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GPOBA Commitment Paper: Vietnam EMWF GPOBA Rural Water Supply Development Project September 26, 2007

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GPOBA COMMITMENT PAPER

Project Name: Vietnam EMWF GPOBA Rural Water Supply Development Project (P104528)

Project Summary The objective of the project is to provide access to clean water services through the construction of about 75 new water systems in low income rural communities in five provinces located in the central part of Vietnam. Each community has around 500 households (HHs) and the uptake for the proposed scheme is expected to be around 75% or 400 HHs. The total beneficiaries are therefore around 30,000 HHs. Under the proposed project, GPOBA will provide a US$100 subsidy per HH connected, which represents 79% of the estimated total connection cost of US$127. Each beneficiary HH will contribute a cash payment of US$14; and in-kind work (digging and back-filling trenches) for a monetary value equivalent to US$11. The local authorities will make a land contribution valued at US$2 per beneficiary HH. The total connection cost includes the cost of the connection itself (from house to tertiary network) and a share of the capital cost for developing the primary and secondary network and associated facilities. Only connections realized through the development of new schemes would be eligible, while connections linked to the extension of an existing scheme, even when previously financed by the East Meets West Foundation (EMWF), would not be eligible. EMWF, the grant recipient and project implementation entity, is a well recognized US-based international non-governmental organization (INGO), operating in Vietnam for the last 20 years. EMWF has been working with local government authorities and beneficiaries to develop a community-based approach to provide clean water to rural HHs for more than ten years. EMWF has built about 90 small piped water systems providing service to about 150,000 rural people (about 30,000 HHs1) in central Vietnam. EMWF has developed a track record in delivering sustainable services at low cost, and with high customer ownership and satisfaction. The total system cost, estimated to be about US$50,800 per village or about US$127 per connection, was derived from a review of costs experience by EMWF in similar projects over the past three years. This amount is higher than the US$37,500 indicated in the Eligibility Note, and is caused by an increase in construction costs due to the booming economic situation in Vietnam, higher cost associated with improved design, as well as a more conservative expected uptake. Although this cost is higher than originally foreseen, it compares well with the US$142 per connection estimated on the basis of benchmarks of current market costs in Vietnam.

1 This coverage level is lower than in the GPOBA proposed project as communes did not always contain at least 500HHs, and the number of HHs was not a selection criteria for EMWF involvement then.

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GPOBA Commitment Paper: Vietnam EMWF GPOBA Rural Water Supply Development Project September 26, 2007

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Furthermore, connection costs for similar projects financed by other donors/lenders in Vietnam range from US$200 to US$245. The proposed OBA project will be the first project for EMWF where a financing mechanism based on output delivery is introduced to enhance its performance. EMWF will pre-finance the construction of about 75 water systems for the next 3 years with a phased approach (Year 1: 20 systems; year 2: 25 systems; year 3: 30 systems). The GPOBA subsidy of US$3,000,000 (with a possible up scaling of up to US$5,000,0002 to be considered at the project’s mid term review anticipated to be in May 2009) will be disbursed directly to EMWF quarterly after connection to water services have been realized and independently verified (80% of subsidy amount or US$80) and after evidence of satisfactory service delivery for at least six months (remaining 20% or US$20).

2 EMWF has approached GPOBA for a US$5,000,000 grant, which was deemed eligible by GPOBA Panel of Experts in November 2006. Due to GPOBA financial constraints, GPOBA reduced its potential commitment to the Project to US$3,000,000, allowing for the development of about 75 water systems and additional US$300,000 for GPOBA monitoring and supervision.

Vietnam - GPOBA EMWF Rural Water Supply Development Project –Commitment Document September 26, 2007

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PROJECT FACT SHEET

Scope: Expanding access to water services to low income households in rural central region of Vietnam through an innovative community-based approach, involving public-private partnership. Service Provider and Grant Recipient: EMWF, a US-based INGO operating in Vietnam. Total Project Costs: US$ 3,810,000 (US$4,110,000 with verification and GPOBA supervision costs) Total GPOBA Funding Requested: US$3,300,000 • Grant to EMWF for subsidy funding = US$3,000,000 (W3) • Project implementation = US$150,000 (Independent Verification Agent, IVA) • GPOBA/Bank Supervision = US$ 150,000 (including Financial management training,

procurement prior and post reviews and regular GPOBA / Bank supervision) Potential conditional increase to US$5 million will be considered at mid-term review, subject to successful implementation and GPOBA funding availability. GPOBA funding to be funded from the Netherlands’ contribution, as less than US$30 per capita and within 25% ceiling for non-SSA countries Additional Funding Sources:• Beneficiaries’ financial contribution: US$14 per HH connection, totaling US$ 420,000 • Beneficiaries’ in-kind contribution (digging and back-filling trenches) valued at US$11

per HH totaling a potential US$ 330,000 • Land contribution from local governments valued at US$60,000 (average US$800/

system) Outputs: working connection to safe piped water network, as evidenced by working house connection to network and six months of billed consumption. Potential beneficiaries: The project will target 75 rural communities in a phased approach over a period of 3 years. Each community has around 500 HHs. Expected uptake for each scheme is estimated at 75% or 400 HHs, totaling around 30,000 HHs or about 150,000 people (with 5 inhabitants per HH). Possibility to scale up to 50,000 HHs (about 20,000 additional HHs or 100,000 people) will be considered at Project mid-term review, providing performance and funding availability. GPOBA subsidy “efficiency”: US$20/person (US$22/person with IVA and GPOBA supervision costs) Targeting: Communities will be targeted where: (1) Poverty rate exceeds the national average of 18.1%; (2) Drinking water resources suffer from bacteriological contamination above the permissible limit for E.Coli;


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(3) A water source of adequate quantity and of treatable quality is available (confirmed at drilling tests), (4) Commune People’s Committee (CPC) is ready to set tariff covering O&M and to have the scheme managed by competitively selected water managers or private operators (as set out in an MOU); (5) The number of beneficiary HHs registering for connections is sufficient to enable financial sustainability while the tariff remains affordable; (6) The proportion of beneficiary HHs having paid the upfront US$14 cash contribution exceeds 50%. All HH in selected community will be eligible for the GPOBA subsidy. Year 1 Subprojects: EMWF has identified 19 communities or subprojects across four provinces for the first year of implementation. In each community, consultation with beneficiaries and local authorities took place, the MOU was signed and commitment and upfront payments were received as appropriate. EMWF began to drill the wells to test water quantity and quality in these 19 subprojects, to ensure timely implementation. One project will go ahead without GPOBA support. GPOBA did not fund TA for Project preparation. Sustainability: Project sustainability is ensured through: • Early and sustained consultation and communication with local authorities and

beneficiaries; • CPCs setting up financially sustainable water tariffs that would cover O&M costs and

provisioning of reserves for periodic replacement and possible system extension or upgrade, after assets are transferred from EMWF to communes;

• Beneficiaries participation in implementation and commitment to pay consumption-based water bills;

• Selection of water managers or small private sector operator for the management of the water schemes prior to construction, allowing for on-the-job training;

• Training of water managers or small private operators selected by local authorities to manage water systems;

• Support to local authorities in scheme management and supervision. Involvement of private sector: Water systems will be managed by competitively selected water managers or private operators. EMWF has experience with private sector participation in 15 of the rural water schemes it funded. EMWF will explore the opportunity to aggregate management of geographically close water schemes in order to reach economies of scale and make it more attractive to private operators. Financial Management: GPOBA subsidies will be disbursed quarterly to EMWF in the United States, who is responsible for pre-financing the works. GPOBA-recruited IVA will verify outputs and sign off prior to all GPOBA disbursements. The Financial Management (FM) approach presented in this document has been prepared by the FM Specialist in Hanoi and reviewed by the Disbursement officer in DC. It will be cleared by the regional hub leader as part of the process of finalizing the Grant Agreement. Disbursement: - 80% after realized working house connection, verified by an IVA; and


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- 20% after 3 months of satisfactory service delivery, evidenced by billed consumption.

Procurement: Procurement Clearance was received on September 10, 2007. Environmental and Social Safeguards: The Project has obtained environmental clearance. The Environmental Assessment (EA) Framework, acceptable to the Bank, has been sent for disclosure in Infoshop. It has been disclosed for information to the PPCs and will soon be publicly disclosed in the target provinces, in compliance with World Bank requirements. A Subproject EA will be prepared for each subproject, reviewed and disclosed in relevant village, in compliance with Vietnamese regulation. Social clearance is pending. Returns: FIRR: 5% with subsidy; negative without subsidy; EIRR: 54% (Assumptions: one productive adult wage earner / HH; minimum wages (adjusted downward for the high proportion of self and low-wage contractual employment) as the opportunity cost of time. 12 percent discount rate; 15 years useful life of the project. Government endorsement: Yes. Local authorities will approve individually each scheme that EMWF will construct (a requirement for EMWF’s acceptance to operate in a particular commune). Central Government will be sought, on a no objection basis, from the Ministries of Planning and Investments, the Ministry of Finance and the Ministry of Agriculture and Rural Development as part of the Follow-Up letter to the August 12 – 25 preparation mission (See Annex 11). Exchange rate: VND 16,000/USD


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Panel of Experts’ Issues raised at Eligibility Stage (November 2006)

1. Private operators The panel of experts (PoE) questioned how water schemes will be operated after transfer to communes. ¾ To date, most of the water schemes funded by EMWF are managed by the community,

through a team of two to three water managers, selected by the Commune People’s Committees (CPCs). While the water managers are usually not registered as a private company, they enter into an agreement with the CPCs, which have the legal responsibility for service provision and own the assets. The water managers are responsible for all scheme operations and management duties, including meter reading, billing and collection. All O&M expenses, including their salaries are paid out of the water tariff. EMWF provides a one-year guarantee on the schemes it finances. Then, it provides punctual technical support, as needed.

¾ However, EMWF experienced involvement of private operators in 15 of the schemes it financed. EMWF provides regular training and support to built local capacity and develop technical and management skills of water managers or private operators to the necessary level. EMWF is currently carrying out a review of such schemes to gather lessons learned from these experiences. EMWF will explore the opportunity to introduce private operators (selected through a competitive bidding process) and to aggregate villages in order to reach economies of scale and make it attractive for private sector involvement. A conference is scheduled in Danang on October 4 and 5, targeting local authorities, to raise awareness on the opportunities and possible forms of public private partnership for rural water schemes management.

2. Sub-projects and Tariffs The PoE asked whether there would be sub-projects (each small water scheme constituting a subproject) and separate tariffs for the various sub-projects. The PoE asked for clarification on how to ensure that tariff will cover O&M costs.

¾ Financial sustainability of water services is an issue in Vietnam, however, 100% of the

water schemes financed by EMWF to date are still in operation, with tariff covering all O&M costs, while remaining affordable and well below alternative supply costs (e.g. water vendors). The responsibility for tariff setting lies with CPCs. There is no national tariff structure in Vietnam. CPCs will sign a MOU in which they formally commit to set a tariff to a level sufficient to cover al O&M costs and, to the extent possible, a provision for repairs and service upgrade or expansion. EMWF will provide training and assistance to local authorities on water scheme financial management and tariff setting.

3. Sub-projects ERR / NPV The PoE asked that each sub-project be evaluated to ensure it was economic to supply – such sub-schemes could also be ranked for subsidy/investment prioritizing – and recommended that the ERR or NPV for several sub-projects be calculated, to allow a ranking mechanism to be developed for the remaining sub-projects.


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¾ The development of water schemes in the 19 sites considered for financing under the first year of implementation is economically justified, with ERR ranging from 39% to 71% (average is 53%). ERR will be calculated for future subprojects and EMWF will add ERR to the list of criteria for ranking future water subprojects.

4. Other discussions: The Panel endorsed the project for eligibility of the US$5 million subsidy scheme. On that basis, the disbursements profile proposed in the Concept Note entailed an advance payment of 20% of the amount of signed construction contracts. While EMWF wished to keep this arrangement with the reduced subsidy, it decided to forego it in order to simplify internal accounting and reporting. All financial aspects being managed by EMWF headquarters, located in Oakland, California.


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EMWF: Provides Funding for Water

Schemes

Commune People’s Committee (CPC)

Province People’s Committee (PPCs)

District People’s Committee (DPCs)

Final users Final users

MOU

Government of Vietnam

& National People’s Committee

Water Scheme

Water managers or private operator

Selectsand Manage

Operates

Service provision

Contractors

Ind. Verification Agent

Selects, manage and supervise

IVAOutput

Verification

WB / GPOBA

Grant Agreement

With GPOBA subsidy

Final users

Commune People’s Committee (CPC)

Without GPOBA

No structured service:

Own wells, river, water

vendors; etc.

Institutional organization of GPOBA project


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TABLE OF CONTENT

Project Summary............................................................................................................................. 1

PROJECT FACT SHEET ............................................................................................................... 3

ACRONYMS AND ABBREVIATIONS ..................................................................................... 11

A. STRATEGIC CONTEXT AND RATIONALE....................................................................... 12

A.1. Country and Sector issues ..................................................................................................... 12

A.2. Rationale for involvement..................................................................................................... 13

A.3. Higher level objectives to which the project contributes ...................................................... 14

B. PROJECT DESCRIPTION ...................................................................................................... 16

B.1. Project development objective and key monitoring indicators ............................................. 16

B.2. Project design ........................................................................................................................ 17

B.2.1. Nature of services to be subsidized ................................................................................... 17

B.2.2. Technical solution proposed.............................................................................................. 17

B.2.3. Investment costs and pre-financing ................................................................................... 17

B.2.4. Output Monitoring and Subsidy Disbursement.................................................................. 18

B.2.5. Targeting and eligibility .................................................................................................... 19

B.2.6. Subsidy efficiency and value for money ........................................................................... 20

B.2.7. Affordability: ...................................................................................................................... 21

B.2.8. Innovation.......................................................................................................................... 22

B.2.9. Scale-up and replication .................................................................................................... 22

B.3. Economic and financial analysis ........................................................................................... 22

B.4. Lessons Learned and Reflected in the Project Design .......................................................... 23

B.5. Dissemination of results ........................................................................................................ 24

B.6. Alternatives considered and reasons for rejection................................................................. 24

C. IMPLEMENTATION .............................................................................................................. 26

C.1. Milestones for Project Implementation ................................................................................. 26

C.2. Partnership arrangements ...................................................................................................... 26

C.3. Institutional and implementation arrangements .................................................................... 26

C.4. Monitoring and evaluation of outcomes/results .................................................................... 28

C.5. Sustainability ......................................................................................................................... 28

C.6. Critical risks and possible controversial aspects ................................................................... 30


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ANNEXES

Annex 1. Total Project Cost Schedule ......................................................................................... 31

Annex 2. Financial Management ................................................................................................. 32

Annex 3. Procurement.................................................................................................................. 40

Annex 4. Environment and Social Safeguards............................................................................. 46

Annex 5. Results Framework and Monitoring Mechanisms........................................................ 49

Annex 6: Technical and Cost Review of the Project .................................................................... 51

Annex 7. Project preparation and supervision .............................................................................. 64

Annex 8: Criteria for Selecting Communities............................................................................... 65

Annex 9: Example of House Connection Confirmation Form: ................................................... 68

Annex 10: Samples of First Year Communities: Population, Poverty levels, Estimated Costs and

Economic Rate of Return –Source: EMWF................................................................ 69

Annex 11: Aide-Mémoire preparation mission............................................................................. 70

Annex 12: Map of Vietnam.......................................................................................................... 85


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ACRONYMS AND ABBREVIATIONS

CPC Commune People’s Committee CPS World Bank Country Partnership Strategy to Vietnam for the years 2007-2011 CQS Selection Based on the Consultant’s Qualifications DOLISA Department of Labor, Invalids and Social Affairs DONRE Department Of Natural Resources and the Environment DPC District People’s Committee EAP East Asia and Pacific Region EIRR Economic Internal Rate of Return EMWF East Meets West Foundation EA Environmental Assessment FIRR Financial Internal Rate of Return FM Financial Management GA Grant Agreement GOV Government of Vietnam GPOBA Global Partnership on Output-Based Aid HHs households IC Selection of Individual Consultants ICB International Competitive Bidding IFR Interim Financial Reports INGO international non-governmental organization IVA Independent Verification Agent lcpd Liters per Capita Per Day MOU Memorandum of Understanding MTEF Medium Term Expenditure Framework NCB National Competitive Bidding NPV Net Present Value NRWSS National Rural Clean Water Supply and Sanitation Strategy up to year 2020 O&M Operation and maintenance OBA Output Based Aid PCA Procurement Capacity Assessment PoE Panel of Experts PPC Province People’s Committee QCBS Quality & Cost Based Selection USD US Dollar VND Vietnam Dong VUWSDP Vietnam Urban Water Supply Development Project WB World Bank


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A. STRATEGIC CONTEXT AND RATIONALE

A.1. Country and Sector issues

Vietnam is classified as a DAC II country and is a Frontier Country for IFC. Key Statistics for Vietnam and East Asia and Pacific Region (EAP) of the World Bank. Key statistics as of 2005 Vietnam EAP Region Population, total (millions) 83.1 1,870 GNI per capita, Atlas method (current US$) 620 1,420 GNI (current US$ billions) 51.5 2,647 Population growth (average annual % 1999-05) 1.4 0.9 Access to an improved water source (% of population) 62 78 Urban population (% of total population) 27 42 Poverty (% of pop. Below national poverty line) 20 N/A Life expectancy at birth, total (years) 70 70 Mortality rate, infant (per 1,000 live births) 18 29

Vietnamese Water Sector About 74% (2004) of the population are concentrated in the rural areas. Access to safe, clean water varies according to where these people live. According to the Vietnam Household Living Standards Survey, rural access to water supply and sanitation in 2004 is 48% and 16% respectively, although these estimates vary considerably depending upon their source. The corresponding access rates in urban areas are 82% water and 76% for sanitation. These figures vary significantly by province, with poorer, more remote provinces typically having much lower coverage of improved water and sanitation services. According to the Vietnamese Ministry of Construction, only 30 percent of small towns have piped water systems. Even in places with piped water, the connection rates can range from anywhere between 20 to 80 percent. Lower rates of connection are a major problem for water system financial sustainability, since fewer connections mean lower water revenues, so that water tariff collections can be insufficient to cover O&M costs. The effectiveness and quality of services is variable, with larger urban centers having higher coverage and better services than the smaller ones. The levels of improved water and sanitation services are considerably lower in the rural areas, so that many people lack even the minimum amount of clean water needed. In response to consumer demand not being met by public services, the private sector and non-governmental organizations have steadily increased support for rural and small towns’ water supply by leveraging funds from fee-paying customers and cash and in-kind contributions for system construction. Sustainability of service provision is a key issue in Vietnam, where the primary focus was on asset creation, with limited effort put into creating the institutional arrangements for sustainable service provision. The project provides for an adapted approach to ensure long term financial and operational sustainability of water schemes, as described in section C.5.


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A.2. Rationale for involvement

This project meets GPOBA operational criteria, as well as the core OBA principals of: • explicit use of targeted subsidies; • payment on output delivered and verified • increasing accountability of service providers; • providing incentives for innovation and efficiency; • enhancing sustainability through appropriate design and tariffs; • monitoring of results; and • encouraging public-private partnership. This project helps to strengthen the role of the international non-governmental organization (INGO) in delivering water services to poor communities, many of which are located in remote areas in the central part of Vietnam and do not enjoy the services that are available in many major and secondary cities that are going through tremendous growth in Vietnam. The INGO, EMWF and its subsidiary, Reach Vietnam were respectively established in Oakland, California, USA in 1988 and in Danang, Vietnam, in 1989. EMWF has been working with local government authorities and beneficiaries to develop a community-based approach to provide safe water to rural households for more than ten years. EMWF has developed a track record in delivering sustainable services at low cost, and with high customers’ ownership and satisfaction. One important reason for EMWF’s success is the program’s focus on communities who have the ability and the willingness to make the contribution in cash (US$14/HH for equipment and materials for their own house connections) and in-kind labor (a US$11 value mainly for digging and backfilling pipe trenches) for construction. The total user contribution represents 25% of the average monthly household income in the targeted communities3. Furthermore, the HHs have the ability and willingness to pay monthly water tariffs which fully cover operation and maintenance costs and wages paid to water managers. Tariffs in EMWF-financed systems range from VND2,000 (US$0.12) to VND2,500 (US$0.15) per cubic meter, which is higher than many Government-financed piped water systems (about VND 1,000 per cubic meter). The expected tariffs that the HHs in the targeted communities will pay in average represent about 2% of the monthly income of a household in the lowest quintile and 1% of the average monthly income in the first 19 communities identified. Please see Section B.2.7 for more details. EMWF has also built up its staff capacity over the last ten years, and is now poised for a major expansion in Vietnam and possibly to other countries in the region. This project introduces an innovative risk sharing mechanism for output delivery to enhance EMWF’s performance, and maintain its high value for money, in comparison with similar projects financed by other donors/lenders in Vietnam. Sustainability has been enhanced through EMWF’s work to improve water system design (see section B.4 for details), and to provide additional training to water managers in operation,

3 On the basis of socioeconomic assessment carried out in the 19 communes identified for funding under the first year of implementation.


