Report and Recommendation of the President to the Board of Directors

Project Number: 41496 January 2013

Proposed Loan and Administration of Grant for Additional Financing Socialist Republic of Viet Nam: Greater Mekong Subregion Southern Coastal Corridor Project

CURRENCY EQUIVALENTS (as of 10 January 2013)

Currency unit – dong (D)

D1.00 = $0.00005 $1.00 = D20,820.00

ABBREVIATIONS

ADB – Asian Development Bank AusAID – Australian Agency for International Development Cuu Long CIPM – Cuu Long Corporation for Investment, Development and

Project Management of Transport Infrastructure GMS – Greater Mekong Subregion km – kilometer MOT – Ministry of Transport MTR – midterm review mission PAM – project administration manual

NOTE

In this report, "$" refers to US dollars.

Vice-President S. Groff, Operations 2 Director General K. Senga, Southeast Asia Department (SERD) Director J. P. Lynch, Transport and Communications Division, SERD Team leader R. Ishenaliev, Transport Specialist, SERD Team members M. Buendia, Senior Safeguards Specialist (Resettlement), SERD

N. Farrofo, Senior Project Officer, SERD B. Konysbayev, Senior Counsel, Office of the General Counsel J. Miller, Principal Transport Specialist, SERD

J. H. Nam, Safeguards Specialist, SERD L. D. Thang, Senior Project Officer (Transport), SERD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

PROJECT AT A GLANCE

MAP

I.  THE PROPOSAL 1 

II.  THE PROJECT 1 

A.  Rationale 1 B.  Impact and Outcome 3 C.  Outputs 3 D.  Investment and Financing Plans 4 E.  Implementation Arrangements 5 

III.  DUE DILIGENCE 6 

A.  Technical 6 B.  Economic and Financial 7 C.  Governance 7 D.  Poverty and Social 7 E.  Safeguards 7 F.  Risks and Mitigating Measures 8 

IV.  ASSURANCES 8 

V.  RECOMMENDATION 8 APPENDIXES

1. Revised Design and Monitoring Framework (Viet Nam Component Only) 9

2. List of Linked Documents 12 

PROJECT AT A GLANCE 1. Project Name: Greater Mekong Subregion Southern Coastal Corridor Project (Additional Financing)

2. Project Number: 41496-014

3. Country: Viet Nam 4. Department/Division: Southeast Asia Department/ Transport and Communications Division

5. Sector Classification:

Sectors Primary Subsectors

Transport, and information and communication technology

√ Road transport

6. Thematic Classification:

Themes Primary Subthemes

Economic growth Widening access to markets and economic opportunities

Regional cooperation and integration √ Cross-border infrastructure

6a. Climate Change Impact No climate change indicator available

6b. Gender Mainstreaming

Gender equity theme (GEN)

Effective gender mainstreaming (EGM)

Some gender elements (SGE)

No gender elements (NGE) √

7. Targeting Classification:

General Intervention

Targeted Intervention

Geographic Dimensions of

Inclusive Growth

Millennium Development

Goals

Income Poverty at Household

Level

√

8. Location Impact:

National Medium

Regional High

Rural Low

9. Project Risk Categorization: Complex

10. Safeguards Categorization:

Environment B

Involuntary resettlement A

Indigenous peoples B

11. ADB Financing:

Sovereign/Nonsovereign Modality Source Amount ($ million)

Sovereign Project loan Asian Development Fund 25.0

Total 25.0

12. Cofinancing:

Financier Category Amount ($ Million) Administration Type

Government of Australia Official-Grant 12.0 Full

Total 12.0

13. Counterpart Financing:

Source Amount ($ million)

