P

roject Performance Audit Report PPA:VIE 25019

Irrigation and Flood Protection Rehabilitation Project (Loan 1259-VIE[SF]) in Viet Nam September 2005 Operations Evaluation Department

Asian Development Bank

CURRENCY EQUIVALENTS

Currency Unit – dong (D)

At Appraisal At Project Completion At Operations Evaluation (August 1993) (December 2001) (April 2005)

D1,000 = $0.0943 $0.0662 $0.06317 $1.00 = D10,600 D15,104 D15,830

ABBREVIATIONS

ADB – Asian Development Bank ADTA – advisory technical assistance BME – benefit monitoring and evaluation CPO – Central Project Office DDMFC – Department of Dike Management and Flood Control DWR – Department of Water Resources EA – executing agency EIRR – economic internal rate of return ha – hectare IMC – irrigation management company ISF – irrigation service fee km – kilometer kWh – kilowatt-hour m – meter m3 – cubic meter MARD – Ministry of Agriculture and Rural Development NNAIC – North Nghe An Irrigation Company O&M – operation and maintenance OEM – operations evaluation mission PCR – project completion report PIM – participatory irrigation management PPAR – project performance audit report PPTA – project preparatory technical assistance SCIC – Song Chu Irrigation Company SDR – special drawing rights SPO – subproject office TA – technical assistance VRM – Viet Nam Resident Mission of ADB VSL – value of statistical life WUA/C – water user association/cooperative WUO – water user organization

NOTES

(i) The fiscal year (FY) of the Government ends on 31 December.

(ii) In this report, "$" refers to US dollars.

Director General, Operations Evaluation Department : Bruce Murray Director, Operations Evaluation Division 1 : R. Keith Leonard Evaluation Team Leader : Toshio Kondo

Operations Evaluation Department, PE-666

CONTENTS Page

BASIC DATA iii EXECUTIVE SUMMARY v MAP ix I. BACKGROUND 1

A. Rationale, Purpose, and Outputs 1 B. Cost, Financing, and Executing Arrangements 1 C. Completion and Self-Evaluation 1 D. Operations Evaluation 2

II. PLANNING AND IMPLEMENTATION PERFORMANCE 2

A. Formulation and Design 2 B. Cost and Scheduling 3 C. Consultants’ Performance, Procurement, and Construction 3 D. Organization and Management 4

III. ACHIEVEMENT OF PROJECT PURPOSES 5

A. Operational Performance 5 B. Performance of Operating Entities 8 C. Economic Reevaluation 8 D. Sustainability 9

IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS 9

A. Socioeconomic and Poverty Reduction Impacts 9 B. Environmental Impact 10 C. Impact on Institutions and Policy 11

V. OVERALL ASSESSMENT 11

A. Relevance 11 B. Efficacy 12 C. Efficiency 12 D. Sustainability 13 E. Institutional Development and Other Impacts 13 F. Overall Project Rating 14 G. Assessment of ADB and Borrower Performance 14

Toshio Kondo, senior evaluation specialist (team leader), was responsible for the preparation of this report; conducted document reviews and key informant interviews; and guided fieldwork undertaken by Jonathan Cook, Tran van Phuc, and Bui Quoc Tuan (staff consultants).

This report observed the guidelines formally adopted by the operations evaluation department on avoiding conflict of interest in independent evaluations. To the knowledge of the operations evaluation department management, there were no conflicts of interest of the people preparing, reviewing, or approving this report.

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VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS 14 A. Key Issues for the Future 14 B. Lessons Identified 16 C. Follow-Up Actions 17

APPENDIXES 1. Project-Related Data and Statistics 18 2. Irrigation and Dike Infrastructure 21 3. Socioeconomics, Poverty, and Participatory Irrigation Management 30 4. Crop Area Production and Yield 34 5. Economic Reevaluation 38 6. Other Statistics 59 SUPPLEMENTARY APPENDIX (available upon request) Floods Since 1900

BASIC DATA Irrigation and Flood Protection Rehabilitation Project (Loan 1259-VIE[SF])

Project Preparation/Institution Building TA No. TA Project Name Type Person-Months Amount

($’000) Approval Date

1968 Operation and Maintenance Strengthening

ADTA 57 1,800 26 Oct 1993

2869 Operation and Maintenance ADTA 33 150 16 Sep 1997 Development in the Irrigation

Sector

3064 Strengthening of Resettlement Management Capacity in the Ministry of Agriculture and Rural Development

ADTA 12 150 4 Sep 1998

Key Project Data ($ million)

As per ADB Loan Documents

Actual

Total Project Cost 95.6 87.5 Foreign Currency Cost 37.5 29.5 Local Currency Cost 58.1 58.0 ADB Loan Amount/Utilization1 76.5 66.2 ADB Loan Amount/Cancellation1 7.1

Key Dates Expected Actual Fact-finding 7–26 Sep 1992Appraisal 28 Feb–21 Mar 1993Loan Negotiations 5 Oct 1993Board Approval 26 Oct 1993Loan Agreement 30 Oct 1993Loan Effectiveness 28 Jan 1994 28 Mar 1994Project Completion 30 Jun 1998 30 Jun 2001Loan Closing 31 Dec 1998 8 Apr 2003Months (Effectiveness to Completion) 53 87

Economic Internal Rates of Return (%) Appraisal PCR2 PPAR Overall 39.9 36.8 22.7 Hanoi 53.5 62.6 35.7 Song Chu 13.9 6.4 12.9 North Nghe An 22.0 8.4 11.8 Borrower Socialist Republic of Viet Nam Executing Agency Ministry of Water Resources3

ADB = Asian Development Bank, ADTA = advisory technical assistance, PCR = project completion report, PPAR = project performance audit report, TA = technical assistance. 1 The loan was equivalent to special drawing rights (SDR) 54,370,000 at the time of approval. Net loan amount was

equivalent to SDR49,011,502.92 at the time of loan closing. Total cancellations amounted to SDR5,358,497. 2 Reflects case B analysis which did not consider the probable failure of the two irrigation systems. In comparison,

case A benefits included avoided production losses caused by the possible failure of the two irrigation subprojects. Under case A, the overall economic internal rate of return was estimated at 37.4% at project completion (compared with 41.5% at appraisal), Song Chu at 7.3% (15.9% at appraisal), and North Nghe An at 9.5% (25.9% at appraisal).

3 Restructured in December 1995 to form the Ministry of Agriculture and Rural Development.

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Mission Data Type of Mission No. of Missions Person-Days Fact-Finding 1 120 Appraisal 1 169 Inception 1 21 Project Administration Review 4 77 Special Project Administration 7 91 Midterm Review 1 36 Project Completion 1 58 Operations Evaluation4 1 52

4 The Operations Evaluation Mission comprised Toshio Kondo, Senior Evaluation Specialist (Mission Leader);

Jonathan Cook (international consultant); and Tran Van Phuc and Bui Quoc Tuan (domestic consultants).

EXECUTIVE SUMMARY

Irrigation and flood protection infrastructure in northern Viet Nam was old and often dilapidated when the project was formulated in the early 1990s. The Hanoi dike and the two main irrigation schemes proposed for rehabilitation risked failure of major structures, which would cause significant economic and social disruption. Government policies at the time—including the major economic renovation program, doi moi, initiated between 1986 and 1989—supported increased agricultural production. The Asian Development Bank’s (ADB) 1993 interim operational strategy concentrated on four areas, including the rehabilitation and development of physical infrastructure, which became the main focus of the Project.

The Project’s objective was to rehabilitate 45 kilometers of the Hanoi dike and two irrigation systems (Song Chu and North Nghe An) with an irrigated area of 80,000 hectares (ha) in North Central region. The Project’s purpose was to avoid loss of life and mitigate economic loss in case of flooding caused by dike failure. Project investment would result in sustained paddy (unhusked rice) production of 440,000 tons (t) on 80,000 ha for the Song Chu and North Nghe An irrigation schemes. Project objectives were not well defined, partly reflecting lack of detailed project preparation.

Project cost was estimated at $96 million. In addition, grant-funded advisory technical assistance of $1.8 million was planned to strengthen operation and maintenance (O&M). The Project was executed by the Ministry of Water Resources, the predecessor of the Ministry of Agriculture and Rural Development. The Project was approved in October 1993 and completed in June 2001.

The irrigation subprojects focused on restoring damaged infrastructure to its original

state. The emergency irrigation rehabilitation was designed from an engineering perspective only, i.e., without assessment of institutional factors, in part due to the perceived need to complete the subprojects quickly without project preparatory technical assistance.

Rehabilitation of the Hanoi dike improved it substantially and it is now well maintained. While dike rehabilitation had neutral to positive environmental impact, the environment is a key factor in the dike’s performance and long-term stability. In particular, this relates to likely flood levels, and the level of construction that occurs in the floodplain. Both irrigation schemes were rehabilitated as planned. All rehabilitated structures are performing as expected with little deterioration.

Crop yields increased over the project period by an average of 5% per year. Average spring paddy yields now exceed 6 tons per hectare (t/ha), up from around 4 t/ha in 1994. The Project has contributed to these gains, but only as one of many factors, which include improved land security, varieties, and input availability. Average household cash income is estimated to have increased by 145% over the project period, and 97% of respondents considered improved water supplies to be an important contributing factor.1

The direct socioeconomic benefits of the Hanoi dike rehabilitation are threefold: (i) increased sense of security and well-being derived from a sound dike system, (ii) stimulation of investment due to improved flood security, and (iii) transport benefits resulting from concreted dike road systems. The main impacts of the irrigation systems are increased water supply at the headworks and distribution through secondary canals. This has allowed a significant increase in 1 Small-scale Operations Evaluation Mission (OEM) survey.

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the areas fully irrigated, though less than anticipated at appraisal. The Project—supported by a tertiary canal upgrading program—has reduced time spent on manual water lifting and released time for other activities.

The Project is assessed as relevant. The technical solution for Hanoi dike rehabilitation has become a model for dike systems on many other rivers. The Project contributed to this but did not adequately plan for road needs—almost all the road length has been rebuilt or is likely to be rebuilt in the near future—resulting in waste of resources. Rehabilitation of the two core irrigation subprojects was relevant at the time of design, in accordance with the Government’s Third Five-Year Plan (1991–1995), which placed emphasis on expanding irrigated agricultural production. The Project would have been more relevant if it had taken a broader and participatory approach to irrigation development, even under the urgent project preparation situation in 1993. However, it achieved its purpose—the Hanoi dike rehabilitation increased Hanoi’s security and is likely to prevent future dike breaches and ensuing damage and loss of life, in almost all flood conditions.

The purpose of the irrigation subprojects was to provide reliable and increased irrigation

water to the two schemes, and achieve sustained paddy production of 440,000 t per year. This target has been substantially exceeded, with production from the schemes reaching about 730,000 t in 2004 based on irrigation company data. Household cash income in 2004 averaged D15 million in Song Chu and D13 million in North Nghe An, an average increase of 145% in real terms over the project period. In addition to project investments, the lining of tertiary canals under local budget has made a significant contribution to improved water management and scheme performance. The Project is assessed as efficacious.

Efficiency of implementation was satisfactory. All targets were met, despite delays due to lack of familiarity with ADB procedures and the limited construction period dictated by the irrigation calendar. Economic internal rate of return (EIRR) for the Hanoi dike subproject is estimated at around 35% (based on updated appraisal estimates of damage, but assuming that no break in the dike would have occurred during floods of 12 meters or less, and making allowance for reduction in deaths). This level does not include benefits resulting from induced investment inside the dike or time savings by Hanoi residents due to road upgrading. EIRR for the core irrigation subprojects is estimated at around 12%. EIRR is higher than estimated by the project completion report due to the inclusion of labor savings resulting from the Project, reduced O&M costs, and post-project investment in tertiary canal upgrading (also taken into account in economic assessment). Overall, the Project is rated efficient.

The Hanoi dike subproject is expected to be sustainable as the dike is too important to Hanoi for the people’s committees to allow it to deteriorate and threaten its integrity. However, further support is needed to clean up and maintain the northern Ha Tay section, and care is required in the further development of the Red River floodplain. The irrigation schemes have some problems because of the loss of tertiary gates and underfunded maintenance on unrehabilitated secondary canals. However, irrigation management companies, irrigation enterprises/clusters, agricultural cooperatives, irrigation groups, and farmers are trying to maintain their irrigation infrastructure. The rapid expansion of the rehabilitated secondary and tertiary canal network under local budget is notable. Overall, project sustainability is rated as likely. Institutional impact has been moderate due to the Project’s focus on urgent physical rehabilitation.

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Overall the Project is rated successful. This is higher than the project completion report rating of partly successful mainly to improved irrigation scheme economic performance, based on O&M time and cost savings identified in post-completion surveys.

Key issues for the future include (i) the need for improved environmental management on irrigation schemes, and (ii) defining systems to extend participatory irrigation management (PIM). The irrigation schemes’ main environmental problem is the use of canals as a convenient rubbish disposal system. This is particularly severe where canals pass through villages without alternative disposal options. Regular rubbish removal by irrigation companies encourages villagers to continue to dispose of their rubbish in the canal. The Song Chu Irrigation Company is aware of the problem and is seeking ways to address it.

Following a long assessment period, the Government is now moving to promote PIM. Ways need to be found to manage secondary or intercommune tertiary level canals as integrated hydraulic systems rather than on the current political (commune boundary) basis.

The main lesson that can be drawn from the project experience is the desirability of a holistic approach to irrigation scheme upgrading and development. This would assess the need for lower level irrigation and drainage system upgrading as well as headworks and main system work often financed by multilateral lending institutions. Thus, the approach should define lower-level requirements at the outset and outline a program to address the most critical constraints. This would allow irrigation scheme upgrading to proceed in an ordered and participatory manner, rather than the ad hoc, top-down approach dictated by the project design.

This study suggests that (i) rehabilitation of secondary structures should be completed by the irrigation management companies, (ii) guidelines for tertiary canal upgrading should be developed, (iii) systems should be defined to encourage ownership of irrigation assets by farmers/villagers and thus reduce theft of gates, and (iv) PIM on hydraulic boundaries should be extended to all canals.

Bruce Murray Director General Operations Evaluation Department

I. BACKGROUND

A. Rationale, Formulation, Purpose, and Outputs

1. Irrigation and flood protection infrastructure in northern Viet Nam was old and often dilapidated when the project was formulated in the early 1990s. The Hanoi dike and the two main irrigation schemes proposed for rehabilitation risked major structural failure, which would cause significant economic and social disruption and, for Hanoi dike, loss of life. Government policies at the time—including the major economic renovation program, doi moi, initiated between 1986 and 1989—supported increased agricultural production. The Asian Development Bank’s (ADB) 1993 interim operational strategy concentrated on four areas, including the rehabilitation and development of physical infrastructure, which became the main focus of the Project. 2. The Project’s objective was to rehabilitate 45 kilometers (km) of the Hanoi dike and two irrigation systems (Song Chu and North Nghe An) with an irrigated area of 80,000 hectares (ha) in North Central region. The Project’s purpose was not specified but, for the Hanoi dike, it was to avoid loss of life and mitigate economic loss in case of flooding caused by dike failure. For the Song Chu and North Nghe An irrigation schemes, project investment was intended to “sustain agricultural production and other economic activities of the population” (Report and Recommendation of the President [RRP] para. 28).1 It was expected that the Project would result in sustained paddy (unhusked rice) production of 440,000 tons (t) on 80,000 ha compared with a pre-project level of 370,000 t. Project objectives were not well defined, partly reflecting lack of detailed project preparation.2 Cost savings under the Project were applied to extending the Hanoi dike rehabilitation by 16 km, and rehabilitating four small to medium irrigation schemes damaged by severe floods in 1999 in Quang Binh and Quang Tri provinces. B. Cost, Financing, and Executing Arrangements

3. Project cost was budgeted at $96 million of which $31 million was for Hanoi dike civil works, the main project investment (Appendix 1, Table A1.1). The ADB loan of $76.5 million would cover foreign exchange costs of $38 million and part of local costs. In addition, grant-funded advisory technical assistance (ADTA) of $1.8 million was planned to strengthen irrigation operation and maintenance (O&M).3 The Project was executed by the Ministry of Water Resources, the predecessor of the Ministry of Agriculture and Rural Development (MARD), through its Central Project Office (CPO) established for the purpose, and three sub-project offices (SPOs) responsible for monitoring and construction supervision of the three main components. The loan was approved in October 1993 and became effective in March 1994. C. Completion and Self-Evaluation

4. The Project was completed in June 2001, 3 years behind schedule. A project completion report (PCR) was prepared by the Loan Consultants in November 2001, providing information drawn from the final benefit monitoring and evaluation (BME) report. The Project’s self

1 ADB. 1993. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and

Technical Assistance Grant to the Socialist Republic of Viet Nam for the Irrigation and Flood Protection Rehabilitation Project. Manila

2 The Project was prepared without a project preparation technical assistance (PPTA) on the assumption that the Executing Agency (EA) was ready to undertake the Project.

3 ADB. 1993. Technical Assistance to the Socialist Republic of Viet Nam for Operation and Maintenance Strengthening. Manila. (TA 1968-VIE, for $1.8 million, approved on 26 October 1993).

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assessment was conducted by Mekong Department in September 2003 and the ADB PCR was published in July 2004. The PCR concluded that the Hanoi dike subproject was highly successful, whereas the irrigation subprojects were less successful due to the partial approach to rehabilitation adopted. The PCR was comprehensive and analytical, Overall, the Project was rated partly successful. D. OED Evaluation

5. This project performance audit report (PPAR) presents the findings of an operations evaluation mission (OEM) that visited Viet Nam April–May 2005. It is based on a review of the PCR, Report and Recommendation of the President, BME reports, project records, discussions with farmers and farmers’ leaders, as well as discussions with implementing agencies,, ADB staff, and relevant government agencies. The PPAR assesses the Project's efficiency and effectiveness in achieving its objectives and generating sustainable benefits. This report incorporates comments received from reviewers on an earlier draft.

II. PLANNING AND IMPLEMENTATION PERFORMANCE

A. Formulation and Design 6. Formulation was based on French consultants’ studies of the irrigation schemes, followed by local engineers’ feasibility studies. Preliminary work on the Hanoi dike was undertaken by Australian consultants in 1992 and early 1993. The irrigation subprojects focused on restoring damaged infrastructure to its original design operating performance. The engineering assessments were considered adequate for design. The loan project was designed by a 10-person, 3-week appraisal mission in March 1993. The lack of a project preparatory technical assistance (PPTA) may have limited a holistic design approach. As stated in PCR (para. 77), the largely engineering approach was partly due to the perceived need to complete the subprojects quickly and failed to address key constraints facing irrigators. The lack of a PPTA reflected MARD’s belief in the urgency of rehabilitation combined with ADB’s wish to be the first multilateral agency to commence a project in Viet Nam following the resumption of lending. 7. Engineering design was mainly undertaken by Hydraulic Engineering Consultants, apart from the Bai Thuong Diversion and design of treatment for the Hanoi dike foundation, which were undertaken by international consultants. In other areas, technical design was generally straightforward, since it focused on rehabilitating existing infrastructure. In some cases, innovative solutions were developed, such as the bypass tunnel in the North Nghe An main canal, which improved maintainability and provided increased irrigation water supply.4 A significant design issue was the failure to develop access roads along the canals, preventing vehicle access to many sections of primary and secondary canals. Design of the Hanoi dike was sound, and has led to a significantly stronger dike with less encroachment than before the Project. However, the relief well component5 was poorly planned, as design failed to allow for a permanent water discharge solution. Inadequate provision was made for the access needed for relief well monitoring. A discussion of subproject design, construction and O&M is in Appendix 2.

4 However, once the new canal had been built, it was found that the original French tunnel was in reasonable

condition, and probably could have been operated for many years with minor work. This highlights the problem of inadequate study prior to project approval.

5 Pressure relief wells, designed to reduce under-dike pressure and prevent sand boils and piping.

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B. Cost and Scheduling 8. Actual project cost was $87.5 million, $8.1 million less than the appraisal estimate (Appendix 1, Table A1.1). Of the loan amount of $76.5 million, potential savings of $15.9 million were identified in 1999, which were used to extend the Hanoi dike rehabilitation from km 86 to km 101 ($9 million) and conduct emergency repairs to irrigation systems damaged by floods in 19996 in Quang Binh and Quang Tri provinces ($6 million). North Nghe An main canal lining was extended from the planned 6 km to 22 km and substantial work was undertaken on the Bau Ru sluice and associated drainage works. A follow-on technical assistance (TA) project for O&M development was provided in 1997 to help apply ADTA results.7 Cost savings were due to (i) overestimation of costs at appraisal; (ii) devaluation of the dong, which reduced the dollar equivalent of local costs; and (iii) overestimation of contingencies and service charges. Cost savings were mainly in the areas of materials ($7.7 million) and administration ($0.8 million). Land acquisition costs were nearly $5 million compared with the $1.1 million appraisal estimate, due to greater than anticipated resettlement needs relating to the Hanoi dike. An opportunity to apply loan savings ($7.1 million) to extend rehabilitation of main and secondary canals was not approved because some MARD staff believed lower level canal upgrading was local authorities’ responsibility and should not be funded from multilateral agency loans. 9. The Project was completed in June 2001, 3 years later than expected. Loan closing was delayed until April 2003 to enable the executing agency (EA) to liquidate advances to the imprest account. Delays were initially caused by unfamiliarity with ADB procedures of the new CPO and three SPOs. Other delays were caused by (i) the short period available each year for construction, due to the need to avoid disruption to cropping patterns; (ii) lengthy procedures for land acquisition, resettlement, and compensation; (iii) flooding in 1999 also caused construction delays; and (iv) lack of a resettlement plan for Hanoi dike. Land acquisition and resettlement were complicated where canals ran through communes and villages. This prevented construction of adequate access roads along the Song Chu main canal and secondary canals on both schemes. C. Consultants’ Performance, Procurement, and Construction 10. Most of the international consultants performed well under the loan and TAs. However, one international loan consultant proved to be too inexperienced to make much contribution to the Project. One local consultant was criticized by the implementing agency in relation to supervision of the pressure relief well contracts. However, the consultant’s performance was adequate, as the problem was mainly due to contractors’ lack of capacity to meet technical requirements for tubewell construction and development. CPO reports that its relationship with consultants was generally positive. 11. Most contractors performed satisfactorily. However, several contractors for construction of Hanoi dike relief wells lacked the necessary experience and, as a result, many wells were ineffective. Only half the contractors met targets for under-dike pressure relief—4 out of 10 contracts achieved less than 30% efficiency in terms of drawdown in upstream monitoring wells (Appendix 1, Table A1.3). The problem appears to have resulted mainly from ineffective development of the wells but it may be possible to further develop some wells. The relief wells

6 The 1,600 ha Rao Nam system in Quang Binh province and the Bau Nhum, Khe May, and Nam Thach Han

systems in Quang Tri province with a total area of 17,000 ha. 7 ADB. 1997. Small-Scale Technical Assistance to the Socialist Republic of Viet Nam for the Operation and Mainten-

ance Development in the Irrigation Sector. Manila. (TA 2869-VIE, for $150,000, approved on 16 September 1997.)

