Socialist Republic of Viet Nam: Preparing the Ho Chi Minh City Water Supply Project

Transcription

1 Technical Assistance Report Project Number: June 2008 Socialist Republic of Viet Nam: Preparing the Ho Chi Minh City Water Supply Project (Financed by the Government of France) The views expressed herein are those of the consultant and do not necessarily represent those of ADB s members, Board of Directors, Management, or staff, and may be preliminary in nature.

2 CURRENCY EQUIVALENTS (as of 30 April 2008) Currency Unit dong (D) D1.00 = $ $1.00 = D16, ABBREVIATIONS ADB Asian Development Bank AFD Agence Française de Développement BOO build-own-operate BOT build-operate-transfer cmd cubic meters per day DMA district-metered area EA executing agency GIS geographic information system HCMC Ho Chi Minh City HIFU Ho Chi Minh City Urban Infrastructure Investment Fund ISO International Organization for Standardization JICA Japan International Cooperation Agency ODA official development assistance MOU memorandum of understanding NRW nonrevenue water SAWACO Saigon Water Corporation SCADA supervisory control and data acquisition PPTA project preparatory technical assistance TA technical assistance TECHNICAL ASSISTANCE CLASSIFICATION Targeting Classification General intervention Sector Water supply, sanitation, and waste management Subsector Water supply and sanitation Themes Sustainable economic growth, private sector development, capacity development Subthemes Developing urban areas, public private partnerships, institutional development (i) (ii) NOTES The fiscal year (FY) of the Government and its agencies ends on 31 December. In this report, "$" refers to US dollars.

3 Vice President C. Lawrence Greenwood, Jr., Operations 2 Director General A. Thapan, Southeast Asia Department (SERD) Director J. Cooney, Infrastructure Division, SERD Team leader Team members H. Jenny, Senior Urban Development Specialist, SERD E. Cudilla, Senior Project Assistant, SERD J. Everett, Infrastructure Specialist, SERD Y-L. Feng, Principal Environment Specialist, SERD R. Frauendorfer, Senior Urban Development Specialist, SERD M. Huddleston, Senior Social Development/Resettlement Specialist, SERD A. Kunth, Young Professional, SERD A. Mehta, Financial Management Specialist, Regional and Sustainable Development Department H. Nhat Do, Project Implementation Officer, Viet Nam Resident Mission, SERD M. Sultana, Social Development Specialist, SERD Y. Tsujiki, Financial Analysis Specialist, SERD

4 I. INTRODUCTION 1. During the 2007 Country Programming Mission and the water financing conferences held September 2006 in Manila and March 2007 in Hanoi, the Government of the Socialist Republic of Viet Nam requested the Asian Development Bank (ADB) for assistance to prepare the Ho Chi Minh City Water Supply Project. Viet Nam is one of the five target countries for ADB's water financing program, which aims to double ADB lending in the water and sanitation sector by The proposed Project addresses provision of a sustainable supply of potable water for Ho Chi Minh City. The Project is directly linked to the agenda of supporting infrastructure development and public private partnerships in infrastructure, as set out in the Country Strategy and Program ( ). The Project contributes to Goal 7 of the Millennium Development Goals, to "Ensure environmental sustainability", and specifically to Target 10: Halve by 2015 the proportion of people without sustainable access to safe drinking water and basic sanitation., and to the corresponding Viet Nam Development Goals. 2. An ADB mission visited Ho Chi Minh City (HCMC) in May 2007 to undertake fact-finding for a project preparatory technical assistance (PPTA) for the proposed Project. Agreement was reached on the impact, outcome, outputs, implementation arrangements, cost, and financing arrangements for the PPTA. The design and monitoring framework for the PPTA 1 is provided in Appendix 1. II. ISSUES 3. HCMC is Viet Nam s largest city, and its most important commercial and industrial center. Its population of 7.9 million is growing at about 2.1% per annum, and is likely to reach 13.5 million in While Viet Nam s economy is growing at more than 8% per annum, HCMC s economy is growing substantially faster, at around 12% per annum. This growth rate is placing very serious strains on the city s already inadequate infrastructure, and not least on its water supply system. 4. In response, the HCMC People s Committee is preparing a master plan for the HCMC water system up to This provides for an increase in urban water supply coverage (from the present 76% of the city s population to 100%), corresponding to an increase in capacity from 1.2 million cubic meters per day (cmd) to 3.2 million cmd of treated water. Based on this development plan, the World Bank has financed a feasibility study on nonrevenue water (NRW), 2 which divides the city water supply network into six hydraulic zones and about 500 district metered-areas (DMAs), and proposes to reduce actual water losses in two of the six zones. 3 The Government of France has financed a pilot project to determine the components and characteristics of water losses in the city's An Dien An Phu area. 5. Two large wastewater projects are currently being implemented in HCMC, financed by the Japan Bank for International Cooperation (JBIC) 4 and the World Bank. 5 These projects address the difficulties faced by the city as a result of sharp increases in the volume of industrial effluent and domestic wastewater, which stems from rapid industrialization and urbanization in the absence of investment in wastewater treatment plants or rehabilitation of the city's 30-year old sewer network. The JBIC-financed project will increase the city s sanitation coverage and treatment capacity to over 60% by providing wastewater treatment plants with 470,000 cmd The TA first appeared in ADB Business Opportunities on 4 December NRW represents all the water produced that is not sold. This corresponds to a total of about 200 DMAs in zone 1 and zone 2. The Second Ho Chi Minh City Water Environment Improvement Project. The World Bank also implemented the HCMC Environmental Sanitation Project.

