ESTIMATION OF NET BENEFIT FROM THE PROPOSED BAN LA HYDROPOWER
PROJECT IN NGHE AN PROVINCE, VIET NAM
NGUYEN THI HOANG HOA
A thesis submitted
in fulfillment of therequirements forthe degreeofMaster
of EnvironmentalManagementinDevelopmentp l a n n i n g
FacultyofSocialSciences UNIVERSITI
MALAYSIASARAWAK2005
ACKNOWLEDGEMENTS
Firstly, I would like to thank DANIDA funded WaterSPS Subcomponent 1.3 support to Capacity
Building at the Hanoi Water resources University (HWRU), Vietnam for the sponsorship of my
study.
I wish to express my appreciation and gratitude to those who had helped and supported me in the
project that leads to this dissertation.
I wish to thank my major supervisor, Assoc. Prof. Dr Gabriel Tonga Noweg, for his guidance
throughout my study at Unimas. From him and his guidance, I have gained much knowledge and
experiences, which I will pass on in my own future.
I alsowishto thank allmylecturers inUnimas fortheir assistanceandadvice. Iwouldalso like
tothankMr Robert Malongforhis help duringmyMasterCourse.
I
am
also
grateful
tomyco-supervisorDrNgoThi
Thanh
Van(HWRU)
forher
kindandvaluableassistanceduringmydata collection inVietnam.I am indebted to all the officers
intheDANIDAand HWRU Board, Power Engineering ConsultingCompanyNo 1 (PECC1),
districts officials ofNgheAn province,Instituteof Waterresourcesplanning (IWRP) and Aquatic
Product Research Institute, DoLuongweirmanager,Nam Dan sluicemanager,Department of
Agriculture and ruraldevelopmentofNgheAn province,NationalCentralMeteo-HydrologyForecast
(NCMHF),andlocal peoplein the ten districts ofNgheAn province. Thankyouforyourfriendlyand
warmassistance duringmyfieldtrip.
My special thanks go tomyhusbandand my children,wholovemeenough to letmegoandstudy
abroad. Thanksfortheir endlesssupportandencouragementduring thecoursework andcompletion of
thisdissertation.
2
TABLE OF CONTENT
Acknowledgment
Table of content
List of tables
List of figures
Abbreviation
Abstract
Abstrak
ii
iii
vi
viii
ix
xi
xii
C HAPTERI
I NTRODUCTION
1 .1
conomyofVietNam .
1
emandofenergyinVietNam
1 E
owerdevelopmentplan(2003-2020)
.2
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1 GeneralfloodcontrolinVietNam 4
1 .5 Irrigation
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1 .8 Significanceofstudy
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L HAPTERII
ITERATUREREVIEW
2 Introduction
9
2 .2 Approachinsustainabilitydevelopmentofreservoirformultipleuses
2 .3 Cost-benefitanalysis(CBA)
.1
2 Introduction 11
2 3.2 CostBenefitAnalysis(CBA)ofdams
3.1
2 Environmentalcost-benefit
15
2 3.2.2 Socialimpactmitigationcost
3.2.1
2 .3.2.3 loodcontrolcosts-benefits
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M HAPTERIII
ATERIALSANDMETHODS
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gationcostsandbenefits
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3 Introduction
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3 .2 Studyarea
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3 .2.2 opography
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eology
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limate
3 .2.3
ainfall
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emperature
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.2.4
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iverflow
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.2.11
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3 .2.12 I rrigation
3 .2.13 loodoccurance
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3 Privatecostsandbenefits
3.2
Publiccostsandbenefits
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3 Primarydatacollection 39
3 4.2 Secondarydatacollection
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3 Contingentvaluation
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3 .6 Floodcontrolcostestimate
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3 Calculationprinciplesforfloodcontrolcost
3 6.2 Linkbetweendamagecostandreturnperiod
3 6.3 Costoftheenergyloss
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ESULTSANDDISCUSSION
4 .1 Int
4 .2 rivatecostsbenefits
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perationandMaintenanceCosts
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4 .2.4
lectricbenefit
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4 .3 Publiccostsandbenefits................................
