adb-ho chi minh city water supply project-france

Technical Assistance Re
p
ort
The views expressed herein are those of the consultant and do not necessarily represent those of ADB’s
members, Board of Directors, Management, or staff, and may be preliminary in nature.

Project Number: 41070
June 2008



Socialist Republic of Viet Nam: Preparing the Ho Chi
Minh City Water Supply Project
(Financed by the Government of France)



CURRENCY EQUIVALENTS
(as of 30 April 2008)

Currency Unit – dong (D)
D1.00 = $0.00006204
$1.00 = D16,118.500



ABBREVIATIONS

ADB – Asian Development Bank

AFD – Agence Française de Développement
BOO – build-own-operate
BOT – build-operate-transfer
cmd – cubic meters per day
DMA – district-metered area
EA – executing agency
GIS – geographic information system
HCMC – Ho Chi Minh City
HIFU – Ho Chi Minh City Urban Infrastructure Investment Fund
ISO – International Organization for Standardization
JICA – Japan International Cooperation Agency
ODA – official development assistance
MOU – memorandum of understanding
NRW – nonrevenue water
SAWACO – Saigon Water Corporation
SCADA – supervisory control and data acquisition
PPTA – project preparatory technical assistance
TA – technical assistance


TECHNICAL ASSISTANCE CLASSIFICATION

Targeting Classification
– General intervention
Sector
– Water supply, sanitation, and waste management
Subsector
– Water supply and sanitation
Themes
– Sustainable economic growth, private sector development, capacity

developmen
t
Subthemes
– Developing urban areas, public–priv
ate partnerships, institutional
development


NOTE
S
(i) The fiscal year (FY) of the Government and its agencies ends on 31 December.
(ii) In this report, "$" refers to US dollars.


Vice President
C. Lawrence Greenwood, Jr., Operations 2
Director General
A. Thapan, Southeast Asia Department (SERD)
Director
J. Cooney, Infrastructure Division, SERD

Team leader
H. Jenny, Senior Urban Development Specialist, SERD
Team members
E. Cudilla, Senior Project Assistant, SERD
J. Everett, Infrastructure Specialist, SERD
Y-L. Feng, Principal Environment Specialist, SERD
R. Frauendorfer, Senior Urban Development Specialist, SERD
M. Huddleston, Senior Social Development/Resettlement Specialist,
SERD

A. Kunth, Young Professional, SERD
A. Mehta, Financial Management Specialist, Regional and Sustainable
Development Department
H. Nhat Do, Project Implementation Officer, Viet Nam Resident Mission,
SERD
M. Sultana, Social Development Specialist, SERD
Y. Tsujiki, Financial Analysis Specialist, SERD


I. INTRODUCTION
1. During the 2007 Country Programming Mission and the water financing conferences
held September 2006 in Manila and March 2007 in Hanoi, the Government of the Socialist

Republic of Viet Nam requested the Asian Development Bank (ADB) for assistance to prepare
the Ho Chi Minh City Water Supply Project. Viet Nam is one of the five target countries for
ADB's water financing program, which aims to double ADB lending in the water and sanitation
sector by 2010. The proposed Project addresses provision of a sustainable supply of potable
water for Ho Chi Minh City. The Project is directly linked to the agenda of supporting
infrastructure development and public–private partnerships in infrastructure, as set out in the
Country Strategy and Program (2007–2010). The Project contributes to Goal 7 of the Millennium
Development Goals, to "Ensure environmental sustainability", and specifically to Target 10:
“Halve by 2015 the proportion of people without sustainable access to safe drinking water and
basic sanitation.
”, and to the corresponding Viet Nam Development Goals.
2. An ADB mission visited Ho Chi Minh City (HCMC) in May 2007 to undertake fact-finding
for a project preparatory technical a
ssistance (PPTA) for the proposed Project. Agreement was
reached on the impact, outcome, outputs, implementation arrangements, cost, and financing
arrangements for the PPTA. The design and monitoring framework for the PPTA
1

is provided in
Appendix 1.
II. ISSUES
3. HCMC is Viet Nam’s largest city, and its most important commercial and industrial
center.
Its population of 7.9 million is growing at about 2.1% per annum, and is likely to reach 13.5
million in 2020. While Viet Nam’s economy is growing at more than 8% per annum, HCMC’s
economy is growing substantially faster, at around 12% per annum. This growth rate is placing
very serious strains on the city’s already inadequate infrastructure, and not least on its water
supply system.
4. In response, the HCMC People’s Committee is preparing a master plan for the HCMC
water system up to 2025. This provides for an increase in urban water supply coverage (from
the present
76% of the city’s population to 100%), corresponding to an increase in capacity from
1.2 million cubic meters per day (cmd) to 3.2 million cmd of treated water. Based on this
development plan, the World Bank has financed a feasibility study on nonrevenue water
(NRW),
2
which divides the city water supply network into six hydraulic zones and about 500
district metered-areas (DMAs), and proposes to reduce actual water losses in two of the six
zones.
3
The Government of France has financed a pilot project to determine the components
and characteristics of water losses in the city's An Dien–An Phu area.
5. Two large wastewater projects are currently being implemented in HCMC, financed by
the Japan
Bank for Int
ernational Cooperation (JBIC)
4
and the World Bank.

5
These projects
address the difficulties faced by the city as a result of sharp increases in the volume of industrial
effluent and domestic wastewater, which stems from rapid industrialization and urbanization in
the absence of investment in wastewater treatment plants or rehabilitation of the city's 30-year
old sewer network. The JBIC-financed project will increase the city’s sanitation coverage and
treatment capacity to over 60% by providing wastewater treatment plants with 470,000 cmd


1
The TA first appeared in ADB Business Opportunities on 4 December 2007.
2
NRW represents all the water produced that is not sold.
3
This corresponds to a total of about 200 DMAs in zone 1 and zone 2.
4
The Second Ho Chi Minh City Water Environment Improvement Project.
5
The World Bank also implemented the HCMC Environmental Sanitation Project.