5 2 capacity, sewer interceptors, combined sewers, and pumping stations. The World Banksupported wastewater treatment project covers about half of the city center or about 25% of HCMC s population. 6. HCMC s water supply operations are managed by the Saigon Water Corporation (SAWACO), which was established in 1874, and most recently restructured in As of end- 2006, 6 SAWACO had about 3,500 staff, 2,800 of whom worked in water operations, with the balance working in affiliated consulting and contracting companies. SAWACO has an approximately 3,000 kilometer (km) distribution network, with 570,000 connections. Overall, SAWACO has five staff per 1,000 connections, a very low and efficient ratio. SAWACO delivers continuous service with a residual chlorine test of 97%, corresponding to drinking water quality. The company has annual revenues in excess of D1,000 billion (about $70 million) and an average operating ratio of below one. The average water tariff per cubic meter of $0.28 is below the national average, but sufficient to cover operating expenses allowing SAWACO to generate a positive cashflow. About 93% of the water production comes from three surface water treatment plants (Thu Duc, Tan Hiep and Binh An); the latter operated under a build-operatetransfer (BOT) contract. The ongoing extension of the Thu Duc production plant under a buildown-operate (BOO) contract is structured with the participation of the HCMC Urban Infrastructure Investment Fund (HIFU) as equity holder and mostly local currency financing. The remaining production comes from groundwater. 7. SAWACO faces several challenges in the areas of profit generation, financial management, management of costs and service delivery, and institutional structure. Better tariff structures 7 and reduced NRW levels (currently at about 40%) need to be implemented to improve the company s financial and operating performance. The company has a number of subsidiary entities that need to be consolidated to maximize efficiency. Some subsidiary entities have an element of private sector participation, but a more coherent plan for both strategic and financial participation by the private sector in the overall group is needed. 8. Under the new Water Supply Decree 117/2007/ND-CP of 11 July 2007, full cost recovery is now mandatory. SAWACO is under growing pressure to (i) improve and modernize its service and sustainably supply all HCMC residents (i.e., achieve 100% coverage) with potable water by 2025, (ii) increase public private partnerships and private sector participation, and (iii) provide and deliver water to the city in a sustainable manner. Given these challenges, accessing finance for future capital expenditure from a broader base of fund providers as well as the capital markets will require significant reforms in the institutional structures of both SAWACO and related governmental bodies. 9. Accordingly, SAWACO has approached ADB to finance a portion of its expansion program, specifically (i) implementing a NRW management project over the four hydraulic zones not covered by ongoing World Bank and other financing, including a supervisory control and data acquisition (SCADA) system and a geographic information system (GIS); and (ii) strengthening and expanding the city transmission and primary network, including reservoirs, pumping stations and about 90 km of pipeline of various sizes. An institutional strengthening program to be implemented as part of the ensuing project will address SAWACO s most critical institutional issues. This will be identified and prioritized as part of project preparation. The proposed technical assistance will focus primarily on water supply, given that attempts to address HCMC s wastewater and drainage issues have already been undertaken under projects funded by other donors (refer to para. 5). 6 7 Communication from SAWACO management and extracted from Southeast Asia Water Utility Network Data Book of Southeast Asian Water Utilities. Water tariffs in HCMC are officially set at a level to achieve cost recovery.

6 3 III. A. Impact and Outcome THE PROPOSED TECHNICAL ASSISTANCE 10. The impact of the Project will be to improve urban livability and competitiveness in HCMC through development of water supply infrastructure. 11. The outcome of the PPTA will be the design of a project to increase the level of water service by (i) extending and rehabilitating a portion of HCMC s water distribution network, including booster pumping stations and reservoirs, to increase the coverage and provide potable water to all city residents by 2025; (ii) improving the level of service and SAWACO s financial performance by reducing NRW in four of the city s six hydraulic zones; and (iii) overall strengthening of water operations in the city. An initial poverty reduction and social analysis for the project is provided in Appendix 2. B. Methodology and Key Activities 12. The PPTA will prepare a project to be implemented in three parts, as set out below. (i) (ii) (iii) Part I NRW. Based on work now being done under the World Bank-financed project, this part of the PPTA will study the remaining four hydraulic zones to establish a methodology to reduce NRW. The NRW component will be implemented through performance and/or management contracts, for which terms of reference will be prepared as part of the PPTA. SAWACO will use its own funds to finance the feasibility study for the GIS and SCADA systems that will form part of the ensuing project. The PPTA will coordinate with the ongoing information technology projects and standards used by other agencies of the HCMC People's Committee to review and integrate the GIS and SCADA system with the project design. Part II Strengthening and Expansion of the Transmission and Primary Network. Based on the objectives set forth in the master plan, the PPTA will prepare a feasibility study for strengthening and expanding SAWACO s transmission and primary pipe network over the service area to increase coverage and improve the security of distribution. The project will install over 90 km of pipes, for the transmission and primary distribution system, with booster pumping stations and ancillary equipment. SAWACO will finance the secondary distribution system in line with the city s master plan. The study will include a special focus on pipe material selection. Part III Planning and Institutional Strengthening. The PPTA will define a framework for public private partnerships and private sector participation, especially for the divestiture 8 of SAWACO's holding company, its subsidiaries and affiliated companies. This task will include (a) asset inventory and management; (b) a policy for water conservation through demand management; (c) a strategy for energy efficiency through an energy audit and a prioritized investment plan based on cost recovery, which could be included for financing as part of the ensuing project, and (d) a framework for optimizing the provision and the delivery of water supply services during the project, and certification under the International Organization for Standardization (ISO) Divesture is required under the new legislation with a recommended 30% divested to private investors. Certification under (i) ISO 9001 for all design, operation and maintenance activities, (ii) ISO for safety and environment, (iii) ISO for occupational health and safety in the operation, and (iv) the new ISO for the management of drinking water utilities.

