The Dynamics of Water Privatization, Decentralized Power, and the Tragedy of the Commons in Water Management in Vietnam

Thuy Nguyen

Abstract

The recent disruption in clean water supply affecting nearly a million residents in Hanoi, Vietnam, highlights ongoing systemic issues in the country’s water management practices.

The essay discusses the limitations in Vietnam’s water safety management, attributing them to the decentralized nature of power among provincial authorities, inadequate accountability measures, and the complexities introduced by partial privatization of water supply services.

The essay argues that without significant policy reforms and inter-provincial coordination, water safety issues will persist, jeopardizing public welfare and necessitating urgent structural changes in governance and resource management practices.

Keywords: water management, water privatization, Vietnam

Introduction

As many as a million people in Hanoi, Vietnam’s capital, have been without access to clean water for essential needs such as drinking, cooking, and cleaning over the past five days. To meet their fundamental need for clean water, residents have queued for extended periods to fill their buckets with water from mobile water supply tanks. The sight evokes memories of Hanoi from 40 years ago during the early socialist era, when households in apartment buildings relied on shared water tanks and toilets. The incident was attributed to the illegal dumping of oil waste near the Dam Bai reservoir, as reported by Viwasupco, the water supply company (News, 2019).

Disruptions in the supply of clean water or shortages are not uncommon to Vietnamese people, despite the country’s relative abundance of freshwater, characterized by a dense network of streams, rivers, and freshwater reservoirs. Thousands of households in the southwestern region, ranging from Long An to Soc Trang, Ben Tre, and Kien Giang, have experienced water shortages annually in recent years due to salinity intrusion. A similar situation occurs in Da Nang, a rapidly developing city in central Vietnam. Ho Chi Minh City, the largest city with a population of 10 million, also faces a significant risk of water shortages during the dry season. Presently, no water company in Vietnam has sufficient clean water reserves to supply their customers for more than a few days. If a similar incident were to occur elsewhere, their customers would likely endure the same hardships.

Effective water safety planning requires foresight, responsibility, and investment. Best practices should illustrate how swiftly a water utility company can respond to incidents such as waste dumping, how long it can maintain a safe water supply without resorting to contaminated sources, or, in worst-case scenarios, how many households it can serve using mobile devices. Implementing such practices enhances safety for the population but does not yield immediate financial returns.

However, there is minimal regulation to hold public water company executives accountable. While suppliers are permitted to deny services to users who delay payments for more than two months, there is no mechanism for water users to demand a proper response from providers. Furthermore, since public water utilities operate under the jurisdiction of provincial people’s committees by default, they inherit characteristics of Vietnamese bureaucracies: collective decision-making with virtually no individual responsibility. Despite numerous public water safety failures in the past, few individuals have been held accountable.

The recent incident in Hanoi will likely conclude with some culprits facing charges for illegal dumping and polluting the water source. In this scenario, the water company is perceived as a victim. The larger issue of public water safety, as a matter of inter-provincial coordination, investment in social welfare, and good governance, is likely to remain unaddressed.

Decentralized Power and the Tragedy of the Commons

Most rivers in Vietnam, which are utilized for residential water consumption, traverse multiple provinces. Consequently, securing a clean water source for residential use is not the responsibility of any single province. Frequently, the downstream provinces are more populous, enjoy better economic conditions, and therefore have greater water demands, in contrast to their less populous and economically disadvantaged upstream counterparts. Surface water, as a common resource, is not intended for sale – although recent discussions within the Ministry of Environment and Natural Resources have raised the question of whether it should be – but rather for coordinated management (Giang et al., 2012).

Provincial authorities in upstream regions, however, lack incentives to allocate their limited resources toward protecting water sources for downstream provinces. On the contrary, upstream areas can discharge wastewater into rivers and still maintain clean water access by positioning their water treatment intakes above the discharge points.

Water management often exemplifies the “tragedy of the commons”, where individuals, acting in their self-interest, overuse and deplete shared resources to the detriment of the entire community. When resources like land, water, or air are freely accessible, individuals gain personal benefits from their use while the costs of depletion are distributed among everyone. Without regulation or cooperation, this dynamic leads to overexploitation and eventual degradation of the resource, harming collective welfare. Hardin argues that, without intervention or management strategies such as privatization or government regulation, these common resources are likely to become exhausted (Hardin, 1968).

One might expect that a centralized state such as Vietnam could have advantages in dealing with this problem. However, while the centralized state has demonstrated efficacy in maintaining political stability, decision-making authority concerning economic development and resource management is significantly decentralized, leading to fragmented and often uncoordinated policies. Provinces, driven by economic growth goals and revenue generation, compete with one another to attract investment projects and foreign direct investments. In doing so, they sometimes relax or overlook environmental regulations to present themselves as more attractive destinations for development. This competition creates a “race to the bottom” effect, where provinces prioritize short-term economic gains over long-term environmental sustainability.

As a result, shared resources such as rivers, forests, and other natural assets, which often span across multiple provinces, lack a cohesive management strategy. No single province assumes responsibility for protecting these resources because the benefits of conservation are dispersed, while the costs and efforts of protection fall disproportionately on the province undertaking them. Upstream provinces may discharge pollutants into water bodies without facing immediate consequences, while downstream provinces suffer the effects but lack the power or incentive to compel upstream areas to enforce stricter regulations. This absence of a coordinated framework undermines effective resource management and environmental protection, allowing the degradation of shared resources to continue unchecked.

