PPP airport investment model gets its wings

CA - Private investors are still paying little attention to the government’s calling for private investment into aviation infrastructure projects, but the public private partnership (PPP) investment form will change the situation, Airis Holdings LLC chief executive Ronald Factor tells VIR’s Ngoc Linh.

As one of the world’s leading developers in aviation infrastructure, why do you think PPP is important to the development of airport infrastructure?

Actually, investments in aviation infrastructure are very costly and this is also a complicated business sector. Thus, the PPP investment form is essential to call for funds from various sources from the public, private companies and financial institutions. Developing airport infrastructure differs from 20 or even 10 years ago.

An airport should be a small economic centre, not only a place for people to travel by airplanes and to ensure the safe operations of airlines. It is an “economic machine” including other services like commerce, finance and tourism. And to operate effectively such small and complicated economic centre is out of the government’s experience.

Meanwhile there are many private companies have experience and management skills in effectively operating airports in the world. That is also a reason we need to build civil airports under the PPP form in Vietnam to have a harmonious cooperation between the government and private sector.

The Vietnamese government is planning for private investment to upgrade and build 24 civil airports in the country. However, domestic and foreign private investors have been paying little attention. Will the PPP financial legal framework help attract more attention from private investors?

Yes, of course. I have been working in aviation infrastructure sector for 25 years and I see that airport projects with the PPP model would be more attractive to private investors. The reason, as I mentioned above, aviation infrastructure projects need huge capital and the time for taking capital back is very long.

So private investors would like to have a partnership to share investment risks. I think the main reason preventing private investors from paying attention to Vietnam over the past years is the lack of a legal framework creating strong incentives and ensuring rights for investors when they invest into airport projects.

I see the Vietnamese government has been aware of that issue and is going about to approve a PPP framework. Once it is approved and applied in aviation infrastructure projects, I believe projects will be more feasible and effective to private investors.

Do you think all the airport projects in Vietnam should be implemented under the PPP investment model?

We have to study each project to give a final decision. But I think a pilot PPP project in aviation infrastructure sector is very important. Currently, the government’s legal regulations are still unclear.

A pilot project in aviation infrastructure sector would help the government to have perfect PPP regulations to share risks with private investors and to mobilise funds for the remaining projects. In general, I believe PPP is one of the best ways to call for private investors and develop new airport projects in Vietnam.

Has this kind of investment form been widely applied in aviation infrastructure projects in other countries?

Yes, PPP is a new development model in infrastructure projects and it has been applied in aviation infrastructure projects in the world. For example, India is an emerging economy in Asia. This country has a large demand of developing aviation infrastructure projects and had faced difficulties in calling for private investments.

But the country found PPP could attract private investors to airport projects and have been successful in some of projects so far. For Airis Holdings LLC, we are one of the first private companies specialised in aviation infrastructure in the United States.

Since 1984, we have applied PPP investment form in our country and then “export” this kind of investment form to aviation infrastructure projects in other countries. PPP is also implemented at airport projects in Switzerland and Colombia. Now, we expect PPP would be successfully implemented at airport projects in Vietnam.

As I understand, Airis Holdings LLC is asking the government for permission to be involved in the expansion of Noi Bai airport in Hanoi under the PPP investment form. If your company gains permission, what support do you want from the government?

Yes, we have proposed to the government we invest in Noi Bai airport under a PPP investment form. This is an important airport and a main gateway in Hanoi. The biggest the government’s support we would like the government to become our partner in this project.

So that Airis and the government could review master plan of the project to make it a modern and effective airport. We do not ask and financial support but we need support in socio works like site clearance. Being a partnership, we also want governmental supports in making business plan because we are foreigners and we could not have a deep understanding of the market like Vietnamese.