Page 1 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB5350 Project Name URBAN WATER SUPPLY AND WASTEWATER Region EAST ASIA AND PACIFIC Sector General water, sanitation and flood protection sector (100%) Project ID P119077 Borrower(s) The Socialist Republic of Vietnam Implementing Agency Vietnam Development Bank State Treasury Environment Category [ X] A [ ] B [ ] C [] FI [ ] TBD (to be determined) Date PID Prepared September 10, 2010 Estimated Date of Appraisal Authorization December 6, 2010 Estimated Date of Board Approval April 21, 2011 1. Key development issues and rationale for Bank involvement This Project Information Document was prepared in February 2010 and reflects that stage of project preparation. There are 51 cities in Vietnam that have a population greater than 100,000, and about 25 million people, or about 30% of the population, live in these cities. Out of this population, about 6.1 million and 14 million people do not have access to adequate water and wastewater services, respectively. Even for those who are connected, there is a need to improve quality of services. In addition, the service levels for small and medium towns that have a population smaller than 100,000 need improvement. The demand for better services is also increasing as the urban population is growing at the rate of 3.4% per year. For the urban water and wastewater sector alone, the country needs to spend around $ 600 million per year to provide quality services and meet the Millennium Development Goal (MDG). Further, there is a continuous need to rehabilitate the existing water and sewerage networks which require additional investments. The proposed project aims to address the water and wastewater needs of the urban areas in the country. The institutional arrangements for the delivery of water and wastewater services are streamlined. As part of the decentralization efforts, the provinces have been made responsible for the delivery of services and the central government plays a role in setting policies. Water services are provided by the utilities in a province and wastewater and drainage services are provided directly by the province through a department responsible for such services. The main issues to consider are: · Water Supply Services : Apart from increasing coverage, the water sector needs are to: ensure that good quality water is supplied to the population through increased water production; rehabilitate water supply networks, so that adequate pressure can be maintained in the system for quality service; and non-revenue water (water produced but not sold due to leakage) is decreased. On the financial side, water tariffs (around $ Page 2 2 0.2/m 3 ) generally cover operating costs, but increases in tariffs are required to support large investments. At the same time, due to affordability consideration, drastic increases in tariffs are not possible. Thus, there is a need for public sector support given the public good element in provision of clean water. · Wastewater and Drainage Services : With respect to the sanitation sub-sector, sewerage networks in Vietnam are mainly all combined systems where pipes and channels serve to convey storm water as well as wastewater. Most residential units use septic tanks and the wastewater generated from households is discharged to water bodies near an urban area creating environmental concerns and health hazards. The sewerage and drainage systems are in disrepair and often drains are not cleaned which reduce their drainage capacity leading to floods. With the increased variability in rainfall due to climate change, it is important to have well functioning drains with adequate design capacity. There are two fees to recover operation and maintenance cost of wastewater services: environmental protection charge (Decree 67/2003) and wastewater fee (Decree 88/2007/ND-CP). However, the application of these fees is not uniform and this policy matter needs to be addressed to recover costs from the users. Rationale for Bank Involvement: The project is fully in line with the objectives outlined in the Country Partnership Strategy, which include supporting a socially inclusive and sustainable growth, improving public administration and governance, and increasing investment in infrastructure to support growth and help alleviate poverty. The technical assistance under the project will strengthen the public administration responsible for the service delivery, and the infrastructure investments under the project will help to improve services to the population and the poor. Moreover, the Bank has been an active partner of the Government of Vietnam in developing the water and sanitation sector over the last ten years. It has been involved in a number of urban development projects and provided support on policy matters and lessons learned from the past have been incorporated in the project design. Given the large needs of the sector, the Government is identifying priority investments for possible Bank support. 2. Proposed objective(s) The objective of the project would be to improve water, wastewater collection and treatment, and drainage services. The success in meeting the objective would be measured through: expansion of sewerage coverage; expansion of water coverage; increase in wastewater volume treated; reducing the risks of flooding in urban areas; and improving sustainability of services measured through tariffs and working ratios. 3. Preliminary description The following two components are proposed for the project which would be confirmed during preparation. · Component 1: Investments (US$ 141 million). Eligible investments include: water service extension, development of water source, rehabilitation of water network, Page 3 3 sewerage extension, rehabilitation of sewerage, wastewater treatment, drainage, and urban road paving where works would be carried out. The Government will confirm the location of the investments during preparation. At this stage, the investments that are likely to take place are in Ho Chi Minh City (US$ 101 million, drainage); Kien Giang (US$ 20 million, expansion of water service); and Quang Nam (US$ 10 million, expansion of water service). Eligible investments would have to meet the economic, technical, financial, institutional, safeguards, and fiduciary criteria. · Component 2: Technical Assistance (US$ 9 million). This will have the following components. o Institutional Strengthening and Operational Improvement of Utilities and the Sector. This would be carried out in two ways: (i) support for central ministries and Vietnam Development Bank (VDB) through Technical Assistance (TA) that is needed for sector reforms. VDB is being considered as an institution that would manage the funds for the project; (ii) TA support to the provinces/provincial utilities to make utilities run more efficiently and improve sustainability of operations. Emphasis would be put on having a tariff regime that can support the investments proposed under the project. o Project Preparation. Funds provided to the provinces/provincial utilities to prepare projects for investments. Modalities of how the funds from the Bank can be transferred to the provinces for project preparation will be discussed during preparation. o Implementation Support. This will be provided in two ways: (i) institutional strengthening that is needed within VDB/ State Treasury to support the operation; and (ii) fee to VDB for its services of managing the funds. This fee would be paid to VDB as disbursements are made for the components implemented by VDB. Institutional Arrangements There will be two types of final beneficiaries under the project. For the water investments, the final beneficiaries are the water supply companies at the province level. For the wastewater and drainage investments, the final beneficiaries will be the provincial People ’s Committees, which will establish PMUs. There are some provinces that have experience in implementing similar projects, such as the World Bank-financed urban water supply project, or ADB-financed water supply and sanitation project, and thus are familiar, to a certain extent, with the Bank’s policies and procedures. Therefore, technical assistance will be provided both during project preparation and implementation. 4. Safeguard policies that might apply Based on the available information: · The following Bank safeguard policies will apply: Environmental Assessment (OP/BP 4.01) and Involuntary Resettlement (OP/BP 4.12). Relevant safeguards documents (such Page 4 4 as Environmental Management Framework and Resettlement Policy Framework) will be prepared to assess safeguard issues and to mitigate them in line with Bank policies. · During preparation, the applicability of the following policies will be determined. If they apply, remedial measures will be taken in line with Bank policies: Physical Cultural Resources (OP/BP 4.11), Indigenous People (OP/BP 4.10), and Safety of Dams (OP/BP 4.37). 5. Tentative financing Source: ($m.) BORROWER/RECIPIENT 0 International Bank for Reconstruction and Development 75 International Development Association (IDA) 75 Total 150 6. Contact point Contact: Sudipto Sarkar Title: Sector Leader Tel: (202) 473-5575 Fax: (202) 522-3573 Email: Ssarkar1@worldbank.org