2
capacity, sewer interceptors, combined sewers, and pumping stations. The World Bank-
supported wastewater treatment project covers about half of the city center or about 25% of
HCMC’s population.
6. HCMC’s water supply operations are managed by the Saigon Water Corporation
(SAWACO), which was established in 1874, and most recently restructured in 2005. As of end-
2006,
6
SAWACO had about 3,500 staff, 2,800 of whom worked in water operations, with the
balance working in affiliated consulting and contracting companies. SAWACO has an

approximately 3,000 kilometer (km) distribution network, with 570,000 connections. Overall,
SAWACO has five staff per 1,000 connections, a very low and efficient ratio. SAWACO delivers
continuous service with a residual chlorine test of 97%, corresponding to drinking water quality.
The company has annual revenues in excess of D1,000 billion (about $70 million) and an
average operating ratio of below one. The average water tariff per cubic meter of $0.28 is below
the national average, but sufficient to cover operating expenses allowing SAWACO to generate
a positive cashflow. About 93% of the water production comes from three surface water
treatment plants (Thu Duc, Tan Hiep and Binh An); the latter operated under a build-operate-
transfer (BOT) contract. The ongoing extension of the Thu Duc production plant under a build-
own-operate (BOO) contract is structured with the participation of the HCMC Urban
Infrastructure Investment Fund (HIFU) as equity holder and mostly local currency financing. The
remaining production comes from groundwater.
7. SAWACO faces several challenges in the areas of profit generation, financial
management, management of cost
s and service delivery, and institutional structure. Better tariff
structures
7
and reduced NRW levels (currently at about 40%) need to be implemented to
improve the company’s financial and operating performance. The company has a number of
subsidiary entities that need to be consolidated to maximize efficiency. Some subsidiary entities
have an element of private sector participation, but a more coherent plan for both strategic and
financial participation by the private sector in the overall group is needed.
8. Under the new Water Supply Decree 117/2007/ND-CP of 11 July 2007, full cost
recovery is now mandat
ory. SAWACO is under growing pressure to (i) improve and modernize
its service and sustainably supply all HCMC residents (i.e., achieve 100% coverage) with
potable water by 2025, (ii) increase public–private partnerships and private sector participation,
and (iii) provide and deliver water to the city in a sustainable manner. Given these challenges,
accessing finance for future capital expenditure from a broader base of fund providers as well
as the capital markets will require significant reforms in the institutional structures of both

SAWACO and related governmental bodies.
9. Accordingly, SAWACO has approached ADB to finance a portion of its expansion
program, specifica
lly (i) implementing a NRW management project over the four hydraulic zones
not covered by ongoing World Bank and other financing, including a supervisory control and
data acquisition (SCADA) system and a geographic information system (GIS); and (ii)
strengthening and expanding the city transmission and primary network, including reservoirs,
pumping stations and about 90 km of pipeline of various sizes. An institutional strengthening
program to be implemented as part of the ensuing project will address SAWACO’s most critical
institutional issues. This will be identified and prioritized as part of project preparation. The
proposed technical assistance will focus primarily on water supply, given that attempts to
address HCMC’s wastewater and drainage issues have already been undertaken under projects
funded by other donors (refer to para. 5).


6
Communication from SAWACO management and extracted from Southeast Asia Water Utility Network. 2007.
Data Book of Southeast Asian Water Utilities.
7
Water tariffs in HCMC are officially set at a level to achieve cost recovery.

3
III. THE PROPOSED TECHNICAL ASSISTANCE
A. Impact and Outcome
10. The impact of the Project will be to improve urban livability and competitiveness in

HCMC through development of water supply infrastructure.
11. The outcome of the PPTA will be the design of a project to increase the level of water
service by (i) extending and rehabilitating
a portion of HCMC’s water distribution network,

including booster pumping stations and reservoirs, to increase the coverage and provide
potable water to all city residents by 2025; (ii) improving the level of service and SAWACO’s
financial performance by reducing NRW in four of the city’s six hydraulic zones; and (iii) overall
strengthening of water operations in the city. An initial poverty reduction and social analysis for
the project is provided in Appendix 2.
B. Methodology and Key Activities
12. The PPTA will prepare a project to be implemented in three
parts, as set out below.
(i) Part I—NRW. Based on work now being done
under the World Bank-financed
project, this part of the PPTA will study the remaining four hydraulic zones to
establish a methodology to reduce NRW. The NRW component will be
implemented through performance and/or management contracts, for which
terms of reference will be prepared as part of the PPTA. SAWACO will use its
own funds to finance the feasibility study for the GIS and SCADA systems that
will form part of the ensuing project. The PPTA will coordinate with the ongoing
information technology projects and standards used by other agencies of the
HCMC People's Committee to review and integrate the GIS and SCADA system
with the project design.
(ii)
Part II—Strengthening and Expansion of the Transmission and Primary
Netw
ork. Based on the objectives set forth in the master plan, the PPTA will
prepare a feasibility study for strengthening and expanding SAWACO’s
transmission and primary pipe network over the service area to increase
coverage and improve the security of distribution. The project will install over 90
km of pipes, for the transmission and primary distribution system, with booster
pumping stations and ancillary equipment. SAWACO will finance the secondary
distribution system in line with the city’s master plan. The study will include a
special focus on pipe material selection.

