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Country water actions are stories that showcase water reforms undertaken by individuals, communities, organizations, and governments in Asia-Pacific countries and elsewhere.
Viet Nam: Ho Chi Minh's Helping Hands
By Hubert Jenny Senior Urban Development Specialist Ho Chi Minh City's People's Committee is preparing a Master Plan for its water system up to 2025 and has accepted development partners' and the private sector's helping hands. INCREASING CITY WATER SUPPLY Viet Nam's Ho Chi Minh City is pumped up to bring water to 100% of the city's population by 2025. Increasing water supply coverage, currently at 76%, means increasing capacity from 1.2 million to 3.5 million cubic meters per day (cmd) of treated water and considerable investments for improving the distribution network and storage system. The indicative capital program from the sector roadmap amounts to US$3 billion over the next 15 years. About 70% of Ho Chi Minh's water supply sources come from the Dong Nai River in the east while 23% comes from the Saigon River in the west. The Saigon Water Corporation (SAWACO) connects about 734,000 households through a distribution network of some 3,800 kilometers, with an efficiency ratio of 5 staff per 1,000 connections. Service is continuous, water quality is high, and annual revenues exceed US$100 million. About 93% of water produced comes from four surface water treatment plants (Thu Duc, Tan Hiep, Binh An, and Thu Duc). The rest comes from groundwater. SAWACO faces several challenges in the areas of profit generation, financial management, management of costs and service delivery, and strengthening institutional capacity. Better tariff structures and measures to reduce nonrevenue water (NRW, currently at about 40%) need to be implemented to improve financial and operating performance. Subsidiary entities, a number of them, need to be consolidated to maximize efficiency - a more coherent plan for both strategic and financial participation by the private sector is needed. The Ho Chi Minh City's People's Committee is considering all these in preparing a Master Plan for the city water system up to 2025. Faced with such as formidable tasks, the city knows it will need all the help it can get. THE WATER IS ON IN SAIGON Ho Chi Minh City, formerly and more popularly known as Saigon, is Viet Nam's largest city, and the country's most important commercial and industrial center. Population is currently at 7.9 million people, growing at about 2.1% per annum, and will likely reach 13.5 million by 2020. The city's economy is also growing at around 12% annually, substantially faster than the national economy at 8%. These astounding growths place very serious strains on the city's already inadequate infrastructure, and not least on its water supply system. Ho Chi Minh City, along with the provinces of Dong Nai, Ba Ria-Vung Tau and Binh Duong, make up the Key Southern Economic Region, an economic bloc that contributes about 33.2% to the country's gross domestic product. The region is expected by 2020 to raise GDP and average annual export values, speed up technological renovation and economic restructuring, and ensure balanced development with economic and social infrastructure taking the lead. Developing satellite urban centers around big cities which are linked with industrial and hi-tech parks are also planned. Ho Chi Minh City is envisioned by 2020 to become a center of regional and international trade and finance. A parallel objective for water in the region is the development of interconnected water supply, drainage, and environmental sanitation facilities. Water for the region will be mostly exploited from Dong Nai, Saigon and Tien Rivers and Tri An and Dau Tieng reservoirs, with groundwater only used for small areas distant from surface water sources. To achieve these, Ho Chi Minh needs to strengthen SAWACO's partnership with development partners and the private sector. HELP FROM DEVELOPMENT PARTNERS SAWACO has been coordinating few projects financed by Development Partners to assist in achieving a sustainable water supply delivery service in Ho Chi Minh. The Government of France has financed a pilot project to determine the components and characteristics of water losses in the north-east area of Thu Duc. This project was completed in 2008 and was helpful in highlighting underlying causes of NRW including poor construction practices and water theft.
The International Development Association (World Bank Group) is financing a US$43.9 million project to reduce NRW in the city center (Zones 1 and 2). The project started in August 2008 and has a 5-year timeframe for implementation. Part of the http://www.sawaco.com.vn work (in Zone 1) has been let as a Performance Contract to NRW contractors from Manila Water. In Zone 2, work is being managed by SAWACO on the basis of conventional design and tendering of individual contracts supervised by consultants. The Utility Support Program (USP), a 3 year Public-PrivatePartnership (PPP) between the Royal Netherlands Embassy in Hanoi, the Ho Chi Minh People's Committee, SAWACO, and Vitens-Evides International BV (VEI), focuses on NRW reduction to enhance SAWACO's financial status. The USP also supports SAWACO in improving institutional arrangements, master planning, consistency in drinking water production, operation and management of the transport and distribution network, and billing and collection systems. ADB, meanwhile, is processing a US$154 million water sector project for Ho Chi Minh City. This proposed investment program is part of a multitranche for Viet Nam water sector. The first tranche is exclusive for Ho Chi Minh City and SAWACO, which first completed the project preparation and will address the most urgent constraints faced by SAWACO focusing on Increasing distribution capacity to benefit 528,645 new and existing households, including about 20,000 poor households with access to piped water supply Strengthening operational management and nonrevenue water reduction, through a comprehensive information and communication technology program Supporting a climate change action plan for SAWACO PRIVATE SECTOR LENDS A HAND When the Government of Viet Nam initiated the Doi Moi (economic) reforms in 1986 that led to the country's transition from a centrally planned to a more marketoriented economy, water companies have been instructed to seek out private sector participation through equitization. 1 In 2004, SAWACO was the first water supply company to "equitize" its operation, and 2007, became a holding company and equitized 6 out of 8 distribution companies by transforming them into Joint Stock Companies (JSC) and retaining 51% ownership. In 1998 and 2009, SAWACO awarded the water production plants to the private sector in Binh Anh through a Build-OperateTransfer scheme (100,000 cmd) and in Thu Duc through a Build-Own-Operate contract (300,000 cmd). The equitization of SAWACO has produced a number of notable accomplishments, including
Raising about US$20 million in private capital through the initial stock offerings Increasing autonomy and ability of the JSCs to develop and execute their own business plans Strengthening customer focus among the distribution JSCs Providing ownership opportunity for JSCs employees ADB is currently providing assistance to SAWACO to define a framework for private sector development with strong donor coordination, particularly for the development of NRW and Operation and Maintenance contracts for the distribution network, under management contract or leasehold agreement. The framework will increase the share of private sector financing with proper risk allocation between SAWACO, Development Partners, and the private sector to meet the US$3 billion capital expenditure plan for the city's water supply up to 2025. Meanwhile, the ADB-financed project is defining key performance indicators for SAWACO and its distribution companies to provide a guaranteed level of service and commitment from SAWACO to its users, in lieu of prompt tariff increases. This partnership for Ho Chi Minh's water supply between SAWACO, its owners and its clients, and assisted by the private sector and development partners, can prove to be a model partnership for other cities in the region.
_______________________________ 1. Equitization is a privatization process in which provincial state-owned water companies are corporatized and incorporated into companies with shares. *This article was first published online at ADB's Water for All website in July 2010: http://www.adb.org /water/Actions/VIE/ho-chi-minh-helpinghands.asp. The Country Water Action series was developed to showcase reforms and good practices in the water sector undertaken by ADB’s member countries. It offers a mix of experience and insights from projects funded by ADB and those undertaken directly by civil society, local governments, the private sector, media, and the academe. The Country Water Actions are regularly featured in ADB’s Water for All News, which covers water sector developments in the Asia and Pacific region.
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