4 .3.1 Floodcontrolcostsandbenefits ................................
4 Floodcontrolcosts
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4 3.1.2 Floodcontrolbenefits
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3.1.1
4 .3.2 Irrigationcostsandbenefits
4 Irrigationbenefits
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4 3.2.2 Irrigationcosts
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4 4.1.2 Lossofland
4 4.1.3 Lossofexistingagriculturalproduction
4.1.4 Carbonsequestration
4.1.5 Lossofbiodiversity
4.1.6 Lossofexistingfishingincome
4.1.7 Lossofexistinghuntingincome
4.1.8 Lossofrevenueofexistingcollectionofforestproduct
4.1.9 DisruptionofexistingRivertransportation
4 .4. E nvironmentalbenefits
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4 .4.2.1 Merchantabletimber ................................
4 .4.2. F isheriesinCaRiver
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4 .4.2. E mploymentopportunitiesforlocalpeople.
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4 .4.2.6 oadaccess.
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ostbenefitanalysisoftheproject
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5.2
C HAPTERV
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C ONCLUSIONSANDRECOMMENDATIONS
5 .1 Conclusion
5 .2
ecommendation
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A
S PPENDIXA
OILMAP,SOILEROSIONPOTENTAILMAPANDLANDUSEMAP
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80
A
H PPENDIXB
YDROLOGICALDATA
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URVEYQUESTIONNAIRES
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C ONTINGENTVALUATIONFORENVIRONMENTAL
P ARAMETERS
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OST-BENEFITANALYSIS
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ICTURESOFTHESTUDYAREADURINGTHEFIELDTRIP
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134
LIST OF TABLES
Page
Table 1.1
GDP growth, GDP per capita and Population of Viet Nam from 1995
to 2003…………………………………………….……
2
Table 1.2
The power generation capacities by energy sources………….
2
Table 2.1
Benefit of flood control of Klang river basin flood mitigation project
………………………………………………………….……
Table 2.2
26
Key dimensions and key impacts of access to good irrigation water
………………………………………………………….…….
29
Table 3.1
Land use in Ban La catchment and reservoir area…………..
36
Table 3.2
Soil types of Ban La catchment area…………………………..
37
Table 3.3
Potential erosion in Ban La catchment area………………….
37
Table 3.4
Data need and data collection method…………………………
45
Table 4.1
Construction cost of Ban La dam………………………………
51
Table 4.2
Initial investment costs, annual operation and maintenance cost in
percentage and value ……………………………………
51
Table 4.3
Basic data of Ban La hydropower project ……………………
54
Table 4.4
Damage cost of historical flood events …………………………
57
Table 4.5
Flood damage Vs return period …………………………………
57
Table 4.6
Flood routing by Ban La reservoir ……………………………..
59
Table 4.7
Irrigated area and discharge of Do Luong system from Ca river
…………………………………………………………………
Table 4.8.
Irrigated area and discharge of pumping stations direct from Ca river
in the NNAIS ……………………………………
Table 4.9
60
Irrigated area and discharge of Nam Dan system from Ca
river………………………………………………………………….
Table 4.10
60
61
Irrigated area and discharge of pumping stations direct from Ca river
in the SNAIS………………………………………
61
Table 4.11
Irrigated failure in the future without Ban La project………
63
Table 4.12
Irrigated failure in thefutureafter completed Ban Laproject
………………………………………………………………
64
Table 4.13
Effective irrigated area…………………………………………..
64
Table 4.14
Annual benefit from irrigation in the area
66
LIST OF TABLES (CONTINUE)
Table 4.15
Forested area permanently flooded after creation ban La
reservoir………………………………………………………..
67
Table 4.16
Estimation of timber loss in the reservoir area
68
Table 4.17
Estimation of land loss by Ban La project (current
value)…………………………………………………………………
69
Table 4.18
Estimation of annual agricultural production loss …………
69
Table 4.19
Average standing volume (or stock) of the forest ……………
72
Table 4.20
Estimation of timber can be harvest in the reservoir area
72
Table 4.21
Merchantable of timber in the reservoir area ………………
72
Table 4.22
The water level along Ca river before and after construction Ban La
project ……………………………………………………
75
Table 4.23
Construction period criteria …………………………………….