(iii) Part III—Pl
anning and Institutional Strength
ening. The PPTA will define a
framework for public–private partnerships and private sector participation,
especially for the divestiture
8
of SAWACO's holding company, its subsidiaries
and affiliated companies. This task will include (a) asset inventory and
management; (b) a policy for water conservation through demand management;
(c) a strategy for energy efficiency through an energy audit and a prioritized
investment plan based on cost recovery, which could be included for financing as
part of the ensuing project, and (d) a framework for optimizing the provision and
the delivery of water supply services during the project, and certification under
the International Organization for Standardization (ISO).
9



8
Divesture is required under the new legislation with a recommended 30% divested to private investors.
9
Certification under (i) ISO 9001 for all design, operation and maintenance activities, (ii) ISO 14001 for safety and
environment, (iii) ISO 18001 for occupational health and safety in the operation, and (iv) the new ISO 24512 for
the management of drinking water utilities.

4
C. Cost and Financing
13. The PPTA is estimated at $1,900,000. The TA will be financed on a grant basis in the
amount of $1,500,000 equivalent by the
Government of France and administered by ADB.

10

SAWACO will finance $400,000 through in-kind contributions of (i) office space (for a maximum
of 20 consultants) and access to international phone and internet (the PPTA consulting firm will
pay for communications costs), (ii) about 60 person-months of counterpart staff to support the
PPTA, (iii) vehicles for site visits, (iv) feasibility studies for the SCADA system and GIS, and (v)
a topographic survey to confirm resettlement data and any other essential information that may
be identified during the TA. The Government has been informed that approval of the TA does
not commit ADB to finance any ensuing project. A detailed cost estimate is provided in
Appendix 3.
D. Implementation Arrangements
14. SAWACO will act as the executing agency (EA) for the PPTA with overall project
responsibilit
y and will establish a project management unit for day-to-day management of the
PPTA. For the duration of the PPTA, the project management unit will be run by full-time staff
including a director, an English-speaking coordinator, and two to five counterpart personnel.
They will be responsible for day-to-day coordination work with the PPTA consulting firm’s
personnel, other government agencies, and other stakeholders. A steering committee
composed of representatives from relevant agencies of the HCMC People's Committee and
other relevant stakeholders will meet at least every 3 months to (i) review the progress of the
PPTA, and (ii) provide strategic direction for the selection of investment proposals and related
financing plans.
15. The PPTA will be implemented by one consulting firm (see para. 16) over 12 months
from October 2008 to Se
ptember 2009. Total
consulting inputs will be about 130 person-months,
consisting of 16 international consultants for 40 person-months and 15 national consultants for
90 person-months (including 19 person-months of unallocated national consultant services,
which will facilitate policy dialogue with the central and local government, and address specific
issues that arise during PPTA implementation). The scope of work, distributed between project

investment and planning and institutional strengthening, is broadly as follows (outline terms of
reference are provided in Appendix 4).
(i) Project Investment.
This task will
be implemented over 9 months, to define and
prepare parts I and II of the PPTA, including environmental and social
safeguards and financial and economic analysis to meet ADB requirements, and
two local feasibility studies to meet the Government's approval requirements. It is
anticipated that 28 person-months of international consultant services and 73
person-months of national consultant services will be required for this part.
(ii) Planning and Instituti
onal Strengthening. This task will be implemented over
the duration of the PPTA. The consultants (about 5 person-months of
international consultant services and 5 person-months of national consultant
services) will work closely with SAWACO in defining the needs and requirement
for the institutional strengthening program to be implemented as part of the
ensuing project.


10
Through the channel financing agreement (technical assistance program) between the Government of France
and ADB.

5
16. The consultants will be engaged by ADB as (i) an international firm in association with a
local firm, recruited under fixed budget selection (FBS) through simplified technical proposals;
and (ii) individual consultants. FBS is appropriate inasmuch as the TA is limited to the
production of two simple feasibility studies and an institutional strengthening program with
detailed terms of reference, input consultant time, and deliverables clearly identified. The firm
and the individual consultants will be recruited in accordance with ADB’s Guidelines on the Use

of Consultants (2007, as amended from time to time). Equipment will be procured in accordance
with ADB’s Procurement Guidelines (2007, as amended from time to time). All the equipment
purchased under the PPTA will be turned over to SAWACO at the end of the Project.
17. The PPTA will include four workshops in HCMC at (i) the inception phase, (ii) the
midterm completion of t
he preparation of the
two investment components, (iii) the completion of
the feasibility studies, and (iv) following the initial development of the institutional strengthening
program. The workshops will include representatives from the HCMC People’s Committee,
central government agencies, civil society, and the private sector. The reporting requirement will
include an inception report, three progress reports and a final report. In addition, the consultants
will prepare two feasibility study reports for the investment components of the project (NRW and
network strengthening and expansion), and a series of reports for each of the items for the
planning and institutional strengthening component. All the documents produced will be in
English and in Vietnamese.
IV. THE PRESIDENT'S RECOMMENDATION
18. The President, acting under the authority delegated by the Board, has approved ADB
administerin
g technical assistan
ce not exceeding the equivalent of $1,500,000 to the
Government of Viet Nam to be financed on a grant basis by the Government of France for
preparing the Ho Chi Minh City Water Supply Project, and hereby reports this action to the
Board.


6 Appendix 1
DESIGN AND MONITORING FRAMEWORK

Design
Summary

Performance
Targets/Indicators
Data Sources /
Reporting
Mechanisms
Assumptions
and Risks
Impact

Improved urban livability
and ec
on
omic
competitiveness of HCMC
due to better quality and
more sustainable water
supply


•
NRW is reduced in the
proj
ect area
• Water supply coverage
in HCMC i
ncreased
from 76% to 90% in
2015
1

• Water supply service is
continuous, of drinking
water quality, meets
demand, and is
financially sustainable
by 2015
• Positive change in the
perce
ption of the level
of water supply service
in the project area



Investment project completion
report

Government demographic,
economic, health and water
sector statistics

Public feedback, public
opinion surveys, citizen report
card

ADB monitoring of baseline
indicators
Assumptions

• The Government,

SAW
ACO and other
concerned agencies sustain
best practices in water
supply delivery beyond
completion of the project.