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maintenance and management. Furthermore, the water tariff will be set at a level that is aiming at covering not only O&M costs, but total costs, including a reserve for eventual component replacement, upgrading or possible network expansion. Wherever possible, the project will promote the involvement of small private sector operators for water schemes management. EMWF will explore the opportunity to aggregate management of geographically close water schemes in order to reach economies of scale and make it more attractive to private operators EMWF will also explore the possibility of increasing private ownership of the scheme. Since the transition to a market-oriented economy, the private sector in Vietnam continues to develop, particularly in the large and secondary cities. In the rural areas, private sector development is limited to ad hoc arrangements at the community level with weak capacity for management and supervision. EMWF has experience of various forms of private sector involvement in about 15 schemes it recently developed. EMWF is currently preparing a report gathering the types and levels of such public-private partnerships and the experiences and lessons learned. EMWF plans to share the outcomes of their work with other donors and the Government through the National Partnership for Rural Water Supply and Sanitation, hosted by the Ministry of Agriculture and Rural Development. EMWF also plans to strengthen the promotion and the capacity of the private sector role in water and sanitation services under the project and with additional resources from other donors. EMWF’s thorough and comprehensive approach to planning, designing, and building, operating and maintaining its rural water systems is based on extensive community intermediation. This helps to ensure that engineering designs, construction, operation and maintenance can be reasonably financed through affordable tariffs that communities are both willing and able to pay. Prospective customers confirm their willingness and ability to pay in writing4 during a series of consultative meetings with community members and their leaders (see Annex 9). By doing so, each prospective customer commits to contribute both the upfront costs of house connections, in-kind labor for digging and back-filling trenches, as well as the long term payment of consumption-based monthly tariffs. Such an approach has been repeatedly successful in the vast majority of systems built so far by EMWF. Nevertheless, to give additional visibility in schemes to be financed under the project, EMWF now requires that formal commitments and associated upfront payments of at least 50% of potential beneficiaries are received prior to construction. Much of this willingness on the part of local communities to cooperate with EMWF in developing improved water systems is based upon EMWF’s long history of providing high quality support to rural communities, especially in Quang Nam and, to a lesser extent, in Quang Tri provinces. This process has also been facilitated by the substantial political capital EMWF has developed working in Central Vietnam (and now expanding to other areas) over the last 20 years, and translates into active and supportive collaboration on the part of the local authorities, from the provincial down to the commune level.

A.3. Higher level objectives to which the project contributes

The project is fully consistent is with existing development objectives and strategies developed by both the World Bank and by the Government of Vietnam.

4 Literacy rate in Vietnam is 90.3% as of 2006 (source: World Development Indicators database, April 2007)


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The project supports the World Bank Country Partnership Strategy to Vietnam for the years 2007-2011 (CPS), which focuses on the following four pillars: (1) Improve the business environment; (2) Strengthen Social Inclusion; (3) Strengthen Natural Resources and Environment Management; and (4) Improve Governance. The Project is expected to contribute to achieve CPS objectives, as summarized in the table below. Pillar of the CPS Objective of the CPS to which the Project will contribute: 1: Improve the Business Environment

more efficient and reliable provision of infrastructure.

2: Strengthen Social Inclusion

Piloting new instruments to reach the poor; Increasing access to quality, basic infrastructure services for the rural poor. The CPS points out OBA pilot programs to improve water supply mechanisms as good examples that will be continued.

3: Strengthen Natural Resources and Environment Management

The project will help integrate challenges linked to water resources and integrated water resources management, through parallel development of satisfactory wastewater management facilities at the local level (not financed by GPOBA). It will build local capacity on sustainable water management, through public awareness campaigns on personal hygiene and environment protection; and will report and share experience and lessons learned.

4: Improve Governance The project will contribute to making service providers and local authorities accountable for efficient and financially sustainable service provision and monitoring through transparent reporting and participatory approaches.

Under Pillar 2, the Project will complement on-going Bank assistance, including the Red River Delta Rural Water Supply project, which is financing small scale piped water supply schemes in northern areas of Vietnam and the Urban Water Supply Development Project,which entails a GPOBA-funded component for the development of water supply connections to low income households coupled to leakage reduction in Ho Chi Minh City and Tra Vinh province in the south. Collaboration and information sharing during preparation will continue during project implementation, in order to insure appropriate coordination, sharing of experience and lessons learned within the Bank and with development partners and the Government. A World Bank employee based in Hanoi will facilitate exchange of information between EMWF and the Bank teams in charge of the aforementioned projects. The project complies with the Hanoi Core Statements goals on ownership, alignment, harmonization results and accountability, agreed upon between Vietnam and its development partners. The project will contribute to achieve Goal 7, target 2 of the Vietnam Development Goals - Vietnam adapted version of the Millennium Development Goals -, namely “Ensure that 60% of the rural population has access to clean and safe water by 2005 and 85% in 2010”. Starting from 48% access in 2004, Vietnam increased access to 62% in 2005. The Project fully supports the National Rural Clean Water Supply and Sanitation Strategy up to year 2020 (NRWSS), which set forth the following objectives:


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• By 2010, 85% of rural people have access to 60 liters per capita per day of safe drinking water, and 70% have access to hygienic latrines with good personal hygiene; and

• By 2020, all rural people have access to 60 liters per capita per day of clean water, and there will be universal access to hygienic latrine and suitably improved personal hygiene (e.g. regular hand washing with soap). However, currently estimated investment is unlikely to be sufficient to achieve these ambitious targets.

The project makes a significant contribution to reaching the 85% access to safe water in rural areas by 2010 target, set forth in the NRWSS. It is consistent with its recommendation on technology used; complies with its principles of commitment and ownership at the local level; is designed in line with the national guideline of 60 liters per capita per day; complies with construction and water quality standards; encourages private sector involvement in development and management of rural water services; includes elements of knowledge and experience transfer to water managers and local authorities; ensures financial sustainability through tariff covering at least O&M costs; contributes to the development of satisfactory sanitation solutions (sanitation promotion initiative financed by EMWF in parallel to the project) and public awareness campaigns for improved personal hygiene; and includes appropriate cooperation for an integrated development of rural water and sanitation services as the province level is associated to the identification of potential water schemes for EMWF financing.

B. PROJECT DESCRIPTION

B.1. Project development objective and key monitoring indicators

The main development objective of the project is to increase sustainable access to piped water services to low income households in rural central provinces of Vietnam through an innovative community-based approach, involving public-private partnership. The project is expected to have the following impacts:

• Improve the living conditions of beneficiaries through access to affordable and reliable safe water service;

• Health benefits from reduced exposure to environmental risks posed by unsafe water (reduced morbidity and mortality rates – especially in infants);

• Economic benefits from reduction in medical expenses to treat water borne diseases, increased productivity and capacity to work due to reduced morbidity and associated reduction in sickness related absence from work, reduced household’s time to fetch water and reduced expenditure of clean water (water tariff lower than cost of many alternative sources);

• Improved personal hygiene and environmental protection, through satisfactory sanitation; • Possible development of sustainable private sector involvement in rural water

management; and • If successful, implementation of the project is likely to be replicated in other areas of

Vietnam or in other countries in the region.


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The achievement of the development objective will be monitored quarterly, by the increase in the number of beneficiary households connected and the increase in the number of beneficiary HHs with six months of satisfactory service delivery. Other monitoring performance indicators are presented in Annex 5.

B.2. Project design

B.2.1. Nature of services to be subsidized

The project will subsidize working households’ connections to piped water network to be developed. The total connection cost of US$127 entails the cost of the connection itself, i.e. connecting the HH to the tertiary network, and a share of the capital cost for developing the primary and secondary network and associated facilities. Only connections realized through the development of new schemes would be eligible, while connection linked to the extension of existing scheme, even previously financed by EMWF, would not be eligible.

B.2.2. Technical solution proposed

The water sources will be either surface water, where available, or groundwater. Each water system typically consists of drilled boreholes or suitable surface water withdrawal facility, pumps, water treatment (e.g. de-sedimentation, filtration, flocculation, aeration where iron is a problem, chlorination, and improved in-house water storage and filtration where required), a water storage tower, electrical controls, transmission and distribution pipelines and house connections. Household connection shall be constructed in accordance with best water utility practice. They consist of a sealed, high quality water meter, a check valve, a shutoff valve, a T-junction to the distribution pipe, and PVC pipe of sufficient length to reach the house and fittings. The water meter is usually installed where the pipe enters the house, in a closed chamber to prevent tampering. The technical design is simple and standardized through most systems. It has been reviewed by Bank staff and found acceptable. (See Annex 6 for technical design review).

B.2.3. Investment costs and pre-financing

The total system cost is estimated to be about US$50,800 per village, of which US$40,000 will be the capital cost prefinanced by EMWF (78.7% of the total cost); US$10,000 from the beneficiaries (19.7%) and US$800 will represent the value of the land contribution from local authorities (1.6%). As a non-profit organization, EMWF’s sole income is interest payment on its endowments. Under the GPOBA scheme, EMWF will need to borrow to pre-finance the construction of the piped-water systems with partial guarantees from EMWF’s donors. Pre-financing arrangement will entail a combination of loans from commercial banks and foundations. EMWF is pre-approved by a commercial bank and with the Rudolph Steiner Foundation and is pending a response from the Skoll Foundation’s PRI (Program Related


18

Investment) programme. Loans will be backed up in part by EMWF’s balance sheet5 and in part by a collateral fund, set aside in an escrow account. EMW is in the position to pay interest payment due on the loans that will prefinance the outputs under GPOBA’s project. The GPOBA subsidy will be of US$100 per connection. Other funding sources comprise of:

• A US$14 financial contribution from each beneficiary HH to pay for pipes and water meter necessary for HH connections;

• In-kind labor contribution by the beneficiaries for digging and backfilling trenches, estimated at about US$11 equivalent per connection;

• A land contribution from the local government, estimated in average at US$800 per scheme or about US$2 per connection.

In sum, the investments costs for the project are as follows: Cost description Cost per HH Scheme cost Total Project

cost % of total cost

EMWF pre-financing = GPOBA subsidy 100 40,000 3,000,000 78.7%

HH financial contribution 14 5,600 420,000 11.0%

HH in-kind contribution 11 4,400 330,000 8.7%

Value of land contribution from local authorities

2 800 60,000 1.6%

TOTAL 127 50,000 3,810,000 100 %

The estimated total system cost of US$50,800 per water scheme or about US$127 per connection, was derived from a review of costs experience by EMWF in similar projects over the past three years. Please note that this amount is higher than the US$37,500 indicated in the Eligibility Note, and is caused by an increase in construction costs due to the booming economic situation in Vietnam, higher cost associated with improved design, as well as a more conservative expected uptake. Although this cost is higher than originally foreseen, it compares well with the US$142 per connection estimated on the basis of benchmarks of current market costs in Vietnam. Furthermore, connection costs for similar projects financed by other donors/lenders in Vietnam range from US$200 to US$245.

B.2.4. Output Monitoring and Subsidy Disbursement

EMWF will report to GPOBA on a quarterly basis, under a format to be agreed between EMWF and GPOBA, presenting progress during the past quarter, the outputs and associated subsidy payments requested, project monitoring indicator and relevant financial management information. EMWF will be entitled to request payment of:

• 80% of the subsidy amount or US$80 after working house connections realized and verified; and

• 20% of the subsidy amount or US$20 after six month of satisfactory service delivery.

5 In 2006, EMWF Total Assets amount to US$38.2 million, including US$2.7million in “Cash including interest bearing accounts” and 9,538 in “Accrued Interests”. “Unrestricted net assets” amounted to US$4.8 million.


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An Independent Verification Agent (IVA) will be hired and managed by GPOBA. The IVA would carry out reviews of outputs for which EMWF requested a payment as appropriate and no more than once per quarter. The review will be based on the payments request submitted by EMWF as part of its quarterly progress report to GPOBA. For each review, the IVA will review eligibility of outputs through records check of newly realized connections and the invoices and associated payments for connections in operations for at least six months. The IVA will also carry out random physical verification of at least 5% of connections per subproject for which a payment is requested6. For each subsidized connection, EMWF will keep records of all relevant documentation, including the household registration to connect, the amount of financial and in-kind beneficiary contributions (in meters of trenches), invoices for service provision, stating the consumption in cubic meters and the amount for each service period and records of payments for each households. The IVA will then report to GPOBA, stating the number of eligible outputs and making recommendation on disbursement for the given quarter.

B.2.5. Targeting and eligibility

Geographic TargetingEMWF confirmed the geographic targeting of five provinces in central Vietnam (Quang Nam, Quang Tri, Quang Binh, Quang Ngai and Thua Tien Hué). The provinces targeted by the project are among the poorest in Vietnam, with poverty rates7 ranging from 21.3% to 29.4%, while the national average is 18.1%8. EMWF has identified 19 communes in four provinces (except Quang Ngai) considered for financing under the first year of implementation. In these communes the socio-economic assessment carried out by EMWF results in poverty rates ranging from 20% to 60%9, with an average of 30%. Given the expected uptake of 75% of HHs, it can be expected that the less poor households will benefit from the GPOBA scheme. However, this is relative, as average monthly per capita income in these communes is of US$2010, and should remain, in the communes to be selected in the future, of less than US$30, or less than US$1 per day, which is the internationally accepted benchmark for poverty definition. Thus it can be argued that based on this benchmark, 100% of the commune is poor. In addition, a poverty rate above the national average is one of EMWF’s key criteria for subprojects’ selection and ranking (the higher the poverty rate, the higher the ranking). On that basis, the project is found to appropriately target the poor. Eligibility criteria for community SelectionThe 75 villages to be subsidized under the project will be selected where:

• There is an agreement on the site selected between EMWF and the concerned local authorities. Site selection by EMWF is based on a rigorous consultative process involving community meetings, test drilling for suitable water sources, and consultations between

6 Based on expected physical progress (Annex 1), the IVA will physically verify 100 to 150 connections per review. 7 Government poverty standards, as defined by the Department of Labor, Invalids and Social Affairs (DOLISA), are of VND200,000 (US$12.5) per capita per month in rural areas (US$65/HH) and of VND260,000 (US$16.3) per capita per month in urban areas, which represents a monthly income per HH of US$65 and US$81, respectively. 8 Source: Living Standard Survey 2004; General Statistics Office of Vietnam 9 If compared to internationally accepted benchmark for poverty (Per capita income of less than 1$ a day or US$30 a month), the poverty rate then increases to close to 100%. 10 For the 19 communes, monthly per capita income range from US$12 to US$25, with one exception at US$35.


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EMWF, beneficiary communities and local authorities. (See Annex 8 for EMWF’s detailed site selection procedure);

• Current available drinking water resources generally suffer from bacteriological contamination above the permissible limit, and/or there are other serious water quality issues. The water quality standards used will be the Vietnamese government water quality standards. Possible water quality issues include high levels of salinity, sediment, iron, sulfur, chemical fertilizers or pesticides, (natural occurring) arsenic, and other contaminants for which adequate technical solution has been developed;

• The site passed the environmental negative screening developed through the Environmental Assessment Framework;

• Commitment letters signed by each beneficiary HH to co-finance the system by contributing labor for digging and back-filling pipeline trenches, cash and labor for installing household connection, and committing to pay for consumption based water service fees (Annex 9);

• At least 50% of registered households have paid the initial cash deposit necessary for the purchase of water meters, valves, and pipes for house connections;

• Agreement on management of the system as to the governance is reached, and selection of either individuals or private operator to manage the future water scheme is being processed.

B.2.6. Subsidy efficiency and value for money

In order to evaluate the value for money of the subsidy level proposed by EMWF, an experienced Bank/WSP staff reviewed the estimated investment costs of 20 subprojects considered at that time11 for financing during the first year of implementation. Using unit costs benchmark commonly accepted by consulting firms in Vietnam, the average construction cost per household was estimated at US$142 or US$28 per person. This result is 14% higher than the EMWF estimate of US$125 or US$25 per person (US$127 with land contribution from commune). It is however significantly lower than average construction costs of other on-going projects in Vietnam, funded by the World Bank and other donors, for comparable small rural water schemes, which range between US$200 and US$245 per household, or US$40 to US$49 per person, respectively. This assessment is consistent with the conclusion of the evaluation of EMWF’s Clean Water Program, carried out in August 2006 on the basis of 67 small water schemes built between 1996 and 2006. The team is confident that the level of subsidy per household is financially efficient and that the project presents a high value for money. EMWF experienced a relative variability of water scheme costs depending on water quality, terrain and rapidly increasing cost of construction due to high demand of the construction market in Vietnam. For these reasons, construction costs will be closely monitored during implementation, to determine the likeliness to revisit the subsidy level at mid term review. To ensure that the scheme will result in least cost solutions, EMWF will use competitive bidding procedures acceptable to the Bank for procurement of goods and civil works. An assessment of EMWF procurement capacity and a review of EMWF’s bidding documents were carried out during preparation. Results are available in Annex 3.

11 One project will go ahead without GPOBA support.


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B.2.7. Affordability:

Connection Costs:The table below presents the affordability of a subsidized water connection depending on the level of income of beneficiary households. It shows that the cost of connection without a subsidy will represent from almost one and a half month to more than three months of income for households in the first 3 quintiles. With a subsidy, this is reduced to less then 70% for the first 3 quintile, and, considering only the cash contribution, to less than half a month for the first 3 quintiles. Based on EMWF’s experience, households are willing to pay this share of their income to get access to an individual water connection, even those who had water available for free at a neighbor’s well, as communities are selected on the basis of poor quality of available water. As a reference, the Government poverty line as defined by DOLISA for rural areas12 has been indicated in the table.

Quintile 1 (poorest 20%)

Quintile 2 Quintile 3 Quintile 4 Quintile 5

(richest 20%)

DOLISA poverty line

for rural areas Ave. monthly income per HH in Central Vietnam (,000 VND)

572,250 915,150 1,252,050 1,767,100 3,421,100 1,000,000

Ave. monthly income per HH in Central Vietnam (USD)

35.77 57.20 78.25 110.44 213.82 65.00

Connection cost for households, expressed in percentage of monthly income:

User contribution 69.9% 43.7% 31.9% 22.6% 11.7% 38.5% With GPOBA subsidy Cash payment only 39.1% 24.5% 17.9% 13.6% 6.5% 21.5%

Without GPOBA subsidy 355% 222% 162% 115% 59% 195%

With a 75% uptake, it is likely that the HHs in quintile 3-5 are most likely to sign up, with some HHs in quintile 1 and 2. However, even in the fifth quintile, with an average monthly income of US$214 per household of five people, this translates in to US$43 per month per capita, or about US$1.5 a day. In the fourth quintile, the average monthly income per household is US$110, or US$22 per capita, less than US$1 per day, which is the international benchmark of poverty. Therefore, even though this project will mostly benefit HHs that are above the DOLISA poverty line, the majority of these households have a per capita income of less than US$1 per day. Consumption: While the design is set by law at a level of 60 liters/capita/day (9m3/HH/month), the expected monthly average consumption is expected to be around 5m3 per HH. Considering the tariff is to range between VND2,000 (US$0.12) to VND2,500 (US$0.15) per cubic meter, the monthly cost of service would represent US$0.60 to US$0.75 for a 5m3 consumption and US$1.08 to US$1.35 for a 9m3 consumption. This represents respectively 0.8% and 1.4% of the average monthly income per HH in the first 19 communities identified. The table below presents the percentage the water bill represents in regards average monthly income per quintile. Affordability for average consumption complies with the World Bank recommendation that it is kept below 3% of average monthly income.

Quintile 1 (poorest 20%)

Quintile 2 Quintile 3 Quintile 4 Quintile 5

(richest 20%)

DOLISA poverty line

for rural areas

Ave. monthly income per HH in 572,250 915,150 1,252,050 1,767,100 3,421,100 1,000,000

12 Government poverty standards is VDN200,000 (US$12.5) monthly income per capita in rural areas (USD65/HH) and VND260,000 (US$16.3) in urban areas (USD81/HH).


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Central Vietnam (,000 VND)

Ave. monthly income per HH in Central Vietnam (USD)

35.77 57.20 78.25 110.44 213.82 65.00

Water bill for average expected consumption of 5m3/HH/month: 0.60 – 0.75 US$

Water bill as a % of monthly income 1.8 – 2.1 1.1 – 1.3 0.8 – 1.0 0.6 – 0.7 0.3 – 0.4 1.0 – 1.2

Water bill for design consumption (9m3 HH/month): 1.08 – 1.35US$

Water bill as a % of monthly income 3.0 – 3.8 1.9 – 2.4 1.4 – 1.7 1.0 – 1.2 0.5 – 0.6 1.7 – 2.1

B.2.8. Innovation

The project will test the viability of a well targeted OBA approach with full participation and ownership from the beneficiary community, the INGO EMWF, an operator (water managers or private operator), and local government authorities. The Project will build on existing experience to encourage the development of small private sector for the management of rural water services, through the introduction of public-private partnerships, possibly including management contracts, lease of affermage-type contracts.

B.2.9. Scale-up and replication

The project will help EMWF leverage the achievements of their experience of bringing safe water to beneficiary communities. If successful, EMWF plans to replicate the approach in Vietnam and eventually in the Southeast Asia region.

