Document of The World Bank Report No: ICR00002752 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-41150 IDA-47100) ON TWO CREDITS IN THE AMOUNT OF XDR 31.4 MILLION and XDR 42 MILLION (US$ 45.87 MILLION and US$ 65.27 MILLION EQUIVALENT) TO THE SOCIALIST REPULBIC OF VIETNAM FOR A RED RIVER DELTA RURAL WATER SUPPLY AND SANITATION PROJECT December 19, 2013 Vietnam Sustainable Development Unit Sustainable Development Department East Asia and Pacific Region CURRENCY EQUIVALENTS (Exchange Rate Effective December 1, 2013) Currency Unit = Vietnamese Dong (VND) VND 1.00 = US$0.0001 US$ 1.00 = VND 21,105 FISCAL YEAR ABBREVIATIONS AND ACRONYMS ABD Asian Development Bank CAS Country Assistance Strategy CLTS Community-Led Total Sanitation CPC Commune People’s Committee CPO Central Project Office CPS Country Partnership Strategy DARD Department of Agriculture and Rural Development DPC District People’s Committee EIRR Economic Internal Rate of Return EPC Engineering, Procurement and Construction (Design-build contracts) EMDP Ethnic Minority Development Plan FIRR Financial Internal Rate of Return GoV Government of Vietnam HSP Household Sanitation Promoters ICB International Competitive Bidding ICR Implementation Completion Report IDA International Development Association IEC Information, Education, Communication IFR Interim Financial Report ISR Interim Status Reports JSC Joint Stock Company KAP Knowledge, Attitudes and Practices KPI Key Performance Indicator MARD Ministry of Agriculture and Rural Development M&E Monitoring and Evaluation MoF Ministry of Finance MoLISA Ministry of Labor, Invalids and Social Affairs MPI Ministry of Planning and Investment NCERWASS National Centre for Rural Water Supply and Sanitation NCB National Competitive Bidding ODA Official Development Assistance O&M Operation and Maintenance PAD Project Appraisal Document PAP Project Affected People PCERWASS Provincial Centre for Rural Water Supply and Sanitation PDO Project Development Objective PPC Provincial People’s Committee PPMU Provincial Project Management Unit P4R NTP Results-Based Rural Water Supply and Sanitation Under the National Target Program RAP Resettlement Action Plan RRD RWSSP Red River Delta Rural Water Supply and Sanitation Project RWSS Rural Water Supply and Sanitation RWSS 2020 National Rural Water Supply and Sanitation Strategy up to year 2020 RWSSE Rural Water Supply and Sanitation Enterprise SRF Sanitation Revolving Fund TOR Terms of Reference TTL Task Team Leader US$ United Stated Dollar VDB Vietnam Development Bank VND Vietnamese Dong WSS Water Supply and Sanitation WU Women’s Union WB World Bank Vice President: Axel van Trotsenburg Country Director: Victoria Kwakwa Sector Manager: Jennifer Sara Project Team Leader: Hoa Thi Hoang ICR Team Leader: Habab Taifour VIETNAM RED RIVER DELTA RURAL WATER SUPPLY AND SANITATION PROJECT CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design ............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 5 3. Assessment of Outcomes .......................................................................................... 14 4. Assessment of Risk to Development Outcome......................................................... 19 5. Assessment of Bank and Borrower Performance ..................................................... 20 6. Lessons Learned ....................................................................................................... 24 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 26 Annex 1. Project Costs and Financing .......................................................................... 27 Annex 2. Outputs by Component ................................................................................. 28 Annex 3. Economic and Financial Analysis ................................................................. 32 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 36 Annex 5. Beneficiary Survey Results ........................................................................... 38 Annex 6. Stakeholder Workshop Report and Results................................................... 40 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 41 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 54 Annex 9. Revised Results Agreement ......................................................................... 55 MAP A. Basic Information VN-Red River Delta Country: Vietnam Project Name: Rural Water Supply and Sanitation Project Project ID: P077287 L/C/TF Number(s): IDA-41150,IDA-47100 ICR Date: 12/19/2013 ICR Type: Core ICR SOCIALIST Lending Instrument: APL Borrower: REPUBLIC OF VIETNAM Original Total XDR 31.40M Disbursed Amount: XDR 68.41M Commitment: Revised Amount: XDR 68.41M Environmental Category: B Implementing Agencies: Ministry of Agriculture and Rural Development Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 10/10/2002 Effectiveness: 05/31/2006 05/31/2006 Appraisal: 02/03/2005 Restructuring(s): 03/10/2010 Approval: 09/15/2005 Mid-term Review: 10/19/2009 11/03/2009 Closing: 06/30/2011 06/30/2013 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Low or Negligible Bank Performance: Satisfactory Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 3 3 Sanitation 14 14 Sub-national government administration 5 5 Wastewater Treatment and Disposal 18 18 Water supply 60 60 Theme Code (as % of total Bank financing) Administrative and civil service reform 20 20 Other human development 40 40 Rural services and infrastructure 40 40 E. Bank Staff Positions At ICR At Approval Vice President: Axel van Trotsenburg Jemal-ud-din Kassum Country Director: Victoria Kwakwa Klaus Rohland Sector Manager: Jennifer J. Sara Keshav Varma Project Team Leader: Hoa Thi Hoang Richard W. Pollard ICR Team Leader: Habab Taifour ICR Primary Author: Habab Taifour Daisuke Miura F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The development objective is to improve water and household level sanitation services and their effective use in selected provinces in ways that are financially, technically, and environmentally sustainable, thereby contributing to poverty alleviation in participating rural communities. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Number of people in project areas with access to "improved water sources "and Indicator 1 : hygienic sanitation facilities and percentage of these that are poor Value 106,786.00; 15,000; 800,000; 300,000; 950,000; 1,289,674; 960,648; quantitative or N/A% 20% 600,000; 20% 100% Qualitative) Date achieved 06/30/2005 09/30/2005 03/10/2010 06/30/2013 The result for access to improved water sources exceeded AF target values by Comments 30.5%; achievement of hygienic sanitation facilities exceeded AF targets by (incl. % 160%. At project closure 100% of poor households in project areas gained access achievement) to WSS. The percentage of people in project areas with access to "improved water Indicator 2 : sources" Value quantitative or N/A 20% 20% 80% Qualitative) Date achieved 06/30/2005 09/30/2005 03/10/2010 06/30/2013 Comments 80% of total population of 4 targeted provinces now has access to improved (incl. % water sources. This achievement far exceeds Original project targets, which achievement) aimed to reach 20% of total population of phase 1 provinces. The number of new piped household water connections that have resulted from Indicator 3 : the project intervention Value quantitative or N/A N/A 200,000 255,165 Qualitative) Date achieved 06/30/2005 09/30/2005 03/10/2010 06/30/2013 Comments At MTR this indicator was added to harmonize with Core Sector Indicators. The (incl. % target set was 200,000. At project closure 255, 165 household water connections achievement) were realized. Indicator 4 : The number of RWSSEs established, and the financial viability of the enterprises Value quantitative or 0 N/A 4 4 Qualitative) Date achieved 06/30/2005 09/30/2005 03/10/2010 06/30/2013 Comments 4 RWSSEs that are fully operational with 20 year business plans in place, high (incl. % tariff recuperation rate (95%) that covers O&M, depreciation fund and on track achievement) to meeting sustainability targets The percentage of people in project communes who have adopted safe hygiene, Indicator 5 : and sanitation behaviors, based on participatory assessment and Knowledge, Attitudes and Practices (KAP) Value quantitative or estimated 7% N/A 100% 88.4% Qualitative) Date achieved 06/30/2005 09/30/2005 03/10/2010 06/30/2013 The KAP study carried out from 09/2009 – 06/2011 revealed that 88.4% of Comments households in project areas have knowledg of safe and hygienic sanitation (incl. % facilities. Results from impact evaluation at closure indicate higher adoption achievement) rates. (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years number of people in project areas with access to "improved water sources" Indicator 1 : (piped water/household connections) Value (quantitative 30,000 N/A 850,000 1,119,652 or Qualitative) Date achieved 06/30/2005 09/30/2005 03/10/2010 06/30/2013 Comments Achievement of household connections to tap water exceeded AF targets for (incl. % indicator introduced during AF by 31.7% achievement) Percentage of those who are poor in project areas provided access to improve Indicator 2 : water sources Value (quantitative N/A 20% 20% 100% or Qualitative) Date achieved 06/30/2005 09/30/2005 03/10/2010 06/30/2013 This indicator was originally combined with indicator 1 in PAD. At AF stage it Comments was separated to capture % of poor people who received access to improved (incl. % WSS. Based on GoV statistics 100% of poor HH in project area were provided achievement) access to WSS services The number of additional people in project areas with access to hygiene Indicator 3 : sanitation facilities Value (quantitative 15,000 30,000 600,000 960,648 or Qualitative) Date achieved 06/30/2005 09/30/2005 03/10/2010 06/30/2013 Comments Due to concerted efforts (sanitation and hygiene campaigns) & success of SRF, # (incl. % of people in project areas with access to hygiene sanitation facilities surpassed achievement) Original targets by 220%. The final results surpassed AF targets by 160%. The number of new piped household water connections that have resulted from Indicator 4 : the project interventions Value (quantitative N/A N/A 200,000 255,165 or Qualitative) Date achieved 06/30/2005 09/30/2005 03/10/2010 06/30/2013 Comments At MTR this indicator was added to harmonize with Core Sector Indicators. The (incl. % target set was 200,000. At project closure 255, 165 household water connections achievement) were realized. The number of household that borrowed from revolving fund to improve Indicator 5 : sanitation facilities Value (quantitative N/A N/A 40,000 43,946 or Qualitative) Date achieved 06/30/2005 03/10/2010 03/10/2010 06/30/2013 Comments Number of households benefiting from Sanitation Revolving Fund and Savings (incl. % group surpassed targets by 10%. Some households took multiple loans and as a achievement) result 48,215 water supply and sanitation facilities were constructed or upgraded Indicator 6 : The number of public sanitation facilities constructed Value (quantitative 0 N/A 300 661 or Qualitative) Date achieved 06/30/2005 09/30/2005 03/10/2010 06/30/2013 Comments This indicator was introduced at AF stage. Establishment of public sanitation (incl. % facilities surpassed AF target by 120%. achievement) The number of targeted communes that can demonstrate a positive and sustained Indicator 7 : improvement in hygiene knowledge, attitude, and practice in relation to water supply and sanitation facilities Value (quantitative 0 100 120 169 or Qualitative) Date achieved 06/30/2005 09/30/2005 03/10/2010 06/30/2013 At project design stage % of people was noted, frpm MTR onwards figures were Comments reported based on communes. At AF the target was 120 communes. At project (incl. % completion 169 communes have adopted sage hygiene and sanitation behavior, achievement) surpassing AF targets by 141% Indicator 8 : The number of RWSSEs that are financially viable Value (quantitative 0 N/A 4 4 or Qualitative) Date achieved 06/30/2005 09/30/2005 03/10/2010 06/30/2013 This indicator was revised to put in place the wording "financially viable" instead Comments of PAD indicator of "% of RWSSEs' costs for operation, maintenance and debt (incl. % repayment that is covered by revenue from water tariffs" (calculated as average achievement) for all RWSSEs) Indicator 9 : the number of utilities (RWSS enterprises) that the project is supporting Value (quantitative 0 4 4 4 or Qualitative) Date achieved 06/30/2005 09/30/2005 03/10/2010 06/30/2013 Comments (incl. % four fully operational RWSSEs have been supported by the project achievement) The degree of user satisfaction within targeted communities with services and Indicator 10 : advice offered them on water supply and sanitation services Value fully fully satisfactory (quantitative N/A satisfactory satisfactory (90%) or Qualitative) Date achieved 06/30/2005 09/30/2005 10/03/2010 06/30/2013 indicator in PAD listed targets in %. At AF stage targets were changed to Fully Comments satisfactory. User surveys were conducted on 4 point scale from highly (incl. % unsatisfactory to highly satisfactory. This measurement was deemed more achievement) realistic. 90% satisfaction Extent to which satisfactory oversight and quality control are achieved, as Indicator 11 : confirmed through supervision and independent monitoring Value moderately fully (quantitative N/A fully satisfactory satisfactory satisfactory or Qualitative) Date achieved 06/30/2005 09/30/2005 03/10/2010 06/30/2013 Monitoring was generally satisfactory by CPO. Implementation capacity during Comments initial stages was limited and quality needed further enhancement. Throughout (incl. % project implementation, capacity was strengthened and quality control was achievement) deemed to be satisfactory. G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 03/23/2006 Satisfactory Satisfactory 0.00 2 10/18/2006 Satisfactory Moderately Satisfactory 0.60 3 05/07/2007 Satisfactory Satisfactory 0.91 4 12/19/2007 Moderately Satisfactory Moderately Satisfactory 3.34 5 11/25/2008 Satisfactory Moderately Satisfactory 7.41 6 08/01/2009 Satisfactory Moderately Satisfactory 10.36 7 01/26/2010 Satisfactory Satisfactory 18.85 8 01/05/2011 Satisfactory Satisfactory 31.60 9 02/27/2012 Satisfactory Satisfactory 60.54 10 12/01/2012 Satisfactory Satisfactory 78.43 11 06/22/2013 Satisfactory Satisfactory 95.07 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions Additional financing (XDR 42 Million); revision of closing date to June 30, 2013; revision 03/10/2010 S S 20.39 of disbursement schedule; resvision of results framework to harmonize with Bank's core Sector Indicators I. Disbursement Profile 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. Country and Sectoral context. In 2000, the Government of Vietnam (GoV) made concerted efforts to improve rural infrastructure and developed Vietnam Development Goals, based on the Millennium Development Goals. As part of this initiative, GoV developed the Rural Water Supply and Sanitation Strategy from 2000 up to the year 2020 (RWSS 2020). At the time of Appraisal in 2006 Vietnam’s economy was experiencing rapid growth. The average per capita income was estimated at $620 and life expectancy at 70 years. While notable progress was made through targeted government interventions, there were significant disparities in access to basic services between urban and rural populations. At the time, 74% of the population was concentrated in rural areas; according to Vietnam Household Living Standards Survey (2004) only 48% of rural households had access to clean water, in comparison with 82% of households living in urban areas. 2. Despite concerted efforts by government-led programs, access to safe water supply and hygienic sanitation facilities in rural areas was among the lowest in East Asia. It was estimated that only 16% of rural households had access to water supplies meeting clean water standards; and access to hygienic sanitation facilities was equally low. At the time, many rural households utilized untreated water from dug wells, rivers, ponds, streams or irrigation canals. Existing rural water supply and sanitation infrastructure tended to be inappropriately designed as well as poorly constructed and maintained. In many cases, schemes were deemed financially unsustainable as tariffs did not adequately cover the cost of operation, maintenance and repairs; and were dependent on substantial subsidies to continue operation. Higher population densities in the Red River and Mekong Deltas indicated the presence of rural poor households residing in these areas. In 2002, nearly 3 million people in the Red River Delta were classified as poor, which accounted for 17 percent of all poor households in Vietnam. The four provinces included in Phase-1 of the Red River Delta Rural Water Supply and Sanitation Project (RRD RWSSP) were estimated to have poverty rates ranging from 23% to 37%. In these areas, poor rural health was affected by the prevalence of water-borne diseases and recorded child malnutrition rates were higher relative to neighboring countries. Underlying cause of these health issues was related to the availability and use of safe water and sanitation and personal hygiene. Productivity of the rural population was also affected by poor health; increased burden placed on women to care for those with diarrhea and other water-borne diseases as well as labor required primarily from women for the collection and handling of water. 3. Rationale for Bank involvement. The aim of the project was to support the Government of Vietnam in operationalizing its RWSS 2020 through a phased investment program. The RWSS 2020 was deemed to provide a clear, politically-supported policy framework and approach that underpinned the adaptable program design of this project. The project was in line with IDA’s strategic approach in Vietnam to support projects that feature demand-responsiveness, decentralization, community participation and that build local institutional capacity. The phased implementation lending instrument provided the flexibility and resources needed to further develop specific approaches and local capacities that could progressively expand the program. 1 4. The Bank’s involvement rested on added value from (i) experience with participatory methodologies developed and applied at scale in rural water supply and sanitation (RWSS) projects in the region; (ii) provision of technical advice, critical review, field supervision, and follow-up dialogue to provide independent feedback; (c) financial support for infrastructure and social services; (d) links to global and regional research and promotion programs, such as the global hand washing initiative; and (e) access to knowledge concerning global and regional best practice in the water supply, sanitation, and health sectors. 5. Higher level Objectives. The project was consistent to the 2003-2006 CAS theme of enhancing equitable, socially inclusive and sustainable development. Within that theme, the project sought to help reduce the rural/urban development gap, and contribute to gender equality and the advancement of women. It was intended to contribute to the theme of promoting good governance by increasing the capacity of communes and local governments to make development choices through transparent and democratic processes, and to plan and manage development initiatives. Additionally, it was intended to promote the development and operation of transparent and accountable commercially viable RWSS enterprises. The project was expected to support Vietnam’s efforts to achieve the Millennium Development Goals, in particular Goal 7. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 6. The development objective is to improve water and household level sanitation services and their effective use in selected provinces in ways that are financially, technically, and environmentally sustainable, thereby contributing to poverty alleviation in participating rural communities. 7. The following key outcome indicators were reflected in the PAD Results Framework and Monitoring: • The number of people in project areas with access to “improved water sources” 1/ and hygienic sanitation facilities2, and the number of these that are poor; • The percentage of people in project areas with access to “improved water sources”; • The number of new piped household water connections that have resulted from the project intervention; • The number of Rural Water Supply and Sanitation Enterprises (RWSSEs) established, and the financial viability of the enterprises; 1 Improved water sources includes piped includes piped household connections (house or yard connection), public standpipe, boreholes, protected dug well and rainwater collection facilities. These sources must meet quality requirements: no color, smell, strange taste and no component that can affect people’s health. Water from these sources can be used as drinking water after being boiled. Source : NATIONAL RURAL CLEAN WATER SUPPLY AND SANITATION STRATEGY UP TO YEAR 2020 (THIRD UPDATED VERSION); November 3, 2010. 2 Hygienic sanitation facilities, as defined by Decision No. 08/QD-BYT, have to meet the following requirements: (i) human feces isolated from human, animal and insect contact; (ii) facilities should that separate agents in feces (viruses, bacteria, unicellular organisms and worm eggs) from surrounding environment. 2 • The percentage of people in project communes who have adopted safe hygiene and sanitation behaviors, based on participatory assessment and Knowledge, Attitude, and Practices (KAP) Survey. 