Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 83493-VN

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROJECT APPRAISAL DOCUMENT

FOR A CREDIT

IN THE AMOUNT OF SDR 117.1 MILLION (US$180 MILLION EQUIVALENT)

TO THE

SOCIALIST REPUBLIC OF VIETNAM

FOR AN

IRRIGATED AGRICULTURE IMPROVEMENT PROJECT

December 11, 2013

Southeast Asia Sustainable Development Sustainable Development Department East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS (Exchange Rate Effective)

Currency Unit VND21,000

= VND Vietnamese Dong = 1US$

FISCAL YEAR

January – December 31

ABBREVIATIONS AND ACRONYMSAAA Analytical and Advisory Assistance CPMU Central Project Management Unit (under

CPO) CPO Central Project Office CPS Country Partnership Strategy CSA Climate Smart Agriculture DARD (Provincial) Department of Agriculture

and Rural Development DSU Dam Safety Unit DWR Department of Water Resources EAP Environnemental Action Plan EIA ECOP

Environment Impact Assessment Environmental Code of Practice

EMDP Ethnic Minority Development Plan FM Financial Management GAP Gender Action Plan GHG Green- House Gases GOV Government of Vietnam ha Hectare IAIP Irrigated Agriculture Improvement

Project ICB International Competitive Bidding IDA International Development Agency IDMC Irrigation and Drainage Management

Company IMT Irrigation Management Transfer IPF Investment Project Financing ISF Irrigation Service Fee MARD Ministry of Agriculture and Rural

Development MIS Management Information System MIS Management Information System MOF Ministry of Finance

MOF Ministry of Finance MONRE Ministry of Natural Resources and

Environment MPI Ministry of Planning and Investment NCB National Competitive Bidding NGO Non-Government Organization O&M Operation and Maintenance OP/BP Operational Policy/Bank Procedure ORAF Operational Risk Assessment Framework PAP Project Affected People PIM Participatory Irrigation Management PISC Project Implementation Steering

Committee POE Panel of Experts PPC Provincial Peoples Committee PPMU Provincial Project Management Unit QCBS Quality and Cost Based Consultant

Selection RAP Resettlement Action Plan RPF Resettlement Policy Framework SBV State Bank of Vietnam SCADA Supervisory Control and Data

Acquisition SOE Statement of Expenses SRI System of Rice Intensification TA Technical Assistance VAWR Vietnam Academy of Water Resources VND Vietnam Dong VWRAP Vietnam Water Resources Assistance

Project WUA Water User Association WUO Water User Organization

Regional Vice President: Axel Van Trotsenberg Country Director: Victoria Kwakwa

Sector Director: John Roome Sector Manager: Jennifer Sara

Task Team Leaders: Abdulhamid Azad Cuong Hung Pham

VIETNAM Irrigated Agriculture Improvement Project

TABLE OF CONTENTS

Page

I. STRATEGIC CONTEXT .................................................................................................1

A. Country Context ............................................................................................................ 1

B. Institutional Context...................................................................................................... 2

C. Higher Level Objectives to which the Project Contributes .......................................... 2

II. PROJECT DEVELOPMENT OBJECTIVES ................................................................3

A. PDO............................................................................................................................... 3

B. Beneficiaries ................................................................................................................. 3

C. PDO-Level Results Indicators ...................................................................................... 3

III. PROJECT DESCRIPTION ..............................................................................................4

A. Project Components ...................................................................................................... 4

B. Project Financing .......................................................................................................... 5

C. Lessons Learned and Reflected in the Project Design .................................................. 6

IV. IMPLEMENTATION .......................................................................................................7

A. Institutional and Implementation Arrangements. ......................................................... 7

B. Results Monitoring and Evaluation (M&E) .................................................................. 8

C. Sustainability................................................................................................................. 8

V. KEY RISKS AND MITIGATION MEASURES ............................................................9

A. Risk Ratings Summary Table ....................................................................................... 9

B. Overall Risk Rating Explanation ................................................................................ 10

VI. APPRAISAL SUMMARY ..............................................................................................10

A. Economic and Financial Analyses .............................................................................. 10

B. Technical ..................................................................................................................... 11

C. Financial Management .............................................................................................. 12

D. Procurement ................................................................................................................ 12

E. Social (including Safeguards) ..................................................................................... 13

F. Environment (including Safeguards) .......................................................................... 14

i

.

PAD DATA SHEET

Vietnam

Irrigated Agriculture Improvement Project (P130014) PROJECT APPRAISAL DOCUMENT

.

EAST ASIA AND PACIFIC

EASVS

Report No.: 79517 VN .

Basic Information

Project ID Lending Instrument EA Category Team Leaders

P130014 Investment Project Financing

B - Partial Assessment Abdulhamid Azad Cuong Hung Pham

Project Implementation Start Date Project Implementation End Date

1 April 2014 30 June 2020

Expected Effectiveness Date Expected Closing Date

1 April 2014 31 December 2020

Joint IFC: No

Sector Manager Sector Director Country Director Regional Vice President

Jennifer J. Sara John A. Roome Victoria Kwakwa Axel van Trotsenburg .

Borrower:

Responsible Agency: Ministry of Agriculture and Rural Development

Contact: Tran Kim Long Title: Director-General, ICD

Telephone: Email:

Responsible Agency: Central Project Office, MARD

Contact: Vu Dinh Hung Title: CPO Deputy Director General

Telephone: 84-945095908 Email: iaip@cpo.vn .

Project Financing Data(US$M)

[ ] Loan [ ] Grant [ ] Other

[ X ] Credit [ ] Guarantee

For Loans/Credits/Others

Total Project Cost (US$M): 210

Total Bank Financing (US$M):

180

.

ii

Financing Source Amount(US$M)

BORROWER/RECIPIENT 30

International Development Association (IDA) 180

Total 210 .

Expected Disbursements (in US$ Million)

Fiscal Year 2014 2015 2016 2017 2018 2019 2020

Annual 10 20 25 35 35 35 20

Cumulative 10 30 55 90 125 160 180 .

Project Development Objective(s)

The Project Development Objective (PDO) is to improve the sustainability of irrigated agricultural production systems in selected Central coastal and Northern mountains provinces in Vietnam. .

Components

Component Name Cost (US$ Millions)

Component 1: Improved Irrigation Water Management 9.5

Component 2: Irrigation and Drainage Scheme Level Improvements 170.5

Component 3: Support Services for Climate-Smart Agricultural Practices 23.0

Component 4: Project Management, and Monitoring and Evaluation, 7.0 .

Compliance

Policy

Does the project depart from the CAS in content or in other significant respects?

Yes [ ] No [ X ]

.

Does the project require any waivers of Bank policies? Yes [ ] No [ X ]

Have these been approved by Bank management? Yes [ ] No [ ]

Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ]

Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] .

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 X

Natural Habitats OP/BP 4.04 X

Forests OP/BP 4.36 X

Pest Management OP 4.09 X

Physical Cultural Resources OP/BP 4.11 X

Indigenous Peoples OP/BP 4.10 X

iii

Involuntary Resettlement OP/BP 4.12 X

Safety of Dams OP/BP 4.37 X

Projects on International Waterways OP/BP 7.50 X

Projects in Disputed Areas OP/BP 7.60 X .

Legal Covenants

Name Recurrent Due Date Frequency

Section I of Schedule 2 NO N/A

Description of Covenant:

The recipient shall maintain the implementation arrangements as described in Section I of Schedule 2 to the Financing Agreement. .

Conditions

Name Type

Description of Condition

Team Composition

Abdulhamid Azad Task Team Leader/Sr. Irrigation Engineer

Irrigation and Drainage MNSWA

Cuong Hung Pham Co- Task Team Leader/ Sr. Water Resources Specialist

Water Resources and Irrigation EASVS

Steven M. Jaffee Lead Rural Development Specialist

Agricultural Development/ Diversification

EASER

Christopher Paul Jackson Lead Rural Development Specialist

Agricultural Development/ Diversification

EASVS

Masood Ahmad Lead Water Resources Specialist

Peer Reviewer SASDA

Jacob Burke Lead Irrigation Specialist Peer Reviewer TWAIWA

Yuling Zhou Lead Procurement Specialist

Procurement EASR2

Toru Konishi Sr. Economist Water Resources EASVS

Mei Xie Sr. Water Resources Specialist

Peer Reviewer WBICC

Nagara Rao Harshadeep Sr. Environmental Specialist

Peer Reviewer AFTN1

Nina Masako Eejima Sr. Counsel Legal LEGEN

Kishor Uprety Sr. Counsel Legal LEGES

Son Duy Nguyen Sr. Operations Officer Portfolio EACVF

iv

Khang Van Pham ET Consultant Environment EASVS

Miguel-Santiago Oliveira

Senior Finance Officer Disbursements CTRLN

Mai Thi Phuong Tran Financial Management Specialist

Financial Management EASFM

Tuan Anh Le Social Development Specialist

Social and Gender EASVS

Huong Thi Mai Nong Associate Counsel Legal EACVF

Thang Toan Le Procurement Specialist Procurement EASR2

Thu Thi Le Nguyen Operations Analyst Climate Smart Agriculture EASVS

Ngozi B. Obi Malife Program Assistant Operations EASER

Tam Thi Do Team Assistant Team Assistant EACVF

Vansa Chatikavanij ET Consultant Water Resources SASDI

Non Bank Staff

Name Title Office Phone City

Chris Davey Sr. Irrigation and Drainage Engineer, Consultant

King’s Lynn, United Kingdom

Douglas Vermillion Institutional and Water Management Specialist, FAO Consultant

Spokane, Washington, USA

Ravichandran Kannan Agronomist and Climate-Smart Agriculture Specialist, FAO Consultant

Chennai, India

Altaf Iqbal Sr. Agricultural Economist, FAO Consultant

Lahore, Pakistan

John Weatherhogg Sr. Agriculture Economist Consultant

Rome, Italy

.

Locations

Country Province Location - District Planned Actual Comments

Vietnam 1- Thanh Hoa 2- Ha Tinh 3- Quang Tri 4- Quang Nam 5- Ha Giang 6- Phu Tho 7- Hoa Binh

Institutional Data

Sector Board

Agriculture and Rural Development

v

.

Sectors / Climate Change

Sector (Maximum 5 and total % must equal 100)

Major Sector Sector % Adaptation Co-benefits %

Mitigation Co-benefits %

Agriculture (20%); Climate change (20%); Irrigation and Drainage (60%).

87% 13%

Total

I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project.

Themes

Theme (Maximum 5 and total % must equal 100)

Major theme Theme %

Environment and natural resources management

Water resource management 80

Rural development Rural services and infrastructure 20

Total 100

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I. STRATEGIC CONTEXT

A. Country Context

1. Over recent decades Vietnam’s agriculture has made major gains, playing an important role in the achievement of national objectives related to economic growth, food security, poverty reduction, social stability, and trade. Despite structural and demographic changes, the sector still accounts for 22 percent of Vietnam’s GDP, 30 percent of exports and 60 percent of total employment. Area expansion, productivity improvements, and diversification into higher value crops and animal products have each contributed to Vietnam’s impressive agricultural growth story. Thanks to this widely acknowledged success, the challenges for food security in Vietnam are no longer about total production of rice, but about addressing nutrition, affordability, and pockets of vulnerability.1 2. Irrigation and drainage investments have had a strong impact on agricultural intensification, productivity and diversification. Some 9.6 million hectares or 29 percent of Vietnam’s total land area is cultivated. Around 4.5 million ha or 46 percent is irrigated and about 2.5 million ha or 26 percent has drainage. Long-term gains have been achieved in paddy productivity and cropping intensity. In 2012 milled rice exports exceeded 8 million tons, making Vietnam the second largest exporter in the world. Irrigation has also contributed significantly to the expansion of coffee, horticulture, and aquaculture production.

3. However, the sustainability of these gains is at risk. Over half of the irrigation and drainage systems are deteriorating and/or operating below their potential capacity. Rates of water productivity are well below international standards and this poses a threat given climate change impacts and increased competition for water resources. The financial sustainability of many irrigation systems is uncertain. Irrigation service providers need to improve their performance to meet the increasingly complex demands of farmers. 4. The Central Coast Region, dominated by large schemes for rice cultivation, faces increasing challenges for water management. Inadequate drainage and flood management infrastructure often leads to damage to lower end distribution systems, especially earth-lined channels. Water demand for hydropower, aquaculture, municipal and industrial needs is increasing, but institutional arrangements for water sharing are lacking. As a result of increased water storage, withdrawals and climate change, saline intrusion is increasing. Although rice continues to dominate, diversification into crops such as high-value horticulture and sugarcane is growing as a result of local government initiatives and nascent market forces.

5. The Northern Mountainous Region has an underdeveloped potential for agricultural commercialization. Its farming population is generally very poor. In this region there are some pockets of successful sugarcane, livestock and horticultural crop production. Irrigation schemes tend to be small and often include pump stations. As in the Central Coast Region, schemes are prone to flooding and drainage problems. Water storage - for

1 “From Rice Bowl to Rural Development: Challenges and Opportunities Facing Vietnam’s Mekong Delta Region”, Jaffee et al. (2012).

2

multiple purposes - is especially important in the mountainous terrain where catchments are narrow and steep.

B. Institutional Context

6. Investments in irrigation, flood control, and to a lesser extent drainage have dominated public expenditures in agriculture. The Department of Water Resources (DWR) at MARD is responsible for development and management of the irrigation sub-sector. The Provincial Departments of Agriculture and Rural Development (DARDs) are responsible for planning, operation and maintenance (O&M), monitoring and regulation of irrigation at the provincial level under the guidance of the Provincial People’s Committees (PPCs). O&M is financed through state and provincial budgets and carried out by Irrigation and Drainage Management Companies (IDMCs). Farmers are responsible for tertiary and on-farm level O&M. An increasing share of the IDMCs’ budgets is allocated to staff salaries, while less priority is given to maintenance. 7. While irrigated agriculture has been highly successful, modernization of the irrigation and drainage sector is needed in response to various drivers of change which include evolving markets, competition for resources (public finance, land and water) and climate change. Increased rice production has been achieved but consumption trends are shifting rapidly, requiring cropping changes and more flexible irrigation systems. Systematic changes are needed beyond infrastructure, including institutional changes and a more equitable, precise, and flexible service delivery. Irrigation and drainage improvement also needs to be accompanied by strong agricultural support services for farmers to maximize investment returns and promote sustainability. At present the participation of women in irrigation management and water users associations (WUAs) decision-making processes remains limited. 8. Agricultural sector restructuring, a new Water Law, and a forthcoming Law on Hydraulic Works present opportunities for irrigation modernization. MARD’s plan for restructuring the agricultural sector, approved by the Prime Minister in June 2013, calls for performance monitoring of returns on resources invested and the added value to the economy. The new Law on Water Resources stipulates that water must be allocated in an economically efficient manner in anticipation of growing pressures on water resources from increased urbanization, industrialization and climate change. Both these reforms require a more strategic, efficient and market-oriented approach. The new Law on Hydraulic Works (expected in 2015) will provide an opportunity to promote new concepts of modernization for the sector, especially with respect to institutions.

