Socialist Republic of Viet Nam: Preparing the Hai Phong Water Supply Project

Transcription

1 Technical Assistance Report Project Number: October 2008 Socialist Republic of Viet Nam: Preparing the Hai Phong Water Supply Project (Financed by the Netherlands Trust Fund for the Water Financing Partnership Facility) 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 6 October 2008) Currency Unit dong (D) D1.00 = $ $1.00 = D16,590 ABBREVIATIONS ADB Asian Development Bank C&P consultation and participation EA executing agency HPWSCO Hai Phong Water Supply One Member Company HWSP Hai Phong Water Supply Project ISO International Standards Organization MDG Millennium Development Goal PMU project management unit PPTA project preparatory technical assistance TA technical assistance WTP water treatment plant WEIGHTS AND MEASURES km kilometer km 2 square kilometer m 3 cubic meter TECHNICAL ASSISTANCE CLASSIFICATION Targeting Classification General intervention Sector Water supply, sanitation, and waste management Subsector Water supply and sanitation Themes Inclusive social development, environmental sustainability, capacity development Subthemes Human development, urban environmental improvement, organizational development NOTE In this report, "$" refers to US dollars. 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 R. Frauendorfer, Senior Urban Development Specialist, SERD H. N. Do, Project Implementation Officer, Viet Nam Resident Mission, SERD M. Sultana, Social Development Specialist, SERD Y. Tsujiki, Financial Analysis Specialist, SERD

3 I. INTRODUCTION 1. The Asian Development Bank (ADB) fielded a Fact-Finding Mission in April 2008 upon the request of the Government of the Socialist Republic of Viet Nam (the Government) for project preparatory technical assistance (PPTA) 1 to prepare the proposed Hai Phong Water Supply Project (HWSP). The HWSP will assist in improving water supply services for residents of Hai Phong and contribute to achieving the related Millennium Development Goals (MDG). 2 The objectives, scope, cost, financing plan, implementation arrangements, and terms of reference for the PPTA are based on the understanding reached with the Government during the Fact-Finding Mission. The design and monitoring framework is in Appendix 1. II. ISSUES 2. The proposed HWSP results from water financing conferences held in Manila in September 2006, with a follow-on conference in Hanoi in March The project addresses sustainable water supply for the short and medium term in Hai Phong, the third largest city in Viet Nam and main port for the capital, Hanoi. Hai Phong is developing rapidly and has made considerable socioeconomic development gains over recent years. The city s economy is growing at around 11% annually, exceeding Viet Nam s economic growth rate of about 8%. This growth rate places serious strain on the city s infrastructure, including on its water supply system. 3. Given the importance of the city to Viet Nam s socioeconomic development and the need to upgrade its infrastructure to respond to growing demand for improved basic urban services, the Government requested that the project be included in ADB s Water Financing Program for Viet Nam. The project is directly linked to the agenda of assisting and supporting infrastructure development in the Viet Nam country strategy and program ( ) Hai Phong has a population of 1.7 million, of which 700,000 live in urban districts. The city has an area of 1,500 km 2, including seven urban districts and seven peri-urban. The water company was founded more than 100 years ago. A prolonged period of underinvestment brought a water crisis in 1993, which was overcome when the water company successfully implemented programs to improve water supply financed by Finland and the World Bank. Nonrevenue water has been reduced from 70% in 1993 to 25% today, while the number of connections increased from 21,900 to 180,000. In central urban areas, water is provided 24 hours a day, but in peri-urban areas supply can be intermittent, averaging only 14 hours per day. Since 2004, the water company has been International Standards Organization (ISO) 9001:2000 certified for quality management and quality assurance. Hai Phong Water Supply One Member Company (HPWSCO) employs 830 staff and has in place an ongoing program for developing human resources and training staff. There are 4.6 staffers per 1,000 connections, which is very efficient compared with many other water companies in the region. Water tariffs are at cost recovery, with the domestic water tariff at $0.18 per cubic meter (m 3 ), and water quality complies with national standards. In 2007, annual revenues were $10.5 million. 5. The main water sources are three rivers the An Kim Hai, Da Do, and Gia the water from which is treated in four water treatment plants (WTPs) with a total capacity of 178,000 m 3 /day. To achieve 90% coverage by 2020, the water company seeks ADB assistance to 1 The TA first appeared in the business opportunities section of ADB s website on 6 May Goal 7: Ensure environmental sustainability, of which Target 10 is to halve, by 2015, the portion of people without sustainable access to safe drinking water and basic sanitation. 3 ADB Viet Nam: Country Strategy and Program ( ). Manila.