B.3. Economic and financial analysis

Economic AnalysisA cost-benefit analysis using a “with and without GPOBA subsidy” methodology has been used to calculate the FIRR, EIRR and NPV of the project aimed at providing safe drinking water to low income families. The economic analysis has been done for 75 villages in the central part of Vietnam - each municipality comprising 500 households, with an estimated connection rate of 75 percent, namely 400 households per villages. Information from a socio-economic survey carried out in the target villages has been used to calculate household consumption, expenditures on water and household willingness to pay for improved access to water supply services. Information on project costs has been obtained from EMWF estimates of investment and operation and maintenance expenditures. The analysis confines quantified economic benefits to expenditure savings, time savings as a result of lower collection and wait time and health savings in the form of productive days gained and costs saved on treating water-borne diseases. All benefits, other than those in the form of productive days gained, are quantified based on primary information obtained from the household survey of target households. Productive days gained are valued based on adjusted World Health Organization (WHO)13 estimates.

13 Guy Hutton and Laurence Haller, Water, Sanitation and Health Protection of the Human Environment, Evaluation of the Costs and Benefits of Water and Sanitation Improvements at the Global Level, World Health Organization, Geneva 2004.


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The methodology assumes one productive adult wage earner per household and minimum wages14 as the opportunity cost of time. The minimum wage is also adjusted downward for the high proportion of self and low-wage contractual employment among the target households. The project has an economic Net Present Value of $ 9, 359, 810 and economic Internal Rate of Return of 54 percent. The E-IRR is less than 1 percent with only expenditure savings taken into account. It increases to 24 percent when time savings are added and to 54 percent with value of health benefits added. As a percentage of total benefits, expenditure savings account for 3 percent, time savings for 36 percent and health benefits for 61 percent. Time savings have been taken at the low end of the values indicated in the survey: at the higher end, they account for as much as 53 percent of the total economic benefits that accrue from being connected to the water supply system. The analysis uses a 12 percent discount rate and the useful life of the project is assumed 15 years. Financial AnalysisThe financial analysis is based on investment costs for connecting the 75 communes (30,000 households) of which OBA subsidy accounts for 80 percent and user contribution (financial and in-kind) for 20 percent. The project has a very negative financial IRR without the OBA subsidy15 and 5 percent with the subsidy.

No. of

Households

E-IRR E-NPV % Benefits

(Expenditure)

% Benefits

(Time)

% Benefits

(Health)

30,000 54% US$9,359,810 3% 36% 61%

B.4. Lessons Learned and Reflected in the Project Design

The Project design is benefiting from more than ten years of successful implementation of small scale water services in central Vietnam, based on the development of more than 90 rural piped water supply systems. Based on this experience, EMWF has made significant design changes to improve the overall quality of service, particularly with regard to water quality and durability of the investments. Recent design improvements include, for example:

• All systems now have chlorinators for water disinfection; • Improved aeration facilities have been installed at all sites which have significant levels

of iron in their water source; • All new schemes now have both sedimentation tanks (some multi-stage) and mechanical

filters that provide secondary filtration to significantly improve water quality; • For river water sources, in addition to the usual water treatment, alum is also added to

precipitate more of the fine sediment out of the water, and aeration is not so necessary.

14The minimum wage used is $30 per month (as of 2007, computed by the National Wages and Productivity Commission. 15 The high negative F-IRR can be inferred from the F-NPV w/o subsidy which is (-) $2, 976, 419.


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• Procurement of water testing kits which will allow EMWF staff to test water frequently at sources and at beneficiaries’ homes.

EMWF has also made efforts to improve program management and financial aspects, including:

• Developing an improved training program targeted not only on EMWF Water Program staff, but also on the Water Managers responsible for managing water systems in each participating community. This training focuses on technical, financial and management issues such as O&M procedures, accounting methods, the basis for estimating required tariffs and planning for system expansion;

• Development of an hygiene behavioral change program and piloting of an incentive program for the development of sanitation, building on the training of private sector in designing and building affordable skeptic tanks;

• Rationalizing water tariffs so that revenues will cover the full anticipated cost of operation, maintenance, repairs, equipment replacement, and system expansion;

• Introduction of private sector for water system management16 – several EMWF systems (e.g., Tam Ky Commune) have already initiated privatized management of EMWF-financed water systems. EMWF is currently monitoring the progress and suitability of these arrangements.

B.5. Dissemination of results

EMWF is a member of the National Rural Water and Sanitation Partnership, composed of international NGOs, bilateral donors, UN agencies (Unicef, World Bank, UNDP, etc.) and the Government of Vietnam. Its purpose is to share experience information and lessons learned on water and sanitation service provision in rural areas and allow for better coordination and harmonization of successful approaches. As the Clean Water Program is in the process of a major expansion, EMWF started disseminating the approaches and successes developed through the Program and to learn from the experiences of other NGOs and donors. All participants share common programmatic goals of contributing to reach the targets set through the National Rural Clean Water Supply and Sanitation Strategy up to year 2020 in an effective and sustainable way. In addition, the recent creation of a representation office of EMWF in Hanoi combined with the relocation of John Anner, EMWF Executive Director to Hanoi, will contribute to increase EMWF’s information sharing and dissemination with development partners and the Government.

B.6. Alternatives considered and reasons for rejection

Alternative considered Reasons for rejection Subsidize extension of existing networks to connect more households

Tariff levels are expected to cover for O&M and reserves to finance such extension. Highly variable connection costs requesting cost efficiency review on a case by case basis

Introduction of an 20% advance payment on the basis of signed

EMWF renounced to such advance payment for internal accounting reasons.

16 Management Models for East Meets West Rural Water Supply Systems, Rick McGowan, October 2006.


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construction costs Simultaneous inclusion of sanitation EMWF will promote on-site sanitation

solutions in parallel to the project, out of other sources of funds.

Targeting of poor as defined by DOLISA

Populations in project areas are poor, even if not captured by DOLISA standard. Stricter targeting of population under DOLISA poverty line would have translated into affordability problems and lower demand for connection and consequently a lack of critical mass to ensure financial sustainability.


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C. IMPLEMENTATION

C.1. Milestones for Project Implementation

The Project is expected to be implemented over a period of three years. EMWF plans the development of 20 water schemes during the first year of implementation, 25 during the second year and 30 the third year. Thus far, 19 water schemes are considered for financing under the first year of implementation. EMWF water team is currently assessing other sites for potential inclusion to this list.

Milestone Tentative Schedule GPOBA Commitment September, 2007 WB Financial Management Specialist provides training to EMWF project team

October, 2007

Donors’ no objection on commitment October, 2007 GPOBA Grant Agreement signed November, 2007 Project implementation begins November, 2007 GPOBA hires Independent Verification Agent

December, 2007 – January, 2008

Disbursement to EMWF begins April, 2008 Project Mid Term Review May, 2009 Project implementation ends December 2010 Subsidy disbursement ends April, 2011

A mid-term review of the project will take place in May 2009. It will review all aspects of the project, compare them with project design and consider project restructuring or amendment as appropriate. A potential extension of the project scope up to US$ 5 million will be determined at that stage, provided satisfactory performance and funding availability. The level of subsidy will be compared to construction costs, to determine whether a revision of the subsidy amount per connection is necessary for the increased subsidy amount.

C.2. Partnership arrangements

No other international or bilateral agency is co-financing the project.

C.3. Institutional and implementation arrangements

The roles and responsibilities for the implementation of the project are shared between GPOBA, EMWF, the local authorities and final beneficiaries. The Bank, acting as an administrator to GPOBA, enters into a Grant Agreement (GA) with EMWF. The GA will describe the role and responsibilities of EMWF and the Bank for the implementation of the project. EMWF will be in charge of financial management, procurement, compliance with safeguards and monitoring and reporting. EMWF will bear the full


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responsibility and risks for pre-financing and implementing the project and ensuring satisfactory service provision, in compliance with the GA, prior to any disbursement being made. Some responsibilities will be transferred to the local authorities after works have been commissioned, in accordance with the Memorandum of Understanding that EMWF is to enter into with local authorities and water managers for the development of each water scheme. The GA will refer to the MOU and will prevail in case of conflicting provision. An Operations Manual will be prepared in parallel to the GA. It will describe in further detail the procedures and steps to follow for implementation of the project with regard to procurement, financial management, disbursement, monitoring and reporting. The Memorandum of Understanding (MOU) to be signed between EMWF and the local authorities prior to implementation of each water scheme, describes their respective roles. It states that EMWF will be responsible for:

• system design through its own engineer staff; • procurement of all required goods and materials; • procurement and management of scheme construction, testing and commissioning; • community consultation and awareness raising; • supervision of in-kind labor of beneficiaries; • training and operational support to water managers; • training of the community in personal hygiene and sanitation development; • technical support during operational start; • repairs under EMWF’s one year guarantee on the entire scheme; and • financial contribution to major repairs when required, on a case by case basis.

The local authority signing the MOU is usually the chairman or vice-chairman of the District People’s Committee and of the Commune People’s Committee. The MOU has been previously presented and discussed with the DPC and CPC, including the heads of all villages in the commune to ensure high ownership and commitment. By signing the MOU, the local authorities agree to provide at no cost to the project:

• All land required for the water storage tower, all associated equipment and a small office for the water managers, and rights of way for the water pipelines;

• Legal access to water sources to be developed (including groundwater abstraction permit) • Convenient access to a power transformer with good quality and reliable electricity (to

maximize the longevity of the electrical equipment, especially the pumps); and • Active support for project promotion in the beneficiary communities, and within local

government decision-making agencies. They also agree in the MOU to set and revise water tariffs, so that it covers the full anticipated cost of operations and maintenance, and a provision for reserves for repair and possible extension. Every household that wishes to connect to the water system will sign a Commitment Letter addressed to EMWF and the respective CPC and DPC, in which they agree to meet the following obligations:

• Pay for the water meter, valves, pipe and fittings from the distribution line to their house, and dig the trench for their own house connection;


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• Contribute labor for digging and backfilling the transmission and distribution pipeline trenches, the labor for which will be equitably divided among all the participating households;

• Pay in full each month the cost of piped water consumption as indicated by their household meter, based on the water tariff in place; and

• Be willing to participate in the hygiene and sanitation behavioral change promotion activities.

C.4. Monitoring and evaluation of outcomes/results

As indicated in Section B.2.4., EMWF will report to GPOBA on a quarterly basis, under a format to be agreed between EMWF and GPOBA, presenting progress during the past quarter, the outputs and associated subsidy payments requested, project monitoring indicators and relevant financial management information. The satisfactory provision of outputs will be verified on a quarterly basis, by an IVA to be hired by GPOBA within the first three months after the Grant Agreement has been signed. The IVA should have demonstrated knowledge and experience in water supply and sanitation service provision in rural areas in the Vietnamese context. He would ideally speak Vietnamese, to be able to interact directly with the final beneficiaries, water managers and local authorities. In addition to reviewing the outputs and making recommendation on the disbursement levels, the IVA will also review the overall progress of the project, project monitoring indicators, and the results of the annual customers’ satisfaction survey. The IVA will be encouraged to use the opportunity of its regular site visits to comment on potential improvements. Regular Bank supervision and planned mid-term review will also contribute to project outcome evaluation EMWF recently carried out a comprehensive review of its Clean Water Program. It plans to carry out such review once every two years.

C.5. Sustainability

The project will ensure long term sustainability of the water schemes through: • Early and sustained consultation and communication with local authorities and

beneficiaries; • CPCs setting up financially sustainable water tariffs that would cover O&M costs and

provisioning of reserves for periodic replacement and possible system extension or upgrade, after assets are transferred from EMWF to communes;

• Beneficiaries participation in implementation and commitment to pay consumption-based water bills;

• Selection of water managers or small private sector operator for the management of the water schemes prior to construction, allowing for on-the-job training;

• Training of water managers or small private operators selected by local authorities to manage water systems;

• Support to local authorities in scheme management and supervision, to help them set up financially sustainable water tariffs and help develop monitoring units with appropriate


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skills mix, allowing for efficient management of water systems, whether publicly or privately managed.

Up to 2006, EMWF contributed to the water scheme long-term sustainability through additional technical support and financing when major repairs and/or equipment replacement(s) were necessary, independent from the one year guarantee on the water schemes. The need for such assistance by EMWF has since significantly been reduced due to:

• More recently built systems are better designed to fit the conditions in Central Vietnam; • Systems are better built by more experienced contractors and construction supervisors; • Water managers are better trained to carry out proper O&M; and • Water tariffs are higher (VND 2,000 to 2,500 per m3), so that system revenues are now

sufficient to cover not only routine operation and maintenance costs, but also periodic repair and replacement of equipment such as pumps.

However, EMWF will guarantee the first year operation even after the assets have been handed over to the communes. Furthermore, EMWF will also provide water testing in households from time to time to ensure the quality of water delivered.


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C.6. Critical risks and possible controversial aspects

Risk Mitigation Rating with Mitigation

Household beneficiaries may not connect to the system

EMWF will only build the system after at least 50% of committed households have paid the US$14 payment for household connection. Very high demand from villages and households ensures competition to be selected to benefit from GPOBA Grant.

Low

Affordability and willingness to pay -- water tariff may be too high in some areas

EMWF will calculate tentative tariff on the basis of design and number of committed HHs for discussion with local authorities and beneficiaries. The selected operator (either water managers or private operator), with the support of local authorities, will seek to increase number of HHs so the system can be extended and the water tariff could be adjusted. By experience, EMWF has not encountered great challenges in the affordability or willingness to pay.

Low/Modest

Ability to pre-finance outputs

EMWF is pre-approved with a commercial bank, allowing sufficient cash to pre-finance the outputs.

Low

Scheme sustainability Scheme revenue depends on the users having subscribed as well as on consumption levels. Local authorities, responsible for service provision and tariff setting, will be regularly trained by EMWF. Private sector participation will be encouraged wherever possible. EMWF will also train water managers to properly operate, maintain and repair systems, and will educate villagers about the use of safe water.

Modest

Scheme design fails to fulfill the technical or water quality requirements

EMWF bears the financial risk of delayed subsidy payment until the design or water quality requirements are realized and verified. Random quality control will be performed by the IVA.

Low

Construction / connection costs are higher than expected

The subsidy level is fixed. EMW will have to find out the best way to optimize construction costs. For instance, it can decide to contract out the construction of one or more schemes through one competitive tendering process. Costs will be closely monitored during supervision and IVA reviews. The opportunity to revise subsidy amount will be evaluated at mid-term review, in the perspective of a scale up to US$5 million.

Modest/ Substantial


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Annex 1. Total Project Cost Schedule

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

New Connections 2000 2000 2000 2000 2500 2500 2500 2500 3000 3000 3000 3000 30,000

GPOBA Subsidy for connections $200,000 $200,000 $200,000 $200,000 $250,000 $250,000 $250,000 $250,000 $300,000 $300,000 $300,000 $300,000 3,000,000Independent Verification Agent $12,000 $12,000 $12,000 $12,000 $12,000 $18,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 150,000Task Team Supervision $12,000 $12,000 $10,000 $10,000 $10,000 $36,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 150,000

Sub Total OBA Project Costs $224,000 $224,000 $222,000 $222,000 $272,000 $304,000 $272,000 $272,000 $322,000 $322,000 $322,000 $322,000 $3,300,000

Beneficiaries’ financial contribution $28,000 $28,000 $28,000 $28,000 $35,000 $35,000 $35,000 $35,000 $42,000 $42,000 $42,000 $42,000 $420,000Value of beneficiaries’ in-kind contribution $22,000 $22,000 $22,000 $22,000 $27,500 $27,500 $27,500 $27,500 $33,000 $33,000 $33,000 $33,000 $330,000Value of land contribution from authorities $4,000 $4,000 $4,000 $4,000 $5,000 $5,000 $5,000 $5,000 $6,000 $6,000 $6,000 $6,000 $60,000

Sub Total Component 3 $54,000 $54,000 $54,000 $54,000 $67,500 $67,500 $67,500 $67,500 $81,000 $81,000 $81,000 $81,000 $810,000

TOTAL PROJECT FUNDS $278,000 $278,000 $276,000 $276,000 $339,500 $371,500 $339,500 $339,500 $403,000 $403,000 $403,000 $403,000 $4,110,000TOTAL GPOBA FUNDS $224,000 $224,000 $222,000 $222,000 $272,000 $304,000 $272,000 $272,000 $322,000 $322,000 $322,000 $322,000 $3,300,000GPOBA FUNDS as % of TOTAL 80.58% 80.58% 80.43% 80.43% 80.12% 81.83% 80.12% 80.12% 79.90% 79.90% 79.90% 79.90% 80.29%

OBA Project Costs

Other sources of funds

Proposed Schedule of Payments

Physical ProgressTOTAL

2008 2009 2010


32

Annex 2. Financial Management

Risk Assessment The overall risk before mitigation measure is Moderate and after mitigation measures have been taken is Low. Risk Risk Rating Risk Mitigation Measures Incorporated into Project

Design Risk After Mitigation Condition of Negotiation, Board or Effectiveness

Inherent Risk Country level: Overall Fiscal Environment

Moderate Capacity building in Medium Term Expenditure Framework (MTEF), urban planning and budgeting, implementation and monitoring, commitment control and debt management; Performance expenditure reviews at least annually

Moderate

Entity level: The operation license of the EMWF Vietnam Operation may not be renewed.

Moderate EMWF to seek commitment from the relevant authorities of the renewal of operation license upon expiry (which is currently September 30, 2007)

Low

Project level: Fund may not be used for the intended purpose

Moderate (1) Independent Verification Agent (OBA auditor) will check the output before the payments to contractors can be made; (2) Independent Financial Auditor will carry out annual financial audit for both entity and projects.

Low

Overall Inherent Risk

Moderate Low

Control Risk 1. Budgeting Moderate Monthly financial plan to be updated in 3 monthly

rolling budget and linked with operational plan. Moderate

2. Funds Flow Moderate Only reimbursements are allowed Low 3. Staffing Moderate (i) Training to familiarize with WB financial

management and disbursement requirements Low

4. Accounting Policy & Procedures

Moderate Accounting and reporting should be synchronized in both terms of accounting basis and software.

Low

5. External Audit Low Annual Audit is required for both entity and project financial statements where the project financial statements will be an integral part of the entity financial statements.

Negligible

6. Reporting & Monitoring

Moderate Accounting and reporting should be synchronized in both terms of accounting basis and software.

Low

7. Information Systems

Moderate Accounting and reporting software should be synchronized.

Moderate

Overall Control Risk

Moderate Low

I. Assessment of capacity


33

Implementation arrangements The East Meets West Foundation (EMWF) and its subsidiary, Reach Vietnam were established in Oakland, California. Reach Vietnam was set up exclusively for managing the AP (Atlantic Philanthropy) financed projects. In Vietnam, EMWF Vietnam was established in September 30, 2001 as the project office with the license which has been granted/renewed every two years. The latest license will be expired in September 30, 2007. EMWF has already applied for license renewal and the risk of the license not being renewed is limited. The project will be implemented by EMWF Vietnam Operations and managed by EMWF office in Oakland. EMWF operation in Vietnam has experiences implementing projects financed by donors with community based approach. The organization also carried out number of clean water systems (with the total expenditure for the program amounting to USD 277,000 in 2006 out of total projects and programs expenditure of USD 10.2 million). Financial Management Personnel The financial management personnel of EMWF Vietnam operations comprises of 1 Administrative and Finance Manager, 1 Chief accountant, 1 Finance Officer and 1 Cashier. Except for cashier, all the others have accounting background and long experiences with the projects. However, none has experiences with World Bank Financed projects, so training on WB requirements and regulations of financial management and disbursements is needed. The current financial management personnel are assessed as capable to carry out financial management for the project as long as they are familiarized with the WB procedures. (Refer to financial management action plan)

Accounting The current accounting system used in EMWF (Vietnam Operation) is the full double entry system in accordance with cash basis of accounting. However in EMWF Oakland Office, the accounting basis is accrual, thus adjustments will be made at consolidation. The accounting system used in Oakland office is Quickbook application. In EMWF Vietnam office, the Quickbook is used to prepare the data/report to Oakland office for consolidation, while an in-housed developed MS Access based application is used to record and monitor daily transactions. The two applications cannot be linked so every transaction needs to be inputted twice into both systems which duplicate workload to the accountants. It is noted that the MS Access application is more comprehensive than Quickbook as it allowed creation of sub-accounts (for managing expenditure by category, component and source of funds and managing the contracts commitment). The reconciliation between two systems (Quickbook vs MS Access) is done at month end. For the time being, the current arrangement for accounting is considered as acceptable. However, in the future, when the number of projects and amount of expenditure disbursed increase, the work load to accountants will be too heavy. EMWF should seek resolution to synchronize the two systems. (Refer to financial management action plan). EMWF reported during appraisal mission in August 2007, that it has synchronized the system which will be verified during 2008 audit.

Budgeting


34

In EMWF Vietnam Operations, the annual budget is prepared by each “sectors” before being consolidated into the budget for the whole operation. The annual budget is broken down into monthly budget based on the initial operational plan. Though the operational plan is updated, the monthly financial budget is never updated during the year. The link between the operational budget and financial budget therefore is not strong which may lead to the inefficient cash projection and management. The budgeting process therefore needs to be improved with 3 month rolling budget to be updated every month. (Refer to Financial management action plan) Internal Control and Internal Auditing There is no internal audit function. Basic internal control procedures of segregation of duties (cashier/accountant), cash and bank (cash count, bank reconciliation), are in place. However, the following key issues were observed:

• There were no clear policies of cash on hand management (e.g. policies on ceiling of cash on hand balance, on the limit that payment can be made by cash, periodical and/or surprise cash counts). Cash count is not regularly done and balance of cash on hand is significant (USD 6,991 at December 31, 2006);

• The policies on asset management are not adequate. For example, the threshold of USD 2,500 for assets to be monitored appears to be too high in Vietnam context. Furthermore, there are no policies that (i) assets register should be maintained, (ii) periodically assets inventory should be taken and results should be reconciled with assets register.

