A growing number of small businesses are supplying water to villagers throughout Vietnam and Cambodia. Money has been raised from users and investors, but to encourage further expansion, the governments must address key policy issues, including creating appropriate regulation and subsidies and educating people about the link between clean water and good health.

The World Bank’s Water and Sanitation Programme for East Asia and the Pacific studied three cases where small providers use different operating models to supply water to villagers. In Cambodia, lack of regulation has helped provide an environment that enables thousands of small-scale informal suppliers to operate. In southern Vietnam small non-profit and for-profit water companies serve about 65 percent of the population, while in central Vietnam businesses are selling technology to users to enable them to access their own water. In some cases customers were using more than one provider to ensure a reliable supply.

The private sector has supplied water in Cambodia and Vietnam for hundreds of years, but has grown rapidly in the past decade due to an environment that increasingly favours investment. Small-scale private providers fall into two categories: those that sell water directly to consumers and those that provide equipment and knowledge to consumers so that they can access water on their own.

Enterprises are able to obtain funds from both investors and users, and are usually more responsive than the public sector to customers’ needs, cutting waiting times for new connections and response times for leaks and repairs. These Mekong case studies suggest that there are a number of factors important to success:

• Government support for the private sector is critical.
• Government regulation has to protect investments while ensuring that enterprises service, rather than avoid, poor people.
• Pricing controls need to be as decentralised as possible to attract investors, especially in more challenging markets.
• Access to long-term credit is critical for the creation and sustainability of private enterprises.
• Private enterprise needs support in developing the skills to meet standards for water quality.
• Government needs to be open to exploring different operating models and to funding social marketing and health promotion.

The private sector, whether small businesses, cooperatives, or user groups, are ready and able to build on their success and expand rural water supply in the Mekong Region even further. To build a pro-private sector environment, governments (and donors) will need to take the following actions:

• support rather than constrain the private sector, and avoid subsidies that undermine businesses
• educate people to demand clean water. This will boost business generally and increase customers' willingness to pay for quality services
• promote water for productive activities such as irrigation and animal husbandry, as this water is seen as an investment, rather than an expense
• understand the consequences of regulation – positive and negative – to develop an encouraging investment environment and ensure that poor people are supplied
• improve existing technical knowledge to develop sources and treat water, supplemented with management skills.

Source(s):
‘Tapping the market: Private sector engagement in rural water supply in the Mekong Region’, WSP – East Asia and the Pacific Field Note, Dan Satter, January 2004 Full document.
‘Private sector financing of rural water supply in Vietnam and Cambodia’, WSP – EAP report, Dan Satter, 2004

Funded by: World Bank Rural Water and Sanitation Thematic Group

id21 Research Highlight: 14 November 2005

Further Information:
WSP – East Asia and the Pacific
Jakarta Stock Exchange Building
Tower 2, 13th Floor
Jendral Sudirman Kav 52–53
Jakarta 12190
Indonesia

Tel: +62 21 5299 3003
Fax: +62 21 5299 3004

Water and Sanitation Programme - East Asia and the Pacific

Jan Willem Rosenboom
WSP – Cambodia
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PO Box 1115
Phnom Penh
Cambodia

Tel: +855 23 210 922
Fax: +855 23 215 157
Contact the contributor: jrosenboom@worldbank.org

WSP – Vietnam
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63 Ly Thai To Street
Hanoi
Vietnam

Tel: +84 4 934 6600
Fax: +84 4 934 6597

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