8. Key intermediate indicators, as reflected in the main text of the PAD, were: • Targeted rural communes progressively have new or improved water supply, new or improved sanitation, and new or improved household drainage; • Targeted rural commune populations progressively have adopted safe hygiene behavior and are effectively using water supply and sanitation (WSS) infrastructure; • RWSSEs, community, Government and other institutional entities at commune, district and provincial level involved in the project, progressively have the capacity and capability to play appropriate roles in support of all stages of sustainable water supply, sanitation, household drainage, improved hygiene and capacity building; and • Each Provincial Project Management Unit (PPMU) and Central Project Office (CPO) is progressively able to successfully manage and support the project (and similar ones). 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 9. The project outcome and intermediate indicators were revised following Mid Term Review (MTR) as part of restructuring and Additional Financing (AF). This revision sought to clarify terminology and harmonize project indicators with the Bank’s Core Sector Indicators, which were developed in July 2009. Revised indicators are listed in Annex 9. 1.4 Main Beneficiaries 10. The project’s primary target group was 800,000 households in 120 communes across 4 provinces in the Red River Delta, namely Nam Dinh, Hai Duong, Thai Binh and Ninh Binh. Other beneficiaries that were expected to benefit from support and capacity building activities included: Central Project Office (CPO), Provincial Project Management Units (PPMUs), Provincial Center for Rural Water Supply and Sanitation (PCERWASS), District Focal Persons and Hygiene and Sanitation Promotion Teams, Provincial Women’s Unions, Development Assistance Fund (DAF), Rural Water Supply and Sanitation Enterprises (RWSSEs), Departments of Agriculture and Rural Development (DARDs) National and Provincial RRD RWSS Project Steering Committees, Provincial Peoples Committees (PPCs) and Commune Peoples Committees (CPCs). Primary target group was expanded to serve 950,000 households within the same 4 provinces after the MTR, during the AF process. 1.5 Original Components (as approved) 11. Component 1: Water and Sanitation Infrastructure Development (US$45.82 million): this component’s objectives were to respond to growing rural/urban services gap by improving access to safe water supplies and hygienic sanitation facilities in selected rural areas. 25 to 30 communes were expected to develop improved water and sanitation infrastructure from each of the phase-1 provinces. 3 12. Component 2: Hygiene and Sanitation Behavior Change (US$1.73 million): this component’s objectives were to provide a range of hygiene and sanitation promotion interventions aimed at optimizing the effective use of improved water and sanitation infrastructure, and the adoption of safe hygiene behaviors in all households within project areas through commune and school-based programs. 13. Component 3: Strengthening the Capacity of Community and Local Government Institutions and Management Entities ($US0.89 million): The objective of this component was to address deficiencies in fund transfer, institutional capacities, and the effectiveness of decentralized investment through training and technical assistance. Capacity building activities were anticipated to support RWSSEs established under the project. Capacity building activities were also expected to support provincial government line agencies, commune-level government, and commune-level water development groups and cooperatives. 14. Component 4: Support for Project Management, Monitoring and Evaluation (US$1.67 million): the objective of this component was to manage financing and technical assistance for the establishment and functioning of Provincial Project Management Units and a Central Project Office within the National Center for Rural Water Supply and Sanitation (NCERWASS) in Ministry of Agriculture and Rural Development (MARD). 1.6 Revised Components 15. Following the MTR, additional financing of US$65.27 million was added to Original IDA credit for reasons highlighted in section 1.7. The activities within each component remained unchanged. The outputs and targets associated with each component were revised accordingly in the Results Framework to reflect additional funds. Break down of costs per component can be found in Annex 1. 1.7 Other significant changes 16. Revision of project cost and financing following Mid-Term Review (MTR). Additional financing of US$65.27 million Credit from IDA and US$8.13 million from GoV was required to complete all activities in the 120 communes covered in Phase 1 and to achieve the project objectives. The additional funds were needed due to the following reasons: (i) high inflation from 2008-2009 led to sharp price escalation of building materials and as such unit costs exceeded those estimated at project appraisal; coupled with (ii) increase in water demand (from 40 liters/person/day to 80 L/C/D) and expansion of project scope and water scheme capacities (from 60% to 90% connection rate). Due to the following reasons in addition to underestimation during project design, unit costs estimated at appraisal (US$35) were far lower than actual costs during implementation (US$98). The provision of additional financing brought the total IDA loan contribution to US$111.14 million. The projected disbursement schedule was revised to reflect additional financing funds and a revised implementation schedule. 17. Extension of closing date. The project was extended from June 30, 2011 (original) to June 30, 2013 to allow for procurement and implementation using additional financing. The extension also provided additional time to compensate for delays caused by weak fiduciary 4 capacity during initial stages of implementation that subsequently delayed preparation of feasibility studies and technical designs. 18. Modification of procurement thresholds. (i)The threshold of National Competitive Bidding (NCB) method for goods and works was increased from US$100,000 to cost equivalent or more than US$300,000 per contract; and (ii) The threshold for International Competitive Bidding (ICB) method applied for goods and works was increased from a range of US$30,000 to US$2 million to US$300,000 and US$3 million respectively, per contract. This change was prompted as a response to the Bank-wide threshold increases in procurement procedures. 2. Key Factors Affecting Implementation and Outcomes 19. Project implementation was tailored to adhere to tenants of national sector policy, prioritize community empowerment, and introduce novel management modalities for water supply and sanitation that promote demand responsiveness as well as bring about decentralization and build local institutional capacity. Throughout the course of implementation the following factors contributed to project success and posed implementation challenges: 2.1 Project Preparation, Design and Quality at Entry 20. Background analysis: Country and sector priorities and lessons of earlier operations were taken into account. The project design was to be fully consistent with government priorities and was intended to be the first program to operationalize RWSS2020 strategy. Lessons learned from earlier activities in rural water supply sector in Vietnam, in neighboring countries and globally were incorporated into the Project design. First, community participation was considered to be a critical factor for ensuring sustained projected benefits. Second, it was deemed necessary to provide capacity building at all levels of project implementation to help local government agencies adapt to demand-responsive approach of the project. Capacity building was deemed crucial to familiarize stakeholders, particularly in communes and villages with project interventions in order to increase their engagement in planning, supervision and management of infrastructure and in establishment of legally recognized groups that represent community interests. 21. Assessment of the project design: Project preparation carried out detailed assessments and analysis to ensure project components strike an appropriate demand- responsive balance between water, sanitation and hygiene activities. Government of Denmark (Danida) provided a grant to support project preparation through a component of its Water Sector Support (Water SPS) Project. Through its country program for Vietnam, the Water and Sanitation Program (WSP), provided technical inputs and led the Bank’s preparation team for the project. The National Center for Rural Water Supply and Sanitation (NCERWASS) within MARD was assigned to be the coordinating agency, and the Director of NCERWASS was nominated to be the Director of the Project Preparation Unit. Institutional setup of the project implementation unit was adequately assessed and agreed upon by all levels of government. Grant funding was utilized to carry out the following project preparation activities: (i) overview of 12 Provinces (including eight provinces that are now part of the envisioned Phase 2, the Results-Based Rural Water Supply and Sanitation 5 under the National Target Program); (ii) pre-Feasibility Study Report; (iii) guidance for the other interested communes in 8 selected districts to prepare Feasibility Studies; (iv) project Implementation Plan; (v) Project Operations and Project Management Manuals; (vi) Feasibility Study Reports for 8 communes in 4 targeted provinces (including IEC, Socio- economic Surveys, Preliminary Engineering Designs, tariff estimates, and Willingness to Connect Studies); and (vii) other reports such as Environment Assessment Reports, Resettlement Reports, Ethnic Minority Strategy report, Socio-economic Analysis reports and Ability to Pay reports. These assessments ensured that concepts of demand responsiveness, decentralization, community participation and building local institutional capacity were well integrated into project design. As such, they provided a solid framework to design complementary components that fulfilled the targeted project objectives. Additionally, they provided a strong foundation to determine social and environmental impacts for which mitigation measures were subsequently well integrated into project design. 22. Quality at entry was tempered by availability of limited technical design studies and lack of agreement on proposed management models. Feasibility studies and detailed technical designs were completed for 8 out of 120 communes selected in the project scope. The remaining technical designs were to be prepared during project implementation. Weak fiduciary capacity delayed completion of subsequent batches of technical studies in a timely manner, which caused disruptions in implementation progress. Dialogue pertaining to management models carried over well into implementation phase, which also contributed to delays in establishing enterprises that were mandated to carry out technical designs and supervision of civil works. 23. Adequacy of government’s commitment and stakeholder involvement: Project preparation process devoted special attention to engaging stakeholders to ensure their inputs were adequately addressed in Project design. Information regarding the project was disseminated through a series of community consultations as well as through surveys, meetings, brochures, and leaflets. The preparation process made considerable efforts to promote gender balance. This was realized in project design management of sanitation revolving funds by Women’s Unions (WU). Targeting and inclusion of low income beneficiaries was considered through various mechanisms including: (i) flexible payment schedule of water supply contributions; (ii) access to soft credit to construct or upgrade sanitation facilities; and (iii) inclusion in IEC campaigns. 24. Risk assessment. Critical risks and possible controversial aspects were thoroughly vetted during the preparation process. Key risks were considered to be: (i) shift in government underlying strategy, which underpinned project preparation; (ii) prolonged economic setbacks that could potentially reduce or eliminate the viability of the financing strategy for the project. These risks were assessed and significant changes were considered unlikely. Risks to the project development objectives and proposed components were identified as: (a) Procurement management capacity; (b) Affordability by the poorest; (c) resistance to new institutional arrangements introduced; (d) uncertainty regarding legal/regulatory framework for establishing RWSSEs and modalities for consumers’ sharing ownership with Provincial Peoples Committees (PPCs) through commune-level representative bodies; (e) Insufficient local capacity to support community-based planning; (f) Women and the poor or other socially marginalized groups may be excluded from community decision-making and management of services; and (g) beneficiaries may not adopt good hygiene practices and therefore obviate some or all of the health benefits of 6 infrastructure improvements. The project put in place mitigation measures that for the most part helped safeguard implementation from substantial bottlenecks. Section 2.2 addresses how these measures performed during implementation. 25. There was no Quality Assurance Group (QAG) review of the project’s quality at entry. 2.2 Implementation Factors that contributed to success Sector arrangements and Community empowerment: 26. Strong commitment from national and local governments and efficient coordination between pertinent stakeholders contributed to success of project. The Central Project Office (CPO) formed within NCRWASS under MARD played the pivotal role of promoting inter-agency coordination. The CPO effectively brought together PPMUs, PPCs, District People’s Committees (DPCs), CPCs as well as representatives from central government agencies such as Ministry of Finance (MoF), Ministry of Planning and Investment (MPI) and institutions such as Vietnam Development Bank (VDB) and WUs. 27. Capacity building and community participation from early stages of project empowered local governments and beneficiaries and instilled strong sense of ownership. Community participation began at early stages during project preparation and implementation. Sensitization and awareness campaigns in targeted communities preceded project feasibility studies to garner community involvement and ensure their needs are met through project interventions. Throughout project implementation, numerous trainings, workshops and capacity-building activities were tailored to target different stakeholders. RDD RWSSP contributed to and benefited from this strong commitment and inter-governmental coordination by successfully building capacity of local governments and encouraging their active participation in all facets of project implementation. Project management arrangements: 28. Rural Water Supply and Sanitation Enterprises that are demand-responsive and financially sustainable. The establishment of enterprises in the form of joint stock companies proved to be highly suitable for this context. The decision to establish four enterprises at the provincial level struck an appropriate balance between decentralization and establishing viable institutions that do not pose to be an administrative burden in managing rural water supply and sanitation services. RWSSEs collaborated with local government and community officials to oversee construction of water treatment plants and installation of distribution networks. The involvement of communities (users) as well as local government as co-owners of the enterprises allowed them to meaningfully engage in discussions related to quality of construction (distribution networks), tariff pricing as well as business plan development. Elements to target poor households and address gender issues were heavily incorporated into the business plans of these enterprises. Communities contributed 10% of pre-financing for water infrastructure and actively supported the management of construction contracts. Each enterprise worked out various mechanisms to ensure poor households have access to water supply and sanitation infrastructure. Additionally, flexible payment plans of 10% community contributions were set up to allow poor households to contribute at a pace that is not financially taxing on their households. As such RWSSEs were able to effectively meet needs of communities (customers) and set affordable tariffs while achieving full cost 7 recovery, while maintaining standards of service delivery that is comparable to urban-level utilities. As a result of these efforts, tariff collection rates were 99%. RWSSEs experienced limited difficulties in recouping tariffs. This allowed enterprises to continually reduce non- revenue water (water losses), which ranged between 19%-25%. It also allowed the RWSSEs to recoup revenues to establish depreciation funds. Further, it allowed some of the RWSSEs (Hai Duong and Nam Dinh) to begin repayment of loan to provincial Ministries of Finance, well ahead of the anticipated schedule. 29. Development of Inter-commune water supply schemes reduced capital costs, increased coverage and facilitated management. Introduction of schemes that served multiple communes was initially met with reservation from local governments. An institutional arrangement to support management between multiple communes was never introduced and as such commune-level local governments were weary of establishment of such schemes. Despite slow implementation of these schemes due to dialogue to determine best inter-communal institutional arrangements, in the long term these schemes resulted in significant cost savings in capital investments. Inter-commune arrangements reduced the transaction costs of multiple schemes managed by each RWSSE. These schemes also allowed funds that would have been used in establishing new treatment plants to be used to expand the distribution network and increase access to tap water in target communities. 30. Introduction of design-build (also known as Engineering, Procurement and Construction (EPC)) contracts for water supply and sanitation infrastructure reduced contract management burdens and expedited implementation. To expedite implementation and reduce contract management burdens on government procurement specialists, the approach of ECP contracts was introduced. The use of such contracts was a first in Vietnam, particularly for this sector. Initially there were limited firms that possessed the capacity to design and construct water supply and sanitation facilities. This encouraged contractors to enter into joint-ventures or sub-contract the required skills. As a result of these contracts, processing time was halved through the joint tendering of combined design and civil works bidding documents. The success of these contracts is now being promoted by NCERWASS and being replicated in other donor-financed projects. Sanitation and hygiene approaches: 31. Combination of IEC campaigns with management of Sanitation Revolving Fund by Women’s Unions increased women’s roles in the project, increased demand for sanitation financing and enhanced sanitation and hygiene behavioral changes. The project capitalized on the presence of a strong grassroots network of Women’s Unions. The WU’s trusted grassroots presence with the provision of trained Household Sanitation Promoters (HSPs) and ability to provide and manage financing, supported a significant increase in demand for sanitation financing. WU’s worked at household levels to effectively deliver hygiene campaigns in line with Community-Led Total Sanitation (CLTS) principles. Once adequate information was disseminated, WU’s provided low cost loans with 5% interest to interested households. Loan recipients were automatically enrolled in saving groups that stipulated monthly contributions. This mechanism helped households adhere to a repayment schedule; resulting in a nearly 100% loan repayment rate. Loans were provided at lower rates than those available through other micro-finance institutions (Vietnam Bank for Social Development). In addition to the provision of loans, WUs helped households engage in a meaningful discussion on technology options available. WU’s closely followed up to ensure 8 funds were properly utilized and repaid in a timely manner. As a result of their effective campaigns, the amount of loans provided through the fund surpassed AF targets by 10%. Factors that caused implementation bottlenecks 32. Increase in water demands coupled with economic recession, which caused a sharp price escalation in civil works, and underestimation of unit costs during appraisal contributed to a financing gap during implementation, requiring an injection of additional financing to achieve project objectives. During appraisal, inflation was measured at 5% and it was assumed that these rates would remain fairly stable. Due to the unforeseen global economic crisis, in 2008, Vietnam went into serious economic recession and annual inflation rose sharply to 19.9%. Additionally, unit costs for water infrastructure that underpinned the project budget were based on investments for 800,000 people with schemes targeting 60% coverage rates and a scheme standard design for water consumption of 40liters/capita/day. These assumptions yielded an average investment cost of US$35 per capita. Unit costs were theoretically calculated at appraisal as large scale operations such as this project were not existent in Vietnam and as such limited benchmarks were available. During the early stages of project implementation, it became evident that unit costs estimated during appraisal were lower than market prices. After the first sets of tendering documents were evaluated, true unit costs were found to be in the range of US$98 per capita. The high unit cost was due to a combined factor of price escalation due to economic recession and underestimation during preparation. Furthermore, water supply demands during the project were found to be significantly higher and in reality closer to Ministry of Construction standards of 60 liters/capita/day. Due to these factors the original financing was found to cover only 52 out of the original 120 proposed water schemes and 100 out of 300 public sanitation facilities. After a thorough review following the MTR findings, the project was restructured to provide additional financing of US$65.27 million and the project closing date was extended to allow for timely completion of proposed activities. 