Government 2.1

Total 2.1

14. Aid Effectiveness:

Parallel project implementation unit No

Program-based approach No

Project Area

Ca Mau

An Minh

An Bien

Kien An

Thoi Binh

Thu Bay

Long Xuyen

Rach Gia

Xa XiaPrek Chak

Kampot

Kep

Kampong Trach

Tri Ton

Nha Bang

Hon Dat

Soc Son

Kien Luong

Ha Tien

Vinh Thuan

Hong My

Cai Nuoc

Nam Can

Hai Phong

Ho Chi Minh City

Nam Can

Chau Thanh

Minh Luong

Ap Luc

Ben Nhu

Ha Noi

Phnom Penh

Bangkok

NR33

NR31

to P

hnom

Pen

h

NR33

to Krong Preah Sihanoukand Thailand

NR33

QL61

QL80

QL80

QL63

QL61

TL7

TL7

Khanh An Industrial Zone

Tac Cau Ferry

KIEN LUONG

HON DAT

TAN HIEP

CHAUTHANH

AN MINHVINH

THUAN

U MINH

THOIBINH

TRAN VAN THOI

DAM DOICAI NUOC

NGOC HIEN

GIONG GIANG

GO QUAO

KIEN GIANG

CA MAU

BAC LIEU

HAU GIANG

AN GIANG

CAN THO

CAMBODIA VIET NAM

LAOPEOPLE'S

DEMOCRATIC REPUBLIC

THAILAND

CAMBODIA

VIET NAM

PEOPLE'S REPUBLICOF CHINA

National Capital

Provincial Capital

City/Town

Greater Mekong Subregion Southern Coastal Corridor (GMS-SCC)

GMS-SCC Project - Cambodia Component

GMS-SCC Project - Viet Nam Component, Stage 1

Future Viet Nam, Stage 2

Other National and Provincial Roads

National Road (Cambodia)

National Road (Viet Nam)

Provincial Road (Viet Nam)

River

District Boundary

Provincial Boundary

International Boundary

Boundaries are not necessarily authoritative.

GREATER MEKONG SUBREGIONSOUTHERN COASTAL CORRIDOR PROJECT

0 25 50 75 100

Kilometers

N

12-3291 AV

103 00’Eo

20 00’No

108 00’Eo

12 00’No

20 00’No

12 00’No

103 00’Eo 108 00’Eo 105 00'E o

105 00'E o

9 30'N o 9 30'N

o

I. THE PROPOSAL

1. I submit for your approval the following report and recommendation on a proposed loan to the Socialist Republic of Viet Nam for the additional financing of the Greater Mekong Subregion (GMS) Southern Coastal Corridor Project. 1 The report also describes the proposed administration of a grant to be provided by the Government of Australia for the additional financing of the project, and if the Board approves the proposed loan, I, acting under the authority delegated to me by the Board, will approve the administration of additional financing.

II. THE PROJECT

A. Rationale

2. The current project was approved in November 2007 to construct sections of the GMS road corridor in the southern coastal areas of Cambodia and Viet Nam.2 The project preparatory technical assistance to prepare the project identified 51.5 kilometers (km) of roads in Cambodia and 218 km of roads in Viet Nam to be improved along the southern coastal corridor.3 As part of the Viet Nam portion of the project, the Asian Development Bank (ADB) approved a loan in the amount of SDR48,300,000 from its Special Funds resources and the administration of a $25.5 million grant from the Government of Australia through the Australian Agency for International Development (AusAID) to the Government of Viet Nam. In 2010, the Government of the Republic of Korea approved a parallel cofinancing loan through the Export–Import Bank of Korea of $50 million to improve about 96 km of the southern coastal corridor.4 In addition to the improvement of 218 km of roads, the project includes improvement of cross-border facilities, and an HIV/AIDS and human trafficking awareness and prevention program. 3. The ADB loan and AusAID grant for the Viet Nam project became effective on 29 May 2008 with a closing date of 30 June 2015. The project scope includes civil works, consulting services, resettlement, contingencies, and financing charges on ADB’s loan. The project is performing well and is in an advanced stage of implementation. All contracts have been awarded and the project performance is on track at 60% of physical completion.5 Cumulative contract awards and disbursements based on net amounts as of 31 December 2012 are at 99% and 51%, respectively. 4. A midterm review mission (MTR) conducted jointly by ADB and AusAID in December 2011 assessed that project outputs were expected to be delivered as intended, and that the outcome would be achieved if proposed corrective measures were effectively implemented. These measures, as specified by the MTR, were to improve the soft-ground treatment design and construction methodology, resolve delays on resettlement implementation, and ensure compliance with the project’s covenants on resettlement and environment. Since the MTR, the government has taken necessary corrective actions and revised technical designs for soft-ground treatment, updated all resettlement plans for implementation, which ADB has approved,

1 The design and monitoring framework is in Appendix 1. 2 ADB. 2007. Report and Recommendations of the President to the Board of Directors: Proposed Loans to the

Kingdom of Cambodia and Socialist Republic of Viet Nam: Greater Mekong Subregion Southern Coastal Corridor Project. Manila (Loans 2372-VIE and 2373-CAM; Grants 0095-VIE and 0096-CAM).

3 ADB. 2005. Technical Assistance for Preparing the Greater Mekong Subregion Southern Coastal Corridor Project. Manila (TA 6235-REG).

