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Implementation Completion Report (ICR) Review - Vietnam Water Resources Assistance


  
1. Project Data:   
ICR Review Date Posted:
12/09/2013   
Country:
Vietnam
PROJ ID:
P065898
Appraisal
Actual
Project Name:
Vietnam Water Resources Assistance
Project Costs(US $M)
 176.2  177.84
L/C Number:
C3880
Loan/Credit (US $M)
 157.8  159.44
Sector Board:
Agriculture and Rural Development
Cofinancing (US $M)
   
Cofinanciers:
Board Approval Date
  03/30/2004
 
 
Closing Date
12/31/2011 12/31/2012
Sector(s):
Irrigation and drainage (80%), Flood protection (10%), Water supply (5%), Central government administration (3%), Other social services (2%)
Theme(s):
Water resource management (33% - P) Other rural development (33% - P) Rural services and infrastructure (17% - S) Participation and civic engagement (17% - S)
         
Prepared by: Reviewed by: ICR Review Coordinator: Group:
Keith Robert A. Oblitas
Ridley Nelson Soniya Carvalho IEGPS1

2. Project Objectives and Components:

a. Objectives:

To assist the borrower to modernize and increase the productivity of Vietnamese agriculture, improve the management of water resources and reduce dam safety risks through: (i) the modernization of irrigation services in selected irrigation schemes within the Project Provinces; (ii) improvement of dam safety and management; and (iii) integrated development and management of the Thu Bon River Basin in Quang Nam Province.

Source: Development Credit Agreement. (The DCA and PAD versions of the project's objectives are similar in substance but the DCA version is more precise.)

b. Were the project objectives/key associated outcome targets revised during implementation?
No

c. Components:

1. Irrigation Modernization (Expected costs at appraisal (base costs without contingencies), US$154.7 million. (Costs by component at project completion are not provided in the ICR; only costs by financing category.)
Upgrading and modernizing the infrastructure of six of the largest dams in Vietnam, improving the safety of their dams, and strengthen their management structure and operation and maintenance capabilities through training and implementation of comprehensive management plans.

2. Dam Safety Management. (Expected costs at appraisal (base costs without contingencies), US$10.2 million (Costs at completion not available.)
Improving dam safety and management through the establishment of a Dam Safety Unit in the Ministry of Agriculture and Rural Development; implement remedial safety works in at least three more Ministry of Agriculture and Rural Development-affiliated dams other than those included under Component 1; and improve the Hoa Binh dam safety instrumentation system under Electricity Vietnam.

3. Thu Bon Basin Development
(Expected costs at appraisal (base costs without contingencies), US$2.6 million. (Costs at completion not available.)
Investment in Quang Hue River Flow Stabilization works and development of pre-investment studies for priority projects identified in the Thu Bon River Basin Master Plan.

4. Project Management and Capacity Building
(Expected costs at appraisal (base costs without contingencies), US$8.7 million. (Costs at completion not available.)
Providing technical assistance for project management; conducting training programs; and supporting incremental operating costs for the project management offices at national, regional and provincial levels

d. Comments on Project Cost, Financing, Borrower Contribution, and Dates

There were no changes in the project’s Objectives; although the following changes to a monitorable indicator and the Credit were made: First, on March 4, 2010 (a) the indicator on the establishment of a River Coordination Committee was dropped due to a dispute between he Ministries of Agriculture and Rural Development and of Natural Resources and Environment; (b) a minor reallocation of the Credit between financing categories was made; and (c) the purchase of vehicles under the project was granted. And second, on December 22, 2011, the Credit closing date was extended by one year – from December 31, 2011 to December 31, 2012.

Project costs estimated at appraisal were US$176.2 million and were US$177.84 million at project completion. Project costs at completion by component are not provided in the ICR, although costs by financing source are. (The task team has advised IEG that such costs are being sought after from the borrower). The IDA Credit of SDR 105.7 million (US$157.8 million equivalent) was fully disbursed. IDA provided 90 percent of the project’s financing, Government’s US$18.4 million contribution making up the balance 10 percent. There was no cofinancer.
The project period (approval on March 30, 2004 to the extended (by one year) closure date of December 31, 2012) was 8 years. Effectiveness was 9 months after approval.


