Explore the country and target locations of the investment opportunity.
Country
Cambodia
Situate the investment opportunity within sustainability focused sector, subsector and industry classifications.
Sector
Infrastructure
TCdata360 ranked quality of Cambodia’s infrastructure as 99/137 in 2017, indicating a lack of housing, waste management and water treatment to support its growing population and urbanization.(1) As a result, Cambodia’s performance score on SDG 6 (Clean Water and Sanitation) was ~60.(2) As of 2017, rural access to improved quality of water was 73%.(3)
The National Water Supply and Sanitation Sector Policy (2003) sets the target of providing complete water coverage by 2025. (4) Ensuring all Cambodians have access to clean drinking water is a Cambodia Millennium Development Goal.
Poor infrastructure can exacerbate gender and regional disparities. In 2019, the gap between rural and urban coverage for clean water access was 15.2 points. The gap is even wider for access to piped water as it reaches 33.9 points. (5)
The burden of fetching water falls on women and children, especially girls, when water is not easily accessible in homes. As such, the opportunity cost of collecting water is high for women as it shortens their time available to spend on themselves, with families, on child-care, other household tasks, or even in leisure activities.
For both boys and girls, water collection can take time away from their education and sometimes even prevent them from attending school.
Moreover, when water is not available at home, and has to be transported and stored, the risk of contamination increase by the time it is consumed, thereby impacting the health of the whole family, particularly children. (6)
Ensuring availability and sustainable management of water and sanitation for all by 2030, as defined by SDG6, requires investing in adequate infrastructure.(7) China Development Bank invested >USD 5.7 bn from 2007 to 2019 in infrastructure development in Cambodia. Since 2020, European Development Bank (EIB) has invested USD 57 mn in rural infrastructure.(8)
Although, Piped Water System (PWS) is a preferred water supply option, barriers to connectivity include affordability of the initial connection fees, and to a lesser extent, the volumetric tariff.(9) Existing single PWS have been underperforming due to weak operations, significant leakage, and the inability to finance expansion of their networks.(10)
Sub Sector
Utilities
~29% of Cambodian population [73% of rural households (3)] lacks access to an improved water source, making them vulnerable to contracting waterborne diseases. The use of untreated water puts families at risk of contracting dangerous waterborne diseases, including diarrhoea, dysentery, typhoid, cholera, hepatitis, parasites, arsenic poisoning, and malnutrition.(10)
National Strategic Plan for Rural Water Supply, Sanitation and Hygiene (RWSSH) 2014-2025 (11)
Sustainable and reliable water supply remains scarce in Cambodia’s rural areas, where about 77% of the total population (16.4 mn) resides. In 2017, while 73% of rural households had access to improved water supply, only 11% of those had piped water supply. (3)
The existing market of scattered individual piped water operators throughout Cambodia is failing to adequately provide clean water needed, especially in rural areas. (10)
Rural population is vulnerable to climate change impacts, and excluded from protective measures due to the logistical, financial and technological constraints that isolation poses. Thus, it is imperative to provide safe and affordable water to underserved, rural and semi-rural communities through a unique management approach for PWS. (12)
In 2019, ~27% of rural households purchased water from a service provider, 16% from PWS, 9% from a vendor, and 2% from a bottled water distributor (compared to ~11% in 2009). This is a result of the country’s economic growth, increased disposable income, and the emergence, strengthening, and expansion of both centralized and decentralized water supply services. (9)
Although impact investors, donors, and development agencies have strong interest in supporting the piped water sector, single operators struggle to attract adequate funding needed to improve their operations, due to small individual size, inadequate capitalization, and lack of proper governance. (10)
Industry
Water Utilities and Services
Discover the investment opportunity and its corresponding business model.
Investment Opportunity Area
Piped Water Systems (PWS)
Business Model
Invest in businesses engaged in supply and distribution of affordable and safe piped water to rural households through PWS, covering the entire end to end water utility services from source to consumer household. Business model can be under PPP arrangement with the Royal Government of Cambodia (RGC), or under a license.