7 4 C. Cost and Financing 13. The PPTA is estimated at $1,900,000. The TA will be financed on a grant basis in the amount of $1,500,000 equivalent by the Government of France and administered by ADB. 10 SAWACO will finance $400,000 through in-kind contributions of (i) office space (for a maximum of 20 consultants) and access to international phone and internet (the PPTA consulting firm will pay for communications costs), (ii) about 60 person-months of counterpart staff to support the PPTA, (iii) vehicles for site visits, (iv) feasibility studies for the SCADA system and GIS, and (v) a topographic survey to confirm resettlement data and any other essential information that may be identified during the TA. The Government has been informed that approval of the TA does not commit ADB to finance any ensuing project. A detailed cost estimate is provided in Appendix 3. D. Implementation Arrangements 14. SAWACO will act as the executing agency (EA) for the PPTA with overall project responsibility and will establish a project management unit for day-to-day management of the PPTA. For the duration of the PPTA, the project management unit will be run by full-time staff including a director, an English-speaking coordinator, and two to five counterpart personnel. They will be responsible for day-to-day coordination work with the PPTA consulting firm s personnel, other government agencies, and other stakeholders. A steering committee composed of representatives from relevant agencies of the HCMC People's Committee and other relevant stakeholders will meet at least every 3 months to (i) review the progress of the PPTA, and (ii) provide strategic direction for the selection of investment proposals and related financing plans. 15. The PPTA will be implemented by one consulting firm (see para. 16) over 12 months from October 2008 to September Total consulting inputs will be about 130 person-months, consisting of 16 international consultants for 40 person-months and 15 national consultants for 90 person-months (including 19 person-months of unallocated national consultant services, which will facilitate policy dialogue with the central and local government, and address specific issues that arise during PPTA implementation). The scope of work, distributed between project investment and planning and institutional strengthening, is broadly as follows (outline terms of reference are provided in Appendix 4). (i) Project Investment. This task will be implemented over 9 months, to define and prepare parts I and II of the PPTA, including environmental and social safeguards and financial and economic analysis to meet ADB requirements, and two local feasibility studies to meet the Government's approval requirements. It is anticipated that 28 person-months of international consultant services and 73 person-months of national consultant services will be required for this part. (ii) Planning and Institutional Strengthening. This task will be implemented over the duration of the PPTA. The consultants (about 5 person-months of international consultant services and 5 person-months of national consultant services) will work closely with SAWACO in defining the needs and requirement for the institutional strengthening program to be implemented as part of the ensuing project. 10 Through the channel financing agreement (technical assistance program) between the Government of France and ADB.

8 5 16. The consultants will be engaged by ADB as (i) an international firm in association with a local firm, recruited under fixed budget selection (FBS) through simplified technical proposals; and (ii) individual consultants. FBS is appropriate inasmuch as the TA is limited to the production of two simple feasibility studies and an institutional strengthening program with detailed terms of reference, input consultant time, and deliverables clearly identified. The firm and the individual consultants will be recruited in accordance with ADB s Guidelines on the Use of Consultants (2007, as amended from time to time). Equipment will be procured in accordance with ADB s Procurement Guidelines (2007, as amended from time to time). All the equipment purchased under the PPTA will be turned over to SAWACO at the end of the Project. 17. The PPTA will include four workshops in HCMC at (i) the inception phase, (ii) the midterm completion of the preparation of the two investment components, (iii) the completion of the feasibility studies, and (iv) following the initial development of the institutional strengthening program. The workshops will include representatives from the HCMC People s Committee, central government agencies, civil society, and the private sector. The reporting requirement will include an inception report, three progress reports and a final report. In addition, the consultants will prepare two feasibility study reports for the investment components of the project (NRW and network strengthening and expansion), and a series of reports for each of the items for the planning and institutional strengthening component. All the documents produced will be in English and in Vietnamese. IV. THE PRESIDENT'S RECOMMENDATION 18. The President, acting under the authority delegated by the Board, has approved ADB administering technical assistance not exceeding the equivalent of $1,500,000 to the Government of Viet Nam to be financed on a grant basis by the Government of France for preparing the Ho Chi Minh City Water Supply Project, and hereby reports this action to the Board.

