Vietnam ministry opposes higher foreign ownership of local airlines

By Quang Minh
Tue, June 11, 2024 | 3:39 pm GMT+7

Vietnam’s Planning and Investment Ministry has opposed a proposal by Bamboo Airways to increase the foreign ownership limit in domestic airlines to 49% from the current 34%.

 A Bamboo Airways aircraft. Photo courtesy of the airline.

A Bamboo Airways aircraft. Photo courtesy of the airline.

In a document sent to the prime minister early April to give its assessment of the proposal, the ministry has said that under World Trade Organization commitments, Vietnam is not obligated to open up the domestic aviation market, only to allow foreign airlines to provide services in the country through their rep offices or agents.

Therefore, Vietnam holds the right to open up the domestic aviation market as it chooses in its own interests, it said.

Decree 89/2019/ND-CP, dated November 15, 2019 caps foreign holding in a Vietnamese aviation company at 34%.

Lifting the current foreign ownership limit (FOL) will impact the possibility of Vietnamese businesses attracting foreign strategic partners for doing business, improving administration, expanding their international network and gaining a better market share, the ministry argued.

“Increasing the FOL to 49% should be carefully considered,” it said, noting that “Vietnam had once raised the limit, but reduced it to 34% later.”

“At the moment, there is no legal basis to consider Bamboo Airways’s proposal to raise the FOL in the aviation industry to 49%,” it stressed.

Meanwhile, Bamboo Airways has said that it has invited many foreign investors to invest in the carrier and found that while there is great interest in Vietnamese carriers given the local market’s huge potential, the FOL of 34% is not attractive enough.

The 34% FOL does not provide investors with sufficient voting rights, even the desirable vetoing right. “This makes investing in Vietnam’s aviation industry highly risky,” the carrier has said.

Therefore, it would be desirable to relax the FOL and increase it to 49% as previously regulated by Decree 76/2007/ND-CP, dated May 9, 2007, it has argued.

Foreign ownership of Vietnamese carriers remains low at present. As of October 2023, foreign investors held a combined 5.93% in national flag carrier Vietnam Airlines, most of it (5.62%) by Japan’s Ana Holding Inc, according to its 2023 annual report.

Meanwhile, foreign ownership in low-cost carrier Vietjet had reached 17.32% as of end-2023, with no investor holding more than 5%.

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