Currently, no effective coordination mechanism exists to compel provinces to collaborate on water resource protection. Downstream provinces see no justification for bearing additional costs, while upstream provinces lack motivation to invest in protective measures.

The Dynamics of Water Privatization

Vietnam has faced increasing pressure to privatize more state-owned enterprises (SOEs) to meet the requirements of a “market economy” and secure better access to US and EU markets (Sjöholm, 2006). The water supply sector, among others, has been placed on this trajectory. However, privatization in this sector has led to significant disruption nationwide, affecting regions from North to South.

There are three primary phases in the public water supply system: (1) extracting water from sources and transporting it to treatment plants, (2) treating the water at the plants, and (3) distributing the treated water through networks.

Among these phases, the private sector has shown the most interest in constructing water treatment plants, followed by the distribution of treated water. Extracting water and transporting it to treatment facilities in cities such as Hanoi, Ho Chi Minh City, and coastal provinces in the South is not economically appealing. The predominant business model in most areas involves private companies purchasing raw water from state-owned companies, treating it in their own plants—often managed efficiently to minimize costs—and then selling the treated water back to the state company. The treated water is subsequently distributed through existing networks, which may be owned by either public or private entities.

The supply chain of public water, from its source to the end consumers, is becoming increasingly complex due to opaque ownership structures. The question of “who sells what to whom and why” highlights the issue of how profits flow into private companies whose shareholders may simultaneously hold positions on the boards of loss-making state-owned companies.

The complexity further increases when considering measures required to ensure public water safety, such as constructing corridors to protect raw water transmission channels, building reservoirs to store water before it reaches treatment plants, and creating storage for treated water. All these measures demand significant land, financial resources, and political will. In urban areas, land is expensive, and capital investment is challenging, particularly when it offers little or no clear financial return. Moreover, political will remains largely absent.

The recent incident in Hanoi will likely conclude with some individuals being charged for illegal dumping and contaminating a water source, positioning the water company as a victim. However, the larger issues surrounding public water safety—namely, inter-provincial coordination, investment in social welfare, and effective governance—are likely to be overlooked. Consequently, without a sustainable solution, similar disruptions in public water supply are expected in the future, whether in Hanoi, Da Nang, Ho Chi Minh City, or the southwestern regions.

Discussion

To ensure a sustainable and reliable water supply, Vietnam must adopt a comprehensive and coordinated inter-provincial approach that encourages cooperation and promotes the protection of shared water resources, particularly between upstream and downstream regions. Given that water systems often span multiple provinces, managing these resources effectively requires a collaborative framework where provinces work together to balance their respective needs and responsibilities. Implementing watershed management councils or inter-provincial committees could facilitate communication, decision-making, and enforcement of shared regulations, ensuring that water resources are managed holistically rather than in isolated, conflicting silos.

Some research indicates that community engagement in the monitoring and maintenance of water supply infrastructure is critical for the long-term sustainability of clean water services. When communities actively participate, they become more invested in the system’s success, leading to better management and protection of water resources. Engaging local residents fosters a sense of ownership, which encourages them to take responsibility for identifying and addressing issues, such as leaks, contamination, or inefficient use, before they escalate into more significant problems. Moreover, community involvement can enhance transparency and accountability, ensuring that resources are allocated effectively, and maintenance activities are carried out regularly. By empowering communities through education and collaborative decision-making, water supply services become not only more sustainable but also more resilient to challenges like climate change, population growth, and resource depletion (Effah et al., 2015; Nguyen, 2016).

In addition, as Vietnam continues to privatize elements of its water supply infrastructure, it is crucial that these efforts are accompanied by robust, transparent regulations designed to mitigate conflicts of interest and uphold the accountability of both public and private entities. Clear guidelines must be established to define the roles and responsibilities of private companies, ensuring they prioritize public safety and environmental sustainability alongside profitability. This would involve setting and enforcing performance standards, requiring regular reporting on water quality and infrastructure maintenance, and imposing penalties for non-compliance. Transparency in the bidding and contracting processes is also essential to avoid corruption and ensure that the selection of private partners is based on their capacity to provide sustainable and effective water services.

Conclusion

The ongoing challenges in Vietnam’s water supply system highlight the critical need for comprehensive reform in governance, resource management, and regulatory practices. Despite the country’s abundant freshwater resources, the decentralized power structure, coupled with insufficient accountability and opaque privatization efforts, has led to frequent disruptions and mismanagement. To ensure a sustainable and reliable water supply, Vietnam must implement a coordinated inter-provincial approach that incentivizes collaboration and resource protection, particularly between upstream and downstream regions. Furthermore, privatization efforts should be accompanied by transparent regulations that prevent conflicts of interest and ensure accountability of both public and private entities. A long-term commitment to investing in infrastructure, safeguarding water sources, and enhancing governance mechanisms is essential for addressing the systemic issues that threaten water security. Without such measures, Vietnam will likely continue to face recurrent water crises, compromising the health, well-being, and economic stability of its citizens.

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