FOR OFFICIAL USE ONLY

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1 Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY Report No: VN Public Disclosure Authorized Public Disclosure Authorized PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR MILLION (US$175.0 MILLION EQUIVALENT) TO THE SOCIALIST REPUBLIC OF VIETNAM FOR THE HAIPHONG URBAN TRANSPORT DEVELOPMENT PROJECT Public Disclosure Authorized Infrastructure Unit Sustainable Development Department East Asia and Pacific Region February 28, 2011 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective January 31, 2011) Currency Unit = Vietnamese Dong VND 19,497.5 = US$1 US$ = SDR FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AASHTO AMT DIA DMS DOC DOF DONRE DOT DPI EA EIRR EMP FS GIS GPS GRCs GTAP HPPC ICB IDA LED M&E NCB ORAF PCS PMURTW PSC PTA RAP RCS RPF TD UCMP VOC American Association of State Highway and Transportation Officials Aligned Monitoring Tool Department of Internal Affairs Detailed Measurement Survey Department of Construction Department of Finance Department of Natural Resources and Environment Department of Transport Department of Planning and Investment Environmental Assessment Economic Internal Rate of Return Environmental Management Plan Feasibility Study Geographic Information System Global Positioning System Grievance Redress Committees Governance and Transparency Action Plan Haiphong People s Committee International Competitive Bidding International Development Association Light Emitting Diode Monitoring and Evaluation National Competitive Bidding Overall Risk Assessment Framework Planning Connect System Project Management Unit of Regional Transport Works Project Steering Committee Public Transport Authority Resettlement Action Plan Replacement Cost Survey Resettlement Policy Framework Transport Division Urban Construction Master Plan Vehicle Operating Costs Vice President: Country Director: Sector Director: Sector Manager: Task Team Leader: James W. Adams Victoria Kwakwa John Roome Jennifer Sara Reindert Westra

3 Table of Contents I. Strategic Context...1 II. Project Development Objectives...4 III. Project Description...5 IV. Implementation...8 V. Key Risks and Mitigation Measures VI. Appraisal Summary ANNEXES: Annex 1: Results Framework and Monitoring Annex 2: Detailed Project Description Annex 3: Implementation Arrangements Annex 4 Operational Risk Assessment Framework (ORAF) Annex 5: Implementation Support Plan Annex 6: Team Composition Annex 7: Economic and Financial Analysis This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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5 PAD DATA SHEET VIETNAM HAIPHONG URBAN TRANSPORT DEVELOPMENT PROJECT Date: February 28, 2011 Country Director: Victoria Kwakwa Sector Director: John Roome Sector Manager: Jennifer Sara Team Leader(s): Reindert Westra Project ID: P Proposed terms: PROJECT APPRAISAL DOCUMENT East Asia and Pacific Region Infrastructure Unit Sector(s): General transportation sector (100%) Themes: Other urban development (100%) EA Category: (A) Full Assessment Lending Instrument: Specific Investment Loan Project Financing Data: IDA standard terms (US$ 175 million) - Total maturity of 35 years including a grace period of 10 years, principal repayable at 2.5 percent per annum for years and 5 percent per annum for years 21-35, commitment fee of 0.50 percent (waived in IDA's FY11), service charge of 0.75 percent, and zero interest. [ ] Loan [ X ] Credit [ ] Grant [ ] Guarantee [ ] Other: Source Total Project Cost: Cofinancing: Borrower: Total Bank Financing: IBRD IDA New Recommitted Total Amount (US$M) Borrower: State Bank of Vietnam Implementing Entity: Haiphong People s Committee Responsible Agency: Department of Transport Haiphong Regional Transport Works Project Management Unit 32 Dien Bien Phu Street Haiphong, Vietnam Tel: (84-31) Fax: (84-31) pmu.hpdot@gmail.com Contact Person: Mr. Vu Duy Tung, Director

6 Estimated Disbursements (Bank FY/US$ m) FY Annual Cumulative Project Implementation Period: Start: July 1, 2011 End: June 30, 2016 Expected effectiveness date: July 1, 2011 Expected closing date: December 31, 2016 Does the project depart from the CAS in content or other significant respects? If yes, please explain: Does the project require any exceptions from Bank policies? Have these been approved/endorsed (as appropriate by Bank management? Is approval for any policy exception sought from the Board? If yes, please explain: Does the project meet the Regional criteria for readiness for implementation? Project Development Objective Yes Yes Yes Yes X No X No No X No X Yes No The project development objective is to improve urban accessibility and strengthen capacity for urban transport management and planning in Haiphong. Project description Component A - Urban Main Road Development (estimated cost of US$ million; with IDA financing US$ million). This component will increase urban accessibility through construction of a new east-west link (connected to main north-south links) for cross town traffic within Haiphong and longer distance freight to and from Haiphong s port system. Component B - Public Transport Improvement (estimated cost of US$8.04 million; with IDA-financing of US$6.24 million). This component supports transformation of the public transportation services along the Tam Bac Kien An urban corridor, including measures to strengthen institutional development for public transport management, piloting of transformative approaches to fleet management, acquisition of new buses, and upgrading of infrastructure and facilities. Component C - Capacity-building (estimated cost of US$4.99 million; with IDA-financing of US$4.82 million). This component comprises three subcomponents related to (i) the design and implementation of the first phase roll out of a Planning Connect Solution an integrated GIS application that supports transport infrastructure planning; (ii) institutional and human resource capacity development in urban management and urban transportation; and (iii) key consultant services responsible for supporting the PMURTW during implementation.

