Water prices, and determination of customer satisfaction: A comparison of private and rest sectors of managing in the rural water supply schemes

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Water prices, and determination of customer satisfaction: A comparison of private and rest sectors of managing in the rural water supply schemes

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The paper compares water prices and affecting factors customer satisfaction on clean-water supply of private sector with the rest of management (State-owned companies, Province Center for rural Water Supply and Environmental Sanitation and People‟s committee). Using an explanatory regression model with the survey data from 67 water supply schemes and 900 households of different management organizations in two regions of northern and southern Vietnam. The paper shows that private sector has a higher water price compared to the rest sector of the managed area of 962 VND/m3 . Customers of private sector have a higher satisfaction level than the rest of the managed area of 4% compared to the average satisfaction level. The factors affecting customer satisfaction are: (1) waiting time for water deliveries, (2) pressure of water, (3) color of water, (4) smell of water, (5) location of household users and (6) project duration.

WATER PRICES, AND DETERMINATION OF CUSTOMER SATISFACTION: A COMPARISON OF PRIVATE AND REST SECTORS OF MANAGING IN THE RURAL WATER SUPPLY SCHEMES Ass-Pro Dr Doan The Loi Theloi2001@yahoo.com Institute for Water Resources Economics and Management Dr Nguyen Huu Dung dungfuv@yahoo.com Department of Natural Resource Economics, National Economic University PhD student Nguyen Tuan Anh anhnt.iwem@gmail.com Institute for Water Resources Economics and Management Abstract The paper compares water prices and affecting factors customer satisfaction on clean-water supply of private sector with the rest of management (State-owned companies, Province Center for rural Water Supply and Environmental Sanitation and People‟s committee) Using an explanatory regression model with the survey data from 67 water supply schemes and 900 households of different management organizations in two regions of northern and southern Vietnam The paper shows that private sector has a higher water price compared to the rest sector of the managed area of 962 VND/m3 Customers of private sector have a higher satisfaction level than the rest of the managed area of 4% compared to the average satisfaction level The factors affecting customer satisfaction are: (1) waiting time for water deliveries, (2) pressure of water, (3) color of water, (4) smell of water, (5) location of household users and (6) project duration Keywords: water supply, private sector, water prices, customer satisfaction Introduction The concentrated water supply system is the essential infrastructure to provide clean water in order to improve the health of people in rural areas and socio-economic development in the recent past In the period from 2000 to present, the Government has implemented national target programs on rural clean water and environmental sanitation According to the statistics of the Ministry of Finance, by March 2017, there were 15,878 constructions totaling about 33,980 billion VND (1.498 billion USD, 0.50 billion USD per year) Of these, 14,991 works have a national database of assets managed and stored by units with a total value of 19,654 billion VND: (i) Commune People's Committee manages 12,614 submit (accounting for 84.60%); (ii) Public non-business units managed 1,860 (accounting for 12.47%); (iii) enterprises managed 437 works (accounted for 2.93%) 792 Comparing Vietnam's water supply, rural water supply for 2011-2015 accounts for 25.61% of total investment in water infrastructure (totaling 5.85 billion $) Rate of investment capital for rural water supply compared to investment capital for water supply infrastructure in Vietnam in the period 2011-2015 (accounting for 25.61% of total investment in water supply infrastructure) The demand for investment in rural water supply for the period 2018-2025 is 5.59 billion USD (0.63 billion USD per year on average) and 12.22 billion USD in the next 2025-2040 period an average of 0.82 billion USD per year Therefore, the demand for investment in rural water supply in the coming time is 1.44 times higher than the period 2011-2015 According to the assessment of the Center for Rural Water Supply and Environmental Sanitation (RWSA), the constructions will be medium and large scale compared to the previous period in order to ensure the sustainability of the constructions From 2016 onwards, the investment capital for the rural water supply system will be integrated into the new rural program Fig 1: Investment capital for rural water supply in Vietnam until 2040 Nguồn: Global Infrastructure Outlook and author's calculations In addition, according to the National Action Plan report, sustainable maintenance of rural water supply facilities for the period 2016-2020 (2016), funding for maintenance of sustainable water supply facilities is 4,358.618 billion VND To compensate for this funding, it is necessary to involve the private sector in investment, management and operation of water supply facilities in rural areas, reducing the burden on the state budget Studies pointing out that the private sector and the state sector and the management community in the water sector have their own pros and cons There are a number of comparative studies between the private sector and the public sector in the water supply sector According to the authors Antonio Estache and Martín A Rossi (2002) using 1995 data with sample sizes of 50 companies in Pacific regions and using