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were handed over by 401 Company/SPO to the Hanoi Sub-Department of Dyke Management in June 2005. 12. For the irrigation schemes, the short period for implementing the headworks and canal lining (with around 60 days of empty canals each year) limited the work that could be accomplished and delayed project completion. Given this tight annual time constraint, the appraisal design was highly ambitious and, overall, both supervisors and contractors performed well. Importation of equipment and materials by the contractor for Bai Thuong weir was complicated and time-consuming, leading to about 6 months delay. Technical problems were experienced with the flow control gate designed to channel water through the silt-flushing gate at the Do Luong Weir (the diversion structure on the Ma River for the North Nghe An scheme). D. Organization and Management 13. The Project was the first ADB project implemented by Viet Nam and Ministry of Water Resources/MARD since the resumption of lending. The concept of establishing a CPO had merit, as it should have promoted expertise development, inter-project support, continuity, and lesson transfer. However, in practice, CPO had an engineering focus and limited resources. Difficulties arose with the interposition of CPO between the SPOs and MARD—to whom they had traditionally reported—resulting in lack of clarity in reporting and responsibility. The irrigation schemes are managed by their irrigation management companies (IMCs), fully funded by irrigation service fees. The IMCs remain traditional top-down government institutions, although they have increased their consultative aspect through regular meetings with farmer organizations. At the field level, management is through irrigation enterprises (Song Chu) and clusters (North Nghe An). All farmers interviewed by OEM considered irrigation service to be good or moderate, compared with 53% before the Project (Appendix 3). However, further improvement in water management is required to reduce operational and conveyance losses, and improve service to the tail-end of canals and irrigation schemes. The planned transfer of at least tertiary canal management to water users organizations (WUOs) under current MARD policies should have a positive impact. 14. Hanoi dike management is the responsibility of Hanoi city and Ha Tay province people’s committees. Management and O&M are generally satisfactory in Hanoi city but Ha Tay has fewer resources and is not managing the dike to a high standard. The provinces are making major commitments to improve the dike from their own, national and development assistance resources. The operation of dike management clusters—with offices every kilometer along the dike, constructed under the Project—appears to be effective in both dry and flood seasons. 15. Limited technology transfer occurred under the Project. The main new technology related to the Hanoi dike relief wells, which had not been used previously in Viet Nam. The system is one of the largest in the world. While Vietnamese engineers are now familiar with the technology, it has not yet been used elsewhere in the country. Other new techniques introduced under the Project include concrete road construction on the dike crest, the use of gabions (rock-filled wire cages) for dike protection, and devolution of responsibility for resettlement to local government. The planned use of roller compacted concrete in the Bai Thuong weir was new in Viet Nam but was not used in the end by the contractor who preferred conventional concreting techniques. This was unfortunate since roller compacted concrete is cheaper and quicker to lay. 16. BME was reasonably comprehensive, with surveys conducted in 1995, 1997, 1998, and a final report in late 2001. The reports provide substantial information on the Project and its

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performance. BME closely followed design and met ADB requirements. However, a number of criticisms can be made:

(i) BME reports only considered performance within the irrigation schemes—measuring “before and after” rather than the “with and without” project performance required for economic assessment. Benchmarking against control/non-project areas was not attempted.

(ii) BME should provide valuable information to project management as well as assist in project evaluation. However, reports were not translated into Vietnamese and were thus of little use to management.

(iii) There was limited monitoring of the Hanoi dike subproject, restricting the potential to reassess the impact of rehabilitation at completion or postevaluation.

(iv) There has been little ongoing recording of information on the dike or irrigation systems.

III. ACHIEVEMENT OF PROJECT PURPOSES

A. Operational Performance

1. Hanoi Dike 17. Since the start of the main Hanoi dike works, there have been two significant floods in the Red River: 1996 (12.34 meter [m]) and 2001 (12.01 m). These floods were lower than the 1:150–250 year flood8 in 1971, which reached 14.13 m at the Long Bien bridge with a flow of 38,700 cubic meters (m3) per second at Son Tay, upstream of Hanoi. This flood caused problems in the Duong River (which exits the Red River just north of Hanoi) and extensive flooding in the midsections of the Day and Duong/Thai Binh river systems. However, no flood since 1945 has caused significant problems for Hanoi and “failures” reported by the RRP (para. 33) appear to refer to problems such as sand boils or bank slips, rather than breaches of the dike. No floods have tested the dike since rehabilitation. Most sand boils have been cured, though problems remain in some areas and continuous monitoring is required in flood seasons. 18. The completion of the 9.5 billion m3 Hoa Binh reservoir upstream of Hanoi in 1989 has reduced the potential flood height by an estimated 1.2–1.4 m. However, this has been partly offset by urban development in the floodplain, which has reduced its impact to around 0.6 m. The dam has also reduced silt load in the Red River system, which causes accelerated erosion in some areas, thus increasing the value of project protection works. Son La dam (under construction) with storage of 27 billion m3 will further reduce flood risk. 19. Hanoi dike O&M is the responsibility of the Hanoi and Ha Tay Departments of Dike Management and Flood Control (DDMFC). Total O&M costs—including salaries for the 151 km of dike managed by Hanoi DDMFC including 37 km of Red River right bank dike rehabilitated by the Project—were reported at about D10 billion per year. Capital construction costs are around dong (D) 60 billion per year. Ha Tay Dike Management Department reports that 140 dragons (steel gabion cages) were stolen from Xam Thuy and An Canh revetments, causing concern for revetment stability. To date, Ha Tay province has not provided a maintenance budget for the Hanoi dike.

8 A flood level likely to be reached with a return interval of between 150 and 250 years.

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20. The Hanoi dike has now become a major thoroughfare between Thang Long Bridge in the north and Vinh Tuy in the south.9 The Project made a major contribution to the development of this road, through sealing the gravel surface and widening the road by several meters by replacing the earth top dike with a masonry wall. Removal of buildings, construction of interior and exterior access roads on the berm, and reshaping of the dike profile improved the dike’s appearance as well as security. However, development has occurred over much of the lower dike, to within 5 m of the access road on the berm shoulder. This reduces the risk of toe erosion and wave impacts, but limits maintenance access and may prevent identification and correction of problems such as termite damage.

2. Irrigation Schemes 21. Both irrigation schemes were rehabilitated as planned. The Song Chu scheme extends to around 42,000 ha irrigated out of a gross command area of 70,000 ha.10 The scheme reconstructed its diversion weir, main canal, primary (north and south) canals, and generally 1–2 km at the head of secondary canals serving over 500 ha. Minor secondary and tertiary canals and the drainage system were not upgraded. In 2001, BME reported 68% fully irrigated and 32% partly irrigated—drought-affected gravity irrigation and pumped irrigation from drainage channels and watercourses. The rainfed cropping area within the irrigation scheme was reduced from 7% of the irrigable area to zero. By 2004, the fully irrigated proportion had reached 75%, according to the Song Chu Irrigation Company (SCIC). In 2001, around 70% of the tertiary system had been upgraded through concrete lining. 22. North Nghe An’s irrigable area is currently 29,500 ha. North Nghe An Irrigation Company (NNAIC) classifies 19,744 ha as fully irrigated—an increase from the final BME report estimate of 18,763 ha in 2001. A rehabilitation program similar to the Song Chu scheme was undertaken in North Nghe An, with a greater proportion by length (60%) of major canals upgraded—in part because there are fewer canals serving over 500 ha. While the Project did not undertake tertiary canal upgrading, the province and NNAIC have made a major effort to help communes upgrade their tertiary canals. NNAIC estimates that around 90% of tertiary canals have been upgraded, compared with 60% in 2001. This has facilitated improved water management. However there is now a significant disconnect between the rehabilitated parts of the main system and the tertiary system, as many of the smaller secondaries and unrehabilitated parts of major secondaries are in poor condition. 23. All rehabilitated structures are performing approximately as expected. However, operational performance of the two schemes is less than anticipated at appraisal due to (i) partial upgrading of each system, and (ii) adoption of continuous irrigation in many areas for much of the year. In each scheme, the irrigation company and communes operate a complex network of pumping stations, mainly electric powered. Despite the significant electricity subsidy,11 the cost of owning and operating pumping stations is substantial and adds around D400,000/ha/year to farmers’ irrigation costs. Irrigation companies are trying to extend rehabilitation of their canal networks and communes are expanding the lined tertiary network, which should make it possible 9 An Overseas Economic Cooperation Fund design for the Urban Infrastructure Development Project (1998) indicates

that the dike road should become a major connector between Thang Long bridge and the new Thanh Tri bridge (under construction) on Ring Road 3. Total cost of the five subprojects was estimated at $56 million.

10 PCR and BME estimated irrigable area at 50,933 ha. In practice, the area controlled by SCIC is now around 42,000 ha, due to the exclusion of 3,000 ha which has passed on to local authorities, and significant loss of irrigation land to urban development in the project area.

11 Electricity for irrigation pumping is charged at an average of D600 per kilowatt-hour (kWh) day rate (0500–1700), D950/kWh peak (1700–2200), and D240/kWh off-peak (2200–0500). Other economic sectors and domestic sectors pay D860, D1,430, and D480 for day, peak and off-peak electricity, suggesting a “subsidy” of 30%–50%.

7

to at least maintain and probably improve the schemes’ operational performance over time. There has been little deterioration in the four years since most construction was completed. 24. Crop yields have increased rapidly over the project period (Figure 1) by an average of 5% per year. Spring paddy yields now exceed 6 t/ha, up from around 4 t/ha in 1994. Summer paddy production has reached almost 5 t/ha and maize between 3 t/ha (North Nghe An) and 4.7 t/ha (Song Chu). Crop yields are generally higher in Song Chu than North Nghe An. The Project has contributed to these impressive yield gains, among other factors, including improved land security, improved varieties, and input availability (Appendix 4). 25. OEM confirmed the PCR’s conclusions on the emergency flood rehabilitation subprojects: (i) 60% increase in cropping but high cost of pump operation on Roa Nan; (ii) doubled cropping intensity but low construction quality and significant drainage constraints on Bau Nhum; (iii) high investment cost ($4,000/ha) and use of funds for office building construction on Khe May; and (iv) doubled cropping intensity on Nam Thach Han, although works did not relate to flood damage repair.

Figure 1: Trends in Crop Yields in Project Districts (1994–2004)

SC = Song Chu, NNA = North Nghe An. Sou overnment Statistics Office. rce: G

0 1

2

3

4

5

6

7

94 95 96 97 98 99 00 01 02 03 04

Yiel

d (to

ns/h

a)

SC spring paddy NNA spring paddySC summer paddy NNA summer paddySC maize NNA maize

3. Technical Assistance

26. Three TAs were conducted fully or partly under the Project:

(i) TA 1968-VIE Operation and Maintenance Strengthening (footnote 3) supported effective and sustained water resources development and management, including the introduction of the concept of secondary (or inter-commune tertiary) canal and water management by farmer groups on a hydraulic boundary basis. Only one water user group (on canal B6/9 in Song Chu) was established under the TA but systems were developed which will assist in defining management systems based on hydraulic (rather than administrative) boundaries in future. The TA completion report considered the TA successful, though lack of replication limited its impact. OEM confirms this rating.

(ii) Small-scale TA 2869 Operation and Maintenance Development in the Irrigation Sector (footnote 7), successfully strengthened water users’ participation in irrigation management at four locations within the Song Chu and North Nghe An schemes. Assessment of the performance of farms operating within the water user groups12 suggests that farm performance was significantly improved by a combination of participatory irrigation management (PIM) and tertiary canal upgrading. Further discussion of PIM development in Viet Nam is in Appendix 3. OEM rates the TA successful.

12 Janaiah, A. 2004. Poverty Reduction Impact of Public Spending on Large-Scale Irrigation Systems in Viet Nam.

ADB: Hanoi.

8

(iii) TA 3064-VIE13 Strengthening of Resettlement Management Capacity in the Ministry of Agriculture and Rural Development strengthened CPO’s resettlement management capacity, for both the Project and Red River Delta Water Resources Sector Project.14 The TA made a significant contribution to the reasonably timely and effective resettlement of persons affected by the Hanoi dike rehabilitation. It also contributed to the establishment of effective resettlement systems within the Government and particularly to the decentralization of resettlement activities to the district level, with positive impacts on responsiveness and linkages. OEM rates the TA successful.

B. Performance of Operating Entities 27. Several entities are involved in operating project facilities. Hanoi dike is operated by the DDMFCs of the Hanoi and Ha Tay people’s committees. Dike inspection and discussions with the director of the departments suggested that management was generally adequate for dike needs. Maintenance and development budget is provided from central and provincial/city levels, which management considers adequate for O&M. BME considered that the dike was significantly better managed than prior to the Project, with a reduction in illegal activities. However, regulations and enforcement vary between districts. Problems continue with rapid urbanization of the floodplain—damage to the dike from sand mining trucks and poor access to several relief wells, some of which are now inside houses. Considerable work has been undertaken on the dike since project completion, including a large road development program that has made the dike into one of Hanoi’s main trunk routes with dual carriageway over much of its length. Overall, the dike is so important to Hanoi that continued management and operation at an adequate level is likely. 28. The main irrigation schemes are operated by IMCs. Most IMC revenues are from irrigation service fees (ISF) paid by irrigators and collected by the commune people’s committees or agricultural service cooperatives. The ISF concept is well accepted (though the level is resented by farmers) and collection is close to 100% in project communes. The annual ISF for full irrigation is around D1 million/ha/year ($70/ha)—a high level by international standards—and covers the cost of operating and maintaining the irrigation schemes, though with a limited maintenance budget. Both SCIC and NNAIC have been profitable for the last 3 years, though NNAIC’s margin was low in 2002/03 (Appendix 1, Table A1.4). O&M is adequate, although maintenance problems should be addressed more quickly. Both IMCs are improving system efficiency by continuing to rehabilitate secondary canal systems. C. Economic Reevaluation 29. Economic reevaluation was carried out following PCR methodology, which reflected appraisal methodology reasonably closely. For the Hanoi dike, PCR estimated the economic internal rate of return (EIRR) at 62.6%, compared with 53.5% at appraisal, with lower than expected construction costs more than compensating for a lower estimated cost of damage in the event of a dike breach. OEM considers that the likelihood of a breach would have been relatively low compared with appraisal estimates, even without dike rehabilitation. It is accepted by OEM that dike management was poor in the early 1990s, with uncontrolled encroachment 13 ADB. 1998. Technical Assistance to the Socialist Republic of Viet Nam for Strengthening of Resettlement

Management Capacity in the Ministry of Agriculture and Rural Development. Manila (TA-3064-VIE, for $150,000, approved on 4 September 1998).

14 ADB. 2002. Project Completion Report on the Red River Delta Water Resources Sector Project to the Socialist Republic of Viet Nam. Manila.

9

and poor maintenance. However, there have been no dike breaches in Hanoi since before 1945. Reduced flood height due to upstream dam construction has further reduced flood risk. However, benefits did not include allowance for reduced loss of life, which (based on a value of statistical life of around $190,000 in Hanoi) might have doubled benefits. Other factors that improve dike economic performance include its development as a major Hanoi thoroughfare, with significant transport benefits. The rapid increase in the value of housing, and commercial/industrial investment further increase damage avoided values. Overall, it is considered unlikely that an uncontrollable dike breach would have occurred at a flood height less than about 12 m, reducing EIRR to around 40%. If critical flood height is taken as 13 m, and benefits from life savings are added, subproject EIRR would be around 35%, the level assumed for overall project assessment. Economic performance is analyzed in Appendix 5.

30. The irrigation schemes increased the fully irrigated area, though by less than appraisal estimates. Allocation of O&M cost savings and labor cost savings due to improved irrigation efficiency resulted in an increase in EIRR for Song Chu to 12.9% (PCR 6.4%), despite the lower irrigated area based on SCIC data. EIRR is estimated at 11.4% for the North Nghe An subproject, compared to 8.4% at PCR. D. Sustainability 31. A number of factors are promoting or restraining sustainability of the subproject outcomes. The main factors supporting sustainability include (i) ongoing improvements to the Hanoi City section of the Hanoi dike (such as new revetments and roadworks) and generally satisfactory maintenance of structures apart from the relief wells; (ii) high ISF levels sufficient to maintain the irrigation schemes at an adequate level; (iii) MARD is committed to introducing participatory management in all irrigation schemes; (iv) moderate to strong performance by most cooperatives and WUOs leading to an adequate level of tertiary and field system maintenance on most canals; (v) ongoing canal and ditch stabilization program with a farmer contribution of 60%—an estimated 90% of the tertiary canals on North Nghe An and 60% on Song Chu have been concrete lined under this program; and (vi) commitment of provincial and district agriculture departments, commune leaders, and farmers to increase agricultural productivity, supported by a strong extension system. However, several factors are limiting sustainability: (i) limited maintenance of Ha Tay sections of the dike, continued encroachment, theft of dragons, and use of the dike for storing materials and other functions; (ii) rapid development in the Red River floodplain, leading to increased flood heights; (iii) theft of tertiary sluice gates in both irrigation schemes, preventing regulated water flow; and (iv) lack of ownership of the schemes demonstrated by many farmers and local residents, leading to misuse of irrigation infrastructure.

IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS

A. Socioeconomic and Poverty Reduction Impacts 32. The direct socioeconomic benefits of the Hanoi dike rehabilitation are threefold: (i) increased sense of security and well-being derived from a sound dike system, (ii) stimulation of investment due to improved flood security, and (iii) transport benefits resulting from concreted dike road systems. The main impacts of the irrigation systems are increased water supply at the headworks and distribution through secondary canals. This has allowed a significant increase in the areas fully irrigated, though less than anticipated at appraisal. The increased use of full gravity irrigation has reduced pumping costs, particularly in terms of labor needed to raise water into the field canals or onto the paddies. Based on work undertaken in a recent World Bank/ADB study (footnote 12), this amounted to up to 28% of family labor inputs for with-project schemes

10

with full tertiary canal rehabilitation. The effect was due to a combination of canal upgrading and participatory management, which improved water flow to the canal tails. Women are often responsible for manual water lifting. The Project, supported by the tertiary canal upgrading program, has greatly reduced the time required for this task, releasing time for other income-earning, household or leisure activities. Benefits have been highlighted by the absence of many men who leave their villages to undertake off-farm work in the irrigation season, returning for harvest. Aspects relating to household income and poverty reduction under the Project are discussed in Appendix 3. 33. Hanoi dike rehabilitation had little direct impact on poverty reduction, given Hanoi’s relative affluence. However, many rural workers visit Hanoi on a seasonal or long-term basis for construction or other jobs and they have benefited from the economic activity induced by greater security from flooding following dike rehabilitation. While Viet Nam’s lowland irrigation areas are not among the poorest, poverty levels on the six PIM pilot areas exceeded 30% in the mid-1990s, but have now fallen to an average of 5% in Song Chu and 10% in North Nghe An. 34. The Hanoi dike component required substantial resettlement, involving 1,616 households affected, 307 households relocated, and compensation of D25.6 billion. Resettlement was assisted by TA 3064-VIE Strengthening of Resettlement Management Capacity (footnote 13) and was generally completed satisfactorily, despite frequent long delays in relocating resettlers and addressing grievances. Some cases are pending settlement in the Thuong Cat area north of Thanh Long bridge. In this area, owners of houses built on the main dike have yet to be relocated, since they are not satisfied with the compensation offered. Resettlement issues were discussed in detail in Appendix 8 of the PCR, which concluded that the activity was mainly completed satisfactorily despite problems such as the lack of a resettlement action plan at project inception, which delayed implementation. Resettlers interviewed by OEM were satisfied with the program, while one resident who lived just outside the resettled area, expressed regret at not having been resettled. B. Environmental Impact 35. Overall, the environmental impact of the Project has been neutral. Activities focused on upgrading existing structures and few significant new works were constructed. The irrigation systems were restored to approximately their design diversion volumes, and irrigation methods were not changed significantly. Water is consequently wasted (though in many cases it is reused downstream or pumped from drainage channels), less water is available for river flow, while the tail-end canals and areas are undersupplied by gravity, requiring expensive pumping by cooperatives or irrigation companies. Despite the relative inefficiency of watering, no particular downstream issues were encountered, such as salinization or changes to the coastal or estuarine environments. New or replacement irrigation structures were constructed from concrete, and were less aesthetically attractive than the French masonry structures. 36. The key environmental problem on the irrigation schemes is the use of Song Chu’s canals as a convenient rubbish disposal system. This is particularly severe where canals pass through villages. Where no alternative disposal options exist, it is perhaps not surprising that villagers use an apparently simple disposal option, since rubbish either sinks or is carried downstream to the next village, commune, or district, thus removing part of the problem from view. The problem is much less significant in North Nghe An.

37. The Hanoi dike rehabilitation cleaned up the dike substantially. It is now an attractive, well-maintained structure. Encroachment onto the dike and its berms has been largely

11

eliminated, though the building setback is 5 m from the access road on top of the berm—both inside and outside—rather than from the dike toe. Current setback is inadequate, but would be difficult or impossible to change at this stage. While dike rehabilitation was neutral to positive in environmental impact, the environment is a key factor in the dike’s performance and long-term stability—likely flood levels, siltation rates in Red River, and the level of construction that occurs in the floodplain. C. Impact on Institutions and Policy 38. The Project and associated TAs’ impact on institutions and policy has been significant, but less than anticipated. However, the contributions to resettlement policy made by TA 3064 (Strengthening of Resettlement Management Capacity footnote 13) and the Project were notable. The irrigation management TAs, though successful within their pilot areas, did not result in the adoption of PIM on other canals. However, 2004/05 has seen a rapid increase in the level of PIM activity and it is now planned that all provinces will introduce PIM at the secondary canal level of large schemes by around 2010. CPO has become the implementing agency for MARD’s larger projects and implemented the Project effectively. However, it continues to have an engineering bias, and lacks capacity in system management, use of consultants, and sociocultural and economic assessment. The Project failed to enhance CPO’s capacity in these areas, which would have helped it respond more effectively to financing agency agendas. MARD has recently confirmed CPO’s role in managing foreign assistance funded water resources projects. However, the provinces are expected to implement future ADB irrigation projects, with CPO focusing on major procurement.

V. OVERALL ASSESSMENT

A. Relevance 39. The Project is assessed as relevant.15 The Hanoi Dike rehabilitation component is classified as relevant, since people’s safety, particularly in a major city such as Hanoi, must be paramount. The technical solution for the Hanoi dike rehabilitation has become a model for dike systems on many other rivers. Hanoi dike road has become a key component of the Hanoi transport network. The Project contributed to this, but did not adequately plan for road needs, with almost all the road length rebuilt or likely to be rebuilt in the near future, resulting in wasted resources. Rehabilitation of the two core irrigation subprojects was relevant at the time of design, according to the Government’s Third Five-Year Plan (1991–1995), which emphasized expansion of irrigated agricultural production. Rehabilitation of water resources and flood protection infrastructure was supported by the World Bank’s 1996 Water Resources Sector Review, though specific schemes are not identified and by ADB’s 1993 interim operational strategy. However, relevance at the time was reduced by the focus on main system works, without formally addressing constraints to irrigation and drainage in the lower sections of the schemes. 40. By completion in 2001, the Project remained relevant to national economic goals such as the maintenance of rapid Gross Domestic Product growth. The irrigation schemes were also relevant to ADB’s geographic concentration on the central region. North central coast is Viet Nam’s poorest coastal region, with high rural poverty ratios (Appendix 6, Table A6.1) and is falling further behind other regions, according to ADB’s Country Strategy and Program Update 2005–2006. Overall, the Project is rated as relevant although it did not directly address key

15 Using a four category system of highly relevant, relevant, partly relevant, or irrelevant.

12

constraints to efficient water distribution and failed to meet desired gains in the fully irrigated area.

