Legal framework for clean water - Part 2: A law for the clean water market is needed 

As mentioned in the previous article, Vietnam lacks a legal framework for the clean water market, creating many conflicts and paradoxes.

Difficulty in Attracting Businesses Due to the Lack of Policy Framework – People’s Representative Newspaper

There is a need for a comprehensive evaluation and the design of an overall policy system to complete the clean water business market. This should be approached as an essential public service; clean water is a public or semi-public commodity.

Six Major Issues to Address

The current reality of the clean water market raises six major policy issues that need to be resolved:

Who will be responsible for providing this essential public commodity if problems arise in the water supply process for people, such as the clean water incident from the Da River a few years ago?

With the restructuring of the clean water market by allowing the private sector to participate in clean water services, what specific stages will the private sector be involved in? Should the private sector be allowed to participate in pipe installation?

With the PPP mechanism, how will the private sector participate in investment from the start or by stages for the water supply/sewage networks? The appropriate type of PPP contract between the state and private sector remains an unresolved issue.

The issue of setting up pricing mechanisms and profit margins for the sector is also a major concern. There should be regulations on mandatory profit margins to ensure businesses feel secure when participating in the market. Once a contract is signed between the state and private sector, the state must have an obligation to comply with the contract (the volume of water purchased, the price) or compensate the business if violated.

The issue of planning and inter-regional coordination. Currently, the organization, operation, and regulation of the market are assigned separately to localities. However, localities lack coordination mechanisms. This creates difficulties for businesses wanting to provide clean water services to neighboring provinces. The lack of coordination also leads to overlapping planning and inefficiency in the market's operation.

The issue of market regulation. Similar to the electricity sector, there needs to be a single government agency responsible for regulating the clean water market to avoid the current situation of fragmented management by six different ministries.

Socialization Is Not Enough

Socializing clean water services by allowing the private sector to participate is necessary. However, it is important to emphasize that the socialization process for clean water public services has not been accompanied by the creation of a reasonable market structure for clean water services. While the government lacks investment resources, the market still does not effectively attract private sector investment.

Private businesses face high risks when entering the market, such as fluctuations in price and purchasing volumes below capacity. State-owned enterprises also face difficulties when water prices are low and they lack the ability to expand water coverage. The "shadow" and "bright" market conditions make it difficult for the market to develop, creating risks of "policy profiteering" and unhealthy competition.

Therefore, long-term solutions are needed to address this issue.

A Law for Clean Water Supply is Needed

A comprehensive evaluation and the design of an overall policy system are needed to complete the clean water business market. This should be approached as an essential public service; clean water is a public or semi-public commodity.

Once clean water is considered a commodity, a well-structured and systematic market must be in place. This process should be linked to the creation of a Law on Clean Water Supply and Water Treatment, as requested by the government and being implemented by the Ministry of Construction. The government needs to quickly get involved to promote this law.

Vietnam is urbanizing rapidly. Without clear legal regulations, people will not only face a water shortage but also inefficient water supply.

Nguyen Quang Dong - Institute for Policy Studies and Media Development