Vietnam’s first airplane parts factory, invested in by South Korean conglomerate Hanwha Group, was inaugurated Thursday in Hanoi.

Located in the capital city’s Hoa Lac Hi-Tech Park, Hanwha Aero Engines will make aircraft engine components for export.

The $200 million factory is expected to turn out its first products by January 2019.

Vietnam’s first airplane parts factory opened on Thursday. Photo by VnExpress/Le Tien

Speaking at the inauguration ceremony, Nguyen Van Binh, head of the Party’s Central Economic Commission, said the project will become a representative for technology transfer from Korean enterprises to Vietnam, opening up opportunities to access key technologies and build capacity in the country.

He said it would create a spill-over effect, attracting more hi-tech enterprises from South Korea and other countries to Hoa Lac Hi-Tech Park.

Hanwha Group chairman Kim Seung Yeon said they were the only South Korean company producing aircraft engines, and one of the 10 companies with most advanced technologies in the world.

More than 40 technicians from Hanwha Group are present at the factory to train about 200 Vietnamese technicians.

The factory is expected to create jobs for thousands of workers, train high quality workers, transfer know-how, and contribute to Vietnam’s technological capabilities.

Kim said he hoped that with advanced technology, the production facility will contribute to the development of Vietnam’s aviation industry and precision manufacturing.

Chu Ngoc Anh, Minister of Science and Technology, said at the ceremony that Vietnam will continue to support Hanwha throughout its operations in the future.

As of now, the Hoa Lac Hi-tech Park has 87 investment projects with a total registered capital of VND78 trillion ($3.35 billion).

The executives argue that new airports and upgrades will help overhaul the country’s poor aviation infrastructure, now a bottleneck for tourism development.

“My view is we need more airports and upgrades, because infrastructure, especially in important destinations, is critical for future development,” said Tran Trong Kien, chairman and CEO of Thien Minh Group (TMG), one of Vietnam’s top travel and hospitality companies.

Tan Son Nhat is handling 36 million passengers, which is way above its designed capacity of 25 million. Shutterstock/AsiaTravel

Kien was responding to a VnExpress International question about the controversy over provincial proposals on building airports like the one near renowned tourist venue Sapa in northern Vietnam.

Several aviation experts have remarked that there are too many proposals and plans for new airports, and that the country has too many already.

Kien said the first priority should be to expand the Tan Son Nhat airport, second to expand the Noi Bai and Da Nang airports. These three meet or exceed their design capacity.

“Hue and Chu Lai airports are also extremely important, and Hai Phong airport is also a very good solution for future development,” Kien said on the sidelines of the Vietnam Travel & Tourism Summit 2018 Wednesday. He is also chairman of the National Tourism Advisory Board (TAB).

Hue currently has Phu Bai airport while Chu Lai airport is located in the Chu Lai Open Economic Zone in Quang Nam Province. Both are in central Vietnam. The northern city of Hai Phong has Cat Bi airport.

Kien said that up to 80 percent of foreign tourists come to Vietnam by air, but air connections from and to Vietnam, regionally and globally, are much lower than big cities in Asia like Hong Kong, Singapore, Thailand and Kuala Lumpur.

Luong Hoai Nam, deputy general director of joint stock company Vietstar Airlines, also said the country definitely needs new airports and upgrades to the old, poor ones.

“Phu Quoc and Van Don are the only two new airports up and running since 1975 (when the Vietnam War ended). Apart from them, the only changes in aviation infrastructure have been upgrades to military airports whereby limited expansions were made due to limited land areas,” Nam told the tourism event organized by VnExpress.

The Phu Quoc airport in southern Vietnam is a public investment project while the latest, Van Don, is a private project of the Sun Group in the northern province of Quang Ninh.

Nam said Vietnam has 21 airports while Thailand has 38. The aggregate annual capacity of 21 airports in Vietnam is only equivalent to Thailand’s biggest Suvarnabhumi Airport, Singapore’s Changi and Malaysia’s Kuala Lumpur.

“Lack of airports, especially the bigger ones, leads to an overload, with airports serving about 105 million passengers this year against the designed capacity of only 75 million.”

The biggest airport Tan Son Nhat which is handling 36 million passengers, way above its designed capacity of 25 million, has suffered overloading for many years, but the “upgrades are very slow”.

“Our airports are like a house designed to accommodate 25 people, but last year 36 were living in it and the figure this year is 40.

“The images of passengers running, pulling their suitcases to Tan Son Nhat airport (instead of having cars driving them to the gate due to traffic congestion) published in local and foreign media are harming the image of our aviation and tourism sectors.”