9 6 Appendix 1 DESIGN AND MONITORING FRAMEWORK Design Summary Impact Performance Targets/Indicators Data Sources / Reporting Mechanisms Assumptions and Risks Assumptions Improved urban livability and economic competitiveness of HCMC due to better quality and more sustainable water supply NRW is reduced in the project area Water supply coverage in HCMC increased from 76% to 90% in Water supply service is continuous, of drinking water quality, meets demand, and is financially sustainable by 2015 Positive change in the perception of the level of water supply service in the project area Investment project completion report Government demographic, economic, health and water sector statistics Public feedback, public opinion surveys, citizen report card ADB monitoring of baseline indicators The Government, SAWACO and other concerned agencies sustain best practices in water supply delivery beyond completion of the project. Risks Natural disasters or other catastrophes deplete fresh water resources. Factors other than water supply severely affect the economic situation or health of the population in the project area. Political interference prevents successful implementation of the institutional strengthening program and threatens the financial sustainability and competitiveness of the water supply system. Outcome Assumptions Agreed design of new investments to extend and rehabilitate the water distribution network, reduce NRW, and an institutional strengthening program to be implemented during the subsequent loan project Endorsement by HCMC of feasibility studies on (i) strengthening and expansion of distribution network, and (ii) NRW, by September 2009 HCMC and SAWACO agree on the content of proposed institutional strengthening program, by July 2009 Recommended frameworks for the program are adopted by HCMC and SAWACO by June 2009 and initial steps are taken towards implementation. ADB PPTA completion report Official reports and feedback from SAWACO and other agencies Local government and water company policy papers Government, SAWACO, and other concerned agencies committed to timely and successful completion of the Project. Risks Differences between central and local government, or between local government and SAWACO significantly delay approval of the feasibility study and institutional strengthening program. 1 Government s target is 100% supply coverage by 2025.

10 Appendix 1 7 Design Summary Outputs 1. Part I Nonrevenue water: feasibility study and contractual arrangement for implementation of NRW component in subsequent investment project 2. Part II Plan for strengthening and expanding the transmission and primary network 3. Part III Design of institutional strengthening plan for implementation during the subsequent investment project Performance Targets/Indicators Completion by September 2009 of new feasibility study for NRW over four remaining zones, based on existing feasibility study and lessons from ongoing NRW projects Completion by September 2009 of feasibility study and project components for network extension consisting of an additional 90 km of new pipes Design by June 2009 of the various aspects of the capacity building and institutional strengthening program are appropriate, timely, coherent and compatible, including (i) framework for private sector participation, (ii) policy for water conservation, (iii) strategy for energy efficiency, and (iv) framework for ISO certification. Data Sources / Reporting Mechanisms Consultant working papers and reports, including feasibility study and progress reports Workshops and stakeholder feedback from consultation activities and surveys ADB PPTA review missions and back-to-office reports TA completion report HCMC government and SAWACO policy papers Assumptions and Risks Assumptions Good collaboration between the Government, SAWACO and the PPTA consultant throughout PPTA implementation. Government successfully mobilizes various stakeholders and secures counterpart contributions. New decree on water supply will be enforced to allow for sustainable operation. Risks Information and water sector data necessary to successfully undertake the feasibility study is not made available to the TA consultant Activities with Milestones Inputs 1. Part I Feasibility study, nonrevenue water (September 2009) 1.1 Review existing feasibility study and prepare new feasibility study for NRW that incorporates lessons 1.2 Prepare TOR for a management contract for private sector participation 1.3 Make recommendations for implementation of the SCADA system and GIS as part of a network management center 2. Part II Feasibility study, network expansion (September 2009) 2.1 Prepare project summary and information on existing situation and services provided (including water resources, supply, wastewater and drainage, distribution and site information) 2.2 Undertake planning and demand forecasting for future development (includes review of master plan) 2.3 Specify technical requirements for future development distribution system and selection of favored design options, control system, selection of equipment and materials, cost estimates, drawings, and a procurement plan Government of France: $1.50 million Consulting services (40 person-months of international consultant services and 90 personmonths of national consultant services): $1.23 million Travel, equipment, administrative and other costs: $0.27 million SAWACO: $0.40 million Counterpart staff (about