C. Higher-Level Objectives to which the Project Contributes

9. This project is consistent with the World Bank Vietnam Country Partnership Strategy (CPS) for 2012 to 2016 with respect to: (i) strengthening competitiveness through increased productivity and land-use efficiency; (ii) enhancing sustainability through improved water productivity; and (iii) broadening access to social and economic opportunity through improved access to water services. It also supports CPS themes by: (i) strengthening governance through enhanced accountability of irrigation service providers; (ii) increasing resilience to economic and climate-related shocks through promotion of climate-smart agriculture activities;

3

and (iii) affording priority to gender issues and active participation of men and women in the project. 10. The Government of Vietnam has requested World Bank support to the irrigation and drainage sub-sector. In support of MARD’s initiative of agricultural restructuring, the Government has requested the Bank to fund selected investments and institutional strengthening measures associated with irrigated agriculture in selected provinces located in the Central Coastal and the Northern Mountainous Regions.

11. This project is closely linked to the World Bank portfolio in Vietnam, including investment projects and analytical work. The World Bank currently has several active irrigation projects in Vietnam. Small-scale investments in irrigation are also included in the Second Northern Mountains Poverty Reduction Project. The Bank also supports policy and institutional development in the irrigation sector in the ongoing Climate Change Development Policy Operation series.

12. The long-term vision is to support the Government in developing programmatic, results-based approaches. This is predicated on the continued progression of institutional reforms, such as irrigation management transfer to WUAs and improvement of the performance of the IDMCs, as well as necessary improvements in the legal, financial and monitoring/reporting systems. Once these improvements are in place, Vietnam, like many other countries, would benefit from launching a large-scale irrigation and drainage modernization programme in which public-private partnerships could also play a role.

II. PROJECT DEVELOPMENT OBJECTIVES

A. PDO

13. The Project Development Objective (PDO) is to improve the sustainability of irrigated agricultural production systems in selected Central coastal and Northern mountains provinces in Vietnam.

B. Beneficiaries 14. The key beneficiaries of this project include farmers and other rural households, irrigation and drainage entities, and water users organizations/associations in the project areas. Through direct irrigation and drainage service investments (covering an area of 83,400 ha) and support to on-farm water management focused in these areas, it is estimated that 243,000 farm families will benefit from the project.

C. PDO-Level Results Indicators 15. The key PDO-level results indicators are (see Annex 1 for more details):

i) Area provided with improved irrigation and drainage services.

4

ii) Number of female and male water users provided with improved irrigation and drainage services.

iii) Number of farmers adopting improved agricultural practices.

iv) Operational WUAs created and/or strengthened.

III. PROJECT DESCRIPTION

A. Project Components

16. Geographic Focus: The proposed project will focus on two regions of Vietnam: the Central Coast Region (Thanh Hoa, Ha Tinh, Quang Tri, and Quang Nam provinces) and the Northern Mountainous Region (Ha Giang, Phu Tho, and Hoa Binh provinces). The provinces and their irrigation and drainage systems are representative of their respective regions and therefore lessons learned under this project can be used elsewhere in the regions. 17. Project Components: The project will have four components (detailed descriptions are provided in Annex 2): 18. Component 1: Improved Irrigation Water Management (US$9.5 million). This component will improve institutional capacity for modern, efficient, and accountable irrigation and drainage service delivery. The establishment of a financially self-reliant and transparent water services sector will enable reductions in recurring government expenditure on operation and maintenance of irrigation systems in all project provinces and at Ministry level. The component will include: (i) formation or strengthening of water user organizations/ associations and the application of the concept of irrigation management transfer; (ii) enhancing irrigation and drainage asset management and investment planning at provincial and scheme levels; (iii) updating and applying efficiency and performance standards for water user organizations and associations and IDMCs; and (iv) installation of supervisory, control and data acquisition systems for improved water management, with associated logistical support. 19. Component 2: Irrigation and Drainage Scheme Level Improvements (US$170.5 million). The poor condition of irrigation and drainage infrastructure in the project area is a major factor in poor water service delivery and low efficiency. This component represents the bulk of infrastructure investments in the project areas (83,400 ha). It will improve bulk water delivery to irrigation systems, service delivery, and management in the selected irrigation and drainage schemes through: (i) physical improvement of selected existing large, medium, and small-scale irrigation and drainage infrastructure such as canals, pumps, weirs, pipes, and control structures; (ii) improvement and protection works for existing dams; (iii) rehabilitation and construction of small multi-purpose village ponds; and (iv) construction of measuring devices.

20. Component 3: Support Services for Climate-Smart Agricultural Practices (US$23.0 million). This component will build on the improved irrigation infrastructure and water delivery activities realized under Component 2 to improve the productivity and quality of agriculture, increase farmers’ incomes, and reduce their vulnerability to adverse climatic events.

5

It will involve: (i) enhancing on-farm systems for crop intensification and diversification; (ii) provision of laser land-leveling services; (iii) advisory services to facilitate shifts towards feed and horticultural crop production; iv) identification and implementation of measures to reduce the water and environmental footprints of cropping systems; (v) stimulating modernization by promoting the use of sprinkler and drip irrigation systems; and (vi) application of remote sensing imagery for the monitoring of crop performance. Farmer Field Schools (FFSs) and other methods information will be disseminated and field demonstrations will be organized. Each province will undertake research projects on technical and policy-related issues to resolve specific problems which occur with regard to water management and agricultural production as a result of climate change. This research will be carried out during the first two years so that results can be applied during the last four years of project implementation. A part of this component will support MARD in information dissemination on climate smart agriculture and contribution to the national effort on Green-House Gases (GHG) emission from rice production. 21. Component 4: Project Management, Monitoring and Evaluation (US$7.0 million). This component supports the operating costs of the implementing agencies including MARD and the selected provinces/DARDs. It will finance: (a) incremental operating costs; (b) equipment and vehicles purchase; (c) monitoring and evaluation, including third-party monitoring; (d) staff training; (e) internal and external audits; and (f) various consultancies for the design, construction supervision, quality control support, a gender action plan, and safeguards compliance.

B. Project Financing

22. The lending instrument is Investment Project Financing (IPF) in the form of an IDA Credit on blend terms (25 years Final Maturity including a 5 year Grace Period). The total project cost over a six-year implementation period is estimated at US$210 million, of which the World Bank will provide US$180 million. The Government of Vietnam will provide the remaining US$30 million.

Table 1: Project Cost and Financing Plan

(US$ Million)

Project Project Cost and Component Cost

US$ million

Component 1: Improved Irrigation Water Management 9.5 Component 2: Irrigation and Drainage Scheme Level Improvements 170.5 Component 3: Support Services for Climate-Smart Agricultural Practices 23 Component 4: Project Management, Monitoring & Evaluation 7

Total project cost (including physical and price contingencies) 210 Government of Vietnam (14%) 30

World Bank (86%) 180

6

C. Lessons Learned and Reflected in the Project Design

23. The project builds on international irrigation, drainage and agricultural sector experience, gained notably from the recently completed Vietnam Water Resources Assistance Project (VWRAP), and from the findings of the recent Technical Assistance (TA) on the Irrigated Agriculture and Irrigation Systems Management Reform. The project design also recognizes Vietnam’s irrigated agriculture sector’s vulnerability to climate change. 24. Irrigation and drainage improvement also needs strong agricultural support services to maximize investment returns and promote sustainability. To maintain productivity in the face of climate change impacts, and to diversify production systems in line with changing economic conditions and demands, farmers need to acquire and apply knowledge about improved agronomic and risk management practices.

25. Irrigation management and infrastructure improvements must go hand in hand. Extensive international experience has demonstrated that irrigation modernization is not merely a matter of adding measurement and control structures, but also requires a mindset change: irrigation services for farmers, and existing institutional arrangements and policies must be systematically analyzed and redefined. Therefore, project design is based on a combination of infrastructure improvement and management solutions (e.g. improvements in monitoring, planning, institutional capacity and operation). 26. Transparency and accountability are core elements of performance management and service delivery. There is a need to strengthen accountability and governance on the side of the providers (IDMCs) as well as the recipients (farmers) of the service. To overcome chronic problems of poor maintenance and inadequate service delivery in irrigation schemes, the aforementioned TA emphasized the importance of having a clear agreement between IDMCs, WUAs and farmers about respective roles and responsibilities, proper financing arrangements2, and transparency and accountability in monitoring the agreement3.

27. IDMC business plans can be an effective tool to improve water delivery. The IDMC business plans can clarify performance indicators, and specify methods and targets for improving service delivery, human resources, asset management, cooperation with WUAs, and financial accountability.

28. The Government’s decentralization of project planning and supervising has improved irrigation performance. The project will further strengthen this decentralized approach both at scheme level and at field level by supporting the formation of WUAs.

29. Scaling up local knowledge and initiatives on sustainable farming practices is essential. A close linkage between farmers and researchers has been fostered under many previous initiatives and has led to an increased capacity, nationally and locally, to design and guide the implementation of climate-smart agriculture. This project will engage with local 2 A Government Decree 115/2008/ND-CP in 2008 exempted most farmers from paying fees for services provided by the IDMCs. 3 The deficiencies of the current irrigation monitoring system have been acknowledge in MARD’s strategy Restructuring the Agriculture Sector towards Greater Added value and Sustainable Development (August 2012).

7

research institutes and universities to support the (continued) application by WUAs/organizations of sustainable farming practices and techniques in project areas.

IV. IMPLEMENTATION

A. Institutional and Implementation Arrangements.

30. MARD will be the executing agency for the project. Through previous projects, MARD has built substantial capacity and knowledge about Bank procedures at the sectoral and project levels. 31. At Ministry level the Vice-Minister for Irrigation will oversee project implementation, provide policy and strategy related guidance. Within MARD, the Vice-Minister for Irrigation is supported by the Department of Construction Management (DCM) and the Directorate of Water Resources (DWR) which are mandated to provide policy, planning, and management oversight of irrigation schemes. The Department of Crop Production and of Plant Protection (DCPPP) will be responsible for overseeing the implementation of Component 3. To ensure smooth implementation a clear division of responsibilities amongst the various implementation departments within MARD has been defined and is presented in the Project Operational Manual (POM). 32. The project owner would be MARD’s Central Project Office (CPO) which manages all ODA-financed water resources sector projects. CPO staff, which includes managers, engineers, safeguards specialists, procurement specialists, and financial management specialists, are familiar with both Governmental and Bank requirements. A Central Project Management Unit (CPMU) has been established within CPO to provide day-to-day project management and coordination support between the implementation agencies, the Bank, provincial authorities and other relevant departments of MARD. This arrangement is in line with Government Decree 38 on management and utilization of ODA projects/programs. 33. The key principles of project management are as follows:

• Full decentralization and empowerment will be granted by MARD and the provincial authorities to the appropriate project implementing agencies at both the project and sub-project levels.

• MARD and CPO will provide supervision, monitoring and technical assistance support to the project at all levels involved. They will also participate in the Bank’s regular implementation support missions throughout project implementation.

34. Implementation of the subprojects will take place at the provincial level though the existing Provincial Project Management Units (PPMUs). The PPMUs will be composed primarily of staff from the provincial DARDs and the Irrigation and Drainage Management

8

Companies (IDMCs), under the authority of the Provincial People’s Committees (PPCs)4. Operating under the overall MARD project management framework, the PPMUs will be responsible for launching the calls for proposals, conducting proposal screening and short-listing, managing procurement for the subproject, supervising construction activities and making payments to contractors. MARD’s CPMU will oversee management of the project-designated account, will oversee the procurement of ICB and QCBS contracts, and will ensure safeguards compliance. The CPMU will report to IDA and MARD as appropriate.

B. Results Monitoring and Evaluation (M&E)

35. The project’s M&E system will focus on tracking and assessing project implementation progress, outputs, outcomes and impacts across the four components.

36. The CPMU will be responsible for monitoring implementation progress (see Annex 1: Project Results and Monitoring Framework). During implementation, the CPMU will recruit dedicated staff to monitor project progress and update the monitoring indicators. Reports on progress, financial and procurement information, as well as updated indicators will be provided to the Bank on a semi-annual basis.

37. An external third-party agency, such as a university or research institute, will be responsible for evaluating the project’s impact on beneficiaries. For this purpose, funding is included to undertake baseline and final-year surveys, including a provision for any thematic studies that the Government and the Bank jointly regard as relevant, justified and supportive of Components 1, 2, and 3. As an important part of M&E the project will utilize remote sensing studies on an experimental basis to assess irrigated areas, water volume consumed by crops (actual evapotranspiration), and agricultural production (yields).

38. Prior to the mid-term review, the CPMU will provide the Bank with a summary project progress report, updated results indicators (as in Annex 1), updated project cost estimates, and plans for completion. The CPMU will also prepare environmental and social safeguards implementation reports.

C. Sustainability 39. Sustainability is a core project principle and has been factored into the project design through the following features: 40. Commitment to institutional reform (related to Component 1): Long-term sustainability of the project’s benefits depends primarily on the introduction of institutional reforms supported by the provincial authorities under MARD oversight. The Government and MARD recognize the need to develop appropriate legal codes and guides to improve public and private sector governance, management and financing of irrigation and drainage systems. Specifically, following the enactment of the Water Resources Law in January 2013, MARD is drafting the Law on Hydraulic Works. The provisions of the current draft include the collection

4 Except for Ha Tinh province where implementation responsibility rests with the South-Ha Tinh Irrigation and Drainage Management Company acting through its PPMU

9

of baseline data on planning, financing, management and institutional reform. The Government’s commitment to institutional reform is evident through the project’s Participatory Irrigation Management (PIM) programs which will be established in each of the project provinces to help provide a forum for increased farmer interaction with the IDMCs. 41. Irrigated agriculture investments (related to Component 2 and 3): Close engagement of Water Users Organizations (WUOs), WUAs and farmers as well as the Government is necessary to ensure adequate human and financial resources for operation and maintenance of the investments, which is vital for future sustainability. All activities, including the major infrastructure works and agriculture packages, are designed to involve stakeholder participation. For instance, the designs for the rehabilitation of the infrastructure works will involve extensive community consultations, involving both the Women’s Union and Farmer’s Union. This approach is considered critical to ensuring that the investment impacts are long-lasting. 42. Service-delivery and physical asset sustainability. The project creates incentives and provides support for good asset maintenance and management, including assets procured through the project. With regard to institutional capacity, the PDO reflects the overall project focus on building viable irrigation and drainage schemes and improved capacity for service delivery. 43. Borrower’s commitment and ownership: The Government’s commitment to the project is evident through the resources it has allocated to the project such as: (i) sufficient budget and staff provided to various divisions under MARD to undertake preparatory work and to ensure a smooth transition into project implementation; and (ii) the GOV’s agreement to finance 14% of the total project cost.

