Viet Nam : Water Sector Investment Program - Tranche 3

Project Name

Water Sector Investment Program - Tranche 3

Project Number

41456-043

Country / Economy

• Viet Nam

Project Status

Closed

Project Type / Modality of Assistance

• Loan

Source of Funding / Amount

Loan 3251-VIE: Supporting Viet Nam Water Sector, PFR 3

Source	Amount
Ordinary capital resources	US$ 142.50 million

Strategic Agendas

• Environmentally sustainable growth
• Inclusive economic growth

Drivers of Change

• Gender Equity and Mainstreaming
• Governance and capacity development
• Knowledge solutions
• Partnerships
• Private sector development

Sector / Subsector

• Water and other urban infrastructure and services / Urban water supply

Gender

Effective gender mainstreaming

Description

In November 2014, Asian Development Bank (ADB) received the State Bank of Vietnam's periodic financing request letter for project 3 requesting $142.5 million to finance seven water companies (WSCs) having completed their project preparation and initiated advance action under project 2. The investments would improve water services for 1.2 million persons, including 17,500 poor households with their own piped water connection for the first time.

Project 3 outputs will support the multitranche financing facility (MFF) outputs: (i) increased coverage; (ii) improved business planning, financial management, and asset management; and (iii) effective nonrevenue water reduction for seven WSCs for the following: Bac Giang City, Cua Lo Town, Nghi Son Economic Zone, Tam Hiep-Dien Nam, Dien Ngoc Towns, Thai Hoa Town, Thai Nguyen City and Vinh City in four provinces.

Special features of project 3 include (i) promoting technical and financial sustainability by enforcing water tariff increase to full-cost recovery, while reducing subsidies and meeting targets of selected key performance indicators; (ii) providing access to finance for second-ranked WSCs willing to secure their debt through water tariff increase, resulting in greater access to safe water for the poor; and (iii) promotion of engineering, procurement, and construction (EPC) contracts.

The Ministry of Planning and Investment (MPI), coordinating agency for the MFF, is responsible for (i) selecting WSCs that can access the MFF, and (ii) consolidating reports with the assistance of the WSCs. Under project 3, the project management is delegated to the WSCs, and the provincial people committees (PPCs) are the executing agencies. Each WSC has set up a project management unit (PMU) in its organizational structure under project 2. The PMU organizes the procurement of consulting services and works. The MPI has no role in procurement.

Project 3 is structured with one loan to the government. The Ministry of Finance will sign seven subsidiary loan agreements with the participating WSCs with a letter of guarantee from the respective PPC, after the loan signing. Each WSC, acting as implementing agency, will implement its procurement plan separately. The MPI will consolidate the reporting with assistance of the WSCs. The project performance management information system was set-up under project 1 and applies to all subsequent tranches.

Project Rationale and Linkage to Country/Regional Strategy

The project 3 impact will be the sustainable provision of safe water in Bac Giang, Nghe Anh, Quang Nam, Thai Nguyen, and Thanh Hoa Provinces. The outcome will be the improved efficiency of participating water companies. The project impact and outcome address the core sector problem of 'Inefficient Water Service Delivery and contribute to the overall impact of the mutitranche financing facility sustainable provision of safe water in Viet Nam.

Impact

Sustainable provision of safe water in Bac Giang, Nghe An, Quang Nam, Thai Nguyen, Thanh Hoa Provinces.

Project Outcome

Description of Outcome

Improved efficiency of participating water supply companies.

Progress Toward Outcome

Cua Lo and Quang Nam have completed their works. The construction of two civil works contracts in Thai Nguyen is ongoing.

Implementation Progress

Description of Project Outputs

Increased coverage.

Improved business planning, asset and financial management.

Non-revenue water reduced.

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

Constructions completed in Quang Nam and Cua Lo. Thai Nguyen constructions are on-going.

Quang Nam: 297 km

Cua Lo: 99 km

Thai Nguyen: 99 km

Quang Nam: provides free connections for 604 poor HHs, of which 422 FHHs.

Cua Lo provided (connected to water meter) free for 4,300 HH.

Thai Nguyen: still under construction. According to existing local regulations, FHHs and poor HHs are not provided free connections and lifeline tariffs, but the lowest flat tariff for the poor HHs.

Quang Nam: 16,242 HHs in which, poor HHs are 604.

Cua Lo more than 6,000 households.

Thai Nguyen: 416 poor HHs, of which 121 HHs are female headed. 5,713 households will be connected with clean water for first time after project completion.

Constructions completed in Quang Nam and Cua Lo. Thai Nguyen 50,000 m3/day WTP construction is ongoing.

Quang Nam: 40,000 m3/day

Cua Lo: 20,000 m3/day

Totally 110,000m3/day

Quang Nam: Roadmap for water tariff increases every two years. Water tariff average from 2012-2020 as follow:

2012-2014: VND 7,875/m3

2014-2016: VND 8,450 /m3

2016-2019: VND 9,850/m3

At present, the Company has integrated gender and affordability considerations in water tariff. However, the final decision are PPC and authorities.

Cua Lo: the final decision are with the PPC and authorities. However, Cua Lo JSC will have appropriate policies for poor HHs. 2012-2014: VND 4,500/m3; 2014-2017: 10,000/m3; 2017-2020: VND 10,800/m3

Thai Nguyen: the existing water tariff roadmap is increase once a year.

However, due to COVID in 2020-2021, the tariff slightly decrease (3% in TN in 3 months) then stands still to benefit the community.

DSCR should be analyzed from 2021 when the ADB loan principle payment starts. Quang Nam WSC will achieve sufficient (DSCR) above 1.2 from 2021.

