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VIETNAM IS CAUTIOUS ABOUT EXPANDING AVIATION MARKET TO MULTINATIONAL CORPORATIONS

Mr. Nguyen Xuan Phuc - the Vietnamese Minister has agreed to increase the legal maximum ownership ratio for foreign investors by only 4 percent.

Hanoi recently released a decree, which amends on business condition in the civil aviation sector. The charter capital can be up to 34 percent, which is higher than the previous regulation 4 percent. The newly regulation takes effect on 1st of January 2020.

The strict conditions not just stayed intact but also was reinforced: transferring shares could be conducted after 2 years from licensing and must be approved by the Ministry of Transport.

The room for international investors in Vietnamese Aviation Market, which was one of the criteria to join WTO, was first put into discussion in 2007, as aviation carriers could not ignore the S-shaped potentiality. The Government then released a decree allowing foreign holders possess up to 49 percent of chartered capital in Vietnamese Airlines.

Air Asia and Lion Air were the leading investors seized the golden opportunity to join one of the fastest growth market among Southeast Asian Area.

Right after 1 year, the Government reduced the maximum foreign ownership ratio from 49 percent to 30 percent in an effort to create favorable conditions for domestic enterprises to growth.

And, in the latest move, the ceiling was lifted by 4 percent to 34 percent.

The Ministry of Transport initially wanted to lift the ceiling to 49 percent because it would help to mobilize all foreign possible capital sources for the development of the civil aviation sector.

Meanwhile, Vietnam Airlines and Jetstar Pacific, two giant carriers wanted to maintain the 30 percent ceiling  as stipulated in Decree 92.

They argued that if multinational investors hold more than 35 percent of capital, foreigners will have the right to veto decisions, which are made by the shareholders' meeting in accordance with the Enterprise Law, thus causing difficulties for the management and operation of Vietnamese Airlines.

They also warned that if international investors hold 49 percent of capital, some investor could take advantage by establishing new airlines on paper just to sell shares.

Therefore, the 34 percent ceiling was chosen.

At the present, 30 percent of Jetstar Pacific's shares are held by Qantas, foreign investors owned 24 percent of VietJet's shares as of the end of 2018. As for Vietnam Airlines, 8.7 percent of shares are held by ANA Holding.

Lucas

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