B. Efficacy 41. The Project is assessed as efficacious.16 In general, the Project achieved its purpose. The Hanoi dike rehabilitation increased the city’s security, and is likely to prevent dike breaches with consequent damage and loss of life, in almost all flood conditions. The relief wells have not been entirely effective, with only half achieving their goal of reducing pressure under the dike. However, most sand boils that used to occur during floods have been cured. Although PCR considered MARD’s resources to be limited, Hanoi and Ha Tay people’s committees are responsible for dike O&M. They are continuing to upgrade the dike with their own and central government resources and are considered to be able to manage the dike effectively—particularly through the dike clusters that manage and monitor each kilometer of dike, based in offices built under the Project. 42. The purpose of the irrigation subprojects was to provide reliable and increased irrigation water to the two schemes, “resulting in sustained paddy production of 440,000 t annually” (RRP para. 28) In practice, paddy production increased to 730,000 t (according to irrigation company data) or by an average of 3.8% per year, compared with 1.2% per year outside the scheme in the same districts. Interviews with 12 commune people’s committees indicated that (i) the proportion of gravity irrigation in 2004 had risen to 80% compared with 55% in 1996, (ii) the time required to take water in SCIC had declined by 38%, and (iii) water could be supplied to 89% of canal tails compared with 60% in 1996. The proportion of manual irrigation has declined greatly, liberating time for other income- and non-income-generating activities. In 36 household interviews, 97% of respondents considered that improved irrigation water supply had led to increased household income. Other factors included improved seeds (56%), integrated new technologies (33%), and off-farm income (6%). According to the survey, household cash incomes in 2004 averaged D15 million in Song Chu and D13 million in North Nghe An, an average increase in real terms of 145% since before the Project. All respondents except one considered that their family income had increased. Average cash income per capita in 2004 was D3.1 million in Song Chu and D2.0 million in North Nghe An. While the lining of tertiary canals under local budget has also contributed to these gains, the subprojects are rated as efficacious against the rather vague purpose level objectives set during project formulation. 43. The irrigation extension subprojects were not inspected by OEM. However, discussion with the provincial Department of Agriculture in Quang Tri indicates that satisfactory performance has been achieved. For example, the rubber dam on the Nam Thach Han scheme has led to the provision of about 30 million m3 of irrigation water annually. As a result, the third crop rice area increased from 4,500 ha to 5,000 ha with stable yield while, prior to rehabilitation, an average of 1,250 ha had limited yields and up to 3,000 ha could be lost to drought. Annual maintenance cost was reported to have declined by about 35%. C. Efficiency 44. The Project is assessed as efficient.17 Given the context at the time of early implementation, implementation efficiency was satisfactory. All targets were met, despite delays due to lack of familiarity with ADB procedures. Although final loan closing was delayed by more

16 Using a four category system of highly efficacious, efficacious, less efficacious, or inefficacious. 17 Using a four category system of highly efficient, efficient, less efficient, or inefficient.

13

than 4 years, the overall delay for core subproject construction was only 18 months. For the irrigation schemes, the construction period was limited to 2 months a year to minimize disruption to cropping. Meeting this target was a major achievement, but prevented realization of canal rehabilitation targets in the early years. Economic efficiency, assessed through the subprojects’ EIRR, is rated efficient. EIRR for the Hanoi dike subproject is estimated at around 35%, based on updated appraisal estimates of damage, but assuming that no break in the dike would have occurred for floods of 12 m or less, and making allowance for reduction in deaths. Actual EIRR could be higher due to induced investment inside the dike and time saving benefits by Hanoi residents due to road upgrading. The core irrigation projects are estimated to average 11.8% EIRR, higher than at PCR, due to inclusion of labor savings resulting from the Project, reduced O&M costs, and post-project investment in tertiary canal upgrading (also taken into account in economic assessment). D. Sustainability 45. Overall, project sustainability is assessed as likely.18 The Hanoi dike subproject is likely to be sustainable as the dike is too important to Hanoi for the people’s committees to allow it to deteriorate and threaten its integrity. However, further support is needed to clean up and maintain the northern Ha Tay section, and care is required in the further development of the Red River floodplain. The irrigation schemes have some problems because of the loss of tertiary gates and underfunded maintenance on unrehabilitated secondary canals. However, IMCs, irrigation enterprises/clusters, agricultural cooperatives, irrigation groups, and farmers are trying to maintain and develop their irrigation infrastructure—evidenced by the ongoing rehabilitation of secondary and tertiary canals. The likely sustainability rating will be underpinned through the introduction of PIM, and engendering ownership among farmers and residents, thus reducing the problem of destruction of irrigation assets. E. Institutional Development and Other Impacts 46. Overall institutional, socioeconomic, and environmental impacts are considered to have been moderate.19 The Project’s institutional impact has been limited, due to its emphasis on urgent physical rehabilitation. It supported the establishment of CPO, which, despite making a significant contribution to project implementation, still has limited capacity and capability in the non-engineering aspects of irrigation project design and implementation. In future, CPO’s role will change as implementation becomes more decentralized. The resettlement TA had positive institutional outcomes, in relation to resettlement approaches and decentralization of responsibility. The irrigation management TAs demonstrated that PIM could work, and lead to improved O&M and a significant rise in irrigation efficiency. To date, the system has not been widely replicated, though this may change in the future with MARD’s promotion of PIM. Many irrigation companies are preparing PIM action programs for 2006–2010 (Appendix 3). 47. Environmental impact has generally been neutral. While Song Chu’s rubbish disposal problem cannot be directly attributed to the Project, this is one aspect that requires management attention and new, innovative approaches. Initially, North Nghe An’s successful systems should be studied. Socioeconomic impact has been universally positive. While it is not possible to fully segregate the factors that have led to increasing crop yields, it is clear that farmers consider the improved availability and reliability of irrigation water to be one of the key factors. One aspect of particular note has been the increase in the extent of gravity irrigation (though less than

18 Using a four category system of most likely, likely, less likely, or unlikely. 19 Using a four category system of substantial, significant, moderate, or negligible.

14

planned), which has reduced irrigation labor inputs and released time for other activities. Increasingly, irrigated cropping is seen as a source of subsistence, with cash earned through livestock, fish farming, handicrafts, small business, or off-farm work. F. Overall Project Rating 48. The Project is rated as successful based on the assessments in paras. 41 to 49.20

G. Assessment of ADB and Borrower Performance 49. ADB’s performance is assessed as satisfactory.21 However, some deficiencies are noted: (i) lack of response to EA’s request for capacity building assistance to apply the systems required by ADB, (ii) failure to allow loan savings to be spent on extending the upgrading of the irrigation systems,22 and (iii) limited pre-investment assessment of the 1999 flood-damaged irrigation scheme rehabilitation. 50. Performance by government agencies at all levels is assessed as satisfactory. CPO and SPO performance in relation to tendering and construction supervision was generally adequate. The relief wells were an exception, with inappropriate prequalification of some contractors, and inadequate supervision of construction and well development under some contracts, leading to ineffective well operation. The EA’s complex and time-consuming review and approval procedures exacerbated implementation delays. CPO’s capacity was strengthened under the Project in a number of areas (e.g., resettlement), which has benefited other projects. However, the Project’s lessons have yet to be adopted in areas such as taking a holistic approach to irrigation scheme development and involving farmers in scheme design, construction, and operation. Nonetheless, MARD’s promotion of PIM since 2004 is a positive outcome, largely attributable to the Project and subsequent project-related activities such as the PIM workshops held in 2004. Some problems were experienced in the relationships between MARD, CPO, and the SPOs. The responsibilities of MARD and CPO were unclear, with SPOs often reporting directly to MARD, leading to coordination problems.

VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS

A. Key Issues for the Future

1. Environmental Management on Irrigation Schemes

51. Environmental management on the Song Chu scheme is poor, in relation to the use of canals for waste disposal. SCIC’s current policy of identifying key locations, removing rubbish from the canal, and disposing of the rubbish to landfill—using their own resources or on contract—is not an appropriate long-term solution. The removal of rubbish in this way encourages villagers to continue to use the canal as a dumping site. SCIC is aware of this issue and is seeking ways to address it. In practice, a multi-pronged approach is considered necessary, which might include:

20 Based on a four category system of highly successful, successful, partly successful, or unsuccessful. The PCR

rated the Project partly successful under the assessment of relevant, less efficacious, efficient, less likely sustainability, and moderate environmental, sociocultural, and other impacts.

21 Using a four category system of highly satisfactory, satisfactory, less than satisfactory, or unsatisfactory. 22 This decision may also have been influenced by the Ministry of Finance’s requirements to limit foreign currency

borrowings.

15

(i) working with Thanh Hoa province to create new well-designed landfill sites and a commune collection system;

(ii) promoting the establishment of a recycling industry (as in northern Nghe An province), possibly including plastic bag recycling/extruding/pelleting cooperatives and composting enterprises;

(iii) working with districts and communes to develop regulations prohibiting waste disposal in canals, and establishing a penalty system for such disposal;

(iv) conducting a public awareness campaign about the regulations and littering in general;

(v) introducing a bonus system (similar to the North Nghe An approach) within the SCIC system for irrigation enterprises and canal workers to work with their communities to keep canals clean;

(vi) introducing annual “clean up Song Chu” days with participation from schools and communities; and

(vii) establishing a well-publicized “clean village” competition with prizes for clean villages and canals.

52. A study could be undertaken or commissioned by SCIC in collaboration with Thanh Hoa province people’s committee to assess these and other options, and develop a 5-year program to eliminate rubbish from the Song Chu irrigation system. While North Nghe An still considers that it has a rubbish problem, it is much less than Song Chu’s. Thus, a useful beginning could be evaluation of North Nghe An’s program and analysis of its relevance to Song Chu. Other aspects of pollution which need to be addressed are (i) use of canals and canal banks by livestock; (ii) cleaning of vehicles in areas that drain into canals; and (iii) the poorly maintained dredging unit in the North Nghe An main canal, which is releasing diesel and oil into the irrigation system. The Song Chu north primary canal needs to be maintained at a particularly high level of hygiene as it supplies around 70% of Thanh Hoa City’s water.

2. Participatory Irrigation Management

53. Following a long assessment period, dating from Decision 126/1998 of the Minister of Agriculture and Rural Development, the Government is now moving to promote PIM. Based on their experience under the Project, both SCIC and NNAIC now support PIM. The key issue now is to define how to implement PIM. The main benefits of PIM include (i) improved maintenance responsibility, (ii) improved water management and distribution, and (iii) reduced IMC management costs. The problems facing its introduction at the secondary or inter-commune tertiary level relate to the need to manage each canal as an integrated hydraulic system. This will require the establishment of WUOs from several communes and agricultural service cooperatives, resulting in some loss of power and control by the communes and cooperatives and a need to share ISFs with another organization. Since the farmers own the cooperatives, the problem should not be insuperable, but a major education and awareness raising campaign will be needed. These demarcation problems would also be overcome if farmers owned the entire scheme, and it is desirable that such a solution is attempted. Under this option, the farmers would own and direct the irrigation company, which would subcontract secondary canal O&M to WUOs. PIM will need to be carefully managed to avoid capture by more articulate groups and decision making that is overly influenced by groups with limited legitimacy. It requires mechanisms to facilitate active involvement of stakeholders, including women. A TA planned to promote PIM under the Second Red River Basin Sector Project23 will provide an opportunity to 23 ADB. 1998. Technical Assistance to the Socialist Republic of Viet Nam for the Second Red River Basin Water

Resources Sector Project. Manila. (TA 3050-VIE, for $600,000, approved on 22 July 1998.)

16

analyze gender roles and develop structures and operating protocols that maximize equity and deepen the involvement of women in irrigation management.

3. Canal Upgrading Program

54. The canal upgrading program achieved on both schemes subsequent to the Project has been impressive, particularly on North Nghe An. The program should be continued and extended to the non-rehabilitated parts of secondary canals, since there is currently a disconnect between upgraded sections and the new concrete-lined tertiary canal network. Drainage systems need to be assessed and, where necessary, upgraded. System upgrading is a necessary component of successful PIM introduction. Ways must be found to apply part of the ISF to secondary and drainage system upgrading, as well as the tertiary system, and to apply the 40% subsidy available under the government’s canal and ditch stabilization program. 55. Most tertiary canal upgrading has involved concrete lining, which is perceived as having several benefits by irrigators. However, while concrete lining is beneficial in sandy soils, a well-constructed and maintained earth canal can be equally efficient in suitable soils. Moreover, concreting is expensive and should thus be applied to canals or canal sections where it is most beneficial, not used as a panacea. MARD could initially undertake a study of the costs and benefits of lined and compacted earth canals, and develop a set of criteria and guidelines to help communes and systems define the optimal development approach for their tertiary and secondary canal upgrading programs. A comparison of positive and negative features of concrete and earth canals is in Appendix 2, section E. B. Lessons Identified

56. The main lesson that can be drawn from project experience is the desirability of taking a holistic approach to irrigation scheme upgrading and development. This lesson is similar to that observed by the Red River Delta Water Resources Sector Project PCR (footnote 14) and is being applied in ongoing ADB and World Bank irrigation projects. Such an approach would assess the need for lower level irrigation and drainage system upgrading as well as the headworks and main system work often financed by multilateral lending institutions. Thus, the approach should define lower level requirements at the outset and outline a program to address the most critical constraints. This would allow irrigation scheme upgrading to proceed in an ordered and participatory manner, rather than the ad hoc and top-down approach dictated by the project design. Other lessons include:

(i) Adequate setting and collecting of ISFs provides a major contribution to effective scheme operation, maintenance, and development.

(ii) A firm approach must be taken from the start in relation to canal damage, illegal use, and canal rubbish disposal—perhaps by establishing contracts with participating communes, developing commune regulations, and establishing appropriate incentive systems.

(iii) BME should provide useful data to irrigation system management.24 This requires the evaluation system to be defined in consultation with potential data users, and reports to be translated and made widely available. This should make evaluation outputs more useful to local stakeholders and increase the prospects for the evaluation to continue after the end of the Project.

24 ADB no longer uses BME for the reasons outlined in this study. Its successor, the project performance management

system, is expected to be much more integrated into management decision-making.

17

(iv) Secondary data can provide useful information for evaluation, particularly to facilitate comparison between project investments and control areas. Viet Nam’s system for collecting and processing rural statistics is now reliable and evaluation should maximize the use of such data. This could reduce the need for survey data collection and improve the coverage and statistical reliability of evaluation outputs.

(v) Schemes should be mapped adequately. System maps were not readily available in Song Chu or North Nghe An. Maps are an essential part of project planning and management, and should be available readily in the IMCs, irrigation enterprises, and clusters. Projects now have the capacity to develop sophisticated mapping systems to allow geographic information system development and maps to be prepared at the range of scales required by management.

(vi) Project-related documents should be stored permanently in an accessible location. This has been difficult, given the limited storage space available. However, cheap data storage now means that all records can be stored permanently in on-site systems, and backed up off-site.

(vii) Construction of assets such as relief wells must be accompanied by adequate and enforceable land use planning to ensure long-term access for O&M.

C. Follow-Up Actions 57. A number of issues raised invite follow-up action by the Government to promote the further achievement of project benefits and their sustainability. Suggested actions were discussed and agreed in principle during OEM. Suggested Action Institutions

ResponsibleSuggested

Timing

Monitoring

A. Complete rehabilitation of secondary structures. SCIC/NNAIC by 2010 MARD/DWR/ ADB

(MKAE/VRM)

B. Prepare and distribute guidelines for tertiary canal upgrading. MARD end 2007 ADB (MKAE/VRM)

C. Define systems to encourage ownership of irrigation assets by farmers/villagers, and thus reduce theft of gates. Develop design for theft-resistant gate.

SCIC end 2006 MARD/ADB (MKAE/VRM)

D. Extend PIM on hydraulic boundaries to all canals. SCIC/NNAIC by 2010 MARD/DWR/ ADB

(MKAE/VRM)ADB = Asian Development Bank, DWR = Department of Water Resources, MARD = Ministry of Agriculture and Rural Development, MKAE = Agriculture, Environment and Natural Resources Division of the Asian Development Bank’s Mekong Department, NNAIC = North Nghe An Irrigation Company, PIM = Participatory Irrigation Management, SCIC = Song Chu Irrigation Company, VRM = Asian Development Bank Viet Nam Resident Mission.

Appendix 1 18

PROJECT-RELATED DATA AND STATISTICS

Table A1.1: Cost Breakdown by Project Component ($ million)

Cost Appraisal Estimate Actual Civil Works 68.2 66.1 Materials 13.9 6.2 Equipment 1.1 1.0 Survey, Investigation, and Design 1.7 3.6 Consultant Services 3.1 3.0 Land Acquisition 1.1 4.8 Administration 2.2 1.4 Tax and Duties 1.7 — Service Charge 2.6 1.3 Total 95.6 87.4

— not available. Source: ADB PCR.

Table A1.2: Actual Cost Breakdown by Project Component

(D billion)

1994 1995 1996 1997 1998 1999 2000 2001 Total

A. Hanoi Dyke 1. Foreign Civil Works 3.7 2.7 2.2 11.1 6.9 18.9 25.0 11.7 82.2 Material/Equipment 0.6 0.3 0.8 7.7 0.5 9.8 Survey/Design 0.6 0.2 0.2 0.5 0.2 0.4 2.1 Subtotal (A1) 4.3 3.2 2.7 12.1 14.6 19.9 25.2 12.2 94.22. Local Civil Works 7.2 7.5 7.4 26.8 21.3 55.5 62.8 33.0 221.6 Material/equipment 2.2 0.4 14.9 17.5 Survey/Design 0.7 1.9 0.8 1.9 1.4 0.3 0.5 7.6 Incremental Operating 0.3 0.2 0.4 0.3 0.3 0.4 2.0 Land Acquisition 1.1 10.1 13.3 23.7 7.9 56.1 Other 0.1 0.1 1.7 2.4 2.2 6.5 Subtotal (A2) 10.1 7.5 11.3 37.9 51.9 82.7 65.7 44.0 311.2 B. Song Chu 1. Foreign Civil Works 2.1 1.3 7.1 8.4 16.3 11.9 6.0 2.1 55.2 Material 1.0 0.5 2.4 2.3 1.8 7.9 Equipment 0.3 0.7 0.0 1.0 2.0 Survey/Design 0.2 0.5 0.0 0.2 0.1 0.1 0.1 1.2 Subtotal (B1) 3.7 2.4 10.0 8.4 18.7 13.8 6.1 3.1 66.22. Local Civil Works 4.2 2.7 17.5 22.8 40.3 35.7 18.7 6.5 148.3 Material 1.9 0.9 4.6 4.4 3.5 15.2 Survey/Design 0.3 0.9 3.4 0.3 1.2 1.0 0.2 0.1 7.5 Incremental Operating 0.2 0.3 0.2 0.3 0.4 0.4 1.7 Land Acquisition 1.1 0.1 0.4 0.4 0.0 0.1 2.1 Other 0.9 0.6 0.8 0.4 0.4 0.3 3.5 Subtotal (B2) 6.5 4.5 27.8 24.1 47.3 41.4 19.7 7.0 178.3 C. North Nghe An 1. Foreign Civil Works 1.8 0.4 4.2 7.1 10.7 13.4 9.0 1.0 47.6 Material 0.1 0.0 0.2 Equipment 0.3 0.7 0.0 1.0 2.0 Survey/Design 0.2 0.1 0.0 0.6 0.1 0.4 0.0 0.0 1.4 Subtotal (C1) 2.4 1.1 4.3 7.8 10.8 13.7 9.1 2.0 51.22. Local Civil Works 3.5 3.4 11.8 16.1 30.4 33.2 26.0 4.0 128.5 Material 0.3 0.0 0.3 Survey/Design 0.3 0.6 2.2 1.2 1.9 2.1 0.8 0.3 9.4 Incremental Operating 0.0 0.3 0.1 0.2 0.1 0.1 0.1 1.0 Land Acquisition 0.1 0.3 1.1 0.5 0.3 0.1 2.4 Subtotal (C2) 3.8 4.1 14.4 17.9 33.7 35.9 27.2 4.6 141.6

Appendix 1

19

1994 1995 1996 1997 1998 1999 2000 2001 Total D. Quang Tri Quang Binh 1. Foreign Civil Works 38.2 13.8 52.0 Material 9.0 1.5 10.4 Equipment 0.4 1.4 1.8 Survey/Design 1.4 0.4 1.8 Subtotal (D1) 49.0 17.1 66.02. Local Civil Works 98.8 41.1 139.9 Material 17.4 2.9 20.3 Survey/Design 5.7 2.0 7.7 Incremental Operating 0.8 0.7 1.5 Subtotal (D2) 122.7 46.6 169.3

E. CPO 1. Foreign Equipment 0.4 1.1 0.4 0.2 0.4 2.6 Survey/Design 0.4 0.1 0.0 0.2 0.7 Consulting Services 3.8 8.9 5.1 5.3 2.9 0.7 3.8 30.6 Service Charge 0.2 0.7 1.1 2.5 4.5 5.8 3.6 18.2 Subtotal (E1) 0.4 5.5 10.0 6.5 7.8 7.5 6.5 8.0 52.22. Local Survey/Design 0.5 0.5 0.1 0.1 0.2 1.4 Consulting Services 0.7 1.6 0.9 0.9 0.5 0.1 0.7 5.4 Incremental Operating 0.3 0.3 0.1 0.1 0.2 0.3 1.3 Subtotal (E2) 1.5 2.3 1.0 1.0 0.9 0.5 0.9 8.1

F. Total Costs 1. Foreign Civil Works 7.7 4.3 13.6 26.6 33.9 44.2 78.2 28.7 237.1 Material 1.0 0.5 2.4 0.1 9.9 1.8 9.0 1.5 26.1 Equipment 1.1 3.0 0.8 1.0 0.5 0.4 3.8 10.6 Survey/Design 1.1 0.5 0.7 0.8 0.3 1.1 1.8 1.0 7.3 Service Charge 0.2 0.7 1.1 2.5 4.5 5.8 3.6 18.2 Consulting Services 3.8 8.9 5.1 5.3 2.9 0.7 3.8 30.6 Subtotal (F1) 10.8 12.2 27.0 34.8 51.9 54.9 95.9 42.4 329.92. Local Civil works 14.9 13.5 36.8 65.7 92.0 124.4 206.3 84.6 638.2 Material/Equipment 4.1 0.9 4.6 0.3 19.3 3.5 17.4 2.9 52.9 Equipment 0.4 0.4 Survey/Design 1.3 2.1 8.0 2.3 5.0 4.7 7.1 3.1 33.6 Incremental Operating 0.2 0.0 0.8 0.6 1.0 0.9 1.5 1.2 6.2 Land Acquisition 2.3 10.5 14.7 24.6 0.3 8.1 60.6 Consulting Services 0.7 1.6 0.9 0.9 0.5 0.1 0.7 5.4 Other 0.3 1.3 0.7 1.0 2.3 3.1 2.5 11.2 Subtotal (F2) 20 17 56 81 134 161 236 103 808

Total 31 30 83 116 186 216 332 145 1,138CPO = Central Project Office, D = Vietnamese Dong. Source: ADB PCR files.

Appendix 1 20

Table A1.3: Relief Well Contracts and Well Effectiveness

Contract Number and Length

Number of Wells

Built Effective Percent Effective

1. From km 48+000 to km 52.5 31 31 7 23 2. From km 72+500 to km 73+500 36 36 26 723. From km 81+500 to km 82+500 25 25 25 1004. From km 48+000 to km 53+000 24 24 12 505. From km 72+000 to km 72+500 15 15 5 336. From km 74+000 to km 75+000 39 39 11 287. From km 80+500 to km 82+000 30 30 14 478. At km 44 17 9 0 09. At km 82 7 7 9 100km = kilometer. Source: BME Final Report.

Table A1.4: Revenue and Costs of Song Chu and North Nghe An Irrigation Companies

(D million)

1996 1998 1999 2000 2001 2002 2003 2004 A. Fee Collection 1. SCIC 17,388 18,551 19,594 20,803 29,640 33,910 35,634

2. NNAIC 10,324 11,463 12,432 13,645 12,214 12,357 12,152B. O&M costs

1. SCIC 11,340 11,314 10,594 12,999 13,675 13,352 15,412

2. NNAIC 9,920 5,666 6,586 7,352 6,831 7,627 7,506

B. Other costs

1. SCIC 14,824 18,680 18,440

2. NNAIC 4,292 4,488 4,458

Margin

3. SCIC 1,141 1,878 1,782

4. NNAIC 1,091 242 188D = Vietnamese Dong, NNAIC = North Nghe An Irrigation Company, O&M = operation and maintenance, SCIC = Song Chu Irrigation Company. Source: SCIC and NNAIC.