EMWF should have action plan addressing these issues to improve the internal control system. (Refer to financial management action plan)

External Audit The financial statements of EMWF Vietnam Operation were audited by Ersnt and Young Vietnam and the consolidated financial statements for EMWF were audited by PMB and Co. The audit opinions on the two reports were unqualified. We however noted that Ersnt and Young, in their closing meeting minute with EMWF Vietnam Operation stated number of issues relating to internal controls which were not resolved by the management. We would like EMWF to resolve the issues raised by the auditor, in particular, the “matters for consideration of management”. (Refer to financial management action plan).

II. Proposed Financial Management and Disbursement Arrangement Disbursement Arrangements The table below details the allocation of the Grant

Category Amount of the Grant Allocated (expressed

in USD)

Percentage of Expenditures to be

Financed (inclusive of Taxes)

Component 1: Installation of Water Service connection for selected

3,000,000 100%


35

households

TOTAL AMOUNT 3,000,000 ========

Disbursement methods can be any of the followings:

• Reimbursement - The Bank may reimburse EMWF for expenditures eligible for financing pursuant to the Grant Agreement (“eligible expenditures”) that the borrower has pre-financed from its own resources.

The Disbursement Deadline Date will be four months after the Closing Date of the project. Supporting documentation required under the reimbursement method are the Interim Financial Reports (IFRs) and list of payments against contracts that are subject to the Bank’s prior review, if any. The template of IFRs needs to be agreed between EMWF and the Bank/GPOBA before clearance of the Grant Agreement. All IFRs should be supported by approval from the TTL prior to submission to the Bank for payment. Frequency of Reporting Eligible expenditures IFRs on the use of Grant proceeds should be prepared by EMWF on a quarterly basis. Counterpart Funds Counterpart Funds will be provided by final beneficiaries and local government.


36

Figure 1: Proposed Flow of Funds

GPOBA

Contractors

Bank Account ofEMWF Oakland

1

2

EMWF Oaklandoffice

Ind. VerificationAgent

3

EMWF VietnamOperation Office

Document Flow

Cash Flow

5

65

7

4


37

1. Contractors send the supporting documentation to EMW Vietnam Operation Office.

2. EMWF Vietnam sends on a quarterly basis the request for fund to EMW Oakland Office, attaching progress report and supporting documentation of expenses incurred.

3. EMWF Oakland sends, on a quarterly basis, withdrawal application (requests for reimbursements) and supporting documentation to WB/GPOBA TTL for its review and no objection.

4. The WB/GPOBA TTL gets the Independent Verification Agent (OBA Auditor) to carry out a review of outputs and supporting documentation.

5. Independent Verification Agent (OBA Auditor) submits its conclusions and disbursement recommendations for eligible outputs to the WB/GPOBA TTL for approval, cc EMWF.

6. EMWF Oakland revises the withdrawal application as approved by WB/GPOBA TTL, get it signed by an authorized representative of EMWF and submits it to WB (Manila Office) for disbursement, copying the WB/GPOBA TTL for formal approval.

7. WB (Manila Office) disburses funds to the bank account of EMWF Oakland, upon receipt of formal approval by WB/GPOBA TTL.

Financial Reporting and Monitoring Quarterly Interim Financial Reports (IFRs) will be prepared by EMWF Vietnam Operation for monitoring of financial performance of the project in a format to be agreed between the EMWF and the Bank/GPOBA before clearance of the Grant Agreement. The IFRs include the followings (to be agreed by clearance of the Grant Agreement): Financial reports (analyzing expenditures against budgets) • IFR1- Report on Sources and Uses of Funds by expenditure category; • IFR2- Report on Uses of Funds by project components; Contract monitoring reports • IFR3- Report on delivered outputs and associated Contract Progress; • IFR4- Report on Procurement Monitoring. The quarterly IFRs will be submitted to the Bank within 45 days of the end of reporting quarter. Annual Project Financial Statements: The Project Financial Statements will consist of: • A Statement of Sources and Uses of Funds / Cash Receipts and Payments which

recognizes all cash receipts, cash payments and cash balances controlled by the entity; and separately identify payments by third parties on behalf of the entity.

• A Management Assertion that GPOBA funds have been expended in accordance with the

intended purposes as specified in the relevant World Bank legal agreement. The annual financial statements can be presented as an explanatory note of the EMWF Vietnam Operation Financial Statements and Oakland Office consolidated financial statements. The Financial Statements of EMWF Vietnam and Oakland Office are required to


38

be audited by an independent auditor acceptable to GPOBA and submitted to the Bank within 6 months of the end of each financial year.


39

Financial Management Action Plan

Action Responsibility To Be Completed By

1- Training to EMWF financial personnel on WB requirements on Financial Management and Disbursement

WB, EMWF

By project approval of

GPOBA (Tentatively

September 2007) 2- Synchronization of the accounting and reporting applications (Quickbook and MS Access based application)‘

EMWF By June 30, 2008

3- Improvement of budgeting process with the 3 monthly rolling budget to be updated every month and linked with monthly operational plan

EMWF


GPOBA (Tentatively

September 2007) 4- Improvement of internal controls: (i) establishment of clear policies on cash on hand management (policies on ceiling of cash on hand balance, limit that payment can be made by cash, periodical and/or surprise cash count; (ii) improvement of policies on assets management (revising threshold of assets to be recognized, maintaining assets register, periodical asset inventory)

EMWF


GPOBA (Tentatively

September 2007)

5- Resolving the issues raised in the section “Matters for consideration of Management” of the closing meeting minutes with the Auditor

EMWF By December 31,

2007

6- EMWF Vietnam Operation obtains commitment of relevant authority of renewal of operation license upon expiry date.

EMWF


GPOBA (Tentatively

September 2007)

See Appendix 4 to Annex 11 for progress to date.


40

Annex 3. Procurement

A. General 1. Procurement for the proposed project will be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Grants and IDA Credits” dated May 2004, revised October 2006 (the Procurement Guidelines) in the case of goods, works and non-consulting services; and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, revised October 2006 (the Consultant Guidelines) in the case of consultants’ services, and the provisions stipulated in the Grant Agreement. The various items under different expenditure categories are described in general below. Under the project which is designed on the basis of Output Based Aid (OBA) disbursement will be made as reimbursement on the basis of realized and verified outputs – in this case working water connections. The implementing agency EMWF will assume 100% of the pre-financing risk, the level of the payment for each connection will be fixed in advance and has been reviewed by technical experts from the Bank to ensure that there is value for money. The proposed approach will ensure that EMWF has an incentive to carry out procurement in a reasonable manner and with economy and efficiency. The project funds will not disbursed until, GPOBA has received sufficient evidence that the water connections have been made and are operational, this being verified, on a quarterly basis, by an independent verification agent hired and managed by GPOBA, in accordance with AMS15.00; In order to ensure transparency, the project will be widely advertised through various media, the project implementation and procurement plans will be published nationally and in the communities. EMWF will also be required to publish widely the details of results of evaluation and contract awards, periodically. B. Procurement Arrangements 2. Organization: Since procurement activities under this project will be implemented by EMWF at district and/or commune levels, a procurement capacity assessment was carried out which indicated that EMWF staff in charge of procurement are generally proficient with implementing low value procurement given their extended experience over the last ten years in implementing more than 90 similar water schemes in several central provinces of Vietnam. However, the EMWF procurement staff may be challenged by having to get familiar with procurement policies and procedures under Bank-financed projects and to comply with provisions of the Bank Procurement and Consultant Guidelines. It is also foreseen that EMWF may face potential staffing limitations to carry out procurement activities due to geographically dispersed locations of project activities. It was therefore recommended that the EMWF management team should include a dedicated procurement specialist, who is sufficiently familiar with and proficient in the Bank’s procurement procedures. The procurement activities under the project will be overseen by this procurement specialist located in the central Project Office. In addition, EMWF will hire on as needed basis procurement assistants who will carry out executive procurement functions in the project communes. The procurement specialist will be responsible for preparing and updating the project’s annual procurement plan and for ensuring that procurement is carried out in


41

accordance with the procedures, agreed with the Bank in the legal agreement and the procurement plan. 3. Bidding documents: EMWF proposed to use its own sample bidding documents for procurement of low-value packages under National Competitive Bidding and Shopping procedures. Review of EMWF-established bidding documents found them generally acceptable to the Bank, according to the guidance of the Bank’s Operational Memorandum from James Adams, Vice President and Head of Network Operations Policy and Country Services (OPCS) dated November 7, 2005: “Application of paragraph 3.13 of the Procurement Guidelines to Cases involving Incumbent Concessionaires”. The procurement will be done as described in the Operational Manual, which will include sample bidding documents including draft contracts satisfactory to the Bank. The bidding documents will include a detailed scope of work, specifications and relevant drawings for construction works as defined by EMWF current practice, based on basic designs that fully comply with Vietnamese government design standards, and on improvements made based on ten years of experience designing and constructing rural water systems, and applicable Government of Vietnam (GOV) legislation and regulations. The specifications, among other things, will include requirements ensuring compliance with relevant Vietnamese laws and regulations for the water sector pertaining to environmental, technical and quality standards, and in accordance to ethical standards and professional integrity. 4. Procurement of Civil Works and Non-consulting Services: Procurement for works under the project will be for relatively small rural piped water systems (water schemes) costing from US$ 25,000 to US$ 70,000 and serving between 1,000 – 4,000 people with a design consumption of 60 liters per capita per day. The average estimated cost for each scheme is US$ 50,000. Wherever possible, EMWF will use contracts for multiple water towers in a limited geographical area, in order to reduce mobilization and transportation costs, and also to help develop local capability to build the water towers. Procurement of both water towers and pumping systems would be grouped in lots to better attract local bidders. All systems will require community labor contributions for installing their own house connections, and digging a certain length of the transmission and distribution pipelines. As these contracts for civil works will be small and project activities dispersed (in different rural communes in several different provinces), it is not likely that foreign bidders will be interested and therefore no international competitive bidding for works contracts is envisaged under the project. The particular methods of procurement of works and supply and installation under the project include: (a) National Competitive Bidding (NCB), (b) Shopping, (c) Direct Contracting, (d) Community Participation procedures and (e) established practices of EMWF, the last two of which have been found acceptable to the Bank. The thresholds for the particular procurement methods are as follows:

• National Competitive Bidding -. Each package of civil works estimated to cost the equivalent of US$50,000 or more shall be procured on the basis of National Competitive Bidding procedures.

• Shopping – Contracts estimated to cost less than US$50,000, EMWF will be procured

using shopping procedures Shopping procedures are appropriate where it is difficult to group the works are scattered geographically The contracts to be procured under shopping procedures will mainly be for water towers, (ranging in cost from US$


42

6,000 - US$ 8,500) and related goods and materials for supply and installation of relatively small rural piped water systems17.. .

• Direct Contracting– For contracts below US$ 2,000, such as the hiring of pipe

plumbers to install the water pipelines, EMWF may use the Direct Contracting method.

• Community Participation – Each participating household will contribute labor for

digging and backfilling of all pipeline trenches (under the direction of EMWF construction supervisors).

5. Procurement of Goods: Procurement for the acquisition of various goods for water schemes such as wells, pumps, water towers, water transmission and distribution pipes, water meters, water filtration and aeration, elevated water storage tanks and related accessories, will be carried out in accordance with the Operational Manual, using the particular procurement methods as follows:

• International Competitive Bidding (ICB): Contracts for goods estimated to cost the equivalent of US$150,000 or more per contract, shall be procured on the basis of International Competitive Bidding (ICB). The applicable Bank Standard Bidding Documents for Procurement of Goods, dated May 2004 and revised May 2005, shall be used.

• National Competitive Bidding (NCB): Each package estimated to cost less

than US$150,000 but above US$30,000 shall be procured on the basis of NCB procedures.

• Shopping: Each package estimated to cost US$30,000 or less will be procured

using Shopping procedures. Under NCB and Shopping procedures, EMWF’s internal control procedures, sample bidding and contract documents which have been reviewed and found acceptable to the Bank, may be used.

6. Selection of Consultants: EMWF does not envisage that it would require consulting services during the first 18 months of the project implementation, but it may require such services in the coming years. For this reason, provisions for selection of consultants’ services under Quality & Cost Based Selection (QCBS), Selection Based on the Consultant’s Qualifications (CQS) and Selection of Individual Consultants (IC) will be included in the Financing Agreement, to allow such possibility. C. Procurement Capacity Assessment 7. Summary of Procurement Capacity Assessment (PCA): The Bank procurement specialist, Hoang Xuan Nguyen, carried out an assessment of procurement capacity of EMWF in April 2007. The assessment was discussed and agreed with EMWF. Following are the main findings:


43

(i) Overall, capacity of EMWF staff involved with procurement is “fair” and the associated risks are in the “average” category. However, EMWF staff is not much familiar with the Bank’s procurement procedures, and thus has little experience in implementing Bank-financed procurement. Therefore, in order to mitigate the risk and improve their performance, EMWF will assign or hire a staff with Bank procurement experience to be responsible for coordinating and overseeing the procurement operations of the project. The assigned procurement specialist will have several years of procurement and contracting experience, and be knowledgeable of disbursement procedures in Bank-financed project.

(ii) The bidding documents being proposed by EMWF to be used for NCB and

Shopping for procurement of Goods and Works under this project are based on those which were used in other EMWF-administered projects funded by other donors, which are acceptable to the Bank. In order to ensure broad consistency with the Bank Procurement procedures/guidelines while using the EMWF-established bidding documents for NCB, the EMWF should be aware and to avoid the following potential mistakes: (a) allowing re-bidding, rejecting all bids or undertaking negotiations when the bid exceeds the budget allocated without seeking the Bank’s concurrence, (b) rejecting bids if there are no more than three bidders, (c) use of merit point system for evaluation (rather than in monetary terms); (d) Assessing bidders qualification on merit points (rather than on the basis of pass or fail) and (c) requiring a bidder, as a condition for award, to undertake obligation not specified in the bidding documents, or otherwise to modify the bid as originally submitted.

(iii) Mitigation measures to address the risks include: (a) internal and external training

for EMWF staff in charge of procurement, (b) provision of specialized consultants with excellent procurement knowledge and experience, c) timely access to the Bank procurement specialists for help, if required and (d) Hiring of an independent external auditor directly by GPOBA to verify the outputs from the project and to confirm that procurement was carried out in accordance with the legal agreement and the agreed procurement plan.

8. Risk assessment: With the above measures in place, the overall risk assessment of procurement implementation for this project is considered medium.

D. Review by the Bank of Procurement Decisions and Frequency of Procurement Supervision 9. Given the nature of the project, most of the procurement review will be carried out ex-post and on a quarterly basis by an external independent auditor under terms of reference prepared by the GPOBA task team. The selection of the independent audit firm for services of ex post output verification will be executed by the GPOBA task team in accordance with policies and procedures under the Bank’s Admin Manual AMS 15.00. To provide for an independent verification of outputs, EMWF will be responsible for presenting all relevant documentation upon requests of the independent audit firm, hired by GPOBA, that would conduct ex post reviews of the completeness, accuracy and authenticity of documentation provided by EMWF as well as undertake ex post physical spot checks of sample of connections. The audit firm will also provide assurance that the facilities are not being financed from another source. The initial coverage of the Independent Procurement Review will be 15%. The coverage for the subsequent review periods will be adjusted depending on audit findings.


44

10. The capacity assessment has recommended the following procurement be subject to prior-review by the Bank:

• Works: The first NCB contract, and the first Direct contract for hiring plumbers;

• Goods: The first ICB contract, and the first Shopping contract;

• Consulting services: Contracts with firms above US$100,000 each, contracts with individuals above US$50,000 each, and assignments of critical nature as identified in the procurement plan.

11. In addition to the Bank’s prior review, and the independent procurement review, bi-annual supervision missions will carry out post reviews of on as needed basis E. Procurement Plan 12. EMWF presented a tentative procurement plan for the first 18 months of the project implementation in attachment 1 below. The plan will be discussed and agreed between the EMWF and the Project Team before signature of the Grant Agreement. All procurement plans will be updated in agreement with the Project Team annually, or as required to reflect the actual project implementation needs and improvements in institutional capacity. Attachment 1: Tentative Procurement Plan for the first 18 months (as of September 4, 2007)

Attachment 1 to Annex 3: TentativeProcurement Plan for the first 18 months (asof September 4, 2007)

45

1 2 3 4 6 7 8 9 10 11 12

Type Method

1 Water Towers (complete package, including power, valves, etc.) 32 7 Works (4,6)NCB /

Shopping (1)$6,500 $208,000 No 01-Oct-07 15-Oct-07 31-Oct-07

2 Wells (2 per site), Pumps (2 per site), Controls, Valves, Electrical System 24 4Supply andInstallation

NCB /Shopping (1)

$3,900 $99,600 No 01-Oct-07 15-Oct-07 31-Oct-07

3 River Intakes, Pumps (2), Controls, Valves and Electrical System 8 1Supply andInstallation

NCB /Shopping (1)

$2,500 $20,000 No 01-Dec-07 05-Jan-08 15-Jan-08

4 Catchment Dams and Slow Sand Filters (if any) TBD TBDSupply andInstallation

NCB /Shopping (1)

$2,500 TBD No TBD TBD TBD

5Water Treatment (Aeration, Filtration, Chlorination, Valves, Production Meters,and Water Treatment Chemicals)

32 3 Goods (5)NCB /

Shopping (1)$2,800 $89,600 No 01-Nov-07 15-Nov-07 20-Nov-07

6 Transmission and Distribution Pipe 32 2 GoodsICB / NCB

(2,5)$18,500 $592,000

PriorReview

Yes 15-Nov-07 01-Dec-07 10-Dec-07

7 Electrical Service (from transformer to water tower) 32 20Supply andInstallation

DirectContracting

$1,000 $32,000Prior

ReviewNo 15-Nov-07 25-Nov-07 05-Dec-07

8 Tool Kits for Water Managers 32 1 Goods Shopping $50 $1,600 Post No 15-Dec-07

9 Water Quality Test Kits 2 1 Goods Shopping $3,000 $6,000 Post No 20-Oct-07

10 Pipe Fitters and Storekeepers 25 1Non-

ConsultingServices

DirectContracting

$900 $22,500 Post No 15-Nov-07

$1,071,300

Notes:

3. The current scheduling assumptions are that about 20 systems will be built in Year 1, 24 in Year 2, and another 26 in Year 3, for a total of 70. Annual outputs may vary.4. During the 18 months (1.5 years) of this Procurement Plan, it is estimated that 32 systems will be completed. The remaining 38 systems will be built in the second 18 months.

Assumptions1. The revised agreement is for US$ 3 million, or about 70 rural water systems to be built over a three year period.2. The average cost per system (which in fact varies depending upon many factors such as population served, length of pipeline, water treatment requirements, etc.) is about $43,000.

Rev. 5, September 4, 2007

(6) The NCB threshold for Works is $50,000.

(7) The NCB threshold for Goods and Materials is $30,000.

(8) For Goods valued at less than $30,000, the Shopping Method is acceptable.

DomesticPreference

(yes/no)

Review byBank

Pr ior /Post

ExpectedContractsigning

No. ofExpectedBidding

Packages

(4) The ICB threshold for Works is $2 million.

(5) The ICB threshold for Goods and Materials is $150,000.

(6) For Works valued at less than $50,000, the Shopping Method is acceptable.

(3) In at least one international company bids, the bidding documents will have to be in English.

(2) As the value of this contract is expected to be more than $300,000 if a single contract is used.

EstimatedCost (US$)

Contract Descr iptionNo. of

ExpectedItems

the firstNCB & firstShoppingpackages

will be prior-reviewed

EMWF World Bank GPOBA - GENERAL PROCUREMENT PLAN FOR THE FIRST 18 MONTHS (Rev. 5)

(1) Two contracts for pipe purchasing in year one, as NCB. To be discussed and agreed upon by relevant Bank staff.

5

ProcurementExpected

Issuance ofBidding

documents/RFP

Estimated Total 18 Month Cost =

Ref. No.