77
Table 4.24
Cost disbursement for Ban La hydropower project ………….
78
Table 4.25
Basic data for economic assessment of Ban La hydropower project
(FSL= 200m; P = 320 MW; 5 years construction time and 10%
discount rate …………………………………….
Table 4.26
Result of cost benefit analysis of Ban La hydropower project
discount rate = 10% …………………………………………..
Table 4.27
79
80
Results of sensitivity analysis with changes in discount rate, output
and lifespan of the project
82
LIST OF FIGURES
Figure 3.1
Figure 3.2
Figure 4.1
Location of the study area ……………………………………
Total cost and total benefits …………………………………
Hydraulic network scheme ……………………………………
Page
32
42
62
LIST OF ABBREVIATIONS
%
Per cent
ADB
Asian Development Bank
APRI
Aquatic Product Research Institute
B/C
Benefit/ cost
BVND
Billion Vietnamese Dong
CBA
Cost Benefit Analysis
CVM
Contingent Valuation Method
DARD
Department of Agriculture and Rural Development
EIA
Environmental Impact Assessment
FIPI
Forest Inventory and Planning Institute
FSL
Full Supply Level
GDP
Gross Domestic Product
GWh
Gigawatt hour
ha
Hectare
HPM
Hedonic Price Method
IAP
Institute of Agricultural Planning
IE
Institute of Energy
IG
Institute of Geography
IRR
Internal Rate of Return
IWRP
Institute of Water Resources Planning
kg
Kilogram
km
km2
Kilometer
kW
Kilowatt
kWh
Kilowatt hour
l/s
Liter per second
mm
Millimeter
m2
Square meter
m3
m3/s
Cubic meter
Square Kilometer
P
P
P
Cubic meter per second
PP
MARD
Mm
P
3
Ministry of Agriculture and rural Development
Million cubic meter
LIST OF ABBREVIATIONS (CONTINUE)
MVND
Million Vietnamese Dong
No
Number
NNAIS
North Nghe An Irrigation System
NB
National Bank
NPV
Net Present Value
O&M
Operation and maintenance
P
Probability
PECC1
Power Engineering Consulting Company 1
Q
Discharge
SNAIS
South Nghe An Irrigation System
TCM
Travel Cost Method
TWL
Tail Water Level
USC
US Cent
USD
US Dollar
VND
Vietnamese Dong
WB
World Bank
WE
Wood Equivalent
WTA
Willing To Accept
WTP
Willing To Pay
Yr
Year
ABSTRACT
The construction and operation of Ban Lahydropowerproject willleadto avarietyof changes in the
localandwiderenvironment.Many of the impacts will be beneficial, both at the regionalandnational
level. Project implementation will havesomesocioeconomicimpacts on communities intwodistricts
upstream and nine districtsdownstreamfrom the dam.Completionof
willsupplywater
totwoirrigationsystems:NorthNgheAn
Irrigation
Ban
System
La project
and
SouthNghe
An,which cornersome62,220haof irrigated area inNgheAn province.Theconstruction
project
will
also
reduce
floodpeakin
the
downstream
area
and
of the
hencereducing
flooddamagesforriverine residents in the downstream area. This study evaluateseconomicand
environmental impacts of Ban La project on local communities: upstream of the Ban La dam;
flooded area and irrigation areas downstreamfromtheproposeddam. Private costs and benefits as
well aspubliccosts and benefit areestimated for theproject in order to arrive at the total net
socialbenefits.Contingent Valuation Method (CVM) isusedtoestimatethe costs and benefits
associated with intangible item ornon-market goods.The studyfoundthat thenetpresentvalueof
social benefitsat10% discount rate and 30 years project operationperiodis positive (BVND
533.8).Benefit-Costratio is 3.18andInternalRate of Return (IRR) is 11%. Sensitivityanalysisis also
performed to detectresponsivenessof theinvestmentto changes in discount rate, changes inoutputof
the project as well as different scenarios of projectlifespan.