4 An unprecedented price escalation in 2008 and the need for redesign due to resettlement resulted in cost overruns, for which a supplementary loan from the Government of the Republic of Korea in the amount of $70 million was signed in December 2010.

5 Summary of Project Performance (accessible from the list of linked documents in Appendix 2).

2

resolved claims from affected people, and improved environmental oversight of construction sites. Output-related project risks are being effectively managed and assumptions remain valid. 5. Based on the findings of the MTR and the government’s request, additional financing is required to achieve the project’s intended outputs with greater technical quality, and to resolve delays on resettlement implementation. Additional financing is proposed to (i) fund changes in the project scope that improve soft-ground treatment measures for better overall quality of the completed roads and better road safety characteristics, (ii) meet the cost overruns and financing gaps due to increased cost of (a) land acquisition and resettlement and (b) general price escalation, and (iii) scale up a well-performing project by financing the cost of detailed design and implementation support for the subsequent stage 2 of the project (para. 9). 6. Soft-ground treatment. The project area is in the Mekong Delta, a geologically difficult environment due to its weak soils. Original engineering designs did not properly provide for soft-ground treatment. Without doing so, as proposed under this additional financing, the quality of the finished roads will be substandard, resulting in premature deterioration of the road surfaces and structures, higher road maintenance costs, and expensive repairs. Above all, inadequate soft-ground treatment will present a high safety risk for the traveling public due to abrupt changes in the road levels at the transition points from the road embankments to the bridges and culverts. The estimated cost of stepping up soft-ground treatment is $11.7 million. 7. Increased costs due to price escalation. The price inflation in Viet Nam’s construction sector since has averaged about 20% per annum, and affected the project’s financing. Based on the price escalation clauses under the ongoing civil works contracts and estimated cost to completion, the total price escalation by the loan and grant closing date is estimated at $37.1 million. Available uncommitted loan and grant amounts are $8.0 million and $2.9 million, respectively. The government has allocated an additional $17.2 million in counterpart funds and requested ADB to finance the shortfall of $9 million. 8. Land acquisition and resettlement. The cost of land acquisition and resettlement has increased from $26.11 million at appraisal to $38 million during implementation. This increase is largely attributed to a rise in property values and compensation rates. The MTR listed the following issues: (i) resettlement activities had begun without ADB’s concurrence to the updated resettlement plans; (ii) loan conditions for sectional hand-over of construction sites were not complied with; and (iii) implementation of the grievance process and responses to complaints from affected people was slow. Since the MTR, the government has satisfactorily rectified all the issues, and updated resettlement plans have been approved for all sections. However, implementation of resettlement plans is delayed due to increases in resettlement costs during implementation, and the government’s inability to finance the full cost increase. The government has allocated $31.2 million and requested ADB to finance the shortfall of $6.8 million to clear the project sites from any remaining encumbrances and avoid delays to the ongoing construction.6 Further delay in implementing the resettlement plans would interrupt the progress of ongoing civil works and increase the risk of further cost overruns and implementation delays. 9. Improve readiness of stage 2 of the project. At the time the current project was under preparation, stage 2 was proposed to finance the only remaining southern coastal corridor link (i.e., from Ha Tien near the border with Cambodia to Minh Luong [see map]). The project preparatory technical assistance for stage 2 is ongoing and expected to be completed by

6 The shortfall will cover compensation for affected structures and utilities, allowances, and provision of basic services

at the relocation sites. It also includes $676,000 for an income restoration program.

3

January 2013.7 To enhance project readiness, the government has requested financing for the detailed design and implementation support for stage 2. This request is consistent with the objectives of the policy on additional financing, as scaling up the current project by including in its scope the detailed design and implementation support for an ensuing project will reduce incremental transaction costs, compound synergy of the two interconnected projects, improve ADB’s responsiveness, and boost development effectiveness. Efficiency gains will be realized through timely and seamless transition from project preparation to detailed design and implementation, resulting in about 24 months of time savings, significant transaction cost reductions, and an early accrual of project benefits.8 This expansion of scope, estimated at $9 million, reflects the government’s commitment to improve project readiness, which in turn will also contribute to better performance of ADB’s transport sector portfolio in Viet Nam. 10. Eligibility of additional financing. The additional financing meets the eligibility criteria for additional financing and is a suitable modality, as the nature of additional civil works and associated cost overruns are an integral part of ongoing civil works.9 If these costs are not met, the project cannot be completed to the expected standards, and the project outputs will not be delivered fully. 11. This additional financing proposal is not included in the country operations business plan, 2012–2014 for Viet Nam,10 as the need for such financing was established during project review missions. The government accords high priority to this additional financing and has approved a project detailed outline, as required under the government’s internal clearance procedure for priority projects. B. Impact and Outcome

