International Water International Water AssociationAssociation

Financing Water SecurityFinancing Water Security

Rudolf FrauendorferRudolf FrauendorferAsian Development BankAsian Development Bank

2 Nov 2010 2ADB Financing Water Security

IntroductionIntroduction Why “Financing Water Security” Why “Financing Water Security” Linking Water Security to Water SafetyLinking Water Security to Water Safety ADB’s water program, Water Security and ADB’s water program, Water Security and

Water SafetyWater Safety

2 Nov 2010 3ADB Financing Water Security

OverviewOverview

ADB’s approach to Water Security ADB’s approach to Water Security Use Viet Nam as an example of Use Viet Nam as an example of

developmental contextdevelopmental context Serves to illustrate approach to water Serves to illustrate approach to water

security in Southeast Asiasecurity in Southeast Asia As pre-requisite for water safetyAs pre-requisite for water safety

2 Nov 2010 4ADB Financing Water Security

Viet Nam in historyViet Nam in history September 1945September 1945: independence: independence 19541954: Dien Bien Phu, Geneva Accords: Dien Bien Phu, Geneva Accords 19751975: Reunification: Reunification 19861986: “: “Doi MoiDoi Moi” declared: renovation” declared: renovation 19931993: ADB operations resumed: ADB operations resumed 19941994: US trade embargo lifted: US trade embargo lifted 20072007: Accession : Accession to to World Trade OrganisationWorld Trade Organisation

2 Nov 2010 5ADB Financing Water Security

2010: Regional Indicators2010: Regional Indicators

INO MAL PHI THA VIE

Population 231.4 28.3 92.2 66.9 86.0

Poverty, % 54.6 7.8 45 11.5 48.4

GDP (/cap, $ PPP

4,149 13,493 3,514 8,056 2,992

% Industry 13.2 17.2 8.7 14.4 21.5

% Urban 43.1 63.7 65 33.8 29.6

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Poverty: % population on < $ 2/dayPoverty: % population on < $ 2/day

Poverty, < $2/day 1994 - 2007

0

20

40

60

80

100

INO MAL PHI THA VIE

Poverty, %, 1994

Poverty, %, 2007

2 Nov 2010 7ADB Financing Water Security

Employment in IndustryEmployment in Industry

Employment in Industry, %; 1995 - 2009

0

5

10

15

20

25

INO MAL PHI THA VIE

% in Industry, 1995

% in Industry, 2009

2 Nov 2010 8ADB Financing Water Security

UrbanisationUrbanisation

Urban Population, in %; 1995 - 2009

0

10

20

30

40

50

60

70

INO MAL PHI THA VIE

% Urban, 1995

% Urban, 2009

2 Nov 2010 9ADB Financing Water Security

Transformation of the economyTransformation of the economy Strong industrial growthStrong industrial growth Transition to market economy; part of global Transition to market economy; part of global

economy economy De-centralisation: administrative / fiscalDe-centralisation: administrative / fiscal Agriculture: still 52% of employedAgriculture: still 52% of employed Still using 80% of waterStill using 80% of water

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Water ResourcesWater Resources Annual RainfallAnnual Rainfall: 1,200 – 3,000 mm/year: 1,200 – 3,000 mm/year Rivers dischargeRivers discharge: 830 billion m: 830 billion m33/year/year

57% from Mekong basin57% from Mekong basin 16% Red – Thai basin16% Red – Thai basin Total 60% generated outside bordersTotal 60% generated outside borders

Water endowmentWater endowment: 9,800 m: 9,800 m33/capita.year/capita.year In some basins: In some basins: < 3,000 m< 3,000 m33/capita.year /capita.year CriticalCritical in dry season for Dong Nai and in dry season for Dong Nai and

other basinsother basins

> 1700 m3/cap/yr “under stress

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Water UsersWater Users

20082008 20202020

AgricultureAgriculture 82%82% 72%72%

AquacultureAquaculture 11%11% 14%14%

IndustryIndustry 5%5% 9%9%

UrbanUrban 3%3% 5%5%

Total use 2008: 80 billion m3/yearTotal use 2020: 120 billion m3/year

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Ground WaterGround Water Strategic reserve – essential for rural areasStrategic reserve – essential for rural areas Renewable potential: 63 billion mRenewable potential: 63 billion m33/yr/yr

In Northwest: 3,770 m3/cap.yrIn Northwest: 3,770 m3/cap.yr In Mekong delta: 84 m3/cap.yearIn Mekong delta: 84 m3/cap.year

Water source for 55% of population: Water source for 55% of population: 34 % of urban population34 % of urban population 65% of rural population 65% of rural population

2 Nov 2010 13ADB Financing Water Security

Ground water - issuesGround water - issues Unknown resource: insufficient data on Unknown resource: insufficient data on

renewable Quantity or Qualityrenewable Quantity or Quality HCMC and Hanoi: groundwater table HCMC and Hanoi: groundwater table

lowered by 30m+lowered by 30m+ Need to protect strategic resourceNeed to protect strategic resource

Storage to bridge between floods and droughtsStorage to bridge between floods and droughts Potential for artificial / induced re-charge?Potential for artificial / induced re-charge?