Abstrak
Pembinaan
empangan
hidroBanLadijangkaakanmembawaberbagaikesan,terutamanyafaedah
terus dan jugasampingankepada penduduk setempat khasnya.Kesansosioekonomi akan dirasai
diduabuahdaerah(TuongDuongdanKySon) dibahagianh u l u empangan danjuga9
Abstrak
Pembinaan empangan hidroBanLadijangkaakanmembawaberbagaikesan,terutamanyafaedah
terus dan jugasampingankepada penduduk setempat khasnya.Kesansosioekonomi akan dirasai
diduabuahdaerah(TuongDuongdanKySon) dibahagian huluempangan danjuga9 daerah
dikawasanhilirempangan. Antarafaedahyangakan dinikmatiialahdalam bentuk kemudahan sistem
pengairan (North NgheAnIrrigationdanSouth NgheAnIrrigation)yangmeliputi 62,220 hektar
tanah pertanian. Kajian yang dijalankan iniadalahbertujuan untuk menilai
kesanpembinaanempangan BanLadarisegik e s a n s o s i o e k o n o m i n y a .
Analisispelaburan dijadikan asas penilaian inidimana segala elemenfaedah dan kos diambil kira.
Faedah dan kos barangan sumberaslidan alam sekitar dinilai dengan
kaedahpenilaiankontinjen.H a s i l kajianm e n d a p a t i p r oj e k mempunyaini l a i f a e d a h sosialk i n
i berjumlahB V N D
533.8.Nisbahfaedah-kos pelaburan ini adalah 3.18dankadar pulangan dalam adalah
11%.Inibermaksud
projek
tersebut
sumbanganpositifkepadasosioekonomi
adalah
penduduk
baik
dan
berupayamemberi
tempatan.
CHAPTER
IINTRODUCTIO
N
1.1. Economyof VietNam
Viet Nam’s moderneconomyevolves from the burden ofmilitaryaction andpolitical upheavals.After
partition in 1954, NorthVietNamandSouth VietNameachdevelopedtheirown economicstructure
separately,reflectingdifferenteconomic
systemswith
differentresourcesand
different
tradingpatterns.The Northoperated undera highlycentralizedandplannedeconomy,
whereasthe
South maintained a free-market economy.With the reunification of VietNamin 1976, North Viet
Nam’s centrallyplannedandcontrolled economywasintroducedandadopted in thesouthofVietNam.
Since 1986, the “innovative”and“opened-door” policypracticedby theVietnameseGovernmenthas
attracted foreign investors to come to do businesses andpromoteboth the stateandprivateeconomic
elements,
which
spurtheeconomic
orientedeconomysince
Product(GDP)growthrate
then.
developmentof
Having
a
VietNam.Ithas
stable
political
ofVietNamfrom1991
changed
regime,
to
tothemarket-
theGrossDomestic
2002hasreached
anaveragefigureof7.5%.GDPpercapitaof Viet NamwasUSD 490 in 2003. TheGDPpercapitaandits
populationgrowthfrom 1995 to2003isshownin theTable1.1
1
Table 1.1 GDP growths, GDP per capita and Population of Viet Nam from 1995 to 2003.
Year
1995
Real
GDP 9.5
growth rate
(%)
GDP
287
percapita
(USD/head)
Population
(Millions)
71.96
1996
9.3
1997
8.2
1998
5.8
1999
4.8
2000
6.8
2001
6.8
2002
7.0
2003
7.5
323
326
342
372
398
422
458
490
73.16
74.56
75.56
76.60
77.64
78.69
79.70
80.80
(Sources: General Statistics Office of Viet Nam (2004)
1.2. Demandof energyinViet Nam
Theeconomic growthin Viet Nam is strongly indicated bythe increasein thedemand for
energy.Electricity
generation
plants
in
Viet
Nam
atpresentarefrompetroleum,
naturalgas,hydropower,coal and diesel.However,the dependence on oilforelectricitygenerationhas
declined
significantly
in
recentyear.TheViet
Nam
government’s
policy
is
to
encouragetheexploitation of renewable energyresources, suchashydropower.