33. The presence of limited number of detailed technical designs and feasibility studies delayed implementation. At the onset of project implementation only 8 out of a total 120 schemes had detailed technical designs. The lack of detailed feasibility studies and technical design for individual water treatment schemes delayed tendering of bidding documents and as such slowed down disbursement estimates. Weak fiduciary capacity during initial stages of project implementation complicated development of proposed technical studies. This challenge was remedied through targeted capacity building and the introduction of EPC contracts. 34. Limited fiduciary capacity caused discrepancies in the tendering processes. Project staff had limited or no experience in fiduciary management aspects, particularly procurement. During the initial stages of implementation there were many inconsistencies between World Bank and Government Guidelines. This resulted in protracted delays in procurement. These inconsistencies also led to a contract being declared as misprocurement. Upon investigation and declaration of a verdict, MARD took up the matter with urgency and misappropriated funds were returned to IDA accounts. This proved to be a very useful lesson learned. It also made fiduciary staff more aware of potential pitfalls within procurement processes. Procurement staff took greater care in reviewing subsequent contracts and ministry level directives were sent to ensure staff complied with more stringent review processes. Overall 9 fiduciary capacities at all levels were gradually strengthened through extensive trainings, workshops and hands-on support. As project implementation progressed, fiduciary capacity also steadily increased and helped speed up pace of project progress. 35. Weak contractor capacities in carrying out both design and build activities for civil works hampered quality and caused significant implementation delays. There were initial difficulties in finding qualified contractors who possessed both design as well as construction capacities. As demand for these types of contracts increased within the project, contractors began to enter into joint ventures or sub-contracted to provide comprehensive services. A review of initial EPC contracts revealed many inadequacies where contractors specialized in developing technical designs could not adequately execute civil works and vice versa. This caused extensive delays as numerous initial contract required extensions to complete the required works. The low capacities of contractors were exacerbated by economic recession. During this time period, many contractors could not fulfill their contractual obligations due to limited financial liquidity. As such, many contractors could not mobilize civil works, which subsequently delayed project implementation progress. To ensure poorly performing contractors were not continuing to bid and win remaining contracts, the Ministry of Planning and Investment created a “black list” to warn provincial level fiduciary staff of contractors to potentially avoid. In addition, to remedy poor construction quality, the CPO, engaged numerous technical supervision consultants who were tasked to closely follow up with the construction of civil works. 36. Expansion of rural roads caused disruptions to established water supply networks. Throughout the course of project implementation, parallel efforts by GoV in rural development led to revised directives to increase the size of rural roads. This led to enormous rural road expansion efforts. These activities severely impacted project implementation. It complicated efforts of distribution network construction, which closely follow rural roads. Furthermore, where distribution networks were previously laid, they were forced to be relocated to accommodate the road expansion. This not only caused technical complications but also raised various financial issues, including how to cover additional costs associated with the extra work to relocate water distribution networks. After protracted dialogue, a combination of local and provincial government support was utilized to finance the additional works, as it was deemed unfair to hold contractors accountable for these changes. 37. Unclear institutional arrangements led to weak O&M of public sanitation facilities. Sanitation and hygiene campaigns led to tremendous demand for both household and public sanitation facilities. Through the project, 661 public sanitation facilities were constructed. Unfortunately O&M of these facilities greatly varied depending on local context. Overall the O&M of these facilities was very poor, with many in serious risk of being unsustainable in the future. These issues were raised during implementation support missions. In some communities, local governments of pertinent institutions hired caretakers for these facilities, but long term financing for O&M remains a challenge. At present, institutional mechanisms to set and enforce collection of service fees are not systematized. Further, despite notable gains and willingness to pay for water supply and household sanitation facilities, the same attitudes do not extend to public sanitation blocks and there are some sentiments that O&M of these facilities should be subsidized by government. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 10 38. M&E Design. The project’s M&E system was thoughtfully developed to rely on participatory, process and sustainability monitoring mechanisms. It was designed to measure the achievement of the PDO as well as intermediate indicators and outputs to measure progress of each of the components. The project’s Key Performance Indicators (KPI) adequately captured outputs and outcomes. The KPIs were also well aligned with GoV indicators and facilitated monitoring and reporting in line with national standards. Indicators and corresponding targets were agreed upon based on findings of baseline survey carried out during project preparation. There was discrepancy between the key indicators in the main text, the Results Framework, and the Arrangements for Results Monitoring in the PAD. Additionally, in Annex 3 of the PAD, only 4 out of the 12 PDO and intermediate outcome indicators had target values. Despite well-intentioned efforts the terminology used in Results Framework at design stage was vague and some of the targets in the PAD were not properly defined. 39. M&E Implementation. The CPO coordinated M&E efforts and conducted verification missions to ensure data quality control. Communities were heavily involved and aided in the monitoring of progress during implementation through community members appointed by CPC. Village level groups reported to PPMUs and RWSSEs on the status of construction, particularly of water distribution networks and public sanitation facilities. Furthermore, they monitored and reported on hygiene and sanitation activities and provided feedback on the utility and effectiveness of these activities. During the MTR, project restructuring introduced new indicators to align with GoV’s monitoring framework and revised terminology and phrasing of indicators to harmonize with the Bank’s Core Sector Indicators. These changes did not adequately capture PDO indicators in the Arrangements for Results Monitoring table and omitted value targets for user satisfaction rate and oversight & quality control. The Bank’s internal Operations Portal was not changed to reflect these revisions. As such, at an initial glance it gives the perception that there are inconsistencies between indicators in the revised Project Paper (Restructuring) and the indicators in the internal system. The M&E system and reporting, by the Government via quarterly and biannual progress reports and by the Bank through Aide Memoires, reflected those changes. 40. M&E utilization. The M&E system was used by CPO, PPMUs, Enterprises and the Bank Task Team to track project implementation and results. Quarterly progress reports were disseminated within NCERWASS for internal project management. Results and progress of the project were occasionally highlighted on Department of International Cooperation’s, within MARD, website and newsletter. Information collected through M&E activities helped guide project implementation and provided useful insights for project restructuring. Data related to project progress was thoroughly reviewed by the National Target Program (NTP) to better understand achievements and bottlenecks in implementation and draw lessons that could be applied to the government’s NTP activities. These results also served as the foundation during the design of the PforR operations (previously phase 2 APL of RRD RWSSP). Findings from these results helped the PforR team assess interventions and set reasonable targets for the KPIs. In addition to the M&E system designed to capture both outputs and outcomes; an independent assessment survey and impact evaluation was carried out by an international firm after project closure. Although, long term impacts were not anticipated at such an early stage, the impact evaluation (available in Project file) indicated 11 positive results from schemes and interventions that were completed in earlier phases of the project. 2.4 Safeguard and Fiduciary Compliance 41. Safeguards compliance. The relevant environmental and social safeguard policies were in full compliance. The project was a category B project and triggered OP/BP 4.01- Environmental Assessment for its potential safety, construction and operation adverse impacts related to construction of water supply and sanitation infrastructure. Environmental Assessments/Environmental Management Plans concluded that overall the project would have positive environmental and public health impacts. Potential adverse impacts were deemed to be localized and reasonably mitigated through appropriate project design and mitigation measures. All technical designs prepared during implementation followed outlined environmental guidelines, which articulated design, consultation and disclosure requirements as well as monitoring indicators. Additionally, the project triggered the following social safeguards: (i) OP/BP 4.12-Involuntary Resettlement related to land acquisition for construction of water supply and sanitation infrastructure and (ii) OP/BP 4.20-Indeginous Peoples, due to presence of small number ethnic minority group (primarily Moung) in one commune out of 120 targeted communes. A Resettlement Action Plan (RAP) was prepared in close consultation with project affected persons (PAPs), local authorities and pertinent stakeholders, and subsequently publicly disclosed. For subprojects designed during implementation, a Resettlement Policy Framework (RPF) guided their preparation. To ensure that identified indigenous people in target project areas would benefit, a Strategy for Ethnic Minority Development Plans was prepared in accordance (EMDPs) with BP 4.20 standards. The EMDPs ensured that participatory methods were used during project planning and provided equitable choices to ethnic minorities to avoid adverse impact through land acquisition. The overall community-participation approach also helped to ensure that ethnic minority rights were included in overall infrastructure development, capacity building and sanitation and hygiene promotion. 42. Financial Management. Financial management performance was Moderately Satisfactory throughout the Project period, with the exception of satisfactory performance during a short period from late 2010 to early 2011. Quarterly Interim Financial Reports (IFRs) submitted were acceptable to the Bank albeit with some delays in timely submission. Audited financial statements and audit reports were generally submitted to the Bank on time and with acceptable quality. However, the audit opinions for the initial years of Project implementation were usually qualified due to (i) ineligible expenditure; (ii) cut-off errors in recognition; (iii) internal control weaknesses; and (iv) delays in collection of community fund contributions. 43. During preparation the following issues were identified: (i) lack of adequately qualified and experienced financial staff; (ii) lack of suitable accounting software; and (iii) lack of a detailed manual on financial management. A financial management action plan was developed to rectify these shortcomings and provide targeted capacity building to pertinent institutions. 12 44. Internal controls remained a challenge during implementation mainly due to limited financial management capacity and accountability at the provincial level, which resulted in qualified audit opinions and a significant number of internal control weaknesses highlighted in the audit management letters. These issues were primarily resolved toward the closing of the Project. Excess funds realized through foreign exchange rate fluctuations were reported by VDB and approved by the Bank for use to expand project scope. Out of the total credit amount the project was able to utilize US$105.31 million (93% of total amount). 45. Project preparation and implementation provided valuable lessons learned that helped enhance financial management activities within the scope of this project and better inform other interventions. These lessons were: (i) establishment of an acceptable accounting software and training of users is critical during early stages of the project; (ii) different roles of implementing agencies, namely, CPO, VDB and the Women Unions should be defined before project implementation with clear reporting responsibilities; (iii) community contribution should be set up at a level acceptable to the households to avoid lack of community contribution throughout implementation; and (iv) VDB should allow advances to the PPMUs’ project accounts (instead of having 100% expenditure disbursed as reimbursements or direct payments) to facilitate project activities such as training, workshops, media campaigns where the PPMUs need funds to initiate these activities. 46. Procurement. Procurement compliance was rated Moderately Satisfactory in ISRs during the early and mid-stages of project implementation and gradually improved to Satisfactory. In general, procurement was acceptable to the Bank. The Procurement Plan was in place from Project start, and was subject to various updates to accommodate changes to contract amounts, due to price escalations and delays. Delays in procurement were primarily caused by limited procurement capacity at all levels of project implementation during the initial stages; this issue was remedied with targeted capacity building. Teething pains were experienced in executing EPC contracts as noted in Section 2.2 (paragraph 29). Further, contractor capacity was limited as few entities had combined experience in both design as well as construction, which resulted in poor quality tendering documents (discussed in section 2.2). The economic recession that affected Vietnam from 2008-2009 and 2011 hampered the financial autonomy of contractors. Consequently, tendered contracts were extended multiple times to allow for works to be completed. 47. A case of misprocurement was documented in November, 2010 relating to Contract Package 1.4/CPO4: Preparation of Phase II Sub-Projects in 8 Project Provinces. The contract was investigated and misappropriated funds were reimbursed to the IDA account. Despite the bottlenecks noted, procurement capacity increased steadily over the course of project implementation. Albeit with some delays, project staff at PPMUs identified collusion incidences and reported occurrences to the World Bank for bid cancellation. Moreover, due to competitive bidding processes, transparency was greatly enhanced and subsequently a cost savings of 20% of total works contracts was achieved. Funds from cost savings were utilized to expand scope of the project and increase the number of beneficiaries. 2.5 Post-completion Operation/Next Phase 48. Financially viable institutions are in place to carry out operation and maintenance of project-financed infrastructure. The 87 water supply schemes established through this 13 project are under the capable management of four RWSSEs. All four enterprises have shown remarkable growth and maturity in management of water supply infrastructure, with detailed business plans; cost recovery for operation and maintenance as well as debt repayment for 2 of the enterprises; community representative shareholders who actively participate in tariff distribution; as well as noted steps to enhance service delivery as evidenced by the declining percentage of water losses. 49. Joint stock companies/Enterprise model for rural water supply management are now an approved and formally promoted model by Ministry of Agriculture and Rural Development nationwide. MARD has thoroughly reviewed the track record of RWSSEs established under this project and has concluded that they are a prime example of effective rural water supply management. As such the enterprise model is now being promoted as part of National Target Program’s interventions when considering management of new and existing schemes. 50. Sanitation Revolving Funds have been approved by Provincial Peoples Committees to continue operation under the management of Women’s Union to scale up sanitation financing. Following the success garnered by the sanitation funds and its ability to generate demand for sanitation and hygiene financing while availing funds to all rural households, PPCs have agreed to continue to scale up the use of this fund. The SRFs will continue to be managed by Women’s Unions under the conditions set out in this project. Finances will continue to be supervised by Vietnam Development Bank. 51. Phase 2 APL of this project has been successfully launched as Program for Results supporting government systems and infrastructure in 8 provinces in Red River Delta. The project APL second phase had 2 policy triggers, 2 access triggers, 1 institutional reform triggers and additional 2 institutional triggers. The expected institutional framework and conditions put in place were largely met during first phase of the APL. Given the strong progress and commitment, the second phase of the APL was converted to PforR in order to better support government-wide interventions across the sector and align with national goals. The delivery of the PforR NTP is largely due to the institutional gains and successful model of RRD RWSSP. This project in addition to very strong counterparts, trusting relationship with GoV and high government commitment allowed for the scaling up of engagement in RWSS sector through NTP. The PforR’s objective is to increase sustained access to water supply and sanitation services and improve sector planning, monitoring and evaluation in participating provinces of the NTP. This is supported by the government’s adoption of the enterprise model for rural water supply management, and increased support for sanitation and hygiene promotion and financing. 52. Design-build (EPC) contracts for civil works have been promoted by MARD in water supply programs funded by other donors. These contracts have been credited with reducing management burdens and expediting the pace of implementation. Furthermore, such contracts have been sought to increase demand for multi-faceted contractors who possess the capacity to both design and build. As such MARD, in collaboration with Ministry of Planning Investment have stipulated the use of such contracts in the implementation of rural water supply interventions financed by Asian Development Bank (ADB) in the central region of the country. 14 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 53. The project objective was highly relevant for Vietnam and in line with pertinent national and Bank engagement strategies. The project’s development objective was consistent with development objectives of Vietnam as stipulated in the RWSS 2020. RRD RWSSP’s objectives and adaptable program approach was the first large scale investment used to operationalize RWSS 2020. The development objectives were true to RWSS 2020 tenants of responsiveness, decentralization, community participation, and building local institutional capacity. Additionally, the project objectives effectively responded to the themes of the 2003-2006 Country Assistance Strategy (CAS) of: (i) enhancing equitable, socially inclusive and sustainable development; (ii) reducing the rural/urban development gap; (iii) contributing to gender equality and the advancement of women; and (iv) promoting good governance. 54. The project’s design and implementation were also highly relevant. The project design was reasonably sound and struck an appropriate balance between financing of “hardware” (infrastructure) and “software” (Information, Education, Communication) interventions. The activities of the four components were complementary in equally addressing both water and sanitation. With relation to relevance of implementation arrangements, the project was structured in an adaptable manner to allow for flexibility in implementing proposed novel approaches in Vietnam. The decentralized implementation modalities were effective in cementing community engagement throughout the planning and implementation phases. The project’s preparation should have perhaps put more emphasis on preparing detailed technical designs ahead of implementation or have appropriately apportioned the disbursement schedule to account for the initial slow start. Implementation modalities were effective in engaging all stakeholders, with a strong emphasis on institutional and capacity building at all levels of project scope. 3.2 Achievement of Project Development Objectives 55. The project markedly improved access to water supply and household level sanitation services. Despite initial delays, the project achieved its PDO and exceeded all targets. The number of people in project areas with access to “improved water sources”, 1,289,674, surpassed AF targets by 13.5%; while 960,648 were provided with improved hygienic sanitation facilities, surpassing AF targets by 160%. Public sanitation was greatly enhanced through the construction of 661 public sanitation blocks, more than double the AF targets. 