Binh Duong, one of Viet Nam’s fastest developing provinces, has pioneered the country’s first transition from sovereign financing to standalone private sector financing for water utilities.
In 2020, the country’s water supply system had a total treated water production capacity of 9.5 million m3/day, with piped water supply coverage in urban areas reaching 88%. This achievement was driven by the gradual equitization of state-owned water utilities as part of the government’s sector reforms initiated in 2007. A key water legislation issued by the government in 2007–2009 transformed water from a social to a commercial commodity; tariffs are set on a full cost-recovery basis; and water supply service companies are required to comply with ambitious targets to reduce non-revenue water from an average of 30% in 2010 to 18% by 2020.
ADB enables Binh Duong Water Environment Joint Stock Company (BIWASE) to secure Vietnam's first private sector water financing. Find out how they moved from sovereign to standalone private sector financing
The water supply service in Binh Duong is provided by Binh Duong Water Environment Joint Stock Company (BIWASE), originally founded in 1975 as a government-owned entity. It started equitization in 2016 and was converted into a joint stock company in September 2016. In July 2017, it was listed on the Ho Chi Minh Stock Exchange. With over 310 thousand m3/day of water production capacity, BIWASE serves all the key demand centers and about 80% of its population. It serves more than 25 industrial zones and clusters, including the Viet Nam-Singapore Industrial Park. These areas employ nearly 1.3 million local and more than 500,000 foreign workers.
A landmark project
In October 2020, a corporate loan of up to $8 million for the Binh Duong Water Treatment Expansion Project was signed between BIWASE and the Asian Development Bank (ADB). This is the first private sector water supply project in Viet Nam, prepared through funding from the Netherlands Trust Fund under the Water Financing Partnership Facility.
The Netherlands Trust Fund via ADB's Water Financing Partnership Facility supports Vietnam's first private sector water supply project. The Binh Duong Water Treatment Expansion Project meets the rising water demand of 25 industrial zones and clusters in the province.
This project serves to demonstrate to other international financiers the viability of private sector commercial financing in the water sector in Viet Nam.
During the signing ceremony of the project, ADB Vice President for Private Sector Operations and Public-Private Partnerships Ashok Lavasa recognized the importance of achieving this milestone for both parties.
“Through this transaction, ADB is delighted to be part of BIWASE’s journey in transitioning from reliance on sovereign financing to standalone private sector financing and supporting BIWASE in its production capacity expansion to meet the rapidly growing water demand in the province,” he said. “This transaction will also open the door to new financial support from ADB to Viet Nam’s privatizing water sector and can be replicated for wider acceptance and growing appetite from the market.”
The $8 million ADB loan will help BIWASE increase the production capacity of the Tan Hiep Water Treatment Plant (WTP) by 100,000 cubic meters per day (m3/day). This will enable the water utility to serve the rising demand of residential and industrial customers in Ben Cat town, Tan Uyen town, Binh Duong new city, and Thu Dau Mot city. The loan will also help BIWASE install additional water intake pumps and build raw water transmission pipes from the Dong Nai River intake facility.
The financing package also includes a parallel cofinancing of $8 million from JICA. The Republic of Korea e-Asia and Knowledge Partnership Fund provided additional $500,000 in technical assistance. This will be used to build the capacity of BIWASE staff on financial management and climate-resilient business and operational planning. It will also enhance the legal foundation of the business and operational framework between BIWASE and the Binh Duong Provincial People’s Committee.
“We highly value our long-term relationship with ADB, which goes back since 2002 when we participated in the third provincial towns water supply and sanitation project,” said BIWASE’s chair of the board of directors Nguyen Van Thien. “We appreciate the continued support from ADB in providing a one-stop solution to enable BIWASE to transition from sovereign financing to standalone private sector financing as it continues on its growth path. We look forward to ADB’s continued engagement with the water sector in Viet Nam and hope to work with ADB again in the future.”
Private sector commercial financing in Vietnam’s water sector is viable. ADB is now discussing the second and third private sector-financed transaction with other utilities in the country after the success of the Binh Duong Water Treatment Expansion Project.
Reducing gender gap
The project aims to reduce the gender gap by enhancing gender-inclusive initiatives in the project design, building on the gender action plan from the previous sovereign loan. BIWASE is committed to being “an equal opportunity” employer that provides equal pay and benefits to all employees. Following ADB’s Policy on Gender and Development, BIWASE has incorporated measures to promote gender equality and/or women’s empowerment in its business activities. The project is categorized as effective gender mainstreaming.
Potential for replication
The Tan Hiep water treatment plant with expanded water production capacity was officially inaugurated in April 2021.
Building on the success, ADB is discussing the second and third private sector-financed transaction with other utilities in Viet Nam. Although small, the project proved potentials of Vietnamese water utility companies and opened the door to a new financial instrument for them.