Thepeakelectricity demandrecordedin2002was8,700MW, whilethetotalcapacity of all kinds
ofpowerplantconnectedtothenetwork
was8,749MW.The
electricitygenerationcomprises
thefollowing(Table1.2).
Table 1.2: Power generation capacities by energy sources
E nergygeneration
Hydropower plant
Thermal power plant (coal)
Thermal power plant (oil)
Gas turbines (Gas)
Diesel
Total
0
B
Source: Tran (2004)
P owercapacity
4115 MW
1245 MW
573 MW
2322 MW
494 MW
8749 MW
1B
%
47.03 %
14.23 %
6.55 %
26.54 %
5.65 %
100%
of
Power consumption
Energy demand inViet Namhasgrownat afasterrate than thegrowthofGrossDomestic Product
(GDP).Consumptionof energy increasedfrom11,200 GWh in 1995 to 30,235 GWh in
2003,whichis equivalent to thegrowthrate of 15.3% perannum.Thenumberof customers
isaround4million.
Industryconsumed41.8%ofthewhole
powersales,residential
customersconsumed47.8%, commercials and servicesused4.6% and otherusersconsumed 6% of
thepowersupply.
Economicgrowthand
industrialization
haspushedVietNam’sdemandforelectricityup,at
an
averageannualrate of 14-15% in thepastfewyears.This demand is projected to grow yearly at 1315% till 2010. According to thegovernmentestimates,around70-80billionkilowattsofpowerwill
beneededby 2010. Thereafter, thedemandis expected to reachbetween160 and 200 billion
kilowatts in 2020(Central GovernmentAdministration Power Report,2002a).
1.3
Powerdevelopmentplan(2003-2020)
The development of energy resource in Viet Nam will have to be in tandem with the acceleration
of the nation’s industrial growth, particularly the growth emphasis on the development of energyintensive and energy based industries.
In recent years, sustainable development has become the central concept of formulating strategies
for future economic progress. While raising the real per capital income remains the basic
development goal, there is now increasing emphasis on balancing this goal with the “quality of
life” or “well-being”. This makes the development of an efficient and economic energy system
even more challenging because of the need to reconcile the energy and the environmental policy
objectives.
Based on the above forecasted demand, the development programme of power generation for the
period 2003-2020, the plan for expansion of power supply are:
(1) Tomeetthe country’s rising energyneed.
(2) To develop balanceddevelopmentof theresources (hydro,coal and gas firedthermal)in
order
to
explore
effectivelythe
primaryenergy
sources
and
at
thesametimelimittheadverseimpact on theenvironmentandecology,and
(3) Toreduce theuseoffossilfuel. This isoneof the causes of serious environmental
problem today(Central Government AdministrationPower Report, 2002b).
Hydropowerhas
beenprovento
be
safe,
relativelyclean,efficient
and
arenewable
sourceofenergycomparedto oil fired generation and naturalgas-fired generation. Unlike
nuclearandfossilfuels, hydroelectric is by nature less damaging to theenvironmentas the
generationprocessdoesnotresult
in
continuouswasteproduction
oremissionof
air
pollutant.Hydropoweris alsooneof the cheapestpowerand its reservoir have high recreational
value.
Theyareextensivelyused
for
fishing,watersupply,irrigation,
flood
control
andsoil
erosioncontrol.
1.4. Generalfloodcontrolin VietNam
Water
relateddisasters,including
intheworld,
floods
and
drought,
bothforindividualhouseholdsand
intheworldareaffectedthrough
homelessness,injury,
haveseriouseconomic
nationaleconomies.Moreand
disease,lossof
property
implication
morepeople
and
death.
Thevastmajority of the millions of Asians affected annually by flood are thepoor.Frequent
flooding gives them no opportunity to breakoutof the cycle of poverty.Inaddition, floods often
cause marginally better-off people to descend into poverty as a result of floodrelatedlosses
(Linder, 2002).