Unit Costfor EachSystem(US$)

ExpectedBid

Opening &Evaluation

Vietnam - GPOBA EMWF Rural Water Supply Development Project –Commitment Document

46

Annex 4. Environment and Social Safeguards A. General The project will consist in subsidizing development of rural water schemes in order to provide access to safe, reliable and financially sustainable water services in rural areas of Central Vietnam. Affordable and reliable water service, coupled with improved hygiene and sanitation behavioral change (HSBC) will lead to better quality of life from improved environmental sanitation and improved community health, particularly for the rural low-income families, many of whom now have very limited access to sufficient quantity of good quality water that is reliable and affordable. The proposed project will build upon EMWF’s ten years of experience through its Clean Water Program, which provided technical and management support to construct 90 piped water systems in the Central Region provinces where this project will be implemented. As a result, EMWF has developed substantial political capital that will help expedite active support and cooperation from the local authorities, who play important roles in mobilizing communities to participate not only in the consultation process, but also to encourage beneficiaries to support the need for full cost recovery water tariffs and consumption based payments. B. Application of Safeguards Policies The project is a Category B project. Environmental Assessment (OP 4.01) - TriggeredAn EA Framework has been prepared, in accordance the World Bank’s Environmental Assessment Policy (OP4.01), to evaluate potential negative impacts of the Project; propose mitigation measures through an Environmental Management Plan (EMP) and set forth Environmental Guidelines for the screening of the subprojects and the preparation of subprojects EAs. Potential negative impacts: The EA identified potential safety, construction, and operation related adverse impacts (including water source protection, management of collected sediment filtered or precipitated from water sources, use of chlorine for water disinfection). It concluded that such impacts are minor, largely reversible, and can be mitigated through easily implemented measures, as described in the environmental management plan that has been developed. Environmental guidelines: Potential subprojects will be screened against a negative checklist and projects triggering certain safeguard policies will be disregarded. A short subproject EA will be prepared for each eligible subproject, to list potential negative impacts of each subprojects and list appropriate mitigation measures that will be put in place in case any negative impacts materialize. All subprojects will be reviewed and approved by the appropriate provincial Department Of Natural Resources and the Environment (DONRE). EA Framework has been submitted to each DONRE for their information. It will soon be sent to the Infoshop for publication and will be locally disclosed in each targeted province. Environmental Management Plan: The EMP, incorporated in the EA Framework, includes a set of standard operating procedures that will be a requirement of the contractor, as listed below: 1. Personal protective equipment for workers. 2. Trench safety procedures.


47

3. Public safety and traffic management. 4. Equipment to provide safety during night works. 5. Occupational safety and health procedures. 6. Handling removal of asbestos cement pipes if encountered. 7. Handling and disposal of solid, liquid (including oils and fuels) waste. 8. Management of burrow sites for backfill material. 9. Chance finds procedures for cultural property. An EMP will be prepared and incorporated in each subproject EA. Some revisions to the EA framework are being made to incorporate aspects of social safeguards: Involuntary Resettlement(OP 4.12), conditionally not triggered The nature of the systems to be built makes it very unlikely that resettlement be triggered. This has never occurred at any of the previous rural water systems built by EMWF in Vietnam over the past ten years. No resettlement will take place as part of the 19 subprojects considered for the first year of implementation. Therefore, the Safeguards policy is not triggered, provided that land requirement (area), ownership and actual use of such land are further detailed in the EA Framework and be in turn documented in each subproject EA, in accordance with provision of EA Framework.

Indigenous Peoples(OP 4.10) – conditionally not triggered While Indigenous people are present in the provinces targeted by the project, ethnic minorities mostly live in mountainous areas, away from the coastal areas where subprojects are to be selected. No ethnic minorities were encountered in any of the water supply projects financed by EMWF in the past, or in the 20 subprojects considered for the first year of implementation. Therefore, the Safeguards policy is not triggered, provided that Annex will be added to the EA Framework to document the existence and location of ethnic minorities in the provinces targeted by the Project; indicate that there are no ethnic minorities present in the sites identified for first year implementation; and mention that, shall ethnic minorities be encountered in any of the sub-projects; the key principles of the policy will applied and documented. C. Monitoring EMWF will monitor compliance of the contractor with the standard operating procedures and will include quarterly compliance reports and annual environmental reports as part of its progress reports. D. Consultation and grievance procedures A participatory framework has been incorporated into the project design which involves consultations before works are undertaken that cover among other things the environmental impacts and measures. A mechanism to allow communities to raise concerns or complaints on the execution of the project works and environment measures is also included and the complaints and related follow-up will be reported in the monitoring reports, to be referred to in the Operational Manual, to be developed. E. Capacity to implement safeguards


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Based on its 15 years of working experience in Vietnam, and ten years implementing the Clean Water Program, EMWF’s institutional capacity for community consultation, established relationships with the local authorities at all levels, water engineering design, supervision, construction, operation and maintenance, and training of technical specialists (two to three local Water Managers are hired to operate, maintain and repair each system, and collect water tariffs), EMWF is well qualified to carry out this proposed project. In addition to its current 12 full-time staff (not including numerous pipe fitters and storekeepers, nor the 196 trained Water Managers – two responsible for O&M at each of the 94 CWP piped water systems), the EMWF Clean Water Program (CWP) is now in the process of expanding its staff to include the following additional staff: water design engineer, electrical engineer, environmental specialist, three additional construction supervisors, two additional site supervisors, and an MIS specialist. The environmental specialist will be responsible for ensuring that the subprojects EAs are prepared in accordance with the environmental guidelines, as stated in the EA Framework. The environmental specialist will also ensure that the project complies with World Bank Environmental and Social Safeguards Policies and will seek advice and relevant training, as appropriate.


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Annex 5. Results Framework and Monitoring Mechanisms

EMWF will report to GPOBA on a quarterly basis, under a format to be agreed between EMWF and GPOBA, presenting progress during the past quarter, the outputs and associated subsidy payments requested, project monitoring indicators and relevant financial management information. The IVA will monitor the progress and performance of the project quarterly, on the basis of EMWF quarterly reports, using the proposed project monitoring indicators for each subproject:

Proposed project monitoring indicator

Frequency of reporting

Means of Verification

Number of beneficiary households connected

Quarterly List of all connections made per scheme, indicating names of beneficiaries, address, meter number and amount of upfront payment and in-kind contributions (in meters of trenches).

Number of beneficiary HHs with six months of satisfactory service delivery

Quarterly Disaggregated data per household and per scheme of invoices for water services, stating the consumption in m3, associated amount billed and records of payments

Volume of water produced per billing cycle *

Quarterly List of production meter readings in m3 per scheme and per billing cycle

Volume of water billed per billing cycle *

Quarterly Aggregated volume billed per scheme in m3

Collection ratio per billing cycle * Quarterly Aggregated volume collected per scheme Itemized O&M costs per sub-project Annually List of annual costs per scheme of energy,

chemicals, salaries, repairs and periodic maintenance and other expenses

Average distance to an improved water point

One-time (baseline)

Inclusion in Socioeconomic survey of HHs during subproject selection process. Average to be calculated per subproject.

EMWF-funded costs per subproject –planned versus actual

One-time Record keeping of procurement document and time spent by EMWF staff

Tariff per m3 per sub-project Upon change Tariff charged per scheme (in VND/m3) * Billing cycles are expected to be on a monthly basis. The IVA will carry out quarterly reviews of outputs for which EMWF requested subsidy payment. The review will be based on the payments request submitted by EMWF as part of its quarterly progress report to GPOBA. For each review, the IVA will review eligibility of outputs through EMWF records of newly realized connections and the invoices and associated payments for connections in operations for at least six months. The IVA will also carry out random physical verification of at least 10% of connections for which a payment is requested.


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On an annual basis, the IVA will review the results of the annual customers’ satisfaction survey carried out by EMWF to assess quality of service provision and report its conclusions in its quarter report. The IVA shall report any change or deviation from the project scope or approach it may discover during its regular reviews. The IVA shall also report its comments or suggestion of potential improvements. The IVA will also monitor the implementation of the environmental guidelines, as stated in the Environmental Assessment Framework, and shall randomly check that the Subprojects EAs have been prepared and approved by the respective DONRE. The IVA will monitor and report potential land acquisition or involvement of ethnic minorities in subprojects.


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Annex 6: Technical and Cost Review of the Project

Introduction EMWF has been working in central province of Vietnam for over 10 years and has gained significant knowledge and experience in developing small scale water supply schemes. In the past ten years, EMWF has contributed to the construction of over 95 water supply schemes, mainly in Quang Nam and Quang Ngai provinces. The purpose this annex is to independently review technical and costing aspects of the proposed rural water supply development project for which East Meets West Foundation has approached GPOBA for funding. The project aims at developing about 70 small water schemes in 5 provinces in central Vietnam: Quang Binh, Quang Tri, Thua Thien Hue, Quang Nam and Quang Ngai over a period of three years. This review was carried out on the basis of the 20 sub-projects considered for funding during the first year of implementation, at the time this review was carried out.

Objectives The technical verification focused on reviewing:

1. technical aspects of the proposed schemes in regards assessment of water demand, selection of technical solution for water treatment and design of water distribution network;

2. construction costs of each proposed scheme for the 20 schemes proposed for the first year and comparison with costs incurred under similar projects in Vietnam;

3. operation and maintenance costs and tariff setting mechanisms; 4. consistency with National Rural Water Supply and Sanitation Strategy (NRWSS),

applicable standards and regulations for the sector and World Bank’s policies.

Water demand and water coverage The estimated number of beneficiary households for the 20 sub-projects ranges from 226 to 900, while total population in subprojects’ area varies from 301 to 1200, respectively. This means that the proportion of household connecting to the proposed water supply systems is estimated to be 75%. The NRWSS set a target of 85% access to safe water supply in rural area by year 2010. The lower coverage estimates by EMWF seems realistic and reasonable, taking into account that, in rural areas, people often have a choice to use other water sources such as harvested rain water, shallow wells, rivers or lakes, depending on quality. Water demand in rural area is depending on availability of alternative sources of safe water and water tariff. Demand in rural areas is significantly lower than in urban area. The NRWSS sets as a guideline for scheme design a daily demand of 60 liters/capita/day. However, as it is mentioned above, the people may use piped water only for drinking and cooking and they use water from other sources for other purposes like washing, bathing etc. As a result, the actual water demand ranges usually between 30 and 40 liters/capita/day, which is consistent with the Design Standard TCXDVN 33:2006.


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The average size of households in rural areas depends on the area. However, an average size of 5 people per household is considered a reasonable benchmark in rural areas of Vietnam. Therefore, daily water demand estimates for each sub-project range from 67.8m3 to 270m3. If the losses (25% as it is proposed in Joint Circular No. 104/2004/TT/BTC-BXD on water tariff) and rush daily factor (120% as it is proposed in Design Standard No. TCXDVN 33:2006) are taken in account, the daily capacity of each water supply sub-project is estimated to range from 101.7 m3 to 405m3. These daily capacities should be taken in account for the preparation of detailed design of each sub-project, especially for selection of pumps and treatment facilities dimensioning.

Water source Among the 20 sub-projects considered, 7 are expected to rely on surface water from rivers and 13 on groundwater from wells. There is no data available in regards water quality or water resource capacity from groundwater aquifers. These data should be collected in further stages of preparation of sub-projects. However, at this stage, on the basis of existing information, the proposed attraction of required raw water volume seems feasible as the rivers considered are large ones and as groundwater aquifers in the region has proven sufficient where tested.

Water intakes There are 2 types of water intakes used:

• For surface water, the water intake is in form of a cylinder reinforced concrete well with diameter 2.0m putted down into ground on the river’s side bank. The well is connected to the river and water from this well is pumped to water treatment facilities by means of submerged pumps located directly into the well.

• For groundwater, the water intake consists of wells, from which water is pumped to

treatment facilities.

For safety purposes, there are usually 2 pumps in each water intake, one being on duty while the other is in standby.

Raw water main Raw water mains connecting the water intakes and water treatment facilities are estimated to be from 46m to 631m long. These estimates will be refined at the detailed design phase. The size and length of raw water main is affecting the pressure to be delivered by raw water pumps.

Water treatment and water quality There are 2 proposed water treatment schemes applying separately for treatment of surface water and ground water.

• Surface water treatment includes sedimentation tanks (2 tanks of 1.5m width x1.5m length x 2.8m height) using alum as coagulant, pressurized filter with diameter 0.76m


53

and height 1.82m using water backwash and disinfection using diluted sodium hypochlorite.

• Ground water treatment includes aerators in form of a towers of size 1.3m width x

1.3m length x 1m height with 2 perforated plates for aeration, sedimentation tanks (2 tanks of sizes 1.5m width x1.5m length x 2.8m height), pressurized filter with diameter 0.76m and height 1.82m using water backwash and disinfection using diluted sodium hypochlorite.

The proposed water treatment schemes are common and well applied in Vietnam for rural water supply schemes. While the relatively standardized approach for scheme design seems reasonable, some details should be carefully looked at the detailed design stage, including fine tuning the treatment design on the basis of the quality of raw water to allow to adapt the concentration of chemicals added during treatment process to possibly variable raw water quality. However, as designed, these schemes are likely to treat water in accordance with the standard required by Decision 1329/2002/QD-BYT for the main parameters.

Distribution and service network There are no details of the network’s design. It should be presented in the detailed design. Existing information indicates that the network is to use PVC pipes with different sizes buried into the ground. House connections include water meters. In order to maintain adequate pressure in the network and to adapt supply depending on real time water demand, each sub-project entails an elevated tank with volumes of 20m3 or 50m3. The water treatment plant is usually constructed in the lower part of the water tower, underneath the tank. The volume of elevated tank should be calculated on the basis of water balance. For small schemes, it is reasonable and cost efficient to standardize its design.

Construction cost The calculation of construction cost is applying the following principles:

- Construction work items and volumes are taken from the list EMWF established on the basis of the site survey by its water engineer;

- Unit costs are taken from available data of previous projects and updated to real

market prices;

For the first 20 sub-projects, total construction cost is estimated at 1,313,998.60 $US or in average 141.53 $US per household (see attached detailed sheet). In comparison with other rural water supply projects such as the Red River Delta Water Supply and Sanitation Project (RRDWSSP), Lim township water supply project and Minhduc township water supply project, this figure is very low as presented in table below: (unit cost per household connection – HH, in USD) Project estimate RRDWSSP Lim township projectMinhduc township


54

project 141.53$US/HH 234.22$US/HH 245.00$US/HH 200.10$US/HH

Low construction costs under the project can be explained by the following reasons:

- It is free of taxes when the projects are delivered as a grant (VAT is 10%);

- The water schemes’ design is very simple and the treatment level ensure only minimum requirement of the standards on water quality. There are no auxiliary construction such as administration house, external treatment plant, fences or landscaping, which represent a potential saving of about 30%;

- Pipe for water distribution network is mainly PVC type. The cost for this type of pipe

is about 35-40%less than the cost of HDPE pipe; - The use of standardized design for water treatment utilities and distribution network

instead of completing a new set of layouts and profiles for each subproject translates in reduced design costs. Such cost usually represents about 3% of construction cost.

Taking into account all these additional costs the end cost of proposed project would increase to about 186,29$US per household, which is still lower than costs of other projects.

Operation and maintenance The main challenge of this kind of small scale projects is to ensure their sustainability in the long run. It has represented a significant problem for many projects in Vietnam. Appropriate O&M require:

- Proper design; - Good quality of materials and construction works; - Appropriate set of skills; - Sufficient financial resources.

Two first items are guaranteed during design and construction of the system which is under professional supervision of EMWF staff. Once system has been constructed and handed over to the communes for operation, it required skilled labor and sufficient budget. Operation and maintenance (O&M) costs for the 20 subprojects are estimated as follows: Power (electricity) 3,481.5m3/dayx 0.45kWh/m3 x 365days x

0.0625$US/kWh = 35,739.77$US/year

Chemicals 3,481.5m3/day (for 20 systems) x 365days x 0.0125$US/m3 =

15,884.34$US/year

Small repairing and periodic maintenance

3%/year x 1,343,488.60$US = 40,304.66$US/year

Salary for operation staff

3men/system x 20systems x 60$US/month x 12months =

43,200.00$US/year

Total O&M cost for 20 systems 135,128.77$US/year

Average O&M cost per supplied m3(with 25% Non Revenue 0.133$US/m3or


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Water): 2,126.8VND/m3.

The management of water supply system is under the responsibility of the commune people’s committees. It may be organized in several forms, including direct hiring by the commune of a team of water managers or delegating management to the private sector through open competition. As a response to the rampant problem of ensuring long term sustainability of the water schemes in Vietnam, the Central Government encourages the development of public-private partnership for the water services management. The opportunity to involve the private sector will be raised and promoted in the discussions with the CPCs. EMWF has experience of such PSP approaches, however, the decision remains with each CPC. Independent from the management form, during project preparation, EMWF seeks commitment that the CPCs will set tariffs covering at least O&M costs, and, to the extend possible, some provisions for bigger repair and service extensions. Such provision is very clear in the MOU EMWF signs with the CPCs prior to getting involved. After commissioning and transfer of responsibility to the local authorities, EMWF provides assistance and training to water managers and local authorities. It carefully follows up that the scheme is performing and is appropriately managed. To date, 100% of the water schemes built by EMWF are still in operation, with tariff covering at least O&M. Such results are recognized as a great achievement for EMWF, which is recognized at all levels of government.


56

DESCRIPTIONS TAM HOA TRA DINH HUNG MY

WB-01-WQN07 WB-02-WQN07 WB-03-WQN07Water sourceSurface water source River source River sourceName of river/stream/lake/pond Vu Gia river Ly Ly riverCapacity of water source (m3 for lake/pond-l/s for river/stream One of the largest river of the province One of the largest river of the province

Structure to be constructed (dam/ pit etc.) River water intake River water intakeType and size of water intake Size: 2,000 ; H5m Size: 2,000 ; H3m

Number, type and size of raw water pumps

2 pumps; Descriptions:BEST5 ; Output : 8m3/h; Pressure : 13m; Capacity: 1.5 KW


Preliminary data of water quality Not available Not availableGround water source Ground water source

Number and size of wells 2 wells; D148 L20m

Number and size of pumps

2 pumps, Descriptions: 6BHS8 5/15; Output : 9.6 m3/h; Pressure 33.5 m; Capacity: : 1.5 KW.

Preliminary data of water quality Test well is driiled nowRaw water mainLength Total length 46 m Total length 46 m Total length 46 mDiameter and type D100 L15m, D60 L25, D49 L6m. D100 L15m, D60 L25, D49 L6m. D100 L15m, D60 L25, D49 L6m.

Water treatment unit

Surface water treatment Surface water treatment Surface water treatment

Type, number and size of sedimentation tanksSedimentation tanks (1.5mX1.5mX2.8m) x 2 tanks

Sedimentation tanks (1.5mX1.5mX2.8m) x 2 tanks

Using coagulant: type and method of dosing Coagulant: Al2 (SO4)3 ; Dose 0.3g/m3 Coagulant: Al2 (SO4)3 ; Dose 0.3g/m3

Type, number and size of filters One pressure filter (Inox): D760 H1,820 One pressure filter (Inox): D760 H1,820

Disinfection system: type of disinfectant, method of dosing

Disinfectant : Ca(OCl)2 - Dose : 0.3mg/lMothod of dosing: Using one quantity controlling pump and one mixer. (b m nh l ng và máy khu y tr n)

Disinfectant : Ca(OCl)2 - Dose : 0.3mg/lMothod of dosing: Using one quantity controlling pump and one mixer. (b m nh l ng và máy khu y tr n)

Method of treatment of discharged sludgeSludge flows through drainage pipes into the ditch only.

Sludge flows through drainage pipes into the ditch only.

Type, number and size of backwash pumpsOne pump Epara Q=10:12 m3/h; H=18m - 24m

One pump Epara Q=10:12 m3/h; H=18m - 24m

Type, number and size of treated water pumpsOne pump Epara Q=10:12 m3/h; H=18m - 24m


Ground water treatment

Type, number and size of aerators (1.3m X 1.3m) x 2 sheets , H1m

Type, number and size of sedimentation tanks(1.5m X 1.5m X 2.8m) X 2 sedimentation tanks

Type, number and size of filters One pressure filter (Inox): D760 H1,820


Disinfectant : Ca(OCl)2 - Dose: 0.3mg/lMothod of dosing: Using one quantity controlling pump and one mixer. (b m nh l ng và máy khu y tr n)



Reservoir

Type and size of reservoir/ elevated tank Elevated tank : �H 11m, Q = 20m3 Elevated tank : �H 11m, Q = 20m3 Elevated tank : �H 11m, Q = 20m3

Distribution networkTotal length of pipe with diameter 100mm and above, type 114 = 200m 114 = 1,380m 114 = 150m

Total length of pipe with diameter 50-100mm, type

90 = 1,174m76 = 1,406m

60 = 620m

90 = 220m76 = 1,170m60 = 1,400m

90 = 460m76 = 400m

60 = 1,200m

Total lenght of pipe with diamter under 50mm, type

49 = 2,100m42 = 6,700m34 = 6,350m

21 = 300m

49 = 1,150m42 = 8,200m34 = 3,000m

21 = 200m

49 = 2,459m42 = 6,310m34 = 3,800m

Total lenght of distribution pipe Total: 18,850m Total: 16,720 Total: 14,779mNumber of house connection with water meter 839 HHs 900 HHs 485 HHsPower supply

Length and size of cable mainPower 220V - 380VSize 3X16+1X10 - L300M

Power 220V - 380VSize 3X10+1X6 - L50M


Tam Hoà, Sông Bình, Tr ng An, xa i Quang,huy n i L c Thôn 4,5,10 và 11, xã Qu Phú, huy n Qu S n thôn H ng M , xã Bình Tri u, Th ng Bình


57

DESCRIPTIONS TRA CHAU LY TRUONG HALOC-HUONG DIEN

WB-04-WQN07 WB-05-WQN07 WB-06-WHU07Water sourceSurface water source River sourceName of river/stream/lake/pond Thach Han RiverCapacity of water source (m3 for lake/pond-l/s for river/stream One of the largest river of the province

Structure to be constructed (dam/ pit etc.) River water intakesType and size of water intake Size: D300 L3m - 2 intakes



Preliminary data of water quality Not availableGround water source Ground water source Ground water source

Number and size of wells 2 wells; D148 L25m 2 wells; D148 L45m




Preliminary data of water quality Test well is driiled now Test well is drilled nowRaw water mainLength Total length 46 m Total length 46 m Total length 631 mDiameter and type D100 L15m, D60 L25, D49 L6m. D100 L15m, D60 L25, D49 L6m. D76 L300m, D60 L325, D49 L6m.