7 Safeguard policies triggered? Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waters (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60) X Yes Yes Yes Yes X Yes Yes X Yes Yes Yes Yes No X No X No X No No X No No X No X No X No Financing Agreement Reference Section V. Other Undertakings Conditions and Legal Covenants: Description of Condition/Covenant The Recipient shall: (1) ensure that all vehicles procured under Part B.2 of the Project are deployed on bus line 2 along the Tam Bac Kien An Corridor for a period of at least three (3) years from entry into operation of such vehicles; and (2) further to implementation of Part B.2 of the Project, provide, throughout Project implementation, the necessary financial support for purposes of continued operation of such line with a view to improved performance on such line in terms of the relevant indicators. Date Due

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9 I. Strategic Context A. Country Context 1. The Government of Vietnam is committed to developing Haiphong as a significant growth center in the context of the country s trade and economic development. Designated as a Class 1 city, Haiphong is the second largest urban center in northern Vietnam with a population of 1.8 million people (of which approximately half are living in urban districts). Average population growth rates from were about 1.07 percent per annum (p.a.), with its urban population expanding 3.68 p.a. during this period, and contraction in its rural areas of about 0.45 percent p.a. Given these recent rural to urban migration trends, projections indicate that the urban population may double to more than 1.8 million inhabitants by In 2009, Haiphong s gross domestic product was approximately US$1.14 billion, or equivalent to US$1,547 on a per capita basis, which was attained following a remarkable average annual growth rate of percent in the period from 2001 to In recent years, the sectoral composition of the city s local economy has shifted, with the agriculture and forestry sector now contributing only 9.8 percent; industrial/construction increasing to 41.1 percent, and services now leading with 49.1 percent of Haiphong s gross domestic product. Haiphong has also benefited as the second largest recipient of Foreign Direct Investment in the northern region (behind Hanoi), which has been concentrated in manufacturing. 3. The volume of imports and exports through Haiphong ports, which are currently located in the city center, has contributed significantly to increasing traffic volumes. Haiphong City maintains the country s largest seaport in the Northern region, serving as a key transport hub by connecting Ha Noi and several Northern provinces, linking the Northern and Southern regions of Vietnam, and facilitating international trade and commerce. In 2009, the volume of goods transported through the whole of Haiphong s port system was officially recorded at about million tons, of which the total throughput of Haiphong Port was million tons (about 45 percent of the total). The main generators of interprovincial traffic between Haiphong and the northern region are the existing ports (Hoang Dieu, Doan Xa, Chua Ve) and the developing ports at Dinh Vu; most of the port-related traffic volumes are crossing the city via the NH5 route comprising Nguyen Van Linh and Nguyen Binh Khiem roads. 4. In support of its trade and economic development strategy, and to address the mounting pressures on the City s port and road infrastructure, the national and Haiphong City governments are pursuing two major development programs: Upgrading and Developing Haiphong Port. The City is undertaking a two-phased approach to upgrading Haiphong Port by reorganizing existing operations and relocating seaport functions away from the city core. In Phase I ( ) the City intends to reorganize the existing operation of the Haiphong Port and expand capacity to approximately 50 million tons/year through new port activity away from the city core in the Chua Ve-Doan Xa area, developing toward Dinh Vu; Phase 2 ( ) entails developing the deep-water port of Lach Huyen with a capacity of 100 million tons/year. 1 Haiphong Department of Finance. 1