test results in the US With this topic study, Elizabeth L Kleemeier (2010) summarized the rural private operator initiatives as a promising option for addressing sustainability and sustainability issues The site describes 25 case studies from Sub-Saharan Africa, North Africa, Latin America, the Caribbean, South and Southeast Asia In addition, the Latin American study by George, 793 Clarke, Katrina and Scott (2009), based on a comparison before and after private sector participation, shows that the proportion of household The results of a study in Portugal by Rui Cunha Marques (2008) compared water supply systems managed by the private sector and the state sector, indicating that the management of the water supply system in the area The private sector is better than the state sector However, the study by Edouard Pe'rard (2009) in OECD countries is based on the evaluation of 22 empirical tests with 51 case studies showing that private sector participation in water supply has not a positive consequence A study by L Koestler (2009), in four case studies in Uganda, shows that private sector participation provides a high degree of motivation and effectiveness, but is not appropriate at all community Research by Eshien Chong, Freddy Huet, Stephane Saussier, and Faye Steiner (2006) supplies water in France with a sample size of 3,650 enterprises (31% managed by the public sector and 69% managed by the other sector) The average water price of pumping stations managed by PPP is higher than the average water of 17.45% Another aspect is the satisfaction of water service users at water supply stations by different organizations, which is an important objective in overall quality management In the field of public service in general and water supply services in particular, there are many studies to evaluate customer satisfaction According to the study by KC Ellawala and DPMP Priyankara (2016) in southern Sri Lanka from July to September 2015, a sample of 583 households with 25 interview questions revealed that the site the residence area is the most influential parameter on satisfaction Satisfaction on the safety of the smell was more than 95% of the respondents The authors Parviz Fattahi, Amirsaman Kherikhah, Ramin Sadeghian, Shahla Zandib and Saeed Fayyaz (2011) propose a model for measuring the level of satisfaction of customers in the water supply sector Some important criteria such as water quality, quantity of water, corporate responsibility, etc are differentiated and used in the proposed model Adnan Enshassi (2005) surveyed 609 households in Gaza Strip states, the results of which show that most respondents were dissatisfied with the service water supply relates to water quality, quantity and continuity A study by Karoline Hormann (2016) analyzes the determinants of user satisfaction in clean water, sewage and trash in Portugal The study conducted a survey of 1,070 clients conducted by the Portuguese Water and Wastewater Management Authority And using the logitic model to analyze the relationship between overall service satisfaction and service satisfaction, the results show that overall consumer satisfaction with specific service aspects but not related to socio-economic and demographic features The study by Jayaramu KP, B Manoj Kumar, Prasanna Rashmi KK (2014) in the city of Hubli-Dharwad, South India for a long time compared two continuous water supply and intermittent water supply in Hubli The results of the study show that most clients in the continuous water supply area are very satisfied with water quality, continuity, quantity, and pressure; while there is little (12%) dissatisfaction in discontinuous water supply In Vietnam, the general concept of private sector is based on level of generalization including public sector and non-state sector There are many opinions about the private sector in Vietnam's regulations such as Joint Circular 37/2014/TTLT-BNNPTNT-BTCBKHĐT of the Government of the Socialist Republic of Vietnam provides: (1) Private; (2) 794 Cooperatives; (3) Public non-business units; (4) Enterprise In Circulars 54/2013/TT-BTC, assigns the works to directly manage, use and exploit, including: (1) Public non-business units; (2) Enterprises; (3) People's committees of communes, wards and townships And according to Directive No 35/CT-TTg, the order of priority for management and operation assignment is as follows: (1) Enterprises; (2) Public non-business units; (3) Commune People's Committee According to Doan The Loi, Nguyen Tuan Anh (2016) in the water sector, some forms of management organizations such as communities, cooperatives, commune people's committees are not entirely state-owned or private sector In order to identify private sector , the research team divides the active organizations and individuals that provide rural water supply into three main areas (1) Private sector includes: organizations and individuals investing in the construction of rural water supply facilities (CRWS) and directly managing or privatized rural water supply enterprises, government no holding share (over 50% of capital) The private sector mainly operates as an enterprise (under Enterprise Law 2014, excluding state owned enterprises) and individual business households (2) The State-owned sectors: are state-owned organizations whichs set up construction of rural water supply facilities The state sector usually consists of state-owned enterprises, Public non-business units; (the Center for Rural Water Supply and Environmental Sanitation, management board) (3) The other sectors: is organizations outside the two sectors, such as People's Committees, communities, cooperative groups, etc., are jointly invested in the construction of rural water supply