4 2 upgrade two existing WTPs and construct a new WTP and related distribution network. The additional water treatment capacity of 110,000 m 3 /day will increase water purification capacity by more than 60%. In areas without piped water supply, residents rely mostly on water provided by informal vendors and self-supplied groundwater that is subject to pollution and poses a health risk. 6. The main issues affecting Hai Phong water supply include the need to (i) expand domestic service coverage, particularly in peri-urban areas; (ii) improve water supply for commercial use to support rapid economic development in the city; (iii) provide continuous water supply 24 hours a day at appropriate pressure; (iv) further reduce and manage nonrevenue water levels in district meter areas; (v) increase water purification capacity and develop new water sources; (vi) raise customer awareness for water conservation; and (vii) continue capacity development to cope with business growth, further improve financial and operational performance, and prepare for potential private sector participation in the future. 7. While HPWSCO is in charge of water supply services, wastewater and drainage management is the responsibility of a separate entity, the Hai Phong Sewerage and Drainage Company. The city is partly served by a sewer system and successfully implemented over recent years major wastewater management and environmental improvement programs financed by Finnish International Development Assistance and the World Bank. In 2005, the Japan Bank for International Cooperation approved an additional sanitation project to further enhance drainage, solid waste management, and wastewater collection and treatment in Hai Phong. This program will provide the city s first wastewater treatment plant, another major step forward in reducing environmental pollution and further enhancing public health and the city s livability. As sanitation issues are already well covered by other donors, the HWSP will primarily address improvements to water supply. III. THE TECHNICAL ASSISTANCE A. Impact and Outcome 8. The PPTA for preparing the HWSP will help to enhance the performance and efficiency of water supply services for Hai Phong s urban and peri-urban residents. The HWSP will (i) improve the living conditions and health of residents, (ii) redress water-supply inadequacy as a factor limiting economic growth and development, and (iii) help to improve institutional constraints affecting the sector. The initial poverty and social analysis is in Appendix The outcome of the PPTA will be agreement on the design of the ensuing loan project by HPWSCO, the Government, and ADB. The PPTA will (i) prepare components for improving the Hai Phong water supply system and enhancing performance; (ii) develop the HWSP to a level of detail suitable for consideration by ADB for funding; and (iii) prepare implementation support and institutional development programs addressing sector reform, governance, and public awareness. The ensuing loan project worth $30 million is expected to materialize in B. Methodology and Key Activities 10. The consultant will prepare the feasibility study under the PPTA for the HWSP using a consultative process. The project will be developed in accordance with relevant national legal requirements and standards and ADB requirements, policies, and guidelines. The PPTA will investigate innovative financing schemes for improving urban water supply through, for

5 3 example, local currency financing, municipal bonds, and public-private partnerships as applicable. The PPTA will be carried out in two phases that may overlap. 11. Phase 1. The first phase is expected to be implemented in about 3 months and will address (i) water demand planning, (ii) water conservation, and (iii) financial and institutional analyses of HPWSCO. (i) (ii) (iii) Water demand planning. The consultant will develop a model that will allow forecasting water demand for the city until 2020 and determining how to meet demand from various water sources. The consultant will review existing studies and project proposals for related investment, including levels of preparedness and the need for updating. The consultant will confirm the project proposals and, if required, update them such that ADB can consider financing them. Water conservation. The PPTA will review and assess the potential for water conservation for all consumer groups, measures required for reducing water consumption, and outline a program for building awareness. Financial and institutional analyses. The consultant will assess in detail HPWSCO s financial management capacity and financial state and analyze major constraints to its financial sustainability. The PPTA will include an institutional analysis, identify issues and areas for improvement, and recommend related development activities. 12. Phase 2. Subject to the findings of phase 1, the consultant, in agreement with HPWSCO and ADB, will proceed with the preparation of phase 2, which will last 8 months. This will include (i) preparing an investment program and packaging of the HWSP to a level of detail suitable for consideration by ADB for funding, (ii) developing implementation and fund-channeling arrangements, and (iii) preparing capacity-development programs. 13. The scope of phase 2 will address in particular (i) increasing the capacity of two existing WTPs in An Duong and Vat Cach; (ii) constructing a new WTP in Kim Son; (iii) rehabilitating the existing WTP at Do Son and converting it into a pumping station, with the construction of transmission mains, distribution network, and service connections; and (iv) related capacity development. (i) Feasibility study and basic design. 4 The consultant will prepare a feasibility study and basic design for (a) increasing the capacity of WTP Vat Cach from 10,000 m 3 /day to 30,000 m 3 /day, including about 18 kilometers (km) of transmission mains; (b) increasing the capacity of WTP An Duong from 100,000 m 3 /day to 180,000 m 3 /day, including about 4 km of raw water transmission pipe, a storage reservoir with a capacity of 6,000 m 3, and related installations; (c) constructing the new WTP Kim Son with a capacity of 10,000 m 3 /day, including 1 km of transmission main; and (d) rehabilitating WTP Do Son and converting it into a pumping station, and constructing 6 km of transmission mains and a distribution network that includes 13,000 house connections in Do Son district. HPWSCO is reviewing additional water supply components (e.g., WTP Ngu Lao, transmission mains, and distribution network) that may replace one or more of 4 The preparation of the feasibility study has to comply with relevant national laws, regulations, and standards, including the Prime Minister s Decision No. 48/2008/QD-TTg, Decision on Issuance of Common General Guidelines on Feasibility Study Preparation for Official Development Assistance (ODA) Projects Funded by the Five Banks (ADB, AFD, JBIC, KfW, World Bank). Hanoi Detailed design is not part of this TA and will be prepared under separate arrangements during the implementation of the ensuing loan project.