10 This capacity expansion means increasing regional traffic demand, with the heavy-truck volume forecasted to increase at about 10.9 percent per year. Hanoi-Haiphong Expressway Project. The national government is committed to the construction of the Hanoi-Haiphong Expressway, with a target to be operational by The expressway will reduce travel times from Hanoi and connect the Northern provinces to the new ports in Dinh Vu and Lach Huyen, and is expected to remove longer distance, inter-city freight traffic from the City s central business district. Though national-level transport infrastructure strategies are well articulated, there remains a need to address municipal-level local access improvements that will also facilitate regional development objectives. B. Sectoral and Institutional Context 5. Haiphong is seeking to balance the conflicting pressures of preserving the city s character while meeting the travel demands posed by high levels of continuing economic growth. The urban road network is relatively limited, and congestion is starting to worsen in recent years. Haiphong s total motorized vehicle fleet was 667,035 in 2009, of which motorcycles accounted for nearly 93 percent. Figures indicate that the city s vehicle fleet has witnessed an annualized average growth rate of more than 11 percent p.a. between 2005 and Inter-city traffic to and from Haiphong is currently estimated at about 52,000trips/day, and preliminary analysis suggests that the estimated traffic demand is forecast to increase to about 177,000 trips/day by The municipality s urban road network of radial and arterial roads remains an investment priority to accommodate this forecast increase in traffic. 6. Improvements in Haiphong s road hierarchy are necessary to ensure that that the City s geospatial characteristics can meet future urban development plans. The current road network of urban roads are often of low standard, and not well balanced to serve burgeoning rates of urbanization and motorization. The existing urban arterial road network increasingly serves regional transport and to a lesser degree interprovincial transport. A lack of secondary and tertiary roads, especially in Le Chan, Kien An and Hai An, has led to heavy inter-regional traffic flows on main arterial roads such as Nguyen Van Linh - Nguyen Binh Khiem, Lach Tray - Cau Dat. This corridor has experienced the most intensive urbanization in Haiphong during the last decade, which has resulted in a mix of local light vehicles and inter-city heavy trucks competing for road space. In order to ensure access to the modern port system via NH5 and the Northern provinces, there is pressure for another arterial urban road that will bypass the city center. While the corridor would help serve to reduce heavy vehicle traffic from the ports along on the Nguyen Van Linh - Nguyen Binh Khiem routes, a new arterial road will contribute to raise urban road density, as well as ensure the reservation of sufficient right of way for future public transport operations. 7. Haiphong recognizes that its transportation infrastructure will be a key driver in defining or preserving spatial landscape, economic geography and development patterns. The City has therefore identified several goals to meet these objectives: (i) enhance urban accessibility and mobility while managing commercial and residential growth patterns; (ii) integrate the urban network in a manner that provides regional connectivity for multi-modal logistics while meeting intra-provincial and locally generated trips, and (iii) pilot new approaches to efficient and 2

11 attractive public transportation service provision, especially in the urban core and high-density corridors. 8. Access to reliable public transportation services needs further development. Despite Haiphong s relatively high urban density, less than one percent of all person trips are made by public transport. The primary reason for low ridership is a poor level of service and lack of sufficient and appropriate infrastructure for bus operations. Bus network density is relatively low when compared to Ha Noi and Ho Chi Minh City; a city-wide fleet of 116 buses covers 12 routes over a total network length of 330 km. Although the city s bus fleet is relatively new (compared to that of Hanoi or Ho Chi Minh City), small bus sizes, low service frequency, and inconvenient routings have contributed to low ridership. Despite these shortcomings, ridership surveys suggest people whom travel by bus do so because they perceive that it provides a safer alternative to travelling by motorcycle. In the absence of a public transport strategy, the potential for an efficient transit system may not be fully realized. 9. The Transport Division (TD) of the Department of Transport (DOT) is responsible for organizing the route structures for public transport services in Haiphong. TD management is limited to minimal administration procedures such as registration and licensing; however, it does not manage the level of service (scheduling and frequency), fare setting, or compliance with relevant regulations in the operation of public transport. Haiphong Road Transport Company is a formerly subsidized state owned enterprise, which has been converted to a Limited Liability Corporation that meets mandates of the 2010 Law on Enterprises. Four of the five bus companies operating in the City are privately owned. Since private operators are not entitled to claim any subsidy, they therefore charge higher, production-cost based fares. Currently, TD arranges bus line operations under direct concessionaire contracts that are not competitively tendered. 10. The adoption and application of contemporary planning tools is necessary in order to improve urban management capacity, geospatial planning, and access to information. In Vietnam, Geographic Information System (GIS) technology has been piloted and implemented in several cities and agencies, though with different priorities and approaches. GIS was first applied at the central level in the Ministry of Natural Resources and Environment with cadastral mapping. At the municipal level, GIS has been piloted in Ho Chi Minh City (2006) and Hue (2007), and with the only comprehensive application of GIS being implemented in Da Nang (2008). Haiphong, as a leader in administrative reform and modernization of urban management systems, seeks to pilot this technology for road and pavement management. An integrated planning management information system (Planning Connect System), which is applicable not only in formulating infrastructure plans but also in other areas of socio-economic development (such as land titling, monitoring and responding to climate change, and evaluating investment and trade opportunities), offers a contemporary data management solution that provides greater visibility for all facets of urban management. 11. Vietnam s rapid economic growth over the past decade is resulting in serious transport bottlenecks and investment demands that are beyond the reach of the national government s own resources to meet municipal needs. Haiphong People s Committee, through the State Bank of Vietnam, has requested IDA support for financing construction of critical road infrastructure that facilitates future city development, as well as piloting of public transportation service improvements and institutional strengthening activities. 3