Appendix 2

21

IRRIGATION AND DIKE INFRASTRUCTURE

A. Hanoi Dike

1. Rehabilitation of 45 kilometers (km) of Hanoi main dike (km 40 to km 85), plus an extension of 16 km (km 85 to km 101). 2. All dike rehabilitation items under the Project were generally completed as designed.

(i) Quality of rehabilitation was generally acceptable. (ii) All revetments have been covered by several meters of deposited silt, which are

now vegetated. Revetments have provided substantial protection, as they were constructed in erosion prone areas. However, to some degree, the erosion problem has moved downstream, with major protection works completed and ongoing using local funds.

(iii) Since completion in June 2001, the Red River water level at Hanoi has not reached a critical level and the practical effectiveness of the dike cannot be evaluated. However, operations evaluation mission (OEM) surveys and interviews with implementation, construction, and management offices, including Central Project Office, subproject office (SPO) 401, Department of Dike Management and Flood Control (DDMFC) of the Ministry of Agriculture and Rural Development, Hanoi DDFMC as well as interviews with people living close to the dike lead a number of conclusions, outlined below.

1. Design

3. A number of issues were identified in relation to dike rehabilitation design:

(i) Two access roads were constructed in the berm elevation on each side of the dike, which have increased dike stability, improved access, and facilitated maintenance. The roads had a negative impact on management of encroachment for housing construction on the dike because authorities have permitted building construction to within 5 meters (m) of the roads. The berm top is thus considered to be the dike foot, and many houses have been built on the berm slope.

(ii) The 2 m high retaining wall, constructed at km 89 to km 90 (extension section), is too high to assure the dike’s stability at high flood levels.

(iii) No provision was made for bank protection revetments to be used for loading and unloading boats. Many concrete blocks have been broken to make boat attachments.

(iv) Provision for water drainage is inadequate along the dike top and slopes. (v) Many relief wells are located in the gardens of people living close to the dike. In

recent years, many houses have been constructed in these areas. Some wells are now inside houses, which can clog or break the drainage line of the wells and make monitoring and operation of the wells more difficult.

(vi) The SPO reports that low relief well efficiency was due to failure to adopt appropriate technical criteria for different soil conditions. However, it is also likely that many wells were poorly constructed or developed.

(vii) The relief well system has not been handed over by construction management (SPO401) to operation management (Hanoi DDMFC). A 3-day (28 March–1 April 2005) training course on operation and maintenance (O&M) of relief wells and under-dike water pressure testing systems was completed by 12 staff from Hanoi

Appendix 2 22

DDMFC. The trainers were experienced specialists from Hanoi Water Resources University. Handover of the 205 wells is expected in August 2005.

2. Operation and Maintenance 4. The departments of dike management and transportation (for the road system) are responsible for dike maintenance. Annual O&M funds for 151 km of Hanoi dike include dong (D) 2 billion from central government, D7 billion–D8 billion from Hanoi People’s Committee, and a limited amount from districts. O&M cost for the 61 km section rehabilitated by the Project cannot be identified. However, maintenance costs have fallen substantially due to the Project, with less need for public labor and reduced cash cost for dike repair. Issues include:

(i) encroachment onto the dike for storage and processing of wood and bamboo as well as for cultivation or storage of construction materials, which is evident in some parts of Dan Phuong district (Ha Tay province), Tu Liem district (Hanoi), and Hanoi city;

(ii) many concrete drainage ditches of dike are damaged; (iii) most drainage ditches on the dike slopes are clogged by soil and grass; (iv) monitoring and maintenance of relief wells is difficult because many wells are

located in private gardens; (v) cracks between old and newly constructed parts of asphalt pavement on the crest

of the dike at Tu Lien quarter (Tay Ho district); (vi) severe cracking between retaining wall and yard upstream of Thuy Phuong bank

protection at the Pagoda, due to inadequate pressure relief/drainage; and (vii) breakdown of dike areas at road crossings where heavy trucks access sand

loading areas. B. Song Chu Irrigation System

5. Song Chu Irrigation System is one of the biggest systems in Viet Nam, located to the south of the Ma river basin in Thanh Hoa province. The system comprises:

(i) provision of irrigation water to 50,000 hectares (ha); (ii) domestic and industrial water supply with discharge of 1.25 cubic meters per

second (m3/s); (iii) electricity generation with installed capacity of 960 kilowatts—Ban Thach

hydropower plant; and (iv) water transportation from Bai Thuong to Thanh Hoa city.

1. Main Structures

6. Construction commenced on 28 October 1994 and was completed on 31 December 2000, including the following main components:

Headworks: (i) Bai Thuong weir: Clean concrete covered reinforced concrete (ii) Sand flushing sluice: Rectangular cross-section and reinforced concrete (iii) Intake gate and navigation lock: Canal system: (i) Main canal: 19.3 km (ii) North canal of 54 km (45 km upgraded), South canal of 37 km (30 km upgraded)

Appendix 2

23

(iii) Secondary canals: 61 canals totaling 230 km were resectioned under the Project and 122 km were lined, mainly in the head of these canals. Some secondary canals have been lined using provincial funds.

(iv) Tertiary canals: total length 320 km not upgraded under the Project. (v) 307 structures on north and south canals and 960 on secondary canals

rehabilitated or replaced under the Project.

2. Design 7. Design was generally satisfactory for headworks, main canal, north and south canals, and heads of the secondary canals. All components are in good condition, and generally meet their design specifications.

(i) Some lengths of secondary canal were not lined, leading to higher maintenance needs, which have not been met—2.3 km of the main canal, 9.2 km of the north canal, 6.7 km of the south canal, and half the secondary canals are unlined.

(ii) Road access to canals and structures for operation, monitoring, and maintenance is limited—a 4 m wide road with gravel surface was planned for the main canal right bank, and 1.5 to 2.5 m roads for the north and south canals but construction was not completed. There is no road on either side of the main earth canal from km 0+500 to km 2+850. Inspection of the main, north, and south canals can only be undertaken by motorbike and access for staff and equipment for maintenance is limited.

(iii) Design was not planned to meet demands of the local community (such as aquaculture and domestic water supply).

(iv) No rubbish and waste removal system at regulated gates.

3. Construction 8. No serious faults have been identified during more than 4 years’ operation. Stone-facing wall protection on both sides of the weir is in good condition. However some problems are evident:

(i) Some small cracks appeared just after handover—from dam upstream to downstream (at dam top and 3 m from top in all seven gate piers) and at the top of the earth retaining wall. The cracks were repaired by enlarging them and injecting them with a bonding material. They have not deteriorated and the weir is stable.

(ii) Inadequate compaction of earth in many sections of canal banks, especially where sluices were installed on secondary and tertiary canals, is causing collapse and water leakage around the sluices.

(iii) Collapsed concrete facing plates in some parts of the canals (e.g., km 5 on main canal and 200 m upstream of Nghiem regulator on north canal).

(iv) Collapse of brick or stone walls of some secondary canals (e.g., secondary canal in Thieu Minh commune).

Appendix 2 24

4. Operation 9. A number of problems relating to O&M were identified during OEM site inspections:

Weir and Headworks (i) Automatic measurement of open and close height of gates has not worked since

2002. (ii) Automatic shutoff for gate overload has not worked since 2002. (iii) Automatic water level height recorder accuracy is considered inadequate by Song

Chu Irrigation Company (SCIC). Sensors were prone to damage and expensive to replace. System has not worked since 2004 due to sensor problems.

(iv) Navigation locks have not operated, since transport from Bai Thuong to Thanh Hoa is now mainly by road.

(v) Sand flushing has not been undertaken since the water level required for this procedure has not been reached since completion.

Canals (vi) Most structures on canals are in good condition, but many tertiary sluice gates

have been stolen (reportedly by people with drug problems) while others have been removed for safekeeping.

(vii) Automatic overload shutoff of the gates of Phong Lac regulated sluice was broken.

(viii) Freeflow offtake sluices exist on some secondary and many tertiary canals. (ix) Widespread illegal digging through the bank and installation of pipes to take water

from the canals for aquaculture or domestic needs. In Toan Thanh village (Thieu Toan commune), this caused a 20 m break on north canal in 2001. In village 5 (Xuan Khanh commune), the canal has been dug in many places to install pipes in eight aquaculture farms. In other cases, SCIC authorized the pipes and construction.

(x) Floating fish cages in some areas cause flow clogging and water contamination. (xi) Lack of gates in some small sluices that offtake water from large to smaller canals

and many small sluices on secondary and tertiary canals. SCIC said some gates have been removed for safekeeping but staff of clusters, districts, communes, and farmers said that steel parts of a lot of gates were stolen. The lack of gates prevents effective regulation of irrigation system.

(xii) Damage to canal banks by buffalos and cows grazing freely on canal banks and buffalo bathing.

(xiii) Water leakage on many parts of canals, especially secondary and tertiary canals.

5. Maintenance and Repair 10. The amount of earth used to maintain the system has declined significantly after rehabilitation (2000–2004) as shown in Table A2.1. The amount of concrete and stone used for repair has increased since the pre-project period (1992–1995). There is a need to:

(i) introduce methods for desilting canals that do not break concrete plates facing bank slopes.

(ii) form and compact the earth from dredging canals or transport it away from canal banks.

(iii) repair even small damage on a timely basis.

Appendix 2

25

Table A2.1: Maintenance and Repair of Song Chu System, Before and After Project

Earth Cutand Fill

Amountof Stone

Amount ofConcrete

Budget

(‘000 m3) (m3) (m3) (D billion) Before Project 1992 921 1,240 25 2.4 1993 1,080 1,760 70 2.8 1994 1,150 1,357 230 3.0 1995 971 2,400 450 2.9 After Project 2000 87 819 941 3.0 2001 233 455 748 2.5 2002 222 406 1,844 3.5 2003 214 65 1,103 3.9 2004 235 744 1,392 3.8

D = dong, m3 = cubic meter. Source: Song Chu Irrigation Company.

6. Rubbish and Water Contamination

11. Waste disposal in canals and water contamination are significant issues.

(i) Rubbish is found along the main, north, and south canals. (ii) Bathing and washing, as well as other forms of contamination (such as dead

animals), pollute many canals. (iii) Rubbish concentrates upstream of regulators. (iv) Secondary canals face severe rubbish and water contamination, particularly

where canals pass through villages. (v) Water quality for drinking water supply is low in Thanh Hoa city, requiring

substantial treatment at the water supply plant. C. North Nghe An Irrigation System

12. North Nghe An irrigation system covers 31,000 ha and supplies water for domestic use to Do Luong, Yen Thanh, Dien Chau, and Quynh Luu districts in Nghe An province. Its principal specifications are as follows:

(i) Irrigation coefficient: 0.70 liters per second per hectare (l/s/ha) (ii) Drainage coefficient: 4.7 l/s/ha (iii) System efficiency coefficient: 0.65 (iv) Headworks and main canal:

(a) Do Luong weir - length 316 m (b) Sediment discharge gate 21 m (c) Sand preventing (flow direction) gate 21 m (d) Regulated Mu Ba sluice at: km1 800 on main canal; design sluice

discharge 31.7 m3/s (e) Main canal headrace canal discharge: Design: 31.7 m3/s (maximum 37.7

m3/s) (f) Total length: 55.9 km. Lined 25 km

Appendix 2 26

(ii) Secondary and lower level canals: 98 canals, of which 9 were rehabilitated under the project as indicated in Table A2.2,

Table A2.2 Canals Rehabilitated Under the Project Canal Irrigated

Area (ha)

Total Length

(km)

LinedLength

(km)N2 4,300 20.0 2.0N8 3,210 15.0 8.6N13 2,500 14.1 7.6N14 550 5.0 2.2N1 1,020 5.2 2.0N18A 1,400 5.0 2.0N20 2,000 6.6 4.0N24 660 4.8 3.2N26 1,000 7.6 6.5 Total 16,640 83.3 38.1ha = hectare, km = kilometer. Source: North Nghe An Irrigation Company.

(iii) Tertiary: 329 canals, length: 392 km, not under the Project. In recent years these canals have been partially lined by local funds.

(iv) Sluices: 139, aqueducts: 16,

siphons: 31.

1. Design 13. The design is generally sound for headworks, main canal, tunnels, structures on the canal, and heads of the secondary canals.

a. Weir and headwork

(i) Sedimentation upstream of the weir on the Ca River is a major problem. The complex is now in normal operation but the massive sedimentation process upstream of the weir has not been solved. OEM observed a large island of river deposits in front of the main canal intake that threatens to obstruct water flow into the canal. Do Luong headwork station management said that sedimentation decreases 30–40% of discharge into the main canal. North Nghe An Irrigation Company (NNAIC) issues contracts to dredge 8,000 cubic meter (m3) of sediment in the headworks area every year. One dredging vessel works year-round in the head section of 1.8 km (between Mu Ba regulator and the offtake).

(ii) The sand flushing direction gate has not operated since its completion date in 1999, according to the head of Do Luong Station. River heights have reportedly been too low for effective gate operation. Operation and gate effectiveness will need to be assessed during the next major river flow.

(iii) The automatic water level height recording system is not working.

b. Canals

(i) The remaining 31 km of the main canal is unlined or lined on one slope only; almost the entire length of secondary canals is unlined; about 75–80% of on-farm canals have been lined supported by local budget.

(ii) Lack of continuous maintenance of road along the main canal. (iii) Many small offtake sluices of tertiary and on-farm canals were designed without

gates. Farmers close the canals by either using bags of earth, grass, or by filling with earth.

(iv) All structures on canals are in good condition. (v) Automatic height recording system is not working.

Appendix 2

27

2. Construction

14. The construction quality of all items (headwork, canals, and structures) is acceptable. No serious faults have occurred during more than 4 years’ operation. However there is evidence of:

(i) inadequate compaction of earth in many sections of canal bank, especially where sluices are installed on secondary and tertiary canals, causing collapse and water leakage around these sluices;

(ii) sliding at some places of inner and outer slopes of main canal and secondary canals; and

(iii) erosion in earth canal sections.

3. Operation 15. No problems have occurred during operation with headwork and regulators on the main and secondary canals. However, a number of problems are evident:

(i) Freeflow through sluices on some secondary and many tertiary canals. (ii) Illegal digging of banks and installation of pipes to take water from the canals for

aquaculture ponds still occurs in some secondary canals, although less than in the Song Chu system.

(iii) No gates on some offtakes from main canals to tertiary canals and on many small sluices on secondary and tertiary canals preventing effective regulation of irrigation. NNAIC reports that some gates are removed for safekeeping but staff of clusters, districts, communes, and farmers said that the steel parts of many gates were stolen,

(iv) Damage to canal banks by buffalos and cows grazing freely on canal banks and buffalo bathing.

(v) Water leakage on many parts of canals, especially secondary and tertiary canals. (vi) Encroachment on some canal banks by locals for cultivation. 4. Maintenance and Repair

16. The volume of sediment dredging has decreased by about 50% after rehabilitation—27,000 m3 in 2004, of which 8,000 m3 was from the headworks area. Before rehabilitation, the amount of dredge material for the whole system was approximately 50,000 m3 per year. Problems include:

(i) Many gates are missing and freeflow is common; (ii) There is a need to dump and compact the earth from dredging canals or transport

it away from canal banks; and (iii) Deterioration due to even small damages must be repaired. (iv) NNA has few rubbish problems. There is little rubbish on canal banks along most

canals (main, secondary, and smaller), even in sections passing through villages. (v) Water in the main and secondary canals is clean compared to Song Chu. (vi) NNAIC has worked well with district and commune authorities on keeping canals

clean. This experience needs to be built on, by Song Chu and other irrigation systems.

D. Conclusions and Recommendations 17. The main conclusions and recommendations arising from OEM’s visits to project facilities are summarized in Table A2.3 below:

Appendix 2 28

Table A2.3 Conclusions and Recommendations Relating to System O&M Conclusions and Recommendations

1. General (i) The three subprojects were completed and are used effectively. (ii) After 4 years’ operation, the main components of the systems are evaluated as acceptable. (iii) Project documents must be stored in a location accessible to all relevant stakeholders (central project office,

subproject offices and irrigation companies). (iv) During design and implementation of the irrigation systems, attention was paid only to the main items such as

headworks, main canals, and structures on main canals. Auxiliary items—important for long-term system operation such as management access roads, outer earth banks of the main canals, secondary canals, and structures on smaller canals—were not paid adequate attention or given sufficient investment.

(v) Investment is required to improve access and complete upgrading of secondary and tertiary canal systems, and the drainage network.

(vi) Local authorities should seek funding to finish all uncompleted items of these systems. (vii) Decentralization is required so that communes or water user organizations can take responsibility for managing

secondary canals according to hydraulic boundaries. Irrigation companies and other provincial agencies should help at the start—not only with organization but also with technical and management aspects—to promote the organizations’ survival and growth. Devolution of management responsibility must be real and not nominal.

(viii) Monitoring of the physical quality of all civil works and other aspects of these systems should be carried out regularly by specific staff, and the data analyzed and stored to support operation and management.

(ix) Even small system faults must be repaired quickly. (x) A provincial level awareness campaign is needed for people, including school children (in addition to current

regulations), on the care and protection of water resource works. 2. Irrigation System

(i) Eliminate or greatly reduce rubbish problems in Song Chu in cooperation with the PPC, DARD, DPCs, and Commune People’s Committees. NNAIC lessons and experience can be learned and applied.

(ii) Repair damaged offtakes. (iii) Move away from freeflow to regulated flow, initially by assessing canal capacities to accommodate higher water

volumes associated with regulated flow. (iv) Fix water leaks and landslides on all canals. (v) Define system for developing and managing private offtakes from canals (e.g., aquaculture and domestic use).

Define payment levels for construction and O&M. (vi) Eliminate gate theft in cooperation with commune and villages authorities. (vii) Solve problem of free grazing on canal banks. (viii) Solve the problem of encroachment of secondary canals for housing or cultivation (NNAIC) (ix) Estimate water demands for non-irrigation use of people living close to the canals to establish an adequate

response plan and guidelines. 3. Sustainable Development of the Irrigation Systems

(i) Improve decentralization and establish regulations appropriate to project villages and communes to (i) foster community ownership, and (ii) participate and contribute to the defense and O&M of the works. The farmers’ water user organization should become a social organization, with activities based on the enterprise law of state. Water supply contracts would be signed between this organization, the irrigation company, and users.

(ii) Mobilize resources (central, provincial, district, commune, village) as soon as possible to (a) rehabilitate all offtake sluices; (b) fix operational problems such as canal freeflow, leakage, and collapse of canal walls; and (c) improve on-farm systems and access roads and ensure the system can be controlled from the headwork to the gates of on-farm canals.

(iii) Establish a detailed defence solution for irrigation schemes, based on community participation. 4. Hanoi Dike

(i) Relief wells must be assessed and transferred to the operating agency (HDDMFC) as soon as possible. (ii) Land use rights and access to areas where wells are located must be resolved as soon as possible. (iii) Monitoring of the wells must be carried out regularly by specific staff and the data should be stored in a database

for operation and management. (iv) There must be cooperation between dike, road transport, and transport/tourism sectors on system operation and

protection, e.g., where tourist operators use revetments for landing. DPC = District Peoples Committees, DARD = Department of Agriculture and Rural Development, HDDMFC = Hanol Department of Dike Management and Flood Control, NNAIC = North Nghe An Irrigation Company, O&M = operations and maintenance, PPC = Provincial Peoples Committee.

Appendix 2

29

E. Pros and Cons of Concrete-Lined Irrigation Canals

18. Most tertiary canal upgrading has involved concrete lining, which irrigators perceive to have several benefits: (i) reduced conveyance losses, provided special designs are applied, generally requiring the use of geo-membranes (the concrete panel system currently in use does not reduce seepage losses significantly); (ii) improved irrigation water conveyance; and (iii) improved irrigation under certain conditions. While concrete lining has advantages in some soils, a well constructed and maintained earth canal can be equally efficient in suitable soils. Moreover, concreting is expensive and should be applied to canals or sections where it is most beneficial, and not used as a panacea. Table A2.4 summarizes some positive and negative aspects of earth and concrete lined canals. Key positive factors for each system are in bold.

Table A2.4: Summary of Main Features of Earth and Concrete-Lined Irrigation Canals

Factor Compacted Earth Concrete Design Relatively simple. May require detailed and higher cost survey. Construction Low cost, simple.

Adequate compaction required. Higher cost. May require contractor from outside village. Higher standard of compaction required. May be cheaper where there is a right-of-way issue, especially where land is expensive.

Damage Risk of piping and slumping. Should eliminate risk of piping and slumping. Maintenance Easy to maintain, reshape, and desilt

mechanically (if tractor available). Canal bed and banks/walls stabilized. Less maintenance required as long as well constructed. Desilting normally manual.

Need to cut vegetation periodically Voluntary labor often needed for cleaning

Less labor for cleaning Can almost eliminate need for voluntary labor

Water delivery

Can be slow, particularly if high weed growth present.

Fast to tail end sections due to reduced roughness and less filling time (in case of rotational supplies).

Higher proportion of silt deposited in canal, leading to increased desilting need.

Faster water speed promotes movement of sediment to paddies.

Water losses

High in sandy soils or if compaction inadequate.

Low if well constructed and maintained (but not for current designs). Reduced risk of waterlogging adjacent land.

Space requirement

Canal is wide, particularly compared with vertical-sided lined canal.

Space can be “liberated” by lining, particularly if vertical sided.

Elevation Elevation/water depth may be difficult to maintain, so high areas may require scoop lifting to water─high areas can be reached, even with earth canals.

Easier to design for higher elevation and maintain command levels. Need for scoop lifting should be reduced.

Access Easy tracks on dike embankment often trafficable by two-wheel tractors and bicycles.

Same as earth for V-section. Less easy with vertical walled canal.

Crossings for people, livestock, machinery

Easy for people, livestock, bicycles, and tractors to cross.

Bridge/culvert required for crossing. Canal can be damaged by machinery crossing. May be expensive, depending on elevation, compared with ground level.

Livestock Cause damage to canal. Water retention in canal can be beneficial for livestock watering.

Cannot easily cross vertical-walled canals.

Sources: OEM, Robert Hill. 2000. How Well Does Your Irrigation Canal Hold Water? Utah State University.