Risks
• Natural disasters or other
catastroph
es deplete fresh
water resources.
• Factors other than water
supply severely affect the
economic situation or
health of the population in
the project area.
• Political interference
prevents successful
implem
entation of the
institutional strengthening
program and threatens the
financial sustainability and
competitiveness of the
water supply system.

Outcome

Agreed design of new

investments to ext
end and
rehabilitate the water
distribution network,
reduce NRW, and an
institutional strengthening
program to be
implemented during the
subsequent loan project


• Endors
ement by
HCMC of feasi
bility
studies on (i)
strengthening and
expansion of
distribution network,
and (ii) NRW, by
September 2009
• HCMC and SAWACO
agre
e on the content of
proposed institutional
strengthening program,
by July 2009
• Recommended
frameworks for the
program are adopted

by HCMC and
SAWACO by June
2009 and initial steps
are taken towards
implementation.



ADB PPTA completion report

Official reports and feedback
from SAWACO and oth
er
agencies


Local government and water
compan
y policy papers
Assumptions

• Government, SAWACO,
and oth
er concerned
agencies committed to
timely and successful
completion of the Project.

Risks
• Differences between central

and local government, or
between local government
and SAWACO significantly
delay approval of the
feasibility study and
institutional strengthening
program.
1
Government’s target is 100% supply coverage by 2025.








Appendix 1 7
Design
Summary
Performance
Targets/Indicators
Data Sources /
Reporting
Mechanisms
Assumptions
and Risks
Outputs
1. Part I—Nonrevenue
wa

ter: feasibility
study and
contractual
arrangement for
implementation of
NRW component in
subsequent
investment project

2. Part II—Plan for
strengtheni
ng and
expanding the
transmission and
primary network



3. Part III—Design of
institutional
strengthe
ning plan
for implementation
during the
subsequent
investment project

• C
ompletion by
Septemb

er 2009 of
new feasibility study for
NRW over four
remaining zones,
based on existing
feasibility study and
lessons from ongoing
NRW projects

• C
ompletion by
Septemb
er 2009 of
feasibility study and
project components for
network extension
consisting of an
additional 90 km of
new pipes

• Design by June 2009
of the various aspects
of the capacity building
and institutional
strengthening program
are appropriate, timely,
coherent and
compatible, including
(i) framework for
private sector

participation, (ii) policy
for water conservation,
(iii) strategy for energy
efficiency, and
(iv) framework for ISO
certification.


Consultant working papers
and reports, in
cluding
feasibility study and progress
reports

Workshops and stakeholder
feedback from consu
ltation
activities and surveys

ADB PPTA review missions
and back-to-office reports

TA completion report

HCMC government and
SAWACO polic
y papers
Assumptions
• Good collaboration
bet

ween the Government,
SAWACO and the PPTA
consultant throughout
PPTA implementation.
• Government successfully
mobilizes various
stakeholders and secures
counterpart contributions.
• New decree on water
supp
ly will be enforced to
allow for sustainable
operation.

Risks
• Information and
water
sector data necessary to
successfully undertake the
feasibility study is not made
available to the TA
consultant


Activities with Milestones


Inputs

1. Part I—Feasibility study, nonrevenue water (September 2009)
1.1 Review existing feasibility study and prepare new feasibility study for NRW that
incorporates lessons
1.2 Prepare TOR for a management contract for private sector participation
1.3 Make recommendations for implementation
of the SCADA system and GIS as part
of a network management center

2. Part II—Feasibility study, network expansion (September 2009)
2.1 Prepare project summary and information on existing situation and services
provided (including water resources, supply, wastewater and drainage, distribution
and site information)
2.2 Undertake planning and demand forecasting for future develo
pment (includes
review of master plan)
2.3 Specify technical requirements for future development—distribution system and
selection of favored design options, control system, selection of equipment and
materials, cost estimates, drawings, and a procurement plan

Government of France:
$1.50 million
• Consulting services
(40 pers
on-months of
international consultant
services and 90 person-
months of national
consultant services): $1.23
million
• Travel, equipment,

administrative and other
costs: $0.27 million

SAWACO:
$0.40 million
•
Counterpart staff (about

8 Appendix 1

Activities with Milestones


Inputs

2.4 Undertake an institutional assessment (description of existing agencies, policies,
and the project; and review and recommendations for improvement of SAWACO)
2.5 Prepare a financial and fiscal assessment and financial model and report for
SAWACO
2.6 Assess tariffs
2.7 Prepare an environmental assessment, social assessment and resettlement plan in
complianc
e with ADB safeguards
2.8 Prepare an economic analysis
2.9 Prepare a procurement plan
2.10 Address other issues (risk analysis; water supply metering; labor health; and safety
and training program for contractors on best practices for installation, transport,
and storage of pipes)
2.11 Prepare a project implementation plan (includin
g administrative and institutional

arrangements, organization structure, monitoring and evaluation)

3. Part III—Institutional strengthening pro
gram (June 2009)
3.1 Private sector participation: p
repare options for HCMC People's Committee and for
SAWACO on how it can be publicly listed as a joint-stock company under a public-
private partnership, review the existing asset inventory and asset management
system and propose a program to implement asset management as part of the
project.
3.2 Water conservancy: review current HCMC pr
ovince water conservation policies
and make conservation-related recommendations
3.3 Energy efficiency: conduct energy audits for each operational site, and prepare
strategies and recommendations for energy savings and energy efficiency, and a
prioritized investment plan based on cost recovery
3.4 Certification: review current certificatio
n obtained by SAWACO, assess readiness
to comply with ISO 9001, ISO 14001 (environment protection and safety), ISO
24512 (management of water utilities), ISO 18001 (occupational health and safety)
and, propose a certification program with budget and schedule.
3.5 Finalize the financing plan and the funding requirement.

