 hectares have been used for civilian purposes. If using 160 hectares meant for a golf course and clearing part of the planned area, Tan Son Nhat can be enlarged to 1,000 or 1,200 hectares equivalent to the area of airports in the region. It is unnecessary to expand the airport to 1,500 hectares.

The total investment capital for the project is too large with US$18.7 billion. On the other hand, the fund for the first phase is only an estimated not accurate figure.

Use of state capital for construction of the Long Thanh Airport amidst state budget difficulties and high public debts does not ensure feasibility. Loans from international financial institutions require the Government’s guarantee. 

Concern about management, operation ability

From the angle of socioeconomic effectiveness, the Government has been optimistic about the passenger number which Long Thanh Airport can obtain, said the NA Economic Committee.

A large and modern international transit airport such as Long Thanh requires management and operation abilities, which show limitations now although domestic airports are not large in scales.

In conclusion, chairman of the Economic Committee Nguyen Van Giau proposed the Government to further clarify the necessity, urgency and construction time of the Long Thanh International Airport. They should spell out the soundness, efficiency, and feasibility on capital sources and mobilization measures.

The Government should define the state capital part in the project on the basis of balancing the total state capital for the country’s development and for transportation also. Attention ability of private and foreign investors should be made clear.

The project’s impacts on public debts, socioeconomic development, and aviation industry should be comprehensively estimated. The Government should propose specific mechanisms for the project and submit the NA for approval, he added.

By Phan Thao – Translated by Hai Mien

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