How can Vietnamese people manage a water supply monopoly?

By Duc Hoang   October 16, 2019 | 10:29 pm PT
It's easy to criticize a water monopoly at times of crisis. But, if there are systemic shortcomings in holding it accountable, our hands are tied.
Duc Hoang

Duc Hoang

The most potent weapon of a consumer is to stop consuming. How do we then answer the question: "If we don't use their water, who else will provide it to us?"

My family was among those troubled recently over the fact that our son's school was located just one kilometer from the burnt Rang Dong light bulb warehouse (that leaked 15-27 kilos of mercury into the air).

Now we've got a new one: polluted tap water and the difficulty in getting bottled water.

Since my family and I are not the only ones severely affected by this, since there are millions of us, one would expect the company responsible for the crisis to be hit hard by it too.

However, the stocks of Song Da Water Investment Joint Stock Company (code: VCW) on the Unlisted Public Company Market (UPCoM) still went up on Tuesday.

There was no chain reaction following a public crisis like what one would see in a movie, where a negative news about a company spreads and causes its stock to spiral downwards.

The city's water supply is contaminated with oil, no proper solutions have been announced to address the issue, in fact, the official announcements have been riddled with inconsistency, Hanoians' health has been put at risk with a lack of clean water. And despite all this happening, the water company at the heart of the crisis is doing well, at least from a business viewpoint.

Song Da Water Investment Joint Stock Company provides about 300,000 cubic meters of water to the more than 250,000 families in the entire southwestern area of Hanoi including the districts of Thanh Xuan, Hoang Mai, Cau Giay, Ha Dong and some urban districts. It also supplies water to Son Tay – Hoa Lac – Xuan Mai – Mieu Mon – Hanoi – Ha Dong urban areas.

Recent history has shown that the company's wellbeing has sustained even after it became a target of public outrage after water pipelines broke 21 times in four consecutive years from 2012-2016, affecting the lives of 177,000 citizens and its management board was placed under a criminal probe.

The crux of the problem is this. Today you might feel irate knowing you have been drinking their water for the last few days and then being suddenly informed that it is not drinkable. But, tomorrow, you still can’t change to another water supplier, unless you plan to use bottled water for the rest of your life.

Bottles are arranged by residents at an apartment complex in Hanoi who wait for water tankers as their tap water supplied by Viwasupco has been contaminated with oil, October 14, 2019. Photo by VnExpress/Ngoc Thanh.

Bottles are arranged by residents at an apartment complex in Hanoi who wait for water tankers as their tap water supplied by Viwasupco has been contaminated with oil, October 14, 2019. Photo by VnExpress/Ngoc Thanh.

Clean water supply is referred to as a "natural monopoly." You can't switch to a different seller if you are dissatisfied with its service.

This particular business has a specific distribution infrastructure, which costs a fortune to build. Assigning a single company to deploy and operate the system will maximize social costs. Water companies become monopolies in one particular area, but their exclusivity has been approved by society even in developed countries.

What makes the Vietnam's case different from developed countries is that the latter are better equipped to deal with a "natural monopoly."

A myriad of studies on "monopoly water supply regulations" conducted by universities and non-governmental organizations in Europe and the U.S. is just a click away. They are part of the answer to the question: how can the toxic effects of monopoly be mitigated? As we look into this, some interesting facts come up. For instance, the British Parliament has once said that fining such monopoly companies 20 million pounds for every crisis they create would be a slap on the wrist, because their earnings are much greater.

There are at least five big questions that come up regarding the natural monopoly in clean water supply: the first and most basic one is pricing; environmental risks (they can be as harmful to the environment as any other business); social risks (what if they refuse to provide clean water to some communities?); customer care (if they are already an exclusive seller, what do customers’ opinions mean to them?); and water safety. Hanoi is gripped by the last one at the moment.

Countries have different ways to live with this natural monopoly. Even in the most capitalist countries, care is taken to prevent the private sector from controlling everything.

In the Netherlands, where the nation's lifeline literally depends on the water supply system. The country has independent councils separated from the government which has its own budget to oversee clean water. The United Kingdom, on the other hand, is constantly bringing water supply companies to the Parliament and taking them to task.

Vietnam has a relatively strict legal system, which prevents the water supply monopolies from setting their own prices. The companies are responsible for providing water equally to the areas they are in charge of.

But when it comes to handling a crisis, like contaminated water or broken pipes, residents’ call for "strict punishments" are likely to fall on deaf ears unless there’s enough of a case to be taken to court.

And then the questions arise about what is a suitable punishment. How big would a fine have to be to be "strict" enough? And after the penalty is paid, will they change the operating procedures to ensure safety? Will their management board still stay the same? It's worth noting that the government does not directly run these companies. Terminating contracts with them won't solve anything.

In theory, if I was a shareholder of a major water company, and the company's head survived an environmental disaster, the citizens still happily bathed in the water provided, and the company's stocks still went up, its costs remained optimal and profits were still growing, I would laud him or her at the year-end shareholders' meeting. This is how businesses work, so I can't be blamed for being heartless.

And even if some senior official was taken to court after a problem and the stocks continued to rise, procedures and operation costs remained unchanged, I would still find no cause to complain and would appreciate the company for protecting my interests.

The Da River water crisis has not only raised the issue of personal responsibility. Social outrage can exert pressure on someone. But it has brought us to a bigger problem, opening up a conversation about a particular economic relationship.

Has the natural monopoly of clean water suppliers been sufficiently dealt with? Are there any loopholes in Vietnam's law that we have not noticed? Have these water monopolies been put under enough pressure to do their job properly?

If the citizens don't know how to hold the company accountable, then who can help them?

These are questions that need to be taken repeatedly to the National Assembly and the People's Committees. And if we do not succeed in identifying and making relevant changes to this business model, we would not have taken the first step to solving the problem.

*Duc Hoang is a journalist at VnExpress. The opinions expressed are his own.

The opinions expressed here are personal and do not necessarily match VnExpress's viewpoints. Send your opinions here.
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