3. Relevance of Objectives & Design:

a. Relevance of Objectives:

The project supports development strategy for the Socialist Republic of Vietnam as enunciated in the most recent strategy documents of both the Bank and the Government. The Bank's Country Partnership Strategy for Vietnam for FY12-FY16 (November 7, 2011) builds on the country's dual strategy of growth and poverty reduction emphasizing improving competitiveness, governance, resource management and social equity. Government's Social-Economic Development Strategy: 2011 - 2020 includes modernization and improved effectiveness and sustainability of agriculture, in order to increase agricultural production and exports, and to improve rural living standards, especially of the poor. Agriculture is a key sector in Vietnam, accounting for 22 percent of GDP, 30 percent of exports and 60 percent of employment. Improved irrigation infrastructure could both significantly enhance productivity and, for farmers at the tail-ends of irrigation schemes, typically amongst the poorest, provide them with water and the source for improved livelihoods. Competition for water for the urban and industrial sectors is growing, putting a further premium on the need to enhance the productivity of water's largest user - agriculture - and to better manage water between sectors. But basin based integrated water resources management is still in its infancy in Vietnam. And the productivity of water for agriculture is low. Dam safety is a necessary concern, recognized in Government's 2001-2010 Social-Economic Development Strategy, but which did not have an institutional framework for monitoring and actions.

Thus, all three of the project's objectives were strategically important, and the Relevance of the Project's Objectives is assessed High.

b. Relevance of Design:

The matrix and monitorable indicators in the project's results framework (PAD, Annex 2) represented a logical sequence of cause and effect in the case of the objective to improve dam safety: dam safety works, inspection reports, dam safety instrumentation, and establishment of a dam safety unit could be expected to reduce dam safety risks. Likewise, project actions would make a start improving water resources management. The project's design was less clear in how it would support the objective to modernize and increase the productivity of Vietnam agriculture. The only indicator to measure increased agricultural productivity was increases in irrigated area, and there were no plans to ramp up agricultural extension and research to accompany the irrigation improvements. From Bank experience, agricultural productivity can be significantly enhanced if water management improvements are accompanied by better agricultural practices.

The project's complexity also raises a question. As materialized during project implementation, handling the myriad activities targeted at appraisal proved difficult. In effect the project could be considered as two broad thrusts: irrigation and agricultural improvement (if an agricultural intensification sub-component was added) as one; and water resources management and dam safety as another. These require different skill sets and different geographic and time horizons, and the procurement and other intensive actions involved with the irrigation component would not run the risk of diverting attention from the more "software" oriented water resources management. On the other hand, by including water resource management and dam safety in the project, in view of the pressing need to also introduce these areas, their inclusion in the project might be argued as justified, even if this implied a larger implementation challenge. But two separate projects would seem to have been the better option.

On the basis of the lack of an agricultural component to augment the productivity of agriculture by more than from irrigation modernization alone, the project's Relevance of Design is assessed Modest.


4. Achievement of Objectives (Efficacy) :


Modernizing and increasing the productivity of Vietnamese agriculture
(through the modernization of irrigation services in selected irrigation schemes within the Project Provinces)

This was to be achieved through rehabilitation and modernization of irrigation infrastructure, coupled with improvements in management of six irrigation systems (representing about 5 percent of the command area of Vietnam's 75 irrigation schemes). In terms of the monitorable indicator established at appraisal to reflect productivity, project actions achieved the target: The average "collection area" (the actually irrigated area of each scheme) increased from 50 percent to 81 percent of total command area, compared with a targeted 75 percent. In turn, this impacted significantly on agricultural productivity. Annual crop production increased by 31 percent for paddy, 41 percent for maize, 52 percent for soybean, and 94 percent for vegetables.

