17 December, 2019
The government has issued Decree No.89/2019/ND-CP amending regulations of some decrees on conditional business lines in the aviation sector. What are the most notable changes for the business community?
Decree 89 is aimed to cut business conditions and simplify administrative procedures in line with the government’s policy to create favourable conditions for investment attraction, and facilitate business development, while strengthening state management to ensure safety and security on par with international standards.
The new decree has provided some highlighted changes for air carriage business enterprises, airport businesses, services at airports, flight operation safety supply services, design and manufacturing, maintenance, aircraft testing, engines and propellers and other equipment, and staff training as well.
In air carriage enterprises, minimum capital requirements for establishment and operation are adjusted towards no longer having a distinction between international and domestic-only carriers with the lowest level chosen.
The conditions on apparatus and personnel organisation, capacity of manufacturing, financial capacity, business plans, headquarters, and main business location in Vietnam are also cut.
In addition, Decree 89 amends the regulation on removal and re-granting of the license to facilitate businesses to continue investment activities and re-join the market, while eliminating regulations on seeking approval for transfer of stake and capital contribution to foreign partners.
In regards to airport business, regulations on requiring approval from the Minister of Transport for establishment, stake transfer, and capital contribution to overseas partners are removed.
There is now no distinction in minimum capital required to run an airport business between domestic and international airports, with the level fixed at the lowest rate of VND100 billion ($4.35 million).
In addition, common conditions on apparatus and personnel organisation, and capacity of manufacturing for suppliers of aircraft, propellers, and equipped aircraft maintenance services in Vietnam are abolished.
They are required to have accreditation of maintenance organisation, with documents to prove capacity; and manufacturing process, design, maintenance, and testing of the entity carrying out manufacturing, design, and testing of aircraft, engines, and aircraft propellers in Vietnam.
In terms of aviation training, 16 conditions on manufacturing capacity are removed, with only the documents to prove capacity as ruled required. The license granting for qualified training establishments are also further simplified to meet demands.
How can the improvements make an impact on relevant enterprises, and what are the possible changes in the market you foresee when the new decree takes effect?
The new decree is expected to open up the aviation market for businesses and investors to venture further into.
At present, while the new regulations are yet to come into force, the air carriage market is undergoing strong growth, and the demand for establishment of new airlines and aviation service suppliers is growing. Thus, the cut in business conditions and administrative procedures will reinforce the trend.
With the regulation on Aircraft Operator Certificates (AOC), the management of aviation safety and security for newcomers will be intensified. Only air carriers with capable and serious business plans can actively make preparations to meet the condition of AOC in line with international regulations.
What are the state’s orientations in attracting domestic private and international financers in the aviation sector in the months to come?
The prevailing rules on civil aviation do not limit private investors in varied kinds of civil aviation businesses, except for air traffic services which are 100 per cent owned by the state.
A number of non-state businesses have made investments in aviation, including establishment of airlines, development of airports, and other kinds of aviation services.
For foreign investors, in order to protect domestic funding in the framework of aviation agreements, other agreements on trade and services, and because of national defence and security, Vietnam still curbs the foreign ownership limit at 34 per cent in airlines, and no higher than 30 per cent in airport businesses.
In the roadmap of implementation of international commitments on investment, trade, and the international air carriage business, the Ministry of Transport will continue to study and consider the possibilities of increasing that ownership limit in the sector.
For further information, please contact:
Dang The Duc, Partner, Indochine Counsel
duc.dang@indochinecounsel.com