56. Through comprehensively integrated sanitation and hygiene campaigns effective use of developed water supply and sanitation facilities has been greatly enhanced. 169 communes can effectively demonstrate positive and sustained improvement in hygiene, knowledge, attitudes and practices in relation to water supply and sanitation, in comparison to AF targets of 100 communes. 135 communes (80% of total project population) have pledged to adhere to tenants of Community-Led Total Sanitation (CLTS). Communes have adopted internationally recognized CLTS principles and committed to improving their commune’s sanitation. The Sanitation Revolving Fund was able to provide a record 43,946 loans surpassing AF targets of 40,000 loans. Through the provision of these loans, households were motivated to construct or upgrade (septic tanks) 48,215 water supply and 15 sanitation facilities. Through communal mechanisms, societal peer-pressure and motivation of WUs and HSPs, communities were instilled to stop open defecation practices. Communities actively engaged in site selection of public sanitation blocks. Beyond technology options, household surveys indicted pronounced behavior change in increased number of households reporting hand washing prior to food preparation or after using sanitation facilities. “Green Sundays” program was led by CPCs to encourage community members to come out on designated Sundays to help in community cleanup programs. This included collection of garbage and removal of debris in rain drainage ditches. 57. The project put in place water supply and sanitation infrastructure that is financially, technically and environmentally sustainable. The project successfully supported the establishment of 4 enterprises, one in each participating province. Each enterprise has been capacitated and is fully functional in the operation and maintenance of 87 schemes established under this project and 2 additional schemes established under GoV’s NTP. Three out of the four enterprises have established various price discrimination tariff structures, which allow for price distinction based on either volume or type of use (domestic, institutional, industrial, etc.). This is a clear sign of institutional maturity. Connection rates to each scheme surpassed the targeted 60% connection rates and varied between 85%-100%. Technical considerations such as selection of appropriate technology and introduction of inter-commune schemes greatly enhanced efficiency. As such, non-revenue water (water losses) has continually decreased to a range between 19-25%. Recuperation of tariffs is 99% and household surveys carried out at project closure indicate that 90% of households are highly satisfied with services. Due to environmental considerations put in place during project design, established infrastructure has minimal impact on surrounding environment. The increase of access to sanitation facilities has contributed to the reduction of environmental pollution in project areas. 58. The project increased access of water supply and sanitation facilities to poor households, thereby contributing to poverty alleviation in participating rural communities. Project design aimed to provide access to improved water supply and sanitation facilities to 20% of poor households in project areas based on Ministry of Labor, Invalids and Social Affairs statistics. Project interventions such as the low cost access to sanitation financing (SRF), flexible payment plans for water infrastructure contributions and affordable tariffs afforded the opportunity of a greater number of poor households to gain access to water supply and sanitation services. These interventions coupled with effective management of funds, which resulted in 20% cost savings of civil works, allowed the project to expand its coverage. As such, 100% of poor households in the 4 participating provinces were provided with access to improved WSS facilities. 3.3 Efficiency Rating: satisfactory 59. An economic rate of return analysis for water supply and sanitation infrastructure shows positive economic impact that is higher than anticipated at appraisal. Economic analysis at completion stage was conducted for the water and sanitation infrastructure component (Component 1). This component accounted for approximately 92% (USD $42.0 million) of the Bank financed cost at PAD stage, and 95% (USD $98.2 million) including additional funding at completion stage. At appraisal, it was agreed that the Project would adopt the water tariff structure determined by an inter-ministerial decree. Consistent with the 16 decree, the tariff planned was set to ensure the recovery of O&M cost, depreciation of fixed assets funded by loans and consumer contributions. A Cost Benefit Analysis (CBA) carried out at appraisal resulted in an anticipated Economic Internal Rate of Return (EIRR) of 10.8%. At completion, CBA indicated the project yielded more benefits than expected at appraisal, resulting in EIRR that ranges between 13.0% and 17.2% for the four provinces. These results highlight evident combination of direct benefit and consumer surplus. The value of EIRR would increase by including (i) the time saving of not having to collect water and (ii) public health benefits. The EIRR would change either upward or downward by (ii) conducting a separate socio-economic analysis to identify more accurate consumer surplus benefit. But it is fair to say this Project has achieved the expected value of economic benefit. Methodology for this analysis is included in Annex 3. 60. Financial analysis of water supply and sanitation infrastructure indicates that investments are financially viable. At appraisal, financial analysis was not conducted for targeted 120 communes, but to 8 communes in the four provinces. On the other hand, the analysis at completion has been conducted with water and sanitation service enterprise in each province, meaning all the 89 schemes are covered. Financial Internal Rate of Return (FIRR) following MTR, at AF were lower than the original (appraised) figures due to the increase in investments costs and calculation of FIRR that included 100% of investment costs in line with Government policy of not providing any capital subsidy. The FIRR at completion is satisfactory when compared to the AF stage, primarily due to (i) meeting the expected water demands; and (ii) the establishment of tariff structures that are gradually increasing and allowing for full recovery of the O&M and depreciation cost. 61. Efficiency analysis concluded that RWSSEs are financially sustainable. The FIRR at completion ranged from 3.5% to 12.2% with each province exhibiting varying degree of financial sustainability. Hai Duong exhibits excellent FIRR because (i) investment cost per m3 of water supply is the lowest among the four provinces; (ii) the highest unit sales revenue of 6,612 VND/m3 in 2013 has already been achieved; and (iii) the spread between unit sales price and unit production cost is the widest, indicating the operational cost has been efficiently managed. FIRR of Ninh Binh province is below expectation because (i) the capital cost per capita was the highest among the four provinces; and (ii) the pace of the tariff increase is slower than the other provinces. The business plan of RWSSE in Ninh Binh shows the average water tariff increased by only 4% over the past five years, which affected the operational cash flow for those years, leading to a lower FIRR. Despite the slower pace of tariff increase, the financial position of the Ninh Binh RWSSE is expected to improve in line with the projected demand increase and tariff increase. Detailed results of FIRR analysis can be found in Annex 3. 62. Average unit costs for water supply and sanitation infrastructure are significantly lower than interventions delivered by government and bilateral donors in this sector. The average cost varied considerably between provinces, though ranging from US$57-$81.70 for water supply infrastructure per capita. At present the National Target Program- Phase III is delivering similar investments at a unit cost of $140 per capita. For Sanitation, the investment ratio per capita ranged between US$6-$8.29. This calculation takes into account community contribution (10%). 17 3.4 Justification of Overall Outcome Rating Rating: satisfactory The outcome of the RRD RWSSP Phase 1 is rated Satisfactory based on, high relevance, the highly satisfactory rating of its efficiency and achievement of PDO and satisfactory rating of efficacy. This project out-performed its design target but given its implementation delays and fiduciary challenges, it is prudent to provide a satisfactory rating. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 63. Poverty Impacts. With regards to access to water supply, the 10% of community contribution was utilized to subsidize connections for poor households. Each enterprise devised various programs to continue supporting low income households. Poor households were allowed to pay contributions in installments. In some provinces, they are exempt from the minimum water usage limit that is imposed by enterprises. Regarding sanitation, the integration of hygiene promotion with sanitation financing through SRF, has tremendously increased demand for improved sanitation facilities. Findings of an independent impact evaluation3 found a statistically significant impact of this project on health and long term economic development. Results indicate positive impact on labor force participation. Men in treatment areas were found to have lower number of days off work due to water-related illnesses. Findings also show some positive impacts on reduced number of days off work to take care of ill children. Moreover, with high access rates to tap water and satisfactory service delivery, the project has contributed to decreasing the urban/rural gap. This project was found to significantly contribute to the increase in shared prosperity as it increased access to improved water sources and hygienic sanitation facilities. 64. Gender Aspects. Project activities greatly contributed to increasing women’s participation and role in water and sanitation as well as income generation. Household surveys carried out at project closure indicate that now in 48% of households women are equally important in earning income as their husbands. Given the hands-on approach adopted by Women’s Unions in management of SRF, nearly all sanitation related decisions were made by women (92%). With regards to household sanitation, women made decisions on appropriate sanitation technology. For public sanitation, through the proactivity of a high number of female Sanitation Promoters, women played a greater role in site selection of public sanitation blocks. Women were also found to be more frequent users of public sanitation facilities (in health clinics, community houses and CPC offices). Further, women’s active participation in environmental sanitation activities, such as “Green Sundays” outnumbered male participants. Overall, women’s participation indicates that not only were they beneficiaries of project interventions but also active stakeholders. 65. Social Development. The project was found to have positive impact on health. Findings indicated that households in treatment areas reported significantly lower incidences of diarrhea and eye diseases, particularly among men and boys. Reduced health problems 3 Impact evaluation was based on “intention-to-treat” (ITT) methodology to determine the project’s impacts. ITT approach estimates the program impact from a comparison of those directly targeted by project interventions with control group of community members in nearby outside of project scope. 18 were found to significantly lower health expenditures of household in treatment groups. Although no statistical variance was noted between female participants in treatment 4 or control groups, overall disease incidence rates was found to be lower in treatment groups. Through the SRF, households were able to gain access to funds to construct or improve household sanitation. Project activities have also strengthened community proactivity in environmental sanitation issues. Many communes have adopted “Green Sunday” campaigns and have incorporated them into routine community activities. (b) Institutional Change/Strengthening 66. The establishment of RWSSEs as joint stock companies has been very successful. The enterprises were able to effectively support supervision of civil works construction. The management of water supply schemes involves people’s committees (Provincial and Commune levels) as well as community members (users) in all facets of operation, including tariff setting. The active participation of the enterprises, local government representatives and community members has allowed for establishment of tariff rates that are affordable for users, while being well on-track to achieve full cost recovery. The enterprises have effectively managed 87 schemes. In some of the provinces, enterprises have also assumed management of NTP financed schemes. In total the enterprises are currently managing 89 schemes. As their capacity continues to grow, there is a high likelihood that provincial level schemes will be transferred under their management. The joint stock company enterprise model is now part of the national government’s repertoire of promoted management mechanisms. This model is now promoted for rural water supply management in other parts of the country. (c) Other Unintended Outcomes and Impacts (positive or negative) 67. The project has resulted in several unintended outcomes. The establishments of RWSSEs have demonstrated a positive model for rural water supply. Consequently it has created a market of potential public-private sector involvement in water supply management. Realizing that affordable service delivery can be effective with cost recovery has nominally encouraged private sector entities to approach local governments regarding potential public- private sector partnerships. Further, the introduction of EPC contracts have created demand for more all-inclusive firms that have built in capacity to design as well as construct water supply and sanitation infrastructure. Firms that brought in consultants to supplement their current operations have since realized the utility of internalizing such capacity. As such technical capacity of contractors has been improved through the implementation of this project. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 68. The Project Completion Report compiled by CPO with contribution from each of the four PPMUs highlighted the results of project implementation. The CPO commissioned an independent evaluation of results and impacts of the project. The household survey assessed the project’s appropriateness, effectiveness and efficiency. Additionally this evaluation sought to assess sustainability and quantify impact of the project’s WSS interventions on household welfare; with a focus on health, education and labor force participation. Both quantitative and qualitative methods were utilized including informant interviews, focus group discussions, field observations and household surveys. The methodology and findings of the survey are also presented in Annex 5. 4 Treatment group refers to participants who were directly targeted by RRD RWSSP interventions 19 4. Assessment of Risk to Development Outcome Rating: low 69. Four fully operational RWSSEs currently recover full O&M costs and are on track to meet sustainability targets. Given the good standing of the four enterprises and the recent launching of phase 2 as a Program for Results, there is every reason to believe that enhanced capacity will be sustained in the long-term While most of the Project’s activities were designed and implemented with sustainability considerations in mind, there are a few issues that need to be considered to ensure the sustainability of the Project’s outcomes over the long-term. 70. At present, the project has established public sanitation blocks that are appreciated and well utilized by community members. However, most of these facilities have poor O&M oversight and are at risk of being unsustainable in the long run. Better management mechanisms are needed to ensure facilities are adequately maintained. 71. Hygiene promotion related to communal environmental sanitation needs stronger efforts to sustain gains in behavior change. Despite commendable gains, household surveys indicated that presence of solid waste disposal continues to be a problem. Efforts by community groups and local governments to continue community engagement in environmental sanitation are needed to uphold standards outlined by Community-Led Total Sanitation principles. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 72. The Bank performance during preparation is rated satisfactory. The Bank team provided the needed expertise and experience in the project preparation and appraisal process and established good working relationship with government counterparts. The Bank team also put lessons learned regarding Project’s design flexibility and balance of hardware and software activities to good use. As noted in sections 2.3 and 3.1, the Bank did a good job in helping to identify key Project components, which were fully aligned with the PDO, and the key elements of the M&E framework. Several novel approaches were introduced, such as new management models and implementation arrangements for sanitation financing, and their challenges were well understood by the Bank team and taken into account in the project design. 73. A key project design weakness was that project preparation under-estimated unit costs, as pointed out in 2.2, this coupled with economic recession that led to price escalations has affected the project scope and timely completion of the originally envisaged activities. Given that this was the first large scale operation of its kind in the country, there was limited benchmarks for unit costs. Furthermore, the terminology used for some of the indicators in the Results Framework was vague and required enhancement during AF stage. There were discrepancies between the indicators in the main text and Annex 3 of the PAD, and 8 out of the 12 PDO and intermediate outcome indicators did not have target values in the PAD. 20 Despite these inconsistencies, the project level M&E system used by project to monitor progress included an integrated mix of Bank and government indicators that were monitored regularly from project effectiveness and were later enhanced and harmonized with Bank’s Core Sector Indicators during AF process. (b) Quality of Supervision Rating: Satisfactory 74. The Bank Performance in supervision is rated satisfactory. The Bank supervision missions were regular, instrumental in identifying and helping to address critical problems. Supervision missions were also effective as platforms for policy dialogues and learning tools. Mission members made strong efforts to provide training, disseminate knowledge and critically assess the pros and cons of various management models in consideration. The prolonged period of dialogue regarding selection of management models contributed to initial delays in implementation. In retrospect, these discussions yielded a successful outcome, where an appropriate management model (joint stock companies) was selected to effectively tackle challenges in RWSS sector and meet the needs of all stakeholders. 75. The Bank team worked very closely and effectively with GoV counterparts and showed flexibility in modifying implementation modality at MTR to adjust to the changing economic situation. This was critical for achieving results. The TTL being based in Hanoi added value to the overall management of the Project. Proximity to implementing agencies (CPO, PPMUs and enterprises) allowed closer monitoring and intensive on-the-ground implementation support, and also helped create trust. 76. There was no formal QAG review of quality of supervision for this project. The MTR served as a review tool, which helped restructure project along with provision of additional financing. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 77. The overall performance of the Bank is assessed as satisfactory. The Bank team played a critical role in supporting the CPO, PPMUs enterprises and communities and in turning the Project around and making it a success. The limitation observed at quality at entry caused some delays in implementation but had marginal impacts on the achievement of the PDO. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory 78. Central government. Satisfactory. Under this project the “Central Government” includes the recipient of the loan - Ministry of Finance (MoF) as well as pertinent line ministries and departments who were actively involved in project preparation and implementation such as Ministry of Agriculture and Rural Development (MARD), and Ministry of Planning and Investment (MPI). Inputs from Ministry of Education and 21 corresponding departments at the national level were solicited with regards to sanitation and hygiene activities. 79. The performance of national government during preparation and implementation is satisfactory. GoV provided counterpart financing and increased its contribution at AF stage. The GoV also provided clear decrees and followed through with tariff setting, which supported financial sustainability of enterprises. Significant improvements such as government technical capacity, coordination and the mainstreaming of Project activities within the national structure are testaments to the commitment that government entities afforded to this Project. 