However, much of the increase was due to the increase in effectively irrigated area (rehabilitation) rather than to the impact from modernization. While training related to irrigation modernization exceeded targets (1,189 persons trained as compared with 125 persons targeted at appraisal), a number of the intended modernization actions - for instance, irrigation modernization guidelines, operations and maintenance manuals, scheme level management plans, computerized real time water control systems, and guidelines for irrigation performance bench-marking - were only completed in the last year of the project. Further, on some schemes, modernization infrastructure was not used to its full potential for water control. A more productive irrigation system was the main purpose of modernizing rather than rehabilitating. As expressed in the ICR (page 11): "while the project completed a first phase of the modernization process, it did not achieve all the modernization goals set out in the PAD." And, "The heavy management workload of the project, the delayed start, and consequent pressure to complete the construction, led to reduced attention to non-structural modernization measures." (Component 1 of the project involved 295 construction contracts.)

In short, the project's achievement at its completion, while it did increase the agricultural productivity of the six schemes, fell short of its modernization intentions and the potential agricultural productivity increases that the modernization measures could have provided. As such, the Efficacy of the project at Modernizing and increasing the productivity of Vietnamese agriculture was Modest.


Reducing Dam Safety Risks
(improvement of dam safety and management)

A significant start was made to develop Vietnam’s institutional and material capabilities for improving dam safety, and all monitorable indicators were met: A Dam Safety Unit was established responsible for all dams under the purview of the Ministry of Agriculture and Rural Development (the Ministry oversees about 95 percent of the nation's dams); remedial safety works were carried out on four dams; dam safety advanced instrumentation was piloted on one dam; a dam safety manual was produced; and a national regulation on dam safety was issued. These measures fully met project targets and the monitorable indicators. (The Task Team has also advised IEG that, since project closure, the Guidelines for dam safety have been adopted by the Ministry for nation-wide application.)The Efficacy of the project in reducing dam safety risks was Substantial.


Improving Management of Water Resources
(Integrated development and management of the Thu Bon River Basin)

The three intended outputs were: restoring river flows to Danang city; preparing two feasibility studies for water infrastructure projects; and, establishing a basin coordination committee for coordinating the management of water resources in the basin. The first two were fully achieved. For the latter, a basin committee was established in 2005 by the Ministry of Agriculture and Rural Development, The committee was later transferred to be under the Ministry of Natural Resources and Environment, but has not functioned as a regularly meeting body. In 2010, the monitorable indicator about establishing a coordinating committee was removed from the project, with an adjustment of the Credit Agreement, as it was considered that, for political reasons, the ministries were unlikely to cooperate.

Nevertheless, in a number of key aspects, integrated water resources management has made progress in the basin: The Ministry of Natural Resources and Environment has convened multi-stakeholder meetings as needed to decide on water allocation and management. This has included allocation and management of water between the two provinces sharing the basin, a significant achievement given their separate governments. Also, water allocation for Danang city required diversion of 20 - 30 percent of river flow, much of it away from agricultural use. Agricultural to urban (municipal and industrial) diversion of water, involving strong and competing stakeholder interests, was implemented in a number of other locations as well. And the two feasibility studies, involved multi-sectoral water development and management of water on two significant sub-basins (tributaries of the Mekong). These are all coordinated basin management activities.

In view of the number of basin-based multisectoral integrated water resources management actions (most under the project) taken in the Water Resources Assistance Project, Efficacy is assessed Substantial. Nevertheless, based on global experience, establishment of a permanent basin management committee would be an appropriate next step.

5. Efficiency:


For the project's main component, irrigation, unit construction costs were about 40 percent more than expected due primarily to higher than anticipated inflation of costs of materials. (by June 2006, only two years after Board approval, cement prices had increased by 20 percent, steel by 100 percent, and labor by 150 percent, far exceeding the cost contingencies assumed at appraisal). Only 63 percent of canal works were able to be constructed within the project budget. Construction of works started over three years after effectiveness, but was relatively expeditious thereafter - the works done, though less than planned due primarily to funding constraints from higher than anticipated price inflation of materials and labor, were completed in the remaining four years of the project.