12 12. The Bank is currently engaged in the urban transport sector in Vietnam and can leverage the experience of similar urban, transport and planning investment operations. The Bank is well positioned to offer its international expertise on multi-modal urban transport systems, with an emphasis on institutional capacity development. C. Higher Level Objectives to which the Project Contributes 13. Consistent with the Country Partnership Strategy, the envisaged urban transport infrastructure investments aim to improve both the national and regional level business environment by reducing logistics/transport costs through the provision of more efficient and reliable infrastructure services. Furthermore, the project is aligned with the Bank s sectoral strategy for promoting clean, safe, and affordable transport by improving accessibility for Haiphong s residents through measures that address the mix of heavy vehicle longer distance traffic with local congestion, enhancing public transport service delivery, while also facilitating trade and commerce. 14. The Bac Son - Nam Hai East-West Link arterial road represents a major investment identified in Haiphong City s Urban Construction Master Plan through The project s strategic approach to traffic demand management conforms to Eco-City sustainable development paradigms, including promotion of concentrated urbanization in the urban core, improving environmental and social benefits through interventions that aim to reduce accidents and address air quality, and fostering mechanisms that support integrated approaches to planning and management of urban systems by local institutions. II. Project Development Objectives A. PDO 15. The project development objective is to improve urban accessibility and strengthen capacity for urban transport management and planning in Haiphong. 1. Project Beneficiaries 16. Direct project beneficiaries include city road users (freight transporters, bus passengers, and automobile and motorcycle users) that will benefit from reduced cross city travel times. Users of Bus Line 2 services will also benefit directly through increased frequency, reliability and comfort of bus services, as well as improved access and facilities. City and district level departmental staff working in transportation and urban planning will benefit from a range of capacity building and training programs, in addition to technical assistance initiatives related to the platform development and data management of the Planning Connect System (PCS). 17. Indirect beneficiaries of the urban arterial road are the 40,000 city residents residing in proximity of the NH 5 corridor that will experience reductions in local congestion, as well as noise and air pollution, due to divergence of inter-regional freight and motorized traffic. Additionally, all public transport service providers are indirect beneficiaries through formalization of a Public Transport Authority and the subsequent strengthening of the regulatory 4

13 framework. Indirect beneficiaries of the PCS will also include civil society, public and private enterprises, and contractors and developers upon future roll out of an integrated platform through provision of improved access to transport and planning information. 2. PDO Level Results Indicators 18. Achievement of the development objective will be measured by: (i) reduced travel times on urban arterial corridors; (ii) increased ridership of public transport service delivery on a pilot corridor; and (iii) establishing and making operational a Geographic Information System (GIS) platform for urban road infrastructure. III. Project Description A. Project components 19. Component A - Urban Main Road Development (estimated cost of US$ million; with IDA financing US$ million). The component will finance improvement of access for cross-town traffic within Haiphong and longer-distance freight to and from Haiphong s port system, including: a. construction of the Bac Son Nam Hai East-West Link; b. replacement of the deck structure of Niem 1 Bridge and surface treatment of Truong Chinh Road; c. compensation, resettlement, rehabilitation and livelihood restoration of Project Affected Persons, including construction of resettlement sites with basic infrastructure, such as roads, electricity, water, and sewage systems; and d. provision of support for detailed design, procurement and construction supervision of works under this component. 20. Component B - Public Transport Improvement: (estimated cost of US$8.04 million; with IDA-financing of US$6.24 million). The component will finance transformation of public transportation services, including: a. (i) development of an institutional framework, regulatory model, and operational procedures for the establishment of a public transport management authority; (ii) provision of support to a strategic approach to service delivery, including carrying out of route optimization reviews and implementation of fare setting measures; and (iii) implementation of public awareness campaigns and consultations, including a media management strategy; b. transformation of line 2 bus services along the Tam Bac Kien An Corridor, including acquisition of new vehicles and global positioning system-based fleet management and other intelligent transport applications; and c. (i) carrying out of infrastructure and facilities upgrades along the Tam Bac Kien An Corridor, including installation of bus shelters and signs, development of road markings, implementation of traffic engineering measures such as improved pedestrian sidewalks and convenient paved pedestrian ways into side streets, and construction of a bus depot in 5

14 the An Lao area; and (ii) provision of support for detailed design and construction supervision of works under this component. 21. Component C - Capacity-building: (estimated cost of US$4.99 million; with IDAfinancing of US$4.82 million). This component will finance: a. (i) Development and implementation of the first phase of the rollout of an integrated geographic information system-based application supporting transport infrastructure planning, including acquisition and installation of equipment, establishment of institutional arrangements, provision of technical and data management support to the Department of Transport, and development of protocols for both public access and internal use and training; and (ii) development of a strategic plan for the expansion of system functionality to other urban management and planning agencies; b. Human resource development of the Recipient s relevant Haiphong province entities through the preparation and implementation of training programs; and c. Provision of support to the Regional Transport Works Project Management Unit for Project implementation, including for Project management and monitoring and evaluation, external monitoring of implementation of environmental and social safeguards and capacity building in relation to the implementation of such safeguards, carrying out of an independent land price survey, and carrying out of independent annual financial audits of the Project, and office and equipment upgrading and acquisition of vehicles. B. Project Financing 1. Lending Instrument 22. The project will be partially financed by a Specific Investment Loan in the form of an IDA Credit for US$175 million equivalent. The Credit will be lent on IDA standard terms. The choice of lending instrument and use of IDA resources is considered to be in line with the central government strategy for supporting regional infrastructure investment priorities. 2. Project Cost and Financing 23. Total project financing requirements are estimated to be US$ million, inclusive of price and physical contingencies, and taxes. An IDA Credit (US$175 million equivalent) will finance: 85 percent of the civil works for the Bac Son - Nam Hai East-West Link and Niem 1 Bridge and 100 percent of consultant engineering and advisory services related to these investments; 100 percent of civil works and consultant services under the Public Transport Improvement component; and 100 percent of consultant services, goods, training and study tours under the Capacity Development component. Counterpart funding in the amount of US$ million will finance 15 percent of the civil works under Component A of the project, all land acquisition and resettlement compensation (including all related civil works and engineering services), as well as internal management costs. The Borrower availed itself of the Project Preparation Facility in an amount of US$3 million in order to secure IDA s partial funding commitment and to facilitate initiating procurement of the detailed design consultant services. 6