TapEffect is a social enterprise that brings the technical know-how and financial capabilities to manage a portfolio of commercially viable PWS, providing safe & affordable water to underserved rural & semi-rural communities. It operates in a region near the Thai border, covering an area of ~2,300 households.(13)
In 2020, TapEffect received USD 220,000 as a loan from The Pioneer Facility for constructing and operating a new piped water station and pipeline in Banteay Meanchey province in rural Cambodia.(7)
Khmer Water Supply Holding (KWSH), seeded in 2013, by the project promoters, Obor Capital and an early stage investor, Insitor Seed Fund [majority owner (14)]. It operates a portfolio of small-scale piped water networks that distribute clean drinking water directly to households in rural Cambodia. (15)
Each rural water station is a subsidiary company with its own water license, operations team & water treatment / distribution facilities. Currently, KWSH manages 5 stations, for a total of over 40,000 households. KWSH has received a grant from a Development Finance Institution (DFI) and its program is designed to expand the delivery of key infrastructure services. (14)
Learn about the investment opportunity’s business metrics and market risks.
Market Size and Environment
Market Size (USD)
USD 100 million - USD 1 billion
CAGR
Demand for water is so high; Consumers pay USD50-100 per year for contaminated/low quality water(16)
Critical IOA Unit
>5 mn people lack access to clean water; >11 mn (70% in rural areas) lack access to piped water (17)
Apart from 13 existing public urban water utilities, there are ~530 private PWS operators in urban and rural Cambodia that are known to the regulatory authority, Ministry of Industry and Handicrafts (MiH) and the Cambodia Water Supply Association (CWA). ~350 of these private operators are categorized as being Small Water Enterprises (SWEs), serving small towns and rural areas. (9)
The Asian Development Bank (ADB) issued USD 49 mn (USD 15 mn policy-based loan; USD 29.61 mn project loan; USD 4.39 mn grant from the Asian Development Fund) to help RGC achieve its 2025 goal of providing universal access to improved water supply and sanitation services in rural areas.(3) Since 2020, European Development Bank (EIB) has invested USD 57 mn in rural infrastructure.(8)
The Third Rural Water Supply and Sanitation Services Sector Development Program aims to benefit >400,000 people by constructing or rehabilitating 2,500 rural water facilities in at least 400 villages across 10 Cambodian provinces. (3)
Indicative Return
IRR
15% - 20%
One TapEffect water system can connect 1,000-10,000 households, with each household paying an initial USD 40-70 connection fee and an average annual water bill of USD 50 for safe, clean, and reliable water. (17)
For every dollar invested in water and sanitation, there is a USD 4.3 return in the form of reduced health care costs for individuals and society around the world. (18)
Investment Timeframe
Timeframe
Long Term (10+ years)
As for any utility, the returns from a PWS are affected by high initial investments and the need for low tariffs. Returns can realistically be expected within 12-15 years, license periods being over 20 years. (19)
TapEffect has developed a new piped water system, covering 19 villages (3,000+ households) in Banteay Meanchey, Cambodia. It has received a 20-year license to construct and operate a new Piped Water System. (17)
For TapEffect, equipment used is more durable, yet advanced, resulting in low start-up costs. Initial capital is needed to install the TapEffect systems in rural and semi-rural communities. This investment can cost as little as USD 540,000 to support a water system connecting 19 villages or 3,000 households. (17)
Ticket Size
Average Ticket Size (USD)
Investment needs can vary from USD 500,000 to several millions depending on the size (capacity of the company) and growth stage of the water supply business.
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
The low willingness of households to connect to PWS can be a significant barrier to expansion of networks.
Capital - CapEx Intensive
Expansion of PWS to new regions requires significant investment flow. In addition, majority of rural population resides far from the networks, resulting in high transportation costs.
Market - Highly Regulated
Due to the social significance of water supply for achieving sustainable development across the country, businesses need to follow various compliances, and work closely with the regional municipalities. Thus, freedom of operations, and thereby the efficiency of systems may be impacted.