The project's economic rate of return is estimated in the ICR at 15.3 percent, but the calculation will not have captured all of the benefits as it is based on the agricultural benefits from the irrigation modernization component (88 percent of project costs) but benefits from municipal and industrial use of water were included for only two of the irrigation schemes. A more complete ERR estimate, including non-agricultural as well as agricultural benefits for all of the schemes, is also provided in the ICR and was calculated to be 27.7 percent. This estimate is a better reflection of the project's economic rate of return, as benefits from municipal and industrial use were significant. For instance, on two of the schemes - Phu Ninh and Dau Tieng - the Task Team has advised IEG that municipal and urban sector usage is significant, which is consistent with the ERR results for these two schemes where combined agricultural and urban and municipal usage resulted in ERRs more than twice the ERRs calculated from irrigation alone. The ERR from combining benefits from both agriculture and municipal and urban use (i.e. 27 7 percent) is therefore considered the irrigation component's economic rate of return.

This may be an underestimate of the project's total net benefits, as the benefits (and costs) of the dam safety and water resources management components are not included in the ICR's economic rate of return estimate. However, the aggregate ERR including these would depend on the net benefit streams of each of these other sources of benefits in relation to the agricultural net benefit stream calculated.

The project's Efficiency was Substantial.

a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:


Rate Available?
Point Value
Coverage/Scope*
Appraisal:
Yes
14.7%
88%
ICR estimate:
Yes
27.7%
88%

* Refers to percent of total project cost for which ERR/FRR was calculated

6. Outcome:


The project was highly relevant to Vietnam’s need to enhance agricultural productivity and introduce improved water resources management and institutional capacity to increase the safety of dams, and the objectives were consistent with Bank and Government strategies. For the agricultural productivity objective, the project’s design lacked agricultural modernization to accompany the irrigation improvements, and this reduced the potential impact of the project. The project was effective in introducing a dam safety capability, and made a start with multi-sectoral water allocation.

It was less effective in increasing agricultural productivity. The expanded irrigated area increased agricultural yields but yields could have been further enhanced with improved agricultural practices as well. Also, modernization works were not always used by operators and farmers for the improved water management intended. Nevertheless, the expanded irrigation area significantly increased agricultural production and the project was economically viable, especially when the benefits from urban usage are taken account of. The further benefit of the project is that it has provided experience, both of what did and what did not work, for Vietnam's intentions to scale-up the program over time, and a forthcoming Bank assisted irrigated agriculture project will also benefit. However, as an overall assessment of the project, there were moderate shortcomings in the achievement of the objectives and the relevance of design, and the project’s Outcome was Moderately Satisfactory

a. Outcome Rating: Moderately Satisfactory

7. Rationale for Risk to Development Outcome Rating:

The commonly found situation of progressive deterioration of irrigation works due to inadequate funds and O&M, may be a lesser risk in Vietnam due to coverage of service fees by Government (providing such subsidies continue). Nevertheless, government provisions for O&M will need to provide adequate funds for repair and maintenance, compared with the present situation where a substantial part of the funds are taken up for staff salaries and to cover inflation of materials costs. A continuous training and technical assistance effort will also be needed to ensure that the institutional and infrastructural gains under the project are protected and further enhanced.

Two factors will help mitigate these risks. First, Government has shown a sustained interest in the project and is looking for an expanded irrigation modernization program. This commitment is likely to apply to the project's initiatives as well as to new investments. Second, an Irrigated Agriculture Improvement Project is being prepared for Bank financing, which should help strengthen institutional capability. Providing that adequate O&M funds are provided, project risks are manageable, and the program appears set for continued Government and Bank support. The project's Risk to Development Outcome is Moderate.

a. Risk to Development Outcome Rating: Moderate

8. Assessment of Bank Performance:

a. Quality at entry:

The strength of the project was the degree of innovation applied, especially for the irrigation modernization program for which design was to move Vietnam from conventional irrigation and rehabilitation to higher levels of irrigation management through modernized water management systems and infrastructure.