12. The impact and outcome statements for the project will remain unchanged since the additional financing would essentially deliver the originally intended project outputs without altering the project’s design. The impact of the project will be to promote economic growth in the project area and the GMS by strengthening connectivity with neighboring countries and increasing competitiveness. The outcome will be to reduce transport times and costs, and induce more efficient movement of passengers and goods within the project area and between GMS countries. The additional financing will help achieve the project impact and outcome through improving overall quality of outputs and meeting cost overruns and financing gaps. C. Outputs

13. The project outputs will remain unchanged, except that the output for improving the cross-border facilities at Ha Tien (formerly Xa Xia) is proposed to be postponed to stage 2. This postponement is acceptable because the current border crossing on the Viet Nam side is sufficient to handle the projected traffic level in the next 4 to 5 years and the ongoing TA (footnote 7) is preparing a comprehensive modernization plan for Ha Tien border crossing under the stage 2 project.11 7 ADB. 2011. Technical Assistance to the Socialist Republic of Viet Nam for the Second Greater Mekong Subregion

Southern Coastal Corridor Project. Manila (TA 7924-VIE). 8 If a separate transaction, such as a project design facility or a stand-alone TA loan, were to be proposed, it would

duplicate efforts and processes and increase transactions costs to ADB as well as the government. 9 With the proposed additional financing, the combined project (i) remains technically feasible, economically viable,

and financially sound, (ii) is accorded high priority by the government, (iii) is consistent with the current project’s development objectives, and (iv) is consistent with the current country partnership strategy.

10 ADB. 2011. Country Operations Business Plan: Viet Nam, 2012–2014. Manila. 11 Latest reports indicate that currently there is no bottleneck at the border and trucks cross it in 5–10 minutes, cars in

5 minutes, buses in 15 minutes, and motorbikes do not stop at the border, all of which is well within the performance targets set for the project, i.e., less than 0.5 hours for passengers and 2.0 hours for freight.

4

14. An additional output is proposed—detailed design and implementation support for stage 2—as a preparatory step for scaling up a well-performing operation. The revised design and monitoring framework is in Appendix 1. D. Investment and Financing Plans 15. The overall project is estimated to cost $329 million. The overall increase in the revised project costs is 13.5% above the current project cost. The revised investment plan is in Table 1 and the revised detailed cost estimates to be financed by each financier is in the project administration manual (PAM).12

Table 1: Revised Investment Plan

Item

Amount ($million) Current Projecta

Additional Financing Total

A. Base Cost 1. Civil works 187.7 20.7 208.4 2. Resettlement 31.2 6.8 38.0 3. Consultants 17.7 8.6 26.3 4. Taxes and dutiesb 18.7 2.1 20.8 5. Recurrent costs 2.6 0.0 2.6 Subtotal (A) 257.9 38.2 296.1 B. Contingenciesc 28.1 0.3 28.4 C. Financing Charges During Implementationd 3.9 0.6 4.5 Total (A+B+C) 289.9 39.1 329.0

a Based on current actual cost in mid-2012 estimates, including 10% physical contingencies. b Includes taxes and duties of $2.1 million on additional financing to be financed by the government. c Price contingencies computed based on prevailing price escalation in Viet Nam during 2009–2012 and estimated

cost to completion by end-2014. d Includes interest during construction on additional financing to be capitalized in the loan. Interest during construction

for the Asian Development Bank loan has been computed at 1% per annum. Source: Asian Development Bank estimates. 16. The government has requested a loan in various currencies equivalent to SDR16,270,000 from ADB’s Special Funds resources to help finance the cost of the additional financing.13 The loan will have a 32-year term, including a grace period of 8 years, an interest rate of 1.0% per annum during the grace period and 1.5% per annum thereafter, and such other terms and conditions as are set forth in the draft loan agreement. 17. The revised financing plan is in Table 2. The Government of Australia through AusAID will provide grant cofinancing equivalent to $12 million, to be administered by ADB.14 The grant will finance civil works for improving soft-ground treatment. The physical contingencies remain within 10% of base costs, and total inflation of about 17% is assumed until the end of project completion. The Government of Viet Nam will finance any further funding shortfall that may occur during implementation of the overall project.