80. A few limitations that contributed to implementation delays include: (i) lack of clear regulations on mobilization and utilization of the Official Development Assistance (ODA) grant for each phase from MPI; (ii) lack of harmonization of appraisal and approval procedures between the GoV and donors relating to concessional credit; and (iii) limited experience and knowledge of handling procedures for ODA funds between central and provincial governments. 81. Local government. Satisfactory. The local government entities that were actively involved in the project were the respective Provincial People’s Committees (PPCs) and Commune People’s Committees (CPCs). CPCs were instrumental in engaging community members in all facets of project preparation and implementation. During preparation, CPCs actively contributed to dialogues and decision making for management model options and approved the decision of Joint Stock Company as RWSSEs. During implementation, CPCs effectively facilitated the land acquisition for water supply and sanitation infrastructure and mobilized community members to supervise civil works construction of water supply distribution lines. Proactive CPCs went beyond project expectations and institutionalized environmental sanitation activities such as Green Sundays to continuous community events. Performance of CPCs varied based on engagement and enthusiasm of elected members. In some CPCs delays were experienced due to protracted land clearance processes and collection of counterpart financing. (b) Implementing Agency or Agencies Performance Rating: Satisfactory 82. Central Project Office. Satisfactory. CPO was fully committed to the Project from the conceptualization stage, and was instrumental in its successful implementation. The CPO worked diligently to quickly build up its management capacities. In addition to obtaining intensive fiduciary training and bringing on board pertinent personnel to fill capacity gaps, CPO worked to bolster its technical and supervision capacity by engaging supervision consultants to closely follow up with civil works contractors. These efforts dramatically improved management capacity and supported PPMUs. Further, CPO played a critical convening role in elevating the profile of this project and engaging high level government officials in conceptualization, preparation and implementation of this project. The CPO focused its activities towards achieving the PDO and played a very active role in adopting novel implementation approaches such as inter-commune schemes and EPC contracts that accelerated the pace of implementation and facilitated technical support. 22 83. Shortcomings were noted in fiduciary management. In instances where fiduciary problems were discovered (most notably the case of misprocurement), once implications were understood, CPO handled the matter with the utmost professionalism by notifying the Bank and the Minster of MARD. By elevating the issue to the highest management level of government, the Minister then promptly ordered an extensive review and the matter was handled in accordance with Bank guidelines. Further, limited availability of technical designs delayed implementation progress during initial phases. Given that this was the first program at this scale that the government had implemented in the sector, implementation hurdles such as fiduciary capacity that contributed to delay of preparation of technical studies in a timely manner were not adequately assessed. 84. Provincial Project Management Units. Satisfactory. The capacities of the PPMUs varied depending on the existing government capacities. The four participating PPMUs were established within the respective DARD offices and were responsible for implementation of project activities at the provincial level. PPMUs quickly identified capacity gaps and engaged specialists to support project management. PPMUs were the primary interface between project stakeholders and government prior to the establishment of the RWSSEs. Throughout project implementation the PPMUs provided close supervision of the quality of civil works contracts. The PPMUs were also very supportive and responsive to the operationalization of new implementation approaches (inter-commune schemes and EPC contracts). Given the novel nature of these approaches in Vietnam, many implementation challenges came to light. PPMUs were able to effectively liaise with contractors, local governments, enterprises as well as CPO to facilitate implementation. 85. Shortcomings noted in PPMU performance was occasional delays in settlement of expenditure funds with the Vietnam Development Bank, which caused some delays in disbursement of payments. 86. Women’s Unions. Highly Satisfactory. The Women’s Unions were responsible for management of Sanitation Revolving Fund as well as dissemination of Information, Education, Communication materials related to sanitation and hygiene. The WUs leveraged their established presence at household level through their vast grassroots network to effectively combine hygiene promotion with sanitation financing. Prior to this project WUs primarily played promotional and advocacy roles promoting government-led program in health, education, water and sanitation, etc. Within the scope of this project, WUs also managed all aspects of SRF, including vetting of loan requests, monthly follow up and savings contribution as well as dissemination of promotional materials. The WUs successfully generated demand for sanitation financing and facilitated increased community contribution for water supply schemes. Their targeted programs combined with trustworthy relationship with communities allowed the WUs to reach a large number of households. The use of various approaches including positive peer pressure, created an enabling environment for women to take on an active role in securing household level sanitation loans, choosing sanitation technology options at household level, community level sanitation as well as facilitating water supply household connections. 87. There were initial teething challenges as WUs took on the management role of the SRF given limited engagement in such activities. This primarily involved financial management. WUs received targeted training, which was then carried out periodically by WU’s through training of trainers to continually build management capacity. 23 88. Rural Water Supply and Sanitation Enterprises. Satisfactory. The RWSSEs were established almost 2 years into project implementation. Once established the RWSSEs took on roles previously carried out by the PPMUs, which included establishment of water supply and sanitation infrastructure. Like the PPMUs the capacity of the enterprises varies from province to province. The enterprises collaborated effectively with CPO, PPMUs as well as Ministry of Planning and Investment to plan proposed infrastructure, closely follow up with contractors and liaise with community members to ensure adequate construction and smooth handover. When faced with challenges of poor contractor performance, the enterprises worked with MPI to add non-performing contractors to the national government’s blacklist. Furthermore, enterprises collaborated closely with each other to share implementation challenges and discuss troubleshooting mechanisms. 89. Vietnam Development Bank. Satisfactory. The VDB was responsible for disbursement of project funds into the respective PPMU and WU’s designated accounts. VDB made transfers in a timely manner and worked with respective PPMUs and the Bank to resolve fiduciary issues as well as repayment of funds related to misprocurement case. VBD has highly regulated internal controls and requested PPMUs and WUs managing SRF to adhere to these standards. At times, disbursements delays were reported but were primarily due to the PPMU’s failure to adhere to VDB’s reporting guidelines. Performance of regional VDB varied from province to province. Overall, VDB developed good working relations with all PPMUs and WUs involved in project implementation. In some provinces, strong VDB relations extended beyond formal correspondence to provide hands-on support to rapidly correct reporting mistakes and expedite disbursements. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory 90. The overall Borrower performance is rated as satisfactory. Despite the shortcomings presented in section 2.2, the project implementing agencies provided unconditional leadership and its performance was commendable. 6. Lessons Learned 91. Flexible Design. One of the key lessons this project illustrated was the need to have a project design that focuses on end goals and is not too rigid in the implementation modalities to achieve these results. For example, although the introduction of novel water service delivery approaches, which expanded beyond government administrative boundaries (inter- commune schemes), posed a series of technical and institutional challenges, it facilitated the achievement of project objectives, and even afforded the project the opportunity to surpass some targets in the results framework. This was achieved through review and revision of implementation modalities to optimize development of water supply infrastructure and reduce unit costs per capita. Cost savings from these measures were utilized to further expand access to water supply services. 92. Project costs need to be underpinned by stronger economic analysis, review of macro-economic trends and comparisons with similar interventions in the region. Underestimation of project unit costs coupled with impacts of economic recession caused a 24 large financing gap. Notwithstanding that limited benchmarks existed for a program of this nature at the time of preparation, unit costs should have incorporated a safety factor to account for some unit cost deviations. However, even with detailed analysis and educated projections of unit costs, impacts of large scale macro-economic shocks such as the one experienced by Vietnam in 2008 cannot be forecasted. 93. Joint stock company model provided successful balance between financial sustainability and affordable service delivery of water supply and sanitation services. Management of rural water supply infrastructure remains a challenge, not only in Vietnam but globally. Within the scope of this project, both government and the Bank made concerted efforts to understand the unique challenges facing the sector in Vietnam and decided on a management model that meets the needs of all stakeholders. The selection of the joint stock company model proved to be the most effective as it allowed community members to become shareholders within the company. The decision to establish 4 JSC at provincial level also proved to be ideal balance between decentralization of service delivery without incurring problems with fragmentation and proliferation of management entities that could have posed bureaucratic hurdles. Through this management model, community members have an adequate voice to determine tariffs. This process is critical in helping the RWSSEs maintain high levels of user satisfaction that is needed to recoup costs required for sustainable water supply service delivery, while maintaining tariffs at affordable levels. 94. Active community participation in planning, supervision and management of rural water supply schemes is critical to success and sustainability of interventions. Community and local government participation in all facets of project preparation and implementation ensured sustained engagement and empowered citizens to voice concerns and needs throughout the project lifecycle. Ownership was further instilled through community ownership of developed infrastructure. The provision of community contributions (10% of capital costs) coupled with community and local government’s active support for supervision of civil works contractors helped cement the community’s stake in project. 95. Integration of hygiene promotion with sanitation financing coupled with management by community organizations effectively built strong demand and promoted genuine behavioral changes. Improving sanitation services, particularly in rural communities poses immense challenges, given the concerted efforts needed to bring about meaningful behavior changes. In many interventions, governments and practitioners grappling with how to deliver effective sanitation services often heavily subsidize interventions to incentivize communities to take part in project or program activities. Subsidies have provided mixed results and in many instances communities were found to revert to old practices after removal of subsidies or financial incentives. As such this project veered away from subsidy provision and took on a different approach, which strived to trigger communities’ own demand for sanitation. This approach was operationalized by leveraging the Women’s Unions extensive grassroots network and trusted presence within communities. The combination of hygiene promotion with sanitation financing facilitated meaningful behavioral change. 96. Conservative disbursement schedule for initial year of project implementation and fiduciary management capacity building activities during preparation could have alleviated bottlenecks during implementation. In low capacity context, such as RRD RWSSP where it was the Bank’s first large scale engagement in this sector, slower project start up should have 25 been factored into implementation and disbursement schedules. This could have allowed for a longer “teething” period where project staff could have gained familiarity with project management, primarily fiduciary processes, which contributed to delays in preparation of technical designs and engagement of civil works contractors. Capacity building for large scale, decentralized programs of this kind should begin during project preparation to provide upfront support to implementing agencies in critical areas such as financial management and procurement, ahead of project implementation. This was remedied during implementation through adaptive capacity building measures. 97. Adaptive and targeted capacity building activities to all project stakeholders enhanced awareness, engagement and ownership of project financed infrastructure. The true challenge of rural water supply extends well beyond establishment of infrastructure and rests primarily with institutions or entities that will carry out O&M. This project realized at an early stage that capacity building at all levels is needed to put in place institutions that can effectively sustain investments in water supply and sanitation. These activities highlighted that investment in human capital (capacities) drastically enhanced all the stakeholders’ engagement in decision making processes and ultimately safeguarded their ownership of the established infrastructure. 98. Balanced emphasis on provision of water supply with sanitation is critical to enhancing outcomes of interventions. Given the complexities of delivering sanitation interventions, water supply activities often eclipse delivery of sanitation services, which undermines the impacts of access to water supply. This project sought to ensure an adequate balance where provision of water is supported with strong sanitation and hygiene interventions. A lesson from RRD RWSSP was that this holistic approach of balancing sanitation activities at varying levels (household and community) enhanced access to water supply, which supported the realization of positive impacts to health improvements and labor contributions. 99. Public sanitation infrastructure needs to be better coordinated and addressed. Lessons from RRD RWSSP implementation highlight the need for dialogue with Ministry of Education to harmonize school latrine O&M and similarly with Ministry of Heath for clinics. Establishment of latrines in public markets needs to be reassessed and suitable latrine designs and institutional arrangements need to be put in place. Design of public latrines needs further assessment to incorporate materials and technologies that can withstand high frequency usage and require limited repair or replacement. With regards to institutional set up financing of O&M for public sanitation blocks faces some challenges as the notion of government subsidies for these facilities still prevails. This requires further sanitation and hygiene campaigns like those for water supply and household sanitation to promote willingness to pay and sustainability of these public facilities. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies N/A 26 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Appraisal AF Estimate in Actual/Latest Percentage of Components Estimate (USD (USD millions) Estimate (USD Appraisal millions) millions) Total Baseline Cost Water and Sanitation 63.52 Infrastructure 98.18 42.00 233.76% Development Hygiene and Sanitation 0.46 1.73 2.06 119.08% Behavior Change 0.82 Capacity Strengthening 0.89 1.12 125.84% Support for Project 0.47 Management and 1.26 3.95 313.49% Evaluation Total Project Costs 45.87 65.27 105.31 229.58% Physical and Price 0.00 0.00 0.00 0.00 Contingencies Total Financing 65.27 45.87 105.31 229.58% Required (b) Financing Appraisal Actual/Latest Percentage of Source of Funds Estimate Estimate Appraisal (USD millions) (USD millions) Borrower 0.84 12.36 1,471.43% Local Communities 3.41 8.96* 262.76% International Development Association (IDA) 45.87 105.31 229.85% *local community contribution is 10% of capital cost of water supply infrastructure, which accounted for 85% of total loan. 27 Annex 2. Outputs by Component Component 1: Water and Sanitation Infrastructure Development Water and Sanitation Infrastructure Development. Achievements under this component were captured through the following indicators: (i) The number of people in project areas with access to “improved water sources”; (ii) the number of additional people in project areas with access to “hygienic sanitation facilities”; (iii) the number of new piped household water connections that have resulted from the project intervention; (iv) the numbers of targeted rural communities that have functioning, well operated and maintained water supply scheme; (v) the number of public sanitation facilities constructed; (vi) the proportion of designated poor households that have access to water and sanitation facilities from the project; and (vii) the number of households that have borrowed from revolving fund activities. The project surpassed all targets set out in the indicators for this component. Loan recovery rates under for the SRF have been nearly 100%. The table below highlights achieved targets: Table 1: Results of Component 1 No Content Unit Hai Thai Nam Ninh Total Doung Binh Dinh Bình 1 The number of water supply Project 24 20 15 30 89 projects completed and being operated 2 The number of households HH 59,291 74,255 76,559 45,060 255,165 supplied with tap water 3 The number of public latrines Latrine 220 190 154 97 661 completed and being operated 4 The number of households HH 8,776 8,033 13,135 14,002 43,946 taking out a loan from the Revolving Fund 5 The number water suppply and Latrine 8,676 12,592 12,945 14,002 48,215 sanitation facilities (constructed or renovated) Table 2: Results of Sanitation Revolving Fund Provinces No. of Number of Loan Credit Savings- Households latrines renovated recovery rate group and built Hai Duong 8,776 8,676 100% 466 Nam Dinh 13,135 12,945 100% 571 Ninh Binh 14,002 14,002 100% 332 Thai Binh 8,033 12,592 100% 184 Total 43,946 48,215 1,553 Component 2: Hygiene and Sanitation Behavior Change Achievements under component 2 were measured by the following indicator: The number of targeted communes that can demonstrate a positive and sustained improvement in hygiene knowledge, attitude and practice in relation to water supply and sanitation facilities. MTR design targets aimed at reaching 100 communes. The project effectively reached 169 communes through its comprehensive information, education and communication campaigns. The campaigns, which were jointly administered by PPMUs as well as Women’s Unions, covered a wide range of topics related to water, sanitation, personal hygiene as well as community sanitation. These campaigns encompassed all forms of awareness training meetings, 28 school activities, TV programming, announcements through loud speakers as well as large posters on fixed panels around the community. 