Flooding is a major watermanagement problem, whicheach year causes a great loss of human life,
property damages and loss of agricultureandotheroutputin the floodproneareas. Climate
changeandupstreamwatershed
changesboth
within
Viet
Namandotherupstream
countrieshavecreated associatedproblems suchas flash floods with great damage(Fox,2001).
Viet
Nam
isoneof
themostdisasterpronecountries
in
theworldbecauseofitgeographicalandtopographicalfeatures.The country suffers from almost all
types of disaster,amongwhichwater disasters induced by typhoons and floodsare themostfrequent
andsevere. Everyyear disasters claim hundreds of human lives and cause millions of dollar
ofeconomic lossin the country(Nguyenand Le,2002).Floodcontrol isnecessarytoincrease food
productionandalsoforeconomicdevelopment.Governmentof
Viet
Nam
has
alwaysputdisastermanagement,particularly flood andstormcontrol as top priority initagenda.
1.5. Irrigation
Viet Nam isoneof the fewfastgrowingeconomies in theworldsince the 1990s.ItsGDP grew
atabout7 per cent perannumduring this period. Rapideconomic growthcontributed substantially to
the reduction of poverty in the country during 1990s. Theproportionof poor in the total population
declinedfrom58
to
29percentbetween
1993and2002.However,acceleratedgrowthhas
alsobroughtconsiderable inequalities between the rural and urbanareas,and between rich andpoor
households.The poverty rate drastically declinedfrom25 to 6.6percentin urban areaswhile from66
to
37percentin
rural
areas
between1993and2002.
Poverty
inVietNam
is
largely
a
ruralproblem;nearly 85 per cent of the country’spoorlive in rural areaswhose primarysource of
livelihood is agriculture. As poverty is widespread intherural areas, a top prioritywaslaiddownin
the comprehensive poverty reduction andgrowthstrategy to accelerateagriculture growthand rural
income,
therebyimprovethe
living
condition
of
ruralpopulation.Irrigation
lifelineforagriculturaldevelopmentespeciallyforVietNamwhereabout80percentofcropland
is
a
is planted with rice, which is predominantly an irrigated crop. One of the best outcomes for
improvement to the existing irrigation system will lead to a better availability of irrigation water,
thereby empowering rice farmers through increased in rice yields and in farm incomes (Janaiah,
2004).
1.6
Problemstatement
Dam’s
multipleusesare
both
their
greatest
strength
and
theirbiggest
weakness.Itis
aweaknessbecause of the conflictbetweenthemanydifferent stakeholders on how tousea
reservoirsystem.Aclassicconflict over wateruseisthe one between thosewhowanttousethe water
inthereservoir
strictlyfor
hydropowergenerationandthosewhowantto
divertsomeof
it
tosupplyindustrialandagricultural needs as well aswhowantto reduce thefloodinthedownstream.
There aremanyenvironmental parameters that are affected byhydropowerdevelopment project.
Environmental impacts can be given positive ornegativevalues thatneedto be taken into account
tocomeup with the estimate of net costs or benefits of the project. The applicationofcostbenefitanalysisto environmental impactassessmentis faced with thefollowingproblems: the
uncertainly in the valuation of non-market goodssuchaswildlife andlandscape. Howshould this be
done, and howmuchshould the society rely on the estimates that are generated? Areweacting
immorally by placingmoneyvalues on such intangibleitems?Howcanthe society accurately predict
the effects of changes ineconomicactivity on complex ecosystem? How can anincreasein an
environmentalgoodbevalued?Canweestimateiteitheronthe people’smaximumwillingness to pay is
to have this increase, or theirminimumwillingness to accept compensation toforgothisitem.Ifa
reduction in thesamegoodis being valuedwecanaskeither theirmaximumwillingness to pay to
prevent such a reduction or theirminimumwillingness to acceptcompensationto tolerate it.
Thisallowsa monetary value to be placed on an environmental gain orloss,which is anestimateof
underlying utility gain orloss(Hanley,2001).