15 Project Cost By Component and/or Activity Table 1: Estimated Project Costs Total US$ million IDA Financing % Financing A. Urban Main Road Development Component A1 Construction of Bac Son - Nam Hai East-West Link A2 Niem 1 Bridge/Truong Chinh Road A3 Land Acquisition and Resettlement Compensation Resettlement Sites (less cost recovery from land sales) A4 Engineering Services Internal Management Costs B. Public Transport Improvement Component B1 - Technical assistance for a Public Transport Authority B2 Transformation of Line 2 Bus Services B3 Kien An Corridor Improvements Land Acquisition Internal Management Costs C. Capacity Building Component C1 Integrated planning connect system C2 Human Resource Development C3 Project Implementation Support Internal Management Costs Total Project Costs Interest during construction Front-end Fee Total Financing Required C. Lessons Learned and Reflected in the Project Design 24. Use of Project Preparation Facility (PPF). A key issue impacting project readiness in the Vietnam transport portfolio relates to timely funding of preparation activities. Current government regulations prevent agencies from initiating procurement without confirmed commitments for project financing. The practice has therefore been to finance feasibility study and detailed design activities from an existing, on-going Credit, or from the proposed Project s proceeds. The PPF is therefore providing the Government with sufficient assurance that IDA is committed to the Borrower s financing proposal. Previous experience also highlights that procurement cycles for Bank-financed projects in Vietnam generally take months. The PPF is effectively accelerating the procurement process by allowing the implementing agency to advance with the selection of the detailed design consultants by more than one year ahead of project approval. The disbursement projections reflect the timing for completion of the detailed engineering designs, civil works contract tendering periods, and land acquisition and resettlement compensation processes. Though use of the PPF in this manner is not considered good practice, it has drawn attention to needed preparation resources and mobilized a new approach to addressing this challenge through the recently approved Project Preparation Technical Assistance Facility. 25. Establishment of a Grievance Redress Committee. In Vietnam, resettlement planning and implementation is carried out by the provincial, district and commune resettlement committees in 7

16 coordination with the respective PMURTWs. Any problems and grievances by affected households are channeled to the same resettlement committees often raising the question of conflict of interest and resulting in dissatisfaction among complainants. Consequently, independent Grievance Redress Committees (GRCs) are being established in projects, with members drawn from civil society and representatives of affected households, along with the PMURTWs and a member of the respective resettlement committees. These GRCs are expected to increase transparency in addressing community concerns, providing an early warning system in which the project owner can more promptly respond. 26. Independent Land Appraiser. One of the most common complaints by project affected households in Vietnam is in regard to land compensation rates not being reflective of prevalent market rates. The project design therefore includes a practice being introduced to World Bankfunded projects in Vietnam for an independent market study, carried out by a professional appraiser, to conduct a Replacement Cost Survey (RCS) to determine prevalent market rates for different types of affected assets, including land. RCS results will serve as the basis for the City to decide the appropriate compensation prices, to ensure they reflect market prices. (It should be noted that 2010 was the first year Haiphong undertook independent land appraisals as part of a new policy for determining and setting compensation prices in 2011 and beyond). This mechanism allows the project to support updating rates during the year, ostensibly to reflect market rates, with efforts to ensure transparency and fairness. The proposed RCS is to be carried out in parallel with the Detailed Measurement Survey (DMS) of affected assets and updating of compensation plans. IV. Implementation A. Institutional and Implementation Arrangements 27. Haiphong People s Committee (HPPC) is the central government s Line Agency responsible for investment decisions, as well as overall project management, guidance and oversight. The city has a Standing Committee responsible for infrastructure that will facilitate implementation. The Borrower of IDA Credit financing the Project will be the State Bank of Vietnam but the Proceeds of the Credit will be passed on without charge to the HPPC. 28. The Department of Transport (DOT) is the project owner responsible for executing project implementation; the Project Management Unit of Regional Transportation Works (PMURTW) is the implementing agency responsible for day to day supervision and management of all project components, including financial management and procurement accountabilities (including the signing of contracts on behalf of DOT). 29. In addition to relevant human resource development and capacity building to support the PMURTW and DOT with technical knowledge and skills enhancement, mitigation measures that address potential implementing agency capacity constraints relate to the following: (i) appropriate decision making authority a project steering committee will monitor and support project management and will coordinate and address any cross-agency issues during project implementation; 8