6 4 (ii) the items above (e.g., Vat Cach WTP and transmission main) or complement the project scope, subject to available PPTA budget. 5 Institutional development. The consultant will review and assess the organizational and institutional arrangements of HPWSCO and outline a program of financial and operational performance improvement, including terms of reference for consultant support and cost estimates. The consultant will provide initial training for HPWSCO staff on the relevant ADB procedures regarding procurement, recruiting consultants, and environmental and social safeguards. 14. An assessment of innovative financing schemes for improving urban water supply will be carried out, including, for example, local currency financing, municipal bonds, refinancing and restructuring, and public-private partnerships as applicable. The PPTA will review and assess options for revolving funds for financing charges for water supply connections. 6 It will develop capacity-building components, including programs for further strengthening the financial and operational performance of HPWSCO. Activities under phase 2 will be supported by workshops and seminars aiming to disseminate information, develop institutional capacity, and implement support. C. Cost and Financing 15. The total cost of the PPTA is estimated at $1.25 million, of which $1 million will be financed as a grant from the Netherlands Trust Fund for the Water Financing Partnership Facility, to be administered by ADB. The Government will finance the remaining cost of $250,000 through in-kind contributions, which cover office and support facilities, counterpart staff, administrative support, and local transportation for counterpart staff. The Government and HPWSCO have been informed that approval of the PPTA does not commit ADB to finance any ensuing project. Cost estimates and the financing plan for the PPTA are in Appendix 3. D. Implementation Arrangements 16. The Executing Agency (EA) for the PPTA will be HPWSCO, which has an existing project management unit (PMU) experienced in implementing donor-financed programs. The PMU will be responsible for organizing the technical and administrative aspects of the PPTA and for day-to-day decisions affecting its conduct. The PMU will include suitably qualified and experienced counterpart staff working alongside the PPTA consultants. PMU staff will include a director, an English-speaking coordinator, 7 and 4 5 counterpart personnel for engineering, institutional, and financial matters. The PPTA consultant will provide full support to the head of the PMU and will work in close collaboration with the counterpart team. A steering committee chaired by Hai Phong People's Committee and comprising senior officials from HPWSCO and Hai Phong People's Committee agencies will be established to provide guidance and oversee PPTA implementation. The steering committee will meet at least once every 2 months. 17. The PPTA will require 77 person-months of consulting services, 22 international and 55 national. One consultant can cover more than one field of expertise. All international consultants should have relevant regional experience, preferably in Viet Nam. One of the international consultants will, besides providing technical expertise, act as team leader, and one of the 5 The consultant will review and update existing studies and design as applicable. The proposed water supply components and figures are indicative only and will be reviewed and confirmed as part of the TA. 6 The TA will include lessons from ADB Technical Assistance for Implementing Small Piped Water Networks. Manila (TA 6265-REG). 7 The consultant firm will provide for its own translation services.