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Water Safety PlansWater Safety Plans

1.1. System Assessment: System Assessment: to review supply to review supply chainchain

2.2. Operational monitoring Operational monitoring ofof all control all control measuresmeasures

3.3. Management Plans: Management Plans: documenting day-to-documenting day-to-day operations; emergency measuresday operations; emergency measures

a. Minimize contamination: protect sourceb. Reduce or remove contamination: treatc. Prevent further contamination: protect network

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Urban water supply Urban water supply 68 water companies, 68 water companies, under VWSAunder VWSA

Design capacity 5.4 million m3/dayDesign capacity 5.4 million m3/day Operating at 4.2 million m3/dayOperating at 4.2 million m3/day

CoverageCoverage: 98% : 98% “access to improved source”“access to improved source” 59% with house connection59% with house connection 39% shared connection or standposts39% shared connection or standposts

Investment 1991 - 2008: Investment 1991 - 2008: $ 2 billion$ 2 billion Mainly treatment & transmission,Mainly treatment & transmission, 15% on distribution improvements15% on distribution improvements

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Urban water: data needsUrban water: data needs

1.1. ReliableReliable: independent verification: independent verification

2.2. Relevant: Relevant: performance indicators, performance indicators, Financial performanceFinancial performance Asset inventory and valuationAsset inventory and valuation

3.3. Comprehensive: Comprehensive: data on small town data on small town systems (~ 400 towns)systems (~ 400 towns)

Minimum requirements to attract private sector interest in management, operation, investment

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Urban water: Urban water: non revenue water NRWnon revenue water NRW

RangeRange: 15 – 70%: 15 – 70% Average: Average: 30% (30% (20092009) ) down from down from 39% (39% (20002000)) Government targetGovernment target: 15% by 2025: 15% by 2025 $ 500 million $ 500 million government program, to be government program, to be

supported by ADBsupported by ADB Importance of reducing NRW as Importance of reducing NRW as indicator indicator of of

improved all-round efficiencyimproved all-round efficiency

VWSA: some doubt on data means of measurement lacking

2 Nov 2010 18ADB Financing Water Security

Urban water: Urban water: Business principlesBusiness principles

LegislationLegislation: enables tariff increases to full : enables tariff increases to full cost recoverycost recovery

Some hesitation to applySome hesitation to apply but promising but promising progressprogress

Affordability Affordability not an issue < 1% hh incomenot an issue < 1% hh income Ownership Ownership of assets still unclear: prevents of assets still unclear: prevents

progress with full privatisationprogress with full privatisation

2 Nov 2010 19ADB Financing Water Security

Rural water: the issuesRural water: the issues CoverageCoverage: 90% (2009) from 43% (1990): 90% (2009) from 43% (1990) Sector in transition: Sector in transition:

supply driven developmentssupply driven developments no funding for operation & maintenanceno funding for operation & maintenance unsustainable systemsunsustainable systems

Provincial water companiesProvincial water companies: combining : combining urban + rural responsibility.urban + rural responsibility.

ADB project in HueADB project in Hue: pilot with sustainable : pilot with sustainable rural schemes to become part of urban rural schemes to become part of urban company.company.

2 Nov 2010 20ADB Financing Water Security

Urban wastewater: the issuesUrban wastewater: the issues CoverageCoverage: waste from <10% of urban : waste from <10% of urban

households is treatedhouseholds is treated Government targetGovernment target: 70% coverage by 2025: 70% coverage by 2025 Investment implication: Investment implication: $ 15 – 25 billion$ 15 – 25 billion Decentralised: Decentralised: local government’s local government’s

responsibility responsibility Financing: Financing: tariff can be raised, but not tariff can be raised, but not

widely implemented.widely implemented.

2 Nov 2010 21ADB Financing Water Security

Summary of IssuesSummary of Issues

A.A. Efficient water supply companies: Efficient water supply companies: define assets, thendefine assets, then manage to improve efficiency and safetymanage to improve efficiency and safety

B.B. Protect the sources: Protect the sources: Reduce waste discharges, to Reduce waste discharges, to secure secure sources sources

for the futurefor the future

WSP step 1

WSP step 2

2 Nov 2010 22ADB Financing Water Security

ADB’s strategiesADB’s strategies Water supply: Water supply: supportsupport to water supply to water supply

companies – including NRW reduction – to companies – including NRW reduction – to enable access to investment by private enable access to investment by private sector: sector: Improving EfficiencyImproving Efficiency

Wastewater – assist local government to Wastewater – assist local government to meet government’s targets in waste meet government’s targets in waste treatment: treatment: Protect the sourcesProtect the sources

Province-wide programs Province-wide programs combining urban combining urban & rural water & sanitation & rural water & sanitation

2 Nov 2010 23ADB Financing Water Security

Water supply Water supply Line of credit $ 1 billion, Line of credit $ 1 billion, 2011 – 2020 2011 – 2020

Four large cities initially, specifiedFour large cities initially, specified Smaller cities to submit applicationsSmaller cities to submit applications

Institutional Support Institutional Support to water companiesto water companies NRW reduction programNRW reduction program Asset inventory & management Asset inventory & management Run on business principles, maintain service Run on business principles, maintain service

charter charter Prepare for privatisationPrepare for privatisation Gain access to capital marketsGain access to capital markets

2 Nov 2010 24ADB Financing Water Security

Wastewater Wastewater Starting pointStarting point

Skills gap / Awareness gap / Funding gapSkills gap / Awareness gap / Funding gap Long term programme Long term programme

City sanitation strategies + capacity building City sanitation strategies + capacity building Loan preparation Loan preparation ==> ==> line-of-credit 2013 - 2022line-of-credit 2013 - 2022

New approachesNew approaches: : Explore decentralisationExplore decentralisation Fit-for-use treatment Fit-for-use treatment Local re-useLocal re-use

2 Nov 2010 25ADB Financing Water Security

ConclusionConclusion

Promote Water Safety Plans Promote Water Safety Plans By better understanding on essential By better understanding on essential

operating data, to improve operating data, to improve efficienciesefficiencies,, to achieve financial to achieve financial sustainabilitysustainability,, critical for maintaining critical for maintaining safetysafety of supplies of supplies

Protect the sourcesProtect the sources Urgent and large scaleUrgent and large scale Creative approaches & flexibility requiredCreative approaches & flexibility required