60 person-months):
$0.05 million
• Other in-kind contributions:
(office space, feasi
bility
study for SCADA system
and GIS, and logistics):

$0.35 million

ADB = Asian Development Bank, GIS = geographic information sy
stem, HCMC = Ho Chi Minh City, ISO = International
Organization for Standardization, km = kilometer, MOU = memorandum of understanding, NRW = nonrevenue water,
SAWACO = Saigon Water Corporation, SCADA = supervisory control and data acquisition, PPTA = project preparatory
technical assistance, TA = technical assistance.










Appendix 2 9
INITIAL POVERTY AND SOCIAL ANALYSIS

Country/Project Title: Viet Nam: Ho Chi Minh City Water Supply Project

Lending/Financing
Modality:
Project preparatory technical assistance
Department/
Division:
Southeast Asia Department,
Infrastructure Division

I. POVERTY ISSUES
A. Linkages to the National Poverty Reduction Strategy and Country Partnership Strategy
1. The Viet Nam country strategy and program, 2006–2009 stresses the importance of maintaining sustainable equitable
economic growth to achieve further reductions in poverty. Viet Nam’s success in reducing the portion of the population living
below the poverty line (from 70% in 1990 to 27% in 2005) was based on rapid but equitable economic growth. The
Government’s strategy for Ho Chi Minh City (HCMC) is to develop water and sanitation infrastructure, improve service levels,
and expand services to new urban and peri-urban areas. The proposed project is expected to reduce nonrevenue water and to
strengthen and expand the primary transmission network in order to improve coverage. In addition, the project will include an
institutional strengthening program to assist the Saigon Water Corporation (SAWACO) improve efficiency and service. These
measures will ultimately improve the quality of life, working environment, ability to attract investment into the city and access to
services, and will therefore help reduce poverty. The Government’s poverty reduction strategy will be reviewed to identify the
impact of such large-scale infrastructure projects on poverty reduction in Viet Nam.

B. Targeting Classification
1. Select the targeting classification of the project:

General Intervention Individual or Household; Geographic; Non-Income MDGs

2. Explain the basis for the targeting classification: The project will seek to improve water service delivery and expand
coverage in HCMC.

C. Poverty Analysis
1. If the project is classified as Targeted Intervention Household, or if it is policy-based, what type of poverty impact
analysis is needed? N/A

2. What resources are allocated in the PPTA/due diligence? A total of 6 person-months of international and national
consultant services and a provisional sum of $20,000 for the social assessment survey.

3. If General Intervention, is there any opportunity for pro-poor design (e.g., social inclusion subcomponents, cross subsidy,
pro-poor governance, and pro-poor growth)? The water tariff structure will be pro-poor and focus on providing the urban

poor, vulnerable and disadvantaged people access to service, and will use a citizen report card to measure the service.

II. SOCIAL DEVELOPMENT ISSUES
A. Initial Social Analysis
Based on existing information:
1. Who are the potential primary be
neficiaries of the project? How do the poor and the socially excluded benefit from the
project? The objective of the project is to enable SAWACO to provide 100% of HCMC residents with potable water by
2025. The project will directly benefit people living in peri-urban areas and improve the level of service to all users. The
tariff includes a subsidized “lifeline” of 4 cubic meters of water per person per month; this would include the connection
cost, to promote access and the use of the service by vulnerable and disadvantage groups in HCMC.

2. What are the potential needs of beneficiaries in relation to the proposed project? The project will provide affordable and
clean water to prospective users, such as households, industries, commerce and institutions (e.g., hospitals and public
buildings).

3. What are the potential constraints in accessing the proposed benefits and services, and how will the project address
them? Block tariffs and access to service are known to be counterproductive with the poorest segment of the urban
population. The project team will work with SAWACO and the HCMC People's Committee to incorporate the one-off
connection to access the service unto the water tariff. Miscellaneous programs, such as output-based aid and "small pipe
networks" will be examined and considered for inclusion in the project.


10 Appendix 2

B. Consultation and Participation
1. Indicate the potential initial stakeholders: Stakeholders include the water users, the water company and the local
government.
2. What type of consultation and participation (C&P) is required during the PPTA or project processing (e.g., workshops,
community mobilization, involvement of nongovernment organizations and community-based organizations, etc.)?

There will be several public consultation meetings over the course of project preparation, including four workshops, a
resettlement town hall meeting, willingness to pay and affordability surveys, and a water tariff public consultation. The
project would strengthen SAWACO’s customer service department, seek to address complaints from users, and
develop a plan addressing communication between water companies and users.

3. What level of participation is envisaged for project design?

Information sharing Consultation Collaborative decision making Empowerment

4. Will a C&P plan be prepared? Yes No Please explain. A C&P plan will be prepared by the PPTA
consultant during the social assessment survey and focus groups discussion to seek views from the project population.
The C&P plan will be used in formulating a communication plan for disseminating information from water companies to
users, and in defining performance indicators to measure the level of service through the citizen report card.


C. Gender and Development
1. What are the key gender issues in the sector/subsector that are likely to be relevant to this project/program? The
consulting firm will conduct a detailed gender assessment for the households affected by resettlement. A gender plan
for addressing gender concerns in the Project related to resettlement, HIV/AIDS, safety measures, and capacity
building of the EA and relevant stakeholders will be prepared for the proposed project. The communication plan will be
gender focused to promote and build awareness.