Surface water treatment Surface water treatment


Using coagulant: type and method of dosing Coagulant: Al2 (SO4)3 ; Dose 0.3g/m3



Disinfectant : Ca(OCl)2 - Dose : 0.3mg/lMethod of dosing: Using one quantity controlling pump and one mixer. (b m nh l ng và máy khu y tr n)

Method of treatment of discharged sludge

Sludge flows through drainage pipes into the end of the river, 300m meter from the river water intake




Type, number and size of aerators (1.3m X 1.3m) x 2 sheets , H1m (1.3m X 1.3m) x 2 sheets , H1m


(1.5m X 1.5m X 2.8m) X 2 sedimentation tanks









Reservoir

Type and size of reservoir/ elevated tank Elevated tank : �H 11m, Q = 20m3 Elevated tank : �H 11m, Q = 20m3Reservoir with capacity of 50m3, located in the hill 20meters in height.

Distribution networkTotal length of pipe with diameter 100mm and above, type 114 = 280m 114 = 48m 114 = 2,270m


90 = 700m76 = 550m

60 = 1,900m

90 = 150m76 = 540m60 = 2,200

90 = 1,350m 76 = 510 m

60 = 1,700m


49 = 1,400m42 = 2,000m34 = 3,350m

21 = 200m

49 = 2,600m42 = 3,520m34 = 1,780m

21= 200m

49 = 1,800m42 = 6,700m34 = 7,400m

21 = 300m

Total lenght of distribution pipe Total: 10422m ( ng s t: 42m) Total: 11,038m Total: 22,230m ( ng s t: 100m)Number of house connection with water meter 452 HHs 326 HHs 546 HHsPower supply




thôn Trà Châu, xã Duy S n, Duy Xuyên thôn Lý tr ng, xã Bình Phú, Th ng Bình Hà L c, H ng i n, xã H i S n, H i L ng


58

DESCRIPTIONS PHU NHAM DONG YEN-PHU BONG PHONG SON

WB-07-WQN07 WB-08-WQN07 WB-09-WHU07Water sourceSurface water source River sourceName of river/stream/lake/pond Bo RiverCapacity of water source (m3 for lake/pond-l/s for river/stream One of the largest river of the province

Structure to be constructed (dam/ pit etc.) River water intakesType and size of water intake Size: D300 L3m - 2 intakes








Preliminary data of water quality Test well is drilled now Test well is drilled nowRaw water mainLength Total length 46 m Total length 46 m Total length 631 mDiameter and type D100 L15m, D60 L25, D49 L6m. D100 L15m, D60 L25, D49 L6m. D76 L300m, D60 L325, D49 L6m.









Sludge flows through drainage pipes into the end of the river, 300m meter from the river water intake









Disinfectant : Ca(OCl)2 - Dose: 0.3mg/lMethod of dosing: Using one quantity controlling pump and one mixer. (b m nh l ng và máy khu y tr n)






Reservoir

Type and size of reservoir/ elevated tank Elevated tank : �H 11m, Q = 20m3 Elevated tank : �H 11m, Q = 20m3Reservoir with capacity of 50m3, located in the hill 20meters in height.

Distribution networkTotal length of pipe with diameter 100mm and above, type 114 = 160m 114 = 84m 114 = 1,760m


90 = 380m76 = 710m60 = 950m

90 = 852m76 = 306

60 = 1,464m

90 = 1,479m76 = 1,142m60 = 1,522m


49 = 1,970m42 = 2,900m34 = 4,192m

49 = 1,056m42 = 3,528m34 = 4,128m

49 = 3,047m42 = 5,996m34 = 7,233m

Total lenght of distribution pipe Total: 11,262m Total: 11,418m Total: 22,179mNumber of house connection with water meter 377 HHs 338 HHs 758 HHsPower supply




Phú Nham, xã Duy S n, Duy Xuyên xã Duy Trinh, Duy Xuyên xã Phong S n, huy n Phong i n, Hu


59

DESCRIPTIONS QUANG CONGSAO PHONG, CAO TRACH, MA

THUONGCAM TRANG, CAM NOI, CAM NGOAI

WB-10-WHU07 WB-11-WQB07 WB-12-WQB07Water sourceSurface water source River sourceName of river/stream/lake/pond Gianh riverCapacity of water source (m3 for lake/pond-l/s for river/stream One of the largest river of the province

Structure to be constructed (dam/ pit etc.) River water intakeType and size of water intake Size: 2,000 ; H3m































Reservoir


Distribution networkTotal length of pipe with diameter 100mm and above, type 114 = 420m 114 = 240m 114 = 400m


90 = 1,240m76 = 1,520m60 = 1,100m

90 = 110m76 = 220m60 = 490m

90 = 610m76 = 1,200m

60 = 600m


49 = 940m 42 = 1,684m34 = 3,750m

21 = 200m

49 = 1,100m42 = 2,650m34 = 2,430m

21 = 200m

49 = 1,150m42 = 2,734m34 = 3330m

Total lenght of distribution pipe Total: 10,896m ( ng s t:42m) Total: 1,440m Total: 10,024mNumber of house connection with water meter 512 HHs 276 HHs 385 HHsPower supply




xã Qu ng Công, huy n Qu ng i n, Hu xã Phong Hoá, huy n Tuyên Hoá, Qu ng Bình xã Phong Hoá, huy n Tuyên Hoá, Qu ng Bình


60

DESCRIPTIONS LAM LANG GIO HAI MY SON, NAM DINH

WB-13-WQT07 WB-14-WQT07 WB-15-WQN07Water sourceSurface water source River sourceName of river/stream/lake/pond Gianh riverCapacity of water source (m3 for lake/pond-l/s for river/stream One of the largest river of the province
































Reservoir




90 = 1,300m76 = 1,210m60 = 1,350m

90 = 1,500m76 = 1,130m

60 = 800m

90 = 724m76 = 508m60 = 786m


49 = 3,400m42 = 6,100m34 = 6,200m

21 =200m

49 = 915m42 = 3,530m34 = 8,400m27 = 1,520m

21 = 300m

49 = 1,048m42 = 2,570m34 = 2,552m

21 = 200m





xã Cam Thu , huy n Cam L , Qu ng Tr xã Gio H i, huy n Gio Linh, Qu ng Tr xã Tam Anh Nam, huy n Núi Thành


61

DESCRIPTIONS TUNG LY DAI AN BINH DAO, BINH TRIEU

WB-16-WQB07 WB-17-WQN07 WB-18-WQN07Water sourceSurface water sourceName of river/stream/lake/pondCapacity of water source (m3 for lake/pond-l/s for river/stream

Structure to be constructed (dam/ pit etc.)Type and size of water intake

Number, type and size of raw water pumpsPreliminary data of water qualityGround water source Ground water source Ground water source Ground water source

Number and size of wells 2 wells; D148 L25m 2 wells; D148 L25m 2 wells; D148 L25m





Preliminary data of water quality Test well is drilled now Test well is drilled now Test well is drilled nowRaw water mainLength Total length 46 m Total length 46 m Total length 46 mDiameter and type D100 L15m, D60 L25, D49 L6m. D100 L15m, D60 L25, D49 L6m. D100 L15m, D60 L25, D49 L6m.


Surface water treatment

Type, number and size of sedimentation tanks

Using coagulant: type and method of dosing

Type, number and size of filters



Type, number and size of backwash pumps

Type, number and size of treated water pumpsGround water treatment

Type, number and size of aerators (1.3m X 1.3m) x 2 sheets , H1m (1.3m X 1.3m) x 2 sheets , H1m (1.3m X 1.3m) x 2 sheets , H1m




Type, number and size of filters One pressure filter (Inox): D760 H1,820 One pressure filter (Inox): D760 H1,820 One pressure filter (Inox): D760 H1,820











Reservoir




90 = 620m76 = 730m

60 = 1,500m

76 = 1,000m60 = 1,100m 76 = 458m

60 = 2,575m


49 = 2,230m42 = 7,505m34 = 4,939m

49 = 1,662m42 = 1,670m34 = 2,100m

21 = 200m

49 = 2,934m42 = 3,507m34 = 3,691m

21 = 200m





xã Qu ng Châu, huy n Qu ng Tr ch, Qu ng Bình xã i Ngh a, huy n i L c xã Bình Tri u, huy n Th ng Bình


62

DESCRIPTIONS HAI TRUONG TAM PHU

WB-19-WQT07 WB-20-WQN07Water sourceSurface water source River sourceName of river/stream/lake/pond O Lau riverCapacity of water source (m3 for lake/pond-l/s for river/stream One of the largest river of the province




Preliminary data of water quality Not availableGround water source Ground water source

Number and size of wells 2 wells; D148 L25m



Preliminary data of water quality Test well is drilled nowRaw water mainLength Total length 46 m Total length 46 mDiameter and type D100 L15m, D60 L25, D49 L6m. D100 L15m, D60 L25, D49 L6m.







Disinfectant : Ca(OCl)2 - Dose : 0.3mg/lMethod of dosing: Using one quantity controlling pump and one mixer. (b m ?nh l ?ng và máy khu?y tr?n)





Type, number and size of aerators (1.3m X 1.3m) x 2 sheets , H1m




Disinfectant : Ca(OCl)2 - Dose: 0.3mg/lMethod of dosing: Using one quantity controlling pump and one mixer. (b m ?nh l ?ng và máy khu?y tr?n)



Reservoir

Type and size of reservoir/ elevated tank Elevated tank : ?H 11m, Q = 20m3 Elevated tank : ?H 11m, Q = 20m3

Distribution networkTotal length of pipe with diameter 100mm and above, type 114 = 150m 114 = 882m


90 = 460m76 = 2,010m60 = 1,152m

60 HDPE = 200m

90 = 24676 = 488m60 = 400m


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DESCRIPTIONS Total for 20 projects Unit cost

(USD) Total cost

(USD)

Water sourceSurface water sourceName of river/stream/lake/pondCapacity of water source (m3 for lake/pond-l/s for river/stream

Structure to be constructed (dam/ pit etc.)7 units of river water intakes with diameter 2m, depth 3m 1,500.00 10,500.00

Type and size of water intake

Number, type and size of raw water pumps 14 units of pump Q=8m3/h, H=13m 300.00 4,200.00 Preliminary data of water qualityGround water source

Number and size of wells26 units of well; D148mm; depth 25m each 2,000.00 52,000.00

Number and size of pumps 26 units pump Q=9.6m3/h; H=33.5m 450.00 11,700.00 Preliminary data of water qualityRaw water mainLengthDiameter and type D100mm: 280m 12.00 3,360.00

D76mm: 600m; 4.20 2,520.00 D60mm: 1,100m 3.10 3,410.00 D49mm: 120m 2.20 264.00


Surface water treatment

Type, number and size of sedimentation tanks7 units of sedimentation tank with size 1.5m x 1.5m x 2.8m x 2 1,080.00 7,560.00

Using coagulant: type and method of dosingAlum with preparating mixer and dosing pump: 7 units 400.00 2,800.00

Type, number and size of filtersPressurised filter D=760mm, H=1,820mm: 7 units 1,700.00 11,900.00


Sodium hypochlorite system with preparating mixer and dosing pump: 7 units 400.00 2,800.00

Method of treatment of discharged sludge Direct discharging 200.00 1,400.00

Type, number and size of backwash pumps 7 units of pump Q=10-12m3/h; H=18-24m 450.00 3,150.00

Type, number and size of treated water pumps 7 units of pump Q=10-12m3/h; H=18-24m 450.00 3,150.00 Ground water treatment

Type, number and size of aerators13 units of aerators 1.3m x 1.3m x 2 sheets, height 1m 200.00 2,600.00

Type, number and size of sedimentation tanks13 units of sedimentation tank size 1.5m x 1.5m x 2.8m x 2 1,080.00 14,040.00

Type, number and size of filters13 units of pressurised filter D=760mm, H=1,820mm 1,700.00 22,100.00


Cloramin with preparating mixer and dosing pump: 13 units 300.00 3,900.00

Type, number and size of backwash pumps13 units of pump Q=10-12m3/h; H=18-24m 450.00 5,850.00

Type, number and size of treated water pumps13 units of pump Q=10-12m3/h; H=18-24m 450.00 5,850.00

Reservoir

Type and size of reservoir/ elevated tank20 units of elevated reinforced concrete tank size 20m3, height 11m 3,050.00 61,000.00

Distribution networkTotal length of pipe with diameter 100mm and above, type D114mm= 9,926m 26.60 264,031.60

Total length of pipe with diameter 50-100mm, type D90mm= 13,575m; 6.50 88,237.50

D76mm=17,208m; 4.20 72,273.60 D60mm=25,009m 3.10 77,527.90

Total lenght of pipe with diamter under 50mm, type D49mm=34,697m; 2.20 76,333.40

D42mm=83,837m; 1.70 142,522.90 D34mm=85,782m; 1.35 115,805.70 D27mm=1,520m; 1.10 1,672.00 D21mm=2,900m 0.90 2,610.00

Total lenght of distribution pipeNumber of house connection with water meter 9,284HHs 20.00 185,680.00 Power supply

Length and size of cable main Cable 3x16+10mm2=5,000m 10.25 51,250.00

Total for 20 project 1,313,998.60

Average construction cost per HH 141.53


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Annex 7. Project preparation and supervision A. Institutions responsible for project preparation: 1) GPOBA c/o World Bank 2) East Meets West Foundation Primary contacts: John Anner (Executive Director) Minh Chau Nguyen (Chief Strategy Officer) Craig Fox (Chief Operation Officer and Financial Controller) B. GPOBA/World Bank Team: Core Team Xavier Chauvot de Beauchêne Infrastructure Specialist, TTL GPOBA

Vinh Quang Nguyen Water and Sanitation Specialist EAPVS

Nguyen Cong Thanh Sr. Operation Officer WSP/EAP

Iain Menzies Sr. Infrastructure Specialist GPOBA/FEU

World Bank Team

Hoi Chan Nguyen Senior Counsel LEGES

Hoang Xuan Nguyen Procurement Analyst EAPCO

Cung Van Pham Financial Management Specialist EAPCO

Edward Daoud Senior Finance Officer

LOAFC

Trang Phuong Thi Nguyen Environmental Specialist EAPVS

Hoa Thi Mong Pham Sr. Social Development Specialist EAPVS

Advisory team:

Name Title Role Unit

Patricia Veevers-Carter Program Manager Peer Review/ Advisory GPOBA/FEU

Irving Kucynski Panel of Experts Advisory GPOBA

Alejandro Jadresic Panel of Experts Advisory GPOBA


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Annex 8: Criteria for Selecting Communities Each year, EMWF sends a letter to the Provincial People’s Committee (PPC) in the five provinces targeted under the Project to offer funding and support to develop water schemes and to request for proposals in districts and communes according to the eligibility criteria listed below. Subprojects should be located in the rural districts and communes where:

• there is a greatest need for clean water • poverty level is above 20% • there are more than 200 household beneficiaries • household connections will not be widely dispersed • there are adequate water sources • the community will participate in labor for digging and backfilling trenches • beneficiaries will be willing to pay for household connection charges

Each PPCs selects certain districts where it requests support from EMWF for the development of rural water systems. EMWF sends the long-listed District People’s Committees (DPC) a copy of the Water Project Investigation Form. After receiving forms, the respective DPCs then develop long lists of communes and villages that might be appropriate sites for EMWF assistance. Upon receipt of long-lists, the EMWF Water Team uses a series of 9 forms to facilitate the water system planning and development process. The function of each form is described below. Form #1 is filled out for each prospective site, and a date is set for a site visit by all of EMWF Water Team members. Form #1 summarizes basic socioeconomic and health data for the proposed beneficiary community, and other important indicators such as current and possible future water sources, water quality, availability of reliable electricity, and willingness in principle to participate and co-finance the water system. After subsequent site visits and discussions between the community, local authorities, and the EMWF water team, sites are either accepted or rejected. To put this is perspective, of 43 prospective sites proposed last year by the local authorities, only 10 sites were eventually selected for program support. After a site is tentatively selected for support (pending the system feasibility study), a Family Questionnaire (Form #2) is filled out by 15-20 families at each short-listed sites. The form collects basic family-level socioeconomic, health and water use data. This corresponds more or less to the Socioeconomic Surveys (SES) routinely used in development projects funded by World Bank or ADB, but more simplified (a WB or ADB SES is about ten pages long with 100 questions, and the typical sample is 100 families per village). The SES Family Questionnaire is more than adequate for this task. The questionnaire data is used to fill out Form #3. Form #3 (Criteria for Ranking Proposed Water Systems) assigns a weighted value to the various data from Form #2 to develop a numeric ranking of all the prospective sites, so that a relatively objective order of priority is assigned to each short listed site. The number of systems actually funded in a given year depends upon the availability of program funding for that fiscal year, as well as on the technical and financial feasibility of the proposed system. See attached project ranking form in Attachment 1 to this Annex.

Form #4 (Request for Clean Water System Construction Funding) describes the proposed water system location, main components (water tower, filter system, drilled wells, pumps,


66

electrical system, pipe distribution system, etc.), cost of each major component, number of anticipated beneficiaries, list of project activities (essentially what EMWF inputs will consist of), estimated schedule of completion, a summary of the current water situation and a water needs assessment at the proposed site, tasks assigned to the project partners (e.g., the local authorities, and members of the beneficiary community), and some photos of the current situation. This document is sent to EMWF in the US for review and comment, and serves as the basic document for seeking donor financing. After sending the project procedures given in Form #4, EMWF schedules a meeting with the local people to discuss the proposed project, including test drilling of the proposed water source. Form #5 gives the Summary Results of the Water Quality (WQ) Testingof water samples from the test well. It uses the more or less standard WQ criteria for 11 physical, and chemical and biological. There are two separate forms that provide the biological test results (faecal coliforms per 100 ml). If there are no major problems with the proposed water source, the planning process proceeds apace. If there is any major problem with the proposed source, the feasibility of other potential sources will be assessed. Continuing on with Form #6 (Memorandum of Understanding– MOU for Construction of Clean Water Systems) it is initially sent to the local people to review, and then discussed directly in a follow-up meeting with EMWF. Representatives of the District People’s Committee (DPC), the Commune Peoples’ Committee (CPC), and EMWF senior management and Water Program staff meet to discuss project activities and agreements thus far, and then agree on detailed responsibilities and the contributions required of all partners in the upcoming water system planning and development tasks. The final MOU is then signed by EMWF, the DPC and CPC. Form #7 (Commitment Letter for Involvement in the EMWF Clean Water System Project) is signed by each individual family confirming their commitments to co-finance the water system through their contribution of labor (digging and back-filling pipeline trenches – see early construction photos) and cash (the cost of the house connection). Form #8 (Registration Form of Installing Water Meters and Fittings) is the financial commitment for each family who agreed to pay the cost of installation of a house connection, which is a small diameter pipe with a good quality water meter installed between the distribution pipeline and individual households. It also obligates the family to make an initial deposit for the cost of the house connection materials and equipment, which are bought in bulk by EMWF from a proven supplier to ensure quality control of both the pipe and the meter. These two forms #7 and #8 have now been combined to simplify the process.


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Attachment 1 to Annex 8: Criteria for ranking Water Project

2007 CRITERIA FOR RANKING WATER PROJECTS

Name of water system: …………………………………………………………….Hamlet/Ward : …………………………………………………………………Commune : …………………………………………………………………..District : ……………………………………………………………………….Province : ……………………………………………………………………..

I GENERAL INFORMATION1 Number of households benefiting from project

* from 350 to 500 3 * from 200 to 350 2 * from 100 to 200 1

2 Poverty rate of the commune* Above 50% 3

from 25% - 50% 2from 10% - 25% 1

3 House density* dense 1* scattered 0

II NEEDS FOR SAFE DRINKING WATER IN COMMUNITY1 Percentage of households really having bad water in project area

*100% 3*70% 2*50% 1

2 Drinking water used in the area:* Got from other area 3* Bought 2* filtered from source at home 1

3 Population having water-borne diseases* 70%-100% 3* 40% - 70% 2* 10% - 40% 1

III SUPPLY WATER SOURCE* in the project area 2* From other places, ............................ to project site/ water tower site * about 1,000m - 1,500 m 1

* Over 1,500m 0IV COOPERATIVE ATTITUDE OF COUNTERPARTS:

Government:* Good 1* OK 0* Bad -1

People:* Good 1* OK 0* Bad -1

V COST PER PERSON* from $5 to $10 2* From $10 - $15 1* More than $15 0

TOTAL

NOTETOTAL

POINTSNO. CRITERIA

RATING(Points)


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Annex 9: Example of House Connection Confirmation Form:

SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness

-----------***-----------

COMMITMENT Subject: Involvement in Safe Water System Projects funded by East Meets West

Attention: DISTRICT PEOPLE’S COMMITTEE COMMUNE PEOPLE’S COMMITTEE EAST MEETS WEST FOUNDATION (EMWF)

My name is .............................................is the householder of .............people Address: ...................................hamlet:..................commune:.......................district: Today is day month year, on behalf of my family, I hereby register to take part in the implementation of safe water system project funded by EMWF. Our family would like to commit our positive involvement into the project implementation with an aim to ensuring the health for the family, the community and the environment with the following responsibilities: 1. Fully contribute in labor or in cash equivalent with the labor for digging and backfilling works of main trenches as regulated under the instruction of EMWF program staff and local Project Management Committee (PMC); 2. Take part in digging and backfilling the main trenches in line with the project schedule 3. Register to hook the system into my house and install water meter in term of equality in using the water for daily life. All the costs for these works will be paid by our family to the PMC. 4. Pay a monthly fee equal to the amount of water used by my family according to the water meter times the set tariff per m3.