135 communes (80% of total project population) have been pledged to adhere to tenants of Community-Led Total Sanitation (CLTS). Communes that took part adopted internationally recognized CLTS principles and committed to improving their commune’s sanitation. These programs were integrated into school activities, health centers and village meetings. A pilot program, “Green Sunday” was established to encourage participation of community groups in commune-wide environmental sanitation campaigns. These efforts were aimed to promote improved hygiene and environmental sanitation. Numerous communities have adopted the campaign and converted the event into a continuous effort, where community members are encouraged to come out at regular intervals to help clean the community’s public spaces. No Activities Hai Doung Thai Nam Dinh Ninh Bình Binh 1 Project Communes 39 50 37 39 2 Communes implementing IEC 20 10 19 19 activities 3 Communes having media 21 10 19 13 committee 4 Communes having led- 29 30 37 39 sanitation program 5 Number of communicators 777 665 550 600 6 Number of trained 777 665 550 600 communicators (basic and supplementary training) 7 Number of teachers of 60 62 64 62 elementary school who were trained about hand washing with soap and clean water 8 Number of communes 192 360 380 4 times implementing Green Saturday /month/ Activities or monthly 24th commune 9 Number of meetings and 288 305 407 30 workshops on community behavior change communication 10 Number of announcements 493 530 2 times 4 times through loud speaker of /month/ /month/ communes commune commune 11 Number of printed 290 238 320 300 leaflets/posters 12 Communicator handbook 578 430 480 400 Component 3: Capacity Strengthening Achievements under this component were measured through the following indicators: (i) the number of RWSSEs that are financially viable; and (ii) the degree of user satisfaction within targeted communities with services and advice offered to them on water supply and sanitation services. By the end of the project, four financially viable enterprises were fully operational. The enterprises as well as all other stakeholders in the project, including local governments and community members, participated in a series of capacity building activities. These activities were comprised of tailored workshops, training courses and a study tour to help each stakeholder maximize their involvement in project activities. For each of the enterprises, courses to enhance: monitoring and evaluation; financial management; financial analysis and planning; accounting systems; business plan development; management of financial risks; and enterprise laws were 29 given. For technical staff and operators, theoretical and hands-on courses were tailored to strengthen the capacity of operation and maintenance as well as chemical treatments. Accordingly, all enterprises established have a solid track record for professionalism, transparency and efficiency. Although project design targets to achieve 60% connection rates per scheme were estimated; due to highly effective community involvement and service delivery, the enterprises achieved a minimum connection rate of 85% with some schemes covering up to 100% of population in its coverage area. Each enterprise assigned a member of the PPC to receive complaints and grievances and report back in order to ensure limited disruptions to service delivery. Furthermore, each enterprise has instituted a maintenance hotline, with numbers printed on billing statements to facilitate communication with users. User satisfaction was monitored regularly by enterprises through periodic surveys. Activity Description Results Establish Rural Water Supply and Sanitation Establish 4 Water Supply 4 Water Supply Joint Enterprises Joint Stock Companies in 4 Stock Companies were provinces in phase 1 established and went into operation Capacity building, and training for staff and Bidding contract No 16 training courses, 19 provincial agencies on rural water supply 3.2/CPO/14 workshops, 1 study tour Improve capacity for the community Organize stakeholders at 5 courses (142 commune level participants, organized by Adcom) Organize stakeholder Province: meetings at commune level Nam Dịnh: 6 Workshop on rights, interests workshops (790 and roles of commune participants) stakeholders 5 workshops (1,330 participants) Improve capacity for managerial officials of Plan and monitor the project 1 course (28 Departments, Divisions and Joint Stock progress; participants) Companies Enterprise financial management; 1 course (15 Enterprise financial analysis participants) Organize financial and 1 course (12 accounting system; participants) Orient and develop business 1 course (15 strategy; participants) Organize the enterprise and operation mechanism; 1 course (15 Manage financial risk control participants) Laws on enterprise. 1 course (15 participants) 1 course (21 participants) 1 course (22 participants) Improve capacity for technical staff and Operate and maintain rural Province: workers water supply system Nam Dnh: 31 courses (362 participants) Chemicals treatment Thai Binh: 20 courses (115 participants) Ninh Binh: 35 courses (133 participants) Hai Doung: 16 courses 30 (170 participants) 3 courses organized by Adcom (118 participants) 1 course (39 participants) Organized study tours At Binh Thuan, Ba Ria - 1 study tour, for 28 Vung Tau officials Component 4: Support for Project Management and Evaluation This component provided technical assistance to develop project management techniques, procurement, finance and accounting, engineering, operation and maintenance, monitoring and evaluation, and provision of equipment and vehicles for PPMUs. The project has achieved the following results: • Provided continuous oversight of techinical design and feasibility studies of water supply schemes. Engaged additional supervision consultants to closely follow up with contrators to enhance construction quality. • Provided continuous training to improve capacity of PPMU staff in terms of project management. Training included: financial managernt, procurement, technical assistance to operate and manage water supply systems. • Procurement and disbursement training: coordinated trainings with WB specialists to improve capacity of PPMUs, enterprises, WUs • Financial management: established financial reporting system and provided training to PPMUs, enterprises and WUs on reporting standards and guidelines to streamline quarterly reporting requirements. • Land acquisition and clearance: worked closely with PPMUs, PPCs, CPCs to ensure proper land acquisition procedures. In cases where land acquisition was required, coordinated compensation processes. • Environment: Water supply works of the project have complied with all environmental requirements of the government and the World Bank. The water supply facilities which are currently being constructed have been granted certificates for meeting environmental standards from the Department of Environment and Natural Resources in the districts. • Monitoring and Evaluation: collected data for indicators approved in results framework and provided quarterly reports of progress. 31 Annex 3. Economic and Financial Analysis A. Economic Analysis 1. Methodology Economic analysis was conducted by comparing two scenarios: (a) those “with” the Bank project and (b) those “without” the Bank project. Without project scenario assumes that the Project area continues to have no access to piped water, and therefore relies water supply on alternative methods such as bore holes, open wells, rainwater etc. The concept of and the methodology for calculating direct benefit, consumer surplus and public health benefits are summarized below. Direct Benefit: Direct-use benefits measure the gain in society’s welfare from the incremental increase in output at a lower price and its value that a consumer attaches to the output that they receive. It can be measured by the amount a consumer pays for water after the project has been commissioned. In this analysis, the financial revenues generated by the subproject were used as the proxy. Consumer Surplus: Consumer surplus is the additional benefit to society’s welfare arising from a higher consumption with a lower price than the consumption and price in the “without” case. The consumer surplus consists of two parts, one arising from the less costly water supply, and the other arising from higher use of water with lower prices, compared to alternative water supply options in “without” case. In order to estimate the consumer surplus, alternative water supply options including possible water supply cost and water consumption in without case needs to be identified. Those are usually determined using information from various socio-economic surveys analyses. But it is not practical to conduct such surveys at completion stage, and therefore, the analysis relied on the latest estimation submitted by each water and sanitation service enterprises. Water supply cost was reported as 12,000 VND/m3, depending on the types of alternative supply options and conditions in each subproject. This value is consistent with the values reported in other references. Water supply projects have often been justified on the basis of perceived positive impacts on public and private health, e.g., clean water supply reduces water-related diseases such as diarrhea, worms and skin-infections. Also, people affected by those diseases lose income when they cannot work and have to spend money for curing. Quantification of this public health benefits is, however, not straightforward because of several reasons including that (i) improved health cannot be achieved only by clean water, but accompanied by health and hygiene awareness, (ii) health impacts are sometimes caused by nutrition issues rather than safe water issues, and (iii) health benefit in monetary terms is ultimately realized by increased productivity due to reduced number of sick days. These benefits were not considered in this analysis, which is consistent with the methodology applied at appraisal. 2. Results 32 EIRR for each province is shown in the Table A3-1. EIRR at completion ranges between 13.0% and 17.2%, showing evident combination of direct benefit and consumer surplus. The value of EIRR would change upward by including (i) the time saving of not having to collect water and (ii) public health benefits. The value would change either upward or downward by (ii) conducting a separate socio-economic analysis to identify more accurate consumer surplus benefit. But it is fair to say this Project has achieved the expected value of economic benefit. Table 1: Results of Economic Analysis (EIRR) At appraisal At AF At completion Thai Binh 10.8% 10.7% 17.2% Nam Dinh 12.4% 16.8% Ninh Binh 10.2% 13.0% Hai Duong 11.0% 16.9% B. Financial Analysis 1. Methodology Financial Internal Rate of Return (FIRR) for the water and sanitation service enterprise in each province was estimated for the period 2006-2018, including 10-year service operation during 2009-2018. The analysis relied most financial data on their business plan from 2012- 2016, in which actual financial performance up to today and future financial projection are compiled in good shape. However, several modification or adjustment was also carried out in order to compliment the missing data. The main methodology is summarized as follows; Revenue: Actual water supply revenue excluding 10% Value Added Tax (VAT) for 2009- 2012 and projected revenue for 2013-2018 with the increase in water supply amount by 5% p.a. and average water tariff by 10% p.a. Operation and maintenance cost: O&M cost includes cost of materials, chemical and electricity costs, labor cost, and general administrative cost. Actual value was used for 2009- 2012 and projected value was used for 2013-2018. Repayment: The annual repayment schedule set out in the business plan for each enterprise was used. Repayment starts in 2011 and increases gradually year by year. Corporate tax: Effective corporate tax was assumed at 5%. But in reality there was no cash- out due to tax payment because each company has recorded the net loss in its profit and loss statement due to the burden of fixed asset depreciation over the project period. Another important assumption is that (i) FIRR is calculated for recognizing the stream of community capital as the equity of the enterprise, and (ii) the effect of subsidy (the government contribution) is excluded from cash flow analysis. 2. Results FIRR at both appraisal and completion is presented in the Table A3-2. At appraisal, financial analysis was not conducted to whole communes, but to eight communes in the four provinces. On the other hand, the analysis at completion has been conducted with water and 33 sanitation service enterprise in each province, meaning all the 89 participating communes are covered. FIRR at AF are lower than the original (appraised) one due to the increase in investments costs and for the purpose of 100% of the investment cost was considered in the analysis in line with the Government policy of not providing any capital subsidy. FIRR at completion is satisfactory level when compared to the AF stage, because of realizing (i) the expected water demand and (ii) the average tariff which is moving toward the full recovery of the operational and depreciation cost. Hai Duong exhibits excellent FIRR because (i) investment cost per m3 supply is the lowest among the four provinces, (ii) the highest unit sales revenue of 6,612 VND/m3 in 2013 has already been achieved, and (iii) the spread between unit sales price and unit production cost is the widest, indicating the operational cost has been efficiently managed. FIRR of Nin Binh province is below the expectation because (i) the capital cost per population was the highest among the four provinces, and (ii) the pace of the tariff increase is slower than the other projects. The business plan of RWSSE in Ninh Binh shows the average water tariff increased by only 4% over the past five years, which affected the operational cash flow for those years, leading to a lower FIRR. But even if this was the case, the financial position of the Ninh Binh RWSEE is expected to improve in line with the projected demand increase and tariff increase. Table 2: Results of Financial Analysis (FIRR) Province At appraisal At AF At completion 60% initial 70% initial 85% initial household household household connections connections connections Thai Binh 4.85% 6.6% Viet Hung 8.0% 8.4% 8.8% Minh Tan 7.2% 7.5% 7.9% Nam Dinh 4.90% 4.5% Dai Thang 6.8% 7.1% 7.4% Xuan Phu 6.8% 7.1% 7.4% Ninh Binh 4.90% 3.5% Binh Minh 5.8% 6.0% 6.3% Gia Xuan 5.0% 5.2% 5.6% Hai Duong 4.85% 12.2% Dong Gia 5.0% 5.2% 5.6% Chi Lang Bac 6.8% 7.1% 7.5% 3. Household Sanitation Revolving Funds Management of Sanitation Revolving fund was highly efficient. The funds have been well managed by the respective Women’s Unions in each province. The number of household which had access to this facility reached 46,907, exceeding the target of 40,000. Approximately $10.23 million has been disbursed and the repayment rate was almost 100%. Two households were pardoned from debt owed to SRF due to death of bread-winners in the family. WU’s paid their remaining contribution out of interest accrued from management of SRF. 34 C. Conclusions The economic analysis has evidenced that the Project provided sufficient economic benefits to the consumers in the Project area by providing better access to clean water with higher quantity and with lower price. The financial analysis shows the positive cash flow to RWSSE expected at AF have generally been achieved, and this achievement will be continued or even reinforced if the current pace of increasing demand and increasing average tariff for cost recovery are maintained. Criteria set during appraisal to meet financial viability have been fully met. The Project had set out two conditions for entry of communes to help assure minimum project financial viability. These are: (i) at least 60% of households within the proposed service area agree to being connected; and (ii) monthly water consumption per household is estimated to be at least 5 m3/ household per month. Financial assessment at completion has confirmed the both two criteria have been successfully met in each Province. 35 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Sr. Water Supply and Sanitation Richard Pollard EWDEA Team Leader Spec. Alan Coulhart Infrastructure Coordinator EASUR Water Supply and Sanitation Spec Michael Seager EWDEA (consultant) Hoi-Chan Nguyen Senior Counsel LEGEA Hoang Thi Hoa Community Development Spec. EASUR Nilanjana Mukherjee Sr. Community Development Spec. EWDEA Le Viet Hung Financial Management Spec. EAPCO Nguyen Chien Thang Procurment Spec. EAPCO Philip Brylski Safeguards Coordinator EASES Quang Ngoc Bui Environment Safeguard Spec. EAPCO Vinh Quoc Duong Social Safeguard Spec. EAPCO Mariko Ogawa Finance and Economics Spec. EASEG Nguyen Huong Thi Giang Program Assistant EACVF Quality Team: Parameswaran Iyer EWDWS William Kingdom EASUR Peer Reviewers: Caroline van den Berg EWDWS Scott Guggenheim EASES Richard Myers EASHD Supervision Dean A. Cira Lead Urban Specialist AFTU1 TTL William D. Kingdom Lead Water and Sanitation Spec SASDU TTL Sudipto Sarkar Sector Leader EASWE TTL Hoa Thi Hoang Sr. Urban Spec. EASVS TTL Quang Vinh Nguyen Sr. Water & Sanitation Spec. TWIEA EASUR - Thanh Cong Nguyen Sr. Water Engineer HIS Cuong Hung Pham Sr Water Resources Spec. EASVS Yoonhee Kim Sr. Urban Economist LCSDU Robert J. Gilfoyle Sr. Financial Management Spec. EASFM Cung Van Pham Sr Financial Management Spec. EASFM Hung Viet Le Sr. Financial Management Spec. EASOS EASTE - Simon Lucas Sr Transport Spec. HIS EASRP- Nguyen Chien Thang Sr. Procurement Spec. HIS 36 Kien Trung Tran Senior Procurement Spec. EASR2 Tran Thi Thanh Phuong Sr. Environmental Spec. EASVS Quang Ngoc Bui Operations Officer EASVS Hoai Van Nguyen Procurement Spec. EASR2 Hoang Xuan Nguyen Procurement Spec. EASR2 Huyen Thi Phuong Phan Urban Spec. EASVS Hisham Abdo Kahin Senior Counsel LEGEA Mai Thi Phuong Tran Financial Management Spec. EASFM Elizabeth L. Kleemeier Consultant TWISA Giang Thi Huong Nguyen Program Assistant EACVF Habab Taifour Young Professional EASWE Chris Banes Consultant EASVS ICR Habab Taifour Young Professional LCSWS TTL Hoa Thi Hoang Sr. Urban Spec. EASVS Economic/financial Daisuke Miura Energy Spec. EASVS analysis Hoai Van Nguyen Procurement Spec. EASR2 Hanh Thi Huu Nguyen Financial Management Spec. EASFM (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY02 27.55 FY03 49.24 FY04 87.63 FY05 234.12 FY06 40.98 FY07 0.00 FY08 0.00 Total: 439.52 Supervision/ICR FY02 0.00 FY03 0.00 FY04 0.00 FY05 0.00 FY06 50.84 FY07 62.34 FY08 63.27 Total: 176.45 37 Annex 5. Beneficiary Survey Results Results of beneficiary survey and impact evaluation have been published separately with an independent impact evaluation commissioned by the CPO at project closure. A full report is available through Project folder. The following is a brief summary of methodology and findings: Project was appropriate in meeting needs of targeted communities. Irrespective of socio- economic background, survey respondents indicated that the target communities were well informed, 76% of household believed that the location and technology of water supply systems was appropriate, and 70% believed that the project time scale was appropriate. The project exceeded targets. It aimed at achieving 60% commitment rates, while in reality community commitment to connect to water supply schemes exceeded 85% for each scheme. The project was welcomed by local government and communities. In areas were land acquisition was needed, procedures were facilitated by all stakeholders. Management of water supply schemes by RWSSEs was highly appreciated and deemed appropriate in engaging all stakeholders. Service delivery was highly regarded by users. Non-revenue water (water losses) has gradually decreased to a range of between 19 -25%. Project was effective in providing water supply and sanitation infrastructure, influencing hygiene behavior change and increasing institutional and technical capacity of stakeholders. Number of households with access to improved water sources increased 40 times due to project interventions from 30,000 in 2006 to 1,289,674 at project closure. This achievement has surpassed design targets of 60% coverage to 80%. The survey indicates that 83% of household now use a tap (from schemes) as their main source of water. With regards to sanitation coverage, 100% of households have access to improved sanitation facilities. 52% of households reported utilizing SRF to construct or upgrade latrines. The prevalence of septic tanks from 2006 to project closure more than doubled from 39.7% to 80.4%. Survey results also indicated that the percentage of low income households with access to septic tanks is equal to that of other socio-economic groups. 82% of household noted their household sanitation facilities are hygienic 5 . 78% of households surveyed indicated high satisfaction with their household sanitation facilities. For public sanitation, 80% of households in target areas are aware of the location of these facilities. Of those who reported using public sanitation facilities, 77% reported their locations were satisfactory; 95% indicated that public latrines have access to water; and 84% reported that they were private. The intervention group surveyed users of latrines in markets, health clinics and public houses and found that 24.8% of respondents had a negative attitude towards public latrines (highly dissatisfied to dissatisfied), while 52% had no clear attitudes and 23.1% were satisfied. Reasons sighted for negative attitudes included: (i) preference to utilize private latrine in household; (ii) perception that public latrines are dirty or degraded due high frequency of users; and (iii) need to pay for usage in some public facilities. Ownership of private latrines and access to public toilets has completely eradicated open-defecation practices in project areas. Survey respondents articulated negative perceptions of open-defecation. A positive change in hygiene behavior was also noted. 92% of respondents indicated washing their hands after defection; of which 72% indicated hand-washing with soap. Overall a large 5 Hygienic latrines are deemed to have dry floors, odor free or limited odors, private, have water for flushing and cleaning. 38 percentage of survey participants also indicated practicing hand-washing before eating, returning from outside visits, after cleaning baby feces, before child breeding and before preparing food. Project was efficient in implementing water supply and sanitation interventions. Despite initial delays caused by inflation, underestimation of unit costs and limited implementation capacity, the project picked up the pace of implementation in 2008 and exceeded all project targets by the closure date. Survey participants noted prolonged delays during the initial stages of implementation but overall there is high level of satisfaction as previously noted. The four enterprises are currently managing 89 schemes. As a sign of adequate service delivery, water bill payment rates exceed 95% on a monthly basis. 80% of households now have access to improved water supply sources and 100% of population has access to hygienic sanitation facilities. 84% of survey participants noted that current water tariffs are acceptable or highly satisfactory. With regards to water consumption, water usage increased beyond project design estimates. On average, the volume of water consumed is 8.3 m3 per month and 90% of survey participants indicated that quantity of water provided is acceptable or highly satisfactory. 