2. Does the proposed project/program have the potential to promote gender equality and/or women’s empowerment by
improving women’s access to and use of opportunities, services, resources, assets, and participation in decision
making? Yes No Please explain.
The project will not directly lead to women's empowerment; how
ever, the improved services and the expansion of the
distribution network will benefit women through improved access to a potable water supply.

3. Could the proposed project have an adverse impact on women and/or girls or to widen gender inequality?

Yes No Please explain.
Not Applicable.

III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS
Issue Nature of Social Issue Significant/Limited/
No Impact/Not Known
Plan or Other Action
Required
Involuntary Resettlement
Relocation (temporary and
permanent) will be required
along the construction route
of the 90 km of primary
transmission pipeline and at
the selected pumping
station sites.
We expect a significant
resettlement impact.
Full Plan
Short Plan
Resettlement
Framework
No Action

Uncertain
Indigenous Peoples
Not known at this stage. The
project team anticip
ates that

no indigenous people live in
the project area, but this will
be assessed.
Plan
Other Action
Indigenous Peoples
Framework
No Action
Uncertain
The social assessment
survey
will confirm if there
are affected indigenous
people in the project area.





Appendix 2 11
Labor
The Project will design and
implement pri
mary
transmission pipes, some of
which will feed into
industrial zones and
improve industrial growth.
Access to water has the
potential to contribute to

industrial growth and can
facilitate expansion of
employment opportunities.

There will be employment
opportunities during the
construction phase of the
Project.

Clauses on core labor
standards
will be included in
all bidding documents
Significant (indirectly)






Limited
Plan
Other Action
No Action
Employment
Opportunities
Uncertain Labor Retrenchment
Core Labor Standards
Affordability
Affordability has not been a

problem for urb
an water
supplies. This will be
confirmed through the
social assessment survey,
which includes a
willingness-to-pay and
affordability study; however,
the one-off cost of
accessing the services is an
issue that will be discussed
with SAWACO and is
proposed to be included as
part of the water tariff.
Limited
Action
No Action
Uncertain
Other Risks and/or
Vulnerabilities
An awareness campaign
wi
ll be conducted on
prevention of HIV/AIDS.
The construction sites will
have an influx of workers
and might increase the risk
of HIV/AIDS and trafficking
of girls and women.
Limited

Plan
Other Action
No Action HIV/AIDS
Uncertain Human Trafficking
Others (conflict, political
instability, etc.), please
specify

IV. PPTA/DUE DILIGENCE RESOURCE REQUIREMENT
1. Do the TOR for the PPTA (or other due diligence) include poverty, social and gender analysis and the relevant
specialist/s?
Yes No If no, please explain why.



2. Are resources (consultants, survey budget, and workshop) alloc
ated for conducting poverty, social and/or gender
analysis, and C&P during the PPTA/due diligence?
Yes No If no, please explain why.


ADB = Asian Development Bank, C&P = consultation and participation, EA = executing agency, GIS = geographic
information system, HIV/AIDS = human immunodeficiency virus/acquired immunodeficiency syndrome, HCMC = Ho Chi
Minh City, MDG = millennium development goal, NRW = nonrevenue water, SAWACO = Saigon Water Corporation,
SCADA = supervisory control and data acquisition, PPTA = project preparatory technical assistance, TA = technical
assistance, TOR = terms of reference.


12 Appendix 3
COST ESTIMATES AND FINANCING PLAN

($'000)

Total
Item Cost
A. Government of France Financing
a

1. Consultants
a. Remuneration and Per Diem
i. International Consultants 930.00
ii. National Consultants 300.00
b. International and Local Travel 100.00
2. Equipment
b
20.00
3. Training, Seminars, and Conferences

20.00
4. Surveys

60.00
5. Miscellaneous Administration and Support 40.00
6. Representatives for Contract Negotiations 10.00
7. Local Transportation 20.00
Subtotal (A) 1,500.00

B. Government Financing
1. Office Accommodation and Transport 100.00
2. Remuneration and Per Diem
of Counterpart Staff

50.00
3. Others
c
250.00
Subtotal (B) 400.00
Total 1,900.00
a
Financed through the Channel Financing Agreement (Technical Assistance
Program) between the Government of France and the Asian Development Bank,
and administered by the Asian Development Bank.
b
Purchase of information technology equipment, such as photocopier, computers,
printer, and plotter.
c
Feasibility studies for the supervisory control and data acquisition and geographic
information system and topographic surveys.
Source: Asian Development Bank estimates.


Appendix 4 13
OUTLINE TERMS OF REFERENCE
A. Introduction
1. The project preparatory technical assistance (PPTA) for the Ho Chi Minh City Water Supply
Project will prepare an institutio
n
al strengthening program and an investment plan for (i)
nonrevenue water (NRW) in four hydraulic zones, and (ii) strengthening and expanding 90
kilometers (km) of transmission and primary network.
2. The PPTA will use an international firm in association with a local firm (hereinafter referred
to as "the consulting

firms") recruited under fixed budget selection using simplified technical
proposals to define the institutional strengthening program and to finalize two feasibility studies for
(i) NRW and (ii) the transmission and primary network. A total of 40 person-months of international
consultant services and 90 person-months of national consultant services will be required,
distributed as shown in Table A4.
Table A4: Summary of Consultants Required (person-months)
Consultants International National
Total
Feasibility Studies

Team Leader (NRW or Network Specialist) 9.0 9.0
18.00
Civil Engineer (NRW or Network Specialist) 4.0 9.0
13.00
Civil Engineer 0.0 9.0
9.00
Mechanical and Electrical / Process Engineer 2.0 6.0
8.00
Mechanical and Electrical / Process Engineer 0.0 6.0
6.00
Draftsman (2 positions) 0.0 18.0
18.00
SCADA Specialist 1.0 0.0
1.00
GIS Specialist 1.0 0.0
1.00
Institutional Specialist 2.0 0.0
2.00
Environmental Specialist 2.0 4.0
6.00