11 8 Appendix 1 Activities with Milestones 2.4 Undertake an institutional assessment (description of existing agencies, policies, and the project; and review and recommendations for improvement of SAWACO) 2.5 Prepare a financial and fiscal assessment and financial model and report for SAWACO 2.6 Assess tariffs 2.7 Prepare an environmental assessment, social assessment and resettlement plan in compliance with ADB safeguards 2.8 Prepare an economic analysis 2.9 Prepare a procurement plan 2.10 Address other issues (risk analysis; water supply metering; labor health; and safety and training program for contractors on best practices for installation, transport, and storage of pipes) 2.11 Prepare a project implementation plan (including administrative and institutional arrangements, organization structure, monitoring and evaluation) Inputs 60 person-months): $0.05 million Other in-kind contributions: (office space, feasibility study for SCADA system and GIS, and logistics): $0.35 million 3. Part III Institutional strengthening program (June 2009) 3.1 Private sector participation: prepare options for HCMC People's Committee and for SAWACO on how it can be publicly listed as a joint-stock company under a publicprivate partnership, review the existing asset inventory and asset management system and propose a program to implement asset management as part of the project. 3.2 Water conservancy: review current HCMC province water conservation policies and make conservation-related recommendations 3.3 Energy efficiency: conduct energy audits for each operational site, and prepare strategies and recommendations for energy savings and energy efficiency, and a prioritized investment plan based on cost recovery 3.4 Certification: review current certification obtained by SAWACO, assess readiness to comply with ISO 9001, ISO (environment protection and safety), ISO (management of water utilities), ISO (occupational health and safety) and, propose a certification program with budget and schedule. 3.5 Finalize the financing plan and the funding requirement. ADB = Asian Development Bank, GIS = geographic information system, HCMC = Ho Chi Minh City, ISO = International Organization for Standardization, km = kilometer, MOU = memorandum of understanding, NRW = nonrevenue water, SAWACO = Saigon Water Corporation, SCADA = supervisory control and data acquisition, PPTA = project preparatory technical assistance, TA = technical assistance.

12 Appendix 2 9 INITIAL POVERTY AND SOCIAL ANALYSIS Country/Project Title: Viet Nam: Ho Chi Minh City Water Supply Project Lending/Financing Modality: Project preparatory technical assistance Department/ Division: Southeast Asia Department, Infrastructure Division I. POVERTY ISSUES A. Linkages to the National Poverty Reduction Strategy and Country Partnership Strategy 1. The Viet Nam country strategy and program, stresses the importance of maintaining sustainable equitable economic growth to achieve further reductions in poverty. Viet Nam s success in reducing the portion of the population living below the poverty line (from 70% in 1990 to 27% in 2005) was based on rapid but equitable economic growth. The Government s strategy for Ho Chi Minh City (HCMC) is to develop water and sanitation infrastructure, improve service levels, and expand services to new urban and peri-urban areas. The proposed project is expected to reduce nonrevenue water and to strengthen and expand the primary transmission network in order to improve coverage. In addition, the project will include an institutional strengthening program to assist the Saigon Water Corporation (SAWACO) improve efficiency and service. These measures will ultimately improve the quality of life, working environment, ability to attract investment into the city and access to services, and will therefore help reduce poverty. The Government s poverty reduction strategy will be reviewed to identify the impact of such large-scale infrastructure projects on poverty reduction in Viet Nam. B. Targeting Classification 1. Select the targeting classification of the project: General Intervention Individual or Household; Geographic; Non-Income MDGs 2. Explain the basis for the targeting classification: The project will seek to improve water service delivery and expand coverage in HCMC. C. Poverty Analysis 1. If the project is classified as Targeted Intervention Household, or if it is policy-based, what type of poverty impact analysis is needed? N/A 2. What resources are allocated in the PPTA/due diligence? A total of 6 person-months of international and national consultant services and a provisional sum of $20,000 for the social assessment survey. 3. If General Intervention, is there any opportunity for pro-poor design (e.g., social inclusion subcomponents, cross subsidy, pro-poor governance, and pro-poor growth)? The water tariff structure will be pro-poor and focus on providing the urban poor, vulnerable and disadvantaged people access to service, and will use a citizen report card to measure the service. II. SOCIAL DEVELOPMENT ISSUES A. Initial Social Analysis Based on existing information: 1. Who are the potential primary beneficiaries of the project? How do the poor and the socially excluded benefit from the project? The objective of the project is to enable SAWACO to provide 100% of HCMC residents with potable water by The project will directly benefit people living in peri-urban areas and improve the level of service to all users. The tariff includes a subsidized lifeline of 4 cubic meters of water per person per month; this would include the connection cost, to promote access and the use of the service by vulnerable and disadvantage groups in HCMC. 2. What are the potential needs of beneficiaries in relation to the proposed project? The project will provide affordable and clean water to prospective users, such as households, industries, commerce and institutions (e.g., hospitals and public buildings). 3. What are the potential constraints in accessing the proposed benefits and services, and how will the project address them? Block tariffs and access to service are known to be counterproductive with the poorest segment of the urban population. The project team will work with SAWACO and the HCMC People's Committee to incorporate the one-off connection to access the service unto the water tariff. Miscellaneous programs, such as output-based aid and "small pipe networks" will be examined and considered for inclusion in the project.