17 (ii) lack of knowledge and experience with Bank procurement rules and procedures procurement support will be an explicit assignment included in both the detailed design and implementation advisory consulting services; and (iii) management of safeguards - external (resettlement and environmental) monitoring consultancies are included in the project design. 30. Funds flow arrangements for payments are channeled directly from the designated account/ida account and state treasury account to suppliers and other beneficiaries, subject to verification procedures by the local state treasury. The designated account will then be funded following submission of a satisfactory withdrawal application by the PMURTW. The PMURTW will prepare annual financial statements covering the portion of the project components and activities for which they are responsible. The financial statements must be prepared on a modified cash basis in accordance with international and national accounting standards. 31. Project Steering Committee (PSC). The HPPC is to establish a Project Steering Committee. The chair-person of PSC is a Vice Chairman of Haiphong PC responsible for infrastructure. The PSC will be responsible for (i) coordination and liaison of all Project Implementing Agencies and other departments; (ii) monitoring the Project s progress; and (iii) ensuring that the Project related policy and institutional reforms are achieved. In addition, the Steering Committee will consider and decide on issues related to the guidelines, policies/strategy and implementation of the detailed tasks of the Project. The PSC includes members from the executing agency as well as the participating project agencies. 32. Implementation Schedule the Project will be implemented over a five year period, commencing in FY 2012 and closing in FY The implementation schedule is included in the Project Implementation Plan. The disbursement schedule reflects the need to complete the detailed engineering designs, contract tendering and completion of land acquisition and resettlement compensation activities during the first two years of project start-up. B. Results Monitoring and Evaluation 33. The PMURTW, together with relevant city departments, will be responsible for regular collection of data required for monitoring and evaluation of outcomes and results. The main outcome indicators for the project, as well as the intermediate indicators for each component, are provided in Results Framework in Annex 1. The baseline data and target values were agreed and will be included as part of the project s monitoring reports. The implementing agencies will use, collaboratively, the specific technical, social and economic indicators defined in this framework to assess project progress and effectiveness. 34. The indicator monitoring will be integrated into the day-to-day work routines of the project implementing agencies. The PMURTW is also to engage consulting services, to be financed from Credit proceeds, over a three-year period to support the monitoring and evaluation of the results framework. This activity would also include assistance to the Transport Division with monitoring and evaluation of travel times along project corridors, level of service and ridership of Bus Line 2, and conducting periodic customer satisfaction surveys and analysis for determining the effectiveness of the improved bus service and facilities. 9

18 35. The Aligned Monitoring Tool (AMT), which has been developed by Ministry of Planning and Investment (MPI) in collaboration with the World Bank and donor community, under the Vietnam-Australia Monitoring and Evaluation Strengthening Project provides a simplified, harmonized and aligned monitoring format. The report includes consolidated procurement monitoring and the status of implementation of the procurement plan, as well as information on contract progress and expenditure. These reports will include physical progress and financial progress, as well as information on compliance with social safeguards and institutional strengthening. C. Sustainability 36. Physical Sustainability. The overall road design for the Bac Son Nam Hai East-West link is considered physically sustainable as it is consistent with the road function and cross section indicated in the Urban Construction Master Plan (with provisions for 2050) of Haiphong City (UCMP 2020). This provides for an overall cross-section of 50.5m within which is located a 2x3 lane arterial road. This cross section is sufficient to meet the forecast traffic demand in the medium term for a 2x2 lane arterial road while reserving space for future expansion as the city develops to 2x3 lanes or the addition of bus lanes/brt. The engineering standards adopted for the road design and the procedures for quality assurance during construction should ensure the sustainability of the key road elements for their normal functional life as set out in international guidelines. However, this will depend in part on the ability of the HPPC and DOT to provide sufficient budget funding for maintenance. 37. Financial Sustainability. The project intends to enhance public bus services along Haiphong s bus route No. 2 through the deployment of 20 new busses, with the installation of GPS and LED technologies for improved reliability and visibility. It is foreseen that the buses and equipment will remain the property of the City and will be leased to the operator for the duration of the pilot operation. As the pilot program is expected to increase bus frequencies, the cost of operations will be higher than current service provision while the projected increase in revenues is dependent on increased ridership levels. To ensure short term financial sustainability, the City will guarantee a full operating cost budget for continued service deployment of the new assets along route No. 2 for three years. 38. Longer term sustainability will be instilled through the development of an appropriate regulatory framework and establishment of a Public Transport Authority to manage public transport services for the City of Haiphong. Recent international good practice for City governments indicate that tendering out routes to private operators obtains more competitive pricing in service delivery. Gross cost contract arrangements entail paying operators a fixed fee for the provision of bus services, while the City determines the level of services to be provided, sets fare structures, and collects all revenues. Under these arrangements it is envisaged that the overall level of financial support from the annual budget would be minimized, but the actual amounts for long term financial sustainability is dependent on the City s policy decisions related to fare settings and structures. As the City finances these services for the betterment of social welfare, any shortfalls between revenues and costs are to be covered by the City and budgeted accordingly. 10