V. KEY RISKS AND MITIGATION MEASURES

A. Risk Ratings Summary Table

Stakeholder Risk M

Implementing Agency Risk

- Capacity M

- Governance M

Project Risk

- Design M

- Social and Environmental M

- Program and Donor NA

- Delivery Monitoring and Sustainability M

Overall Implementation Risk M

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B. Overall Risk Rating Explanation

44. The overall risk rating for this project is moderate given the high level of ownership displayed by the Government, WUOs, and farmers, as well as the experience of the Government in implementing Bank-funded projects. Various consultations with a number of Governmental departments and stakeholders have been conducted since the concept stage to build ownership of the project at all levels. These consultations will continue during implementation. MARD will continue to oversee and guide the implementation and monitoring of all project activities in order to ensure synergy and coordination amongst activities and relevant agencies. The risks identified and mitigation measures proposed are detailed in Annex 4: the Operational Risk Assessment Framework (ORAF).

VI. APPRAISAL SUMMARY

A. Economic and Financial Analyses

45. Project Benefits: The project will improve the water services in each sub-project command area, resulting in a more reliable, flexible, equitable, and responsive water delivery to users, including farmers. The irrigation modernization component is expected to increase the land area under full gravity-serviced irrigation, while reducing the non-irrigated and/or unreliably irrigated land area. Improved water supply and irrigation will also provide farmers with the opportunity to intensify and/or diversify their present cropping patterns. For example, an increased diversification into higher-value crops such as peanuts and soy beans is expected to not only provide farm families with increased income but also improve soil fertility and reduce pest and disease incidence by breaking the cycle of grain cropping. 46. The main benefits will be to agricultural production in the command area, and most of the benefits will accrue as increases in crop production arising from the conversion from rain-fed to irrigated agriculture, or from improvements in output of existing irrigated areas resulting from a more reliable and timely available water supply. 47. Economic Rate of Return: The analysis indicates that irrigation rehabilitation is economically viable in all the regions, with internal economic rates of return (ERRs) ranging from 14 to 24 percent as detailed in Annex 6. The overall ERR is calculated at 18 percent with a net present value at a 10 percent discount rate of US$66.0 million (VDN1,386 billion). These results are robust across a range of sensitivity tests relating to changes in project cost and benefit assumptions. 48. Financial Analysis. The farm-level analysis indicates that annual net margins for a typical 0.34 ha fully gravity-irrigated farm increases by around VND 1.84 million or US$88 annually at full project development. For the partially irrigated and pumped 0.34 ha farm the increase is VND 2.2 million or US$ 107 annually. Overall, about 243,000 families will benefit directly from improved irrigation and drainage. The irrigation improvement works would give the greatest benefit to farms at the lower end of canal systems which presently suffer from inadequate irrigation or flooding, and to farms that are currently only rain-fed. These areas are

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home to the poorest families in the schemes and the project is therefore inherently poverty-targeted.

49. Fiscal Impact. The project is expected to have a positive impact in reducing the Government’s O&M costs in several ways, including: (i) conversion of schemes from (expensive) pumped to (cheaper) gravity irrigation; (ii) support to formation and strengthening of WUOs and WUAs to enable them to take over an increased share of the O&M burden currently resting on the IDMCs; (iii) reduction in O&M costs as a result of canal lining and other improvements as well as expansion of the scheme command areas; and (iv) improvement in overall management efficiency of MARD and the IDMCs. In addition to these cost reduction benefits there would be an increase in tax revenue as a result of the increased agricultural production.

50. The project will reduce the pump-irrigated area from 17,524 ha to only 2,159 ha in the project areas. Associated pumping costs currently being paid by the farmers would be reduced by 88 percent. In monetary terms, this is equivalent to a reduction from VND 7.010 billion (US$ 0.334 million) to VND 0.864 billion (US$ 0.041 million) per annum. Savings in the pumping costs would reduce the burden on the Government of subsidies being offered to the farmers. 51. The above cost savings and increased tax revenue from most schemes would likely be sufficient to cover debt servicing at the provincial level, assuming continued government subsidies to the IDMCs. Therefore, the overall fiscal impact of the project is expected to be generally neutral.

B. Technical

52. The project will introduce innovations in the selected project provinces. These will include: (i) using the global best practice of climate-smart agriculture to ensure that agricultural and water productivity are maximized; (ii) (continued) support to the state and provincial agricultural and water agencies to enhance agricultural modernization plans; (iii) using the project framework to help facilitate coordination across various programs and departments; and (iv) introducing better water governance through improving information, water users participation and accountability for the irrigation and drainage service delivery. 53. Improvement of irrigation and drainage schemes will focus on structural and non-structural measures. There is a need to improve both the physical systems and the institutional arrangements for system operation. The physical works will be implemented by reputable contractors under adequate day-to-day supervision by consultants appointed by DARD. Similar irrigation projects have been carried out successfully, which gives support to the expectation that the project works can be implemented without major difficulties.

54. The project will develop climate-smart agriculture which implies an effective and efficient use of the irrigation and drainage systems. The effective adoption of climate-smart practices will require intensive awareness-building and training through farmer-field schools, and learning-by-doing approaches.

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55. The project proposes implementation of modern agricultural practices for improving both technical and service delivery. It includes supporting farmers in adopting systems of rice intensification (SRI) and crop diversification, introducing and promoting drip and sprinkler irrigation systems, integrated pest management, improved fertilizer use based on soil tests, and the utilization of crop residues to reduce emission. 56. The project includes the conversion of irrigated areas from pumped irrigation to gravity. One of the large-scale irrigation and drainage schemes will be converted to gravity by the supply of water from a recently completed reservoir. Appropriate modern technologies (such as turbine pumps and low-cost drip irrigation) will be introduced in some areas within the schemes.

C. Financial Management

57. The CPMU will be responsible for financial management (FM) at a central level. Key financial management personnel will have experience in managing Bank projects. The financial management function in the provinces will be performed by existing provincial PPMUs except in the two new provinces Ha Giang and Hoa Binh where new PPMUs will be established. These arrangements meet the Bank’s minimum financial management requirements at both the central and provincial level.

58. Fund flow will be channeled through the Designated Account (DA) and provincial project accounts opened at commercial banks. There will be one segregated DA denominated in US$ dollars maintained by CPMU for the whole project. Each of the provinces will maintain a provincial project account in VND at a commercial bank in the province to receive funds from the DA for the activities to be implemented by the provinces.

59. There will be a single auditor, hired by CPMU. CPMU will consolidate all provincial financial statements to provide one overall project financial statement, to be audited and submitted to the Bank annually within six months after the year-end. Interim Financial Reporting (IFR) will be done on a semester basis to be submitted to the Bank within 45 days after the end of each semester.

D. Procurement

60. The CPMU will lead and coordinate the procurement activities for the whole project, provide guidance to the PPMUs on all procurement-related aspects, and monitor the procurement activities to be carried out by the PPMUs, while the PPMUs will be responsible for procurement within their respective provinces. The capacity of the CPMU and PPMUs has been assessed by reviewing the project organization structure and functions, past experience of implementing agencies, staff skills, quality and adequacy of supporting and control systems, and the legal and regulatory aspects. The CPMU and several PPMUs are familiar with the Bank’s procurement procedures. However, there is a risk that procurement delays occur at all stages of the procurement cycle including planning, preparation of procurement documents, bid evaluation, approval of the bid evaluation report and award recommendation and contract management. 61. Procurement plan and readiness for implementation. The procurement plan for activities to be taken up during the first 18 months of project implementation has been agreed.

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The procurement of major civil works, goods and consultancies has been identified. Detailed engineering designs and bidding documents for over 35,000 ha, or more than 42 percent of the project area, have been completed. More details on the procurement arrangements are provided in Annex 3.

E. Social (including Safeguards)

62. The project promotes transparency and informed participation of the target beneficiaries, encouraging farmer participation and supporting the realization of the project’s expected broad range of positive social impacts including reduced time and efforts needed to irrigate fields and to maintain irrigation canals reduced conflicts as a result of better on-farm water management practices and more reliable irrigation services, improved access to water at tail-ends of the canals, and increased participation of women in water users organizations and associations and on-farm irrigation, resulting from less physically demanding operations at the farm outlet. Agricultural productivity and resilience to climate variability and extreme weather events are expected to increase with the improvement of irrigation and drainage infrastructure, the promotion of enhanced climate-smart practices, and the building of stakeholders’ capacity. 63. A Social Assessment (SA) was carried out during project preparation to: (a) explore potential positive and negative impacts of the project to inform the project design and impact mitigation measures; and (b) to consult with ethnic minority peoples present in the project area in accordance with OP 4.10. The SA confirmed that the overall social impact of the project is positive, given its aim to strengthen national, provincial, and local capacities for better irrigation management. However, some negative impacts, primarily related to acquisition of land to allow for rehabilitation of existing infrastructure, is unavoidable. In some sub-project areas, land acquisition is expected to affect ethnic minority households. The results of the SA are set out in Annex 7 and summarized as follows: 64. Loss of land would affect some 4,500 households, but 95 percent of these would lose only a small strip beside the canal. Affected households number 220, of which 13 may require relocation. Some 97 ha would need to be permanently acquired, while 105 ha would need to be temporarily acquired during construction. 65. Adverse impact on ethnic minority peoples is primarily due to land acquisition to allow rehabilitation of the existing infrastructure. However, for them, too, the project will lead to improved water availability. The project design has furthermore kept the number of affected households to a minimum, project preparation included full consultation, and the ethnic minority peoples have indicated community support for the project and will be fully involved in PIM.

66. Involuntary Resettlement (OP 4.12) was triggered due to the need for land acquisition and a Resettlement Policy Framework (RPF) was prepared to guide Resettlement Action Plans (RAP). 67. Indigenous Peoples (OP 4.10) was triggered and an Ethnic Minority Policy Framework (EMPF) prepared. As detailed in Annex 7, the EMPF was developed to ensure ethnic minorities have an opportunity to receive socioeconomic benefits from the project in a way that is culturally

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appropriate to them, and to provide guidance on preparation of Ethnic Minority Development Plans (EMDP) for sub-projects to be identified during project implementation. 68. Social safeguards implementation: The implementation of the RAPs and EMDPs will be the responsibility of the respective PPMUs. Land acquisition will be financed by the Government whereas the budget for EMDP will be funded by the Bank. 69. Gender mainstreaming: Females in the project area are generally at a disadvantage. Although equality laws have been passed, men still dominate most aspects affecting agricultural development, including implementing processes for improving productivity. Men dominate at meetings where landowners congregate, including extension training. Men also dominate in water management since they are considered more able to resolve disputes and technical problems. In community organizations about 30 percent of the members are women, but they mostly hold the lower clerical-type positions. The Gender Action Plan (GAP) has been developed during project preparation, and it has included consultation with relevant governmental mass organizations at the central level (Central Women’s Union and Farmers’ Union). The GAP aims to change the ideas, attitudes and behaviors of the community with regard to full participation of women in project activities, which will benefit the position of women in the project areas. The GAP will be implemented and monitored as part of Component 4.

70. Public Consultations and Information Disclosure: A series of public consultations have been conducted in accordance with Bank policy requirements and national laws. Before conducting public consultations, the relevant project documents have been disseminated to project-affected groups and local Non-Governmental Organizations (NGOs). The Vietnamese and English versions of these documents were disclosed at the Bank’s InfoShop and in Vietnam during the period from June 19 to July 16, 2013.

F. Environment (including Safeguards)

71. The overall environmental impacts of the project are expected to be positive. The improvement and upgrading of irrigation and drainage infrastructure and on-farm irrigation and drainage will lead to more efficient and productive use of irrigation water and increased crop yields. The dissemination of irrigation technology and the strengthening of WUAs and local farmers’ organizations will further improve overall water and land management at the local level. For the purposes of O.P. 4.01 on Environmental Assessment (EA), the project has been classified as Category B, given that no significant, irreversible or long-term adverse environmental impacts are anticipated and that any identified adverse impacts can be effectively addressed through appropriate preventative or mitigating measures. The project could result in intensifying crop production in terms of vertical expansion, which could increase the residual pesticide/fertilizer load per hectare in some project areas. These and other environmental issues were examined closely during the Environmental Impact Assessment (EIA) and are addressed in the Environmental Management Plan (EMP). The CPMU will be responsible for implementation of the EMP, whereas the day-to-day management of the prevention/ mitigation activities will be undertaken by PPMUs. The EMP addresses the environmental impacts identified by the EIA through a combination of preventative actions and mitigation measures, including environmental monitoring/benchmarking and institutional capacity building.

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72. Further details are provided in Annex 7. The project triggers five environmental safeguard policies, namely: • OP/BP 4.01(Environmental Assessment): The project has civil works for irrigation and

drainage schemes. An Environmental and Social Management Framework (ESMF) has been prepared for the project and Environmental Management Plans (EMP) and Environmental Codes of Practices (ECoP) have also been prepared for sub-projects in accordance with Bank safeguards policies.

• OP/BP 4.11 (Physical Cultural Resources): Relocation of 12 graves in Thanh Hoa sub-

project triggered OP/BP 4.11. Mitigation measures have been included in the EMP for this sub-project. Also, a “chance find procedures” will be included in EMP and ECOP in case any unexpected cultural resources are found during construction.

• OP/BP 4.09 (Pest Management): The project will not finance the purchase of pesticides but

with the increase in irrigated land area to 83,400 ha the amount of agricultural chemicals including fertilizers and pesticides will increase. An Integrated Pest Management Plan (IPMP) has been prepared by MARD as part of the ESMF.

• OP/BP 4.37(Safety of Dams): A Dam Safety Framework has been prepared to comply with

the requirements on dam safety.

• OP/BP 7.50 (International Waterways): The sub-project to improve the South Ma scheme will draw water from the Cua Dat Reservoir, located on the transboundary Chu River. This project falls within the exception provided for in paragraph 7(a) of OP 7.50.

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Annex 1: Results Framework and Monitoring

Irrigated Agriculture Improvement Project

.

Project Development Objectives

The Project Development Objective is to improve the sustainability of irrigated agricultural production systems in selected provinces in the Central Coastal and Northern Mountainous Regions of Vietnam. . Project Development Objective Indicators

Cumulative Target Values

Frequency Data Source/ Methodology

Responsibility for Data Collection

Description (Indicator Definition)

Indicator Name Core Unit of Measure

Baseline YR1

YR2 YR3

YR4

YR5 YR6

Direct project beneficiaries

HHs 0 0 0 100,200 165,300 210,800 243,000 Yearly Project

reporting PMU

Area provided with irrigation and drainage services - improved

Hectare

0 0 5,450 31,760 57,520 75,370 83,400 Yearly

IDMC records, Third party supervision consultancy

records

Not including area for aquaculture

Water users provided with improved irrigation and drainage services

Number 0 0 0 252,900 450,800 633,900 674,800 Yearly

Water users provided with improved irrigation and

Number (Female)

0 0 0 125,900 224,600 316,000 336,700 Yearly

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drainage services

Water users provided with improved irrigation and drainage services

Number (Male)

0 0 0 127,000 226,200 317,900 338,100 Yearly

Farmers in scheme area adopting improved production techniques

HHs Number 0 0 1,000 3,950 7,650 11,950 15,700 Seasonal Project report PPMU

Techniques promoted for adoption in each location need to fir the local conditions.