Appendix 3 30

SOCIOECONOMICS, POVERTY, AND PARTICIPATORY IRRIGATION MANAGEMENT A. Household Rapid Appraisal Survey

1. A rapid appraisal survey was conducted of 23 households in Song Chu (SC) and 13 in North Nghe An (NNA). While not a statistical sample, the results provided useful information on attitudes as well as data on costs and prices for economic analysis. Household (hh) size was smaller in SC than in NNA (total 5.1:7.0 persons/hh)1 and there were fewer adults in the household (2.2:2.7 adults/hh). Farm size on both schemes was similar (0.337:0.343 hectare [ha]). All farmers interviewed planted their entire area to paddy in both summer/autumn and winter/spring seasons. Maize was grown by (65%:31%) of farmers. Some farmers in the SC sample also grew sweet potatoes and sugar cane. 2. Participation in the Project (through payment of paddy for tertiary system upgrading) was (91%:77%). Paddy contribution to the Project averaged (170:0 kilograms per hectare per year [kg/ha/yr]) for an average of (4:N/A years). 3. Irrigation labor demand declined due to the Project (and tertiary canal lining). Pump/scoop irrigation before the Project was required on (29%:31% of the farm area), while the proportion declined to (7%:3%) after the Project. Irrigation reliability was assessed through the number of winter/spring irrigations missed (1.3:0.5). NNA was more reliable than SC with (48%:69%) receiving 100% of their water allocation. Irrigation fees to the irrigation management company were higher for SC than NNA (446:419 kg paddy/ha/yr), but slightly lower in relation to payment to the cooperative (74:79 kg/ha/yr). 4. Irrigation service was rated good by (64%:54% of farmers), an increase from (0%:8%) before the Project. No farmers rated irrigation service as poor after the Project, compared with (43%:54%) before. 5. All respondents (except one in NNA who did not respond) supported the concept of water user organizations or water user groups attached to the cooperative, suggesting considerable enthusiasm for increased involvement in irrigation management. Almost all respondents cited improved irrigation water management as their reason. B. Commune Rapid Appraisal Survey

6. In addition to the household survey, commune/cooperative leaderships were interviewed in six communes each in SC and NNA. Construction quality was rated good by (16%:66%) of communes and acceptable by the rest. 7. Pre-project, full gravity irrigation extended to (45%:43% of irrigated area). By 2004, these areas had increased to (79%:81%) or by an average of 82%. Time consumed for taking water by farmers had declined on SC from 65 to 41 hours per watering. NNA data was not available. In 1996, (44%:75% of canal tails) received water. By 2004, the proportion had rose to (83%:94%), an increase of (88%:25%), probably reflecting the shorter canals in NNA. For all communes combined, 33% had no problems with damaged structure while 67% had moderate problems. In relation to management capacity, 42% of communes considered that system planning and management was sound while a higher proportion (50%) considered that cooperatives managed water well. No commune assessed management capacity at any level as “bad”. All SC communes reported the garbage situation as bad compared with 33% of NNA communes. 1 Results are presented in brackets (SC:NNA units) in this Appendix, unless otherwise stated.

Appendix 3

31

C. Poverty

8. Household cash income in the SC and NNA household survey samples averaged (D15.4:12.9 million/hh). Per capita income showed more variation (D3.0:1.8 million/person) due to the greater household size in NNA. Upper quartile income averaged (D4.8:3.1 million/person/year) and lower quartile (D1.5 million:D1.1 million), suggesting a reasonably equitable distribution of income, particularly when subsistence income is taken into account. Expenditure on major assets since 1996 reflected these patterns (D55 million:D39 million), indicating that a lower proportion of household income was used for consumption in NNA. Motorbike ownership was (70%:54% of hh), representing a significant proportion of household assets for these households. 9. Almost all respondents indicated that their real income had increased since 1996 (100%:92% of sample). Estimated increase in real terms was (118%:176%), suggesting that NNA was catching up with SC. Respondents were asked to define the reasons for their increase in income. Those reporting improved irrigation first or equal first were (96%:100%), new seeds (48%:69%), integrated new technologies (43%:15%), and off-farm income (9%:0%). Irrigation and new seeds were thus dominant. The low relative importance of off-farm income was surprising though a further (17%:0%) of respondents rated it second or lower in importance. The commune survey indicated a higher level of off-farm work with (56:49 off-farm workers/100 hh). 10. In common with other communes in the project provinces, water users organizations (WUOs) in participatory irrigation management (PIM) communes have experienced a rapid decline in poverty over the past decade. Poverty in 1998 was (26%:N/A) as reported by commune leaders, declining to (20%:23%) in 2002, and (12%:11%) in 2004.

D. PIM in SC and NNA Irrigation Schemes

11. Four water users associations/cooperatives (WUA/C) were established under project technical assistance (TA): B8A and B6-9 (SC) and N4B and N6 (NNA). In parallel, a PIM model has been adopted by one agricultural cooperative in each scheme: Thieu Do ASC (SC) and Nam Thanh ASC (NNA). All six have been successful in improving irrigation management. However, the four WUA/Cs have not proved able to develop a firm operating basis, and only one has built up any assets. Two of the WUA/Cs and both ASCs are classified as “very active and efficient” while the remaining two WUA/Cs are active but at a low level.

Table A4.1: Poverty Levels in Participatory Irrigation Management (PIM) Communes (%)

WUA/C <1997 1998–2000 2002–2003 2004 Thanh Hoa B8A WUA >30.0 21.0 15.0 5.0 B6/9 WUC >30.0 7.0 5.0 4.5 Thieu Do Coop >30.0 14.0 12.0 na Nghe An N4/B WUC >30.0 22.0 16.0 11.0 N6 WUC >30.0 22.0 17.0 14.0 Nam Thanh Coop >30.0 20.0 15.0 3.7 na = not available, WUA = water users association, WUA/C = water users associations/cooperatives, WUC = water users cooperative. Source: Special Evaluation Study team survey updated by Operations Evaluation Mission 2005.

Appendix 3 32

E. Participatory Irrigation Management in Viet Nam

1. Background

12. Since the development of large irrigation schemes in Viet Nam under the French regime during the early to mid-20th century, irrigation schemes have been managed by government agencies, most recently the Irrigation Management Companies (IMCs). Since 1975, the concept of involving farmers in the planning, construction, management, operation, and maintenance of the schemes (PIM) has gained currency. 13. Two TA grants were awarded under the Project to help define the systems needed to introduce participation into irrigation management. The TAs were successful in introducing PIM systems into a small number of secondary and intercommune tertiary canals within the Song Chu and North Nghe An systems. Both IMCs supported the idea and introduced a further canal to the system using their own resources. 14. The Ministry of Agriculture and Rural Development (MARD) was an enthusiastic supporter of PIM, encouraged by the Asian Development Bank (ADB) and the World Bank. Following the second TA, the Minister of Agriculture and Rural Development circulated a document 1959/BNN-QLN (May 1998) on strengthening, consolidating, and renovating grass-roots irrigation management organizations. This emphasized that, to expand the pilot systems to other provinces and areas, provincial authorities should focus on establishing grassroots irrigation management models (cooperative, association) suited to the local situation, with a strengthened role for farmers in irrigation management. However, in practice, little happened, apart from the establishment of Viet Nam PIM Network (VNPIM), the local affiliate of the International Network on Participatory Irrigation Management, which helps expand PIM to new areas and schemes.

2. Current Status

15. A workshop on Participatory Irrigation Management—Pathways for Progress in Viet Nam was held in Ha Long City, Quang Ninh province from 30 March to 2 April 2004, supported by ADB, Danida, International Network on Participatory Irrigation Management, and World Bank. Following this workshop a number of documents have been produced and circulated, and meetings held (Table A4.2). 16. Following the activity over the past 12 months, appropriate national level structures and legislation is in place to support widespread adoption of PIM. Discussion between ADB’s operations evaluation mission and the management of the Song Chu Irrigation Company and North Nghe An Irrigation Company indicates that both organizations are keen to expand PIM to more of their schemes and possibly to the secondary canal level. Provided this change is adequately resourced, it will have the potential to improve water management and maintenance significantly. However, issues remain relating to management of hydraulic structures on hydraulic boundaries, rather than current political (commune) boundaries. This will require sharing of power and financial resources between the agricultural service cooperatives (which are commune-based) and the new WUOs, which may operate across two or more communes. Since the farmers will own both organizations, it should not be an insuperable problem, though care will be required to ensure that (i) resource allocation correctly reflects responsibilities, (ii) funds are not siphoned off for non-irrigation use, and (iii) conflict and competition between the cooperatives and WUOs are avoided.

Appendix 3

33

Table A4.2: List of PIM Documents Prepared by MARD

Document Content 10 November 1998 Resolution 06 by Political Bureau

Policies encouraging farmers’ participation in investment and irrigation system management.

8 December 1998 Decision 126/1998/BNN-TCCB

Establishing VNPIM.

4 April 2001 Ordinance on Exploitation and Protection of Hydraulic Works

Stipulating the form of WUOs.

18 March 2002 Resolution 15 by CPC

Applying improved technologies and water-saving technology in construction and management of irrigation and drainage systems, and development of WUOs and water management of farmers.

28 November 2003 Decree 143/ND-CP

Providing detail of the 2001 Ordinance, and specifying that provincial people’s committees would establish action plans to introduce PIM, set up regulations on decentralization of irrigation schemes, and plans for irrigation management transfer.

02 December 2004 Decision 100/QD-TL

Establishing VNPIM (including full-time and part-time membership).

20 December 2004 Circular 75/2004/TT-BNN

Guidelines on establishment, strengthening, and development of WUOs.

30 December 2004 Framework Strategy

Framework Strategy on development of PIM, including roadmap (draft prepared at Ha Long city regional workshop).

20 January 2005 Meeting on Framework Strategy on Development of PIM and circular on guidelines for establishment, strengthening, and development of WUOs.

CPC = Central Party Committee, PIM = participatory irrigation management, VNPIM = Viet Nam Participatory Irrigation Management Network, WUO = water user organization. Source: MARD. 17. In the medium term, it should be possible to define a mechanism where the entire system from the headworks/main system to the tertiary and farm canals is managed by the farmers, though a hierarchical system of WUOs at different levels. In effect, this would mean that farmer within the scheme would take over the IMC from the province. Other stakeholders (e.g., urban water supply organizations and industrial users) would also need to be represented to ensure that their interests are represented in system management. 18. MARD is currently working to produce the remaining policy and legal documents defined in the roadmap, and assist provinces and irrigation systems to promote PIM. A major recent development has been the establishment of a PIM unit supported by MARD at Hanoi Water Resources University, which will act as a consultancy unit to assist IMCs and provinces to define and introduce PIM systems.

Appendix 4 34

CROP AREA, PRODUCTION AND YIELD

1. Benefit monitoring and evaluation provided a wealth of information on the project area and its agricultural production. However, it approached data collection on a “before and after” rather than “with and without project” basis. Thus, while yields increased rapidly in the project communes, many factors contributed to this increase, notably (i) allocation of land rights to farmers, (ii) improved seed and fertilizer quality and availability, (iii) improved access to financial resources through the Viet Nam Bank for Agriculture and Bank for Social Policy, and (iv) improved water quantity and reliability. To attempt to isolate project from non-project factors, it is necessary to identify “control” areas, which should not have received major government investment during or after the project period. This is less easy to do in Thanh Hoa and Nghe An than in the Red River Delta schemes where many of the irrigation schemes coincided closely with district boundaries and were virtually identical to non-project districts (except investment in a new pumping station and main system under the projects).

2. Under the Song Chu (SC) and North Nghe An (NNA) schemes, the control districts are less obvious but adequate controls can be identified. A more accurate control system can be defined on the basis of commune yield data, although it separates communes within project districts that lie inside and outside the project command area.

3. As stated in ADB’s project completion report (para. 16), much of the increase predated the completion of project works and was also observed in non-project communes and districts.

4. A total of 10 districts in Thanh Hoa and 7 in Nghe An were analyzed for 1994–2004 (Thanh Hoa) and 2003 (Nghe An). In each case, three districts fully outside the project area were included, as follows:

Thanh Hoa Province Hau Loc North of SC, in South Ma irrigation scheme Hoang Hoa North of SC, in South Ma irrigation scheme Tinh Gia South of SC, no major project investment, also valuable as a

control for NNA scheme Nghe An Province Nghi Loc Coastal district partly in South Nghe An scheme Nam Dan Inland and adjacent to Nghi Loc, mainly in South Nghe An

scheme Hung Nguyen Inland of Nam Dan, mainly in South Nghe An scheme

5. While the South Ma scheme received World Bank financing to upgrade the main canal, this work was only completed in 2002, meaning that comparison for the earlier years at least is relevant. Tinh Gia lies between the SC and NNA schemes and appears to have received little large-scale irrigation investment over the project period. South Nghe An is mainly a pumped scheme and has had its pumping stations and some canals upgraded.

6. Overall, crop production in the two provinces has made great progress over the last 10 years. In Thanh Hoa, winter paddy yields increased by an average of 7.2% per year (yr) from 2.4 tons per hectare (t/ha) in 1994 to 4.5 t/ha in 2004—an increase of 89% over the period. Other changes for the total provinces are in Table A4.1 which highlights the rapid gains made over the period.

Appendix 4 35

Table A4.1 Yield Changes in Thanh Hoa and North Nghe An Project Districts

Yield 1994

Yield 2004 Increase

Rate of increase

(t/ha) (t/ha) (%) (%/yr) A. Thanh Hoa

1. TH spring paddy 4.6 6.5 41 4.2 2. TH summer paddy 2.6 5.0 90 7.5 3. TH maize 2.9 4.6 59 5.3 4. TH sweet potatoes 6.1 7.3 20 1.8 5. TH peanuts 0.8 1.9 129 6.5

B. North Nghe An 1. NNA spring paddy 3.9 6.3 60 4.9 2. NNA summer paddy 3.0 4.6 53 5.0 3. NNA maize 1.8 3.9 112 5.9 4. NNA sweet potatoes 6.1 7.2 19 3.5 5. NNA peanuts 0.8 2.1 156 6.9

ha = hectare, NNA = North Nghe Ann, t = ton, TH = Thanh Hoa, yr = year. Source: Government Statistics Office.

7. Average annual yields in project and non-project districts are summarized in Table A4.2:

Table A4.2: Crop Yield Trends in Thanh Hoa and Nghe An 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Trend A. Summer/Autumn Paddy

1. Thanh Hoa a. 7 project districts 2.6 3.3 1.8 3.4 3.4 4.1 3.3 4.3 4.7 4.8 5.0 7.5% b. 3 non-project districts 2.7 3.2 1.6 3.2 3.1 3.3 3.7 3.7 4.1 4.3 4.6 6.7%

2. Nghe An a. 4 project districts 3.0 3.0 2.4 3.5 2.9 3.5 3.7 3.6 4.2 4.1 4.6 4.7% b. 3 non-project districts 2.6 2.6 2.4 3.0 2.9 3.1 3.3 3.6 3.7 3.7 4.2 5.0%

B. Spring Paddy 1. Thanh Hoa

a. 7 project districts 4.6 4.4 4.4 5.3 5.1 5.4 5.8 5.9 6.2 6.3 6.5 4.2% b. 3 non-project districts 3.8 3.3 3.8 4.4 4.2 4.6 5.1 5.4 5.6 5.6 5.8 5.7%

2. Nghe An a. 4 project districts 3.9 4.3 4.3 4.8 4.9 5.2 5.7 5.8 6.0 6.0 6.3 5.2% b. 3 non-project districts 3.4 3.9 3.7 4.4 3.9 4.4 5.0 5.0 5.7 5.7 6.0 5.9%

C. Maize 1. Thanh Hoa

a 7 main project districts 2.9 2.6 3.2 3.4 3.6 3.8 3.5 4.0 4.2 4.5 4.6 5.3% b. 3 non-project districts 2.2 2.3 2.2 2.7 3.1 3.5 3.0 4.0 4.0 3.9 4.4 7.6%

2. Nghe An a. 4 project districts 1.8 2.3 2.4 2.2 2.6 2.5 2.0 3.1 2.9 3.3 3.9 5.0% b. 3 non-project districts 1.7 2.2 2.3 2.3 2.9 2.7 2.6 3.2 3.2 3.1 3.6 6.2%

D. Sweet Potatoes 1. Thanh Hoa

a. 7 main project districts 6.1 6.0 6.3 6.0 6.8 6.4 6.4 6.4 6.9 7.1 7.3 1.8% b. 3 non-project districts 5.0 5.1 6.0 5.2 6.6 5.6 6.6 6.8 7.1 6.9 6.4 3.2%

2. Nghe An a. 4 project districts 6.1 3.7 5.6 5.6 6.6 6.1 5.4 6.7 6.4 6.6 7.2 3.5% b. 3 non-project districts 3.8 3.0 4.9 4.4 5.3 5.6 5.1 5.6 5.5 5.6 5.7 4.8%

E. Peanuts 1. Thanh Hoa

a. 7 main project districts 0.8 1.2 1.3 1.2 1.6 1.4 1.7 1.7 1.5 1.8 1.9 6.5% b. 3 non-project districts 0.7 1.2 1.1 1.2 1.4 0.9 1.6 1.5 1.9 1.7 1.5 7.1%

2. Nghe An a. 4 project districts 0.8 1.3 1.2 1.3 1.4 1.1 1.4 1.5 1.9 1.6 2.1 6.9% b. 3 non-project districts 1.0 1.4 1.2 1.5 1.7 1.3 1.7 1.5 2.2 2.0 2.5 7.5%

Source: Government Statistics Office.

Appendix 4 36

8. The trends are shown in Figure A4.1

Figure A4.1 Yield Trends for Major Crops in Thanh Hoa and Nghe An

9. The main conclusions from the yield trends are explained below.

A. Winter Paddy (i) No significant change in area for project or non-project districts of Thanh Hoa. (ii) Significant decline in area in Nghe An, averaging 5.6% per yr in project districts,

about half of which was offset by yield increases.

Summer/Autumn Paddy Yields

0

1

2

3

4

5

6

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

tons

/ha

Thanh Hoa project

Thanh Hoa non-proj

Nghe An project

Nghe An non-proj

Spring Paddy Yields

7

6

5

0

1

2

3

4

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Thanh Hoa project

Thanh Hoa non-proj

Nghe An project

Nghe An non-proj

tons

/ha

Maize Yields

0

1

2

3

4

5

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

tons

/ha

Thanh Hoa project

Thanh Hoa non-proj

Nghe An project

Nghe An non-proj

Peanut Yields

0

1

1

2

2

3

3

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

tons

/ha

Thanh Hoa project

Thanh Hoa non-proj

Nghe An project

Nghe An non-proj

Sweet Potato Yields 876

tons

/ha

543

Thanh Hoa project

2 Thanh Hoa non-proj

1 Nghe An project

Nghe An non-proj02000 1994 1995 1996 1997 1998 1999 2001 2002 2003 2004

Appendix 4 37

(iii) Rapid yield gains in Thanh Hoa, with lower gains and a lower base in Nghe An. Thanh Hoa yields were 76% higher than Nghe An’s in 2003.

B. Spring Paddy

(i) Overall, there were few trends in spring paddy area in either province. All districts were within the +/- 1% per yr range except Thanh Hoa city in the SC scheme (+4.5% per yr) and Quynh Luu in North Nghe An (+2.2% per yr).

(ii) In aggregate, the seven project districts increased area by 1,240 ha (to 54,800 ha) over the period.

(iii) Total production of spring paddy increased rapidly, by an average of 5.3% per yr in Thanh Hoa and a remarkable 7.1% per yr in Nghe An, due to rapid yield gains in both provinces, but particularly Nghe An, where yields are now higher than Thanh Hoa, despite being significantly lower in 1994.

(iv) There were higher yields of spring/summer paddy in both provinces. C. Maize

(i) Maize production has increased rapidly in both provinces, with areas in both provinces doubling from 1994 to 2004. Some project districts have expanded from a low base to become substantial producers, including Quang Xuon in Thanh Hoa and Quynh Luu in Nghe An.

(ii) Rapid advances in maize yield, with increases close to or exceeding 100% over the period. Yields are about 300 kilograms/ha higher in Thanh Hoa than in Nghe An.

Appendix 5 38

ECONOMIC REEVALUATION

A. Introduction

1. Project economic performance was reestimated based on information contained in the Asian Development Bank’s (ADB) project completion report (PCR), the Government’s project completion report, and benefit monitoring and evaluation (BME) reports. The methodology used at PCR is applied, through updating the PCR spreadsheets, which followed appraisal methodology reasonably closely. B. Hanoi Dike

2. Benefits from Hanoi Dike rehabilitation result from a reduced risk of dike breaches and resulting flood damage. The appraisal report stated that:

“The Hanoi dike, a 45-km stretch along the right bank of the Red River, from Tien Tan in Ha Tay Province to Thanh Tri in Hanoi, provides critical protection against floods for this area. Since 1971, 76 failures have been reported in this section alone, including 50 cases of seepage and sand boils in the foundation and 21 cases of collapse and slips in the dike body. Nearly one-tenth of the Central Government's annual dike maintenance budget for the Red River delta is allocated to maintaining the Hanoi dike, which has less than 2 per cent of the delta's total dike length. The strenuous efforts of the Government and the people participating in repair and maintenance have prevented the Hanoi dike from failing in the recent past. However, changes in flood patterns and morphology have of late worsened the dike's inherent structural problems, making failure a distinct possibility. Based on available geotechnical information and past records of failures of the Hanoi dike, nine locations were identified as having serious risks: four were associated with riverbank erosion and five with weak and permeable foundations. It is estimated that when floodwaters exceed 10 m above mean sea level at Hanoi (once every 2.5 years), the dike has a 20 per cent probability of failure. If the water level exceeds 13 m (once in 59 years), the probability of dike failure is estimated to exceed 80 per cent.”

3. Table A5.1 includes the assumptions on which appraisal estimates are based:

Table A5.1: Without Project Estimated Frequency of Dike Breaches

Height Frequency Cumulative Conditional Probability of Breach Up to

Given Water Level (%)

Probability of Break in Any Year (%)

Expected Period Between Breaches

(years) (m) (years) Sect 1 Sect 2 Sect 3 Sect 1 Sect 2 Sect 3 Sect 1 Sect 2 Sect 3

5 1 3 0 0 6 1 5 3 0 7 1 8 7 0 8 1 9 13 10 9 1 12 17 22 2.9 4.1 5.3 35.0 25.0 19.0 10 3 20 24 42 8.0 7.2 12.6 13.0 14.0 8.0 11 6 39 43 60 8.6 9.5 13.2 12.0 11.0 8.0 12 16 63 64 74 7.3 7.4 8.6 14.0 13.0 12.0 13 59 82 82 86 3.9 3.9 4.0 26.0 26.0 25.0 14 143 99 96 94 0.9 1.0 0.9 111.0 104.0 106.0 15 286 100 100 100 0.4 0.4 0.4 286.0 286.0 286.0

Total 31.9 33.3 45.0 3.1 3.0 2.2 m = meter, Sect = Section, Sect 1 = Tien Tan km 40–59, Sect 2 = West Lake km 59–71, Sect 3 = Than Tri. Source: Project Preparation Consultants’ Report.

Appendix 5 39

4. For a maximum 10 meter (m) river “without project”, an average of one break every 8 years would be expected in Section 3. In total, one break every 3.1 years is expected (Section 1) and every 2.2 years (Section 3). These probabilities substantially overestimate the potential for breaches, given Hanoi’s flood history of Hanoi (Supplementary Appendix). 5. The probability of a breach in any section “with project” was estimated as shown in Table A5.2:

Table A5.2: With Project Estimated Frequency of Dike Breaches

Height Frequency Cumulative Conditional Probability Up to Given Water

Level (%)

Probability of Break in Any Year (%)

Expected Period Between Breaches

(years) (m) (year) Sect 1 Sect 2 Sect 3 Sect 1 Sect 2 Sect 3 Sect 1 Sect 2 Sect 3

5 1 0 0 0 6 1 0 0 0 7 1 0 0 0 8 1 0 0 0 9 1 0 0 2 0.4 0.4 0.4 278.0 278.0 278.0 10 3 2 2 5 1.4 1.4 1.4 74.0 74.0 74.0 11 6 3 3 9 2.0 2.0 2.0 51.0 51.0 51.0 12 16 5 5 12 1.6 1.6 1.6 62.0 62.0 62.0 13 59 6 6 14 1.1 1.1 1.1 89.0 89.0 89.0 14 143 6 6 14 0.5 0.5 0.5 208.0 208.0 208.0 15 286 7 7 14 0.4 0.4 0.4 286.0 286.0 286.0

Total 7.3 7.3 7.3 13.8 13.8 13.8 m = meter, Sect = Section, Sect 1 = Tien Tan km 40–59, Sect 2 = West Lake km 59–71, Sect 3 = Than Tri. Source: Appraisal Report files.