If our family do not comply with all the above responsibilities or cause any delay affecting on the project progress and turn-over schedule, we will not be entitled to hook into the system and benefit from this project with the local authorities and PMC.

ON BEHALF OF MY FAMILY Signed by the householder

NOTES:WOULD YOU LIKE TO INSTALL THE WATER METER AND HOOK THE SYSTEM INTO THE HOUSE?

YES NO

GPOBA PAD: EMWF Improved Access to Rural and Sanitation Services in Central Vietnam

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Annex 10: Samplesof First Year Communities: Population, Pover ty levels, Estimated Costsand Economic Rate of Return –Source: EMWF

East Meets West Foundation L IS T OF WAT E R PROJE CT S IN 2007/2008Clean Water Program Prepared by Vo Thi Hien

Approved by Hoang Thi Hang Tam

Updated : Sep 4, 2007

WB-01-WQN07 WB-02-WQN07 WB-03-WQN07 WB-04-WQN07 WB-05-WQN07 WB-06-WQT07 WB-07-WQN07 WB-08-WQN07 WB-09-WHU07 WB-10-WHU07 WB-11-WQB07 WB-12-WQT07 WB-13-WQT07 WB-14-WQN07 WB-15-WQB07 WB-16-WQN07 WB-17-WQN07 WB-18-WQT07 WB-19-WQN07

Tam Hoa Ngu Xa Hung My Tra Chau Ly TruongHa Loc &

Luong DienPhu Nham

Dong Yen &Phu Bong

Phong Son Quang CongCam Trang,Cam Noi &Cam Ngoai

Lam Lang Gio HaiMy Son &Nam Dinh

Tung Ly Dai An

Hamlet 3,4Binh Dao andgroup 3 Binh

Trieu

Hai TruongTan Phu &Phu Dong

TOTAL (1)WB

Province QN QN QN QN QN QT QN QN HUE HUE QB QT QT QN QB QN QN QT QN QN, QT, QB, H

Water source River Well Ground Ground Ground River Ground Ground River Ground River River Ground Ground Ground Ground Ground River Ground

Length of pipe system (m) 24,150 16,189 15,058 10,398 10,676 13,100 10,666 10,865 24,552 10,451 10,158 20,061 22,775 7,821 16,883 6,608 13,404 13,976 6,008 263,799

Donor WB WB WB WB WB WB WB WB WB WB WB WB WB WB WB WB WB WB WB -

53,025 36,784 36,087 28,097 30,514 35,150 28,999 29,298 49,328 29,677 28,737 42,592 51,163 25,232 38,825 23,412 33,606 34,465 22,514 657,502

Water tower/storage tank 9,000 6,000 6,000 6,000 6,000 9,000 6,000 6,000 6,000 6,000 6,000 6,000 9,000 6,000 6,000 6,000 6,000 6,000 6,000 123,000

Filter and treatment system 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 47,500

Well digging/pumping station 3,500 3,000 4,000 3,000 5,000 3,000 4,000 4,000 3,000 5,000 4,000 3,000 5,000 4,000 4,000 4,000 4,000 4,000 4,000 73,500

Pipe system and fittings 36,225 24,284 22,587 15,597 16,014 19,650 15,999 16,298 36,828 15,677 15,237 30,092 34,163 11,732 25,325 9,912 20,106 20,964 9,012 395,699

Electric control system 1,800 1,000 1,000 1,000 1,000 1,000 500 500 1,000 500 1,000 1,000 500 1,000 1,000 1,000 1,000 1,001 1,002 17,803

14,052 9,748 9,563 7,446 8,086 9,315 7,685 7,764 13,072 7,864 7,615 11,287 13,558 6,686 10,288 6,204 8,906 9,133 5,966 174,238

Staffing (15% of line-item cost) 7,954 5,518 5,413 4,215 4,577 5,273 4,350 4,395 7,399 4,451 4,311 6,389 7,674 3,785 5,824 3,512 5,041 5,170 3,377 98,625

Admin (10% of line-item & staff) 6,098 4,230 4,150 3,231 3,509 4,042 3,335 3,369 5,673 3,413 3,305 4,898 5,884 2,902 4,465 2,692 3,865 3,963 2,589 75,613

67,077 46,531 45,650 35,543 38,600 44,465 36,684 37,061 62,400 37,541 36,352 53,878 64,721 31,918 49,113 29,616 42,512 43,598 28,480 831,739

3,354 2,327 2,283 1,777 1,930 2,223 1,834 1,853 3,120 1,877 1,818 2,694 3,236 1,596 2,456 1,481 2,126 2,180 1,424 41,587

70,430 48,858 47,933 37,320 40,530 46,688 38,518 38,914 65,520 39,418 38,170 56,572 67,957 33,514 51,569 31,097 44,637 45,778 29,904 873,326

5,634 3,909 3,835 2,986 3,242 3,735 3,081 3,113 5,242 3,153 3,054 4,526 5,437 2,681 4,125 2,488 3,571 3,662 2,392 69,866

76,065 52,766 51,767 40,305 43,773 50,423 41,599 42,028 70,762 42,571 41,224 61,098 73,393 36,195 55,694 33,585 48,208 49,440 32,297 943,192

13,256 9,196 9,022 7,024 7,629 8,788 7,250 7,324 12,332 7,419 7,184 10,648 12,791 6,308 9,706 5,853 8,402 8,616 5,629 164,375

2,121 1,471 1,443 1,124 1,221 1,406 1,160 1,172 1,973 1,187 1,149 1,704 2,047 1,009 1,553 936 1,344 1,379 901 26,300

91,442 63,434 62,232 48,454 52,622 60,617 50,009 50,524 85,067 51,177 49,557 73,449 88,230 43,512 66,953 40,374 57,954 59,435 38,826 1,133,868

76,065 52,766 51,767 40,305 43,773 50,423 41,599 42,028 70,762 42,571 41,224 61,098 73,393 36,195 55,694 33,585 48,208 49,440 32,297 943,192

15,377 10,667 10,465 8,148 8,849 10,194 8,410 8,496 14,305 8,606 8,334 12,352 14,837 7,317 11,259 6,789 9,746 9,995 6,529 190,675

1,119 500 646 602 435 728 503 450 1,010 682 513 574 725 352 617 301 704 435 410 11,306

5,595 2,500 3,230 3,010 2,175 3,640 2,515 2,250 5,050 3,410 2,330 2,870 3,625 1,760 3,085 1,505 3,520 2,175 2,050 56,295

6,141 2,744 3,545 3,304 2,387 3,995 2,760 2,470 5,543 3,743 2,557 3,150 3,979 1,932 3,386 1,652 3,864 2,387 2,250 61,789

14 21 16 13 20 14 17 19 14 12 18 21 20 21 18 22 14 23 16 17

68 106 80 67 101 69 83 93 70 62 80 106 101 103 90 112 68 114 79 83

839 375 485 452 326 546 377 338 758 512 385 431 544 264 463 226 528 326 308 8,480

WB-Adjusted number of beneficiaires 3776* 1,875 2182* 2,260 1,630 2,730 1,885 1,690 3,790 2,560 1,924 2,153 2,719 1,320 2,314 1,129 2,640 1,631 1,538 35,786

91 141 107 89 134 92 110 125 93 83 107 142 135 137 120 149 91 152 105 111

Poverty rate in the target hamlet 30% 25% 22% 25% 25% 25% 25% 25% 24% 25% 60% 25% 32% 24% 57% 33% 31% 40% 20% 30.16%

Average income of the commune $25 $13 $16 $20 $20 $20 $20 $35 $20 $20 $11 $20 $15 $21 $13 $22 $17 $25 $20 20

Economic Rate of Return (%) 65 42 55 66 44 64 53 47 63 71 55 41 44 43 49 40 65 39 56 53

Tam Hoa, Song Binh& Truong AnHamlets, Dai QuangCom, Dai Loc Dis,Quang Nam Prov.

Ngu Xa, Long Hoiand My Tra hamlets,Binh Chanhcommune, ThangBInh district, QuangNam province.

Hung My Hamlet,Bing Trieu Com,Thang Binh Dist,Quang Nam Prov.

Tra Chau Hamlet,Duy Son Com,Duy Xuyen Dis,Quang Nam Prov.

Ly Truong Hamlet,Binh Phu Com,Thang Binh Dis.,Quang Nam Prov.

Ha Loc & LuongDien Hamlets,Hai Son Com,Hai Lang Dis’,Quang Tri Prov.

Phu Nham Hamlet,Duy Son Com,Duy Xuyen Dis,Quang Nam Prov.

Dong Yen & PhuBong Hamlets,Duy Trinh Com,Duy Xuyen Dis’Quang Nam Prov.

Co Bi 1,2,3, Son Bo,Hien Si & Phe TuHamlets, Phong SonCom., Phong DienDis., Hue

Hamlets 1, 2, 3, 4 &14, Quang CongCom., Quang DienDis., Hue Prov.

Cam Trang, CamNoi & Cam NgoaiHamlets, Phong HoaCom, Tuyen HoaDis, Quang BinhProv.

Lam Lang Hamlets 13 and Tam HiepHamlet,Cam Thuy Com,Cam Lo Dis’, QuangTri Prov.

Hamlets 4- 8 &Diem Ha Hamlet,Gio Hai Com., GioLinh Dis., Quang TriProv.

My Son & NamDinh Hamlets, TamAnh Nam Com, NuiThanh Dis, QuangNam Prov.

Tung Ly hamlet,Quang Chau com,Quang Trachdistrict, Qbinhprovince

Dai An 1 & 2Hamlets, Dai NghiaCom, Dai Loc Dis,Quang Nam Prov.

Hamlet 3&4 BinhDao and group 3 ofBinh Trieu, ThangBinh dis, Qnamprovince

Dong Truong , MyTruong and TrungTruong hamlets,Hai Truongcommune, HaiLang district,Quang Tri province

Tan Phu and PhuDong hamlet, TamPhu com, Tam Kytown

4 provinces in Centralarea.

COST PER CAPITA

LOCATION (Commune, District, Province)

WB-Adjusted number of households

WB-Cost per household

COST PER HOUSEHOLD

d) Land and const rights (4% of line-item)

Sum Base costs

a) Line-item cost

e) Labour contribution (25% of line-item)

c) Contingency (5% of base costs)

d) Financial Cost (8% of System Cost)

b) Construction Cost

GPOBA FUNDED PROJECTS

Project Name

Number of households

Number of beneficiary people in ten years

Local contribution

Number of beneficiary people today

TOTAL PROJECT VALUE

Donour contribution

TOTAL SUBSIDY COST

Sum System Cost


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Annex 11: Aide-Mémoire preparation mission

VIETNAM – RURAL WATER SUPPLY DEVELOPMENT PROJECT

GPOBA / WORLD BANK MISSION

AUGUST 12 TO 25, 2007

AIDE-MÉMOIRE

1. A GPOBA mission comprising Mr. Xavier Chauvot de Beauchene (Task Team Leader - Infrastructure Specialist, GPOBA) visited Vietnam from August 12 to 25, 2007. The objectives of the mission were primarily to finalize project preparation with EMWF and review its assessment by the World Bank team. Mr. Vinh Quang Nguyen, Consultant to WB Hanoi office joined the mission, including the field visit, to complete his review of technical aspects of project design. The mission met with representatives of the Central Government; EMWF staff in Hanoi and Danang; the Quang Nam provincial peoples’ committee (PPC) and several officials in districts and communes visited during field visit. The mission would like to thank the people met for their support and cooperation. A list of people met is held in Annex 1. This Aide Memoire summarizes the main findings of the mission.

The mission met with representatives of the Central Government in the Ministry of Planning and Investments (MPI), Ministry of Finance (MOF) and the Ministry of Agriculture and Rural Development (MARD) to present the project, put it in prospective in regards coordination with other programs and activity and its contribution to the target set by the Government in the National Rural Water and Sanitation Strategy up to 2020, stating that 85% of the population living in rural areas should have access to clean water supply by 2010. The mission explained the specificity of the Output-Based Aid design of the project, namely that the disbursement will be linked to realized and verified outputs, in this case connections to piped water supply. All welcomed the project, appreciated the initiative for information sharing and coordination and offered support to ensure its timely implementation. Ministry of Planning and Investments The mission was informed by representatives of the MPI, that, given the flow of funds and the pre-financing of the water schemes by EMWF, the project is considered as Aid from an international NGO. As such, the mission understands that it is regulated by Prime Minister’s Decision No. 64/2001/QD- TTG of April 26, 2001 promulgating the regulation on the Management and Utilization of Aid from International NGOs (Decision 64). Under this regulation, NGO Aid programs or projects which are budgeted at USD 500,000 or more should be approved by the Prime Minister, while approval is under the responsibility of the Provincial people’s committee for NGO Aid programs or projects which are budgeted at less than USD 500,000. As defined in Decision 64, each small water scheme (subproject) to be developed is to be considered an independent project, for which all necessary documentation is prepared and submitted for approval by the Chairman of the respective Province People’s Committee (PPC). The documentation required in the request for approval entails, inter alia, the Memorandum of Understanding signed by the Commune People’s Committee (CPC), the District People’s Committee (DPC) and EMWF, demonstrating the decision and commitment to the project and defining respective roles and responsibilities of each party in its implementation, detailed scheme design and results of well drilling tests and associated quantity


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and quality tests. It was agreed that EMWF will continue require Government authorization by the Chairman of the relevant PPCs on a subproject basis, in compliance with Decision 64. Ministry of Finance The mission was informed by the MOF that, because of the international source of the investments, the project is eligible to tax exemption. MOF offered to issue an official letter stating the same. The mission welcomed the proposal. MOF expressed interest in OBA approaches and inquired on the opportunity to seek more support from GPOBA to test such approaches in and beyond the water sector. The mission indicated that, while GPOBA is facing financial constraints, and does not accept requests for subsidy financing, it has funds under its Technical Assistance and Dissemination windows. The mission encouraged the MOF to submit to GPOBA potential ideas it might have. Ministry of Agriculture and Rural Development The mission met with the International Cooperation and the Water Resources Management departments of the Ministry of Agriculture and Rural Development (ICD and WRM). Both departments welcomed the project, its expected contribution to reach access targets set forth in the NRWSS and praised the information and coordination effort. The mission indicated the highest level of coordination and information sharing will be expected from EMWF, in particular through the partnership for rural water and sanitation, through and beyond the project, to create synergy and optimize contributions to reaching the targets set forth in the NRWSS. While EMWF has exchanged experience and lessons learned with other NGOs and donors such as IDE, EMWF is very committed to broaden its involvement in the partnership for rural water and sanitation. Moreover, John Anner, Executive Director of EMWF, recently relocated from Oakland, California to Hanoi, in part to ensure better information and cooperation with other donors and the central government in regards its contribution to the NRWSS, though the Clean Water and Sanitation Program it recently developed. The international cooperation department was informed that EMWF is planning a conference to raise awareness of local communities on the opportunities to introduce private management schemes in EMWF-funded water schemes. It was agreed that the local communities considered for funding during the first year of implementation would be invited. ICD offered to invite the vice-minister of Agriculture and Rural Development to chair the meeting, shall EMWF wish it, as a sign of support to EMWF’s work and to stress government effort to introduce private sector participation in water services management in Vietnam. The mission thanked ICD representatives for offering and indicated that the information would be shared with EMWF for their consideration and action. Representatives of Provincial and Local Authorities. During the sites visits, the mission met with the PPC of the Quang Nam province and with heads of villages and CPC members in the communes of BinhDao, BinhTrieu, DienTien, where EMWF funded water schemes between 2005 and 2007, and in the communes QuePhu (TraDinh village) and TamAnhNam (MySon and NamDinh villages), which are considered for funding under the first year of implementation. Local authorities consistently praised the quality of EMWF’s partnership for the development of the water schemes, the one year guarantee provided and the training regularly proposed to water managers and local authorities. Customers met expressed their satisfaction with the service provided.

Project Design and review issues


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The mission discussed with EMWF pending questions in regards project design, the status of the review process by the World Bank and the next steps of project preparation. The following present the outcome of the discussions. The main design features of the project are available in Annex 2. Independent technical reviews The mission and EMWF discussed the practical organization of the output monitoring and verification. An Independent Technical Reviewer (ITR) would be hired and managed by GPOBA, as part of its own budget. The ITR would carry out quarterly reviews of realized connection, including physical verification of at least 5% of connections for which a payment is requested and review of satisfactory service provision for connections in operations for at least six months, measured through the receipt and payment of invoices by customers. For each subsidized connection, EMWF will keep records of all relevant documentation, including the household registration to connect, the amount of financial and in-kind beneficiary contributions (in meters of trenches), invoices for service provision, stating the consumption in cubic meters and the amount for each service period and records of payments for each households. The ITR will also review the reports provided by EMWF and the project monitoring indicators. Monitoring and Evaluation and reporting: EMWF will report to GPOBA on a quarterly basis, under a format to be agreed between EMWF and GPOBA, presenting progress during the past quarter, the outputs and associated subsidy payments requested, project monitoring indicator and relevant financial management information. The mission discussed and revised the proposed key project monitoring indicators, for each subproject, and the frequency of their reporting as follows: Proposed project monitoring indicator Frequency of

reporting EMWF-funded costs per subproject – planned vs actual One-time Number of beneficiary households connected Quarterly Tariff per m3 per sub-project As tariff changes Itemized O&M costs per sub-project Annually Volume of water produced per billing cycle * Quarterly Volume of water billed per billing cycle * Quarterly Collection ratio per billing cycle * Quarterly Annual customers satisfaction surveys of at least 10% of the households connected in each subproject during each calendar year

Annually

* Billing cycles are expected to be on a monthly basis. The indicators proposed in the draft Project Commitment Document to measure the quality of service provision were not adapted to the specificities of the schemes. They were written off. It was agreed that, instead, EMWF would perform annual customers satisfaction surveys of at least 5% of the households connected in each subproject during each calendar year. Selection criteria for subprojects. The mission reviewed the procedure and criteria for the selection of subprojects. These criteria will be completed by the environmental screening checklist presented in the Environmental Assessment framework. To date, the criteria do not included an estimation of the project outcome. As required by the GPOBA Panel of Experts, Economic Rates of Returns were calculated for subprojects considered for funding for the first year, in order to determine whether ERR should be considered as a criteria for the selection of subprojects. It was agreed that EMWF would submit these calculation top GPOBA by September 10, 2007.


