Viet Nam: Improving Operational Performance of the Water Supply Sector Project

Sovereign Project | 44002-022

Summary

In February 2011, the Asian Development Bank (ADB) approved a $1 billion multitranche financing facility (MFF) to fund operational improvements for urban water supply during 2011 2020. The MFF provides access to financing to many water companies to help them improve their operations and expand their water supply systems, including intake works, production transmission, and distribution. The facility addresses water as a limiting factor for growth and inclusiveness by expanding water supply services to peri-urban areas, ultimately increasing competitiveness and assisting the transformation of cities and towns to keep pace with rapid urbanization. This capacity development technical assistance (TA) is being processed in parallel with the MFF to help the Government of Viet Nam improve water supply services.

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Project Name Improving Operational Performance of the Water Supply Sector Project
Project Number 44002-022
Country Viet Nam
Project Status Approved
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 8357-VIE: Improving Operational Performance of the Water Supply Sector (Supplementary)
Technical Assistance Special Fund US$ 500,000.00
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Governance and capacity development
Partnerships
Sector / Subsector Water and other urban infrastructure and services - Urban water supply
Gender Equity and Mainstreaming
Description

In February 2011, the Asian Development Bank (ADB) approved a $1 billion multitranche financing facility (MFF) to fund operational improvements for urban water supply during 2011 2020. The MFF provides access to financing to many water companies to help them improve their operations and expand their water supply systems, including intake works, production transmission, and distribution. The facility addresses water as a limiting factor for growth and inclusiveness by expanding water supply services to peri-urban areas, ultimately increasing competitiveness and assisting the transformation of cities and towns to keep pace with rapid urbanization. This capacity development technical assistance (TA) is being processed in parallel with the MFF to help the Government of Viet Nam improve water supply services.

In 2007, the government formulated a progressive legal framework that requires water companies to be equitized and to operate on business principles that would improve their performance. The government's Socio-Economic Development Plan, 2011 2015 includes water sector objectives: (i) identify water as a limiting factor of growth, and support local economic development by developing modern urban infrastructure, and (ii) improve the quality of life and health of people by providing access to safe water. The country program for the water sector in ADB's country partnership strategy, 2012 2015 for Viet Nam is consistent with these policies.

The TA aims to prepare selected water companies to operate on sound business principles in order to efficiently fulfill their service obligations and establish a partnership with the private sector on a voluntary basis.

Project Rationale and Linkage to Country/Regional Strategy

The TA will contribute to the capacity development of selected water companies borrowing under the MFF to improve service to users, specifically targeting improved business planning and financial sustainability, nonrevenue water (NRW) reduction, energy efficiency, and water safety plans. The TA will help water companies define service contracts with local governments (as owners of the water companies and regulators of the water services) and users. The service contracts will include qualitative and quantitative key performance indicators, defined in the business plan, as a basis for regulation by contract, in the absence of an independent regulator. The TA will assist in strengthening the corporatization process to increase the accountability and performance of water companies, and to enable private sector participation in different forms, including PPPs. The TA will address institutional development of the water sector to support (i) the National NRW Reduction Program, which defines ambitious targets for NRW reduction from the current national average of 30%, and (ii) the circular that defines the methodology to calculate water tariffs.

In 2014, ADB increased the TA amount by $500,000 to finance a pilot Pre-Feasibility Study under Public Private Partnership for the water and sanitation of Nghi Son Economic Zone, Thanh Hoa Province, Viet Nam.

Impact Improved institutional framework for water supply services in Viet Nam
Project Outcome
Description of Outcome Improved business practices of selected water companies, serving as best practice examples for the Viet Nam water sector
Progress Toward Outcome Completion of 6 Operation and Maintenance Diagnostic for Water Companies borrowing or intending to borrow under MFF0054-VIE Water Sector Investment Program
Implementation Progress
Description of Project Outputs

1. Improved performance and accountability of selected water companies

2. Introduction of pragmatic procedures for implementing the NonRevenue Water Reduction Program

3. Support for monitoring and evaluation mechanisms for water supply services

Status of Implementation Progress (Outputs, Activities, and Issues)

1) Definition of Key Performance Indicators and discussion with participating water companies on schedule for continuous improvement process and monitoring of water tariff increase to financial sustainability and compliance with Vietnamese Legislation

2) Review of Nonrevenue Water (NRW) under the Operation & Maintenance Diagnostic of the water companies. Discussion with Ministry of Construction to complete National NRW Reduction Program with possible bilateral cofinancing.

3) Monitoring and assistance to project implementation under MFF0054-VIE, especially L2754-VIE and L2961-VIE.

Development of Public Private Partnership initiatives in water supply in line with the Government support for equitization of the water and sanitation sector.

Geographical Location
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design Strong donor coordination on the project design to supplement the policy dialogue and capacity development under MFF0054-VIE
During Project Implementation The TA will support a pilot Pre-Feasibility Study for the financing under Public Private Partnership of the water and sanitation of Nghi Son Economic Zone, Thanh Hoa Province, Viet Nam with additional financing of $500,000.
Business Opportunities
Consulting Services The TA will finance international consultants (estimated 36 person-months) and national consultants (52 person-months).
Procurement Equipment will be procured in accordance with ADB's Procurement Guidelines (2010, as amended from time to time).
Responsible ADB Officer Hubert M. Jenny
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Urban Development and Water Division, SERD
Executing Agencies
Asian Development Bank6 ADB Avenue, Mandaluyong
Metro Manila, Philippines
P.O. Box 789, 1099 Manila,
Philippines
Timetable
Concept Clearance 13 Nov 2012
Fact Finding 05 Sep 2012 to 07 Sep 2012
MRM -
Approval 24 Apr 2013
Last Review Mission -
Last PDS Update 24 Sep 2014

TA 8357-VIE

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
24 Apr 2013 07 Jun 2013 07 Jun 2013 31 Dec 2014 31 Dec 2015 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
500,000.00 0.00 0.00 0.00 0.00 0.00 500,000.00 24 Apr 2013 1,289,567.24

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