7 5 national consultants will act as the deputy team leader. The consultant team will provide international expertise in (i) water supply and civil engineering (10 person-months), (ii) water utility management (2 person-months), (iii) financial and economic analysis (3 person-months), (iv) institutional development (2 person-months), (v) social development and resettlement (3 person-months), and (vi) environment (2 person-months). It will further supply national expertise in (i) water supply and civil engineering (29 person-months), (ii) mechanical and electrical engineering (7 person-months), (iii) financial and economic analysis (5 person-months), (iv) institutional development (4 person-months), (v) social development and resettlement (6 person-months), and (vi) environment (4 person-months). ADB will engage the consultants through a firm in accordance with the ADB s Guidelines on the Use of Consultants (2007, as amended from time to time), using the quality- and cost-based selection method with a quality cost ratio of 80:20 and the preparation of a simplified technical proposal. HPWSCO will be responsible for providing the agreed counterpart resources. The proposed outline terms of reference for the consultants are in Appendix The PPTA is expected to be implemented over 11 months, commencing in November 2008 and completing in September The consultants will prepare (i) an inception report by the end of month 1, (ii) an interim report by the end of month 4, (iii) a draft final report by the end of month 8, (iv) a final report 1 month after receiving comments, (v) monthly progress reports of 2 3 pages, and (vi) other reports as may reasonably be required. Tripartite review meetings will be held after inception, at the interim report stage, and at the draft final report stage. The consultants will provide all reports to (i) HPWSCO as at least 9 copies in English and 20 copies in Vietnamese, (ii) ADB headquarters as 7 copies in English and 1 copy in Vietnamese, and (iii) the ADB Viet Nam Resident Mission in Hanoi as 2 copies in English and 2 copies in Vietnamese, as well as electronically in MS Excel, MS Word, PDF, and other electronic formats as required. The interim, draft final, and final report will include a separate report in English using the standard ADB format for a report and recommendation of the President. Equipment will be procured in accordance with ADB s Procurement Guidelines (2007, as amended from time to time) and handed over to HPWSCO upon PPTA completion. 19. The EA will provide the consultant with suitable office space; office furniture including a sufficient number of standard desks, chairs, shelves, and closets; lighting; electricity; air conditioning; and access to phone lines. The consultant will cover the cost of phone service and internet access, and the EA will cover electricity costs. The EA will provide the consultant with free access to relevant information, studies, reports, and data as applicable. 20. The PPTA will include at least two workshops to increase stakeholders' participation in project design and ensure the appropriate dissemination of project results. IV. THE PRESIDENT'S DECISION 21. The President, acting under the authority delegated by the Board, has approved ADB administering technical assistance not exceeding the equivalent of $1,000,000 to the Government of the Socialist Republic of Viet Nam to be financed on a grant basis by the Netherlands Trust Fund for the Water Financing Partnership Facility for preparing the Hai Phong Water Supply Project, and hereby reports this action to the Board.

8 6 Appendix 1 DESIGN AND MONITORING FRAMEWORK Design Summary Impact Improved urban livability and competitiveness in Hai Phong from better water supply infrastructure and the sustainable provision of safe water Performance Targets and/or Indicators Water supply service is continuous, of potable quality, sufficient to meet demand, and financially sustainable Additional 50,000 house connections installed Data Sources and/or Reporting Mechanisms Primary data provided by Hai Phong Water Supply One Member Company (HPWSCO) Government demographic, economic, and water sector statistics Assumptions and Risks Assumptions Project is implemented as designed Political and socioeconomic conditions are stable and favorable HPWSCO sustains best practices in water supply Risks Political interference prevents successful implementation or financial sustainability Onlending arrangements from the Ministry of Finance to water companies for ordinary capital resources loan financing may change. Outcome Design of the ensuing loan project agreed by HPWSCO, the Government of Viet Nam, and the Asian Development Bank (ADB) Endorsement of project preparatory technical assistance (PPTA) reports by HPWSCO, government agencies, and ADB (end of month 11) Memorandum of understanding Reports and feedback from HPWSCO and related government agencies Assumption HPWSCO and government agencies committed to timely and successful technical assistance completion Risk External events delay completion and approval of the PPTA Outputs 1. Bankable investment program prepared 2. Capacity development and implementation support prepared 3. Workshops conducted 4. Implementation and fund-channeling arrangements established Feasibility study for water supply infrastructure components Outline of capacity development and implementation support Technical assistance reports and working papers ADB mission reports Workshop and stakeholder consultation reports Assumptions Effective participation of all project stakeholders New decree on water supply is enforced Risks Unavailability of sector data Discontinued commitment of project stakeholders Activities with Milestones Inputs 1.1 Financial and institutional analysis of HPWSCO (end of month 3) 1.2 Water demand planning (end of month 3) 1.3 Water conservation assessment and strategy (end of month 3) 1.4 Feasibility study prepared and agreed (end of month 11) 2.1 Capacity development needs of HPWSCO identified (end of month 8) 2.2 Capacity development program agreed and prepared (end of month 11) Total PPTA cost: $1.25 million Netherlands Trust Fund for the Water Financing Partnership Facility, administered by ADB: $1 million