Operational water users association created and/or strengthened

Number 0

0

2

5

10

20

20

Baseline, mid-term, yearly, and

final

WUA records, IDMC

records, WUA support

consultancy records, impact

evaluation surveys

Intermediate Results Indicators

Indicator Name Core Unit of Measure

Baseline

Cumulative Target Values Data Source/ Methodology

Responsibility for

Data Collection

Description (indicator definition) YR1 YR2 YR3 YR4 YR5 YR6 Frequency

Component 1: Improved irrigation water management

Each province develops and implements a five-year, and

Provincial plans

Existing plans not

comprehensive,

3 3 7 7 7 7

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annual modernized irrigated agriculture plans

partially implement

ed

Improved performance of IDMC

Score cards To be

determined Yearly

IDMC annual reports

DARD or Consultant

The score card will be based on few easily measured indicators, weighted to provide an overall score

WUAs - PIM agreements established and implemented

Number of service contracts

0

0

2

5

10

20

20 Yearly

IDMC annual reports

DARD or Consultant

Percentage increase in WUAs assessing service delivery by IDMC as satisfactory

percent of WUAs

0 0 0 30 40 50 90 Seasonal

Seasonal interviews with WUO

officer

DARD or Consultant

Component 2: Irrigation and drainage scheme level improvement Area provided with irrigation and drainage services - Improved

Hectare 0 0 5,451 31,763 57,515 75,368 83,425

Increase in crop yields in project areas

- Paddy (winter-spring)

0 - - 0.19 0.34 0.47 0.54

Remote sensing data, ground truth

data

Paddy 0 - - 0.18 0.35 0.49 0.57

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(summer-autumn)

collection, impact

evaluation surveys

Maize 0 - - 0.11 0.19 0.26 0.29

Increase in irrigation intensity

% 0 100 107 136 151 175 205

Component 3: Support services for climate smart agriculture practices

Seasonal Farmers Field School established

Number 0 35 105 245 385 525 670 Seasonal Project report PPMU

Area under ICM cultivation5 Hectare 0 0 800 1,500 5,000 12,000 20,000 Seasonal Project report PPMU ICM6

Area under drip irrigation Hectare 0 0 50 110 260 500 698 Seasonal Project report PPMU

New cropping system technologies

Number 0 0 28 28 28 28 28 Yearly Project report PPMU

Systems will have better profits and reduce negative impacts on the environment due to adoption of ICM.

5 Area under ICM cultivation include: appropriate varieties; good quality seed/seedlings; appropriate plant density; proper management of plants (fertilization, irrigation, weeding); integrated pest management (IPM); appropriate harvest and post-harvest technique; and proper management of waste. 6 ICM is the complete technique package covering all the production steps from preparation to harvest and post-harvest. Depending on the local conditions, ICM can be adopted completely or only partly. However, in any case IPM and appropriate “balanced fertilizer” regimes will need to be followed.

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Annex 2: Detailed Project Description

Irrigated Agriculture Improvement Project Project Components 1. The project will have four components with a total investment of US$210 million.

Project Project Cost and Component Cost

US$ million

Component 1: Improved Irrigation Water Management 9.5

1.1. Operationalizing the government regulations and guides

1.2. Strengthening irrigation and drainage management companies

1.3. Strengthening the knowledge base for service contracts, performance assessment and introduction of innovative technology and management tools

1.4. Strengthening Water Users Organizations and Associations Component 2: Irrigation and Drainage Scheme Level Improvements 170.5 1. Thanh Hoa province: South Ma irrigation and drainage scheme

2. Ha Tinh province: Ke Go and Rac river irrigation and drainage schemes 3. Quang Nam province: Phu Ninh and Khe Tan irrigation and drainage schemes 4. Hoa Binh province: Medium and Small scale irrigation and drainage schemes 5. Phu Tho province: Tam Nong and Thanh Thuy irrigation and drainage schemes 6. Quang Tri province: Medium scale irrigation and drainage schemes 7. Ha Giang province: Small scale irrigation and village ponds Component 3: Support Services for Climate-Smart Agricultural Practices 23.0

Component 4: Project Management, Monitoring and Evaluation 7.0 Total project cost (including physical and price contingencies) 210.0 Government of Vietnam (14%) 30.0 World Bank (84%) 180.0

Component 1: Improved Irrigation Water Management (Estimated Cost: US$9.5 million, including contingencies). 2. The main objectives of the project are to improve the performance of irrigation management services in terms of productivity, equity and sustainability. The project aims to improve agricultural productivity, adapt agriculture to climate change, protect the environment, and enhance people’s standards of living. Component 1 focuses on a number of the immediate interventions designed to promote institutional strengthening and develop good governance, management and financing of irrigation and drainage systems. Strengthened capacity of governmental institutions will allow for the development of effective irrigation and water services policies, thus contributing to the project’s long-term objectives.

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3. Government Regulations and Guides. The development of a number of regulations (circulars or decisions) and guides will be supported. This will include assessments, M&E, studies, stakeholder consultations, and workshops for the preparation and finalization of these regulations and guides.

4. Irrigation and Drainage Management Companies (IDMCs) and Public-Private Partnerships (PPPs). This activity focuses on strengthening the capacity of IDMCs to improve irrigation and drainage services; to manage demand; to develop business plans aimed to strengthen professionalism and autonomy; to conduct research on the application of PPPs in the irrigation sector; and to prepare the annual, mid-term, and final reports for the sub-component. 5. Technical and Economic Norms, Service Contracts, Performance Assessment and Introduction of Innovative Technology and Management Tools. This activity will support: the review and updating of the technical and economic performance standards of the IDMCs and WUOs for irrigation O&M and management at the provincial level; the development of criteria to systematically assess the efficiency and operational performance of service contracts; the preparation of a guide for adoption of technical and economic norms for Irrigation & Drainage (I&D) systems; the implementation of I&D service contracts between the IDMCs and WUAs; the development and implementation of a Geographic Information System (GIS) database with information on irrigation and drainage structures to aid the development and implementation of service contracts; the installation of SCADA systems at key regulating sites on some schemes, including transmitters and data control centers; the provision of regulators and gauging structures at the interface between WUAs and IDMC zones; the development of irrigation scheme maps that include performance data used to support decentralization of management; the development and implementation of databases for asset management and service contract performance; and the preparation of the annual, mid-term, and final reports on the activities. 6. Development of WUAs and Irrigation Management Transfer (IMT). This activity aims to support the establishment of new WUAs. The focus will be on selecting water users organizations that can be federated to form WUAs at secondary canal levels. The activities have been designed to link with sub-components 1, 2 and 3 through reconfiguration of the institutional arrangements in large and medium size schemes. The activities will include: (i) collect an inventory of the existing types of WUOs in the project provinces and identify the locations where new WUAs can be formed; (ii) identify locations where technical/managerial improvements are needed; (iii) explore incentives and systems to increase the rate of water user payments of the Irrigation Service Fee (ISF); (iv) prepare action plans to form WUAs, and prepare IMT to selected WUAs; (v) introduce performance-based monitoring by WUAs; and (vi) preparation of annual, mid-term, and final reports on this sub-component. • Since the Irrigation and Drainage Management Companies (IDMCs) have the responsibility

for operation and maintenance of the headworks and main canals and for the supply of water to the WUAs, irrigation service agreements will be prepared, implemented and monitored during implementation. In provinces where an IDMC is not appointed, the irrigation service agreement will be between the Provincial Peoples Committee (PPC) and the WUA.

• More than 20 WUAs will be established or strengthened during project implementation.

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7. Funds are provided for training of WUA members on aspects including technical, management and operation processes, all aimed to improve the capacity of the WUAs to manage the available water resources in an efficient manner.

Component 2: Irrigation and Drainage Scheme Level Improvements (Estimated cost: US$170.5 million, including contingencies). 8. This component will support infrastructure improvement investments for a total command area of 83,400 ha, including the upgrading and modernization of selected existing irrigation and drainage projects in the project area and provisions for some small multi-purpose village ponds (to serve livestock, irrigation and drinking water supply) in one of the seven provinces. Increasing the numbers of water-control structures will improve the capacity for effective and efficient management of the water resources. On all schemes the existing infrastructure, including canals, pumps, weirs, and surface drains, will be upgraded and/ or modernized. Indicators showing the present situation in some of the project areas are shown in the following table.

Indicators Phu Ninh South Ma Ke Go Rac River Khe Tan

Designed Command Area (ha) 19,427 11,525 21,538 8,532 3,500 Actual Area Irrigated (5 years average) (ha)

11,287 6,586 14,735

4,182 2,105

Design area irrigated (%) 0.6 0.6 0.7 0.5 0.6 Annual irrigation water supply (m3/ha)

26,113 18,106 22,116 35,530 21,344

Actual Water Delivery Service by the Main Canals to the Second-level Canals

Average Average Average Average Average

Actual Water Delivery Service to farms Poor Poor Poor Poor Poor

I&D Infrastructure in good condition (%) 50% 60% 50% 50% 50% Command area with functioning drainage (%)

35% 40% 35% 35% 35%

9. Works include: remodeling canal systems to be hydraulically more efficient, replacing primary, secondary or tertiary sluice gates with more effective and efficient options; constructing small bridges; strengthening canal banks; upgrading and modernizing energy-efficient turbine-pumps and associated weirs with appurtenant water delivery pipelines; refurbishing existing infrastructure; and modernizing and increasing the efficiency of major drainage pumping plants.

10. With all the project schemes reliant on dams, improving dam safety and ensuring that appropriate monitoring systems are in place, is essential. Funds will be allocated for each province to adequately upgrade existing dams and appurtenant works to the standards now established by the Dam Safety Unit, including appointment of a POE to review all requirements specified in the Dam Safety Framework completed for the project.

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11. If a mid-term review concludes that works are significantly lagging and/or institutional reforms such as irrigation management transfer are not progressing at an adequate pace, funds could be reallocated to a better-performing province.

12. Detailed descriptions of the schemes are summarized below:

13. Phu Ninh Irrigation and Drainage scheme: The area under irrigation on this large scheme will be increased from the present 11,287 ha to its original designed area of 19,427 ha by upgrading the main and other canals and related works including rehabilitation of eight (8) small electrical pumping stations along the North main canal, ensuring water supplies to the tail end of the system. The extension of one primary canal N30 across the Ba Ren River will increase the command area by about 1,800 ha, providing gravity irrigation to that area, and allowing the decommissioning of other eight existing pump stations in this expanded area. This area had declining productivity due to intrusion of saline water into the river water as a result of climate change. 14. Southern Ma River scheme: This entire scheme will be converted by the project from a pumped scheme, drawing water from the Ma River, to a fully gravity-fed irrigation scheme, making it particularly energy-efficient. This scheme will use water from the recently completed Cha Dat Reservoir. About 80 pump stations will be decommissioned, including the Southern Ma Pumping Station, and the conversion will save more than 6 million kWh per year. 15. Improvement of small irrigation and drainage schemes in Hoa Binh: The project will improve small irrigation and drainage schemes covering about 4,266 ha scattered in the province. Some schemes include upgrading the pump-turbines that raise water from rivers level with the project areas. On other schemes project works will resolve problems such as inadequate spillway capacity, poor construction quality control, and inappropriate structural design, so as to ensure stability and longevity of the structures. 16. Ke Go Irrigation and Drainage scheme in Ha Tinh Province: This scheme will be improved by further upgrading of the canal system, including selective canal lining, introduction of additional canal measurement structures. All these actions will provide IDMC with tools to improve overall water management and ensure that the irrigated area increases from 11,900 ha to the originally designed area of 21,563ha. 17. Rac River Irrigation and Drainage Scheme in Ha Tinh Province: The project will upgrade the capacity of the canal system and the regulating structures for the full original design area of 8,523 ha (an increase of more than 3,600ha), including canal lining and the introduction of flow measurement structures. 18. Khe Tan Irrigation and Drainage scheme in Quang Nam Province: Only about 2,000 ha of the original design area of 3,500 ha functions at present. The project will upgrade the main and secondary canals, providing canal lining, regulators and other protection works to bring the original full command area under gravity irrigation.

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19. Truc Kinh Irrigation and Drainage schemes in Quang Tri Province: A major part of the works on this scheme concerns the safety of the dam. The project will upgrade the main dam section and strengthen the spillways to pass the maximum design flood. In addition, the intake electrical valve operators would be replaced, and the overall power system for gate and headworks operation would be repaired. The canal network which covers an area of 2,350 ha will be upgraded, including selective canal lining works, rehabilitation of surface drainage, upgrading regulators and off-takes and installing additional measuring structures.

20. La Nga Irrigation and Drainage scheme in Quang Tri Province: The project will upgrade the main dam section and strengthen the spillways to pass the maximum design flood. In addition monitoring equipment for seepage and subsidence will be installed. Replacing the existing Intake with electrical-operational system installed and the overall power system for gate and headworks operation will be upgraded. The scheme covers an area of 2,000 ha. The improvement works will include selective canal lining, and provision of regulators, siphons and measuring weirs and control structures, to allow efficient and effective management of irrigation water. Existing main drains will be reinstated, and gates and salinity prevention sluices will be upgraded. 21. Ha Thuong Irrigation and Drainage scheme in Quang Tri Province: The upgrading of this 1.050 ha scheme includes stabilizing canal banks by selective lining, and provision of measuring weirs, control structures. 22. Tam Nong Irrigation and Drainage scheme in Phu Tho Province: Drainage infrastructure will be provided to benefit an area of 3,840 haof agricultural (partly irrigated) area. Drainage pumps will remove the excess rainwaters and flood flows, and the irrigation and drainage canals and water control structures serving the irrigated area will be improved. 23. Thanh Thuy Irrigation and Drainage scheme in Phu Tho Province: Drainage infrastructure will be provided to service an area of 2,122 ha. The drainage pumps will remove the excess rainwaters and flood flows. The pumping stations will remove up to 20m3/sec with a maximum head of 7.2 m. Rehabilitation of five (5) irrigation small pumping stations, two (2) transportation bridges and 3.5 km. irrigation canal lining. 24. Small-Scale Irrigation in Ha Giang Province including village ponds: Multi-purpose village ponds will be constructed. These rectangular tanks have a capacity generally between 3,000 to 5,000 m3 with a maximum depth of 3m. Purposes are: (i) to provide safe drinking water for rural communities in areas which experience droughts and hence face substantial difficulties in satisfying daily water requirements; (ii) to provide water for livestock and poultry to enable a major part of their incomes; and (iii) to provide water for irrigation of cultivated areas of between 3 – 14 ha, which contributes to reducing poverty. A total of about 186 ha irrigated area would be developed. . The irrigated areas would be partly provided with family drip irrigation systems (component 3), carrying the water from the pond under pressure to the plots to cultivate vegetables and fruit trees (oranges). Rehabilitation of five (5) small-size reservoirs with storage capacity ranging from 10,000 cu.m to 20,000 cu.m and about 31 small weirs on various small natural streams to serve for approximately 3,098 ha. agricultural and horticultural area.