Resettlement Specialist 2.0 4.0
6.00
Social Development Specialist 2.0 4.0
6.00
Financial Analyst 2.0 2.0
4.00
Economist 1.0 2.0
3.00
Subtotal Feasibility Studies 28.00 73.00 101.00
Institutional Strengthening


Energy Savings Specialist 1.0 0.0
1.00
Water Conservancy Specialist 1.0 1.0
2.00
ISO Certification Specialist 1.0 1.0
2.00
PPP / Water Operation Specialist 2.0 3.0
5.00
Subtotal Institutional Strengthening 5.00 5.00 10.00

Unallocated Person-Months 7.0 12.0 19.00

Total Person-Months 40.0 90.0 130.00
GIS = geographic information system, HCMC = Ho Chi Minh City, HIFU = Ho Chi Minh City Urban Infrastructure
Investment Fund, ISO = International Organization for Standardization, NRW = nonrevenue water, PPP = public–private
partnership, SCADA = supervisory control and data acquisition.

B. Feasibility Study

3. The consulting firms will finalize two feasibility studies over 9 months, which will be
produced in
English and
in Vietnamese (for local approval).


14 Appendix 4
(i) A feasibility study on NRW will detail how to implement the NRW reduction program
over four hydraulic zones, in parallel with the ongoing NRW project financed by the
World Bank for two other hydraulic zones in the city center.
(ii) A feasibility study on strengthening and expanding about 90 km of transmission and
primary network, which will in
clu
de: (i) a description of the site conditions,
highlighting any condition likely to impact on project construction (e.g., soil
conditions and flooding potential); and (ii) the project scope and the investment
proposal, including the rationale, showing the increase in coverage and access to
water supply, and improvement in service delivery.
4. The two feasibility studies will require an estimated 28 person-months of international
consultant services and about 73 person-months of national consultant services.
The international
team leader will either be a NRW specialist or a network specialist with over 10 years professional
experience in the water supply sector, including over 5 years in a management position. Other
international positions will require at least 5 years professional experience, including 2 years in the
water supply sector. For both feasibility studies, the consulting firms will also prepare all the
necessary safeguards documents, including social and environmental assessments, financial and
economic analyses, project implementation and procurement plans, and the information described
in the following paragraphs.
5. Planning and water demand forecasting for future development:

(i) Master plan
.
The consulting firms will review the water supply master plan.
(ii) Demand forecasting—w
ater supply. The consulting firms will establish current
and future water supply demand figures for each of the four study zones based on
the last 2 years of historical data. The consulting firms will also consider self-
provided supply and its impact on existing and future water demand, as well as the
financial consequences to major individual consumers.
(iii) Demand forecast model.
To faci
litate the analysis, the consulting firms will develop
a demand forecast model to 2025. The demand forecast model will be linked to the
financial model.
6. Technical requirements for future development—NRW and water supply network:
(i) The design of the network system will allow for staged development to suit demand
projections. It will optimize strateg
ic transmission and primary distribution lines and
balance the costs, financial and technical, of future duplication against installation of
elements to cater for future demand.
(ii) The consulting firms will complete a process flow chart and review the feasibility
study for the superviso
ry control and data acquisition
(SCADA) system and the
geographic information system (GIS) designed by SAWACO. The control equipment
will be appropriate for the current skills and manpower available in SAWACO, and
conform to the technical standards for information technology in HCMC; the
consulting firms will assist in drafting a training plan for the SCADA system and GIS.
(iii) The consulting firms will provide a list of all maj

or equipment items and construction
material required for the water supply system. This will include lengths and
diameters of pipes as well as a recommendation on suitable pipe material, including
internal lining.
(iv) The consulting firms will liaise with the World Bank-financed NRW project to take
into consider
ation lessons from the project and incorporate them into the NRW
project design.

Appendix 4 15
7. Institutional Assessment. The consulting firms will prepare a detailed description of the
project city, districts and communes. This will include descriptions of current and/or planned future
organizational setups and regulatory responsibilities, focusing on fiscal policies and municipal
finance, municipal and urban planning, development of urban infrastructure, construction oversight,
water resource management, water companies, environmental regulations relevant to urban
infrastructure, and pricing regulations. Other matters to be considered will be tariffs, connection
fees and subsidy policies, corporate charters and bylaws, and ownership of SAWACO and
financial relations with supervising authorities (e.g. transfer of bills collected or profit and/or loss
sharing arrangements).
8. Financial and Fiscal Assessment. The consulting firms will describe the current and
near-
future fiscal situat
ion of SAWACO and HCMC, including breakdown of revenues, financing and
expenditures, highlighting key policy issues such as priority investment areas or special purpose
vehicles. The consulting firms will conduct a financial management capacity assessment of
SAWACO and propose a financial management system. The consulting firms will also finalize
financial and economic analyses of the proposed project components and of SAWACO, according
to ADB’s latest guidelines for the financial management and analysis of projects.
1
To facilitate the

analysis of the water company, the consulting firms will develop a financial model that produces
the needed forecasts over a 10-year operational period, with links to a minimum of 2 years of
historical information. The financial model should separate assumptions, calculations and outputs
(reports). The financial model should be presented as a separate paper and a computerized model,
with all major assumptions and calculations documented and discussed. The financial analysis
should address a 10-year operational period; considerations should include the cost of chemicals,
power consumption, and the design life of equipment used, as well as any associated financial
costs.
9. Assessment of Tariffs. The water supply tariff
s and tariff structure will be reviewed and
analyzed. Detailed tariff assumptions will be a part of the financial model of the water company,
and include tariffs for water and wastewater.
10. Economic Analysis. The consulting firms will prepare an analysis of the economic costs
and benefits of the project. Economic analyses are to follow ADB's guidelines for the economic
analysis of water supply projects.
2
11. Environmental Safeguards. The Project has been classified category B, since it is
expected that most of the project components selected will have minimal impact on the
environment. Therefore, the consulting firms will prepare category B project components, and
produce an initial environmental examination and summary according to ADB's Environment Policy
(2002), Environmental Assessment Guidelines (2003), and the Operations Manual section on
environment.
3