9 Appendix 1 7 Activities with Milestones 3.1 Workshops and seminars conducted (intermittent) 4.1 Implementation, procurement, and fund-channeling arrangements (end of month 11) Inputs Consulting services (22 person-months of international consultant services and 55 personmonths of national): $0.67 million Travel, reports and communication, equipment, training, surveys, and administrative costs: $0.18 million Contingencies and other costs: $0.15 million Government of Viet Nam: $0.25 million Counterpart staff: $0.14 million Office space and other costs: $0.11million

10 8 Appendix 2 INITIAL POVERTY AND SOCIAL ANALYSIS Country/Project Title: Viet Nam: Hai Phong 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, , a stresses the importance of maintaining sustainable equitable economic growth to achieve further reductions in poverty. Viet Nam s success in bringing down the share of the population living in poverty from 70% in 1990 to 27% in 2005 relied on rapid, equitable economic growth. The Government s strategy for Hai Phong is to develop infrastructure, including water and sanitation, to improve service quality and expand services to urban and peri-urban areas. The proposed project is expected to update demand projections, upgrade existing water purification capacity, prepare new water sources, improve and expand the water transmission and distribution network, and enhance the efficiency of operations. In addition, the project will include capacity development and institutional strengthening for Hai Phong Water Supply One Member Company. These measures will contribute to improving the quality of life and the city s ability to attract investment. B. Targeting Classification 1. Select the targeting classification of the project: General Intervention Individual or Household (TI-H); Geographic (TI-G); Non-Income MDGs (TI-M1, M2, etc.) 2. Explain the basis for the targeting classification: The project will look at improving service delivery and expanding water supply coverage in Hai Phong. C. Poverty Analysis 1. If the project is classified as TI-H, or if it is policy-based, what type of poverty impact analysis is needed? Not applicable 2. What resources are allocated in the project preparatory technical assistance (PPTA)/due diligence? A total of 9 person-months of international and national consultancy and a provisional sum of $10,000 for the social and environmental assessment surveys. 3. If GI, is there any opportunity for pro-poor design (e.g., social inclusion subcomponents, cross-subsidy, pro-poor governance, and pro-poor growth)? The project will assess the water tariff structure and its impact on connecting the urban poor. The design of the ensuing investment program will be based on affordable water tariffs for cost recovery. 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 project will benefit people currently not connected in urban and peri-urban areas and improve the quality of service to all users. 2. What are the potential needs of beneficiaries in relation to the proposed project? The project will provide affordable and clean water to prospective and existing users. 3. What are the potential constraints in accessing the proposed benefits and services, and how will the project address them?

11 Appendix 2 9 High upfront connection charges often impede access to piped water supply for the urban poor. The project team will work with Hai Phong Water Supply One Member Company and the People's Committee to overcome hurdles and ensure an affordable tariff structure. B. Consultation and Participation 1. Indicate the potential initial stakeholders. The main stakeholders are 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 such as workshops and seminars. The project will include household surveys, focus group discussions, and hearings on resettlement and environmental issues as required. 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 group discussions to learn the popular view of the project. The C&P plan will then assist in formulating a communication plan to connect the water companies and users. 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? A detailed gender assessment for households affected by resettlement will be prepared if required. A gender plan for addressing gender concerns in the project related to resettlement, HIV/AIDS, safety measures, and capacity building of the Executing Agency and relevant stakeholders will be prepared for the proposed project. 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 empower women, but improved services and the expansion of the distribution network will particularly benefit women by facilitating their access to safe water supplies. 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 Involuntary Resettlement Nature of Social Issue Initial assessment indicates that resettlement is limited to the planned expansion of water treatment plant Vat Cach (3 hectares of paddy) and construction of the new water treatment plant Kim Son (2 hectares of paddy). Temporary resettlement may be required during the repair and expansion of the water transmission and distribution network. Significant/Limited/ No Impact/Not Known Number of people affected is not yet known. The resettlement impact is potentially significant. Plan or Other Action Required Full Plan Short Plan Resettlement Framework No Action Uncertain

