Urban Sanitation in Vietnam: Challenges Ahead

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Urban Sanitation in Vietnam:

Challenges Ahead

Taro Katsurai,

Senior Specialist,

International Development Associates, [email protected]

Manila, June 29th, 2011



Contents

Introduction

Issue 1: Scaling up

Issue 2: Institutional reforms

Summary and way forward



1. Introduction: Urban Sanitation in VN

Brief overview Most urban area is flat and located in low altitude: vulnerable to sea

tide and flooding. Extensive combined sewers in most cities. Septic tanks are installed in most HH; greywater goes to the sewer

directly, blackwater to the septic tanks. But STs are not well built nor well maintained

Almost no WWTP at the end of the combined sewer system.(serviced population around 7%)

Government Goal: Percentage of treated urban wastewater (Prime Minister Decision No. 1930/2009) 2015: 40-50% 2020: 60% 2025: 70-80%

12 bil USD over the next 15 years.(WB estimation)

Sewer



1. Introduction: Urban Sanitation in VN

How can we assist GoV in achieving theseambitious targets?

Intuitively, Scaling up financial assistances.

Catalyzing private finance

Building technical and institutional capacity inparallel

Empirically? Topic of today¶s presentation



2. Scaling up

Map of 15th century Hanoi Hanoi in 1990s



2.1 Hanoi: context

Drainage and Sewerage Master Plan (1993-1995) Target year: 2020 (25 years from 1995)

Serviced population: all inner city (around 1.5 mil)

Total cost: around 1 bil USD

Accordingly, series of loans were providedbetween 1995 to 2010 totaling 50.9 bil JPY (630

mil USD)



Map of Hanoi Water

Environment Project Phase 1

and Phase 2



2.2 Hanoi: Where are we now?

Progress Phase 1: completed but delayed for nearly 5 years.

Phase 2: construction has not even started but already

behind by 2.5 years.

Current treatment capacity Around 7,800 m3/day

Serviced population: 25,000



9

2.3 Performance of Sewerage Projects ( 1)

* WWTP Capacity will be increased to 469,000 m3/day

* The largest WWTP in Tokyo is 629,130m3/day

Project WWTP Capacity(m3/day)

ServicePopulation

Hanoi 40,000 (2006)3,000 (2005)

4,800 (2005)13,300 (2013)

9,743

16,02841,200

HCMC 141,000 (2008)*469,000 (2015)

1,422,000

Hai Phong 36,000 (2015) 240,000

Binh Duong 17,560 (2013) 174,650

Vinh Phuc 5,000 (2014) 26,440

Hue 20,000 (2015) 145,600

What about the other cities?



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2.3 Performance of Sewerage Projects ( 2 )

In fact, delay is not just a characteristic of Hanoi but ALLsewerage projects.



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2.3 Performance of Sewerage Projects ( 3)

Is it the characteristic of Vietnam? No, power and transport projects perform much better. (*not enough

data to compare construction schedule)

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It is the characteristic of PPC projects.



2.3 Performance of Sewerage Projects (5 )

Why are sewerage projects slow? Physical

Covers a large surface area

Conducted in urban area

Institutional Local governments (PPCs) have minimum experience

handling large scale, ICB projects.

Harm of lack of experience Unclear demarcation of responsibilities between

agencies -> slow approval procedures. Inappropriate bidding contents -> bidding failures

Lack of understanding to ³changes´ (variation order,additional quantities, price adjustment) -> disputes ->delay of construction.



2.4 Way forward

Conclusion Before ³scaling up´ financial assistances or discussing

about efficient operations, we need to strengthen

project implementation capacity of the local

governments.

What can we do?

Procurement training

FIDIC training

Trainings should target approval agencies and

inspection agencies also.

Facilitate knowledge transfer from Ministries to

Provinces.

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4. Institutional Reforms for Sustainable

Management and Operation

Binh Hung WWTP in HCMC (capacity 141,000m3/day, financed by JICA)



4.1 Institutional Reforms and HCMC

Background To create an enabling environment for private financing

To ensure sustainability of the management and operation of thesewerage facilities

Activities

Development of sewerage management

decree and circular

Capacity building (administrative,

management )

Capacity building (technical)

Central Gov.

Local Gov.

O&M Entity



4.2 Sewerage Management Institutions

Local Gov.

(PPCs)

& Entity

Before Decree 88/2007

Local Gov.

(PPCs)

& Entity

Performance Based

Management Contract

(direct appointment or Open bidding)

Decree 88/2007 clearly defined: the roles and functions of stakeholders including the clear

separation of asset owner and operator.

the nature of the relationship between asset owner andO&M organization = performance based managementcontract

the principle of cost recovery and allowed setting seweragetariffs accordingly. (Before it was constrained to below 10%

of water tariff)



4.3 Administrative Capacity Building

Application of Decree 88/2007 in HCMC Step 1:

Establishment of an administrative body to manage sewerage systems.

Step 2: Administrative capacity building of that entity (management information

system, sewerage ledgers, asset management systems, tariff

calculation, etc.) Preparation of performance based management contract.

Step 3: Committed back-finance for management contract

Local Gov.

(PPCs)

& Entity

(Public)

Performance Based

Management Contract

Sewerage

Administrator

& Entity

(Private)

Performance Based

Management Contract



4.4 What happened?

What happened? Management contract was ready, back-finance ready, private

company eager to participate, but« the two sides could not cometo an agreement.

Why? (personal view«) Lack of technical understanding.

Many unreasonable requests: request to treat heavy metal

Could not evaluate the appropriateness of the proposed methodology andproposed cost.

Lessons Keep aware that sewerage system management is still new in

Vietnam.

Capacity building of both the administrative side (the owner) andthe operator side is necessary.

Even the administrative side require technical knowledge.



5. Summary and Conclusion

Observation Large need to expand sewerage systems but the current

bottleneck is NOT financing but project execution.

Raising the capacity of the administrator/owner of the seweragesystem is crucial to the sustainability of the system and the

involvement of the private sector.

(Bold) prescription towards a sustainable seweragesector STEP 1: Strengthen project execution capacity.

STEP 2: Strengthen technical capacity (these technical peoplebecomes the resource pool of the administrator)

STEP 3: Strengthen administrative capacity

STEP 4: PPP



Thank you

Urban Sanitation in Vietnam: Challenges Ahead

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