Read about impact metrics and social and environmental risks of the investment opportunity.
Sustainable Development Need
Development of water storage and delivery systems, along with capacity expansion can help resolve the issue of quality and stability of water supply in a timely manner in both wet and dry seasons.
For an effective Water, Sanitation and Hygiene (WASH), a concerted, holistic and systematic approach is required as making progress in each aspect depends on the presence of the other- without toilets, water sources become contaminated, and without clean water, basic hygiene is not possible. (20)
Technological advances in PWS allow for remote monitoring innovations, easy and accurate water payments and bill tracking, as well as sales support and marketing to expand to new communities. (16)
Gender & Marginalisation
Regional disparities in water supply can be resolved through an efficient PWS. With approximately 77% of Cambodians living in rural areas, poor access to safe water and sanitation disproportionately affects Cambodia's rural communities. (3)
Improvement in WASH is required to offer a safe a hygienic environment for underserved children and communities (poor, marginalized, and living in areas vulnerable to environmental risks). 7/10 pre-primary schools lack WASH facilities, and 1/2 rural healthcare facilities lack sufficient water. (20)
Inadequate water and sanitation facilities in schools is problematic for pubescent girls as they reach menarche, and must subsequently manage monthly menses while attending school. This may often lead to girls dropping out of schools. (21)>
Expected Development Outcome
Provide clean drinking water directly to rural and semi-rural households in a scalable and efficient manner. For example, KWSH's consolidated business model allows it to implement high operational standards across its PWS, leverage commercial debt, and scale each PWS to reach more households. (10)
Ensure that PWS service is offered at a lower cost to consumers, than alternative water sources, with significant convenience and improved status. (10)
Generate employment opportunities for local communities, thereby improving their income levels. For its new piped water station and pipeline project in Banteay Meanchey province, TapEffect aims to connect 2 communes (Kouk Ballangk and Sambour), creating 4 full-time jobs on site.(7)
Gender & Marginalisation
Increase access to safe water for informal settlements and rural areas by bringing piped water not only to households, but also to schools and rural health centers. (7)
Promote health and well-being of the population, especially the vulnerable population (children, women and people living near contaminated zones), with decreased rate of communicable water-borne diseases and infections.
Promote menstrual hygiene through progressive WASH behavior change communication, subsequently strengthening sexual and reproductive health of women.
Primary SDGs addressed
6 - Clean water and sanitation
6.1.1 Proportion of population using safely managed drinking water services
Current Value
16% in 2016 (22)
Target Value
50% in 2030 (22)
10 - Reduced Inequalities
10.1.1 Growth rates of household expenditure or income per capita among the bottom 40 per cent of the population and the total population
Current Value
5.2% in 2016 (22)
Target Value
19.2% in 2030 (22)
Secondary SDGs addressed
3 - Good Health and Well-Being
9 - Industry, Innovation and Infrastructure
13 - Climate Action
Directly impacted stakeholders
People
Rural population benefits from reduced regional disparities in supply of clean and safe water.
Gender inequality and/or marginalization
Vulnerable communities benefit from low-cost supply of clean water which helps in ensuring their improved health and well-being. Women are benefited as the burden of acquiring water for the household from far off distances is reduced.
Planet
As water is supplied directly to households, schools and other remote regions, the level of commute required for accessing water sources reduces, thereby reducing the impact of transport pollution on the environment.
Corporates
Companies such as KWSH manage rural water stations and enable them to work effectively, expanding their coverage of households.
Public sector
Improvement in water supply through PWS contributes to several infrastructure and social development related commitments made by RGC.
Indirectly impacted stakeholders
People
Population benefits from increased employment opportunities, adolescent girls and women benefit from improved sanitation facilities, especially in rural areas.
Gender inequality and/or marginalization
Women benefit from improved and safe menstrual hygiene through the provision of WASH facilities.
Planet
Safe and hygienic surroundings through efficient WASH help in reducing land and air pollution, reduce contaminated zones that can lead to potential climate risks.