13 10 Appendix 2 B. Consultation and Participation 1. Indicate the potential initial stakeholders: Stakeholders include the water users, the water company and the local government. 2. What type of consultation and participation (C&P) is required during the PPTA or project processing (e.g., workshops, community mobilization, involvement of nongovernment organizations and community-based organizations, etc.)? There will be several public consultation meetings over the course of project preparation, including four workshops, a resettlement town hall meeting, willingness to pay and affordability surveys, and a water tariff public consultation. The project would strengthen SAWACO s customer service department, seek to address complaints from users, and develop a plan addressing communication between water companies and users. 3. What level of participation is envisaged for project design? Information sharing Consultation Collaborative decision making Empowerment 4. Will a C&P plan be prepared? Yes No Please explain. A C&P plan will be prepared by the PPTA consultant during the social assessment survey and focus groups discussion to seek views from the project population. The C&P plan will be used in formulating a communication plan for disseminating information from water companies to users, and in defining performance indicators to measure the level of service through the citizen report card. C. Gender and Development 1. What are the key gender issues in the sector/subsector that are likely to be relevant to this project/program? The consulting firm will conduct a detailed gender assessment for the households affected by resettlement. A gender plan for addressing gender concerns in the Project related to resettlement, HIV/AIDS, safety measures, and capacity building of the EA and relevant stakeholders will be prepared for the proposed project. The communication plan will be gender focused to promote and build awareness. 2. Does the proposed project/program have the potential to promote gender equality and/or women s empowerment by improving women s access to and use of opportunities, services, resources, assets, and participation in decision making? Yes No Please explain. The project will not directly lead to women's empowerment; however, the improved services and the expansion of the distribution network will benefit women through improved access to a potable water supply. 3. Could the proposed project have an adverse impact on women and/or girls or to widen gender inequality? Yes No Please explain. Not Applicable. III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS Issue Nature of Social Issue Significant/Limited/ No Impact/Not Known Involuntary Resettlement Relocation (temporary and We expect a significant permanent) will be required resettlement impact. along the construction route of the 90 km of primary transmission pipeline and at the selected pumping station sites. Indigenous Peoples The social assessment survey will confirm if there are affected indigenous people in the project area. Not known at this stage. The project team anticipates that no indigenous people live in the project area, but this will be assessed. Plan or Other Action Required Full Plan Short Plan Resettlement Framework No Action Uncertain Plan Other Action Indigenous Peoples Framework No Action Uncertain

14 Appendix 2 11 Labor Employment Opportunities Labor Retrenchment Core Labor Standards The Project will design and implement primary transmission pipes, some of which will feed into industrial zones and improve industrial growth. Access to water has the potential to contribute to industrial growth and can facilitate expansion of employment opportunities. Significant (indirectly) Limited Plan Other Action No Action Uncertain There will be employment opportunities during the construction phase of the Project. Affordability Other Risks and/or Vulnerabilities HIV/AIDS Human Trafficking Others (conflict, political instability, etc.), please specify Clauses on core labor standards will be included in all bidding documents Affordability has not been a Limited problem for urban water supplies. This will be confirmed through the social assessment survey, which includes a willingness-to-pay and affordability study; however, the one-off cost of accessing the services is an issue that will be discussed with SAWACO and is proposed to be included as part of the water tariff. An awareness campaign Limited will be conducted on prevention of HIV/AIDS. The construction sites will have an influx of workers and might increase the risk of HIV/AIDS and trafficking of girls and women. IV. PPTA/DUE DILIGENCE RESOURCE REQUIREMENT Action No Action Uncertain Plan Other Action No Action Uncertain 1. Do the TOR for the PPTA (or other due diligence) include poverty, social and gender analysis and the relevant specialist/s? Yes No If no, please explain why. 2. Are resources (consultants, survey budget, and workshop) allocated for conducting poverty, social and/or gender analysis, and C&P during the PPTA/due diligence? Yes No If no, please explain why. ADB = Asian Development Bank, C&P = consultation and participation, EA = executing agency, GIS = geographic information system, HIV/AIDS = human immunodeficiency virus/acquired immunodeficiency syndrome, HCMC = Ho Chi Minh City, MDG = millennium development goal, NRW = nonrevenue water, SAWACO = Saigon Water Corporation, SCADA = supervisory control and data acquisition, PPTA = project preparatory technical assistance, TA = technical assistance, TOR = terms of reference.

15 12 Appendix 3 COST ESTIMATES AND FINANCING PLAN ($'000) Total Item Cost A. Government of France Financing a 1. Consultants a. Remuneration and Per Diem i. International Consultants ii. National Consultants b. International and Local Travel Equipment b Training, Seminars, and Conferences Surveys Miscellaneous Administration and Support Representatives for Contract Negotiations Local Transportation Subtotal (A) 1, B. Government Financing 1. Office Accommodation and Transport Remuneration and Per Diem of Counterpart Staff 3. Others c Subtotal (B) Total 1, a Financed through the Channel Financing Agreement (Technical Assistance Program) between the Government of France and the Asian Development Bank, and administered by the Asian Development Bank. b Purchase of information technology equipment, such as photocopier, computers, printer, and plotter. c Feasibility studies for the supervisory control and data acquisition and geographic information system and topographic surveys. Source: Asian Development Bank estimates.

