Why Vietnam's aviation industry struggles to attract foreign investors

DNHN - The Vietnamese aviation industry has significantly developed, expanding its flight network and improving service quality. However, several challenges hinder the attraction of international investors.

Intense competition in the aviation industry

Despite improvements in the business environment, issues such as limited investment capital, complex procedures, and inefficient management persist, creating an unstable business climate that deters foreign investors.

Moreover, Vietnamese airlines face stiff competition from regional carriers in countries like Singapore, Malaysia, and Thailand, which have made significant investments in their aviation sectors. This competition involves not only pricing but also service quality and network expansion, posing a major challenge for Vietnamese airlines in attracting foreign investment.

Vietnam's aviation infrastructure still has limitations that need upgrading. Modern airports, transportation infrastructure, and technical facilities are crucial for attracting foreign investors. Currently, many airports in Vietnam face overcrowding and infrastructure constraints, reducing their appeal to international investors who seek reliable systems for efficient business operations.

Additionally, the regulations and policies in Vietnam's aviation sector are not always clear, causing uncertainty for foreign investors. Without assurances regarding business rights and benefits, investors feel insecure about investing in the industry.

The aviation industry requires a safe and reliable operational system to ensure passenger security. However, operational and security management issues in Vietnam's aviation sector have damaged its image and reputation, eroding the trust of foreign investors.

The absence of a clear long-term development strategy hinders the attraction of foreign investors. A focused approach to shaping and implementing sustainable development goals is necessary to improve investment appeal.

Investment Restrictions

Foreign investors are limited to a maximum of 34% equity, with the legal representative required to be a Vietnamese citizen, constraining foreign participation. This makes co-investment with domestic enterprises a more feasible option.

The Tourism Advisory Board (TAB) recently proposed solutions, including encouraging the establishment of new airlines by streamlining licensing procedures, which could foster more favorable conditions for new airlines.

Domestic airfare hikes have led to calls for foreign airline participation to increase competition and lower prices. However, stringent business conditions present difficulties for foreign airlines entering the market.

According to Mr. Luong Hoai Nam, CEO of Bamboo Airways, airlines hesitate to expand fleets due to rising costs and uncertain domestic market profitability. Mr. Lai Xuan Thanh, Chairman of ACV, noted that both domestic and foreign investors are retreating due to perceived low profitability in the aviation sector, with several airports incurring losses.

Despite current challenges, the government continues to invest in the aviation industry, addressing ongoing difficulties.

Nghe Nhan