Why Vietnam struggles to attract private aviation investment
Vietnam’s aviation sector has grown rapidly, but its airport infrastructure struggles to keep up with rising demand, posing challenges for expansion and efficiency, writes Dr Chu Thanh Tuan, associate program manager of the Undergraduate Business Program at RMIT Vietnam.

Dr Chu Thanh Tuan, associate program manager of the Undergraduate Business Program at RMIT Vietnam. Photo courtesy of RMIT.
The need for airport expansion and upgrades has become urgent to ensure passenger capacity, boost trade, and support economic development in Vietnam.
The government aims to expand airport capacity to 275.9 million passengers by 2030, but with public funds covering only 65.8% of the needed capital, attracting private investment remains a challenge. While models like Van Don Airport, developed by Sun Group, show promise, most projects lack private sector participation.
Despite the government’s push for aviation privatisation, key barriers still deter investors. Attracting private investment isn’t just about capital. It’s about ensuring a secure and sustainable environment for investors.

Vietnam's aviation infrastructure demands huge capital with a long payback period, making it less attractive to private investors. Photo courtesy of the government's news portal.
A rapidly growing aviation sector lacking investment
Vietnam’s aviation boom is evident in its steadily rising passenger numbers. In 2019, before the Covid-19 pandemic, 116 million passengers passed through Vietnamese airports, and this figure is expected to surge over the next decade. However, key airports, particularly Tan Son Nhat (in Ho Chi Minh City) and Noi Bai (in Hanoi), are already operating beyond their intended capacity.
Large-scale projects have been proposed to alleviate congestion and accommodate future demand. Yet, with multi-billion-dollar investment costs, these projects cannot rely solely on public funds. Although the government has encouraged the public-private partnership (PPP) model, private sector participation remains limited.
While PPPs offer a viable pathway, the current investment climate is still unattractive to many private enterprises. Aviation PPP projects in Vietnam have yet to truly entice investors due to several challenges, including high investment costs, long capital recovery periods, regulatory uncertainty, and restrictions on foreign ownership.
Key barriers deterring private investment
Aviation infrastructure demands huge capital with a long payback period, making it less attractive to private investors. Construction costs range from hundreds of millions to billions of US dollars, yet revenue takes years to materialize.
Aviation projects are riskier than other industries due to capital recovery periods of 15 to 30 years. Few businesses are willing to invest in projects with such prolonged returns, especially post-pandemic.
Beyond financial risks, regulatory instability further deters investors. Although PPP policies exist, frequent legal changes and inconsistencies create uncertainty for long-term commitments. Without a clear, stable framework, companies will hesitate to invest in this high-risk sector.
This uncertainty is compounded by foreign ownership limits, with Vietnam capping foreign airline stakes at 34% significantly lower than Thailand and Indonesia (49%) and the Philippines (up to 100%). Foreign investors need control for long-term profits, but a 34% cap offers little incentive.
Even when investors show interest, slow approvals and land acquisition issues often delay progress. Bureaucracy and lengthy site clearance processes have stalled major airport projects, some of which were approved years ago but still face significant setbacks. These challenges make Vietnam’s aviation sector a high-risk, low-return investment for many private enterprises.
Breaking the barriers: How Vietnam can attract private investment
To improve the investment climate and encourage greater private sector participation, there needs to be a series of reforms focused on regulatory clarity, financial incentives, investment openness and streamlined land clearance process.
First, Vietnam needs to strengthen the legal framework for PPP, ensuring consistency and transparency in investment policies. The government needs to provide clear regulations, avoid sudden policy changes, and simplify administrative procedures to accelerate project approvals.
Second, financial incentives should be made more attractive to mitigate investor risks. Reducing financial burdens in the early stages of operation can make investment in aviation infrastructure more appealing.
Third, Vietnam should consider raising the foreign ownership limit in aviation infrastructure projects to 49%, aligning with other Southeast Asian countries like Thailand and Indonesia. This would help make Vietnam a more competitive destination for international investors.
Finally, streamlining the approval and land clearance processes is essential to reduce delays and build investor confidence. The government must establish a faster land clearance mechanism, ensuring that sites allocated for aviation infrastructure projects are handed over on schedule to prevent delays in private sector involvement.
If Vietnam can implement these reforms, private enterprises will have stronger incentives to invest in aviation infrastructure, contributing to the long-term growth, resilience, and modernisation of the country’s aviation sector. There needs to be significant policy changes to turn this sector into a truly attractive investment opportunity.
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