12 Project Administration Manual (accessible from the list of linked documents in Appendix 2). 13 ADB will finance resettlement expenses and interest during construction on the ADB loan in accordance with ADB’s

applicable policy and procedures. ADB. 2005. Cost Sharing and Eligibility Expenditures for Asian Development Bank Financing: A New Approach. Manila; ADB. 2011. Cost Sharing and Expenditure Eligibility: Policy Implementation Review. Manila.

14 This amount may be adjusted for currency fluctuations to match the equivalent grant amount received by ADB.

5

Table 2: Revised Financing Plan

Current Project Additional Financing ($ million)

Total

Source Amount ($ million)

Share of Total (%)

Amount ($ million)

Share of Total (%)

Asian Development Bank (ADF)a 75.0 25.9 25.0 100.0 30.4 Government of Australiab 25.5 8.8 12.0 37.5 11.4 Government of Viet Namc 69.4 23.9 2.1 71.5 21.7 KEXIM 120.0 41.4 0.0 120.0 36.5

Total 289.9 100.0 39.1 329.0 100.0 ADF = Asian Development Fund, KEXIM = Export–Import Bank of Korea. a Includes $25 million additional financing for resettlement, consultants, contingencies, and interest during construction. b Through the Australian Agency for International Development. c Includes resettlement cost, taxes and duties, recurrent costs, and contingencies. Source: Asian Development Bank estimates. E. Implementation Arrangements

18. The existing implementation arrangements remain unchanged. The Ministry of Transport (MOT) will be the executing agency and Cuu Long Corporation for Investment, Development and Project Management of Transport Infrastructure (Cuu Long CIPM) will be the implementing agency. Project management will be delegated to the project management unit under Cuu Long CIPM. This unit will be responsible for direct supervision and day-to-day implementation of the project. 19. This additional financing will not require additional procurement of civil works and goods. The additional scope for soft-ground treatment is an integral part of the ongoing civil works, as these works will be integrated into the ongoing construction sequence and schedules, and covered by the existing civil works contracts. Cuu Long CIPM will issue contract variations to incorporate additional soft-ground treatment works into the scope of existing civil works contracts. Associated supervision of these works will be arranged through a variation to the existing construction supervision contract, and necessary funds reallocated from Grant 0095-VIE (footnote 2). 20. Use of loan funds for resettlement will require Cuu Long CIPM to establish an imprest account at a commercial bank acceptable to ADB. In accordance with Vietnamese regulations, resettlement activities are implemented by the relevant provincial authorities through the district resettlement, compensation and assistance boards. Therefore, sub-accounts will be established at commercial banks acceptable to Cuu Long CIPM and ADB in all districts, through which the project funds will pass. Cuu Long CIPM is required to make available to the district boards funds for resettlement that will cover (i) payment for structures and utilities, (ii) allowances to the project affected persons, (iii) provision of basic services at the relocation sites, (iv) income restoration program, and (iv) administration expenses incurred by these district boards in relation to resettlement implementation. Cuu Long CIPM will be responsible for administering and monitoring loan funds for resettlement in accordance with ADB’s Loan Disbursement Handbook (2012, as amended from time to time). 21. Associated services of international and national firms will be required to undertake the detailed design, supervise construction activities, and help implement stage 2 under a single contract. This will require about 110 person-months of international consulting services and 1,400 person-months of national consulting services. The expected implementation period for the detailed design part is from March 2013 to June 2014. The implementation-support part of the services is tentatively expected from July 2014 to December 2018, subject to ADB’s approval of ensuing loan and satisfactory performance of the consulting firm(s). Cuu Long CIPM will recruit

6

the consulting firm(s) according to ADB’s Guidelines on the Use of Consultants (2010, as amended from time to time). An international consulting firm (or firms) in association with national consulting firm(s) will be engaged using the quality- and cost-based selection method with a quality–cost ratio of 80:20 and a full technical proposal. 22. The revised implementation arrangements are summarized in Table 3 and described in detail in the PAM (footnote 11).

Table 3: Revised Implementation Arrangements Aspects Arrangements Implementation period January 2013–December 2018 Estimated completion date 31 December 2018 Management

(i) Oversight body Ministry of Transport Nguyen Ngoc Dong, Vice-Minister (chair) Nguyen Hoang, Director General, Planning and Investment Department (member) Nguyen Thanh Hang, Deputy Director General, Planning and Investment Department (member)

(ii) Executing agency Ministry of Transport (iii) Key implementing agencies Cuu Long Corporation for Investment, Development and Project

Management for Infrastructure (iv) Implementation unit Division under (iii), Ho Chi Minh City, 10 staff

Procurement International competitive bidding

Completed

Consulting services (new output only)

Quality- and cost-based selection

1,510 person-months

$9.0 million

Retroactive financing and/or advance contracting

Advance contracting and retroactive financing of up to 20% of the loan and grant amounts is for consulting services, civil works and resettlement expenses.