12 10 Appendix 2 Issue Nature of Social Issue Indigenous Peoples The social assessment survey will confirm if there are affected indigenous people in the project area. Labor Employment Opportunities Labor Retrenchment Core Labor Standards Employment opportunities will result from construction financed by the project, as well as from economic growth facilitated by improved water supply. Significant/Limited/ No Impact/Not Known Not known at this stage, but the presence of indigenous peoples in the urban area is very unlikely. It will be assessed during project preparation. Significant but indirect Plan or Other Action Required Plan Other Action Indigenous Peoples Framework No Action Uncertain Plan Other Action No Action Uncertain 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 Project design will be based on affordable water tariffs and connection charges. Construction could increase the influx of workers and the risk of HIV/AIDS and the trafficking of girls and women. An awareness campaign on related issues will be included in project design. Limited Limited Limited Action No Action Uncertain Plan Other Action No Action Uncertain IV. PPTA/DUE DILIGENCE RESOURCE REQUIREMENT 1. Do the Terms of Reference 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. a ADB Viet Nam: Country Strategy and Program ( ). Manila.

13 Appendix 3 11 COST ESTIMATES AND FINANCING PLAN ($'000) 25.0 Total Item Cost A. Netherlands Trust Fund for the Water Financing Partnership Facility a 1. Consultants a. Remuneration and Per Diem i. International Consultants ii. National Consultants b. International and Local Travel b 75.0 c. Reports and Communications Equipment c Training, Seminar, and Conference 5.0 Facilitators 4. Surveys d Miscellaneous Administration and Support Costs e 6. Representative for Contract Negotiations Contingencies Subtotal (A) 1,000.0 B. Government Financing 1. Office Accommodation Remuneration and Per Diem of Counterpart Staff 3. Others 30.0 Subtotal (B) Total 1,250.0 a Administered by the Asian Development Bank. b Including $25,000 for a car purchased and/or rented locally. c Provisional sum for the purchase and/or rental of such information technology equipment as a photocopier, computers, printers, scanners, and plotters. d Provisional sum for surveys, including up to $20,000 for geological surveys and test drilling. e Including a provisional sum for translation. Source: Asian Development Bank estimates.

14 12 Appendix 4 OUTLINE TERMS OF REFERENCE FOR CONSULTANTS A. Background and Objectives 1. The objective of the project preparatory technical assistance (PPTA) is to design the Hai Phong Water Supply Project (HWSP) for agreement by Hai Phong Water Supply One Member Company (HPWSCO), the Government of Viet Nam, and the Asian Development Bank (ADB), to be financed with a project loan. The HWSP will help improve living conditions and the health of urban and peri-urban residents with enhanced water supply infrastructure and the sustainable provision of safe water supply. 2. The PPTA will (i) prepare components for improving the Hai Phong water supply system and enhancing performance; (ii) develop the HWSP to a level of detail suitable for consideration by the ADB for funding; and (iii) prepare implementation support and institutional development programs that address sector reform, governance, and public awareness. B. Scope of Work 3. The consultant will develop the HWSP using a consultative process. The project will be prepared in accordance with relevant national legal requirements and standards and with ADB requirements, policies, and guidelines. The PPTA will be carried out in two phases that may overlap. 4. Phase 1 is expected to be implemented in about 3 months and will address (i) water demand planning, (ii) water conservation, and (iii) financial and institutional analyses of HPWSCO. 5. Phase 2 will last about 8 months and include (i) preparing an investment program and packaging of the HWSP to a level of detail suitable for consideration by ADB for funding, (ii) developing implementation and fund-channeling arrangements, and (iii) preparing capacitydevelopment programs. 6. Phase 1. The consultant will carry out the following tasks: (i) (ii) (iii) (iv) (v) Compile and review available data, studies, programs, existing polices, and strategies for developing urban water supply. Review external assistance to the sector and lessons from previous interventions by bilateral and multilateral funding agencies. Review the legal and regulatory framework and sector financing and assess sector development constraints and potential mitigating measures. Assist HPWSCO in preparing and disseminating project-related information to government agencies, consumers, and other stakeholders and conduct workshops and seminars. Carry out a water supply audit, including surveys of connected households and those not served, for information on water source, access, availability, quality, quantity, and price. Assess the current status of water supply services, identify issues, and assess demand for improved water supply. Collect and analyze relevant data and undertake measurements, surveys, and water quality analysis as required. Develop a model that will allow forecasting water demand and supply for the city until 2020 and determining how demand can be met from various water sources.