Public sector
Sustainable development across regions helps in improving Cambodia's score on human development index, with improvement in health indicators.
Outcome Risks
In the case of chemical water filtration method, improper treatment of wastewater can contaminate water resources and the environment.
Unless measures are taken to ensure end to end effectiveness of the PWS value chain, problems such as leakages in the PWS will lead to loss of precious water resource rendering the business model and expected impact thesis ineffective.
Many consumers assume water to be a free commodity, to be supplied by the government, and may not be willing to pay for installation of PWS.
Gender inequality and/or marginalization risk: If the price points for securing PWS systems are not suited to the needs and payment capacities of low income households, communities and regions where such services are required the most they may remain excluded.
Impact Risks
Due to lack of support infrastructure, many people may still be required to travel long-distances to access PWS.
Women and adolescent girls may not fully benefit from such business models if their needs are not accounted for in the design and implementation of PWS services.
Gender inequality and/or marginalization risk: Health issues of rural communities will persist if pipelines installed are not durable, or equipment for water treatment is not adequate.
Impact Classification
C—Contribute to Solutions
What
Installation of PWS to provide access to affordable water supply across regions, ensuring sustainable development in Cambodia
Who
Underserved; Rural and remote areas benefit with improved supply of safe and clean water directly to the place of consumption.
Risk
Inefficient maintenance of pipelines can lead to leakages and therefore loss of water resources with negative impact on the environment
Contribution
For every dollar invested in water and sanitation, there is a USD 4.3 return in the form of reduced health care costs for individuals and society around the world. (18)
How Much
>5 mn people lack access to clean water and >11 mn (70% in rural areas) lack access to piped water (17)
Impact Thesis
Expansion of PWS across rural and remote areas to reduce regional disparities in access to affordable and clean water.
Explore policy, regulatory and financial factors relevant for the investment opportunity.
Policy Environment
National Strategic Plan for Rural Water Supply, Sanitation and Hygiene (RWSSH) 2014-2025 supports the RGC to achieve its vision that everyone in rural communities has sustained access to safe water supply and sanitation services, and lives in a hygienic environment by 2025. (11)
National Strategic Development Plan 2019-2023 presents the vision of development and objectives to reach by 2023 including for rural and urban water supply sector (23)
Financial Environment
Investment Law: Under article 24, green energy technology contributing to climate change adaptation and mitigation is entitled to investment incentives described under article 26 such as income tax exemption for 3 to 9 years, prepayment tax exemption and minimum tax exemption. (24)
Investment Law: Under article 27, besides the basic incentives above, Qualified Investment Project will receive additional incentives such as VAT exemption for the purchase of locally made inputs, deduction of 150 % from tax base for activities such as research development and innovation. (24)
Regulatory Environment
Since 2014, the government has taken progressive steps to strengthen the regulatory framework governing water supply, mainly through a Prakas addressing procedures relating to licensing (2014); and a series of Prakas (2015 – 17) on tariff setting principles. (24)
Water Supply and Sanitation Regulatory Law (draft) aims to encourage the participation and investment of the private sector, both domestic and foreign, in the provision of all Water Supply and/or Sewerage Services. (25)
Prakas on National Drinking Water Quality Standards, 2015 requires private water operators to comply with the water quality standards issued by MIH (26)
Prakas on Procedure for Water Tariff Setting permits the water supply operators to charge from their served customers (27)
Discover examples of public and private stakeholders active in this investment opportunity that were identified through secondary research and consultations.