Disbursement The loan and grant proceeds will be disbursed in accordance with the Loan Disbursement Handbook (2012, as amended from time to time) of the Asian Development Bank (ADB) and detailed arrangements agreed upon between the government and ADB.

Source: Asian Development Bank estimates.

III. DUE DILIGENCE

A. Technical

23. Cuu Long CIPM has completed detailed assessment and design drawings for improvements to soft-ground treatment measures. This involved a change in design criteria to account for differential settlement and long-term residual settlement of soft ground. This will ensure that the finished road surface meets the quality requirements for road safety and travel. A new ground settlement criterion—change in grade (CIG)—is introduced to control the variations in the finished road surface and is set to no more than 1% slope for the design speed of 70 km per hour. The existing civil works contracts are being amended to have adequate provisions to enable construction within the defined CIG parameters. Cuu Long CIPM will ensure that the same standards apply to civil works contracts financed by Export–Import Bank of Korea and make necessary contract amendments.

7

B. Economic and Financial

24. The results of the economic reevaluation for the project under additional financing produce an economic internal rate of return for the Viet Nam component of 15.7%, compared with the economic internal rate of return for the original project of 16.8%. This decrease is attributable to several factors, including the costs of the additional financing to undertake works in the project where costs have increased (i.e., Minh Luong–Ca Mau), and changes in traffic levels. 15 The project does not generate revenues and therefore financial analysis was not required. 25. The government has increased the road maintenance budget allocation during 2007–2012 (from D1.537 billion to D2,671 billion) for the entire national road network in line with the prevailing inflation rates in Viet Nam. In addition, as part of the overall road sector reform process and transition to a more sustainable maintenance program, the government established a road fund in 2012, financed from vehicles registration fees and fuel taxes. While the current funding level is sufficient for routine and small-scale periodic maintenance of the project roads within their first 7–10 years of operation, the road fund is expected to mature and satisfy the maintenance needs for major repairs and rehabilitation of the national road network, including the project roads, and thus ensure their long-term sustainability.

C. Governance

26. Existing procurement, financial management, and governance mechanisms will remain unchanged. Due to internal reforms within MOT, the project management structure was changed in 2009, and MOT took over ownership of the project from its subsidiary organization, the Viet Nam Road Administration, while maintaining the day-to-day project management within the My Thuan project management unit. The project management unit has recently been corporatized into Cuu Long CIPM, which is now responsible for implementation and management of the project. Cuu Long CIPM is currently implementing several donor-funded projects as well as MOT’s own projects, and its capacity is sufficient. 27. ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the government and MOT. Governance risks are low and this additional financing will follow established requirements within the current project.

D. Poverty and Social

28. The poverty and social dimensions envisaged at the time of the current project will remain unchanged. The project is classified as general intervention for poverty reduction and expected to benefit 420,000 low-income persons who live and work in the project area. The project’s gender aspects are being effectively integrated into an HIV/AIDS and human trafficking awareness and prevention program, as well as being monitored and managed through resettlement activities, and equal job opportunities and equal pay for equal work at the construction sites. Women make up about 30% of the workforce at construction sites. E. Safeguards

29. All additional civil works will be complementary to ongoing civil works within the same right-of-way as the current project and will not trigger additional resettlement. There will be no new impacts on environment and/or indigenous peoples associated with this additional financing. All resettlement plans have been updated from the appraisal stage, approved by ADB for

15 Economic and Financial Analysis (accessible from the list of linked documents in Appendix 2).

8

implementation, and disclosed in the ADB website as part of the current project. The implementation is ongoing and the government has set up a grievance redress mechanism that effectively deals with any claims from affected people. Cuu Long CIPM will monitor the use of loan funds for resettlement, and liquidation of any amount paid from any sub-account will be in accordance with ADB’s Loan Disbursement Handbook (2012, as amended from time to time). An international consultant was mobilized in December 2012 and will carry out independent monitoring of resettlement activities on a semiannual basis for a period of 2 years. This consultant is also tasked to review documentation on liquidation of any amount paid from any sub-account for resettlement.

