“I was born and raised in The Netherlands and have lived there for 30 years. Having drinking water from the tap is quite a normal thing in the Netherlands, but here in Vietnam it’s something that millions of people would still dream of.” Ngo Xuan Vinh – Vice Director, Holland Water Supply Company (Howaco).
Five years ago, the young Dutch businessman Vinh decided to leave the Netherlands for Vietnam, where he is originally from, with an ambition to take part in the realisation of Vietnamese clean water dreams.
Let’s follow Vinh's inspiring story about how innovative a private business can be in tapping into the low income market, how challenging yet rewarding to bring advanced technologies from the West to serve the BoP market.
The Market Opportunity
Long An, a Southern Coastal province, is one of many regions in Vietnam that lacks access to a sustainable source of clean tap water. Local people have instead been using inadequately treated saline ground water, rain water or water from local vendors. The water from these sources is often available just a few hours a day. People are forced to choose between paying high prices for clean water supplied by vendors from other provinces, and using inadequately treated water with serious health risks.
The rapidly growing population also adds to the pressing need for water treatment facilities in the area to comply with water safety regulations. This presents a market opportunity for the development of business models that meet the growing local demand in peri-urban/suburban and rural areas in Vietnam.
Tapping into The Market
Holland Water Supply Company (Howaco) has developed a business model that addresses this market opportunity. Howaco is a local private water supply company with expertise in surface water and ground water supply from source to tap. The Company’s expertise is based on Dutch advanced water treatment technologies. It has developed a centralised water treatment facility and distribution system that effectively supplies clean drinking water that meets quality standards at an affordable price. For 10 years the Company has been applying an inclusive business model that engages the low-income population of Vietnam at two points:
As employees/distributors: The Company creates new jobs for workers involved in plant construction, installation, and operation, as well as long-term employment for its distributors. Any household can become Howaco’s distributor as long as they share the same vision with the Company on quality, service and price for consumers. The distributor buys clean water from Howaco’s pipeline through a master meter and sells it to households within their service area.
As consumers: The Company operates efficiently and cost effectively hence is able to supply clean drinking water at an affordable and regulated price and provides 24/7 water supply service to local low-income households and other customers. Howaco secures cost effectiveness by non-use of chemicals in the water treatment process (which is better for human health and the environment) and by keeping the non-revenue water loss at a minimal level. The redundant distribution system and a generator are in place to make sure that the customers are always supplied with clean water.
Howaco applies various control, monitoring and information systems to maintain the company’s sustainability and effective operations. Its water treatment plants are equipped with full automation SCADA system. The Company also uses GIS for asset and customer management and BoPV5 for the maintenance programme. The water treatment technology is a modular design, which is easy to expand with low investment cost.
Howaco has the current capacity to supply 5,800m3 water/day that meets QCVN-01 standard from two water treatment plants Tan Kim and Truong Binh. With support from the UKAid-funded VBCF which is managed by SNV, the Company has been able to double its supply capacity and expand the distribution system. By the end of May 2015, Howaco has already supplied tap water to 2,485 households on top of the existing 3,500 households. More than 10,000 people benefit from this VBCF-supported business initiative with access to clean water at an affordable price (one-time fee of USD 22 to get connected to the water supply pipeline and an average water tariff of USD 0.25/m3, or a monthly fee between USD 3-5 for clean water). Previously, they used to pay as high as USD 0.5 or even USD 1.5-2.5 for each m3 of clean water during dry season.
“Our biggest challenge is sustaining a profitable business that offers good quality products at an affordable price to the low-income consumers. It is important that we keep operation and investment costs as low as possible without compromising the water quality and customer services. Efficient technologies and know-how from The Netherlands, management of staff and structured maintenance programme help reduce operation costs significantly. Upgrading existing water treatment plants or building new ones are also challenging and require big investment. Most water supply companies don’t have enough resources hence they are in need of external support.” – Said Vinh Ngo, Howaco’s Vice Director.
Statistics show that only 40% of the rural population in Vietnam has access to safe water. This indicates high potential to scale up this inclusive business model and adopt Howaco’s technology to meet the increasing market demand for clean water in rural and suburban areas of the country.
"It's so inspiring and rewarding to take up the challenge, grow with your business and bring good things to Vietnamese people. It makes my life more meaningful."- Vinh shared his thoughts.