Too many already

Previously, in interviews with VnExpress International some aviation experts claimed Vietnam was building too many airports without carefully evaluating their necessity.

Authorities in the southern Ba Ria-Vung Tau province have been working with private firm Ho Tram Ltd, the investor of the Grand Ho Tram Strip resort, on plans to construct a $194 million civilian airport nearby.

Ba Ria-Vung Tau already has an operational airport on Con Dao Island and the mega Long Thanh International Airport being planned in southern Dong Nai Province is just 40 kilometers away.

In July, Lao Cai Province proposed that a $246 million airport built near Sapa for both civilian and military purposes.

Nguyen Thien Tong, former faculty head of aeronautical engineering at the Ho Chi Minh City University of Technology, said it’s not necessary to have two new airports in Ba Ria-Vung Tau, as the province does not have a large (enough) number of tourists.

Ngo Viet Nam Son, an architect who participated in designing the Ninoy Aquino International Airport Terminal in the Philippines, argued that it would be much more efficient if money is spent on building an expressway which connects Ba Ria-Vung Tau and HCMC.

As for the proposed airport near Sa Pa, Tong claimed that roads should be the focus of this area, not airports as investing in roads in this area will allow different vehicles to travel to multiple destinations in the north, serving the majority of the population.

Son was concerned about the distance from the airport to Sa Pa town, which is about 100 kilometers away, a distance too long to attract tourists.

The Ministry of Transport in September approved amendments to the expansion plan for HCMC’s Tan Son Nhat airport.

The plan, which lists targets until 2020 with orientation towards 2030, includes the addition of a third terminal and a 250 hectare expansion of the airport’s area. Specifically, the airport’s total area will be increased from the current 545 hectares (1,350 acres) to 791 hectares.

Regarding Hanoi’s Noi Bai airport Deputy Minister of Transport Le Dinh Tho in October urged related agencies to quickly review plans to expand the airport to the south. Their aim is to increase the capacity to 100 million passengers a year in 2050.

The airport now has a capacity of 21 million passengers per year, but accommodated some 24 million passengers in 2017.

The official exchange rate between Vietnamese dong and U.S. dollar reached its highest this year Wednesday, and experts said the dong could depreciate further.

The State Bank of Vietnam set a central exchange rate of VND22,757 on Wednesday, the sixth time the rate has gone up in the last two weeks.

An employee counts U.S. dollar and Vietnamese dong at a bank in Ho Chi Minh City, Vietnam. Photo by VnExpress/Anh Tu

The dong has fallen by VND352, or 1.57 percent, against the greenback since the beginning of the year.

The dollar’s value increased at commercial banks. At 3p.m. Wednesday, Vietcombank sold the dollar for VND23,350, VND15 higher than Tuesday.

Vietinbank also sold its dollar for VND23,350, VND17 higher than Tuesday, while BIDV sold it at VND23,355, VND25 higher.

The dollar also inched up on the free market. At 11.30 a.m. Wednesday, it was selling for VND23,360-23,410, VND10-20 higher than on Tuesday.

Economist Nguyen Tri Hieu said that the reason for the hike was high demand for dollars toward the end of the year as businesses often import large amounts of materials needed for manufacturing.

The ongoing U.S.-China trade war continues to exert exchange rate pressures, despite the U.S. announcing a 90-day halt on additional tariffs on Chinese goods starting next year, as there is no certainty that tensions will decline, he said.

“There is a high possibility that the dong’s value will continue to fall this year,” Hieu told VnExpress International.

Hieu said that the government should also devaluate the dong against the Chinese yuan so that the trade deficit between Vietnam and China can be reduced.

Vietnam relies heavily on China for materials and equipment for its labor-intensive manufacturing sector.

As the yuan’s value has fallen by 9 percent to the dollar since the beginning of this year, some experts have said that the dong should be devaluated even more to avoid impacts a cheaper yuan. Cheap made-in-China goods could be imported in large quantities to Vietnam and compete with domestic products, they said.

But economist Tran Dinh Thien said that the dong should be kept at a balanced rate between the U.S. dollar and the Chinese yuan. A 2-3 percent band a year is acceptable, he added.

A stronger dollar will benefit exporters, but will also create stronger pressure on inflation and interest rates which will increase business costs in a country with high imports and public debt, Thien said at a recent conference.

He added that the fluctuation of the dong should be controlled to help local companies conduct their business with greater certainty.

The government doesn’t want businesses to suffer shocks, he said.

Prime Minister Nguyen Xuan Phuc had said in August that the devaluation of the dong needs to be kept within a 2-percent band this year compared with the end of last year.