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The list of subprojects to be financed under the first year of implementation has been reduced to 18, as two projects ready to go would be financed by Donors’ direct contributions. Geographic and poverty Targeting EMWF confirmed the geographic targeting of five provinces in central Vietnam (Quang Nam, Thua Tien Hué, Quang Tri, Quang Binh and possibly Quang Ngai). The provinces targeted by the project are among the poorest in Vietnam, with poverty rates above Vietnamese average. The 19 subprojects considered for the first years show poverty rates of 30% in average, under the Vietnamese standards (monthly income of less than VND200,000 per capita - USD13 equivalents). If compared to internationally accepted benchmark for poverty (Per capita income of less than 1$ a day), the poverty rate then increases to close to 100% in the targeted communes. On that basis, the mission confirmed that the project appropriately targets the poor. Optimized amount of subsidy – Value for money: Prior to the mission, a technical and unit cost review of the 20 subprojects then considered for funding under the first year of implementation was carried out. It concluded that the requested subsidy amount of USD100 per connection (USD20/capita) was acceptable. It also concluded that expected construction costs under the project are significantly lower than actual construction costs for similar small scale water scheme observed in other internationally financed projects, including from IFIs. The mission made clear that only connections realized through the development of new schemes would be eligible, while connection linked to the extension of existing scheme, even previously financed by EMWF, would not be eligible. Staffing The mission questioned the potential staffing limitations, as the Clean Water and Sanitation Program is relying on three key people, one water engineer (part time) and a management team of two people. EMWF indicated that it recently hired three site supervisors and one water engineer and plans to hire two water supply engineers, two civil works engineers and one electrical engineer, once funding commitment is confirmed. Moreover, EMWF has successfully met the challenge of rapid scale up of other programs, and is confident it can recruit and train staff in a timely basis, in order to ensure timely and quality implementation of the project. Project review process by the World Bank. Financial management The mission discussed the financial management arrangements, flow of funds and action plan included in the GPOBA letter dated August 8, 2007. The mission was informed that EMWF decided to forego the 20% advance payment requested and approved at eligibility, in order to simplify EMWF’s internal accounting and reporting. EMWF confirmed it has enough borrowed funds to cover the pre-financing of the investments. It was agreed that 80% of the subsidy amount would be disbursed when connections are realized and verified, the remaining 20% being disbursed after six months of satisfactory service provision. It was agreed that the flow of funds and disbursement arrangements will be revised accordingly in the Project Commitment Document. As indicated above, it was agreed that the formats for financial reporting will be prepared shortly and submitted to EMWF as part of the progress report format. EMWF confirmed that the requirements set forth in the Financial Management Action Plan would be complied with before the proposed deadlines (see Annex 4 for details). EMWF will prepare a short note formally confirming how and by when it intends to fulfill the requirements set forth in the FM Action Plan. Procurement


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The mission discussed the progress of review of procurement aspects of the project, currently underway. The mission confirmed that the Bank procurement procedures will apply to the Project and that the Bank standard bidding document will be used for International Competitive Bidding and procurement of consultants’ services. EMWF confirmed their wish to use their procurement documents for NCB and Shopping for goods and works. It was agreed that EMWF will submit the English version of these documents for the Bank review and no objection at their earliest convenience. Also, EMWF will submit to GPOBA and the Bank a revised procurement plan including the first 18 months of implementation no later than September 10, 2007. It was agreed that the Bank will complete the procurement review of the Project by September 20 at the latest. Safeguards: The mission confirmed publication in the Infoshop of the Integrated Safeguards Data Sheet – Concept Stage and associated Project Information Document. These documents are attached in Annexes 5 and 6 for information. Environmental Safeguards: An Environmental Assessment (EA) Framework has been prepared to evaluate potential negative impacts of the Project and associated mitigations measures to be developed under the Project. For each subproject, a short Subproject EA will be prepared and submitted for approval by the relevant provincial Department Of Natural Resources and the Environment (DONRE). The EA Framework was reviewed and found acceptable to the Bank, provided that guidelines for the negative screening of subprojects and the preparation of subprojects EA are incorporated as a designated chapter of the EA Framework. A final version of the EA Framework, including such environmental guidelines, was submitted by EMWF on August 30, 2007. It was agreed that the EA Framework will be submitted to the DONRE in each provinces targeted by the project for information. The Executive Summary will be translated in Vietnamese and will be disclosed in each of the five provinces targeted by the Project, referring to the full version in English, which will be made available upon request, and on the website of EMWF. Each subproject EA will later be submitted to DONRE for their review and approval, in compliance with Vietnamese regulation, and will then be publicly disclosed, in accordance with WB requirements. Social Safeguards: No resettlement or land acquisition took place in any of the 94 rural water systems EMWF financed in Vietnam. The project does not expect to involve ethnic minorities or indigenous people. Nevertheless, in case any such situation arises, it was agreed that the Project will adopt the Resettlement Policy Framework and Ethnic Minority Policy Framework developed under the Vietnam Urban Water Supply Development Project and acceptable to the Bank. EMWF officially asked for appropriate PPCs’ adoption of these frameworks in each of the provinces concerned by the Project. Clearance from social safeguards was granted, provided that the two frameworks are formally adopted by PPCs in each of the provinces. EMWF expects to receive a letter from each of the PPCs adopting the two frameworks by September 15, 2007. It will then disclose them publicly through their website. Legal Arrangements: A Grant Agreement would be signed between EMWF and the World Bank, acting as and administrator to GPOBA. As the Government of Vietnam (GOV) will not be a signatory to the Grant Agreement, the Bank needs to receive official acceptance from GOV on a few legal provisions aspects, including allowing access to EMWF staff, WB staff and ITR to the project sites to ensure proper implementation and supervision of the Project, as stated in the GA. The Bank will indicate the form that this official acceptance should take and whether it would have to be signed at the central or provincial government level shortly, to allow for inclusion of the information in the Project Commitment Document.


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A draft Grant Agreement and associated operations manual will be prepared by the end of September to allow for timely review and signing, tentatively by mid-October. It was agreed that provisions from retroactive financing could be included in the GA, in accordance with Bank guidelines. Site visits and technical review The mission visited small water schemes financed by EMWF between 2005 and 2007 in the province of Quang Nam. During the visit, the mission reviewed the design, technical solution and quality of implementation as well as the management, financial aspects and customers and local authorities’ satisfaction. The review concluded that the design was of good size, the technical solution adequate and the implementation of appropriate quality, allowing for the treated water to comply with the main parameters of the Vietnam water quality standards. The proposed standardized design and technological solutions, concentrating the water treatment facilities in the lower levels of the water tower is an appropriate and cost efficient solution, in particular for schemes using groundwater as water source. The mission provided comments on the design of the recently constructed scheme using river water as the water source. As EMWF is starting developing water schemes using surface water as a water source, the mission recommended improving the design of associated treatment facilities and to allow for more space when the lower part of the water tower cannot accommodate the appropriate treatment facilities. The mission proposed to send examples of compact treatment facilities, using river water as a water source. The mission also recommended increasing the frequency of water quality measurements for such systems, at least during the first year of service, to account for the higher variability of the water quality, and fine tune the treatment accordingly. Additional information about visited sites and technical review are attached in Annex 3.

Next steps: The mission confirmed that the project is scheduled to be presented for commitment to the Panel of Experts of GPOBA at the end of September. Upon endorsement by the Panel of Experts, approval of commitment is requested from the donor(s) on a no objection basis (if applicable). Upon approval, a letter is sent to the Government informing of the proposed funding for the project and requesting its no objection to the Project being implemented. On that basis, the World Bank prepares a Grant Agreement and finalized with the Recipient. In the meantime, an Operations Manual describing the steps and processes of implementation, review, approval, will be prepared by EMWF in collaboration with the Bank. Local disclosure requirements of the Environmental and Social Safeguard Frameworks will have to have taken place at least 30 days prior to the signing of the Grant Agreement.


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Appendix 1 to Annex 11: List of persons met Ministry of Agriculture and Rural Development International Cooperation Department - Mrs. Hoa Tuyet Thi Nguyen, Deputy Director General - Mr. Hoan, Staff Department of Water Resources - Mr. Nam Duc Le, Deputy Director General - Mr. Quoc, Staff; - Mr. Hung, Staff; - Mr. Quang, Staff; - Mrs. Lan Anh, Staff; Ministry of Finance: - Mrs. Yen – Deputy Director Department of International Relations - Mrs. Le, Staff; Ministry of Planning and Investment:

- Mr. Khang, Deputy Director General, Foreign Economic Relations Department, Chairman of MI council

- Quan Van Phung, Programme Manager

Site Visit in the Quang Nam province QuangNam Provincial Peoples’ Committee (PPC) - Mr. Anh – Vice Chairman of the PPC; - Mr. Su – Vice Director Department of Construction; - Mr. Cong – Director Department of Planning and Investments; - Mr. Bong – Vice Director Department of Finance; - Mr. Tien – Vice Director Department of Agriculture and Rural Development; - Mr. Son – Department of Foreign Affairs MySon and NamDinh villages – TamAnhNam commune - Nui Thanh district - Mr. Hung – Vice chairman CPC; - Mr. Trung – Vice chairman CPC; - Mrs. Thom – Head of health unit of commune; - 6 heads of villages; TraDinh village - Que Phu commune – ThangBinh district - Mr. Tan – Chairman CPC; PhuocAm village - BinhTrieu commune – Thang Binh district – Quang Nam - Mrs. Phung – Vice Chairman CPC; BinhDao village – BinhDao commune – Thang Binh district – Quang Nam - Mr. Minh – Head of cooperative on electricity and water management; - Mr. Thuan – Supervisor of cooperative on electricity and water management


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East Meets West Foundation Staff - John Anner, Executive Director - Craig Fox, Chief Operating Officer - Minh Chau Nguyen, Chief Strategy Officer - Rachelle Galloway, Communications Coordinator - Mark Conroy, Country Director - Hoang Thi Hang Tam, Vice Country Director, Program Manager, Clean Water and Sanitation Program - Vo Thi Hien, Deputy Program Manager, Clean Water and Sanitation Program - Rick McGowan, Water and Sanitation Specialist - Cao Manh Hung, Consultant, Engineering and Scheme Design - Ho Thi Y Nhi, National Coordinator, Administration and Finance

World Bank Staff - Ajay Chhibber, Country Director, Vietnam - Hoonae Kim, Manager, Sustainable Development Program in Vietnam, Urban, Transport, Energy,

Environment, Social and Rural Sector - Hoi Chan Nguyen, Senior Counsel, Acting Country Director - Trang Phuong Thi Nguyen, Environmental Specialist - Hoa Thi Mong Pham, Sr. Social Development Specialist - Hoang Xuan Nguyen, Procurement Analyst - Kofi Awanyo, Sr Procurement Specialist, Procurement Hub Leader - Lasse Melgaard, Special Assistant to the Country Director - Cung Van Pham, Financial Management Specialist - Simon Lucas, Infrastructure Specialist - Michael Seager, Consultant - Duy Son Nguyen, Operations Officer


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Appendix 2 to Annex 11: Project Fact Sheet: Main design features of the Project Project Name: Vietnam Rural Water Supply Development Project Scope: Expanding access to water services to low income households in rural central region of Vietnam through an innovative community-based approach, possibly involving public-private partnership. Service Provider and Grant Recipient: East Meets West Foundation (EMWF), international non-governmental organization operating in Vietnam. Project Preparation: EMWF has identified 19 sub-projects in the two provinces of Quang Nam and Thua Thien for the first year of the project. Site identification involves consultation with beneficiaries and local authorities to ensure that the community will participate in the implementation of the sub-projects and is committed to share the responsibilities specified in a Memorandum of Understanding between EMWF and the concerned local authorities. EMWF has also begun to drill the wells to test water quantity and quality at these first 19 sites, to ensure timely implementation. Compliance with National Sector Strategy: The project contributes to reach the target of 85% access to water supply in rural areas by 2010 set forth in the National Rural Water and Sanitation Strategy up to 2020 and complies with its principles of commitment and ownership at the local level, design in line with the national guideline of 60 liters/ capita/ day, compliance with construction and water quality standards, transfer of knowledge and experience to water managers and local authorities, ensuring financial sustainability through tariff covering at least O&M costs and the development of satisfactory sanitation solutions (sanitation promotion initiative to be financed by EMWF in parallel to the project). Total GPOBA Funding Requested: EMWF proposes that GPOBA consider a phased approach:

• Low case: US$3 million; • High case: Increase to US$5 million, subject to successful implementation and funding

availability. Outputs: working connection to safe piped water services. Potential beneficiaries: About 30,000 households (about 140,000 people) in 75 communes located in five provinces of the central region of Vietnam: Quang Nam, Quang Tri, Quang Binh, Quang Ngai and Thua Thien, with the possibility to scale up to 50,000 households (about 100,000 additional people) in 50 additional communes located in the same provinces will be considered during a mid-term review. GPOBA subsidy “efficiency”: US$100 subsidy per connection or US$20 per capita. Sustainability: EMWF has developed a track record in delivering sustainable services at low cost, and with high customers’ ownership and satisfaction over the last 10 years. Project sustainability is ensured through: • local authorities and beneficiaries participation in sub-projects’ implementation and

management; • assets transferred to communes once systems are built, one year technical and management

support; • training of water managers (or private enterprises) selected by local authorities to manage

water systems;


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• support to local authorities in setting up financially sustainable water tariffs that would cover O&M costs and provisioning of reserves for periodic replacement and possible system extension or upgrade.

Targeting: Clusters of poor rural households where sufficient water quantity, quality and pressure is available and where beneficiaries are willing and able to pay required upfront cash and labor contributions, and consumption-based monthly water bills Disbursement:

• 80% after realized house connection, verified by an Independent Technical Reviewer; and • 20% after 3 months satisfactory service delivery (according to billed volumes).

Returns: FIRR: 5% with subsidy; EIRR: 54%


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Appendix 3 to Annex 11: Site visits and review of design and technical aspects of water schemes

developed by EMWF between 2005 and 2007 in the Quang Nam province.

1. The mission traveled to the Quang Nam province to visit sites where EMWF financed the development of water schemes similar to the ones to be developed under the proposed project. The mission took the opportunity of this field trip to carry out a review of the design features and quality of technical implementation of the schemes financed. 2. The mission visited small water schemes of developed in the past two years by EMWF in villages of: - BinhDao village – BinhDao commune – ThangBinh district; - PhuocAm village - BinhTrieu commune – ThangBinh district; - ThaiSon village – DienTien commune – DienBan district; 3. The mission visited two other villages where a water supply scheme is proposed to be funded under the GPOBA grant through EMWF. They are: - TraDinh village - QuePhu commune – ThangBinh district - MySon and NamDinh villages - TamAnhNam commune – Nui Thanh district; 4. Brief description of these water schemes is presented in table below:

Name of water scheme

Daily designed capacity

Time of Completion Designed number of demanded

HH

Actual number of connected

HH at August, 07

BinhDao 150 m3 November, 06 650 622 PhuocAm 100 m3 January, 07 466 180 TraDinh 225 m3 NA 900 0 MySon and NamDinh 70 m3 NA 254 0 ThaiSon 75m3 under commissioning 564 320

5. BinhDao and PhuocAm water supply schemes are using ground water source. These schemes typically consist of two wells, a treatment unit for aeration, a sedimentation tank, a pressurized filter, a calcium hypochlorite tank for disinfection and an elevated reservoir of 20 m3, from which the water flows by gravity into the distribution network. In ThaiSon, where the source is surface water, the scheme consists of river water intake in the form of reinforced concrete well connected to the river by steel pipe, raw water pumps, vertical flocculation overflowing to two decantation tanks, alum diluting tank, pressurized filter, calcium hypochlorite disinfection system and an elevated reservoir of 20 m3 capacity, from which the water lows by gravity into the distribution network. 6. During the visits, the mission checked construction quality of structures as well as water quality and concluded they are quite adequate in ground water schemes. But for surface water scheme, the treated water quality seems not to be of the required quality, possibly due to the facilities have just been commissioned and are in the test run phase, some items such as alum dosing is not in function and the speed of water flow through the flocculation and decantation tanks seem too high, possibly leading to quick clogging of the pressurized filter. A sample was taken by EMWF to verify this.


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7. The mission discussed with several water managers (operators) in charge or operating completed water supply schemes in regards technical and financial issues. In BinhDao, the operators are from acooperative for management of electricity and water supply, which is operating based on contract with the commune people’s committee (CPC). In PhuocAm, the water managers were selected directly by the CPC. The responsibilities of these operators include:

- Daily operation and maintenance of water treatment plant;

- Monitoring the network and repairing small leakages as need arises;

- Expanding the network and making new house connections;

- Meter reading, billing and collection of water fee from households;

- Other administrative, record keeping and reporting work.

These operators were identified or selected at the time the CPC committed itself to fulfill the condition set forth by EMWF prior to it funding the network. They were involved at the design stage and were associated at all stages of project implementation, until taking over the responsibility of scheme management. In the meantime, they receive regular training organized by EMWF on technical and financial aspects of water services management, and get together at least once a year in Danang to receive training and exchanges lessons learned and experience. The mission interviewed some of these operators and observed that they have the required basic skills for understanding and running such schemes. 8. These operators reported to the mission that they have to pay operations and maintenance costs (including electricity, chemicals, salaries, repair works and other goods and consumables) from the water fees they collect. The remaining revenue is provisioning reserves to cover for bigger repair, scheme upgrading or network expansion. The mission recorded financial statement of BinhDao’s operator for 6 first months of 2007 as follow:

- Total revenue: 18,700,000.00VND at water tariff 2,500VND/m3;

- Total expenses: 11,303,500.00VND, among them:

+ Electricity: 2,304,500.00VND;

+ Consumables: 392,000.00VND;

+ Minor repair: 2,656,000.VND;

+ Salary (2 men): 5,450,500.00VND;

+ Chemicals: 500,000.00VND;

- Reserves: 7,396,500.00VND.

It seems to be that the revenue covers all O&M costs and be able for amortization. 9. The mission visited some households in that completed scheme and observed that connected households often have their own wells, which they usually use for washing purposes, while they use piped water for drinking and cooking. Households’ consumption depends on availability of alternative sources of water and the quality of these sources. Observed consumption varied from 20 liters/cap./day up to 80 liters/cap./day. 10. The mission visited some households in Communes considered for the first year of implementation and observed that they currently have to use a water of very bad quality. The groundwater is mainly polluted by iron, manganese, hydrogen sulfur (rotten egg smell) and sometimes nitrates and other organic components. It causes many water born diseases to the people


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like diarrhea, among others. While people seek alternative water sources, they have to rely on owned or neighbor’s well, delivered water (ranging from VND500 to 1,000 for 20 liters, i.e. $US1.5-3 per cubic meter or sometimes 20 liter water bottles (cost estimated about $US30 per cubic meter). 11. The mission observed that latrines where often built in the back of houses. The mission was informed that these latrines where sometimes built at owner's expenses, sometimes following a public awareness program. These latrines were developed under different designs, all pretty elaborate and regarded as efficient on-site sanitation solutions. In the NamDinh village, the mission visited a pilot program of EMWF for the development of sanitary latrines. The program, valid for a period of two months, aims at providing a $18 subsidy for the construction of a $90 dollars latrine + septic tank system. Such latrines are constructed by private companies. The company representative met indicated overwhelming demand and mentioned that the company is offering microfinance facilities, allowing poor households to pay for the construction costs over a period of three years. The ladies who were having the latrine built indicated they do not have water supply, but where more interested to get a latrine, in order not to have to go long distances to defecate in the open air. This community awareness is the result of an NGO, Infrastructure Development Enterprise (IDE), who is very active in public awareness campaigns and in training private contractors to develop quality latrines at a decent price (1.5 million VND, i.e. about $90). For very poor people, the CPC indicated it tops up EMWF subsidy by $10 with aid from a local social fund.

RECOMMENDATIONS 12. Project identification Under the proposed project, EMWF intends to develop about 75 rural water supply schemes over a period of 3 years in 5 central provinces of Vietnam. About 20 water supply schemes have been identified and are being considered for financing under the first year of implementation. With the understanding that the selection of the water supply schemes to be financed in subsequent years would be based on the same conditions and commitment of communes and beneficiaries, the mission encouraged EMWF to prepare a list of potential communes which might be considered for the second and third year of implementation and associated selection criteria. 13. Project preparation With reference to suggestions from relevant ministries of central government, it is agreed that EMWF will collaborate with perspective grant recipient to prepare separated sub-project documentations for seeking approval from respective PPCs, as appropriate. The subproject preparation should be in line with the principles set forth in the National Rural Water Supply and Sanitation Strategy, including:

• commitment and ownership at the local level; • design in line with the national guideline of 60 liters/ capita/ day; • compliance with construction and water quality standards; • transfer of knowledge and experience to water managers and local authorities; • ensuring financial sustainability through tariff covering at least O&M costs; • development of satisfactory sanitation solutions in parallel to connection to water supply.

Subproject preparation should also be in line with the environmental guidelines stated in the EA framework developed during project preparation, and all relevant Bank Safeguard Policies. 14. Engineering design The engineering design for each sub-project should follow requirements from relevant appropriate Vietnamese design standards. The typical design of structures, project's components is preferably


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used when it is applicable with necessary adaptation reflecting specific natural condition of the sub-project’s location. The EMWF is responsible for ensuring the quality of the engineering design in both terms: technical and legal as it is required by Vietnamese law and regulations. It is important for clearly specifying in the engineering design the level of intended quality of treated water in comparison with the existing standard on drinking water (issued by Ministry of Health). With respect to increased engineering design work generated by the project, EMWF staffing and capacity may have to be consolidated. The mission was informed of EMWF’s plan for increasing its staff to further strengthen its capacity in the water sector. In particular, EMWF plans to hire 2 water supply engineers, 2 civil engineers and 1 electrical engineer.


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Appendix 4 to Annex 11: Compliance with Financial Management Action Plan

WB Financial Management Action Plan and deadlines for compliance

Action Responsibility To Be Completed By

EMWF Commitment

(August mission)

1- Training to EMWF financial personnel on WB requirements on Financial Management and Disbursement

WB, EMWF


GPOBA (Tentatively September

2007)

Dates to be discussed and

agreed upon with WB FMS

2- Synchronization of the accounting and reporting applications (Quickbook and MS Access based application)

EMWF By June 30,

2008

To be completed by December 1,

2007

3- Improvement of budgeting process with the 3 monthly rolling budget to be updated every month and linked with monthly operational plan

EMWF



2007)

Already in place. Effective as an

explicit policy by September 1, 2007

4- Improvement of internal controls: (i) establishment of clear policies on cash on hand management (policies on ceiling of cash on hand balance, limit that payment can be made by cash, periodical and/or surprise cash count; (ii) improvement of policies on assets management (revising threshold of assets to be recognized, maintaining assets register, periodical asset inventory)

EMWF



2007)

Already addressed. Effective as an

explicit policy by September 1, 2007

5- Resolving the issues raised in the section “Matters for consideration of Management” of the closing meeting minutes with the Auditor

EMWF By December

31, 2007

Issues resolved. Audit report to confirm when

issued in Feb. 08

6- EMWF Vietnam Operation obtains commitment of relevant authority of renewal of operation license upon expiry date.

EMWF



2007)

Request for a 2-year license extension submitted.


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Annex 12: Map of Vietnam


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