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Controversy floods Hanoi over government’s plan to spend big on clean water

Friday, November 15, 2019, 12:26 GMT+7
Controversy floods Hanoi over government’s plan to spend big on clean water
A bird’s eye view of the Song Duong Surface Water Treatment Plant in Gia Lam District, Hanoi. Photo: Ngoc Quang / Tuoi Tre

Hanoians are outraged after local authorities announced a plan in which the city agreed to spend VND200 billion (US$8.6 million) subsidizing local water companies for the outrageously high price of clean water purchased from the Song Duong Surface Water Treatment Plant.

Workers began construction on the VND4,998 billion (US$215.4 million) Song Duong Surface Water Treatment Plant, the largest water treatment plant in the northern region, in Hanoi’s outlying Gia Lam District in  2017.

VND3,998 billion ($172.3 million) of the total amount invested in the plant was acquired through bank loans, according to Nguyen Viet Ha, director of the Hanoi finance department. 

An additional VND1 trillion ($43.1 million) was spent by Duong River Surface Water Plant JSC, the company behind the project, on compensating local residents for site clearance and relocation, Do Thi Kim Lien, the company’s chairwoman, told Tuoi Tre (Youth) newspaper.

The plant first began supplying clean water to vast portions of the capital city in October 2018, when the first phase of construction was completed, just 15 months after breaking ground.

In northeastern Hanoi, Long Bien, Gia Lam, Dong Anh, and Soc Son Districts, as well as urban areas and industrial zones along Road 179 began using water treated by the plant.

Meanwhile, Hoang Mai, Thanh Tri, Thuong Tin, and Phu Xuyen Districts in southern Hanoi and the neighboring provinces of Bac Ninh, Hung Yen, and Hai Duong also started sourcing clean water from Song Duong.

Inside the Song Duong Surface Water Treatment Plant in Hanoi. Photo: Quoc Tuan / Tuoi Tre

Inside the Song Duong Surface Water Treatment Plant in Hanoi. Photo: Quoc Tuan / Tuoi Tre

Alongside a treatment plant operated by Song Da Water Investment JSC, Song Duong became a leading supplier of tap water to Hanoians.

While Song Duong currently sells water to distributors for VND7,700 ($0.33) per cubic meter, Song Da offers its treated water for the slightly lower price of VND5,000 ($0.22) per cubic meter. 

Controversy over the cost of treated water flooded Hanoi, however, when it was publicized that the Hanoi People’s Committee approved a plan in July 2017 to purchase water from Song Duong at a significantly higher rate, VND10,246 ($0.44), and resell it to distributors at subsidized costs.

“We only invested [in the Song Duong Surface Water Treatment Plant] because the city’s authorities agreed to pay VND10,246 [per cubic meter of water]. Otherwise it wouldn’t have made sense for us to invest nearly VND5 trillion in the project,” Lien told Tuoi Tre, explaining that the hefty price tag of the plant’s construction is the driving factor behind its high water rates.

Lien also explained that the firm also factored the 20 percent of the interest on its VND3,998 billion loan into the wholesale price of its water.

Do Thi Kim Lien, chairwoman of Duong River Surface Water Plant JSC, is captured in this photo during a discussion with Tuoi Tre (Youth) newspaper. Photo: Nguyen Khanh / Tuoi Tre

Do Thi Kim Lien, chairwoman of Duong River Surface Water Plant JSC, is captured in this photo during a discussion with Tuoi Tre (Youth) newspaper. Photo: Nguyen Khanh / Tuoi Tre

When local distributors, including Hanoi Water Co Ltd. and Hanoi Water Supply Number 2 JSC, complained they would be unable to purchase water at such high prices, relevant municipal departments proposed a plan to the municipal People’s Committee in December 2018 in which nearly VND200 billion would be allocated to subsidize distributors for the increased costs.

The proposal was approved on January 9, 2019 and the municipal construction department was tasked with implementing the plan on January 10.

According to Nguyen Tien Thoa, the former head of the finance ministry's department of pricing management, Hanoi’s municipal administration neither has, nor had, authority to make agreements on water wholesale prices with Duong River Surface Water Plant JSC.

Thoa told Tuoi Tre that a 2007 government decree regulates that clean water wholesale prices must be agreed upon by water supply wholesale units and water supply retail units.

The proper protocol would have been for Duong River Surface Water Plant JSC to agree on pricing with Hanoi Water Co Ltd. and Hanoi Water Supply Number 2 JSC, rather than the Hanoi People’s Committee.

Thoa also cast a doubt on the transparency of the Song Duong Surface Water Treatment Plant project.

“If [Hanoi authorities] agreed to such an abnormally high water price, it casts doubt on the legitimacy of the bidding process to select a developer for the project,” Thoa said.

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