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Component 3: Support Services for Climate-Smart Agricultural Practices (Estimated cost: US$23 million, including contingencies) 25. This component will build on the improved irrigation and drainage infrastructure and water delivery activities in Component 2 to improve the productivity of agriculture, increase farmers’ incomes, and reduce their vulnerability to adverse climatic events. 26. The Farmer Field School (FFS) approach is proven to be an effective mechanism to improve agronomic and water management practices, and also to augment institutional capacity of WUAs for water management, operation and maintenance. The FFS will consist of 20-30 farmers serving about 15-20 ha. Some of the types of activities may include: i) season-long farmer field studies on a range of agronomic approaches e.g. ridge and furrow irrigation, border irrigation, raised and sunken bed; ii) crop-water budgeting sessions; iii) community interactions and consultations; iv) sustainable intensification of crop production (e.g. soil testing for integrated plant nutrient management) and ecosystem-based and ecologically-sound crop protection practices (e.g. IPM); and v) FFS Field Days for sharing results with other WUO/ WUA farmers. With all these activities, the project aims to encourage at least 20,000 farmers in scheme areas to adopt improved production techniques during the project period. 27. All provinces will implement demonstration areas with their Climate-Smart Agriculture Plans that will increase resilience to climate change. Such integrated packages will comprise relevant technologies that have been proven to be successful in climate change adaptation, but are not widely known in project areas to date. Packages may include improved seeding technologies, crop rotations, saline/ drought/ pest resistant crop varieties depending on the local conditions, systems and techniques of rice intensification, and supplemental irrigation. In particular the project will promote the use of drip and sprinkler irrigation on 700 ha in the seven provinces, with beneficiaries contributing part of the cost. In areas most affected by poverty the cost of installation of these more modern technologies would be covered to a large degree under the project. 28. The project will finance awareness-building and communication on climate-smart agriculture to the wider range of stakeholders. This will include real-time information delivery including weather-related risks and related responses through ICT, and information awareness campaigns through professionally produced multi-media, including radio, television, websites, technical training materials, brochures, and other promotional and extension materials. The project supports application of remote sensing imagery for monitoring of crop performance.

29. In order to capitalize on a large potential of greenhouse gas (GHG) reductions in the rice cultivation and help Vietnam reduce GHG emissions while enhancing economic growth and reducing poverty, the project would provide necessary information for GHG assessment which will be done separately by MARD through another window.

30. Soil sampling and soil fertility testing will be undertaken so that chemical fertilizer is applied according to fertilizer recommendations. This will result in more efficient application of chemical fertilizers. Soil health cards and soil maps will be produced for WUOs and WUAs. Use of organic fertilizers will be promoted. All provinces will undertake regular monitoring of

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selected soil fertility properties at standard sites to evaluate the impact of soil and land management practices on soil fertility status. 31. Finally, various types of crop residue management will be applied in all provinces to improve soils’ organic matter content, soil moisture, and nutrient retention. Crop residue management will include mulching, spreading of crop residues on the soil surface to reduce evaporation, mechanical crushing and chopping of crop residues and incorporating them into the soil through tillage, and application of a biological agent prior to soil incorporation to speed up crop residue decomposition. Component 4: Project Management, Monitoring and Evaluation (Estimated cost: US$7 million, including contingencies) 32. This Component supports the operational costs and capacity development for the implementing agencies within MARD to manage the project. The main content of this component is: (a) project management and M&E consultation, technical consultation and assistance for project management, consultation on implementation, monitoring, and auditing; (b) support CPMU and PPMUs to implement the project management and implementation activities; (c) capacity-building of, technology transfer to, and strengthening of the project management and implementation capacity of management units, especially the local sub-project management units; and (d) support for implementation of the project Gender Action Plan (GAP). 33. The GAP will focus on efforts to promote participation of the whole community and to motivate the community to develop its resources, and create favourable conditions for beneficiaries to participate in decisions affecting the project. The project will provide more opportunities for women to become involved in the economic process, including managing the WUAs. Empowerment of women aims to contribute to gender equality. The action plan will focus on (i) raising awareness of gender issues at all levels of project management; (ii) encouraging local authorities to support gender development, and (iii) piloting agricultural development models (including family drip systems) which favour increased involvement of women, and promoting the increased involvement of women in WUAs.

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Annex 3: Implementation Arrangements Irrigated Agriculture Improvement Project

Project Institutional and Implementation Arrangements 1. The Ministry of Agriculture and Rural Development (MARD) will be the executing agency for the project. Through previous project engagements, MARD has built substantial capacity and knowledge about World Bank procedures at the sector and project levels. 2. The Vice-Minister has the overall responsibility for overseeing project implementation as well as providing policy and strategy related guidance. The Vice-Minister would be supported by the Department of Construction Management (DCM) on technical aspects and the Department of Water Resources (DWR) on institutional aspects. These two departments are mandated to provide policy, planning, and management oversight of irrigation schemes in Vietnam. The Departments, according to the Ministry’s authority, are also responsible for verification and review of the proposals prepared and submitted by CPMU and the Project Provinces, and they make the recommendations for approval of these proposals by MARD.

3. The existing Central Project Office (CPO) of MARD is assigned as the project owner and is responsible for the management of the project following the Government Decree 38-ND-CP on managing ODA-funded projects. It is also responsible for the coordination and monitoring of the project implementation at different levels. CPO will act through its Central Project Management Unit (CPMU) which will be established by MARD and located within the CPO. 4. The CPMU, established by MARD and dedicated to implement this project, has the following responsibilities: i) liaising with the Bank and all concerned departments and provincial authorities; ii) review the draft annual work plan to determine consistency with the project objectives and with the overall implementation schedule; iii) prepare consolidated annual work plans submitted by PPMUs and submit them to the Bank; iv) coordinate and monitor project activities based on the M&E and the Environment Management plans; v) review the semi-annual progress reports based on technical inputs from the PPMUs and submit them to the Bank; vi) review the request letters and disbursement documents of the PPMUs to transfer funds from the Designated Account (DA) to provincial project accounts; vii) consolidate the financial management report of the DA; viii) prepare withdrawal applications; ix) arrange for special studies to be done to fulfill the project development objective; x) prepare procurement guidelines, standards and specifications for equipment, vehicles and spare parts; xi) carry out internal procurement reviews on behalf of PPMUs; xii) support the preparation of the mid-term review report and the implementation completion report; xiii) consolidate the financial management reports; xiv) perform TA support to project provinces in all aspects; xv) ensure the processing quality of prior review contracts, and then submit them to the Bank for review and clearance; xvi) prepare and implement training for staff involved in project implementation; and xvii) address other policy matters, including as climate change.

Implementation Structure

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5. Implementation of the subprojects will take place at the provincial level though the Provincial Project Management Units (PPMUs) established by the respective Provincial People’s Committee (PPC). The PPMUs will be composed primarily of staff from the DARD and the Irrigation and Drainage Management Companies (IDMCs), under the authority of the Provincial People’s Committee (PPC). The PPMUs will carry out their duties and functions as guided by the CPMU, Directorates and Departments of MARD as well as through the Provincial departments according to current construction investment regulations and management. The PPMUs will receive guidance and supervision from CPMU on the issues directly related to project implementation.

6. Operating under the general MARD project management framework, the PPMUs will also be responsible for launching the calls for proposals, conduct proposal screening and shortlisting, and handling procurement and supervise construction activities. MARD CPMU will be responsible for the management of the project designated account, procurement of ICB and QCBS contracts given the complexity of these procurement methods and their advantage in foreign languages, payments of contractors, and ensure safeguard compliance. The CPMU will report to IDA, MARD, and the GOV as appropriate.

7. A Project Operation Manual (POM) has been prepared which provides further detailed implementation arrangements

8. The PPMUs will be authorized to manage the implementation of project within the administrative boundary of provinces. These responsibilities include: i) prepare annual procurement plans. The plans will be adjusted and updated annually by the PPMUs on the basis of actual implementation progress. The plans will be reviewed by the CPMU and approved by the provinces; ii) carry out the approved procurement plans and manage contracts in accordance with the POM; iii) prepare annual funding plans (disbursement plans) for the provincial level and submit it to the PPCs for approval; iv) prepare and submit resettlement and compensation plans for approval; implementing compensation, land acquisition activities for construction; v) supervise construction including environmental and social impacts supervision; vi) manage the secondary project account at the provincial level; vii) procurement handling and payment for contractors; viii) prepare transfer request letter and disbursement documentations for submission to CPMU in accordance with the POM; ix) undertake liquidation and audit of subproject; and x) conduct subproject handover in accordance with current regulations.

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Description

Component 1: Improved Water ManagementCPMU

TA consultant: assist MARD’s CPMU, Provincial PMUs, IMCs, in all technical aspects in project implementation .TA consultant: PIM and IMT, and other international consultants

GOODS: Quang Nam / Thanh Hoa / Quang Tri / Hoa Binh / Ha Tinh / Ha Giang / Phu ThoSupply office equipment, communication, computers etcDevelop & use a GIS-based database for asset management and irrigation management system for IMC

Install equipment to assist in management for WUAs

Component 2: Irrigation and Drainage Scheme ImprovementsProject Supervision Consultant assist Provincial PMUs, IMCs in project implementation Quang NamThanh HoaHoa BinhHa TinhQuang TriPhu ThoHa GiangComponent 3: Agriculture support serviceConsultants in all aspects to support introduction and development of CSA systems

Design and develop pilot CSA systems

Support to up-scaling of adoption of CSA practices and replication of the CSA systemsBaseline surveys in each province to assess the outputs and results of the activitiesAssess the impacts of the CSA systems (economic benefits, emission benefits, efficiency of water use...Final evaluation and final workshop for lessons drawing and recommendationsComponent 4: Project management, monitoring & evaluation Technical assistance (TA) consultants

Independent Supervision Consultants for Environment and Resettlement Support for capacity building and training

2018 2019

Project Schedule

2014 2015 2016 2017

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Financial Management, Disbursements and Procurement

9. The disbursement categories are as follows:

Category

Amount of the Financing Allocated

(expressed in US$ million)

Amount of financing Allocated

(expressed in SDR million)

Percentage of Expenditures to be

Financed (inclusive of Taxes)

Works, goods (including vehicles), services, training and workshops and incremental operating cost

180

117.1

100%

(Note: This amount will be stated in equivalent SDR in the Financing Agreement)

10. An assessment of the financial management (FM) arrangements for the proposed project has been conducted based on the guidelines issued by the FM Sector Board with the conclusion that the project meets the minimum Bank FM requirements, as stipulated in OP/BP 10.0.

11. The financial management manual has been prepared.

12. CPMU will consolidate financial statements from provinces and submit them to the Bank for review. The external auditor has been appointed.

13. Account management and payments of provincial level component activities will be conducted by each of the provinces, as to promote decentralization of project implementation. Confirmation on the activities and level of payments will be confirmed with the Bank. The description of fund flow and management of provincial project accounts will be included in the financial management manual.

14. The CPO and provinces will identify (with high accuracy) the expected amount of counterpart funding required each year. For the provincial sub-projects that require high counterpart funds, the provincial authorities will provide the official commitment to the World Bank prior to the approval of the sub-project.

15. In order to strengthen the financial management arrangements for the project and to help further reduce the risk of fraud and corruption, particular attention will be paid to the following areas: (a) clear FM responsibilities with avoidance of gaps and overlaps of duties has been included in the FM Manual; (b) enhanced disclosure and transparency of financial information by publishing project and entity financial statements; (c) internal audit and inspection by MARD and Provincial People’s Committees for components implemented in their local areas (country system); and (d) authorization of Expenditures Verification Agencies (Provincial State Treasuries) will be obtained before any payment is made.

Disbursement

16. Disbursement will be made primarily via Advances. A segregated Designated Account (DA) at a commercial bank acceptable to the World Bank will be maintained by the CPMU.

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The DA will be denominated in United States Dollars (US$). The ceiling of DA will be fixed at US$ 18 million. Supporting documentation required for documenting eligible expenditures paid from the DA (and for Reimbursements) will be the Statement of Expenditure (SOE) and a list of payment against the contracts that are subject to the Bank’s prior review, together with Records. The frequency for documenting expenditures paid from the DA will be quarterly. The Reimbursement, Special Commitment, and Direct Payments disbursement methods can also be used. Direct Payments will be documented by Records. The Minimum Application Size for Reimbursements, Special Commitments and Direct Payments will be US$1.5 million equivalent. 17. The Project will have a Disbursement Deadline Date (final date on which World Bank will accept applications for withdrawal from the Recipient or documentation on the use of Credit proceeds already advanced by the World Bank) four months after the Closing Date. This "Grace Period" is granted in order to permit the orderly project completion and closure of the Credit account via the submission of applications and supporting documentation for expenditures incurred on or before the Closing Date. Expenditures incurred between the Closing Date and the Disbursement Deadline Date are not eligible for disbursement, except as otherwise agreed with the World Bank.

Procurement

18. Procurement financed by the Bank under the proposed project will be carried out in accordance with the Bank’s “Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers” dated January 2011; and “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers” dated January 2011; as well as the relevant provisions under the Financing Agreement.

19. Procurement Capacity and Risk Assessment (PCRA) of the CPMU under MARD, and PPMUs at provincial level was carried out during project preparation. The CPMU and several PPMUs have been involved in the Bank financed projects and are familiar with the Bank’s procurement procedures. However, the following risks are also identified: (a) possible procurement delays could occur at all stages of the procurement cycle including planning, preparation of procurement documents, bid evaluation, approval of bid evaluation report and award recommendation and contract management and (b) possible non-compliance with Bank procedures (including governance and corruption issues) may occur at the different levels. Therefore the procurement risk for the project is rated “Substantial”. To mitigate the risks and build up capacity, the Bank team has discussed and agreed with the CPMU that the following key measures shall be taken:

• CPMU shall appoint at least two qualified procurement specialists with adequate experience on the Bank procurement procedures prior to the project effectiveness.

• CPMU shall adopt a Project Operational Manual, including an adequate procurement manual (covering clear rules, procedures and division of responsibilities, sample documents and evaluation report for small procurements), prior to the project effectiveness.