39 Annex 6. Stakeholder Workshop Report and Results N/A 40 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR CPO put together a comprehensive Project Completion Report (PCR) that compiled data and inputs from PPMUs. This document is published separately in Project File given its length. Below are pertinent excerpts that highlight Borrower’s PCR: 2. ASSESSMENT OF THE PERFORMANCE OF MAIN ACTIVITIES Table 1: Assessment of the performance of the project Indicators Ratings (1-5) Outcomes 5 Sustainability 5 Institutional development impact 4 Bank performance 5 Borrower performance 5 Table 3 above rates the performance of the various aspects of the RRDRWSS Project on a scale of 1-5. A 1 represents very poor performance, whereas 5 indicates that the project performed very well in that particular indicator. As the table shows, the project performed very well in achieving the desired outcomes, sustainability, bank performance, and borrower performance, with each receiving a rating of 5. Institutional development impact of the project was also rated highly, receiving a 4. Overall the performance of the main activities of the project have achieved great results. 3. ASSESSMENT OF DEVELOPMENT OBJECTIVES AND DESIGN 3.1 Development Objective 3.1.1 Project Development Objective (PDO) The development objective of the Project was to improve water and household level sanitation services and the effective use of loans in four selected provinces in the Red River Delta in ways that are financially, technically, socially and environmentally sustainable, thereby contributing to poverty alleviation in participating rural communities via three forms of intervention in the field of water and sanitation: infrastructure, sanitation and hygiene and sanitation behavior, and capacity building. The specific objectives of the Project include: • Policy development – piloting and improving the ability to refund; emphasizing the proper line; contributing to the completion of national strategy and RWSS policies in experience perspective; and representing the appropriate operation mechanism at the large-scale. • Expand access to resources and improve the quality of life – piloting and adapting the large-scale investment process; piloting and completing the funding strategy and implementation, developing and completing the management models in the RWSS sector, reflecting the fact that the local society of the Red River Delta is densely populated and more consistent with the approach used for town water • Regulatory Reform - Increasing capacity and accepting commercial orientation approaches in service delivery; building capacity to support and promote the water supply and sanitation services through government and non-government agencies, especially at the provincial and district levels; building capacity of water supply and sanitation management; and building capacity of effective coordination of National Target Program of Rural Water Supply and Sanitation. 41 3.1.2 Indicators A set of indicators was used to evaluate the progress of the project, provide a unit of measurement, and report on the results achieved from the start of project until the end of the project (2013) (See Annex E for a table of indicators). The project used the indicators set out in the Project Appraisal Document (PAD) and the set of appraisal and evaluation indicators developed by the Ministry of Agriculture and Rural Development (which includes a total of 26 indicators, 10 indicators adapted from the M&E indicators of rural water supply and sanitation which are promulgated by Ministry of Agriculture and Rural Development in 2008 and 16 indicators designed exclusively for this project). Selected indicators were suitable for assessing how successful the project was at achieving the project development objective (PDO). All indicators are aligned with the goals of the project, and Vietnam’s rural water supply strategy, and therefore appropriate. The indicators do not need to be revised for the second phase of the project. 3.1.3 Strategic context Around 90% of Vietnam’s poor reside in rural areas of the Red River Delta region. In 2002 nearly 3 million people in the Red River Delta were classified as poor. This accounted for around 17 percent of all the poor in Vietnam. The four provinces included in Phase I of the Program were estimated to have poverty rates ranging from 23% to 37%. Community access to safe water and sanitation facilities in the rural area is among the lowest level in East Asia. In 2000, an estimated 10% of rural households had access to safe drinking water. Fewer than 40% of latrines in the Red River Delta are considered hygienic. 3.2 Design The project was well designed. Each of the four components addresses one aspect of water supply. Component one provided water supply and sanitation facilities, component 2 aimed to increase knowledge and therefore demand within the community, component 3 and 4 focussed on increasing the capacity of the water supply company and government for implementing water supply and sanitation programs. This multi-pronged design was appropriate, allowing for the creation of demand while also increasing the capacity for supply. Budget allocation is considered to have been sufficient for achieving the goals of the project, and achieved an appropriate balance between all aspects of the project. 3.2.1 Component 1 – Water and Sanitation Infrastructure Development Component 1 was designed to address the growing rural/urban services gap by improving access to safe water and sanitation facilities in selected rural areas. This included: • Building 89 centralized water supply schemes at both commune and cross-commune scale to meet household water needs of approximately 1,274,000 people throughout 129 communes. • Construction or renovation of 6326 public hygiene and sanitary facilities in schools and markets, and health stations in project communes 6 Source: CPO and PPMUs (as of May 2013) 42 • Implementation of the water supply and household sanitation revolving fund through the Provincial Women’s Union to assist the construction or renovation of approximately 46,0007 household latrines or bathroom facilities. Photo 1: Water supply station (Đại Thắng commune – Nam Định) Selection of location of latrines: The selection of location follows the regulations of the Project: • Households (via the Revolving Fund) are selected after their application appraisal by the Women’s Union; • Public latrines are constructed in important pubic areas such as schools, markets, culture houses, or the offices of the Commune People’s Committees, and the health stations. Photo 2: A farmer using tap water (Đại Thắng commune – Nam Định) Selection of location for centralized water supply schemes: The selection criteria include: • The communes that have high demand in improving water supply and sanitation; • The beneficiaries are willing to make a contribution of 10%, and agree with the full- payment of water prices; 7 Source: Reports of CPO and PPMUs (May 2013) 43 • At least 65% of households commit to connect to the water supply system. In a number of comments, 100% of households are willing to connect. • The water sources are ensured in terms of quality and quantity; the exploitation of water sources is convenient and easy; • Other conditions (the percentage of poor households, the percentage of households using tap water, the percentage of local people having relevant diseases, etc). Public sanitation facilities were built in the important public areas, while private sanitation facilities were built based on the needs of the households. This ensured that construction sites were appropriate. Communes for water supply construction were based on community demand, need, and willingness to pay, and also the location and quality of water resources. This ensured that the selection of communes was appropriate. The design of the water supply schemes as well as public hygiene facilities are required to meet the current standards of Vietnam. The Red River Delta rural water supply and sanitation project applied a demand-based approach and emphasizes community participation in decisions related to water supply and sanitation, including using socio-economic survey results and community consultation as the basis for proposing the project’s technical solutions. The planning of sub-projects was based on the water supply and sanitation demand within local communities, the communities’ willingness and ability to pay, technical requirements and local consultations. This approach is considered to be appropriate to ensure that technological solutions are matched to the needs of the local community. The initial design of water supply was concentrated on single commune systems and the use of water tower technology. This may lead to issues with the long-term viability in Hải Dương. While these facilities were quick to implement, the higher initial fixed and variable costs associated with the operation of each individual scheme. Intercommunal systems such as those implemented in Nam Định led to slower initial progress, however it is believed that this will lead to benefits in the future. Other than the choice of water tower for single commune water supply, the technology chosen was appropriate. Funding for the operation of component 1 has been fully allocated. PMU made a budget plan based on activities and this plan was adjusted according to the status of the contract. The evaluation results illustrate that the project has achieved a balance between water supply and sanitation infrastructure. Photo 3: Public latrine in the office of the Commune People’s Committee (Thai Binh) 44 3.2.2 Component 2: Hygiene and Sanitation Behavior Change Component 2 was designed to provide recommendations for better hygiene practices and change people’s personal hygiene behavior through improving their awareness and changing hygiene behavior such as washing hands with soap, proper waste disposal practices, and proper and safe use of water supply and sanitation facilities. Changing attitudes towards hygiene promotes the use of sanitation services in order to optimize the efficiency of improved sanitation facilities and water. Moreover, changing attitudes towards hygiene also helps people in households in the sub-project areas accept safe hygiene behaviours. Activities of component 2 were: • Performing household surveys; • Formulating the Provincial total sanitation Plan; • Formulating the total sanitation plan for participating communes (each commune has community total sanitation plan); • Establishing communication groups in project communes; • Organising training sessions for communicators; • Holding communication meetings in the communities; and • Conducting media campaigns and education activities in 120 communes (Painting in primary school, coloring in preschool, cultural night, radio broadcast, Green-Saturday). Photo 4: Poster in the Water supply and Sanitation Enterprise (Ninh Bình) Component 2 was appropriately designed to improve the hygiene practices in the community, and this is shown by the success of the project in achieving this goal. The ultimate goal of the Component 2 is to achieve the “Total sanitation-led commune”” in all communes of the Project. This is not limited to construction/use of hygienic latrines but also involves disrupt the spread of diseases in the communities via encouraging the community’s members to change their sanitation behaviors, to use and maintain the hygienic latrines, to wash hands with soap, to protect the water sources, and particularly to pay attention on keeping hygiene for children and project the environment. 45 Photo 5: Ms. Lan’s family uses septic-tank latrine constructed with the loan from the credit group in 2012 Hai Duong 3.2.3 Component 3: Strengthening the Capacity of Community and Local Government Institutions and Management Entities Objectives of component 3 were: • Build capacity in communities for the planning and management of infrastructure projects; and • Build the capacity of local authorities to encourage and support the community to implement the plans effectively, paving the way for new management methods for centrally-run water supply in the participating provinces. Activities of component 3 were: • Supporting the establishment of the model of water supply joint stock company in 4 provinces to perform post-investment management tasks on construction projects within the framework of the project; and • Training to enhance the capacity of Central PMU and local PMU; Enhancing capacity in running businesses, managing operation of JSC; capacity enhancing for shareholders’ representatives; Support and capacity building within this component was sufficient and appropriate. Building the accounting and financial skills of the people working on the ground, like the Women’s Union, early in the project would help avoid problems in managing finances in the early stages. 3.2.4 Component 4: Support for Project Management, Monitoring and Evaluation Project management was focused at the provincial and lower levels. This reflects the decentralization efforts of the Government of Vietnam and the support of the World Bank to make management work more closely with the beneficiaries/water users. The local and international consultants provided support for project management, procurement, consultancy bidding, bid opening, and government sector reform. The international consultants were recruited to assist the Central Project Office (CPO). Activities of the consultants included: 46 • Managing the project and preparing procurement plans that comply with the procurement procedures of the World Bank; • Preparing budget and finance estimations for sub-projects, the procedures for evaluation and approval of sub-projects; • Monitoring, evaluating and setting up a database and monitoring system for the project; and • Implementing a strategy to promote the use of sanitary, change to hygienic habits; The local consultants were recruited and primarily stationed at the provincial level. A number of local consultants will also provide services for the CPO. The local consultants provided support for the following activities: • Information, Education and Communication for communities; • Preparation of technical proposals for sub-projects (pre-feasibility study investment reports), including field surveys, technical design, surveys on willingness to connect to the water system and prepare invitations for bids; • Support for bidding opening and contracting in accordance with the current procedures issued by the World Bank / Government of Vietnam; • Provision of business support and support for organizational development to establish and support the new management-ownership models; • Contract management and monitoring of the implementation; and • Project management, institutional capacity building and training. The design of this component was appropriate. 3.2.5 Technical Assistance Techical assistance provided across all provinces was good. One area that may require greater technical assistance in the next phase is bidding management. This was a weak point in the first phase, and led to delays. Greater technical assistance may help avoid these difficulties. See Table 1 in Annex E for a summary of technical support provided in each province for the duration of the project. 3.2.6 Implementation Schedule In this phase of there were delays during the bidding process and implementation, which led to the requirement for an extension of time. These delays were unforeseen in this phase, but may need ot be considered for the next phase. 3.3 Assessment of quality Previous projects investing in water supply and sanitation for the whole country in general and for the Red River Delta in particular have not been performed in a synchronous manner. Most new projects only focused on the construction of infrastructure without providing adequate attention to education and raising the awareness of the community about water and sanitation issues. Consequently, some projects have experienced low rates of connection to water supply infrastructure, low water use, low effectiveness and lack the ability to recover capital investment. Due to poor operational skills and the lack of a regular maintenance mechanism, many of these previously installed systems have become degraded, lost revenue and suffered from high water high losses. The service time has also been interrupted. There is no money to upgrade and repair the degraded system because the water price is too low and is only enough to pay for the operator. That is because the water 47 prices were not properly calculated. The price excludes the cost of depreciation and periodic maintenance expenses. Furthermore, people in the community are not conscious of the importance of the water supply system, and so feel no responsibility for efficiency when using water supply and sanitation facilities. Therefore, investing in improving the efficiency of management, education, communication and capacity building for the communities and agencies involved in the project is considered an effective solution to mitigate these shortcomings and support for the effective operation of water supply and sanitation constructs. This project aimed to avoid the mistakes made in the design of these projects. 3.3.1 Assessment of Development Objective The objectives of clean water supply and community sanitation project have met the needs of the community for clean water on a sustainable long-term basis; Project objectives have met the appropriate priority in the field of water supply and sanitation project and the National water supply and sanitation. 3.3.2 Assessment of Indicators The Development indicators listed in Table 3 are appropriate with the development goals and specific objectives of the project. These indicators were developed on the basis of indicators set by the Rural Water Supply and Sanitation National Target Program issued by MARD to measure in accordance with the nature of the project. In addition, the results of the final evaluation survey also indicate high satisfaction of people with the quality of public facilities and water service. The people’s evaluation is positive: the satisfaction rate is as high as 71%. Most of the surveyed households are satisfied with other factors such as water tariff, water volume, and attitude of the enterprise staff. Notably, 77%8 of respondents showed satisfaction with the water delivery service, particularly in comparison with the expenses. Regarding public latrines, overall half of the respondents had positive evaluation while the other half held negative opinions. 3.3.3 Assessment of Design Quality The design of the project was well suited to the objectives of the project and the needs of the community. The use of four different but interlinked components that worked together to achieve the goals worked exceptionally well for meeting the projects goals. The water supply construction contractors were required to meet the design standards as set out in their contract. In general the quality of design was sufficient, Water plants were designed with excess capacity to supply water to the communes in the future. Design of individual plants was generally in accordance with the specifications. 8 Impact evaluation report for the RRD-RWSS Project, made by DEPOCEN. 48 Photo 8: Water supply station (Yên Từ commune - Ninh Bình) At the beginning of the project, there occurred a number of issues with 8 communes in the first construction phase, such as lack of hydrogeological information, poor choice of construction location requiring the relocation of construction, and poor justification for the chosen water source. However, in the later phases, these issues were resoved to ensure the project’s quality and progress. The initial focus of design in three of the four provinces was on single commune water supply using water towers. While this design is appropriate for single commune water supply construction of these facilities proved complicated. Furthermore, water towers will not provide sufficient capacity for intercommunal water supply systems. Pumping stations were more appropriate for intercommunal water supply systems, and have proved more efficient and cost effective in the long run. As the project proceeded these problems were reduced, as information became better and the focus of design shifted away from water towers and towards multi-commune pumping stations. The designs of the public sanitation facilities in schools and other public places are to a set standard on design for school latrine issued by the Ministry of Education and Training. However, in a number of facilities following the standard design, after completion it revealed that the design is inappropriate in terms of functionality, lack of light, ventilation and privacy. In some cases the height is not sufficient, and the materials for construction were poorly chosen. In many cases the design of the latrine facilities has not been designed with sufficient capacity for the number of people that will be using them. This was resolved by PPMUs in the later stage of the project and thus the constructed facilities are more convenient and improved. Thus, this needs to be improved in the next phase as it could hinder the attempt to increase hygiene and sanitation practices. 