6. The probability of a breach has been reduced by a factor of 5, but still remains highly significant—around one breach every 14 years, an improbably high frequency. The anticipated reduction in potential for dike breaches was the main basis for the high economic benefits estimated by the appraisal report, with an economic internal return rate (EIRR) of 53%. 7. While the probability of breaching was discussed and agreed between the consultant and the Department of Dike Management and Flood Control, the likelihood of breaching at all flood levels—with and without the Project—was significantly overestimated, for a number of reasons:

(i) The appraisal report states that 76 failures were reported from 1971 to 1992, but these were minor failures resulting from sand boils or piping, rather than dike breaches. Thus, no dike breach failures were experienced during the 1:150 flood in 1971 or subsequently. The last break in the Hanoi dike was in 1915.

(ii) Construction of Hoa Binh dam has resulted in a reduction in flood peaks of about 1.3 m, partly offset by urban development in the floodplain. The reduction in silt load can also increase scouring at the dike toe, though there has been substantial silt deposition on the revetments constructed under the Project.

(iii) Upstream or left bank levees would breach before the Hanoi dike overtops, due to the higher design criteria applied to Hanoi Dike, with an additional 40 centimeters of freeboard.

(iv) Extension of spillways from 100 m to 300 m will help handle extreme floods—4 out of 69 have been constructed to date. The spillways allow for controlled flooding of sacrifice areas, giving rural populations time to protect their belongings and lives, rather than face the high water velocities of an uncontrolled breach. Total cost of the spillway program is estimated at around $10 million.

Appendix 5 40

(v) The relatively poor condition of other dikes in the delta makes them more vulnerable to breach than the Hanoi dike. A survey undertaken under the project design found only 13% of northern dikes in good condition. A proposed survey under the 2nd Red River Basin Sector Project1 (ADB) should provide an updated figure.

(vi) Hanoi can apply immense resources to protect the dike in a major flood. The 1971 flood was at the height of the war with the United States, so maintenance had been neglected and few resources were available to fight any breach (apart from the fact that the dike suffered heavy bomb damage). The city is now far better resourced, with a current capital works program for dike upgrading of D60 million per year.

8. While it is difficult to reestimate the probabilities of failure that would have resulted if the Project had not been undertaken, most risks would be associated with extreme flooding. There have been several floods >12 m since 1986 but none caused a breach. The operations evaluation mission (OEM) has therefore recalculated EIRR with various assumptions of minimum height at which breaching might occur. 9. With the Project, it is considered that Hanoi should be secure up to a 1 in 500 year flood. If proposed projects relating to spillway construction and the Day River diversion are undertaken, Hanoi should be fully secure once the Son La dam is completed (around 2010). Thus, the Project has caused significant savings in potential damage, though substantially less than predicted by the appraisal report or PCR. 10. Other factors, not accounted for at appraisal, are considered to be important contributors to the viability of the Project:

(i) Savings in the lives that would be lost in an uncontrolled breach of the dike. (ii) Improved traffic capacity due to road sealing and widening. The road is a valuable

asset for Hanoi and has resulted in substantial reductions in journey times for users of project roads and alternative routes, particularly during peak hours. While no detailed study has been carried out relating to traffic volumes or journey purpose, it is possible that the economic benefits of road construction would be as high as the potential damage reduction due to changed flood risk.

(iii) Perceptions of reduced flood risk have almost certainly led to increased investment, and a consequent slowing of economic transfers to the south.

(iv) The attractive masonry construction adds significantly to the civic pride of Hanoi residents, adding a positive if non-quantifiable benefit to the dike upgrading.

1. Economic Reevaluation

11. PCR adopted appraisal methodology, updating values to 2002 levels and applying actual costs. The commencement of benefits was delayed until 2000. Operation and maintenance (O&M) costs were assumed to increase by dong (D) 12 billion per year ($0.8 million) compared with D4 billion per year at appraisal. It is not clear why either exercise assumed an increase in O&M costs, when a major benefit of the rehabilitation should have been (and was) a marked reduction in O&M cost. An average damage avoided benefit flow (in 2002 dong) of D679 billion ($44 million) plus the annual O&M cost savings generated an EIRR of 63%, compared with the 53% appraisal estimate. The increase was mainly due to reduced construction costs.

1 ADB. 2001. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

Socialist Republic of Viet Nam for the Second Red River Basin Sector Project. Manila.

Appendix 5 41

12. It is clear that the condition of the dike was poor and erosion was serious in the early 1990s. However, it is not evident that these problems were serious enough to lead to breaches. At worst, floods up to around 13 m would probably have resulted in piping and sand boil problems, which the Hanoi Department of Dike Management and Flood Control was experienced in dealing with. Economic reevaluation of the component is undertaken in a series of stages or sensitivity tests as follows:

(i) Correction of PCR’s miscalculation of potential losses from a break in Thanh Tri district. Average annual damage with Project increases to D195 billion from the assumed D148 billion. EIRR declines to 60% (the adjusted base case).

(ii) No savings allocated 2000–2004 in recognition that no floods have occurred, which would have threatened the dike “without the Project”. EIRR declines to 26%.

(iii) Application of O&M cost savings. There are no precise estimates available for the Hanoi dike O&M cost. Total O&M costs for the Hanoi Dike Management Company for 151 kilometers (km) of dike are approximately D11 billion ($700,000) per year. If half of this level is applied to the 37 km of Red River right bank dike, and cost savings due to the Project are estimated at 30%, cost without the Project can be estimated at around D8 billon per year, or a cost saving with Project of D2.5 million per year. This might increase to around D4 billion if the Ha Tay section of 24 km is included. If these savings replace the incremental costs of D12 billion per year assumed by PCR, EIRR increases to 62.3%.

13. Increase in the river level at which damage is avoided would reduce EIRR as shown in Table A5.3:

Table A5.3: Reduction in EIRR with Increase in Minimum River Depth Causing Breach

Probability of break reduced to zero for flood of: EIRR (%) Base case (adjusted) 60.0 9 meters 57.9 10 meters 50.6 11 meters 37.3 12 meters 16.5

EIRR = economic internal rate of return. Source: Calculated by OEM.

2. Cost of Damage 14. A further factor influencing the level of avoided damages is Hanoi’s development rate over the past 10 years. A major breach of the Hanoi dike in 2005 would have enormous economic consequences. Family and business assets have increased rapidly since the initial assessment was made, suggesting that the damage bill might be substantially higher than the updated appraisal estimates. However, damage (and loss of life) would largely be determined by the length of notice provided of an impending breach. BME argued that damage would be limited, since most residents and businesses are in high buildings, so people and valuable possessions could be moved to higher floors. Appraisal damage estimates—as updated and somewhat reduced by PCR—are retained. 15. Other factors which are important in the Hanoi dike’s economic assessment include savings due to avoided deaths and motor vehicle benefits (and costs) due to the dike road construction.

Appendix 5 42

3. Avoided Deaths

16. The appraisal report and PCR do not attempt to value the cost of loss of life. However, deaths may cause economic loss comparable with property losses. No accurate information is available on the likely loss of life in the event of a breach of the Hanoi dike. However, feasibility studies undertaken for dike rehabilitation list damage and deaths from flooding and typhoons for 1971–1990. Damage over this period amounted to $343 million, while almost 4,000 lives were lost, suggesting property damage of around $86,000 per life lost. If this level is doubled to allow for the relatively low property damage due to lives lost at sea during typhoons, annualized property losses (estimated at D632 billion/year by PCR) would equate to around 225 lives per year. 17. A recent study2 used a contingent valuation methodology to assess the value of statistical life (VSL) based on people’s willingness to pay to avoid death due to landmines or unexploded ordinance in Thailand. This indicated a VSL in rural northeastern Thailand of $0.2–$0.3 million. Other studies have indicated a VSL of between 137 and 195 times Gross Domestic Product per capita. The average of these estimates would provide a VSL of around $190,000 for Hanoi in 2005. This would suggest a value of lives saved of approximately $43 million per year, comparable with the saving in damage of around $40 million estimated by PCR. The analysis would suggest that the value of lives saved could be at least as high as the physical damage caused by a breach in the dike. While avoided death benefits appear high, they are calculated in relation to PCR estimates of potential damage—likely to be significantly overestimated. Further research would be necessary to define more accurate estimates of the likely value of avoided deaths. While such an exercise might be worthwhile in a detailed reevaluation of dike economics, it cannot be justified in relation to the general estimates of Appraisal Report, PCR, and Project Performance Audit Report.

4. Transport Benefits 18. No assessment has been made of the transport benefits resulting from dike rehabilitation and road construction to date. OEM attempted to evaluate them but it was not possible to obtain the before and after project traffic counts, and origin and destination surveys that would be required to complete the analysis. However, it is evident that the road is now economically valuable to Hanoi, both as a major thoroughfare and as a market and truck park.

5. Conclusion

19. If the factors listed in Section 1 above and the estimated avoided deaths in Section 3 are applied to the sensitivity analysis relating to minimum flood height at which damage is sustained, EIRR would change in relation to minimum breach height as shown in Table A5.4.

2 Barns, S. et al. 2003. Valuing the Risk of Death and Injury from Landmines in Thailand. University of Waikato. New

Zealand.

Appendix 5 43

Table A5.4: Hanoi Dike EIRR at Various Levels of River Level at which Breaches Occur

Probability of break reduced to zero for flood of: EIRR (%) Base case (adjusted) 62.3 9 meters 60.1 10 meters 52.9 11 meters 40.0 12 meters 19.7

EIRR = economic internal rate of return. Source: Calculated by OEM. 21. Overall, it is considered that subproject EIRR based on damage avoided might be 20–40%. If savings of life benefits are added, EIRR with no breach below a 12 m flood would be 35%, and this level is assumed in relation to the overall assessment of project performance. C. Irrigation Projects

1. Assumptions 22. Assumptions are included in the Tables A5.11 to A5.16. The main changes to the PCR assumptions are discussed in the following sections.

2. Capital Costs 23. PCR data from the Central Project Office is used. However, the level of farmer-funded tertiary and on-farm canal upgrading costs have increased from PCR level of D3 billion to D10 billion per year for Song Chu (but still far below the BME level of D25 billion). A level of D5 billion per year has been assumed for North Nghe An, which is reported by the North Nghe An Irrigation Company to have around 90% of its tertiary canals upgraded (compared with about 60% for Song Chu). Farmer canal upgrading costs include both the 60% farmer contribution and the 40% government subsidy under the canal and ditch stabilization program.

3. Irrigated Area

a. Song Chu

24. It is surprising that there is still considerable uncertainty about the cultivated area of the Song Chu scheme. The report and recommendation of the President assumed a cultivable area of 50,000 ha and a without project cropping intensity of 192%. PCR adopted the BME conclusion that irrigated area had increased to 50,933 ha. While this may be correct, this significantly overstates the area actually supplied from the Song Chu scheme, which was estimated by Song Chu Irrigation Company (SCIC) during OEM as summarized in Table A5.5.

Appendix 5 44

Table A5.5: SCIC Cropping 1997 to 2006 (ha)

Year 1997 1998 1999 2000 2001 2002 2003 2004 Winter-Spring Crop Full irrigation 26,716 27,738 27,648 28,534 28,617 29,045 29,142 31,380Partial irrigation 8,756 8,066 8,192 7,387 7,633 7,669 7,299 7,275Pumped 3,676 3,607 3,537 3,468 3,399 2,921 2,956 2,947 Total 39,148 39,411 39,377 39,389 39,649 39,635 39,397 41,601 Summer-Autumn Crop Full irrigation 27,655 27,876 28,228 29,269 29,492 28,350 29,246 30,039Partial irrigation 7,139 7,372 7,007 6,184 6,229 7,792 7,793 7,015Pumped 3,676 3,607 3,537 3,468 3,399 2,862 2,851 2,857 Total 38,470 38,855 38,772 38,921 39,120 39,004 39,890 39,911 Third Crop 14,300 14,850 15,000 14,900 15,300 15,300 15,700 15,850 Total 91,918 93,116 93,149 93,210 94,069 93,939 94,987 97,362ha = hectare, SCIC = Song Chu Irrigation Company. Source: Song Chu Irrigation Company.

25. These data are assumed to represent the with project situation. The differences are most pronounced in Tho Xuan, Quang Xuong, and Trieu Son districts. The difference in Thanh Hoa may be due to urban expansion. However, the remaining differences require further analysis by SCIC, as they could not be resolved during OEM.

Table A5.6: SCIC - Irrigated Areas by District

SCIC BME (ha) (ha)Thọ Xuan 5,004 6,433Thieu Hoa 4,114 10,600Dong Son 6,229Thanh Hoa (city) 1,788 3,000Quang Xuong 10,490 12,400Trieu Son 7,773 11,000Nong Cong 6,203 7,500 Total 41,601 50,933

BME = benefit monitoring and evaluation, ha = hectare, SCIC = Song Chu Irrigation Company. Source: Song Chu Irrigation Company.

Appendix 5 45

Table A5.7: Song Chu Area and Yield by Class of Irrigationa

1997 1998 1999 2000 2001 2002 2003 2004 Mean A. Winter-Spring Crop 1. Full Irrigation Area (ha) 26,716 27,738 27,648 28,534 28,617 29,045 29,142 31,380 28,603 Yield (t/ha) 5.62 5.08 5.37 5.56 5.63 6.49 6.54 6.81 5.91 Production (t) 150,055 140,843 148,400 158,537 161,077 188,487 190,619 213,670 168,961 2. Partial Irrigation Area (ha) 8,756 8,066 8,192 7,387 7,633 7,669 7,299 7275 7,785 Yield (t/ha) 4.65 4.23 4.59 4.80 4.85 5.56 5.63 5.81 4.99 Production (t) 40,695 34,131 37,616 35,428 37,014 42,675 41,071 42,236 38,858 3. Source Provision Area (ha) 3,676 3,607 3,537 3,468 3,399 2,921 2,956 2,947 3,314 Yield (t/ha) 3.18 2.99 3.19 3.29 3.32 3.64 3.67 3.87 3.37 Production (t) 11,677 10,767 11,271 11,400 11,289 10,641 10,861 11,411 11,165

Average Yield (t/ha) 5.17 4.71 5.01 5.21 5.28 6.10 6.16 6.43 5.51 B. Summer-Autumn Crop 1. Full Irrigation Area (ha) 27,655 27,876 28,228 29,269 29,492 28,350 29,246 30,039 28,769 Yield (t/ha) 3.22 3.26 3.91 4.81 4.33 4.66 4.78 4.99 4.26 Production (t) 89,063 90,969 110,234 140,876 127,733 132,030 139,735 149,953 12,2574 2. Partial Irrigation Area (ha) 7,139 7,372 7,007 6,184 6,229 7792 7,793 7,015 7,066 Yield (t/ha) 3.05 2.94 3.29 3.35 3.47 4.16 4.27 4.48 3.64 Production (t) 21,781 21,696 23,027 20,731 21,609 32,432 33,266 31,432 25,747 3. Source Provision Area (ha) 3,676 3,607 3,537 3,468 3,399 2,862 2,851 2,857 3,282 Yield (t/ha) 2.25 2.17 2.54 2.91 2.90 3.25 3.27 3.43 2.80 Production (t) 8,258 7,815 8,997 10,080 9,865 9,307 9,312 9,813 9,181

Average Yield t/ha 3.10 3.10 3.67 4.41 4.07 4.46 4.57 4.79 4.02 C. Third Crop Source Provision Area (ha) 14,300 14,850 15,000 14,900 15,300 15,300 15,700 15,850 15,150 Yield (t/ha) 2.31 2.77 2.90 3.04 3.14 3.14 3.16 3.18 2.96 Production (t) 33,065 41,150 43,503 45,231 47,997 47,997 49,546 50,459 44,868 ha= hectare, t = ton. a Source provision is where water is provided only to the secondary canal level with no guarantee of supply to field canals,

meaning that farmers may have to rely on pumping from supply or drainage canals. Source: Song Chu Irrigation Company.

Appendix 5 46

Table A5.8: Song Chu Area and Yield Inside and Outside System

1997

1998

1999

2000

2001

2002

2003

2004

Trend (%)

Gain (t/ha)

A. Winter-Spring Crop 1. Inside System Area (ha) 35,471 35,804 35,839 35,921 36,250 39,637 39,399 39,181 1.8 Production (t) 188,102 178,780 191,524 198,220 202,205 244,665 245,198 253,682 5.4 Yield (t/ha) 5.30 4.99 5.34 5.52 5.58 6.17 6.22 6.47 3.6 1.172. Outside System Area (ha) 8,375 8,334 8,201 8,165 8,050 8,335 8,304 8,188 (0.2) Production (t) 30,467 28,671 29,701 30,904 30,859 35,897 36,371 37,337 3.9 Yield (t/ha) 3.64 3.44 3.62 3.78 3.83 4.31 4.38 4.56 4.0 0.92

B. Summer-Autumn Crop 1. Inside System Area (ha) 34,793 35,248 35,235 35,453 35,721 39,105 38,803 38,825 1.9 Production (t) 118,474 120,350 142,256 147,891 151,758 181,899 184,443 193,076 7.8 Yield (t/ha) 3.41 3.41 4.04 4.17 4.25 4.65 4.75 4.97 5.8 1.57 2. Outside System Area (ha) 8,957 8,957 8,941 8,957 8,760 8,620 8,454 8,432 (1.0) Production (t) 17,503 20,460 21,411 21,869 22,258 24,225 23,943 25,097 4.5 Yield (t/ha) 1.95 2.28 2.39 2.44 2.54 2.81 2.83 2.98 5.6 1.02C. Third Crop 1. Inside System Area (ha) 14,300 14,850 15,000 14,900 15,300 15,300 15,700 15,850 1.3 Production (t) 33,065 41,150 43,503 45,231 47,997 47,997 49,546 50,459 5.2 Yield (t/ha) 2.31 2.77 2.90 3.04 3.14 3.14 3.16 3.18 3.8 0.87 2. Outside System Area (ha) 5,450 5,450 5,500 5,250 5,050 5,050 5,150 5,150 (1.2) Production (t) 16,019 12,549 12,358 13,931 11,617 11,617 11,927 12,011 (3.1) Yield (t/ha) 2.94 2.30 2.25 2.65 2.30 2.30 2.32 2.33 (2.0) (0.61)ha = hectare, t = ton. Source: Song Chu Irrigation Company.

Table A5.9: North Nghe An Area and Yield by Class of Irrigation

1997 1998 1999 2000 2001 2002 2003 2004 Mean A. Winter-Spring Crop 1. Full Irrigation Area (ha) 15,802 15,882 15,962 15,995 16,045 16,100 16,115 16,129 16,004 Yield (t/ha) 5.90 5.88 5.79 5.86 5.80 5.82 5.84 5.92 5.91 Production (t) 94,359 94,638 93,685 94,758 93,512 94,222 94,731 96,239 94,518 2. Partial Irrigation Area (ha) 2,944 2,960 2,974 2,980 2,991 3,004 3,020 3,030 2,988 Yield (t/ha) 5.26 5.21 5.16 4.96 5.17 5.23 5.38 5.45 5.25 Production (t) 15,477 15,325 15,376 15,521 15,418 15,646 16,214 16,466 15,680 3. Source Provision Area (ha) 8,692 8,737 8,781 8,799 8,827 8,845 8,830 8,822 8,792 Yield (t/ha) 5.19 5.05 4.95 4.91 4.89 4.93 5.04 5.16 5.04 Production (t) 45,101 44,048 43,566 43,607 43,395 43,819 44,751 45,889 44,272

Average Yield t/ha 5.65 5.58 5.51 5.54 5.47 5.50 5.57 5.67 5.56

B. Summer-Autumn Crop 1. Full Irrigation Area (ha) 14,828 14,904 14,979 15,009 15,056 15,075 15,065 15,078 14,999 Yield (t/ha) 4.81 4.82 4.78 4.34 4.78 4.75 4.83 5.13 4.85 Production (t) 71,678 73,030 72,948 65,446 73,418 73,076 74,288 78,602 72,811 2. Partial Irrigation Area (ha) 3,373 3,390 3,407 3,413 3,426 3,423 3,397 3,420 3,406 Yield (t/ha) 4.41 4.42 4.38 4.08 4.38 4.39 4.47 4.52 4.37 Production (t) 14,928 15,064 14,938 14,119 14,822 14,911 15,031 15,370 14,898 3. Source Provision Area (ha) 8,492 8,535 8,477 8,595 8,623 8,643 8,663 8,697 8,591 Yield (t/ha) 4.51 4.52 4.48 4.26 4.52 4.55 4.63 4.70 4.53 Production (t) 38,439 38,811 38,131 36,758 38,871 39,210 40,047 40,778 38,881

Average Yield t/ha 4.68 4.73 4.69 4.31 4.69 4.69 4.77 4.95 4.69

C. Third Crop Source provision Area (ha) 5,266 5,567 4,802 4,751 5,895 5,919 5,940 5,957 5,512 Yield (t/ha) 2.26 2.18 2.40 2.51 2.61 2.66 2.72 2.80 2.55 Production (t) 12,094 12,374 11,753 12,100 15,516 15,828 16,144 16,711 14,065 ha = hectare, t = ton. Source: North Nghe An Irrigation Company.

Appendix 5 47

Table A5.10: North Nghe An Area and Yield Inside and Outside System

1997

1998

1999

2000

2001

2002

2003

2004

Trend (%)

Gain (t/ha)

A. Winter-Spring Crop 1. Inside System Area (ha) 27,438 27,579 27,717 27,774 27,863 27,878 27,910 27,930 Production (t) 156,867 154,333 150,150 156,140 159,181 161,222 163,670 166,600 Yield (t/ha) 5.72 5.60 5.42 5.62 5.71 5.78 5.86 5.96 0.9 0.25 2. Outside System Area (ha) 10,538 10,397 10,250 10,202 10,113 10,107 10,093 10,092 Production (t) 53,661 50,399 50,128 51,990 49,163 50,901 51,871 53,039 Yield (t/ha) 5.09 4.85 4.89 5.10 4.86 5.04 5.14 5.26 0.7 0.16 B. Summer-Autumn Crop 1. Inside System Area (ha) 26,693 26,829 26,863 27,017 27,105 26,918 27,224 27,178 0.2 Production (t) 123,047 119,159 112,820 114,349 110,492 11,2178 116,823 118,435 (0.5) Yield (t/ha) 4.61 4.44 4.20 4.23 4.08 4.17 4.29 4.36 (0.7) (0.25) 2. Outside System Area (ha) 11,860 11,724 11,690 11,536 11,448 11,420 11,412 11,390 (0.6) Production (t) 48,101 50,367 46,718 46,001 44,432 45,246 46,372 46,985 (0.8) Yield (t/ha) 4.06 4.30 4.00 3.99 3.88 3.96 4.06 4.13 (0.3) 0.07 C. Third Crop 1. Inside System Area (ha) 5,266 5,567 4,802 4,751 5,895 58,95 5,904 5,956 Production (t) 12,094 12,374 11,753 10,347 12,043 12,453 12,866 13,264 Yield (t/ha) 2.30 2.22 2.45 2.18 2.04 2.11 2.18 2.23 (1.0) (0.07) 2. Outside System Area (ha) 3,839 4,106 3,970 3,898 4,490 4,504 4,574 4,579 Production (t) 8,003 8,247 8,584 7,909 8,622 9,335 10,060 10,623 Yield (t/ha) 2.08 2.01 2.16 2.03 1.92 2.07 2.20 2.32 1.2 0.24 ha = hectare, t = ton. Source: North Nghe An Irrigation Company.