15 Appendix 4 13 (vi) (vii) (viii) (ix) (x) The model will help to develop scenarios for investment planning, including for nonrevenue water reduction, water conservation, and developing new water sources. Review available management information systems, including the existing supervisory control and data acquisition system, and recommend improvements as required. Review and assess the potential for water conservation by all consumer groups and the measures required for reducing water consumption and outline a program for building awareness. Assess practices and standards for monitoring water quality. Assess in detail HPWSCO s (a) financial management capacity and (b) financial state, including income statements, balance sheet and cash flow statements, and existing loan repayments. Analyze major constraints on financial sustainability and, if applicable, the amount of operational subsidies. Prepare an intuitional analysis, identifying issues and areas for improvement and recommending related development activities. Review the current involvement of the private sector in water supply services and recommend suitable options for private sector participation as applicable. 7. Phase 2. Subject to the findings of phase 1, the consultant, in agreement with HPWSCO and ADB, will proceed with the preparation of phase 2, which will last about 8 months. The consultant will carry out the following tasks: (i) (ii) Prepare a feasibility study and basic design 1 for (a) increasing the capacity of water treatment plant (WTP) Vat Cach from 10,000 m 3 /day to 30,000 m 3 /day, including about 18 kilometers (km) of transmission mains; (b) increasing the capacity of WTP An Duong from 100,000 m 3 /day to 180,000 m 3 /day, including about 4 km of raw water transmission pipe, a storage reservoir with a capacity of 6,000 m 3, and related installations; (c) constructing the new WTP Kim Son with a capacity of 10,000 m 3 /day, including 1 km of transmission main; and (d) rehabilitating WTP Do Son and converting it into a pumping station and constructing 6 km of transmission mains and distribution network including 13,000 house connections in Do Son district. HPWSCO is reviewing additional water supply components (e.g., WTP Ngu Lao, transmission mains, and distribution network) that may replace one or more of the items above (e.g., Vat Cach WTP and transmission main) or complement the project scope, subject to available technical assistance budget. The consultant will review and update existing studies and design as applicable. The proposed water supply components and figures are indicative only and will be reviewed and confirmed as part of the technical assistance. Review water supply tariffs, identify any deficiencies, and suggest improvements in line with ADB's position on tariffs, as summarized in ERD Technical Note No Analyze the effective collection rates for various consumer types, including 1 Preparation of the feasibility study has to comply with relevant national laws, regulations, and standards, including the Prime Minister s Decision No. 48/2008/QD-TTg, Decision on Issuance of Common General Guidelines on Feasibility Study Preparation for Official Development Assistance (ODA) Projects Funded by the Five Banks (ADB, AFD, JBIC, KfW, World Bank). Hanoi Detailed design is not part of this TA and will be prepared under separate arrangements during the implementation of the ensuing loan project. 2 Dole, David Setting User Charges for Public Services: Policies and Practice at the Asian Development Bank. ERD Technical Note Series 9. Manila: ADB.

16 14 Appendix 4 (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) collection in cash and in kind, if any, as well as their existing collection rates and ways to improve the collection of current bills and arrears. Review the impact and affordability of cost-recovery tariffs and willingness to pay. Assess demand on the bases of price, income, and access to alternative supplies. Review the impact of connection charges for water supply and recommend options for improved affordability (e.g., payment in installments). Review and assess options for revolving funds to financing charges for water supply connection. Conduct comprehensive economic and financial analyses for each subproject and the overall project using relevant ADB guidelines and handbooks. Prepare financial projections including revenues, operating and capital expenditures, and debt repayment. Based on past and projected financial statements, compute relevant financial indicators, including, but not limited to, debt service coverage ratios and operating ratios. Compute for each subproject and the overall project financial internal rates of return, weighted average cost of capital, and economic internal rates of return. Analyze the impact of the project on poverty reduction. Review in detail the distribution of project benefits, net economic benefits, and poverty impact ratio. Investigate innovative financing schemes for improving urban water supply, including local currency financing, municipal bonds, and public-private partnerships. Identify key stakeholders (poor and vulnerable groups in particular) and their project-related interests, identify the likely barriers to their participation in and benefit from project resources, and suggest possible strategies for addressing their concerns. Identify factors affecting project risk and viability. Prepare an initial stakeholder analysis and a draft participation plan, according to Appendix 4.4 of ADB's Handbook on Poverty and Social Analysis (2001). Undertake focus group discussions with beneficiaries and affected people in the subproject areas to identify key constraints to, and the related economic costs of, access for the poor to sanitation services. Assess the role of nongovernment organizations (NGOs) and other civil society groups and how they should be involved in project design and implementation. Using ADB s Handbook on Poverty and Social Analysis (2001), carry out household surveys in collaboration with other team members and prepare a socioeconomic profile of the target population, including an assessment of its requirements and preferences in sanitation services and social customs and practices relevant to the proposed project design, specifically their ability and willingness to pay for services. Pay particular attention to mitigating any adverse impacts that the subprojects and the overall project have on specific communities or groups, particularly the poor. Prepare a gender analysis of the project according to the guidelines in Appendix 5.1 of ADB's Handbook on Poverty and Social Analysis (2001), and identify project design elements regarding policy, investment, or implementation that (a) will enable women to participate in and benefit from the project or (b) have the potential to exclude women s participation or benefit. Develop and recommend mechanisms and procedures for public consultation and community participation in project planning, operation and maintenance, implementation, and management, particularly in relation to levels of service performance, tariffs, and environmental protection. Assess whether there is a role for NGOs in project activities. Carry out public consultations, including with NGOs.