3.3.4 Assessment of Construction Construction quality: The constructed facilities were checked and monitored by independent consultants and construction was supervised by investors and the community. The construction quality meets the requirements of the technical design and complies with the legal regulations on construction in Vietnam (as Decree No.209/2004/NĐ-CP). Construction quality of schemes has generally been satisfactory, despite a few initial construction problems. Contractor’s capacity: Contractor’s were selected through a bidding process in accordance with the legal provisions of Vietnam and the regulations of the World Bank. The compliance with WB’s regulations helps to ensure the transparency in bidding, as well as the selection of contractors with adequate capacity. Most 49 of the selected contractors are well-known and experienced in the field of water supply, sanitation and environment. The quality of the majority of contractors was very high and their work was satisfactory. Although the bidding is strictly organized to find qualified contractors to deliver the project bidding packages, there were still some issues during implementation with a number of packages, particularly those implemented in 2007 – 2008 when the inflation was high. In all 4 provinces, the implementation period of a number of packages was extended once or twice, and some were extended 3-4 times. The extension period of many packages was equal to or even longer than the contracted implementation period. This could be due objective reasons such as the recession, bad weather, technical changes, and legal procedures, etc. In addition, another cause of delays was the financial capacity of some units directly implementing the construction projects. Although the capacity of selected contractors who sign the contracts is ensured by the processes in place, during implementation the selected contractors may re-assign their work to subordinate units or enterprises with lower capacity to perform the work required. For the most part contractors performed their work as required. A few contractors had problems fulfilling the combined design and construction contracts. While design-bid- build contracts are a possible alternative, it is believed that these types of contracts would be less efficient in time and cost. For most of the construction, design-build contracts were successful and well implemented. Due to the economic difficulties throughout Vietnam it is possible that a number of companies used the money provided for the project to pay off their own debts, or used the money for purposes other than project design and constructions. Management of construction project: with the support of the supervision consultants, the technical staff was assigned by the PMU to closely manage and supervise the implementation of the contract to guarantee the construction’s quality as well as to coordinate with the consultants to solve the problems that arose during the field work. In addition, the commune people’s committee assigned representatives of organizations, such as the Vietnam Fatherland Front and the heads of the villages to participate in community supervision of construction. Assessment of infrastructure built from funding of the project: The project has increase the number of rural people in all four provinces that have access to water supply and sanitation services. The successful implementation of this project has benefited all four of the provinces through improvements in health and the economy. Simultaneously, it has contributed to the achievements of National Rural Water Supply and Sanitation Program and National Rural Water Supply and Sanitation Strategy Towards 2020 3.3.5 Institutional arrangements A Center Project Office was established by the Ministry of Agriculture and Rural Development (MARD), including experienced and high-qualified staff, with the assistance of national and international consultants. The Department of Agriculture and Rural Development (DARD) took the general management role in the project. A Provincial Project Management Unit (PPMU) was established under DARD and staffed by the Provincial Centre for Rural Water Supply and Sanitation (pCERWASS). In the first few years, the PPMU was in charge of managing the project. In 2007, a Rural Water Supply and Sanitation Joint Stock Company (JSC) was formed in accordance with the Enterprise Law. After that, the operation and maintenance of the centrally-run water supply infrastructure were transferred to the provincial JSC. 3.3.6 Evaluation of the rural water supply and sanitation joint stock company model 50 This is a new model in comparison with the current management models in the locality and throughout Vietnam (5 models). A Joint Stock Company model was chosen as the appropriate model for the management of the construction and operation of water supply and sanitation infrastructure for this project. All 04 provinces have inter-communal water supply schemes. This model is characterized by the presence of the beneficiaries (water users) as the stakeholders of the company. The strengths of the joint stock model (as demonstrated in practice) are professional management, its ability to cover operational costs and partly financial costs to the Government, water users as stakeholders, high satisfaction rate, etc. This is a sustainable model, it is in line with Vietnam’s development objectives, and it provides justification for setting tariff levels at a sustainable level. Communication with government institutions was generally good, though in some cases the rotation of staff in and out of key positions within several departments created some coordination difficulties. Providing a better transition during these periods would reduce difficulties. The business model of the joint stock company appears to be more sustainable than other methods of implementing water supply projects. Keeping the management board small was effective, and avoiding bloat and keeping the enterprise efficient is vital to the model. 3.3.7 Evaluation of the Sanitation Revolving Fund All Provincial Women's Unions have complied with the “Manual Guide for the Household Water Supply and Sanitation Revolving Fund." The management units were set up at the provincial level (Provincial Management Board consists of 7 officers) and at commune level (commune management Board consists of 3 people), and have the responsibility to manage and operate the revolving funds from the province level to commune level in the project area. Communes also set up credit and savings groups (2 people / village) that are in charge of guiding and encouraging households through the processes of borrowing and repayment of the principal, interest and savings. The monitoring teams greatly appreciated the role of the Women’s Union in leading and conducting revolving fund activities. The activities of the project in general and the activities of the women’s unions in particular have had an impact on the awareness and behavior of people on safe water and sanitation in rural areas; many households, which didn’t take out loans built their own sanitary toilets; the percentage of households using hygienic toilets has increased by 20-30% from the incidence at the start of the project. The project activities have improved the quality of people's livelihoods and the sanitation condition in rural areas, contributing to the promotion of the movement “All people unite to build a cultural life”, the National Target Program on new rural areas, and the movement "no poverty, no violations of the law and social evils, no violence, no third child, no malnutrition and school dropouts, clean house, clean kitchen, and clean alley” launched by the Vietnam Central Women's Union. 3.3.8 Assessment of Cost The financial resources for the Project: The project was funded by a loan received from the World Bank and the Counterpart fund of Vietnam. It also received contributions from the communities as the beneficiaries of the project. This project is quite unique in receiving funding from the community to help fund infrastructure projects. Funding for piped water supply schemes: 45% was allocated by the Government from World Bank loans, 45% was provided as loans offered by the Government from funds provided by the World Bank loans, 10% 51 was contributed by the community. When the works are completed, the operating unit is required to repay the government loans (45%). For public water supply and sanitation: 100% is allocated by the Government from World Bank loans. The beneficiaries shall bear 100% of the operational / maintenance cost. The activities of components 2,3, and 4: the Government allocated 100%. Cost of the project: The cost of the project was impacted by many factors, including: • Inflation during project implementation; • Increase the level of water used by people from 40 liters / person / day to 60 liters / person / day; • Pre-feasibility report did not cover the cost of public latrines; the investment cost provided in the report is lower than the actual one; and • The scope of the project was expanded leading to increased costs. Evaluation of the additional funding: The Agreement on additional funding helped accomplish the project objectives. In addition, the localities effectively used the savings from the bidding fund to expand the services to 40 communes (about 600,000 people), resulting in an increase of 70% of the initial target for beneficiaries. 3.3.9 Assessment of financial and bidding management arrangements Bidding management contributed to the project’s achievement of 88% disbursement, with an expected 95% disbursement by the end of the project, and 100% completion of contracts. Quality of project procurement and quality of most contractors was high. However, there still exist a number of obstacles: • The capacity of staff of the Central Project Office and the localities is limited concerning the management of bidding and project management. As a result, the implementation of the project was much slower than originally planned and mistakes were made. For example, bidding package No 1.4 of CPO and package No TBO4 of the PPMU of Thái bình were re-bidden. • In a number of bidding packages, the procurement plan did not match with reality, and thus asked for an extension at least 01 time. Some packages required several extensions. • Using National Competitive Bidding (NCB) to procure contracts for the design and construction of water supply facilities is new and is not well-known. 3.3.10 Evaluation of the financial management mechanism The project has complied with regulations of the WB and the Government of Vietnam. The reporting and auditing were implemented periodically in accordance with the regulations of WB. The reports provide up- to-date and sufficient information. However, there were many differences in expenditure principles of the WB and those of the GOV that were not clarified at the beginning of the project, causing difficulties for borrowers. The project has complied with the terms of the Development Credit Agreement, the guidance of the World Bank and was managed in accordance with the Financial Regulations of the Government of Vietnam. 7.1.2 Bank’s support and monitoring Since 2001, representatives of Vietnamese Government, Ministry of Agriculture and Rural development, and World Bank have made great efforts to prepare capacity for establishment and organization of the 52 project. The World Bank also supports the Government in developing rural water supply system, particularly in the Red River Delta region. During the implementation of the project the WB always monitored progress strictly to ensure that the project was implemented effectively, the reasons for the projects interference were appropriate and the necessary adjudications were approved and realized in a timely manner. 7.2 Borrower Performance 7.2.3 Vietnam’s Government After 10 years of implementing the Government's National Target Program for RWSS and with the participation of all ministries and sectors at the central level and provincial level, significant success has been achieved in relation to the objectives of the NTP phase 2. The results of the project have greatly contributed to the achievements of the Government of Vietnam. In the past 10 years, thanks to the great efforts of the whole society and the effective support of international organizations such as the WB, ADB, UNICEF, DANIDA, AusAID, DFID, the Netherlands, JICA, and others, the improvements in the field of rural water supply and sanitation have contributed considerably to the achievement of millenium development goals and the improvement of the rural living conditions, and motivated socio-economic development through the whole country. At the end of 2012, the percentage of people in the rural area served with hygienic water reached 80%. The proportion of households having proper latrines is around 56%. About 81% of schools have safe water and hygienic latrines and 91% of health stations are served with safe water. During the implementation of the project, the capacity of the stakeholders of the Government, especially those at the local level of participating provinces, has been enhanced significantly. 7.3 Conclusion In general, the effectiveness of operations of the organizations that were responsible for the preparation and implementation of the Red River Water Supply and Rural Sanitation Project has been quite positive. From 2001 onwards, the agencies of the Government of Vietnam, such as the Ministry of Agriculture and Rural Development, Ministry of Finance, Ministry of Planning and Investment, Ministry of Construction, Vietnam Development Bank (VDB) and World Bank representatives have focused a lot of effort on investing in capacity building and organizing projects. Now, the project has been evaluated as successful, effective, and has contributed to the implementation of the National Strategic Objective on clean water and rural sanitation, partly thanks to the great effort of the units who implemented the project. In addition, it's necessary to mention the tight coordination of the related ministries in studying and revising the Circular, the Decree, and the guidance of the Government on regulations management and use official development assistance towards improving efficiency, simplifying and synchronizing the financial management procedures of ODA to meet the new requirements and regulations of existing laws. 53 Annex 8. Comments of Co-financiers and Other Partners/Stakeholders N/A 54 Annex 9. Revised Results Framework Updated Results framework from Additional Financing Project Paper. Ust ofP•·ojtc-t PDO Projtc-t Outcomt IndicatOI''i Outc-omt Information • The number of people in project areas with access o ' impro ·ed water o l! es · and hygiene sanita ·on facir ties. and e number To impro e '·ater and of these tare poor. ho tsehold lt ·el sanitat ·on sen ·ces and their effecti e • e percenmge of people in pro·ec are.as ~oritb acce>s to 'impro ·ed ' ·ater sources. To mcmitor achie ·ement tse in se ected provinces · wa 'S tha are finan 'ally, • The number of e N piped househo d \Vater of the PDO onnections that ba e resul ed from e To me~U--ure technicall} and project intervention impro ·em in ervice environm tall r sustainable • The number ofRWSSEs establis ed. and the pro\rided and progre~s thereby contr ·b tting to man ial viabi ·ty of the enterprises. to ~orards meeting pove r allevia .on in parti ipating rural • e percentage of peop e · projec objectives commmities omnnmes vho ha ·e ad pted safe hygiene and sanitation bebavioJS, based o Pat!icipa ory assessment and Kno Nledge. Attitude. and Prn ti es S ·e ' Use of Inte•·mediate Inttrmediate Outc-ome-; Intermediate Outcome Indicator-s Outcome llonitoriug • The number of people · project areas with access o impro ·ed water sour es." • The n~ber of additional people in p oject are.as ~th acce s to ''hygiene sani tion facilities. · • The number of ew piped househo d ' ·ater onnections that ba e resulted fro.m e For Component One p oject · te ·ention. Torno ·tor Targeted .rural ommunes prog;res ·vely ve new or • The numbers of targe ed rural communities imp ementation progress that a e ftmctioning. \Ve operated and Used as inputs in ~ oved' ·ater supp r, e\ · maintained wa er suppl 'scheme. di ogue ~orith or 11DpTO ·ed sanitatio fa ili ·es. • The number of public sanita ·on facili ·es imp ementing age cies onstru ed. • The proportio of designated poor ho olds that have access o ~orater and ·tatio fa ili ·es from the project • The number of ouseholds that ba ·e borrowed from re ·olving fund a ti ·ties. For Component I wo • The number of geted comm1 mes that can Tomo ·tor Targeted rural omm1 me demonstrate a posi · ·e and sustained imp ementation progress. populations progress \rely impro em in rgiene knowledge attitude Used as inputs in and practic.e in re tion to \Vater supply and ba e adopted safe h rgiene ·tatio fa ili ·es. dialome with implanting beha ·or and are eifecti ·ely agencies, GO . The Pro·ect eeds to u grade 55 Use of Pr-oject PDO P roject Outcome Indicator<; Outcome Information the acco ling ofu\ are o generate the · erim finmcial reports from the anti ipated higher demands of e AF us~ \l.i S infrastm · rure for Component Three: RWSSEs, comm ·ty Go ·ernm and o er imti tiona! entities at • e number ofRWSSEs that are financiall · To monitor conumme, district and iable. Areas'· ere capa 'ty provincial le in olved in b rilding of in ·o ved the projec pro1rre-s ·\'ely • The degree of user satisfaction ,..,; thin enterprises needs to be ha ·e the capa ·ty and targeted commmtities Nith seni ces and targeted o:r capacity capability top ay appropria e advi e offered them o water ~upply and building approaches roles · support of all stages sani tion services. improved of sustainab e water suppl '· sanitation and improved h •2iene and apa ·ty b rilcliM~ Tomo · or • Numbe of contracts awarded in accordan~ Progress in p o •iding with agreed Procureme t Plan and effecti enes.s of. for· Component Fout·: project managem and Each PPMU and the CPO is • Degree of adheren e to schedules for techni al assistan~ progress\ •ely able o procurement and implementation inputs suc~s.sfull manage d Need for TA and rate of suppo the projec (and similar ones) • Exten to which satisfa Ol)' o\rersigh and quali ' contra are achieved, as confinned througJl supervision and indepe dent 56 Arra ngements for Result Monitoring Target Yalu~s D at a C ollec-rioo aod R eporting f requeocy D at a R6poll~i_bl~ K..y lnt~ nn. .di: t~ Bas.e.lin~ ~ fid-t~rm 3 .\f~ITR Comp~oD an d CoUec-tiou for Thlt:t Indic-ator~ (! 009) (! 011) . • 013) & ports ln~ trum~nb CoUec-rioo Comll:!!,rtem 1 : #people in project areas with acces.s ro CPO, 'im;>roYed water 30,000 500 ()()() 00,000 sources ' 950,000 Repo PP1fU, Qu;uterly from based on andannua pa1ncipatieg Monit01mg Pen::entage of se uiho are poor in N..i\ 6 _o _o pt01i'Ul'l:.ti report and e>-aluarion projed ;ueas atteSs report o improve water sources # people in project areas with acces.s ro 'im;>roYed sanitation 15000 30 ()()() 00,000 600,000 facilities F of new piped usehold water co!lllleC'tions that are NA 45 000 300000 850,000 resu.lting fro the projec inten-ention # household borrow fi'Olll revolving fund - ,000 30000 ,000 ro impro•-e sanitation 0 hh hh hh facilities # o public somitation facilities constructed 0 190 -o 300 Comll:!!,nenr 2: F of targeted COIDllllllleS that em n.strate a CPO, PPMU positive and sustained Reports based on imprm-ed in hygiene Qu;uterl ' from progress knowledge, N..i\ 5 50 00 and ann pai"ticipating report and po tio ptO'\"lDCE!S e.-aluation progressn have report adopted san; hygiene beh;n-ior and re effectn - usm,o ;> v..rss mfta..--tludure Comll:!!,nenr 3: # of water utilities Reports CPO, PPMU \VSSs en elprises) 0 4 4 4 from based on that proJec Qu;uterly pai"ticipating progress supporting andomnua ptO'\"lDCE!S report and and e>-aluation Pen::entage of 0 5 50 00 RWSS.Es report RW SS.Es thai are financially viab!e 3 The mid-term re iie /iJ carried out from October 19 to November 3. _009. 57 Target Y:tlues D:~ta Collection and Reportin,g f requen('y Data Re-pon~ ible 3 Ke}· lntennedi.'lte Ba~eline :\fid-term .\f :\ITR Completion and Collection forDn lndi~ator s (! 009) (! Oll) (! 013) Reports lnstrume11ts Collection Degree of u:;er satisfaction within targeted Reports CPO. PP. e:o=u:nitie:. mth from based on ~n;ie:e:. and ad\ ~e fully F Quarter! r partiopa.ting progre;:. NA Sat:i:ifactory offered them o Satisfactory Sansfa oty and ann pn n "'inee5 report and water 5Uppl and and enluahon samtatio sen1.ces R\\i'SSE.s report certificate Comf!:!!.nertr 4: S.msfactmy m-eJ:iigbt Repom CPO. PP. and qualiiy contro from based on are aclne1.--eci as Moderate Fully F Qu;uterl pmiopa.ting progre;:. ~onfumed through - satisfactory Sa: . ctory Sans factory and ann piOYIDC6 report and supernsion and and e\ hon independent R rssEs report momtorinl'!; 58 IBRD 38963 C HI N A VIETNAM RURAL WATER SUPPLY Ha Giang Cao Bang VIETNAM AND Lai Chau Town Lao Cai 4 5 SANITATION PROGRAM 1 3 8 9 Bac Can IN THE RED RIVER DELTA 2 7 Yen Bai Tuyen Quang 13 Thai Nguyen 10 Lang Son Son La Viet Tri 12 14 Dien Vinh Yen Bac Giang 11 15 Bien Phu 6 HANOI Bac Ninh 17 Hai Duong Ha Long Hoa Binh 16 18 19 Hai Phong 21 Hung Yen 20 Ha Nam 22 23 NEW PROJECT PROVINCES Thai Binh elta Nam Dinh Ninh Binh 25 rD RRD1 LAO 24 ve i 26 dR RED RIVER BASIN BOUNDARY Re Thanh Hoa PEOPLE'S PROVINCE CAPITALS 27 Gulf NATIONAL CAPITAL DEM. REP. of Vinh To n k i n PROVINCE BOUNDARIES Ha Tinh INTERNATIONAL BOUNDARIES 28 Dong Hoi 29 Dong Ha PROVINCES: 30 1 Lai Chau 31 Thua Thien Hue Hue 2 Dien Bien 32 Da Nang 31 3 Lao Cai 33 Quang Nam 32 Da Nang 4 5 Ha Giang Cao Bang 34 35 Quang Ngai Kon Tum T HA I LA ND Tam Ky 6 Son La 36 Gia Lai 33 7 Yen Bai 37 Binh Dinh 8 Tu Yen Quang 38 Phu Yen Quang Ngai 9 Bac Can 39 Dac Lac 34 10 Lang Son 40 Dac Nong 35 11 Phu Tho 41 Khanh Hoa Kon Tum 12 Vinh Phuc 42 Binh Phuoc 13 Thai Nguyen 43 Lam Dong 37 14 Bac Giang 44 Ninh Thuan Pleiku 15 Quang Ninh 45 Tay Ninh 36 Quy Nhon 16 Ha Noi 46 Binh Duong 17 Bac Ninh 47 Dong Nai 18 Hung Yen 48 Binh Thuan 38 19 Hai Duong 49 T.P. Ho Chi Minh Tuy Hoa 20 Hai Phong 50 Ba Ria-Vung Tau 39 21 22 Hoa Binh Ha Nam 51 52 Long An Tien Giang CA M B O DIA Buon Ma Thuot 41 23 Thai Binh 53 Dong Thap 40 Nha Trang 24 Ninh Binh 54 Ben Tre Gia Nghia Da Lat 25 Nam Dinh 55 An Giang 42 Dong 44 26 Thanh Hoa 56 Vinh Long Xoai 43 27 Nghe An 57 Tra Vinh 45 Phan Rang- 28 Ha Tinh 58 Kien Giang Thap Cham Tay Ninh 47 29 Quang Binh 59 Can Tho Thu Dau46 48 30 Quang Tri 60 Hau Giang Mot Bien Hoa 49 Phan Thiet 61 Soc Trang 51 Ho Chi Minh City 53 62 Bac Lieu 55 Cao Lanh Tan An 50 63 Ca Mau Long Xuyen 52 My Tho Vinh Long Vung Tau 59 Ben Tre Can Tho 56 54 Rach Gia lta 58 60 Tra Vinh Vi Thanh 57 De G ul f 61 Soc Trang ng of 62 ek o Bac Lieu Thail and Ca Mau M This map was produced by the Map Design Unit of The World Bank. 63 0 50 100 150 200 Kilometers The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or 0 50 100 150 Miles acceptance of such boundaries. NOVEMBER 2011