D. Paddy Price

60%

70%

80%

90%

100%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Vn as percent of Thaiprice

Vn as percent of worldpriceLinear (Vn as percentof world price)Linear (Vn as percentof Thai price)

26. Viet Nam has been the world’s second largest rice exporter over the past decade, behind Thailand and marginally ahead of the United States and India. Viet Nam’s annual exports have exceeded 3 million tons since 1996, with a peak of 4.5 million tons in 1999 (Appendix 2, Table A2.3). At the same time, Viet Nam’s relative prices have risen (erratically) from around 70% of Thai price in 1994 to almost 90% in 2003—a commendable achievement (Figure A5.1).

Figure A5.1: Viet Nam Rice Export Price Comparative Trends

Vn = Viet Nam. Source: Food and Agriculture Organization Agristat database.

27. BME and PCR analysis was based on Bangkok rice price. However, since Viet Nam is a major rice exporter, it was considered preferable to base the OEM analysis on Viet Nam’s own

48 Appendix 5

rice export performance. This should more nearly reflect the actual economic farmgate value of paddy. Prices were similar in most years as shown in Table A5.11 below. However, prices derived from Viet Nam export data were significantly higher in 1998, 1999, and 2002.

Table A5.11: Farmgate Economic Rice Price Estimates, Based on Vietnamese and Thai Export Prices

(2005D/kg)

Basis 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 OEM Viet Nam 2,114 2,407 2,083 1,553 1,304 1,758 1,531 1,484 2,001 1,622 1,532PCR Bangkok 2,183 2,286 1,815 1,524 1,298 1,443 1,505 1,540

D = Vietnamese dong, kg = kilogram, OEM =Operations Evaluation Mission,, PCR = ADB Project Completion Report. Sources: Export values 1994–2003 from FAO Agristat data, 2004-07 from WB Commodity Price Projections. E. Results

28. Results of the economic analysis for Song Chu are included in Tables A5.12–A5.14, and for North Nghe An in Tables A5.15–17. Hanoi Dyke performance is assessed in Tables A5.18–A5.21.

Table A5.12: Song Chu Subproject Investment Costs, Crop Areas and Incremental Benefits

Item Units 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006A. Investment Costs

Total Foreign Cost (D billion) 3.7 2.4 10.0 8.4 18.7 13.8 6.1 3.1 Total Local Cost (D billion) 6.5 4.5 27.8 24.1 47.3 41.4 19.7 7.0 Total Investment Cost (D billion) 10.2 6.8 37.8 42.6 76.1 65.2 35.8 20.1 10.0 10.0 10.0 10.0 10.0Dollar Equivalent ($ million) 0.9 0.6 3.4 3.7 5.7 4.7 2.5 1.4 0.7 0.6 0.6 0.6 0.6Total O&M Cost Savings (D billion) (1.2) (2.3) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) Net Cost (D billion) 10.2 6.8 36.7 40.2 72.6 61.7 32.3 16.6 6.5 6.5 6.5 6.5 6.5

B. Economic Costs Foreign Cost (2002 D) (D billion) 6.1 4.0 15.1 12.2 23.3 17.2 6.8 3.3 Local Cost (2002 D) (D billion) 11.1 6.5 37.4 43.0 66.4 56.3 31.5 17.7 10.0 9.5 9.5 9.5 9.5 Total Investment cost (D billion) 17.2 10.6 52.5 55.3 89.7 73.5 38.4 20.9 10.0 9.5 9.5 9.5 9.5Equivalent Cost in 2002 ($ million) 1.1 0.7 3.4 3.6 5.8 4.7 2.5 1.3 0.6 0.6 0.6 0.6 0.6Incremental O&M Costs (D billion) (1.2) (2.3) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) Total Economic Cost (D billion) 17.2 10.6 51.3 52.9 86.2 70.0 34.9 17.4 6.5 6.0 6.0 6.0 6.0

C. Land Use (Without Project) Full Irrigation ('000 ha) 26.1 26.1 26.1 26.1 26.1 26.1 26.1 26.1 26.1 26.1 26.1 26.1 26.1Partial Irrigation ('000 ha) 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0Pumped Area ('000 ha) 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0Total Irrigated ('000 ha) 39.1 39.1 39.1 39.1 39.1 39.1 39.1 39.1 39.1 39.1 39.1 39.1 39.1Unirrigated ('000 ha) 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 Total Irrigable Area ('000 ha) 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0Cropped Area ('000 ha) 87.8 88.4 89.7 90.0 90.2 90.4 90.7 90.9 91.2 91.4 91.6 91.6 91.6Cropping Intensity (%) 209 210 214 214 215 215 216 216 217 218 218 218 218 (With Project) Full Irrigation ('000 ha) 26.1 26.1 26.5 26.7 27.7 27.6 28.5 28.6 29.0 29.1 31.4 31.4 31.4Partial Irrigation ('000 ha) 9.0 9.0 8.9 8.8 8.1 8.2 7.4 7.6 7.7 7.3 7.3 7.3 7.3Pumped Area ('000 ha) 4.0 4.0 3.8 3.7 3.6 3.5 3.5 3.4 2.9 3.0 2.9 2.9 2.9Unirrigated ('000 ha) 2.9 2.9 2.9 2.9 2.6 2.6 2.6 2.4 2.4 2.6 0.4 0.4 0.4 Total Cropped Area ('000 ha) 87.8 88.4 89.7 91.9 93.1 93.1 93.2 94.1 93.9 95.0 97.4 97.4 97.4Cropping Intensity (%) 209 210 214 219 222 222 222 224 224 226 232 232 232

D. Cropped Area (Without Project) Spring Rice ('000 ha) 39.1 39.1 39.1 39.1 39.1 39.1 39.1 39.1 39.1 39.1 39.1 39.1 39.1Summer Rice ('000 ha) 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5OFC ('000 ha) 10.2 10.8 12.1 12.3 12.5 12.8 13.0 13.3 13.5 13.8 14.0 14.0 14.0 Total

('000 ha) 87.8 88.4 89.7 90.0 90.2 90.4 90.7 90.9 91.2 91.4 91.6 91.6 91.6

Appendix 5 49

Item Units 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006(With Project) Spring Rice ('000 ha) 39.1 39.1 39.1 39.1 39.4 39.4 39.4 39.6 39.6 39.4 41.6 41.6 41.6Summer Rice ('000 ha) 38.5 38.5 38.5 38.5 38.9 38.8 38.9 39.1 39.0 39.9 39.9 39.9 39.9OFC ('000 ha) 10.2 10.8 12.1 14.3 14.9 15.0 14.9 15.3 15.3 15.7 15.9 15.9 15.9 Total ('000 ha) 87.8 88.4 89.7 91.9 93.1 93.1 93.2 94.1 93.9 95.0 97.4 97.4 97.4

D. Crop Yields (Without Project)

Winter/Spring Rice (t/ha) 4.6 4.4 4.4 5.2 4.8 5.1 5.3 5.4 6.0 6.0 6.3 6.3 6.3Summer/Autumn Rice (t/ha) 2.6 3.3 1.8 3.4 3.3 3.9 4.0 4.0 4.5 4.6 4.8 4.8 4.8Corn (t/ha) 3.0 3.0 3.0 3.1 3.1 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2Vegetables (t/ha) 4.1 4.3 4.5 4.7 4.8 5.0 5.2 5.2 5.2 5.2 5.2 5.2 5.2Production (t) Spring Rice ('000 t) 179.8 171.0 171.2 203.7 189.6 201.4 208.2 210.5 233.8 235.8 245.6 245.6 245.6Summer Rice ('000 t) 101.4 126.0 69.5 131.1 127.1 150.2 154.0 155.9 171.4 175.3 183.8 183.8 183.8Total Rice Production ('000 t) 281.2 297.0 240.7 334.8 316.7 351.5 362.2 366.4 405.2 411.1 429.4 429.4 429.4Total Value (D billion) 634.4 868.9 687.4 789.8 847.6 817.6 648.8 567.9 806.4 724.7 733.6 950.3 786.7Production Costs (D billion) 557.5 583.1 585.1 568.3 561.0 552.7 558.0 555.3 572.5 547.5 562.6 563.3 563.3Net Value of Production (D billion) 76.9 285.8 102.4 221.5 286.6 264.9 90.8 12.6 233.9 177.2 171.1 386.9 223.5

E. Crop Yields (With Project) Winter/Spring rice (t/ha) 4.6 4.4 4.4 5.3 5.0 5.3 5.5 5.6 6.2 6.2 6.5 6.5 6.5Summer/Autumn Rice (t/ha) 2.6 3.3 1.8 3.4 3.4 4.0 4.2 4.2 4.7 4.8 5.0 5.0 5.0Corn (t/ha) 3.0 3.0 3.0 3.1 3.2 3.3 3.4 3.4 3.4 3.4 3.4 3.4 3.4Vegetables (t/ha) 4.1 4.3 4.5 4.7 4.9 5.2 5.4 5.4 5.4 5.4 5.4 5.4 5.4Production (t) Spring Rice ('000 t) 179.8 171.0 171.2 207.6 196.8 210.4 217.4 221.2 244.7 245.2 269.4 269.4 269.4Summer Rice ('000 t) 101.4 126.0 69.5 131.0 132.7 156.5 162.4 166.2 181.4 189.6 198.5 198.5 198.5Total Rice Production ('000 t) 281.2 297.0 240.7 338.6 329.5 367.0 379.7 387.4 426.1 434.8 467.8 467.8 467.8Total Value (D billion) 634.4 868.9 687.4 812.8 896.9 869.1 693.7 614.7 861.5 780.5 809.5 1044.8 866.5Total Costs (D billion) 559.5 585.3 588.5 579.8 578.0 559.0 564.1 564.9 580.5 559.6 588.8 589.7 589.7Net Value of Production (D billion) 74.9 283.5 98.9 233.0 318.9 310.0 129.7 49.8 281.0 220.9 220.7 455.1 276.8Incremental value Production (D billion) (2.0) (2.2) (3.5) 11.5 32.4 45.1 38.9 37.2 47.1 43.7 49.6 68.2 53.3Additional Working Capital (D billion) 0.3 0.2 0.6 2.1 1.9 -0.5 1.0 1.8 1.0 2.0 3.5 0.0Total Incremental Benefit (D billion) (2.3) (2.4) (4.1) 9.5 30.4 45.6 37.9 35.4 46.1 41.7 46.1 68.1 53.3

D = Vietnamese dong, ha = hectare, O&M = operations and maintenance, OFC = other field crops. Source: OEM.

Table A5.13: Song Chu Financial Budgets for a Typical Farm (With and Without Project)

Without Project With Project Spring Summer Maize Vegetables Farm Spring Summer Maize Vegetables Farm Rice Rice Total Rice Rice Total Total Farm Area ha 0.31 0.31 Cropping Intensity (%) 93% 92% 15% 10% 209% 99% 92% 21% 14% 226% Cropped Area ha 0.29 0.28 0.05 0.03 0.65 0.31 0.28 0.07 0.04 0.70 Farm Output D'000 3,797 2,781 336 175 7,088 4,170 2,908 516 271 7,865 Farm Inputs a Seed D'000 95 91 3 189 101 91 5 197 Fertilizer D'000 606 565 46 28 1,245 644 566 79 41 1,330 Agro-chemicals D'000 88 86 174 93 86 180 Other Costs D'000 339 333 23 15 709 360 333 33 22 748 Land Preparation D'000 218 215 23 15 471 232 215 33 22 502 Total Inputs D'000 1,346 1,290 95 57 2,788 1,431 1,291 149 85 2,955 Net Farm Income D'000 2,451 1,491 241 118 4,300 2,739 1,617 367 186 4,909 Interest b D'000 142 151 Farm Income D'000 4,158 4,758 Family Labor pd/farm 35 34 8 5 83 34 33 12 8 86 Return/Day D'000 50.4 55.2 D = Vietnamese dong, ha = hectares, pd = person-day. a Excluding any cost for family labor. b Assuming short-term production loan for fertilizer and sprays at 10% interest. Source: OEM.

50 Appendix 5

Table A5.14: Song Chu Economic Internal Rate of Return (constant 2002 D billion)

Calendar Project Investment Reduced Total Incremental Net Cash

Year Year Cost O&M Cost Cost Benefit Flow 1994 1 17.2 17.2 (2.3) (19.5) 1995 2 10.6 10.6 (2.4) (13.0) 1996 3 52.5 1.2 51.3 (4.1) (55.3) 1997 4 55.3 2.3 52.9 9.5 (43.5) 1998 5 89.7 3.5 86.2 30.4 (55.8) 1999 6 73.5 3.5 70.0 45.6 (24.4) 2000 7 38.4 3.5 34.9 37.9 3.0 2001 8 20.9 3.5 17.4 35.4 18.0 2002 9 10.0 3.5 6.5 46.1 39.6 2003 10 9.5 3.5 6.0 41.7 35.7 2004 11 9.5 3.5 6.0 46.1 40.1 2005 12 9.5 3.5 6.0 68.1 62.1 2006 13 3.5 6.0 53.3 47.3 2007 14 3.5 (3.5) 50.3 53.8 2008 15 3.5 (3.5) 50.3 53.8 2009 16 3.5 (3.5) 50.3 53.8 2010 17 31.5 3.5 28.0 50.3 22.3 2011 18 3.5 (3.5) 50.3 53.8 2012 19 3.5 (3.5) 50.3 53.8 2013 20 3.5 (3.5) 50.3 53.8 2014 21 3.5 (3.5) 50.3 53.8 2015 22 31.5 3.5 28.0 50.3 22.3 2016 23 3.5 (3.5) 50.3 53.8 2017 24 3.5 (3.5) 50.3 53.8 2018 25 3.5 (3.5) 50.3 53.8 2019 26 3.5 (3.5) 50.3 53.8 2020 27 31.5 3.5 28.0 50.3 22.3 2021 28 3.5 (3.5) 50.3 53.8 2022 29 3.5 (3.5) 50.3 53.8 2023 30 3.5 (3.5) 50.3 53.8

EIRR 12.9%D = Vietnamese dong, EIRR = economic internal rate of return, O&M = operation and maintenance. Source: OEM.

Appendix 5 51

Table A5.15: North Nghe An Investment Costs, Crop Areas and Incremental Benefits

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 A. Investment costs

Total Foreign Cost D bil 2.4 1.1 4.3 7.8 10.8 13.7 9.1 2.0 Total Local Cost D bil 3.8 4.1 14.4 17.9 33.7 35.9 27.2 4.6 Total Investment Cost D bil 6.2 5.2 18.7 30.7 49.5 54.7 41.2 11.6 5.0 5.0 5.0 5.0 5.0Dollar Equivalent $ mil 0.6 0.5 1.7 2.7 3.7 3.9 2.9 0.8 0.3 0.3 0.3 0.3 0.3O&M Cost Savings D bil (0.8) (0.8) (0.8) (0.9) (0.9) (0.9) Total Cost D bil 6.2 5.2 18.7 30.7 49.5 54.7 41.2 10.8 4.2 4.2 4.1 4.1 4.1

B. Economic Costs Foreign Cost (2002 D) D bil 4.0 1.9 6.6 11.5 13.7 17.5 10.4 2.2 Local Cost (2002 D) D bil 6.6 5.9 19.3 22.6 39.0 39.4 28.8 4.7 Total Investment Cost D bil 10.6 7.9 25.9 34.1 52.7 56.9 39.2 6.9 Equivalent Cost (2002 D) $ mil 0.7 0.5 1.7 2.2 3.4 3.7 2.5 0.4 O&M Cost Savings D bil (0.8) (0.8) (0.8) (0.9) (0.9) (0.9)

Land Use–Without Project

Total Irrigated '000 ha 21.9 21.9 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 Rainfed (Winter) '000 ha 7.6 7.6 6.8 7.1 7.1 7.1 7.1 6.9 6.8 6.6 6.5 6.5 Cropped Area '000 ha 49.6 50.0 50.9 51.7 52.6 52.6 52.6 52.4 52.1 51.9 51.7 51.7 Cropping Intensity % 168 169 171 172 175 175 175 175 175 175 175 175 With Project Total Irrigated '000 ha 21.9 21.9 23.0 24.1 26.1 28.1 30.1 29.9 29.8 19.5 19.7 19.7 Rainfed '000 ha 7.6 7.6 6.8 6.0 4.0 2.0 10.1 9.8 9.8 Cropped Area '000 ha 49.6 50.0 50.9 56.5 60.0 59.4 59.5 60.9 60.7 29.6 29.5 29.5 Cropping Intensity % 168 169 171 188 200 198 198 203 204 Cropped Area–Without Project Spring Rice '000 ha 26.6 26.6 26.8 27.0 27.0 27.0 27.0 26.9 26.8 26.7 26.5 26.5 Summer Rice '000 ha 21.9 21.9 22.0 22.2 22.2 22.2 22.2 22.1 22.0 21.9 21.8 21.8 Other '000 ha 1.2 1.6 2.0 2.4 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 Total '000 ha 49.6 50.0 50.9 51.7 52.6 52.6 52.6 52.4 52.1 51.9 51.7 51.7 With Project Spring Rice '000 ha 27.8 26.6 26.8 27.4 27.6 27.7 27.8 27.9 27.9 27.9 27.9 27.9 Summer Rice '000 ha 27.0 21.9 22.0 26.7 26.8 26.9 27.0 27.1 26.9 27.2 27.2 27.2 Other '000 ha (5.2) 1.6 2.0 2.4 5.6 4.8 4.8 5.9 5.9 5.9 6.0 6.0 Total '000 ha 49.6 50.0 50.9 56.5 60.0 59.4 59.5 60.9 60.7 61.0 61.1 61.1 Without Project–Crop Yields Spring Rice t/ha 3.9 4.3 4.3 4.8 4.9 4.9 5.0 5.0 5.1 5.1 5.2 5.2 Summer Rice t/ha 3.1 3.5 3.4 3.9 3.9 4.0 4.0 4.0 4.1 4.1 4.1 4.1 Corn t/ha 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 Vegetables a t/ha 6.6 6.7 6.8 6.9 7.0 7.1 7.2 7.3 7.3 7.3 7.3 7.3 Production (t) Spring rice '000 t 104.0 114.8 114.5 130.6 131.9 133.2 134.4 135.1 135.7 136.3 136.9 136.9 136.9Summer Rice '000 t 68.7 75.8 75.7 86.3 87.1 88.0 88.8 89.2 89.7 90.1 90.5 90.5 90.5Total Rice Production '000 t 172.7 190.6 190.2 216.9 219.0 221.1 223.2 224.3 225.4 226.4 227.4 227.4 227.4Total Value D bil 358.7 525.4 496.5 477.0 552.6 486.1 372.3 318.6 422.4 372.9 363.6 480.9 394.7Production Costs D bil 322.6 337.5 340.1 334.2 334.8 329.2 329.9 325.8 333.5 318.7 323.9 325.8 323.8Net Value of Production D bil 36.1 187.9 156.3 142.7 217.8 156.9 42.5 (7.2) 88.9 54.2 39.6 155.1 70.9With Project–Crop Yields Spring Rice t/ha 3.9 4.3 4.3 4.8 4.9 5.1 5.2 5.3 5.4 5.5 5.6 5.6 Summer Rice t/ha 3.1 3.5 3.4 3.9 4.0 4.1 4.2 4.2 4.3 4.4 4.5 4.5 Corn t/ha 2.3 2.3 2.4 2.4 2.4 2.5 2.5 2.5 2.5 2.5 2.5 2.5 Vegetables t/ha 6.6 6.7 6.8 6.9 7.0 7.1 7.2 7.3 7.3 7.3 7.3 7.3 Production (t) Spring Rice '000 t 104.0 114.8 114.5 132.5 136.3 140.1 143.5 147.1 150.4 153.7 157.0 157.0 157.0Summer Rice '000 t 68.7 75.8 75.7 103.6 106.5 109.1 112.2 115.0 116.7 120.5 122.7 122.7 122.7Total Rice Production '000 t 172.7 190.6 190.2 236.1 242.8 249.2 255.7 262.1 267.0 274.2 279.7 279.7 279.7Total Value D bil 358.7 525.4 496.5 517.6 628.4 556.6 434.8 389.5 517.1 467.0 461.5 605.2 499.1Total Costs D bil 322.6 337.5 340.2 376.3 386.5 377.5 380.6 383.5 394.4 378.2 388.0 389.6 389.6Net Value of Production D bil 36.1 187.9 156.3 141.3 241.9 179.2 54.2 6.0 122.7 88.8 73.4 215.6 109.5Incremental Value Prod D bil 0.0 0.0 (1.4) 24.1 22.3 11.7 13.2 33.8 34.7 33.8 60.5 38.7Additional Working Capital D bil 0.0 0.4 9.0 3.1 (0.8) 0.4 1.1 (27.6) Total Incremental Benefit D bil 0.0 (0.4) (10.5) 21.0 23.1 11.3 12.1 61.4 34.7 33.8 60.5 38.7

bil = billion, D = Vietnamese dong, ha = hectare, mil = million, O&M = operations and maintenance, t = ton. a Budgeted as sweet potatoes. Source: OEM.

52 Appendix 5

Table A5.16: North Nghe An Financial Budgets for a Typical Farm (With and Without Project)

Without Project With Project Spring Summ- Maize Vege- Farm Spring Summ- Maize Vege- Farm Rice er Rice tables Total Rice er Rice tables TotalTotal Farm Area ha 0.31 0.31Cropping Intensity (%) 117 3 11 228 93 91 4 15 223Cropped Area ha 0.36 0.30 0.01 0.03 0.71 0.29 0.28 0.01 0.05 0.69Farm Output D'000 3,125 2,064 40 247 5,476 2,648 2,070 54 349 5,121Farm Inputs a Seed D'000 116 95 1 7 218 92 90 1 10 192Fertilizer D'000 528 433 17 44 1,022 525 510 20 62 1,118Agro-chemicals D'000 110 91 201 88 85 173Other Costs D'000 306 252 557 243 237 480 Total Inputs D'000 1,060 871 18 51 1,999 948 922 22 72 1,964Net Farm Income D'000 2,065 1,194 22 196 3,476 1,700 1,148 32 277 3,157Interest b D'000 122 129Farm Income D'000 3,354 3,028Family Labor (person days) /farm 77 62 2 6 147 58 55 2 9 124Return/Day D'000 22.9 24.5D = Vietnamese dong, ha = hectares. a Excluding any cost for family labor. b Assuming short-term production loan for fertilizer and sprays at 10% interest. Source: OEM.

Table A5.17: North Nghe An Economic Internal Rate of Return (constant 2002 D billion)

Calendar Project Investment Reduction in Total Incremental Project

Year Year Cost O&M Cost Cost Benefit Cashflow

1994 1 10.6 10.6 (10.6) 1995 2 7.9 7.9 0.0 (7.9) 1996 3 26.5 26.5 (0.4) (26.9) 1997 4 34.4 34.4 (9.3) (43.8) 1998 5 52.5 52.5 20.1 (32.4) 1999 6 55.7 55.7 18.7 (36.9) 2000 7 39.1 39.1 11.0 (28.1) 2001 8 6.9 0.8 6.1 11.1 5.0 2002 9 0.8 (0.8) 33.2 34.0 2003 10 0.8 (0.8) 37.3 38.1 2004 11 0.8 (0.8) 42.1 42.9 2005 12 22.8 0.8 22.0 60.5 38.5 2006 13 0.8 (0.8) 38.6 39.4 2007 14 0.8 (0.8) 32.9 33.7 2008 15 0.8 (0.8) 32.9 33.7 2009 16 0.8 (0.8) 32.9 33.7 2010 17 22.8 0.8 22.0 32.9 10.9 2011 18 0.8 (0.8) 32.9 33.7 2012 19 0.8 (0.8) 32.9 33.7 2013 20 0.8 (0.8) 32.9 33.7 2014 21 0.8 (0.8) 32.9 33.7 2015 22 22.8 0.8 22.0 32.9 10.9 2016 23 0.8 (0.8) 32.9 33.7 2017 24 0.8 (0.8) 32.9 33.7 2018 25 0.8 (0.8) 32.9 33.7 2019 26 0.8 (0.8) 32.9 33.7 2020 27 22.8 0.8 22.0 32.9 10.9 2021 28 0.8 (0.8) 32.9 33.7 2022 29 0.8 (0.8) 32.9 33.7 2023 30 0.8 (0.8) 32.9 33.7

EIRR 11.4% D = Vietnamese dong, EIRR = Economic Internal Rate of Return, O&M = operations and maintenance. Source: OEM.