facilities and managed directly Each management model in Vietnam shows different advantages and disadvantages Considering the differences between the private sector and the remaining models, they can be grouped into two areas: (1) water supply stations managed by the private sector; (2) Water supply stations managed by the rest of the area (non-private sectors including Stateowned enterprises, public service delivery agencies, Commune People's Committees, cooperatives, community management) The efficiency of private sector management compared to the rest of the region does the private sector actually operate better than the rest in terms of water prices and customer satisfaction? From there, it is possible to export solutions to attract or overcome pros and cons to attract the private sector to participate in investment, management and operation of rural water supply facilities Method To determine the difference between the private sector and the rest of the water price and customer satisfaction in this study based on dummy variable modeling a Evaluate the difference between water prices Used by estimating the smallest price regression on a set of indicator variables for organizational choice and a set of exogenous factors (including water supply technology, capacity, capital productivity investment, life expectancy, ), the length of the system, the number of households serving, the rate of water loss 795 p =DPδ +Xβ +u with u ~ (0,Σ) Where p is the price of water for 1m3 (VND/m3) DP: A dummy variable containing the management involvement index of different management organizations DP=1 if privater sector is managed DP= if the rest area is managed X is a set of exogenous controls u is the (heteroskedastic) stochastic error We are interested in the coefficients δ which measure the average shift in price across different the private sector and the rest manage Here dummy D receives a value of when the water supply station managed by the private sector manages, and receives zero value when the water supply station managed by the rest of the area includes: public sector, Commune management, cooperative management, and community management Analysis and processing of results use IBM-SPSS 22.0 statistical software This model used by the authors Eshien, Freddy, Stephane, Faye (2006) to examine the differences in water pricing between privatesector water supply stations under PPP contracts with linear regression model According to the Ministry of Agriculture and Rural Development and Mouhamed (2016), the private sector participates in investment, management and participation in areas with high population density and high income In the whole country, the private sector is involved in investment and management mainly in the two major deltas, the Red River Delta (north) and the Mekong Delta (south) According to the General Statistics Office, the population density in 2016 in the Red River Delta is the highest in the country at 994 persons/km2, and the region with the third highest population density is 433 people/km2 Water supply stations were surveyed mainly in the Red River Delta and the Mekong Delta In particular, the Red River delta has a variety of management models, and the efficiency of each province is different, while in the Mekong Delta the provinces have the same management models Table 1: Data of water supply station analysis No 796 Province Describe the data Thai Binh, Ha Nam, Long An Survey data for 30 water supply stations, corresponding to each province surveyed 10 stations There are 15 stations managed by the private sector, managed by the State, 10 by the People's Committee (Commune People's Committee, cooperative, community) in 2015 under the auspices of the Australian Embassy Ha Nam, Bac Ninh, Vinh Phuc, Hung Yen, Phu Tho, Thanh Hoa, Quang Ninh, Ha Noi Survey data includes 37 water supply stations in Ha Nam (3 stations), Bac Ninh (5 stations), Vinh Phuc (2 stations), Hung Yen (5 stations), Phu Tho (2 stations) , Thanh Hoa (4 stations), Quang Ninh (7 stations) Hanoi (6 stations) Data collected by the Institute for Irrigation Economics and Management in 2017 The data for the 2017 survey includes 19 stations managed by private sector, 12 managed by state owned sector and managed by Commune People's Committee b Evaluate the difference between customer satisfaction In determining the difference in customer satisfaction of the private sector and the rest of the region, the authors used the dummy variable model to distinguish the private sector and the rest The impact on customer satisfaction as analyzed above is the amount of water, quality and location of households using the system Using the data set of 900 households surveyed by the Institute of Economics and Management of Irrigation under the Australian Embassy's implementation of the Private Sector Assessment in 2015 in three provinces of Ha Nam (300 households), Thai Binh (300 households), Long An (300 households) S =αD + βY+u S is customer satisfaction on the likert scale of points DS: a dummy variable containing the management involvement index of different management organizations DS= if privater sector is managed DS= if the rest area is managed Y is the control variable (including water hours, water pressure, color, odor, taste of water and distance from household to water supply station) In addition, in this study, the author proposes additional features for the water supply station such as project duration, length of pipeline / household, scale of water supply station Factor α to consider the degree of customer satisfaction differences between the private sector and the rest Data set of 900 households interviewed after analysis using IBM-SPSS 22.0 statistical software Results 3.1 