Private Sector
Corporates: TapEffect, Khmer Water Supply Holding (KWSH) Investors: The Pioneer Facility, Obor Capital, Insitor Seed Fund, Asian Development Bank (ADB), European Development Bank (EIB), China Development Bank
Government
Ministry of Industry, Science, Technology and Innovation, Ministry of Rural Development, Ministry of Water Resources and Meteorology, Department of RWS within the Ministry of Rural Development, Department of Potable Water Supply within the Ministry of Industry and Handicrafts
Multilaterals
World Bank Group, Asian Development Bank, Cambodian Water Supply Association, United Nations International Children's Emergency Fund, Mekong River Commission
Non-Profit
Teuk Saat 1001, WaterAid, 3I (Invest in Infrastructure), GRET, Water for Cambodia, Aqua for All, Cambodian Water Supply Association
Public-Private Partnership
Phnom Penh Water Supply Authority, Sihanouk Water Supply Authority, Siem Reap Water Supply Authority, Battambang Water Supply Authority, Kampot Water Supply Authority
See what country regions are most suitable for the investment opportunity. All references to Kosovo shall be understood to be in the context of the Security Council Resolution 1244 (1999)
Otdar Meanchey Province has the lowest percentage of people with access to safe drinking water, accounting for 1.4%, followed by Kampong Thom at 2% and Ratanakiri Province at 3%. (28)
Mondulkiri, Siem Reap, Pursat, Kompot and Preah Vihear are other provinces in Cambodia with low access to clean water, i.e. less than 10%. (28)
In 2020, The Pioneer Facility issued a loan of USD 220,000 to assist TapEffect in constructing and operating a PWS and pipeline in Banteay Meanchey province (an area of 14,000 people including 10 schools and 2 rural health centers), connecting two communes (Kouk Ballangk and Sambour). (7)
Sector Sources
(1) Business and Sustainable Development Commission. (2017). Better Business, Better World. https://sustainabledevelopment.un.org/content/documents/2399BetterBusinessBetterWorld.pdf
(2) Sachs et al. (2021). The Decade of Action for Sustainable Development Goals. Sustainable Development Reprot 2021. Cambridge: Cambridge University Press. https://dashboards.sdgindex.org/profiles/cambodia
(3) Asian Development Bank. (2019). ADB to Help Cambodia Expand Access to Water Supply, Sanitation Services. https://www.adb.org/news/adb-help-cambodia-expand-access-water-supply-sanitation-services#:~:text=Sustainable%20and%20reliable%20water%20supply,population%20of%2016.4%20million%20live.
(4) Government of Nepal. (2009). National Urban Water Supply and Sanitation Sector Policy. https://www.lawcommission.gov.np/en/wp-content/uploads/2021/01/National-Urban-Water-Supply-and-Sanitation-Sector-Policy.pdf
(5) World Bank. (2015). Water Supply and Sanitation in Cambodia. https://www.wsp.org/sites/wsp/files/publications/WSP-Cambodia-WSS-Turning-Finance-into-Service-for-the-Future.pdf
(6) UNICEF. (2016). Collecting Water is Often a Colossal Waste of Time for Women and Girls. https://www.unicef.org/press-releases/unicef-collecting-water-often-colossal-waste-time-women-and-girls
(7) Nexus for Development. (2020). Pioneer Facility Approves USD 220,000 Loan to Tap Effect for Piped Water Infrastructure in Rural Cambodia. https://nexusfordevelopment.org/blog/pioneer-facility-approves-usd-220000-loan-to-tapeffect-for-piped-water-infrastructure-in-rural-cambodia/
(8) Schmidt, L. (2020). Infrastructure Development in Cambodia. https://borgenproject.org/infrastructure-in-cambodia/
(9) WaterAid. (n.a.). Rural Water Supply in Cambodia: A consolidation of data & knowledge and identification of gaps & research needs. https://washmatters.wateraid.org/sites/g/files/jkxoof256/files/rural-water-supply-in-cambodia-consolidation-of-data-and-knowledge-gaps.pdf