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• Each PPMU shall appoint at least two qualified procurement specialists by the project effectiveness.

• Staff of CPMU and PPMUs who are involved in procurement implementation should receive intensive training on the Bank procurement procedures prior to the start-up of the project and throughout the project implementation. CPMU and PPMUs will take procurement actions according to the agreed procurement plans, including advance procurement activities.

• The Bank shall conduct regular procurement post reviews and provide feedback for timely corrective actions as needed.

20. Procurement Plan: The CPMU has developed an acceptable procurement plan for the initial 18 months of project implementation. The procurement plan includes contracts that are to be awarded under advance procurement; all such contracts, irrespective of value, are subject to prior review. The various items under different expenditure categories are described below in Table 3.1. The procurement plan will be updated annually or as required to reflect the project implementation needs. The procurement plan and its updates will be published on the Bank’s external website in accordance with the Guidelines.

Table 3.1: Summary of Initial 18 months Procurement Plan

Ref. No Description Estimated Cost US$ (million)

No. of Packages

Review by the Bank

(Prior/Post)

Comments (Prior Review Contract)

1 Summary of the NCB (Works) packages

95.74 82 Prior/Post prior-review the first 2 or 1 contract(s) depending on the PPMU’s capacity

2 Summary of the ICB (Goods) packages

11.10 2 Prior

3 Summary of the NCB (Goods) packages

1.75 14 Prior/Post prior-review the first 2 or 1 contract(s) depending on the PPMU’s capacity

4 Summary of the Shopping contracts (Non-consulting services)

0.60 8 Post

5 Summary of number of contract ≥USD0.2m that will be let under QCBS/QBS

6.18 5 Prior

6 Summary of number of contracts <USD0.2m that will be let under CQS

1.73 11 Prior/Post prior-review the first 2 or 1 contract(s) depending on the PPMU’s capacity

7 Summary of Individual Consultant Contracts

0.35 Multi-contract

Post

Total 117.45

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Table 3.2: Procurement Plan for Advance Procurement Activities

Contract No. Description Estimated Cost (US$ million)

Procurement Method

Review by Bank

Expected Bid

Opening CS5/TA/CPO/

2014 TA consultant for overall project implementation

2.5 QCBS Prior Dec.-13

CS6/ISC/CPO/2014

Independent Monitoring Consultant (Third party)

0.75 QCBS Prior Feb-14

CS7/M&E/CPO/2014 M&E Consultant 0.58 QCBS Prior Dec.-13

CS8/AUD/CPO/2014 Financial Audit for the first 3 years 0.07 CQS Prior Jan-14

21. Prior Review by the Bank: Thresholds for the Bank’s prior review and thresholds for procurement/selection methods, currently applicable for this project, are shown in the Table 3.3 below. Contracts with cost estimates below the thresholds of Prior review shall be subject the Bank’s Post review, which will be conducted annually and cover 20 percent of the total post-reviewed contracts.

Table 3.3: Procurement Method and Prior Review Thresholds

Category

Procurement Method Thresholds Prior Review Thresholds

Applicable thresholds

(in USD million)

Remarks Applicable thresholds (in

USD million) Remarks

Works ICB ≥ $10 m All ICB contracts NCB < $10 m First maximum 2 NCB

contracts for each CPMU / PPMU

Shopping < $0.2 m None Goods

ICB ≥$1 m All contracts NCB < $1 m Where goods are not

normally available from within Vietnam, the method of procurement will be ICB even if the contract value is less than $1 m.

First maximum 2 NCB contracts for each CPMU / PPMU

Shopping < $0.1 m None Consultant Services

CQS < $ 0.3 m Para 3.7 of Consultant Guidelines. Other methods (QCBS, QBS, LCS) may also be applied for contracts below $0.3 m.

• Firms: ≥$0.3 m (for competitive selection) plus the first contract for each method (QCBS, QBS, LCS, CQS) regardless of value.

• SSS: All SSS contracts. • All Audit contracts • Individuals: for essential

assignments (procurement consultant, accountant…).

Essential individual assignments will be defined in the Procurement Plan

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22. For achieving the project development’s objective the services of certain government-owned universities and research centers and institutions will be critical for project implementation. These agencies will provide services for capacity building, training and institutional strengthening. These include: (a) Vietnam Academy of Agricultural Sciences and Hanoi University of Agriculture provide services under Climate Change Agriculture practice support (Component 3); (b) Vietnam Academy of Water Resources and Hanoi Water Resources University provide services under water management improvement including Participation Irrigation Management (PIM) program, Irrigation Management Transfer (IMT) program, irrigation modernization training, and national policies development (all components). These agencies are leading national centres and are in a unique position to provide such services and have staff with strong expertise and experience. The services would be procured in accordance with requirements stipulated in paragraph 1.13(c) of the Bank’s Consultant Guidelines.

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Annex 4: Operational Risk Assessment Framework (ORAF)

Irrigated Agriculture Improvement Project (P130014)

.

Project Stakeholder Risks

Stakeholder Risk Rating Low

Description: There is a strong commitment and ownership from all project stakeholders as evidenced by consultations during project identifications and preparation. MARD has a good record of engaging various stakeholders and getting them involved in project preparation and implementation. The stakeholder assessment and consultation was carried out with direct project beneficiaries, farmers, ethnic minorities, women’s union, WUOs, farmers’ association, and NGOs during project preparation. As the overall expected impact of the project is positive, stakeholders all provided their support for the project objective.

Risk Management: Consultation of project affect people, beneficiaries, and other stakeholders will continue through project implementation.

Resp: Stage: Recurrent:

Due Date: Frequency: Status:

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Implementing Agency (IA) Risks (including Fiduciary Risks)

Capacity Rating Moderate

Description: Project lead implementing agency MARD is familiar with Bank procedures and policies including fiduciary, safeguards, and monitoring and evaluation. Some of the provinces have ongoing Bank supported projects. The capacity risks would be related to the new provincial staff and their limited knowledge and experience in applying the Bank’s guidelines.

Risk Management: Project management offices will be fully staffed with appropriate skills sets particularly on monitoring and evaluation. Whenever possible, staff with prior World Bank experience will be used for this project. The Bank will continue to make sure low capacity issues will be addressed. Newly hired staff will receive consultant support as well as training to meet procurement requirements.

Resp: Stage: Recurrent:

Due Date: Frequency:

Status:

Description: The projected is expected to receive US$ 30 million of counterparts funding. The CPMU and PPMUs will identify (with high accuracy) the expected amount of counterpart funding required each year. For the provincial sub-projects that require high counterpart funds, the provincial authorities will provide the official commitment to the World Bank prior to the approval of the sub-project.

Risk Management: Counterpart fund from central and provincial has gone through assessment and does not present an issue.

Resp: Stage: Recurrent: Due Date: Frequency: Status:

Governance Rating Moderate

Description: Coordination between agencies and within MARD at the central and provincial levels may be weak. Governance structure includes a steering committee at the central and provincial level.

Risk Management: During implementation the Bank will continue to monitor the level of coordination effectiveness between agencies. Project implementation arrangements will be clearly defined and outlined in the project implementation plan to improve coordination between the various implementing agencies.

Resp: Stage: Recurrent:

Due Date: Frequency:

Status:

Project Risks

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Design Rating Moderate

Description: Economic sustainability of investments could be weak if technical designs are not optimized in accordance with demand. Detailed demand analysis will be used to help customize the technical designs. Through project preparation, extensive consultation was carried out to get the stakeholders’ view on the proposed investment. Walk through survey at the sites was conducted to identify the current stage, readiness and needs of each project site. Close consultation with stakeholders was also conducted to ensure congruence between agriculture support services and infrastructure improvement needs.

Risk Management: Consultation with stakeholders will continue through preparation to ensure the demand, needs and readiness is being met.

Resp: Stage: Recurrent:

Due Date: Frequency:

Status:

Description: The large number of project activities across seven provinces requires coordination between agricultural support services and infrastructure improvement is also a risk.

Risk Management: The detailed descriptions of the project schemes have been formulated. The designs and quality of construction will be reviewed by project implementation consultants and third party consultants to ensure quality.

Resp: Stage: Recurrent:

Due Date: Frequency: Status:

Description: Possible low adoption rates/ unsuccessful demonstration of new climate change adaptation measures at selected sites and failure of mainstreaming adaptation into overall MARD program.

Risk Management: Use of appropriate extension and dissemination of information and project status updates will be employed. Activities to strengthen expand and integrate agricultural extension services and technical support systems have been included in the project design. Adaptation methods were selected based on good scientific practice, and farmers’ and local officials’ participation in decision making. Information dissemination will continue through project implementation. Pilot activities will be closely monitored and supported.

Resp: Stage: Recurrent:

Due Date: Frequency: Status:

Social and Environmental Rating Moderate

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Description: Construction activities and climate smart agriculture are expected to be simple in nature. There is not a lot of land acquisition involved. ESMF and SAP have been developed, and in the past the implementation agencies have demonstrated the ability to carry this out.

Risk Management: MARD is experienced with Bank's requirements and procedures on safeguard policies through previous projects. All ESMF and SAP have been approved by the provinces. MARD will provide training to the PPMUs social and environmental staff on a annually basis. The Bank and third party consultant will undergo close monitoring.

Resp: Stage: Recurrent:

Due Date: Frequency: Status:

Description: Land acquisition, both temporary and permanent, would be a potential risk during project implementation. In some sub-project areas, land acquisition is expected to affect ethnic minority households.

Risk Management: An SA carried out in early 2013 confirmed that the overall social impact of the project is positive, given the project aims to strengthen national, provincial, and local capacities for better irrigation management. However, some negative impacts, primarily related to acquisition of land to allow for rehabilitation of existing infrastructure, is unavoidable. On the basis of the SA, MARD will prepare an Indigenous Peoples Plan (IPP) for the sites that have ethnic minorities; an Indigenous Peoples Policy Framework (IPPF) for areas where ethnic minority people are identified during project preparation. While the project does not anticipate any major land acquisition or resettlement of project affected person (PAPs), MARD will also prepare Resettlement Action Plans (RAPs) for all sub- projects that are identified by appraisal and also a Resettlement Policy framework (RPF) for those sub-projects that will be identified and prepared during project implementation. MARD is experienced with Bank's requirements and procedures on safeguard policies through previous projects.

Resp: Stage: Recurrent: Due Date: Frequency: Status:

Program and Donor Rating Moderate

Description: NA Risk Management:

Resp: Stage: Recurrent: Due Date: Frequency: Status:

Delivery Monitoring and Sustainability Rating Moderate

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Description: Delays in project implementation particularly civil works may take place due to engineering or climatic related factors. The M&E system will be used and supported by a MIS system to closely monitor contract management and other implementation aspects. A robust baseline survey would also be established for every monitoring indicator across the seven participating provinces to establish parameter benchmarks against which project progress will be measured.

Risk Management: Construction will be planned and scheduled carefully for optimal alignment between design and implementation process. Timing will also be laid out as such to make the best use of dry season construction periods. During preparation, operational plans and detailed water balance studies have been prepared. Third party monitoring and remote sensing for monitoring project progress and delivery will continue through implementation.

Resp: Stage: Recurrent:

Due Date: Frequency:

Status:

Description: Close engagement with IDMCs and WUA/WUOs is vital to ensure participation in system operations. Firm commitment by the borrower is equally as important.

Risk Management: Continuing policy discussion between World Bank and government on its subsidy for irrigation service fees to ensure income of IDMCs and WUAs/WUOs adequately covers sustainable irrigation O&M costs. The focus on building up the institutional capacity and developing a policy framework for climate-smart activities ensures that the project goes beyond one-off investments in the irrigation sector.

Resp: Stage: Recurrent: Due Date: Frequency: Status:

Other (Optional) Rating

Description: NA Risk Management:

Resp: Stage: Recurrent: Due Date: Frequency: Status:

Other (Optional) Rating

Description: NA Risk Management:

Resp: Stage: Recurrent:

Due Date: Frequency: Status:

Overall Risk

Preparation Risk Rating: Moderate Implementation Risk Rating: Moderate

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Description: The overall preparation risk is rated as Moderate. This rating is acceptable as the project will be introducing innovative components that will require the task team to work closely with MARD.

Description: The overall risk rating for this project is Moderate.

Non-disclosable Information for Management Attention (Optional)

Comments:

Note for information: this section is not disclosed at Negotiation and Board presentation stages

Note : Include on average no more than 3 Risk Management Measures per Risk Category

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Annex 5: Implementation Support Plan

Irrigated Agriculture Improvement Project Strategy and Approach for Implementation Support

1. The strategy for Bank implementation support has been developed based on the nature of the project and its risk profile. The ORAF rates the overall implementation risk to be moderate and all individual risk categories are rated either low or moderate. Bank supervision will therefore focus significantly on compliance on Bank procurement, FM and safeguards requirements.

2. During the first 18 months of the project implementation, Bank implementation support missions will be fielded every three to four months, including short follow up missions, in order to proactively provide the implementation agencies with technical guidance both at the central and provincial levels to facilitate project implementation. Implementation support missions will also focus on selected technical issues such as dam safety, climate smart agriculture, and irrigation modernization. 3. In parallel, a series of refresher training courses will be carried out for all implementing agency staff covering procurement, financial management and safeguards aspects to enable them to fully understand the updated guidelines (particularly procurement) and operational policies. The Bank will also review and confirm that adequate qualified staff and consultants are in place for project management, detailed engineering, design and construction supervision, and on environmental and social safeguards. The Bank will maintain regular contact with MARD management to inform them on the findings of implementation support missions and give remedial measures, as necessary. This will be particularly important for the sub-projects carried out at the provincial level.

4. In order to provide timely implementation support through missions and on demand guidance, the majority of the Bank Task Team (technical, procurement, financial management, environmental and social safeguards specialists) will continue to be based in the Bank’s Hanoi Office. The table below indicates the level of effort that will be needed from the Bank to provide implementation support for the project.

Table: Annual Skills Mix Required Skills Needed Number of

Staff Weeks per annum

Number of Trips per annum

Comments

TTL – co-TTL Irrigation

16 4 Bank staff

Institutional specialist 6 2 International and national consultants Agriculture 6 2 International and Country-office

based Bank staff WUAs Specialist 6 2 International and national consultants Bank Safeguards 2 2 each Country-office based Bank staff Bank FM 1 2 Country-office based Bank staff

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Skills Needed Number of Staff Weeks per annum

Number of Trips per annum

Comments

Bank Procurement 2 2 Country-office based Bank staff M&E specialist 4 2 International Irrigation Engineer with modernization experience

6 2 International and national

Dam safety 4 2 International

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Annex 6: Economic and Financial Analysis Irrigated Agriculture Improvement Project

A. Introduction 1. The financial and economic analyses are confined to assessing costs and benefits of Component 2, Irrigation and Drainage Scheme Level Improvements which accounts for more than 70 percent of the total project costs. The analyses examined the impact of the project investments in the following areas:

• Increased agricultural production and revenues from increases in irrigated area and yields;

• Lower production costs due to reduction in private pumping and labor to bring water to the fields;

• Non-quantified benefits: reduced risk of dam and main canal failure; greater reliability for municipal and industrial water users;

• Benefits, not-quantified which are expected from proposed installation of drip technology for existing and new orchards of citrus, various vegetables and peanuts.