17 Appendix 4 15 (xi) Justify the project from the point of view of the social dimensions of social impact, impact on poverty, and gender and development. (xii) Prepare a resettlement plan, if warranted, for a selected subproject in accordance with ADB s policy on resettlement and guided by the Operations Manual section on involuntary resettlement (OM/F2, 2006) and other relevant policies and guidelines of ADB, (e.g., Policy on Gender and Development [1998], Accountability Mechanism [2003], and Public Communications Policy [2005]). Prepare a resettlement framework for the project in accordance with ADB policies and requirements. Assess the capacity-development needs of the Executing Agency and recommend a training program. (xiii) Assess the need for preparing an indigenous people s development framework or development plan, or specific action in accordance with ADB s Policy on Indigenous Peoples (1998). Prepare the necessary framework, plan, and specific action in accordance with ADB s requirements. (xiv) Prepare an initial environmental examination or environmental impact assessment, if warranted, for each individual subproject; a summary initial environmental examination or a summary environmental impact assessment for the whole project; and an environmental assessment and review framework in accordance with ADB s Environment Policy (2002) and Environmental Assessment Guidelines (2003). The environmental assessments should be in line with applicable national requirements. (xv) Hold discussions with HPWSCO, relevant local and central government agencies, consumer groups, and other stakeholders to identify key issues, obtain their views on capacity-building needs, and develop concepts for the design of the capacity-building components. Develop a capacity-building program, outline training programs, recommended interventions that should be included in the project, and estimate costs. (xvi) Outline information programs that will explain and promote the benefits and importance of clean water supply and sanitation for health, especially of children and women. (xvii) Outline a financial and operational performance improvement for HPWSCO, including terms of reference for consultant support and cost estimates. (xviii) Prepare and hold at least two workshops to increase stakeholders' participation in project design and the selection of investment proposals and to ensure the appropriate dissemination of project results. (xix) (xx) (xxi) C. Staffing Prepare detailed project implementation and phasing schedules for each component and investigate options for integrated design-procure-construct packages to improve implementation efficiency, if applicable. Prepare recommendations for project implementation, administration, auditing, and monitoring and evaluation. Design a fund-flow mechanism and identify an appropriate ADB disbursement procedure based on project needs and Executing Agency capacity. Prepare an effective system for monitoring project performance that includes monitoring the project's performance, benefits, and impact on poverty reduction. Identify the training needed to strengthen capacity. 8. The consulting firm will provide 77 person-months of consulting services: 22 international and 55 national. One consultant can cover more than one field of expertise. All international consultants should have relevant regional experience, preferably in Viet Nam. One of the

18 16 Appendix 4 international consultants will, besides providing technical expertise, act as team leader, and one of the national consultants will act as the deputy team leader. The consultant team will provide international expertise in (i) water supply and civil engineering (10 person-months), (ii) water utility management (2 person-months), (iii) financial and economic analyses (3 person-months), (iv) institutional development (2 person-months), (v) social development and resettlement (3 person-months), and (vi) environment (2 person-months). It will further supply national expertise in (i) water supply and civil engineering (29 person-months), (ii) mechanical and electrical engineering (7 person-months), (iii) financial and economic analyses (5 person-months), (iv) institutional development (4 person-months), (v) social development and resettlement (6 person-months), and (vi) environment (4 person-months).