Foreign investment in Vietnam’s aviation sector is considered one of the most attractive options in recent times. With rapid economic development and a favorable geographical location, Vietnam is becoming one of the destinations for foreign investors in this field. In addition, the development of the e-commerce and information technology industries is also changing the way airlines operate in Vietnam, creating many opportunities for international investors who want to participate and enter this market. So, what benefits and challenges will foreign investment in the aviation sector in Vietnam bring to investors? Let’s find out in this article.
Investment activities in which foreign investors can invest
- For airport business (CPC 7461), river port and seaport
WTO, FTA: Not specified in the schedule of commitments
The Vietnam – Japan BIT: This BIT allows for Japanese investors to invest in the form of a joint venture to operate river ports, seaports, and airports.
Vietnamese law: in Article 8 of Decree 89/2019/ND-CP stipulates that foreign-invested air transport enterprises must satisfy the following conditions: Foreign investors account for no more than 34% authorized capital; there must be at least one Vietnamese individual or one Vietnamese legal entity holding the largest share of charter capital; in case a Vietnamese legal entity has foreign investment capital contributing capital, the foreign capital contribution shall not exceed 49% of the legal entity’s charter capital.
- For aviation service business
Appendix 8-B of Vietnam’s Schedule of Specific Commitments in WTO provides for transport services that foreign investors can perform, including:
Sales & marketing services of aviation products: The commercial presence of a foreign enterprise authorized to provide services in Vietnam through its ticket office or agent in Vietnam.
For booking and reservation services on computers: Investors are free to provide cross-border services, except for foreign service providers who are required to use public telecommunications network services managed by the foreign telecommunications authority in Vietnam.
Aircraft maintenance and repair services: Foreign investors are allowed to have commercial presence by allowing the establishment of joint ventures with foreign capital contribution not exceeding 51%. After 05 years from the date of accession, foreign investors are allowed to establish 100% foreign-invested enterprises.
Benefits of investing in Vietnam’s aviation industry
Investing in Vietnam’s aviation sector is a potential and profitable opportunity for foreign investors. This sector is growing strongly and with an emphasis on upgrading infrastructure, the large public investment in this field also helps to significantly enhance the capacity of Vietnam’s aviation industry. In addition, the interests of the homeowner investment when making investments in certain fields in Vietnam’s aviation industry, including:
Growth potential: Vietnam’s airports have high growth potential, due to the increasing demand for domestic and international freight and customers.
Prime geographical location: With the central position of Southeast Asia and the diversity of manufacturing industries, Vietnam has become the most important place in terms of freight and this type is growing rapidly in Vietnam.
Investment policies: Investment incentives policies from the Vietnamese government can also make it easier for foreign investors to invest in the airport sector. According to Decree 89/2019/ND-CP, foreign-invested air transport enterprises must meet three conditions, including: foreign investors account for no more than 34% of charter capital, the domestic shareholder must hold the largest share of charter capital and if the domestic shareholder is a legal entity with foreign capital, such capital shall account for not more than 49% of the legal entity’s charter capital. Decree 92/2016 sets the foreign ownership ceiling in aviation enterprises at 30%. Compared to the previous regulations, the limit of the “foreign room” is increased by 4%, but the role of domestic shareholders will be subject to clearer constraints.
Market competition: With many well-known airline brands operating domestically and internationally, Vietnam’s airports will have a competitive advantage in terms of prices and quality services, attracting many customers and businesses use the service.
Limitations when foreign investors invest in the aviation sector in Vietnam
Although the aviation industry in Vietnam is developing and attracting the attention of many foreign investors, there are still many limitations in the investment process. The following are the main limitations when foreign investors invest in this sector in Vietnam:
Procedures and legalities: The regulations and laws on aviation in Vietnam are still incomplete, and the investment implementation processes are still quite confusing. This makes the investment of foreign investors face many difficulties such as facing many complicated procedures or problems related to legal regulations.
Competition: In the aviation field, there is fierce competition from domestic and international competitors. This competition brings many challenges and pressures to foreign investors as well as businesses operating in the aviation industry in Vietnam.
Underdeveloped infrastructure: Vietnam’s air transport infrastructure is still quite poor. Currently, most airports in Vietnam are under pressure of overload and most airports are still weak in terms of infrastructure to serve passengers and goods.
Difficulty in recruiting: This fiel requires highly qualified human resources and high-quality professional skills. However, currently, the aviation industry in Vietnam still faces a limited number of workers, especially for important positions such as pilots, technicians, etc. This will make it difficult for investors to invest and recruit highly technical human resources in this field.
Prospects and visions of investment in Vietnam’s aviation sector
Although investing in Vietnam’s aviation sector requires the investment and efforts of foreign investors to face challenges, the vision and prospects of this sector in general and Vietnam in particular still very attractive. With the growing economic situation, public investment in the aviation sector, the diversification of services and the increasing quality of aviation services, the aviation sector in Vietnam will continue to develop, attracting many foreign investors invest in Vietnam, creating motivation and bringing many opportunities for economic development to the country.
In summary, although the aviation industry in Vietnam is developing and has potential, there are still many limitations when foreign investors invest in this field. However, the Vietnamese government’s reasonable investment policies will promote and actively contribute to the development of Vietnam’s aviation industry in the future, attracting foreign investors to participate.
HMLF is proud to be a law firm operating in many fields, of which aviation investment is one of our core areas of activity. With a team of professional, dedicated and experienced legal experts in the field of aviation investment, HMLF is confident to help business solve legal problems in the investment field.
Harley Miller Law Firm “HMLF”
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