Independent Evaluation

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Evaluation Report on Loans to the Nghi Son Cement Corporation in Viet Nam
Completed: 2006

This evaluation assessed ADB's support for the Nghi Son Cement Corporation (NSCC), ADB's first private sector project in Viet Nam. In December 1996, the ADB's Board of Directors approved a direct loan of $30 million and a loan of $26.5 million under its complementary financing scheme for NSCC. At the time of project construction, NSCC was the largest greenfield cement plant in the world.

In November 2005, an Operations Evaluation Mission was fielded to review the Project. The evaluation criteria used were based on the best practice guidelines [PDF] identified by the Evaluation Coordination Group of the Multilateral Development Banks on Private Sector Operations as well as ADB's Guidelines for Preparing Performance Evaluation Reports on Non-Sovereign Operations [PDF].

Overall, the project was rated satisfactory.

Lessons Identified

Based on the evaluation of the project, the following factors should be considered when designing projects:

• Government's Commitment to Reform:
  Few of the liberalization measures envisaged in the Report and Recommendation of the President have materialized. This result highlights the need for caution when designing projects in transition economies.



• Private Sector Development:
  The public and private sector operations of ADB should have interacted more for the purpose of discussing policy issues with the Government, including cement pricing and market liberalization to maximize private sector development.



• Revenue and Cost Projections:
  Sensitivity analyses should include variations of up to 50% for prices and volume.



• Resettlement and Compensation:
  When land is forfeit as a consequence of a project, compensation should be in the form of land of an equivalent standard rather than provision of high-risk livelihood maintenance measures such as provision of subsidized credit.



• Sponsor Selection:
  The strong commitment of the sponsors, Nihon Mitsubishi Cement Corporation and Viet Nam National Cement Company, was vital to the success of the Project.



• Financial Structure:
  The financial arrangements adopted have been robust. The model could be replicated in other projects in Viet Nam and other developing member countries where there are problems owning land.



• Project Administration:
  More clarity and standardization of procedures is needed for calculating financial and economic internal rates of return, and improving project administration procedures.



• Development reforms to improve the enabling environment for private firms in areas such as market liberalization without active support from ADB's public sector operations will only have limited impact.



• There is a need for greater involvement of ADB's public sector operations with local governments when designing feasible measures and monitoring implementation of the agreed resettlement initiatives.