(10) Moik, K. (2018). Scalable Solutions for Clean Water Access in Cambodia. https://socialinnovationsjournal.org/editions/issue-47/75-disruptive-innovations/2819-scalable-solutions-for-clean-water-access-in-cambodia
(11) Ministry of Rural Development. (2019). National Action Plan Rural Water Supply, Sanitation and Hygience 2019-2023. https://www.unicef.org/cambodia/media/2741/file/NAP_II.pdf_.pdf
(12) TapEffect. (2021). A Business Providing Safe Piped Water in Rural South-East Asia. https://www.tapeffect.asia/
IOA Sources
(13) Aqua for All. (2020). TafEffect: Tap Water Supply, Cambodia. https://aquaforall.org/project/tapeffect-tap-water-supply-cambodia/
(14) Moik, K. (2018). Scalable Solutions for Clean Water Access in Cambodia. https://socialinnovationsjournal.org/editions/issue-47/75-disruptive-innovations/2819-scalable-solutions-for-clean-water-access-in-cambodia
(15) Khmer Water Supply Holdings. (n.a.). KWSH: Water to Your Reach. https://kwshsite.wordpress.com/who-we-are/
(16) World Hope International. (n.a.). TapeEffect. https://whi-site-images.s3.amazonaws.com/PDF/TAP-EFFECT-fin.pdfhttps://whi-site-images.s3.amazonaws.com/PDF/TAP-EFFECT-fin.pdf
(17) SEVEA. (2017). Access to Drinking Water in Rural Cambodia: Current Situation and Development Potential Analysis. http://www.seveaconsulting.com/wp-content/uploads/2018/01/Sevea-Access-to-drinking-water-in-rural-Cambodia-2017.pdf
(18) United Nations. (2014). Every dollar invested in water, sanitation brings four-fold return in costs – UN. https://news.un.org/en/story/2014/11/484032-every-dollar-invested-water-sanitation-brings-four-fold-return-costs-un
(19) Ibid
(20) UNICEF. (2019). Water, Sanitation and Hygience. https://www.unicef.org/cambodia/water-sanitation-and-hygiene
(21) Connolly, S., & Sommer, M. (2013). Cambodian girls' recommendations for facilitating menstrual hygiene management in school. Journal of Water, Sanitation and Hygiene for Development, 3(4), 612-622. https://iwaponline.com/washdev/article-abstract/3/4/612/30336/Cambodian-girls-recommendations-for-facilitating?redirectedFrom=fulltext
(22) Royal Government of Cambodia. (2018). Cambodian Sustainable Development Goals (CSDGs) Framework (2016-2030). https://data.opendevelopmentmekong.net/dataset/3aacd312-3b1e-429c-ac1e-33b90949607d/resource/d340c835-e705-40a4-8fb3-66f957670072/download/csdg_framework_2016-2030_english_last_final-1.pdf
(23) Royal Government of Cambodia. (2018). Cambodian Sustainable Development Goals (CSDGs) Framework (2016-2030). https://data.opendevelopmentmekong.net/dataset/3aacd312-3b1e-429c-ac1e-33b90949607d/resource/d340c835-e705-40a4-8fb3-66f957670072/download/csdg_framework_2016-2030_english_last_final-1.pdf
(24) World Bank. (2016). Strengthening Sustainable Water Supply Services Through Domestic Private Sector Providers in Cambodia. https://openknowledge.worldbank.org/bitstream/handle/10986/23769/Final0Synthesi0te0Sector0Providers.pdf?sequence=1
(25) Royal Government of Cambodia. (2000). Law on Water Resources Management of the Kingdom of Cambodia. https://www.wto.org/english/thewto_e/acc_e/khm_e/wtacckhm5_leg_8.pdf
(26) World Bank. (2015). Water Supply and Sanitation in Cambodia. https://www.wsp.org/sites/wsp/files/publications/WSP-Cambodia-WSS-Turning-Finance-into-Service-for-the-Future.pdf
(27) Ministry of Economy and Finance. (2007). Customs Declaration Provision and Procedures. http://cambodiantr.gov.kh/kcfinder/upload/files/Prakas%20No.%201447%20on%20Customs%20Declaration%20Provisions%20and%20Procedures%20-%20EN.pdf
(28) WEPA. (n.a.) State of Water Environment Issues. http://www.wepa-db.net/policies/state/cambodia/drinking5_2.htm#:~:text=Otdar%20Meanchey%20Province%20has%20the,Ratanakiri%20Province%20at%20three%20percent.