The main shortfall was in discounting the role of agricultural modernization as a partner to the irrigation improvements. By not having an agricultural component, the project is likely to have missed a chance to have a significantly greater impact relative to its objective to "modernize and increase the productivity of Vietnamese agriculture." The results framework for the agricultural productivity objective, was incomplete in the connections between the objective and the means of getting to it, and this was also reflected in the choice of indicators to assess project performance, which may have contributed to the focus on engineering. But, overall, a demanding project was prepared and well documented, requiring skills across much of the water resources management spectrum.

Quality-at-Entry Rating: Moderately Satisfactory

b. Quality of supervision:

The team performed satisfactorily in helping Government to tackle the innovatory engineering and new institutions introduced under the project, and also helped to expedite project implementation after the slow start that Vietnam encountered at project commencement. Practical implementation changes were made as experience was gained, although more emphasis on "software" aspects of the project rather than mainly on engineering and procurement would have been desirable. But the time spent on this was largely a reflection of the implementation demands posed by the project's multi-activity design, and in the end, the software actions intended under the water management and dam safety objectives were largely achieved, albeit several actions only late in the project period.

The Quality of Supervision was Satisfactory.

Taking Quality at Entry and Quality of Supervision together, the Overall
Performance of the Bank was Moderately Satisfactory.

Quality of Supervision Rating: Satisfactory

Overall Bank Performance Rating: Moderately Satisfactory

9. Assessment of Borrower Performance:

a. Government Performance:

Commitment was strong and central and local governments proactively supported the project and provided the needed counterpart funds. Most implementation issues were resolved expeditiously, although a multi-sectoral river basin committee was not established. At the beginning of the project, staff appointments were slow, which were largely responsible for the project's slow start. Nevertheless, given Government's commitment and pro-active support overall, Government Performance was Moderately Satisfactory.

Government Performance Rating: Moderately Satisfactory

b. Implementing Agency Performance:

The Central Project Office was highly committed to the project, handled procurement and implementation of over 300 contracts, and tried to expedite other aspects of the project that were behindhand. There was a tendency to focus on engineering rather than software, though in part this was because the major effort was to get the project's largest component under construction. Overall, the central office did well in building capacity and expediting implementation, especially of irrigation works. The Performance of the Implementing Agency was Satisfactory.

Implementing Agency Performance Rating: Satisfactory

Overall Borrower Performance Rating: Moderately Satisfactory

10. M&E Design, Implementation, & Utilization:

a. M&E Design:

Monitorable indicators were mostly related to outputs rather than outcome (for instance, for the agricultural productivity objective, the two indicators: (i) the number of schemes under the modernization program; and (ii) number of people trained, tell little about the project's impact). A more outcome oriented set of indicators was designed for dam safety. But, for the project as a whole, only a partial measurement base for assessing the project's impact was established.

b. M&E Implementation:

M&E was coordinated from the Central Project Office with data to be collected and forwarded by field and unit managers. The M&E program started late - some 3 1/2 years after project start-up. Monitoring for the objective to modernize and increase the productivity of Vietnam agriculture was almost entirely related to the engineering works. A bench marking program for measuring performance of irrigation schemes was a good initiative, but was established too late in the project to have much operational use.

a. M&E Utilization:

The combined impact of the late establishment of the M&E program, and the limitations in the indicators for measurement of project outcome, meant that its utility was limited, and primarily confined to the project's physical progress. Nevertheless, periodic project progress reports were produced and helped inform management during project implementation.

The Quality of M&E was Modest.

M&E Quality Rating: Modest

11. Other Issues:

a. Safeguards:

The project was environmental category A and triggered the following safeguards: Environmental Assessment (OP 4.01); Natural Habitats (OP 4.04); Pest Management (OP 4.09); Cultural Property (OP 4.11); involuntary Resettlement (OP 4.30); Indigenous Peoples (OP 4.10); and Safety of Dams (OP 4.37). The ICR reports that the Environmental Management Plan was not effectively monitored at the beginning of the project, and the appointment of an environmental monitoring consultant was delayed by three years. Thereafter, safeguards monitoring and actions improved considerably. A social safeguards assessment and review of technical design of works was able to reduce the number of affected households from the initial 11,000 to about 6,000, although the ICR does not evaluate the adequacy of the compensation package.

b. Fiduciary Compliance:

Procurement was slow during the first part of the project, but with intensive training became generally good thereafter. Financial reporting and audits were timely and of acceptable quality. The ICR does not indicate any cases of financial malfeasance.

c. Unintended Impacts (positive or negative):

d. Other:
Higher than anticipated inflation raising construction costs.



