As a newcomer in the water supply market, Dong Nai Plastics (DNP) has revenue of VND70 billion in 2017 and net profit of VND5 billion.
The profit is modest if compared with the profit from plastics manufacturing, the core business field of DNP, but the company’s board of management has decided that it will make heavier investments in the water industry.
DNP’s chair Vu Dinh Do said competition in plastics manufacturing has become increasingly stiff, while clean water supply has become more attractive than ever.
Do revealed that to date, DNP has invested in many companies in the industry, with the total capacity of 580,000 cubic meters per day and night, while the figure is expected to rise to 1 million by 2022.
|With stable profit margins and steady growth, the clean water sector is attractive to both domestic and foreign investors.|
DNP was the first private institution that IFC provided a loan worth $24 million to support its investment in the clean water industry.
Nguyen Van But, deputy chair of the Vietnam Water Supply and Drainage Association, said as the ODA capital has been decreasing, while the state budget is limited, it is necessary to call for private investment.
Vietnam needs roughly $10 billion to develop the clean water supply system in Vietnam in the next five years.
The Ministry of Construction has decided that by 2025, 100 percent of residents in urban areas will be provided with clean water. This is a great business opportunity for enterprises.
Commenting about the investment mechanism, the representative from DNP said Vietnam is ‘open’ in calling for investments into the clean water sector. In Malaysia, private investors can implement clean water projects under the BOT mode.
In Vietnam, both BOT and BOO are accepted. The water prices are determined by local authorities, while investors can enjoy tax and land incentives.
Not only Vietnamese, but foreign investors also can see the great opportunities of the industry. VOI, a joint venture between Oman’s SGRF and Vietnam’s SCIC, invested $19 million to build the Song Hau Water Plant which became operational in late 2017.
VOI has also kicked off the construction of the Song Duong Surface Water Plant, capitalized at $225 million which will provide clean water to Hanoi, Bac Ninh and Hung Yen.
Another big foreign investor in the industry is Manila Water Asia Pacific from the Philippines which, by holding SII shares, makes direct and indirect investment in Vietnam’s clean water supply.
SII now has 11 subsidiaries and affiliate companies in the water industry.
A series of investment funds, including VOF, Dragon Capital, Maybank Kim Eng, VMFVF1 and VFMVF2, are eyeing shares of Sawaco’s subsidiaries.