12. Involuntary Resettlement and In
digenous People. The consulting firms will review the
initial resettlement classification for each of the selected project components and finalize safeguard
compliance for resettlement. It is expected that most of the project components selected will be
category A, and that a full resettlement plan will be required. The full resettlement plan will follow
ADB's Involuntary Resettlement Policy (1995), guided by the Operations Manual section on

involuntary resettlement
4
and other relevant ADB policies and guidelines, i.e., Handbook on
Poverty and Social Analysis (2001), Policy on Gender and Development (1998), Policy on
Indigenous Peoples (1998), Accountability Mechanism (2003), and Public Communications Policy
(2005). The consulting firms will manage the field surveys on inventory losses and census and a


1
ADB. 2005. Guidelines for the Financial Management and Analysis of Projects. Manila.
2
ADB. 1998. Guidelines for the Economic Analysis of Water Supply Projects. Manila.
3
ADB. 2006. Operations Manual. Section F1: Environmental Considerations in ADB Operations. Manila.
4
ADB. 2006. Operations Manual. Section F2: Involuntary Resettlement. Manila.

16 Appendix 4
socioeconomic survey to profile the project area and the social and poverty impact, which will serve
as the baseline assessment and reference for impact surveys done upon completion and after
several years of operation. If the social analysis determines that ethnic minorities are present in the
project area and (i) are likely to be affected by the Project because of land acquisition and/or
resettlement, or (ii) are disadvantaged or vulnerable because of their social or cultural identity, a
combined ethnic minority development and resettlement plan will prepared, or ethnic minority-
specific actions undertaken to address the concerns of ethnic minorities in accordance with ADB’s
Policy on Indigenous Peoples. The social assessment will also address matters such as ethnic
minorities, urban poor, and disadvantaged and vulnerable persons, and their ability to afford and
willingness to pay for the new and improved services. The consulting firms will take the findings of
the report into account in assessing water demand.
13. The consulting firms will prepare an implementati

on and procurement plan, which will
define
the following.
(i) Administrative arrangements a
nd financi
al management capacity. The
consulting firms will detail the administrative arrangements and assess the financial
management capacity of SAWACO to implement the Project.
(ii) Organizational structure. The
organization
al structure for management and
delivery of the Project will be outlined, showing responsibilities and reporting
guidelines.
(iii) Implementation plan. The consulti
ng firms will set out a tentative timetable for
project implementation. This will show the various stages of implementation,
including (a) feasibility study and design, (b) bidding and procurement, and (c)
construction of the Project. The plan will outline the reporting and approval process
at various stages, and the proposed arrangements for monitoring and evaluation of
project implementation.

14. Deliverables. Reports will be prepared in English and translated i
nto Vietnamese to
facilitate understanding and decision making by the Government. Reports will be submitted in both
electronic and paper format. All data and analyses will be consolidated and provided in electronic
form. There are four workshops planned (in addition to the kick-off meeting) to present and discuss
the status of the study, the scope of the investment, and the proposed institutional and financial
arrangements for the sustainability of the Project.

C. Institutional Strengthening Program

15. The institutional strengthening program will be implemented over 6 months, in parallel with
the feasibility studies, and will require 5 person-months of international consultant services,
supported by 5 person-months of national consultant services. The program will define a series of
proposals or policy dialogues for discussion and evaluation by SAWACO and by the project
steering committee, to be implemented under the ensuing Project. Each consultant will have a
minimum of 10 years experience in the sector. In addition, the private sector participation specialist
will have at least 10 years operation and maintenance expertise at a senior management level in a
private or public–private company.
(i) Energy
efficiency. An international energy savings specialist (1 person-month) will
supervise energy audits for each of up to 15 locations (e.g., pumping stations,
treatment plants, headquarters office) and finalize recommendations for energy
savings and energy efficiency. The audits will be performed by a national firm with
more than 5 years of experience in this type of work, and with the necessary
resources, material and equipment. A provisional sum of $40,000 will be allocated
for the audits.

Appendix 4 17
(ii) Water conservancy. An international water conservancy specialist (1 person-month)
supported by a national consultant (1 person-month) will review the current policies
of SAWACO and HCMC pertaining to water conservation, and propose a series of
measures for water conservation, with a budget and schedule.
(iii) Certificatio
n
. An international quality specialist (1 person-month) supported by a
national consultant (1 person-month) will (i) review the ISO 9001 certification
already obtained by SAWACO; (ii) assess readiness to comply with ISO 14001 and
ISO 18001 for environment protection and safety, and with ISO 24512 for the
management of water utilities; and (iii) propose a certification program with budget
and schedule.

(iv) Private sector participation
.
It is expected that according to the new Decree
117/2007/ ND/CP, SAWACO will be listed as a joint-stock company under a public–
private partnership. HCMC is interested in assessing options for private sector
participation in SAWACO through divestiture. An international consultant (2 person-
months) supported by a national consultant (3 person-months) will prepare options
for the HCMC People’s Committee and for SAWACO on how to facilitate and
optimize this transition. The consultant will also review the asset inventory and
management system in place and propose an implementation program for asset
management.