F. Risks and Mitigating Measures

30. Based on the above impacts, the additional financing is classified as complex. The original safeguards categorization will remain unchanged, i.e., category A for involuntary resettlement and category B for indigenous peoples and environment. Major risks recognized during project appraisal included: (i) insufficient number of bids; (ii) delays in completion of procurement and resettlement; (iii) increased construction and resettlement costs; (iv) contractors’ failure to perform, and (v) increased number and severity of accidents. Risks related to procurement have been effectively managed during the bidding and contracting stages, and the performance of contractors is closely monitored. Implementation delays are unlikely since all project civil works are well advanced. This additional financing will (i) contribute to enhancing road safety characteristics, and (ii) cover the financing gap until the project completion date.16

IV. ASSURANCES

31. The government has assured ADB that implementation of the overall project shall conform to all applicable ADB policies, including those concerning anticorruption measures, safeguards, gender, procurement, consulting services, and disbursement as described in detail in the PAM and loan documents. 32. The government has agreed with ADB on certain additional covenants for the additional financing, which are set forth in the loan and grant agreements.

V. RECOMMENDATION

33. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve the loan in various currencies equivalent to SDR16,270,000 Special Drawing Rights to the Socialist Republic of Viet Nam for the additional financing of the Greater Mekong Subregion Southern Coastal Corridor Project, from ADB’s Special Funds resources, with an interest charge at the rate of 1.0% per annum during the grace period and 1.5% per annum thereafter; a term of 32 years, including a grace period of 8 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft loan agreement presented to the Board.

Haruhiko Kuroda President

18 January 2013

16 Risk Assessment and Risk Management Plan: Updated (accessible from the list of linked documents in Appendix 2).

Appe

ndix 1 9

REVISED DESIGN AND MONITORING FRAMEWORK (Viet Nam Component Only)

Design Summary (Current Project)

Design Summary (Overall Project)

Performance Targets and Indicators with

Baselines (Current Project)

Performance Targets and Indicators with

Baselines (Overall Project)

Data Sources and Reporting Mechanisms

(Overall Project)

Assumptions and Risks

(Overall Project) Impact Promoting economic growth in the project area and GMS by strengthening connectivity with neighboring countries and increasing competitiveness

Unchanged

Average per capita income in project-affected provinces will reach the national average within 5 years of project completion

Total trading volume between Cambodia and Viet Nam will double 5 years after project completion

Unchanged

National and regional economic data and statistics; baseline and ex-post surveys of household income levels in project-affected areas; project completion report and benefit monitoring and evaluation

International trade statistics

Assumption GMS CBTA is fully implemented

Outcome Reduce transport times and costs, and induce more efficient movement of passengers and goods within the project area and between GMS countries

Unchanged

Reduction in passenger and freight vehicle operating costs by an average of 30%, in real terms, within 5 years of project completion

Traffic on improved roads increases by 40% from 2008 baseline within 2 years of project completion

Cross-border processing times of under 0.5 hours for passengers and under 2.0 hours for freight by project completion

Unchanged

Baseline traffic and transport cost data; traffic counts at border crossings and strategic points in the transport network;

Customs statistics; field surveys and interviews of road transport operators and road users

AssumptionGMS CBTA is implemented at pilot sites Reciprocal operating permits are granted to commercial passenger and goods vehicles Risk Cross-border inspection procedures are not harmonized effectively

Outputs Assumption 1. Completion of the road

and bridge improvements enabling unrestricted passenger and freight transport

1. Unchanged In Viet Nam, improve 4 km of QL80 between Xa Xia and Ha Tien, 21 km of QL63 between Minh Luong and Thu Bay, and 70 km of TL7 from Thu

In Viet Nam, improve 4 km of QL80 between Xa Xia and Ha Tien, 21 km of QL63 between Minh Luong and Thu Bay, and 70 km of TL7

Project completion report; Quarterly progress and project performance monitoring reports

Procurement processes ensure that bidders are qualified and quality management and cost control of civil works

10 A

ppendix 1

Design Summary (Current Project)

Design Summary (Overall Project)

Performance Targets and Indicators with

Baselines (Current Project)

Performance Targets and Indicators with

Baselines (Overall Project)

Data Sources and Reporting Mechanisms

(Overall Project)

Assumptions and Risks

(Overall Project) 2. Border facilities

constructed

2. Border facilities constructed under stage 2 of the project

Bay to Ca Mau; construct bridges across the Cai Be and Cai Lon rivers; and construct border facilities at Xa Xia

from Thu Bay to Ca Mau; construct bridges across the Cai Be and Cai Lon rivers; and construct border facilities at Xa Xia under stage 2

Project progress and completion report

are effective. Risks Insufficient number of bids received from qualified, eligible bidders