16 Appendix 4 13 A. Introduction OUTLINE TERMS OF REFERENCE 1. The project preparatory technical assistance (PPTA) for the Ho Chi Minh City Water Supply Project will prepare an institutional strengthening program and an investment plan for (i) nonrevenue water (NRW) in four hydraulic zones, and (ii) strengthening and expanding 90 kilometers (km) of transmission and primary network. 2. The PPTA will use an international firm in association with a local firm (hereinafter referred to as "the consulting firms") recruited under fixed budget selection using simplified technical proposals to define the institutional strengthening program and to finalize two feasibility studies for (i) NRW and (ii) the transmission and primary network. A total of 40 person-months of international consultant services and 90 person-months of national consultant services will be required, distributed as shown in Table A4. Table A4: Summary of Consultants Required (person-months) Consultants International National Total Feasibility Studies Team Leader (NRW or Network Specialist) Civil Engineer (NRW or Network Specialist) Civil Engineer Mechanical and Electrical / Process Engineer Mechanical and Electrical / Process Engineer Draftsman (2 positions) SCADA Specialist GIS Specialist Institutional Specialist Environmental Specialist Resettlement Specialist Social Development Specialist Financial Analyst Economist Subtotal Feasibility Studies Institutional Strengthening Energy Savings Specialist Water Conservancy Specialist ISO Certification Specialist PPP / Water Operation Specialist Subtotal Institutional Strengthening Unallocated Person-Months Total Person-Months GIS = geographic information system, HCMC = Ho Chi Minh City, HIFU = Ho Chi Minh City Urban Infrastructure Investment Fund, ISO = International Organization for Standardization, NRW = nonrevenue water, PPP = public private partnership, SCADA = supervisory control and data acquisition. B. Feasibility Study 3. The consulting firms will finalize two feasibility studies over 9 months, which will be produced in English and in Vietnamese (for local approval).

17 14 Appendix 4 (i) (ii) A feasibility study on NRW will detail how to implement the NRW reduction program over four hydraulic zones, in parallel with the ongoing NRW project financed by the World Bank for two other hydraulic zones in the city center. A feasibility study on strengthening and expanding about 90 km of transmission and primary network, which will include: (i) a description of the site conditions, highlighting any condition likely to impact on project construction (e.g., soil conditions and flooding potential); and (ii) the project scope and the investment proposal, including the rationale, showing the increase in coverage and access to water supply, and improvement in service delivery. 4. The two feasibility studies will require an estimated 28 person-months of international consultant services and about 73 person-months of national consultant services. The international team leader will either be a NRW specialist or a network specialist with over 10 years professional experience in the water supply sector, including over 5 years in a management position. Other international positions will require at least 5 years professional experience, including 2 years in the water supply sector. For both feasibility studies, the consulting firms will also prepare all the necessary safeguards documents, including social and environmental assessments, financial and economic analyses, project implementation and procurement plans, and the information described in the following paragraphs. 5. Planning and water demand forecasting for future development: (i) (ii) (iii) Master plan. The consulting firms will review the water supply master plan. Demand forecasting water supply. The consulting firms will establish current and future water supply demand figures for each of the four study zones based on the last 2 years of historical data. The consulting firms will also consider selfprovided supply and its impact on existing and future water demand, as well as the financial consequences to major individual consumers. Demand forecast model. To facilitate the analysis, the consulting firms will develop a demand forecast model to The demand forecast model will be linked to the financial model. 6. Technical requirements for future development NRW and water supply network: (i) (ii) (iii) (iv) The design of the network system will allow for staged development to suit demand projections. It will optimize strategic transmission and primary distribution lines and balance the costs, financial and technical, of future duplication against installation of elements to cater for future demand. The consulting firms will complete a process flow chart and review the feasibility study for the supervisory control and data acquisition (SCADA) system and the geographic information system (GIS) designed by SAWACO. The control equipment will be appropriate for the current skills and manpower available in SAWACO, and conform to the technical standards for information technology in HCMC; the consulting firms will assist in drafting a training plan for the SCADA system and GIS. The consulting firms will provide a list of all major equipment items and construction material required for the water supply system. This will include lengths and diameters of pipes as well as a recommendation on suitable pipe material, including internal lining. The consulting firms will liaise with the World Bank-financed NRW project to take into consideration lessons from the project and incorporate them into the NRW project design.