19 V. Key Risks and Mitigation Measures 39. The major investment under the proposed project is the development a new urban arterial road, which is relatively straightforward in terms of technical feasibility. No significant risk to achievement of the PDO resulting from the project road has been identified. Other risks relate to compliance with World Bank social safeguard policies, and procurement aspects concerning contract packaging and timeliness in completion of tendering processes. Appropriate mitigation measures have been identified and integrated into the project design and implementation arrangements. Potential risks are summarized in the Operational Risk Assessment Framework in Annex 4. The overall risk is rated as M-L, that is Medium (Low Impact/ High Likelihood). VI. Appraisal Summary A. Economic and Financial Analysis 40. Economic Analysis. An economic evaluation was conducted for the Bac Son to Nam Hai arterial road, which accounts for 94 percent of the Credit and 96 percent of the total project cost. The principal measured benefits are: savings in passenger and freight vehicle operating costs (VOCs) and time savings as a result of reduced congestion, for bus, car and motorcycle passengers. Savings in freight time costs have not been included. As shown in Table 1 below, the estimated overall economic internal rate of return (EIRR) is 13.8 percent. This falls to percent in the sensitivity test with a 10 percent cost increase and 10 percent benefit decrease. Table 2: Summary of Economic Evaluation Road Section and Alternative Main Analysis NPV EIRR (US$ (%) million) Sensitivity Analysis NPV EIRR (US$ (%) million) Bac Son Nam Hai (4 lanes) In addition to the sensitivity analysis, a pivot point analysis indicates that the EIRR drops to 12 percent (i.e., net present value equals zero) if the benefits of the project drop by 30 percent with costs held constant. In an urban area where the benefits are assessed on a network wide basis, it is difficult to be precise about the changes to traffic flows on individual links that would be the main contributors to these changes in benefits. However, analysis suggests that this benefit reduction would result if at least 25 percent of traffic that is assumed to transfer from NH5 to the proposed project road did not do so. 42. The economic evaluation includes an assessment of the maintenance cost for the project road. This assumes routine annual maintenance (including crack sealing of 10 percent of the road surface) and overlays every five years. Local unit costs for maintenance were applied to these requirements, and the average annual maintenance budget is estimated to be VND36 billion (US$1.9 million equivalent), or approximately two percent of the VND1900 billion (US$100 million equivalent) capital cost of the road (excluding the two major bridges). This is slightly under the desirable annual average maintenance budget target of 2.5 percent of capital cost. 11

20 43. Financial Analysis. A financial assessment of Haiphong City s historical and projected revenue and expenditure confirms that the city government has sufficient budgetary resources to ensure counterpart commitments of approximately US$ million, or percent of the US$ million total project cost. The analysis further indicates that: (i) the project s counterpart fund contributions amount to 16 percent of Haiphong s total capital investment budget for infrastructure development; and (ii) beginning in 2015, the fiscal implications on the City s annual transport operation and maintenance (O&M) budget for planned road maintenance costs on the project road and public transport service provision amount to approximately 14 percent and five percent, respectively. While this represents a significant portion of the City s O&M budget, it is deemed sustainable as the budgetary impact will likely continue to decline relative to future growth projections. B. Technical 44. The Bac Son Nam Hai link is a 19.9 km urban arterial road in the Haiphong Master Plan to 2050 (approved by the Prime Minister in September 2009) and the Road and Rail Master Plan to 2025 (approved by Haiphong People s Committee). A Feasibility Study has been undertaken by a competent national consultant. The proposal for construction of a dual two-lane carriageway is based on traffic forecasts to 2030 undertaken using a standard four step transport model as part of the Feasibility Study (FS) of the Project. The socio-economic data and network inputs to the model are based on the Master Plan. The traffic flow forecasts assume that the Hanoi-Haiphong Expressway will be built by 2015, but this does not remove the requirement to construct the project road. 45. A basic road design has been prepared to national urban road design standards, with the American Association of State Highway and Transportation Officials (AASHTO) standards used as an international reference. The road cross section provides for a main four lane carriageway, with adjacent two-lane service/frontage roads on either side. This is a pragmatic solution to the difficulties in Vietnam in limiting access onto arterial roads from frontage properties. The Feasibility Study indicates that the project road is technically feasible, but notes the need for soft soil treatment as the ground on which the road is to be built has never been consolidated. IDA has reviewed the design and agrees with the FS assessment on soft soil; a road safety audit of the basic design is to be undertaken before detailed design commences. C. Financial Management 46. Haiphong PMURTW is responsible for project financial management. An assessment of the agency s capacity confirms that it meets the World Bank s minimum financial management requirements. However, the main risks are that the PMURTW has no prior experience with IDAfunded projects, and the assurance of timely allocation and expenditure of counterpart budgets. The PMURTW has developed a draft Project Financial Management Manual, which includes an agreed format for Interim Financial Reports (and is incorporated into the Aligned Monitoring Tool), that is acceptable to the World Bank. New accounting software has been purchased and properly configured to meet IDA reporting requirements. Trainings on Bank s financial management and disbursement procedures will be provided. Monitoring will be managed through reviews of the project s financial management system, including but not limited to 12

