Trends and opportunities

The market

Vietnam’s annual economic growth rate is predicted to remain around 5.4 to 5.8 per cent from 2013 to 2018. The population is expected to increase from 92.4 million in 2010 to 99.3 million in 2020 and in 2013, 32 per cent of the population resided in urban regions and this figure is expected to increase to 40 per cent in 2020 (Source: World Bank, Gross capital formation, Nov 2014). The country aims to become an industrialised nation by 2020 and the growing population, rapid urbanisation and industrialisation are putting more pressures on the water and wastewater management of the country.

According to Media Analytics Ltd., the demand for water for both residential and industrial purposes has not been fully met in Vietnam since the 2000s because of inadequate, ageing and inefficient water and wastewater infrastructure. Due to the limited expansion of water supply systems in urban areas, there is a lack of water connections in some peri-urban regions and smaller towns. Only 10 per cent of city households’ wastewater is treated.

Equal efforts have been made to make water utilities more efficient and profitable, resulting in water utilities organised either as publicly-owned one member Limited Liability Companies (LLCs) or as Joint Stock Companies (JSC).

The majority of funds needed for water and wastewater infrastructure in Vietnam relies on loans for low income countries from international financial institutions, including Asian Development Bank (ADB) and World Bank. The private sector has been officially encouraged to invest in water supply projects, investment is still limited, while water tariffs remain low, new investment and operation costs are high.

(Source: Media Analytics Ltd, Global Water Market 2014, 11 Apr 2013)

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Opportunities

Opportunities in the water sector include:

• Urban and industrial water: system design, asset management, sustainable cities, recycling water and wastewater especially in emerging industrial zones.

• Agriculture: irrigation technology, surface and groundwater management, leakage control, smart systems, water accounting and flow management.

• Mining: mine planning, aquifer management, mine water quality, wastewater treatment and monitoring and testing.

• Improvement of municipal water and wastewater treatment facilities through new constructions and by retrofitting treatment plants.

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Competitive environment

There is frequently competition from foreign funded projects:

• Finland

• France

• Germany

• Japan.

Local firms such as CIMAS (Taiwanese-Vietnamese joint venture) are more cost-competitive and mainly undertake work for utilities and municipal projects.

The Engineering Procurement Construction (EPC) market is competitive, without single enterprises taking a dominant role. Leading State Owned Enterprises (SOEs), which have undertaken (waste) water treatment plants, include Vietnam Water and Environment Construction Investment Cooperation (VIWASEEN) and the Water and Environment Joint Stock Company (WACO).

Private operators play a limited role in the municipal water sector and have not yet made any investments in this area. However, their role may increase under current pilot public–private partnership (PPP) projects.

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Tariffs, regulations and customs

The national strategy for water resources towards the year 2020, as indicated in Decision No. 81/2006/QD-TTg, announces objectives, guidelines and implementation measures related to the protection, exploitation, use and development of water resources.

A decree on PPP is expected to be issued in early 2015 and will draw investment capital, especially foreign direct investment (FDI), encourage private investment and shorten processes for small projects. The decree also covers competitive bidding, policy publicity and shortened timeframe for price negotiation.

The use of ODA financing is emphasised in the MARD’s plans to achieve rural water supply and sanitation targets.

Decree No. 80/2014/ND-CP will replace Decree No. 88/2007/ND-CP at the beginning of 2015 to achieve full cost recovery, instead of the current low fee structure (as low as 10 per cent) and the remainder is subsidised by municipalities.

The following ministries and agencies regulate the activities of the water and wastewater sector:

• The Ministry of Natural Resources and Environment (MoNRE) with two relevant agencies:

  • The Agency of Water Resources Management (AWRM) is in charge of managing water resources at the country level, including revising the Law on Water Resources.

  • The Vietnam Environment Administration (VEA) is responsible for scientific studies on environmental issues, environmental impact assessments, violations of environmental laws, and the improvement of environmental laws and regulations.

• The Ministry of Construction (MoC) is in charge of urban water supply, wastewater services and drainage infrastructure.

• The Ministry of Agriculture and Rural Development (MARD) conducts and coordinates rural water supply and sanitation projects and is responsible for irrigation and drainage, flood and disaster prevention.

• The Ministry of Planning and Investment (MPI) is in charge of planning investment (including Official Development Assistance (ODA) funds), regulations on investment conditions, procedures, incentives and procurement models.

• The Provincial People’s Committee (PPC) is responsible for policy implementation, urban water and wastewater projects.

• Other governmental and non-governmental agencies involved in water and wastewater management include:

  • The Ministry of Health (MoH) is in charge of water quality standards for drinking water and domestic use.

  • The Ministry of Finance (MoF) is responsible for fees and taxes related to the water and sanitation sector.

  • The National Water Resources Council (NWRC) is an advisory body to the government on national water strategies and policies.

  • The Vietnam Water Supply and Sewerage Association (VWSA) is an umbrella organisation of water and wastewater utilities and individuals working in the water sector.

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Marketing your products and services

Market entry

Australian companies need to keep regular contact with key market players and identify projects at an early stage. In many cases, local partners or representation and a sales resource in-market are needed.

Austrade has a series of planned activities and in-market engagements to keep across market development; identify project opportunities and promote Australian capabilities.

Absence of strong regulations and policies for water supply and sanitation, strong competition as well as a lack of transparency in the bidding and procurement process are popular constraints to ease of business in Vietnam. Language can also be a barrier to market entry.

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Links and industry contacts

Government, business and trade resources for Vietnam

The Ministry of Natural Resources and Environment
The Ministry of Construction
The Ministry of Agriculture and Rural Development
The Ministry of Health
The Ministry of Planning and Investment
The Ministry of Finance
The Government of Vietnam
The Vietnam Water Supply and Sewerage Association

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Contact details

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Working in partnership with Australian state and territory governments, Austrade provides information and advice that can help Australian companies reduce the time, cost and risk of exporting. We also administer the Export Market Development Grant Scheme and offer a range of services to Australian exporters in growth and emerging markets.