Report No: ACS9424

Socialist Republic of Vietnam

Vietnam Water Sector Reform/Regulation

Review of Urban Water and Wastewater Utility Reform and

Regulation

10 June 2014

TWIEA

EAST ASIA AND PACIFIC

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FINAL REPORT

SOCIALIST REPUBLIC OF VIETNAM

REVIEW OF URBAN WATER & WASTEWATER

UTILITY REFORM & REGULATION

June 2014

Abbreviations and Acronyms

(VND 21,200 : US$ 1)

ADB Asian Development Bank

BR-VT Ba Ria-Vung Tau Province

ERAV Electricity Regulatory Authority of Vietnam

GC General Corporation

GSO General Statistics Office

Daily-life water Water for domestic use or for households

HCMC Ho Chi Minh City

JSWSC Joint Stock (Shareholding) Water Supply Company

LGU Local Government Unit

MoC Ministry of Construction

MoF Ministry of Finance

MoNRE Ministry of Natural Resources and Environment

MoH Ministry of Health

MPI Ministry of Planning and Investment

NSCERD National Steering Committee for Enterprise Reform and Development

NRW Non-revenue water

ODA Official Development Assistance

OECD Organization for Economic Cooperation and Development

PC People’s Committee

PPC Provincial People’s Committee

PPP Public-Private Partnership

SAWACO Saigon Water Supply Corporation

SCIC State Capital Investment Corporation

SMLLWSC Single Member Limited Liability Water Supply Company

SOE State-owned Enterprise

VND Vietnam Dong

WB World Bank

WSC Water Supply Company

Acknowledgements

The Water and Sanitation Program (WSP) would like to express its great appreciation of the effort and support extended to the study team by the relevant ministries/ agencies of the Government of Vietnam at different central and local levels and the water supply and sewerage utilities during this study. The study was implemented during April – June 2014 and included (i) desk review, (ii) site visits, (iii) draft report, (iv) consultation workshop, and (v) finalization of the report. At the consultation workshop on June 9, 2014 jointly held by the Ministry of Construction and the World Bank/WSP with representatives from ministries, donors, water supply and sewerage utility companies, and provincial peoples committees, the key findings and recommendations of the study were presented and positively received by the parties. Many comments were received at the consultation workshop and these will form the basis of ongoing dialogue with the government on the reform agenda. The views and conclusions presented in this report are those of the study team and do not necessarily represent those of the WSP or of the World Bank. We hope that this report will serve as a useful resource for further dialogue and discussions on reform/regulation and policy making in the urban water and sanitation utility sector, and as such contribute towards the successful achievement of the Government’s SOE reform goals and targets for the benefit of the peoples of Vietnam. Study Team: Mr Iain Menzies, Senior Regional Water and Sanitation Specialist, WSP EAP (TTL) Mr Nguyen Quang Vinh, WSP Country Coordinator for Vietnam Mr David Stiggers, Utility Reform/Regulation Specialist Mr Pham Ngoc Thang, Financial Specialist Quality Assurance: Ms Almud Weitz, WSP Principal Regional Team Leader, EAP/SA Regions

Contents Review of Urban Water & Wastewater Utility Reform & Regulation in Vietnam ................................... i

Executive Summary .................................................................................................................................. i

Section 1: Review of Reform: The current Urban Water Supply Enterprise Equitization Program ..... i

Section 2: Review of Regulation of the Urban Water & Waste Water Utilities ................................. iii

INTRODUCTION ....................................................................................................................................... 2

Basis of this Review: ............................................................................................................................ 2

Urban Water & Waste Water Utilities ............................................................................................ 3

Equitization of SOEs ............................................................................................................................ 4

SECTION 1 : URBAN WATER & WASTE WATER UTILITY REFORM ........................................................... 5

Section A .Effectiveness of Sector Reform .............................................................................................. 5

1 Equitization: ......................................................................................................................................... 5

Extent of Equitization .......................................................................................................................... 5

a. Difficulties in establishing mechanisms .................................................................................. 5

b. The equitization of WSCs is a lengthy process ........................................................................ 5

c. Difficulties in finding investors/capital for the non-state shares ........................................... 5

(1) Asset Valuation ................................................................................................................... 6

(2) Business Related Valuation : ............................................................................................... 6

d. Levels of State Shareholding ................................................................................................... 6

e. The varying nature of individual regional economies; the size and form of the Utilities ....... 7

f. Utility Diversification ............................................................................................................... 7

g. Fragmentation......................................................................................................................... 7

h. Capacity of Utility Management for effective change ............................................................ 7

2. Sector Performance& Levels of Service Improvement: .................................................................. 8

(a) Benchmarking of sector performance .................................................................................... 8

Key Performance Indicators for Vietnam: ...................................................................................... 8

Drinking Water Quality: .................................................................................................................. 9

KPI of other Countries relativ