3. HIV/AIDS and trafficking awareness and prevention programs completed on the project road

3. Unchanged

Finalization, approval, and implementation of resettlement plans and environmental management plans without delays

Unchanged

Delays in completion of procurement or resettlement also delay start of construction

4. Detailed design and implementation support for stage 2

Civil works contracts awarded within 9 months of invitation for bids

Project-specific web pages established and procurement information made available to the public

Unexploded ordnance cleared prior to start of civil works

Completion of civil works contracts on schedule, in compliance with conditions of contract and all defects rectified by end of defects liability period

Unchanged

Unchanged

Unchanged

Unchanged

Increased construction and resettlement costs reduce the scope of work achievable within the project

Contractors fail to perform as required

Increased number and severity of road accidents

Assumptions Project remains a priority intervention for the government and GMS Executing and implementing agencies remain unchanged and continue to perform satisfactorily

Road safety audits undertaken during detailed design and road safety awareness programs undertaken during construction period

Unchanged

Appe

ndix 1 11

Design Summary (Current Project)

Design Summary (Overall Project)

Performance Targets and Indicators with

Baselines (Current Project)

Performance Targets and Indicators with

Baselines (Overall Project)

Data Sources and Reporting Mechanisms

(Overall Project)

Assumptions and Risks

(Overall Project) All vulnerable groups

and contractor personnel have participated in HIV/AIDS and trafficking awareness and prevention programs

Unchanged Detailed designs for stage 2 agreed and approved by the government, ADB, and cofinanciers; implementation starts in 2014

Activities with Milestones (Overall Project) Inputs (Additional Financing) 1.1 Selection of detailed design and construction supervision consultant (completed) Begin Q4 2007 and complete Q4 2008—ADB component Begin Q4 2007 and complete Q4 2008—KEXIM component 1.2 Preparation of detailed design an bidding documents (completed) Begin Q4 2008 and complete Q4 2009—ADB component Begin Q4 2008 and complete Q4 2009—KEXIM component 1.3 Bidding for civil works contractors (completed) Begin Q2 2010 and complete Q1 2011—ADB component Begin Q2 2010 and complete Q1 2011—KEXIM component 1.4 Civil works for roads and bridges (unchanged) Begin Q2 2011 and complete Q1 2014—ADB component Begin Q2 2011 and complete Q2 2014—KEXIM component 1.5 Implement resettlement plans and project-specific gender strategy (unchanged) Begin Q4 2009 and complete Q2 2011 2.1 Civil works for cross-border facilities under stage 2 (changed) Begin Q3 2016 and complete Q4 2017 3.1 Implement HIV/AIDS and trafficking awareness and prevention programs (unchanged) Begin Q1 2010 and complete Q4 2014 4.1 Consultants for detailed design and implementation support for stage 2 (added) Recruitment begins in Q4 2012 and complete in Q1 2013 Consultants mobilized in Q2 2013 and design completed in Q2 2014 Implementation support begins in Q3 2014 and completed Q4 2018

ADB: $25 million ADF Item Amount ($ million) Civil works Resettlement Consultants Financing charges

9.0 6.8 8.6 0.6

Government of Viet Nam: $2.1 million Item Amount ($ million) Taxes and duties 2.1

Government of Australia: $12.0 million Item Amount ($ million)Civil works 12.0

ADB = Asian Development Bank, ADF = Asian Development Fund, CBTA = cross-border transport agreement, GMS = Greater Mekong Subregion, KEXIM = Export–Import Bank of Korea, QL = national highway Source: Asian Development Bank.

12 Appendix 2

LIST OF LINKED DOCUMENTS http://adb.org/Documents/RRPs/?id=41496-014-3

1. Loan Agreement

2. Grant Agreement

3. Sector Assessment (Summary): Transport, and Information and Communication Technology

4. Project Administration Manual

5. Summary of Project Performance

6. Contribution to the ADB Results Framework

7. Development Coordination

8. Economic and Financial Analysis

9. Country Economic Indicators

10. Summary Poverty Reduction and Social Strategy: Updated

11. Initial Environmental Examination

12. Resettlement Plan: Thu Bay–Nga Bac Section (Updated)

13. Resettlement Plan: Minh Luong–Thu Bay Section (Updated)

14. Resettlement Plan: Xa Xia–Ha Tien Section (Updated)

15. Resettlement Plan: Nga Bac–Ca Mau Section (Updated)

16. Risk Assessment and Risk Management Plan (Updated)

Supplementary Document

17. Outline Scope of Work and Terms of Reference for Consultants