18 Appendix Institutional Assessment. The consulting firms will prepare a detailed description of the project city, districts and communes. This will include descriptions of current and/or planned future organizational setups and regulatory responsibilities, focusing on fiscal policies and municipal finance, municipal and urban planning, development of urban infrastructure, construction oversight, water resource management, water companies, environmental regulations relevant to urban infrastructure, and pricing regulations. Other matters to be considered will be tariffs, connection fees and subsidy policies, corporate charters and bylaws, and ownership of SAWACO and financial relations with supervising authorities (e.g. transfer of bills collected or profit and/or loss sharing arrangements). 8. Financial and Fiscal Assessment. The consulting firms will describe the current and nearfuture fiscal situation of SAWACO and HCMC, including breakdown of revenues, financing and expenditures, highlighting key policy issues such as priority investment areas or special purpose vehicles. The consulting firms will conduct a financial management capacity assessment of SAWACO and propose a financial management system. The consulting firms will also finalize financial and economic analyses of the proposed project components and of SAWACO, according to ADB s latest guidelines for the financial management and analysis of projects. 1 To facilitate the analysis of the water company, the consulting firms will develop a financial model that produces the needed forecasts over a 10-year operational period, with links to a minimum of 2 years of historical information. The financial model should separate assumptions, calculations and outputs (reports). The financial model should be presented as a separate paper and a computerized model, with all major assumptions and calculations documented and discussed. The financial analysis should address a 10-year operational period; considerations should include the cost of chemicals, power consumption, and the design life of equipment used, as well as any associated financial costs. 9. Assessment of Tariffs. The water supply tariffs and tariff structure will be reviewed and analyzed. Detailed tariff assumptions will be a part of the financial model of the water company, and include tariffs for water and wastewater. 10. Economic Analysis. The consulting firms will prepare an analysis of the economic costs and benefits of the project. Economic analyses are to follow ADB's guidelines for the economic analysis of water supply projects Environmental Safeguards. The Project has been classified category B, since it is expected that most of the project components selected will have minimal impact on the environment. Therefore, the consulting firms will prepare category B project components, and produce an initial environmental examination and summary according to ADB's Environment Policy (2002), Environmental Assessment Guidelines (2003), and the Operations Manual section on environment Involuntary Resettlement and Indigenous People. The consulting firms will review the initial resettlement classification for each of the selected project components and finalize safeguard compliance for resettlement. It is expected that most of the project components selected will be category A, and that a full resettlement plan will be required. The full resettlement plan will follow ADB's Involuntary Resettlement Policy (1995), guided by the Operations Manual section on involuntary resettlement 4 and other relevant ADB policies and guidelines, i.e., Handbook on Poverty and Social Analysis (2001), Policy on Gender and Development (1998), Policy on Indigenous Peoples (1998), Accountability Mechanism (2003), and Public Communications Policy (2005). The consulting firms will manage the field surveys on inventory losses and census and a 1 ADB Guidelines for the Financial Management and Analysis of Projects. Manila. 2 ADB Guidelines for the Economic Analysis of Water Supply Projects. Manila. 3 ADB Operations Manual. Section F1: Environmental Considerations in ADB Operations. Manila. 4 ADB Operations Manual. Section F2: Involuntary Resettlement. Manila.

19 16 Appendix 4 socioeconomic survey to profile the project area and the social and poverty impact, which will serve as the baseline assessment and reference for impact surveys done upon completion and after several years of operation. If the social analysis determines that ethnic minorities are present in the project area and (i) are likely to be affected by the Project because of land acquisition and/or resettlement, or (ii) are disadvantaged or vulnerable because of their social or cultural identity, a combined ethnic minority development and resettlement plan will prepared, or ethnic minorityspecific actions undertaken to address the concerns of ethnic minorities in accordance with ADB s Policy on Indigenous Peoples. The social assessment will also address matters such as ethnic minorities, urban poor, and disadvantaged and vulnerable persons, and their ability to afford and willingness to pay for the new and improved services. The consulting firms will take the findings of the report into account in assessing water demand. 13. The consulting firms will prepare an implementation and procurement plan, which will define the following. (i) (ii) (iii) Administrative arrangements and financial management capacity. The consulting firms will detail the administrative arrangements and assess the financial management capacity of SAWACO to implement the Project. Organizational structure. The organizational structure for management and delivery of the Project will be outlined, showing responsibilities and reporting guidelines. Implementation plan. The consulting firms will set out a tentative timetable for project implementation. This will show the various stages of implementation, including (a) feasibility study and design, (b) bidding and procurement, and (c) construction of the Project. The plan will outline the reporting and approval process at various stages, and the proposed arrangements for monitoring and evaluation of project implementation. 14. Deliverables. Reports will be prepared in English and translated into Vietnamese to facilitate understanding and decision making by the Government. Reports will be submitted in both electronic and paper format. All data and analyses will be consolidated and provided in electronic form. There are four workshops planned (in addition to the kick-off meeting) to present and discuss the status of the study, the scope of the investment, and the proposed institutional and financial arrangements for the sustainability of the Project. C. Institutional Strengthening Program 15. The institutional strengthening program will be implemented over 6 months, in parallel with the feasibility studies, and will require 5 person-months of international consultant services, supported by 5 person-months of national consultant services. The program will define a series of proposals or policy dialogues for discussion and evaluation by SAWACO and by the project steering committee, to be implemented under the ensuing Project. Each consultant will have a minimum of 10 years experience in the sector. In addition, the private sector participation specialist will have at least 10 years operation and maintenance expertise at a senior management level in a private or public private company. (i) Energy efficiency. An international energy savings specialist (1 person-month) will supervise energy audits for each of up to 15 locations (e.g., pumping stations, treatment plants, headquarters office) and finalize recommendations for energy savings and energy efficiency. The audits will be performed by a national firm with more than 5 years of experience in this type of work, and with the necessary resources, material and equipment. A provisional sum of $40,000 will be allocated for the audits.