21 operation of Designated Account, Statement of Expenditures, internal controls, reporting and follow up of audit findings and mission findings. D. Procurement 47. Haiphong PMURTW is assigned to directly carry out project procurement under the oversight of DOT. A procurement capacity assessment was carried out by the World Bank, which concluded that the PMURTW has, in general, good institutional capacity and adequate procurement staffing. The main risk is that the PMURTW and its procurement staff have no prior experience with World Bank procurement, nor do they have experience in management of large contracts using international terms and conditions. This risk is mitigated by incorporating procurement support and contract management activities into relevant consultant service packages, as well as through targeted training and capacity building of PMURTW staff. The Procurement Plan for the project has been approved by the World Bank and will be updated at least annually (or as required) to reflect the actual project implementation needs. A summary of the procurement capacity assessment and the procurement arrangements are provided in Annex 3. The complete procurement capacity assessment is available in the project files. E. Social (including safeguards) 48. The Project is expected to have positive social outcomes. Through the proposed improvements, the Project will bring direct economic benefits to the region in general, and the population living in the vicinity of the project areas in particular. The planned investment in the Bac Son - Nam Hai East-West Link is expected to relieve residents along the existing section of the corridor of heavy freight traffic. Nevertheless, the project will result in some resettlement impacts due to the required land acquisition associated with the project road, thus triggering World Bank policy OP 4.12 on Involuntary Resettlement. Additional land acquisition will be necessary for development of resettlement sites to relocate households displaced by the project. 49. Field investigations indicate that there are no ethnic minorities residing within or adjacent to the proposed Bac Son - Nam Hai East-West Link alignment. Therefore, World Bank policy O.P on Indigenous Peoples will not be triggered. 50. PMURTW has prepared a Resettlement Policy Framework (RPF) in accordance with the requirements of the OP 4.12 on Involuntary Resettlement and newly issued Vietnamese Decree 69/ND-CP on additional provisions on land acquisition, compensation, assistance and resettlement. The RPF will be approved by Prime Minister and all Resettlement Plans (RPs) applied for the project will follow the approved RPF to ensure all project affected people will improve or, at least, have restored their pre-project level livelihood. The City s commitment to livelihood restoration is confirmed through the RPF and RPs. 51. According to the preliminary survey results, the project will affect a total of 3,037 households or 12,605 persons living in 13 communes/wards of five urban/rural districts. Of these, 909 households would need to be relocated. PMURTW has hire a consulting firm to prepare a Resettlement Plan (RP) for the urban arterial road, which has been approved by HP 13

22 Peoples Committee. The key provisions of the RP are also discussed with the project affected households and the RP was disclosed at the ward/commune level. 52. PMURTW, in coordination with the ward and commune authorities, has identified 12 potential resettlement sites covering an area of about 37.5 ha., and has conducted feasibility studies for these sites. Land acquisition for these resettlement sites will affect an additional 871 households (4,223 persons), seven of which would also be accommodated at these locations, while the rest would lose agricultural land. A standalone RP for these affected persons at these sites has also been prepared. Resettlement costs, including the cost of development of the resettlement sites, are estimated at US$61.37 million. 53. Extensive consultation with the communities that will be affected by the proposed project was carried out during preparation of the RPF and RPs. Information on the project s objectives and likely impacts, and salient features of the compensation and resettlement policy was disseminated. The participatory approach helped in reaching consensus on the resettlement policy and entitlements for various adverse impacts. A similar participatory approach will be pursued further during project implementation to ensure implementation of the provisions of the RPF. A robust grievance redress mechanism has been designed in a manner that provides increased civil society engagement in addressing potential disputes during implementation. Further consultations with local civil society organizations are proposed during resettlement plan implementation, especially in planning and designing rehabilitation assistance strategies for affected households. 54. The Vietnamese version of the final draft RPF and RPs were initially disclosed at the project ward/communes People s Committees Offices for public access on November 19, The English and Vietnamese versions of the RPF and RPs were made available at the Bank s Information centers in Washington and Hanoi on November 23, The project meets the World Bank policy requirements of OP4.12. F. Environment (including Safeguards) 55. The project triggers the World Bank policy on Environmental Assessment OP4.01. Given the scale of the project s impacts, it has been designated as a Category A project. The primary investment involves the construction of a new urban arterial road along a new alignment corridor, in and around both heavily populated urban areas as well as agricultural land (including aquaculture). The construction of this highway will also involve the slight relocation (by less than 10m) of a small stretch of river flood protection dyke (about 100m) to accommodate the right-of-way required for the road specifications. The proposed urban arterial road will also result in a number of intersections with local roads that have fairly heavy pedestrian traffic crossing the intersection at certain peak times during the working week. When considered with the potentially heavy construction work required to build this road segment, collectively, the potential adverse environmental impacts from these activities will be wide spread (along the corridor and off site locations as well), significant and would require extensive management. These potential adverse impacts include but are not limited to construction impacts, change in land use, flooding and spontaneous planning. The public transport improvement activities have 14