2. The expected diversification into higher value and higher return crops is expected due to availability of timely and reliable water with a resultant increase in cropping of maize and vegetables. High returns and diversification to high value crops is also expected due to proposed drip irrigation for orchards and peanuts in some provinces. The benefits from this technology have not been quantified for financial and economic analysis at this stage.

3. Both the financial and economic analyses rely on the information available with and collected by the project study team and consultants at DARD and VAWR offices responsible for preparing the report on engineering aspects as well as for the feasibility study report. The information was supplemented during the pilot visits in the field and conducting scoping sessions with the farmers and staff of the provincial agriculture departments by the project appraisal team.

B. Approach and Methodology 4. Cultivated Area by Crops and by Sub-Projects. For estimating the benefits for each sub-project/scheme, the average of last five years of the cropped area has been used as the basis for estimating the cropped area under gravity irrigation, pumped irrigation as well as for estimating the non-irrigated land. In fact, a large part of the non-irrigated land is being cultivated as rain-fed, which has also been considered as productive area in the without project situation.

5. Crop Budgets for Estimating Quantifiable Benefits. Although the nine sub-projects are widely scattered and therefore differ in climatic conditions and soil type, all nine sub-projects are in predominantly rice growing areas with generally limited areas of non-paddy crops. Separate crop budgets have been developed under with and without project scenarios for winter and summer crops of rice, maize, peanuts and sweet potatoes for each sub-project under full gravity or partial irrigation as well as for rain fed cultivated areas. Data on average yields and

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inputs have been estimated based on information collected from the field, available reports and from MARD.

6. Based on the above crop budgets, a one ha farm model has been prepared to show typical costs and returns for each sub-project of: (a) a full gravity irrigated farm, (b) a partially irrigated or pumped farm; and (c) non-irrigated farm. These farm models has been utilized for estimating the quantifiable agriculture benefits at scheme/ subproject level first and then aggregated at overall project level. 7. Cropping Pattern and Intensities. The cropping pattern for the partial and fully pumped irrigation farm budget for the areas of non-paddy crops (maize, peanuts, sweet potatoes, vegetable and other crops) have been established based on the published agricultural statistics for the last five years by provinces. 8. Incremental Agricultural Benefits. Computation of incremental agricultural benefits is based on the crop and farm budgets developed for the financial and economic analysis with prices adjusted to reflect at the farm-gate level. The prices to be used for commodities produced, production inputs, the main commodities – rice, maize, peanuts – and for fertilizers have been derived from June 2013 World Bank Commodity Price Forecasts. For all other commodities produced and inputs used, it is assumed that farm-gate prices adequately reflect economic values and no conversion factor has been used for converting the financial prices of these commodities into the economic values.

9. Input Cost for Pumping water. Data on cost of pumping water has been considered as about VND 200,000 per crop based on discussion on the information provided by the project staff and supplemented from the discussions with the WUAs in the field.

10. Benefited area; Following Table summarizes the area under with and without project scenarios, benefits of the project have been estimated in financial as well as in economic terms based upon the area as below;

Table 1: Area under Each Scheme (ha)

Rain-fed Pumped Gravity Rain-fed Pumped GravityLarge scale schemesHa Tinh Ke Go 6,803 0 14,735 - - 21,538 Quang Nam Phu Ninh 4,899 1,760 10,968 - 1,760 19,427 Thanh Hoa South Ma - 11,525 - - - 11,525

Medum scale schemesHa Tinh Rac River 4,341 0 4,182 - - 8,523 Quang Nam Khe Tan 1,395 - 2,105 - - 3,500 Phu Tho Tam Nong - 3,840 - - - 3,840 Pho Tho Thanh Thuy - - 2,122 - - 2,122 Quang Tri 3-Schemes Combined 1,352 399 3,680 - 399 5,400

Sub Total 18,790 17,524 37,792 - 2,159 75,875 Small scale schemes 7,550 7,550

Total 26,340 17,524 37,792 - 2,159 83,425

Without Project Condition With Project ConditionProvince Name of Scheme

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Financial Analysis 11. Based on the above crop budgets, one ha farm budgets have been prepared to show typical costs and returns for each sub-project of: (a) a full gravity irrigated farm, and (b) a partially irrigated or pumped farm. 12. For evaluating impact of the project over beneficiaries, typical farm budgets have been developed at scheme level. The size of an average typical farm has been computed at each scheme by dividing the area provided with irrigation and drainage services - improved with the number of direct beneficiaries households, it ranges between 0.24 ha (Than Hao) and 0.49 ha (Ha Thinh) with an simple average of 0.34 ha. The Table below shows the average returns at typical farm of 0.34 ha.

13. It is evident from the above table that net returns per labor day increase by 3.4 times for the farms irrigating by pumping and by 1.8 times on farms with full gravity irrigation. The high returns per day to labor on farms with partial irrigation are due to the savings in cost of pumping. 14. The comparison shows that net margins after conversion of the rainfed areas to full gravity or partial and pumped irrigation would be much higher in the with-project situation. Average returns in rainfed areas have been estimated as VND 2.1 million (US$100) per ha, which may increase up to VND 6.8 million (US$324) per annum after conversion to gravity irrigation. Thus many farmers at the bottom end of the canal system might not be in a very different situation from the rainfed farmers. The fact that the project through improving water transfer tends to benefit canal tail-end farmers more than those at the head-end, implies that the project is to a significant extent self- targeted on poverty.

Table 2: Net Margin at Farm Level

Description

Partial and pumped irrigation

Full gravity irrigation Partial and pumped

VND 000 US$ VND 000 US$ Without-project annual net Margin 947 45 2,193 104 With-project annual net margin 3,202 152 4,033 192 Increase per year 2,255 107 1,841 88

Increase % 238% 84% Results of the financial analysis 15. Financial Internal Rate of Return: The financial internal rates of return for each sub-project and for the project as a whole have been estimated considering the approach and methodology described above. Table 3 below shows a summary of results:

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Table 3: Summary of Results of the Financial Analysis

Costs Increases

by 20%

Benefits Decreases

by 20%

Costs Increases & Benefit decreases

by 20%Large scale schemesHa Tinh Ke Go 15.7% 1.43 176,410 13.3% 12.0% 10.0%Quang Nam Phu Ninh 21.1% 1.84 389,121 18.0% 16.6% 14.0%Thanh Hoa South Ma 10.9% 1.06 38,183 9.0% 7.7% 6.1%

Medum scale schemesHa Tinh Rac River 19.5% 1.76 124,302 16.7% 15.4% 13.1%Quang Nam Khe Tan 14.0% 1.29 23,817 11.7% 10.4% 8.5%Phu Tho Tam Nong 12.9% 1.18 45,782 10.5% 9.1% 7.2%Pho Tho Thanh Thuy 12.8% 1.18 24,239 10.4% 9.0% 7.1%Quang Tri 3-Schemes Combined 13.9% 1.21 104,106 11.0% 9.4% 7.1%

Overall 15.15% 1.36 925,961 12.62% 11.29% 9.18%

SensitivityAnlaysis (IRR %)

Province Name of SchemeFIRR % (Base Case)

BC RatioNPV (VND

000 Million)

Economic Analysis 16. In the economic analysis, the financial prices were converted into economic values by removing taxes and subsidies from input and output prices and calculating import and export parity prices of major inputs and outputs (rice and fertilizers). Considering the market is competitive and in equilibrium status, it is considered that no price distortion in price structure prevails in Vietnam economy, hence no conversion factor has been applied to local prices of agricultural commodities for estimating the project costs and benefits in economic terms. ( 17. The economic analysis is carried out in a similar manner and using the same methodology adopted in the financial analysis except using the economic values in place of financial prices. 18. Data for investment costs by project component have been taken from engineering estimates. Project costs and benefits are estimated at constant prices over a period of 31 years, including the six-year project implementation period. 19. Prices: For the economic analysis, prices of inputs and outputs have been expressed in June 2013 constant prices. Data on open market prices was collected through various sources for determining the farm-gate financial prices. Economic evaluation has been carried out using economic prices. Parity prices have been derived for rice and fertilizers using commodity price data issued by World Bank in June 2013.

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O&M Costs 20. A conservative approach has been adopted and the possible reduction7 in O&M cost after rehabilitation/modernization has not been credited as a benefit. Considering the requirement for smooth operation and for maintaining equitable distribution of water through gravity canals, a provision for O&M has been included equivalent to 4 percent of the investment costs. Main Assumptions Following are the main assumptions used in the analysis:

a. The life of project civil works is 31 years including the six-year investment period. b. Total project cost, net of taxes, is estimated at US$ 152.492 million. c. No allowance has been made for any possible reduction in operation and maintenance

as a result of project improvements to irrigation infrastructure.

21. Estimation of incremental agricultural benefits. The economic analysis is based on the crop and farm budgets developed for the financial analysis with prices adjusted to reflect economic values. The prices used for commodities produced, production inputs, the main commodities – rice, maize, soybeans – and for fertilizers are derived from June 2013 World Bank Commodity Price Forecasts. For all other commodities produced and inputs used, it is assumed that farm-gate prices adequately reflect economic value. Results of Economic Analysis and Sensitivity Analysis 22. Economic Rate of Return by Sub-Projects: The analysis indicates that irrigation rehabilitation is economically viable in all the regions, with internal rates of returns (ERRs) ranging from 13.7-23.9 percent as summarized in the following table. The overall ERR is calculated at 18.2 percent.

7 During field visits, the mission collected data from farmers on operation and maintenance costs. It is clear

that the farmers spent considerable resources (time, labor and money) to keep the system functional even at the low efficiency, before rehabilitation. After rehabilitation, O&M costs will diminish substantially. However, the benefit of reductions in O&M cost has not been accounted for in the analysis.

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Table-4: Summary of Results – Economic Analysis

Costs Increases

by 20%

Benefits Decreases by 20%

Costs Increases & Benefit decreases

by 20%Large scale schemesHa Tinh Ke Go 17.4% 1.60 228,501 14.9% 13.7% 11.6%Quang Nam Phu Ninh 23.9% 2.05 450,056 20.4% 18.9% 16.0%Thanh Hoa South Ma 13.7% 1.27 148,288 11.5% 10.3% 8.4%

Medum scale schemesHa Tinh Rac River 23.3% 2.12 164,141 20.1% 18.8% 16.0%Quang Nam Khe Tan 17.5% 1.57 42,311 14.8% 13.5% 11.3%Phu Tho Tam Nong 15.1% 1.33 74,803 12.5% 11.1% 8.9%Pho Tho Thanh Thuy 14.7% 1.30 37,692 12.1% 10.7% 8.6%Quang Tri 3-Schemes Combined 19.6% 1.53 241,040 15.8% 14.1% 11.2%

Overall 18.16% 1.58 1,386,833 15.31% 13.92% 11.57%

SensitivityAnlaysis (IRR %)

Province Name of SchemeEIRR % (Base Case)

BC RatioNPV (VND

000 Million)

Sensitivity Analysis A sensitivity analysis was made to determine the impact of a 20 percent increase in costs and a 20 percent decrease in benefits. The results of the analysis, summarized in the above table demonstrates that even with increased costs and decreased benefits EIRR would fall overall to around 11.6 percent, indicating that the project is relatively robust.

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Annex 7: Environment and Social Safeguards Irrigated Agriculture Improvement Project

The Safeguards Context

1. Negative environmental impacts may arise due to certain planned activities, like disposal of silt during the rehabilitation of irrigation infrastructure, construction and installation of irrigation control structures and increased used of agro-chemicals for increased crop productivity. To deal with these impacts, an Environmental Management Plan (EMP) and an Environmental and Social Management Framework (ESMF) have been prepared, which provide appropriate mitigation measures to reduce, contain and reverse some of these potential impacts. The system rehabilitation and modernization is expected to involve a small amount of land acquisition and resettlement, including resettlement of indigenous people. For this exceptional circumstance, the Bank’s OP/BP 4.10 on Indigenous Peoples and OP/BP 4.12 on Involuntary Resettlement shall be invoked as a precautionary measure and accordingly an Indigenous Peoples Plan (IPP), an Indigenous Peoples Policy Framework (IPPF), Resettlement Action Plans (RAPs) and a Resettlement Policy Framework (RPF) will be prepared. The safeguards policies triggered by the project are Environmental Assessment (OP/BP 4.01), Physical Cultural Resources (OP/BP 4.11), Pest Management (OP/BP 4.09), Safety of Dams (OP/BP 4.37), International Waterways (OP/BP 7.50), Indigenous Peoples (OP/BP 4.10), and Involuntary Resettlement (OP/BP 4.12). Safeguard Instrument for Managing Impacts and Risks 2. To ensure that the planned project activities do not lead to adverse environmental and social impacts, an elaborate Environment and Social Assessment was undertaken in all the project areas. The potential negative impacts as well as mitigation measures are presented for the project. Predictions are based on the activities in the nine sub-projects, in three of which work will commence in the 1st year. 3. Based on the findings from the ESA, an ESMP has been developed to provide measures to avoid, minimize and mitigate adverse environmental and social impacts of planned investments, as well as to include measures to enhance and replicate positive impacts. EMPs are developed for construction related work. The final ESA/ESMF/EMP reports were publically disclosed for inviting stakeholder comments, including a translation of the executive summary in Vietnamese and meet the Bank’s disclosure policy requirement. 4. Measures to be taken to mitigate, minimize, reduce or offset these negative environmental impacts, during project preparation: MARD and the PPMUs of Thanh Hoa, Quang Nam and Hoa Binh have prepared environmental safeguards instruments including an ESMF, two EMPs for the Thanh Hoa and Quang Nam sub-projects and an ECOP for the Hoa Binh sub-project in accordance with the Bank’s safeguards policies. During project implementation, the PPMUs will be responsible for preparing EMPs or ECOPs for identified sub-projects.

• Environmental and Social Management Framework (ESMF): This instrument sets out

principles, guidelines and procedures for environmental and social assessment. It includes

50

measures and plans to mitigate, minimize, and/or offset negative environmental impacts and enhance environmental benefits, cost estimates for such measures and information about the responsible agency to address project impacts. An integrated pest management plan has been prepared and included as part of this ESMF.

• The Environmental Management Plan (EMP) includes: (a) the mitigation, monitoring and institutional measures to be taken during the implementation and operation of the project to eliminate or offset adverse environmental and social impacts or to reduce them to acceptable levels; (b) measures to enhance positive environmental and social impacts; and (c) the actions needed to implement these measures.