Quang Nam:

+ 2012-2018: PMU 7/17 - 41%, Company 38/102-37%

+ 2019: PMU 2/2 - 100%, Company 7/28 -25%

+ 2020: PMU 1/3 - 33%, Company 6/26 - 23%

2019-2020: Reach target PMU 3/6 50%.

Cua Lo 2/7: 28,6% in PMU and 38,2 % in WSC

Thai Nguyen: 44% in PMU and 52.3% in WSC

+ 2015: PMU 4/9 - 44,4 %, WSC 245/498 - 49,2%

+ 2016: PMU 4/9 - 44,4 %, WSC 250/435 - 57,5%

+ 2017: PMU 4/9 - 44,4 %, WSC 205/372 - 55,1%

+ 2018: PMU 4/9 - 44,4 %, WSC 189/342 - 55,2%

+ 2019: PMU 4/9 - 44,4 %, WSC 192/367 - 52,3%

+ 2020: PMU 4/9 - 44,4 %, WSC 191/365 - 52,3%

committed.

Quang Nam: equal, 35/114 - 30.7%

Cua Lo equal, 18/47

Thai Nguyen: committed equal.

Ongoing. Provinces commit to apply when operating the system.

Target achieved, 30.7% (12 out of 39 PMU employments are women).

Quang Nam: 29% in 2015 and 20% in 2020.This indicator will be re-evaluated after year 2022.

Cua Lo 22% in 2015 and 20% in 2020.

Thai Nguyen: 21,52% in 2015 and 19,35% as of June 2020 (project has just been started).

Geographical Location

Bac Giang, Cua Lo, Quang Nam, Thai Hoa, Thanh Hoa, Thanh Pho Thai Nguyen, Vinh

Safeguard Categories

Environment

B

Involuntary Resettlement

B

Indigenous Peoples

C

Summary of Environmental and Social Aspects

Environmental Aspects

Project 3 is categorized B for environment, as environmental impacts are not reversible and primarily related to construction works and the safe disposal of sludge the WTPs produce. Those would be mitigated through environmental management plans (EMPs), covering design, pre-construction, construction, and operations phases. Climate resilience measures have been integrated into the project primarily pertaining to water availability as well as site preparation. Environmental impacts related to siting, design, construction, and operation, and mitigation measures for environment impacts are incorporated in the EMPs.

The final EMPs specific to each subproject, cleared by ADB, will form part of the contract bidding documents. The adequate incorporation of environmental considerations during design, and allocation of sufficient budget for operation and maintenance will mitigate the potential adverse impacts during operation. Water balance will be maintained by the water utilities through compliance with the Decree 201/2012 on water abstraction. Public consultations were conducted as part of the initial environment examinations (IEEs) and include communities upstream and downstream of water source and intake points. The IEEs will be updated during detailed design.

Involuntary Resettlement

Project 3 is categorized B for involuntary resettlement because the seven subprojects are assessed to cause potential nonsignificant involuntary resettlement impacts.

One subproject in Cua Lo, already completed land acquisition and resettlement activities for which a due diligence report is prepared. Land acquisition for the construction of the water treatment plan is about 8.2 ha, managed by Nghi Hoa communal people's Committee and 1.25 ha for booster pumping station and administration office is sandy soil and managed by Nghi Hoa ward of Cua Lo town. None of the 32 HHs own the affected land; local authorities had allowed people to temporarily plant trees and cultivate fish on public land. The compensation payments for all assets was paid to them and the due diligence report confirms the same. There are no gaps in accordance with MFF RF and no CAP is required.

Indigenous Peoples

Project 3 is categorized C for Indigenous Peoples. Due diligence confirmed that there are no ethnic minority peoples who may be considered Indigenous Peoples per the Safeguard Policy Statement present in the project 3 subprojects' areas.

Nevertheless, the MFF's indigenous peoples planning framework will guide the application of indigenous peoples safeguards should any unanticipated impact on ethnic minority communities arise during project 3's implementation

Stakeholder Communication, Participation, and Consultation

During Project Design

The Water Companies have conducted stakeholders workshops during the project preparation.

During Project Implementation

A Stakeholder Communication Plan is included into the Project Administration Manual. A Participation Plan is included into Supplementary Appendix 4.

Business Opportunities

Consulting Services

Refer to above section

Procurement

All procurement of goods and civil works will be carried out in accordance with ADB Procurement Guidelines (2013, as amended from time to time). All consulting services will be recruited in accordance with the Guidelines on the Use of Consultants (2013, as amended from time to time). All procurement will follow International Competitive Bidding. Preferred methods of consultants selection are quality- and cost-based selection (QCBS), using quality-cost ratio 90:10, and least cost selection (LCS). Other selection methods can be used with the prior approval of ADB and duly justified. Upon review of procurement thresholds by ADB and information provided by the detailed design, the WSC will propose and optimize the contract packaging for approval by ADB.

Contact

Responsible ADB Officer

Nguyen, Khoa Dinh

Responsible ADB Department

Southeast Asia Department

Responsible ADB Division

Viet Nam Resident Mission (VRM)

Executing Agencies

Bac Giang Water Supply and Sewerage One Mem Ltd Co

Cua Lo Water Supply One Member Limited Company

Nghe An Water Supply One Member Limited Company

Quang Nam Wter Supply&Drainage Joint Stock Company

Song Chu One Member Limited Company

Thai Hoa Water Supply One Member Limited Company

Thai Nguyen Water Joint Stock Company

Timetable

Concept Clearance

-

Fact Finding

29 Aug 2014 to 05 Sep 2014

MRM

07 Oct 2014

Approval

27 Mar 2015

Last Review Mission

-

Last PDS Update

24 Jan 2022

Funding

Loan 3251-VIE