Description of characteristics of the objects to be surveyed a Pumping Stations Based on data collected from 67 pumping stations in 10 provinces (including provinces in the North and a province in the South) among them 34 pumping stations managed by the private sector (accounting for 50.75%) and 33 water supply stations managed by the other sector (accounting for 49.25%) (see table 2) Table 2: Selected pumping stations in survey Organization The other sectors No Province Private Sector I Northern Bac Ninh 2 Ha Nam 10 Ha Noi Govermen t Sector Commune People‘s Committee Coope Community rative Tota l Rate (%) 0 7.46 1 14 20.90 8.96 797 Organization The other sectors No Province Private Sector Govermen t Sector Commune People‘s Committee Coope Community rative Tota l Rate (%) Hung Yen 1 7.46 Phu Tho 0 5.97 Quang Ninh 0 10.45 Thai Binh 1 10 14.93 Thanh Hoa 1 5.97 Vinh Phuc 0 2.99 II Southern Long An 1 10 14.93 34 17 67 100.00 50.75 25.37 7.46 10.45 5.97 100 Total Rate (%) The characteristics of the rural water supply station are described in Table 3, the size of the rural water supply stations operated by the private sector is larger than the rest The performance in terms of m3 night-day and work life of the rest of the area is higher than that of the private sector Table 3: The characteristics of the rural water supply station Management area Capacity according Performance to design by m3 daynight (%) (m3day-night) Water price Pipeline Life expectancy includes VAT length (km) for 2017 (years) (VND/m3) The rest of the area 1256.03 0.61 20.48 5235 Private sector 2979.62 0.57 47.94 6349 b Household users Table show the analytical variables In there, the average water price of the pumping stations survey is 5,800 VND/m3, the lowest is 2,500 VND/m3 which managed by the community (Long An Province) and the highest is 8,400 VND/m3 which managed by individual business households (Long An Province) Other features of the pumping station water are showed in Table below Table 4: Features of the pumping stations were surveyed in the analysis model Variable Concept P 798 The current water price of the pumping stations, the water price included VAT (VND / m3) Minimum Maximum 2500 Mean 8400 5800.075 Variable Concept Minimum Maximum Mean D Denoting the management area Value1 is the managment of private sector and value is the managment of other sector 0.507 X1 Total lost water divided the km of the system 019 1.243 0.296 X2 Rate of water loss %)1 050 750 0.276 X3 Number of connected households divided 10000 015 800 0.206 X4 Length of pipeline divided number of connected households (m/ household) 3.338 107.260 18.505 X5 Project duration to 2017 0.000 30.000 6.150 P After clarifing other values in water quality assessments such as color, smell, and taste, and other water quality assessments Table shows 900 interviewed households then filtering out 442 households which the results describing by region, province of management In table 5, the results of analysis of the households after filtering out, the proportion of households in the private sector and the rest are 58.82% and 41.18%, respectively And the proportion of men and women is 55.88% and 44.12% respectively (see table 5) Table 5: Features of interviewed households by region and province Ha Nam Gender Male Female Long An Thai Binh Total Rate(%) Other Sectors Private sector Other Sectors Private sector Other Sectors Private sector 10 20 69 65 22 61 247 55.88 15 56 58 18 41 195 44.12 Table illustrates the features related to customer satisfaction in the analysis model Table 6: Results of Features related to customer satisfaction in the analysis model Variable Concept Min Max Mean S Satisfied customers about water supply system according to a five point Likert scale (1- Very dissatisfied, - Not satisfied, - Normal, - Satisfied, 5- Very satisfied) 3.67 DS Managed area, value is the private sector‘s management and value is other sectors‘s management 59 Y1 How many hours a day is there in your family? (124h, – Only day, 3- Only night, 4-1/2 day, 5Depending on day, 6-Depending on time) 2.97 Y2 Intensity of clean water (1-strong, 2-medium, 3-weak, 4-depending on time, 5- other) 1.50 Calculated by total sales of water 799 Variable Concept Min Max Mean Y3 The color of water (1-Very bad , 2-Bad, 3- no color, 4-Good, 5-Very good) 3.82 Y4 The smell of water (1-Very foul, 2-foul, 3- No smell, 4-Good, 5-Very good) 3.48 Y5 The taste of water (1-salty, 2- brackish, 3-sour, 4-quite sweet, 5-sweet) 4.36 Y6 Distance from system to home (km) 01 7.50 1.85 Y7 Service life to 2017 30 11.03 Y8 Length of pipeline/household (m /household) 3.33 45.05 14.26 Y9 Number of households by design (100 households) 1.00 105.00 19.35 3.2 The difference between the private sector and other sectors a Difference in water prices The least squares OLS estimation result of the model was significant (Sig.F = 0.00), which was smaller than α = 1% meaning that at least one independent variable affects the dependent variable of the water price And the regression coefficient R2 = 0.346 with the Durbin–Watson coefficient d = 1.717; With k '= 6, n = 67 so having dU = 1.642, dL = 1.251 and 4-dU = 2.358, so the model has no level correlation And the VIF coefficient for variables is less than so there is no multicollinearity (Hoang Trong and Chu Nguyen Mong Ngoc, 2008) This cooefficient is in the range 1-3, so the model does not have selfcorrelation The results of the estimation coefficients are presented in Table The analysis results show that the water price of the pumping stations managed by the private sector is higher than that of the other sectors of 962 VND/m3 This difference is statistically significant at

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