12. Ratings:

ICR
IEG Review
Reason for Disagreement/Comments
Outcome:
Moderately Satisfactory
Moderately Satisfactory
 
Risk to Development Outcome:
Moderate
Moderate
 
Bank Performance:
Moderately Satisfactory
Moderately Satisfactory
 
Borrower Performance:
Moderately Satisfactory
Moderately Satisfactory
 
Quality of ICR:
 
Satisfactory
 
NOTES:
- When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006.
- The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate.

13. Lessons:

The project experience yields the following lessons, of which lessons (i), (iii) and (iv) are adapted from the ICR, and lessons (ii), (v) and (vi) are from IEG:

(i) The productivity of irrigation investments can be substantially enhanced if also accompanied by agricultural modernization. The project did not include an agricultural component, and yield increases were restricted to the impact of irrigation alone. Adding a component or parallel program of intensified agricultural support would have stimulated significantly larger gains in agricultural productivity than irrigation improvements alone.

(ii) Tackling water resources management and major irrigation infrastructure together risks creating a complex project and the possibility that attention to water management is overshadowed by the construction program. The project could be considered as two thrusts - irrigation modernization; and water resources management including dam safety. Demands on staff and government time to get the irrigation modernization program implemented, reduced attention to "software." Under these circumstances, two projects, one for each focus, might have been better, and would have made addition of an agricultural component to the irrigation program more manageable.

(iii) A project with significant innovation needs adequate time for project preparation and subsequent familiarization with stakeholders. Detailed designs for the new structures in the irrigation modernization program were only partly ready at project commencement. Software areas such as modernization guidelines, performance benchmarking and computerized water control plans were developed only at the end of the project.

(iv) Dam safety management relies on a supporting institutional and regulatory framework. Once the Dam Safety Unit and Regulations were established, the ground was set for other actions The dam safety manual, standards, guidelines, and instrumentation were subsequently developed.

(v) Holistic River basin management requires a central coordination mechanism. At local (sub-basin) levels, multi-sectoral feasibility studies and provision of water to an urban area were achieved, and water allocation decisions between provinces were made through multilateral and across provinces levels discussions, but an overall basin coordination unit would have provided an established institution with a clear mandate for basin-wide review.

(vi) Monitoring and Evaluation needs to be focused on a project's outcomes relative to the objectives, and intermediate indicators should be logically linked to the outcomes. Most monitorable indicators measured outputs (such as new irrigated area) without considering outcomes (e.g. changes in agricultural productivity).

14. Assessment Recommended?

Yes
Why?
The project includes several core objectives common in Bank water projects: irrigation modernization, linkage of irrigation with agriculture, dam safety and multi-sectoral, basin based water resources management. The project experience raised a number of issues and lessons relevant to other Bank water projects. Within Vietnam itself, the country will be scaling up such operations for some time, and one such project is under preparation.

15. Comments on Quality of ICR:

The ICR is informative and the discussion of project achievements is issues oriented and thoughtful. Shortfalls in achievements are discussed candidly, including the diagnostic of the Bank's performance. The lessons are issues based, and are forward looking. Project achievements are in most cases discussed with reference to the objectives and monitorable indicators. There is a detailed economic analysis in the annex. Aspects which could have been better include: (i) the objectives for improved management of water resources, and (to a lesser extent) dam safety, could have been expanded, with more focus on the outcome; and (ii) the tables on project costs in Annex 1 should have included costs at completion by component; not just by procurement category.

a. Quality of ICR Rating: Satisfactory

(ICRR-Rev6INV-Jun-2011)
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