Appendix 5 53

Table A5.18: Hanoi Dike Financial Investment Cost (current D million)

1994 1995 1996 1997 1998 1999 2000 2001 A. Investment Costs

Foreign Exchange Costs Civil Works D mil 3,727 2658 2,215 11,054 6,928 18,894 24,980 11,748Material D mil 7,673 Equipment D mil 554 291 813 490 Survey/Design D mil 592 225 190 479 219 438Consulting Service Total Foreign Cost D mil 4,319 3212 2,732 12,057 14,600 19,863 25,200 12,187 Local Costs Civil Works D mil 7,235 7492 7,425 26,817 21,313 55,526 62,767 32,987Material D mil 2,170 14,894 Equipment D mil 375 Survey/Design D mil 723 1,932 771 1,925 1,450 268 536Consulting Service D mil Incremental Operating D mil 316 225 443 348 303 403Land Acquisition D mil 1,110 10,089 13,258 23,727 7,920Other D mil 132 93 1,671 2,402 2,155Total Local Cost D mil 10,129 7492 11,290 37,900 51,926 82,721 65,741 44,001 Total Investment Cost D mil 14,448 10,703 14,022 49,957 66,527 102,585 90,941 56,187Dollar Equivalent $'000 1,318 970 1,271 4,398 5,003 7,357 6,408 3,784

B. Recurrent, Admin, O&M Other O&M D mil 361 629 979 2,228 3,891 6,456 8,730 10,134Total O&M D mil 361 629 979 2,228 3,891 6,456 8,730 10,134 Total Cost D mil 14,809 11,332 15,001 52,185 70,418 10,9041 99,670 66,322

D = Vietnamese dong, O&M = operations and maintenance. Source: OEM.

Table A5.19: Hanoi Dike Economic Investment and O&M Cost(constant 2002 D million)

1994 1995 1996 1997 1998 1999 2000 2001 2002

Foreign Investment Cost D mil 4,319 3,212 2,732 12,057 14,600 19,863 25,200 12,187 Current Dollars $'000 394 291 248 1,061 1,098 1,424 1,776 821 MUV Index (2002 = 1.00) 1.19 1.26 1.19 1.11 1.07 1.07 1.04 1.01 1.00 Cost in Constant 2002 $ $'000 468 366 296 1,180 1,174 1,518 1,853 831 Cost in Constant 2002 D D mil 7,247 5,671 4,586 18,287 18,204 23,535 28,716 12,882 Local Investment Cost D mil 10,129 7,492 11,290 37,900 51,926 82,721 65,741 44,001 Border Price Adjustment D mil 10,129 7,492 11,290 37,900 51,926 82,721 65,741 44,001 GDP Deflator 100 117 127 136 148 156 161 165 171 Local Cost in Constant 2002 D D mil 17,321 10,946 15,176 47,790 60,160 90,640 69,659 45,732 Total Economic Investment Cost D mil 24,568 16,616 19,762 66,077 78,363 114,174 98,375 58,614 Equivalent Cost in 2002 $ $ mil 1,585 1,072 1,275 4,263 5,056 7,366 6,347 3,782 Total Incremental O&M D mil (512) (1,067) (1,725) (2,684) (3,511) (4,003) Average Exchange Rate D'000/$ 10.96 11.03 11.03 11.36 13.30 13.94 14.19 14.85 15.50 D = Vietnamese dong, GDP = gross domestic product, MUV = manufacturing unit value, O&M = operation and maintenance. Sources: World Bank, Commodity Price Projections (July 2003) and ADB. Recent Conversion Factors for the Economic Analysis of

Projects (Oct 1995) SCF = 1.00 (no adjustment in base case).

54 Appendix 5

Table A5.20: Total Damage from Floods (D billion)

Flood Losses Losses Rural Agric Infra Commerce Recon- Total Probability Damage Probability DamageLevel (m) N Hanoi S Hanoi Household Prod structure struction w/o Proj w/o w/Project With A. Tien Tan 9 348 133 30 361 29 9 909 10 266 348 239 53 640 51 9 1,606 11 266 480 305 53 788 63 9 1,965 12 365 480 359 53 902 72 9 2,240 13 688 867 578 116 1,600 128 9 3,985 0.0385 154 0.0113 45 14 807 900 790 118 1,873 150 9 4,649 0.0090 42 0.0048 22 15 807 913 790 118 1,883 151 9 4,671 0.0035 16 0.0035 16

Site Total 0.0510 212 0.0196 84 B. West Lake 9 266 348 239 53 640 51 9 1,606 10 365 348 266 53 734 59 9 1,833 11 688 480 491 83 1,244 100 9 3,095 12 807 480 558 83 1,384 111 9 3,431 13 999 867 856 118 2,042 163 9 5,056 0.0385 195 0.0113 57 14 1,069 900 910 136 2,159 173 9 5,357 0.0096 51 0.0048 26 15 1,131 900 936 136 2,226 178 9 5,516 0.0035 19 0.0035 19

Site Total 0.0516 266 0.0196 102 C. Thanh Tri 9 348 133 30 361 29 9 909 10 480 199 30 509 41 9 1,268 11 480 199 30 509 41 9 1,268 12 266 769 451 86 1,115 89 9 2,786 13 266 769 451 86 1,115 89 9 2,786 0.0404 113 0.0113 31 14 365 867 578 86 1,357 109 9 3,370 0.0094 32 0.0048 16 15 365 867 578 86 1,357 109 9 3,370 0.0035 12 0.0035 12

Site Total 0.0533 156 0.0196 59 Total 0.0520 211 0.0196 82 Net Annual Benefits 129 D = Vietnamese Dong, m = meter, N = north, S = South, w/o = without. Source: OEM.

Appendix 5 55

Table A5.21: Economic Internal Rate of Return (EIRR) (constant 2002 D billion)

Calendar Project Investment Capital Incremental Total Incremental Project Year Year Cost Reinv O&M Cost Benefit Cash Flow

1994 1 24.6 24.6 (24.5)1995 2 16.6 16.6 (16.6)1996 3 19.8 (0.5) 19.2 (19.2)1997 4 66.1 (1.1) 65.0 (65.0)1998 5 78.4 (1.7) 76.6 (76.6)1999 6 114.2 (2.7) 111.5 (111.5)2000 7 98.4 79.9 (3.5) 174.8 258.9 84.22001 8 58.6 (4.0) 54.6 258.9 204.32002 9 (4.0) (4.0) 258.9 262.92003 10 (4.0) (4.0) 258.9 262.92004 11 (4.0) (4.0) 258.9 262.92005 12 95.3 (4.0) 91.3 258.9 167.62006 13 (4.0) (4.0) 258.9 262.92007 14 (4.0) (4.0) 258.9 262.92008 15 (4.0) (4.0) 258.9 262.92009 16 (4.0) (4.0) 258.9 262.92010 17 95.3 (4.0) 91.3 258.9 167.62011 18 (4.0) (4.0) 258.9 262.92012 19 (4.0) (4.0) 258.9 262.92013 20 (4.0) (4.0) 258.9 262.92014 21 (4.0) (4.0) 258.9 262.92015 22 95.3 (4.0) 91.3 258.9 167.62016 23 (4.0) (4.0) 258.9 262.92017 24 (4.0) (4.0) 258.9 262.92018 25 (4.0) (4.0) 258.9 262.92019 26 (4.0) (4.0) 258.9 262.92020 27 95.3 (4.0) 91.3 258.9 167.62021 28 (4.0) (4.0) 258.9 262.92022 29 (4.0) (4.0) 258.9 262.92023 30 (4.0) (4.0) 258.9 262.9

EIRR 35.7%D = Dong, O&M = operations and maintenance, Reinv = reinvestment. a 25% of civil works and equipment cost added every five years to cover major repairs Source: OEM.

56 Appendix 5

Table A5.22: Overall Economic Internal Rate of Return (EIRR)

(constant 2002 D billion)

Calendar Project Investment Capital Incremental Total Incremental Project Year Year Cost Reinvestment O&M Cost Benefit Cashflow

1994 1 53.1 0.0 53.1 (2.3) (55.4) 1995 2 47.0 0.0 47.0 (2.4) (49.4) 1996 3 120.0 (1.7) 118.4 (4.4) (122.8) 1997 4 167.2 (3.4) 163.8 0.3 (163.4) 1998 5 231.1 (5.2) 225.9 50.0 (175.9) 1999 6 252.1 (6.2) 245.9 61.9 (184.0) 2000 7 183.8 79.9 (7.0) 256.7 307.7 51.0 2001 8 95.7 (8.3) 87.4 304.9 217.4 2002 9 10.0 (8.3) 1.7 366.1 364.4 2003 10 9.5 (8.3) 1.2 338.9 337.7 2004 11 9.5 (8.3) 1.2 305.3 304.2 2005 12 127.6 (8.3) 119.3 387.3 268.0 2006 13 0.0 (8.3) (8.3) 350.5 358.8 2007 14 0.0 (8.3) (8.3) 341.8 350.1 2008 15 0.0 (8.3) (8.3) 341.8 350.1 2009 16 0.0 (8.3) (8.3) 341.8 350.1 2010 17 149.5 (8.3) 141.2 341.8 200.6 2011 18 0.0 (8.3) (8.3) 341.8 350.1 2012 19 0.0 (8.3) (8.3) 341.8 350.1 2013 20 0.0 (8.3) (8.3) 341.8 350.1 2014 21 0.0 (8.3) (8.3) 341.8 350.1 2015 22 149.5 (8.3) 141.2 341.8 200.6 2016 23 0.0 (8.3) (8.3) 341.8 350.1 2017 24 0.0 (8.3) (8.3) 341.8 350.1 2018 25 0.0 (8.3) (8.3) 341.8 350.1 2019 26 0.0 (4.3) (4.3) 341.8 346.1 2020 27 149.5 (4.3) 145.3 341.8 196.6 2021 28 (4.3) (4.3) 341.8 346.1 2022 29 (4.3) (4.3) 341.8 346.1 2023 30 (4.3) (4.3) 341.8 346.1

EIRR 22.7% D = Vietnamese dong, O&M = operations and maintenance. Source: OEM.

Appendix 5 57

Table A5.23: Estimated Economic Prices for Internationally Traded Outputs

Item 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Rice (export parity current $)a Thailand 321 315 367 388 321 285 267 205 222 218 213 251 209 198 Viet Nam 214 267 285 244 273 227 192 168 224 191 186 220 183 174MUV index (2002 = 1.00) 1.19 1.26 1.19 1.11 1.07 1.07 1.04 1.01 1.00 1.08 1.15 1.19 1.16 1.14Rice FOB Haiphong (2002 $) $/t 254 335 340 271 292 242 200 170 224 205 251 209 198Adjusted for Quality b $/t 229 302 306 244 263 218 180 153 201 184 193 226 188 179 D/kg 3,548 4,675 4,746 3,778 4,079 3,381 2,791 2,366 3,123 2,859 2,988 3,505 2,910 2,769Losses and Exporter's Margin D/kg 71 93 95 76 82 68 56 47 62 57 60 70 58 55Ex-Haiphong Price D/kg 3,477 4,581 4,651 3,702 3,998 3,313 2,735 2,319 3,060 2,802 2,928 3,435 2,852 2,713Freight Project Area to Haiphong D/kg 240 240 240 240 240 240 240 240 240 240 240 240 240 240Milling Cost (net of bran value D25) D/kg 30 30 30 30 30 30 30 30 30 30 30 30 30 30Handling Charges within Project Area D/kg 40 40 40 40 40 40 40 40 40 40 40 40 40 40Ex-mill D/kg 3,167 4,271 4,341 3,392 3,688 3,003 2,425 2,009 2,750 2,492 2,618 3,125 2,542 2,403

Conversion to Paddy 65% D/kg 2,059 2,776 2,822 2,205 2,397 1,952 1,576 1,306 1,788 1,620 1,702 2,031 1,652 1,562Storage, Handling, and Transport D/kg 30 30 30 30 30 30 30 30 30 30 30 30 30 30Economic Farmgate Price D/kg 2,029 2,746 2,792 2,175 2,367 1,922 1,546 1,276 1,758 1,590 1,672 2,001 1,622 1,532Financial Farmgate Price (from RRA) 2,200 Maize (import parity) No 2 Yellow, Gulf Ports 2002$/t 109 109 109 109 108 98 91 97 99 98 97 84 82 88Shipping to Haiphong $/t 30 30 30 30 30 30 30 30 30 30 30 30 30 30CIF Haiphong $/t 139 139 139 139 138 128 121 127 129 128 127 114 112 118 D/kg 2,155 2,155 2,155 2,155 2,139 1,982 1,874 1,965 2,002 1,982 1,970 1,768 1,734 1,822Losses and Importer's Margin 43 43 43 43 43 40 37 39 40 40 39 35 35 36Ex-Haiphong Price D/kg 2,198 2,198 2,198 2,198 2,182 2,022 1,911 2,005 2,042 2,021 2,010 1,804 1,769 1,858Freight to Local Market (net) D/kg 240 240 240 240 240 240 240 240 240 240 240 241 242 243Economic Farmgate Price D/kg 2,438 2,438 2,438 2,438 2,422 2,262 2,151 2,245 2,282 2,261 2,250 2,045 2,011 2,101Farmgate Financial Price from RRA D/kg 2,306 CIF = cost insurance and freight, FOB = free on board, MUV = manufacturing unit value, No. = number, RRA = rapid rural appraisal.a Export values (1994–2003) from FAO Agristat data, 2004-07 from WB Commodity Price Projections.

214

b Average markdown for lower quality of local sales = 10%. Source: World Bank. April 2005. Commodity Price Projections.

Table A5.24: Estimated Economic Prices for Internationally Traded Inputs

Item 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Urea FOB Europe (bagged) $/t 148 212 205 146 103 78 104 101 104 2002$/t 125 169 172 131 96 73 100 100 97 133 157 152 147 140Shipping to Haiphong $/t 30 30 30 30 30 30 30 30 30 30 30 30 30 30CIF Haiphong $/t 178 242 235 176 133 108 134 131 134 30 30 30 30 30 D/kg 2,759 3,751 3,643 2,728 2,063 1,671 2,075 2,031 2,073 465 465 465 465 465Local Handling and Transport Costs D/kg 300 300 300 300 300 300 300 300 300 300 300 300 300 300Economic Farmgate Price D/kg 3,059 4,051 3,943 3,028 2,363 1,971 2,375 2,331 2,373 765 765 765 765 765Triple Superphosphate (TSP) TSP (bulk Gulf) $/t 134 135 135 136 137 137 142 140 138 Estimated 44% Phosphate Bagged $/t 114 115 115 116 116 117 120 119 137 143 167 161 156 149 2002$/t 114 115 115 116 116 117 120 119 137 143 167 161 156 149Shipping to Haiphong $/t 30 30 30 30 30 30 30 30 30 30 30 30 30 30CIF Haiphong $/t 144 145 145 146 146 147 150 149 167 173 197 191 186 179 D/kg 2,233 2,240 2,248 2,256 2,264 2,271 2,329 2,310 2,595 2,689 3,057 2,957 2,879 2,778Local Handling and Transport Costs D/kg 300 300 300 300 300 300 300 300 300 300 300 300 300 300Economic Farmgate Price D/kg 2,533 2,540 2,548 2,556 2,564 2,571 2,629 2,610 2,895 2,989 3,357 3,257 3,179 3,078Potassium Chloride (KCl) $/t 109 112 115 117 120 123 126 122 118 147 145 143 143 143 2002$/t 109 112 115 117 120 123 126 122 117 109 112 117 117 116Shipping to Haiphong $/t 30 30 30 30 30 30 30 30 30 30 30 30 30 30CIF Haiphong $/t 139 142 145 147 150 153 156 152 147 139 142 147 147 146 D/kg 2,157 2,200 2,243 2,286 2,329 2,372 2,415 2,356 2,279 2,151 2,198 2,283 2,279 2,259Local Handling and Transport Costs D/kg 300 300 300 300 300 300 300 300 300 300 300 300 300 300Economic Farmgate Price D/kg 2,457 2,500 2,543 2,586 2,629 2,672 2,715 2,656 2,579 2,451 2,498 2,583 2,579 2,559CIF = cost insurance and freight, D = Vietnamese dong, FOB = free on board, kg = kilogram, t = ton. Source: World Bank. April 2005. Commodity Price Projections.

58 Appendix 5

Table A5.25: Summary of Economic Prices for Project Outputs and Inputs

Item 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Outputs Paddy D/kg 2,029 2,746 2,792 2,175 2,367 1,922 1,546 1,276 1,758 1,590 1,672 2,001 1,622 1,532 Maize D/kg 2,438 2,438 2,438 2,438 2,422 2,262 2,151 2,245 2,282 2,261 2,250 2,045 2,011 2,101 Potatoes D/kg 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 Other D/kg 2,438 2,438 2,438 2,438 2,438 2,438 2,438 2,438 2,438 2,438 2,438 2,438 2,438 2,438 Other D/kg 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Other D/kg 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Seed Paddy D/kg 4,057 5,493 5,584 4,350 4,734 3,845 3,092 2,552 3,516 3,180 3,343 4,002 3,245 3,064 Maize D/kg 4,875 4,875 4,875 4,875 4,844 4,524 4,303 4,489 4,564 4,523 4,499 4,090 4,021 4,202 Sweet Potatoes (retained) D/kg Other D/kg 4,875 4,875 4,875 4,875 4,875 4,875 4,875 4,875 4,875 4,875 4,875 4,875 4,875 4,875 Fertilizer Urea D/kg 3,059 4,051 3,943 3,028 2,363 1,971 2,375 2,331 2,373 765 765 765 765 765 Phosphate D/kg 2,533 2,540 2,548 2,556 2,564 2,571 2,629 2,610 2,895 2,989 3,357 3,257 3,179 3,078 Potassium Chloride (KCl) D/kg 2,533 2,540 2,548 2,556 2,564 2,571 2,629 2,610 2,895 2,989 3,357 3,257 3,179 3,078 Organic D/kg 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Water Charges and Other Costs/Crop D'000/ha 251 251 251 251 251 251 251 251 251 251 251 251 251 251 Herbicide D'000/l 16 16 16 16 16 16 16 16 16 16 16 16 16 16 Fungicide D'000/l 200 200 200 200 200 200 200 200 200 200 200 200 200 200 Insecticide D'000/l 21 21 21 21 21 21 21 21 21 21 21 21 21 21 Cultivation D'000/ha 600 600 600 600 600 600 600 600 600 600 600 600 600 600 Labor D'000/day 20 20 20 20 20 20 20 20 20 20 20 27 27 27 Family D'000/day 15 15 15 15 15 15 15 15 15 15 15 15 15 15 D = Vietnamese dong, kg = kilogram, ha = hectare, l = liter. Source: World Bank, Commodity Price Projections, June 2003.

Appendix 6 59

OTHER STATISTICS

Table A6.1: Average Poverty Levels by Region (% of households)

Region Rural Urban Northern Upland 64 17 Central Highlands 59 20 North Central Coast 54 16 Viet Nam 46 15 South Central Coast 44 16 Mekong River Delta 40 17 Red River Delta 38 10 Southeast 26 11 Source: Minot, N. and B. Baulch. 2002. The Spatial Distribution of Poverty in Vietnam

and the Potential for Targeting. World Bank WPS 2829 (based on the Vietnam Living Standards Sample Survey).

Table A6.2: Viet Nam Paddy Production, Yield, and Apparent Consumption

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Trenda

Area Harvested (mil ha) 6.6 6.8 7.0 7.1 7.4 7.7 7.7 7.5 7.5 7.4 7.4 1.2%Production (mil t) 23.5 25.0 26.4 27.5 29.1 31.4 32.5 32.1 34.4 34.5 35.5 4.2%Yield (t/ha) 3.57 3.69 3.77 3.88 3.96 4.10 4.24 4.29 4.59 4.63 4.80 3.0% Exports of Rice (mil t) 2.0 2.0 3.0 3.6 3.7 4.5 3.5 3.7 3.2 3.8 4.1 6.6%Paddy Equivalent (mil t) 3.1 3.1 4.6 5.5 5.7 6.9 5.3 5.7 5.0 5.9 6.5 Domestic Consumption (mil t) 20.5 21.9 21.8 22.0 23.4 24.5 27.2 26.4 29.5 28.7 29.0 3.9% Population (million) 70.8 72.0 73.2 74.3 75.5 76.6 77.6 78.7 79.7 80.8 81.8 1.4% Apparent Consumption

(kg/ person) 289 304 298 296 310 319 350 335 370 355 355 2.4%

ha = hectare, kg = kilogram, mil = million, t = ton. a Calculated using LOGEST -1 in Microsoft Excel. Sources: Food and Agriculture Organization for area, production, yield, and export data; Asian Development Bank

(ADB) Developing Member Country (DMC) indicators database for population (2003/04 estimated).

Appendix 6 60

Table A6.3: Rice Export Quantity and Value for Major Exporters

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Trenda

(%)Export Quantity (million t) Australia 0.6 0.5 0.6 0.7 0.6 0.7 0.6 0.6 0.3 0.1 (9.0) India 0.9 4.9 2.5 2.4 5.0 1.9 1.5 2.2 5.1 3.4 5.8 Thailand 4.9 6.2 5.5 5.6 6.5 6.8 6.1 7.7 7.3 8.4 5.1 United States 2.8 3.1 2.6 2.3 3.1 2.7 2.7 2.6 3.3 3.8 2.1 Viet Nam 2.0 2.0 3.0 3.6 3.7 4.5 3.5 3.7 3.2 3.8 6.6 Other 6.8 5.8 5.6 6.5 9.9 8.7 9.1 10.0 8.4 8.0 4.8World 18.0 22.5 19.7 21.0 28.8 25.3 23.6 26.8 27.6 27.5 4.3 Export Value ($ billion) Australia 0.2 0.2 0.2 0.3 0.2 0.3 0.2 0.2 0.1 0.1 (11.5) India 0.4 1.4 0.9 0.9 1.5 0.7 0.7 0.7 1.2 0.9 2.2 Thailand 1.6 2.0 2.0 2.2 2.1 2.0 1.6 1.6 1.6 1.8 (1.1) United States 1.0 1.0 1.0 0.9 1.2 0.9 0.8 0.7 0.8 1.0 (2.4) Viet Nam 0.4 0.5 0.9 0.9 1.0 1.0 0.7 0.6 0.7 0.7 2.9 Other 2.7 2.4 2.7 2.6 3.5 3.0 2.5 3.2 2.4 2.5 0.1World 6.3 7.5 7.7 7.8 9.6 7.9 6.5 7.0 6.8 7.1 (0.4) Export Price ($/ton) Australia 382 398 430 430 409 401 369 301 261 407 (2.8) India 433 288 354 381 304 383 428 322 240 263 (3.4) Thailand 321 315 367 388 321 285 267 205 222 218 (5.9) United States 360 323 390 406 388 354 306 274 237 272 (4.4) Viet Nam 214 267 285 244 273 227 192 168 224 191 (3.5) Other 387 409 479 402 351 342 276 321 281 317 (4.5)World 348 332 389 370 331 312 277 261 246 257 (4.6)t = ton. a Calculated using LOGEST -1 in Microsoft Excel. Source: FAO database - http://faostat.fao.org/faostat/collections?subset=agriculture. .