Independent Evaluation

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Evaluation of Second Provincial Towns Water Supply and Sanitation Project in Viet Nam
Completed 2008

  Background

Following the 1995 project aimed at providing water supply and sanitation facilities in six provincial towns in Viet Nam, ADB approved in February 1997 a $69-million loan to expand the provision of safe water and sanitation to communities in Tuyen Quang, Ninh Binh, Vinh, Dong Hoi, Dong Ha, Qui Nhon, and Ben Tre. This second phase supported the Government's efforts to provide safe water to satisfy a basic human need and improve public health. The Second Provincial Towns Water Supply and Sanitation Project intended to (i) enhance public awareness of hygiene and sanitation, (ii) improve the urban environment in the project towns by investing in drainage and sanitation systems, and (iii) restructure and strengthen existing institutions through a blend of capacity building and policy reform.

  Project Component Outcomes

• Part A (Public Environmental Education Program) had a beneficial impact in terms of physical outputs, with wide-ranging participation that included communities, provincial people's committees (PPCs), the Viet Nam Women's Union, local preventive health care units, and two United Nations volunteers in building awareness on public hygiene.



• Part B (Water Supply Systems Development) made possible the continuous availability of running water, while prior to the Project, water was typically available for just 2-4 hours on alternate days. The rate of nonrevenue water in the seven project towns was about 21%-30%, down from 33%-57% in 1996.



• Part C (Environmental Sanitation Improvements) constructed about 65 kilometers of new drainage and rehabilitated an equivalent length of the primary, secondary, and tertiary drainage systems; improved sanitation systems; and introduced 14,170 toilets with septic tanks (compared with 11,540 units anticipated at project inception).



• Part D (Implementation Assistance and Institutional Strengthening) allowed staff of the Central Project Management Unit (CPMU) and provincial project implementation offices (PPIOs) to gain experience and understanding of ADB procurement and bid evaluation regulations and guidelines.

  Summary of Findings

The Project is rated "successful." It is also rated "highly relevant," given the Government's priorities both at appraisal and at the time of evaluation. It was consistent with ADB's country strategy of improving infrastructure and the standard of public services, which contributed to a general improvement in the environment and standard of living.

The Project was "highly effective," as the envisioned outcomes were achieved. The targets and indicators show that the objectives were generally met, particularly in Part B; the seven towns have gained continuous water supply, with 80% of the core contiguous area of the towns generally covered.

The Project was "less efficient," as the contracting process was delayed, indicating that it was inefficient. Economic benefits identified during project appraisal were realized, and the Project was economically viable. The average economic internal rate of return (EIRR) for the seven project towns is estimated at 13.98%, compared with 16.79% at project completion. The EIRR for individual project towns ranged from 12.19% to 17.95%, which are above the standard threshold of 12% for public infrastructure projects. They are also comparable to the appraisal estimates for the EIRR, which ranged from 11.4% to 20.9%. After the initial start-up delay, the Project picked up momentum. The project scheduling during the processing was too optimistic.

The Project is rated "likely sustainable." The financial reevaluation of the water supply component generated an average financial internal rate of return of 5.59% for the seven project towns, which is above the weighted average cost of capital. Technically and institutionally, the Project has good prospects to be sustainable, but in terms of financial sustainability, most of the seven towns will be facing a challenging task to cover costs for adequate maintenance when facilities begin to wear, and for capital for expansion and renovation. Despite the decentralization, provincial governments are still reluctant to charge the full-cost recovery based tariff. Currently, water supply companies (WSCs) recover cost by doing other businesses or by using subsidies from PPCs. Another concern is water quality; soil in Viet Nam contains high amounts of iron, and towns that chose groundwater extraction require clear guidelines from the Ministry of Construction (MOC) regarding treatment procedures.

  Key Issues

• Autonomy of provincial people's committees and clear delineation of authority on tariff controls. The Government needs to clearly delineate which ministry has overriding authority on tariff controls, and should pursue complete autonomy for the PPC for tariff setting. The line of authority and tariff-setting autonomy should be consistent and clear: Interministerial instruction no. 59 (No. 59/2007/ND-CP, October 1996) has given power to WSCs to project and introduce tariff increases, with the approval of the local PPC. However, the central Government (i.e., the Prime Minister's Office and MPI) can impose a cap on the water tariff increase.



• Government approval process was very extensive. The approval process in Viet Nam was very extensive during project implementation, which has implications for future projects and the ongoing portfolio of ADB operations in Viet Nam. The Government and the international aid community should continuously discuss how approval time can be reduced, as this is almost a constant impediment to any infrastructure-related project. The Evaluation Mission also confirmed (and this was verified by the Fifth Joint ODA Portfolio Report, para. 24) that provincial committees remain hesitant to accept the newly acquired ODA implementation responsibility, and instead seek approval of the ministries involved, still causing major delays.



• Retention of capable staff at PPIO adequate in central coordination unit but problematic in provinces. The OEM observed that there is adequate institutional memory accumulated in the central management and/or coordination unit in MOC in Hanoi since project directors and some staff have been trained on externally assisted project implementation and civil works procurement, and are still working. However, there is little institutional capacity accumulation in provinces despite more delegation of power to PPIOs. Part of the problem lies with the fact that salaries are low in provinces, and thus jobs have high turnover rates.



• Introduce standard guidelines on sludge treatment. WSCs should introduce standard guidelines on the proper disposal of treated sludge from treatment plants. The Evaluation Mission observed during visits to water treatment plants that sludge produced by the plants was casually disposed of with little consideration or control. Proper disposal of the sludge is important to mitigate environmental impacts. Some WSCs also lose the opportunity to raise additional revenue. Depending on its content, some sludge can be effectively used as fertilizer by selling it to farmers' associations, except if it contains pollutants. In general, sewerage and drainage remain significantly underinvested compared with water supply, even after the Project's infrastructure improvements.

  Lessons

• When coordinating with other agencies in the recruitment of consultants, rigorous needs assessment and quality control are needed to meet the high standards of Viet Nam Women's Union.
• MOC needs to draws up a long-term strategy on (i) which agency will be responsible for the development and maintenance of drainage, (ii) whether sewerage operations need to be integrated with water supply or kept separate, and (iii) how to sustain the technical and financial burden of the sewerage, either from local taxes or a specific tariff.
• There is a need to maintain various project impact data, including health and socioeconomic data, to continuously monitor improvements in the public health and livelihood that social infrastructure projects will yield.
• Both the central Government and responsible WSCs need to take concrete actions to improve water quality and address consumers' complaints.
• Where bacteria-related cases are occurring, WSCs should push for (i) an extensive monitoring system on well water quality; (ii) daily microbiological testing at random sites; and (iii) most importantly, public release of results to satisfy concerns on the general public.
• Currently, all expenses associated with septic tank installation and maintenance are fully borne by households, and where there is no sewer system development plan in sight, the provincial government needs to strategize how to achieve greater sanitation coverage to improve local hygiene conditions, including extension of financial incentives.

  Suggested Follow-Up Actions

Team Leader: Tomoo Ueda, tueda@adb.org
Contact: evaluation@adb.org