• Environmental Codes of Practice (ECOP) set out generic mitigation measures for minor construction impacts. ECOP will be included in bidding documents.

• Regarding Dam Safety: Dam Safety Reports (DSR) have been prepared, not included in the ESMF, and will be reviewed by an independent Panel of Experts.

5. Monitoring and Supervision Arrangements: the CPMU is responsible for environmental safeguards implementation and will report compliance as part of semi-annual progress reports submitted to IDA, copied to MONRE. Construction management consultants will supervise environmental compliance by the construction contractors. An environmental consultant will be hired to (a) provide monitoring of the overall project impacts; (b) provide guidance to construction supervision consultants in supervising environmental mitigation measures by contractors; (c) provide training of PPMU staff; and (d) assist the PPMU in implementing the EMP and ECOP. Potential Environmental and Social Impacts 6. The impacts as a result of the project, if not monitored and mitigated, have the potential to lead to negative impacts. The proposed lining in selected stretches, and rehabilitation of drainage would improve overall drainage in the command areas and reduce chances of water logging. The participation of WUOs and WUAs would further ensure improved maintenance of irrigation infrastructures and thereby reduce seepage and water logging. In general, the project will likely have very little indirect or long-term negative impacts on the environment as it is aimed to modernize and rehabilitate existing irrigation structures. 7. Another potential long-term negative impact could be a result of enhanced agriculture production, which could indirectly result in increased dependence on groundwater and possibly increased use of agro-chemicals. However, the ‘climate-smart’ agriculture component of the project aims to foster a culture of using less chemicals and increase adaptive planting of crops, as well as improving irrigation water service delivery. If these measures are implemented correctly, they would reduce agricultural inputs. The awareness-building of the WUAs and the farmers will be done through farmer field-schools and farmer-to-farmer practices training.

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Institutional Capacity for Addressing Safeguards 8. PPMUs will be responsible for safeguards implementation and management of the sub-projects. Regarding EMP and ECOP implementation: environmental mitigation measures will be implemented during construction by contractors with the cost incorporated in the bidding proposal, and be supervised by the construction management consultants. Operation mitigation measures will be undertaken by the facility operator. The cost of mitigation measures is included in the construction cost. 9. MARD has significant experience engaging with the World Bank and has sound knowledge of the World Bank procedures at the sector (institutional) and project (implementation) levels. At central level, MARD founded a safeguards unit with qualified environmental and social safeguards staff to assist in monitoring and evaluation of project environmental safeguards compliance. Besides, MARD will hire qualified environmental management consultants to assist in training, monitoring and evaluation. At the provincial level, the PPMU will establish a safeguards unit with environmental and social staff to assist in monitoring and evaluation of sub-project environmental safeguards performance. Given the low capacity of the PPMU on the Bank environmental safeguards, MARD will provide annual training for PPMU environmental and social safeguards staff. Cost estimate for the training is US$150,000.

Public Consultations

10. A series of consultations have been carried out during project preparation. The first consultation was conducted in December, 2012 with government officials in all 7 provinces. The second consultation was conducted in February and March, 2013 in the project areas with key stakeholders such as farmers, representatives of the women unions, affected people as well as beneficiaries. In addition, a series of consultations with affected households, which may be relocated, was conducted as part of the preparation of ESMF. All comments and suggestions have been incorporated in the ESMF, EMPs and ECOP.

Environmental and Social (including safeguards)

11. Social Assessment (SA): The SA confirmed that the overall social impact of the project is positive, given the fact that the project aims to strengthen national, provincial, and local capacities for better irrigation management. However, some negative impacts, primarily related to acquisition of land to allow for rehabilitation of existing infrastructure, is unavoidable. In some sub-project areas, land acquisition is expected to affect ethnic minority households. The summarized outcome of the SA are as follows:

• Loss of land, assets, and businesses associated to land: The project will acquire land (both permanently and temporarily) to allow rehabilitation of the existing infrastructure. It is estimated that 4,500 households will be affected. While the number of affected households is substantial, the impact at the household level is expected to be minimal. Most (95 percent) of the households are expected to lose a small strip of land due to rehabilitation of existing irrigation channels. The number of

52

severely affected households is also expected to be low – about 220 households scattered across the nine sub-projects. Only 13 households are anticipated to require relocation. In total, about 97 hectares of land will be permanently acquired, while 105 hectares would be temporarily affected to allow for construction operations. Most of the permanently affected land (97.2 percent) is agricultural land, while the remaining is residential land.

• Impact on ethnic minority peoples: The adverse impact on ethnic minority households is primarily due to land acquisition to allow for the rehabilitation of the existing infrastructure. However, various technical design options have been explored to keep the number of affected households to the minimum. As the impacts from the project are expected to be primarily positive (e.g. improve and ensure more reliable access to water), the ethnic minority peoples indicated broad community support for project implementation. During implementation, the project would ensure that local people have opportunities to contribute in Participatory Irrigation Management.

i. Involuntary Resettlement (OP 4.12): A Resettlement Policy Framework (RPF) was prepared in accordance with the World Bank’s OP 4.12 to provide guidance on how a Resettlement Action Plan (RAP) for a sub-project (to be identified during project preparation, should be prepared. The RPF specifies steps to be taken for preparation, review, and clearance. The RPF specifies how compensation should be assessed for land, structures, crops, and businesses affected by the sub-project, including how graves should be relocated and compensation assessed, and how livelihood restoration of people should be monitored and supported, when needed, to assure a full and timely restoration of the livelihoods of affected households to the pre-project level.

ii. Indigenous Peoples (OP 4.10): Because ethnic minorities (as defined by the

World Bank’s OP 4.10) are present in the project area, and some are affected, an Ethnic Minority Policy Framework (EMPF) was prepared on the basis of free, prior, and informed consultation with these affected ethnic minority peoples. The consultation was conducted (as part of the social assessment exercise) to ensure that the potentially affected members of the ethnic minorities, including those who are not adversely affected as a result of land acquisition, are informed of the project activities and their potential impact and on the basis of that, to confirm if they provide broad community support for project implementation. The consultation indicated that affected ethnic minority households and those not affected both support the project implementation. The EMPF was developed to ensure ethnic minorities have an opportunity to receive socio-economic benefits from the project in a way that is culturally appropriate to them, and to provide guidance on how an Ethnic Minority Development Plan (EMDP) should be prepared for sub-projects to be identified during project implementation.

iii. Social safeguards implementation. The implementation of the RAPs and

EMDPs will be the responsibility of the respective provincial PMUs. The costs of land acquisition will be covered by the Government whereas EMDP implementations will funded by the Bank under this project. Social staff will be

53

appointed at the CPMU (the central level) and at the PPMU (provincial level) to provide support to RAP and EMDP implementation. The CPMU will ensure social safeguards implementation and monitoring are in accordance with the project’s RPF. An independent monitoring agency will also be hired by the project to carry out periodic monitoring to ensure social safeguards implementation under the project is in full compliance with the project’s RPF. Both RPF and EMPF specify a grievance redress mechanism.

iv. Gender mainstreaming. Since the project aims to bring direct benefit to an

estimated 243,000 households which use water for irrigation, a gender analysis was carried out. The purpose of the gender analysis (GA) was a) to analyze the current gender-related constraints at household and community level and explore the opportunities to promote gender mainstreaming under the project through identifying and proposing appropriate interventions; b) to promote gender equality in the context of water utilization across the beneficiary irrigated area; and c) to contribute to the gender equality/mainstreaming goal as set forth in the CPS.

v. A Gender Action Plan (GAP) was developed on the basis of the gender analysis

(with consultation at community level), and consultations with relevant governmental mass organizations at the central level (\Central Women’s Unions and Farmers’ Associations). The GAP will be part of the project plan and will be implemented under project Component 4.

Environment (including Safeguards)

vi. Environmental concerns of the project are primarily related to the activities under Component 2 and 3. However, no large-scale, significant and/or irreversible negative impacts are envisaged as the project is designed to benefit the farming communities through investments in rehabilitation of irrigation systems and allied agricultural activities. For these reasons, the project is rated Category B. It triggers five environmental safeguard policies, namely:

vii. OP/BP 4.01(Environmental Assessment): The project implementation involves

civil works to improve irrigation infrastructure such as existing irrigation canals and reservoirs, and provides rural water supply schemes for ethnic populations. Given the negative environmental impacts associated with civil works this policy is triggered to help ensure the environmental soundness and sustainability of the investments. An Environmental and Social Management Framework (ESMF) has been prepared for the project. For the sub-projects an Environmental Management Plan (EMP) and Environmental Codes of Practices (ECOP) have also been prepared in accordance with the Bank’s safeguards policies.

viii. OP/BP 4.11 (Physical Cultural Resources): During preparation, 12 graves were

identified in the Thanh Hoa sub-project. These graves will be relocated. The OP/BP 4.11 is triggered to manage physical cultural resources and avoid their

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destruction or damage. Mitigation measures have been included in the EMP for this sub-project. Also, a “chance find procedure” will be included in the EMP and the ECOP in case any cultural resource is unexpectedly found during construction.

ix. OP/BP 4.09 (Pest Management): The project will not finance the purchase of

pesticides. However, after the completion of the project, it is expected that the irrigated land area will increase to 83,400 ha. The amount of agricultural chemicals including fertilizers and pesticides is expected to increase. This policy is triggered to minimize and manage the environmental and health risks associated with the use of pesticides and to promote and support safe, effective, and environmentally sound pest management practices. An integrated pest management plan has been prepared as part of the ESMF.

x. OP/BP 4.37(Safety of Dams): The project will finance minor rehabilitation of

existing dams to improve dam safety aspects. This policy is triggered to ensure the adequate safety of dams. A Panel of Experts (POE) will be assigned the task to carry out the review of the dam safety reports. The Department of Water Resources has recently been upgraded to a Directorate of Water Resources, and the Dam Safety Unit has been transferred to the Infrastructure and Management Division, forming one of the three Units in the Division.

xi. International Waterways (OP/BP 7.50): The project will support rehabilitation of

the South Ma irrigation subproject which draws water from Cua Dat Reservoir, located on the Chu River. The Chu River is a transboundary river that originates from Laos PDR. After analyzing the exception provisions, this project falls within the exception provided for in paragraph 7(a) of OP 7.50. The exception memo was approved, in accordance with Bank policy, on July 17, 2013.

HANOI

CHINACHINA

C A M B O D I A

THAILAND

LAO

PEOPLE'S

DEM. REP.

PhuQuoc

Hainan I.(China)

To Nanning

To Hepu

To Tiandong

To Babao

To Kunming

To Kaiyuan

To Muang Xai

To Luang

Prabang

To Khammouan

To Savannakhet

To Kampong Cham

To KampongChhnang

1

2

3

4

5

6

7

89

10

11

12

13

14

15

1617

18 1920

2122 23

24 2526

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5051

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63

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5758

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LangSon

Ho Chi Minh City

Bien HoaThu Dau

Mot

Phan Thiet

DongXoai

Tan An

Bac Lieu

Vi Thanh

Vung TauMy Tho

Ca Mau

Rach Gia

Long Xuyen

Hai Phong

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Lai Chau Town

DienBien Phu

Lao Cai

Quy NhonPleiku

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Gia NghiaDa Lat

Vinh

Vinh Yen

Nam DinhNinh Binh

Dong Hoi

Dong Ha

Tam Ky

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Tuy Hoa

Kon Tum

Son La

Yen Bai

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TuyenQuang Thai

Nguyen

Cao Bang

Bac Can

Soc Trang

Tra VinhCan Tho

Cao Lanh

Ben TreVinh Long

Tay Ninh

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Da Nang

Ha Tinh

Thanh Hoa

Thai Binh

Hung Yen

Ha Nam

Viet Tri

Hai Duong

Bac GiangBac Ninh

Hoa Binh

Hue

Phan Rang-Thap Cham

102°E 104°E 106°E 108°E 110°E

102°E

104°E 106°E 108°E 110°E

22°N

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18°N

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IMPROVEMENT OF SMALL SCALEIRRIGATION AND DRAINAGE

HA GIANG PROVINCEFor Detail See IBRD 40349

CONSTRUCTION OF MULTIPURPOSE VILLAGE PONDS

HA GIANG PROVINCEFor Detail See IBRD 40350

IMPROVEMENT OFSMALL SCALE

IRRIGATION SCHEMESHOA BINH PROVINCE

For Detail See IBRD 40352

IMPROVEMENT OFSMALL SCALE IRRIGATIONAND DRAINAGE SCHEMES

HOA BINH PROVINCEFor Detail See IBRD 40353

TAM NONG & THAN THUYSCHEMES IMPROVEMENT OFIRRIGATION AND DRAINAGE

PHU THO PROVINCEFor Detail See IBRD 40351

SOUTH MA RIVER SCHEMEIMPROVEMENT OF

IRRIGATION AND DRAINAGETHANH HOA PROVINCEFor Detail See IBRD 40354

KE GO-SONG RAC SCHEMEIMPROVEMENT OF

IRRIGATION AND DRAINAGEHA TINH PROVINCE

For Detail See IBRD 40355

LA NGA & TRUC KINH SCHEMESIMPROVEMENT OF

IRRIGATION AND DRAINAGEQUANG TRI PROVINCE

For Detail See IBRD 40356

PHU NINH & KHE TAN SCHEMESIMPROVEMENT OF

IRRIGATION AND DRAINAGEQUANG NAM PROVINCEFor Detail See IBRD 40357

12345678910111213141516171819202122232425262728293031

Lai ChauDien BienLao CaiHa GiangCao BangSon LaYen BaiTu Yen QuangBac CanLang SonPhu ThoVinh PhucThai NguyenBac GiangQuang NinhHa NoiBac NinhHung YenHai DuongHai PhongHoa BinhHa NamThai BinhNinh BinhNam DinhThanh HoaNghe AnHa TinhQuang BinhQuang TriThua Thien Hue

3233343536373839404142434445464748495051525354555657585960616263

Da NangQuang NamQuang NgaiKon TumGia LaiBinh DinhPhu YenDac LacDac NongKhanh HoaBinh PhuocLam DongNinh ThuanTay NinhBinh DuongDong NaiBinh ThuanT.P. Ho Chi MinhBa Ria-Vung TauLong AnTien GiangDong ThapBen TreAn GiangVinh LongTra VinhKien GiangCan ThoHau GiangSoc TrangBac LieuCa Mau

PROVINCES:

This map was produced by the Map Design Unit of The World Bank.The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

GSDPMMap Design Unit

0 50 100

0 50 100 150 Miles

150 Kilometers

IBRD 40348

SEPTEMBER 2013

VIETNAMIRRIGATED AGRICULTURALIMPROVEMENT PROJECT

SUBPROJECT LOCATIONS

PROVINCE CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

PROVINCE BOUNDARIES

INTERNATIONAL BOUNDARIES

VIETNAM