viet nam: greater mekong subregion: …...the noi bai–haiphong highway link has already been...

Completion Report

Project Number: 33307 Loan Number: 2222 November 2010

Viet Nam: Greater Mekong Subregion: Kunming–Haiphong Transport Corridor—Noi Bai–Lao Cai Highway Technical Assistance Project

CURRENCY EQUIVALENTS

Currency Unit – dong (D)

At Appraisal At Project Completion (7 November 2005) (10 August 2010)

D1.00 = $0.000063 $0.000052 $1.00 = D15,895 D19,095

ABBREVIATIONS

ADB – Asian Development Bank GMS – Greater Mekong Subregion km – kilometer MFF – multitranche financing facility MIS – management information system MOT – Ministry of Transport PMU – project management unit PRC – People’s Republic of China REMDP – resettlement and ethnic minority development plan SDR – special drawing right TA – technical assistance VAT – value-added tax VEC – Vietnam Expressway Corporation

NOTE

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

Vice-President C. Lawrence Greenwood, Jr., Operations 2 Director General K. Senga, Southeast Asia Department (SERD) Director J. Lynch, Transport and Urban Development Division, SERD Team leader M. Nishimura, Transport Specialist, SERD Team members T. Mella, Operations Officer, SERD Y. Tanaka, Senior Transport Specialist, 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

BASIC DATA

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 1

A. Relevance of Design and Formulation 1 B. Project Outputs 2 C. Project Costs 3 D. Disbursements 4 E. Project Schedule 4 F. Implementation Arrangements 5 G. Conditions and Covenants 6 H. Consultant Recruitment and Procurement 6 I. Performance of Consultants, Contractors, and Suppliers 7 J. Performance of the Borrower and the Executing Agency 8 K. Performance of the Asian Development Bank 8

III. EVALUATION OF PERFORMANCE 8

A. Relevance 8 B. Effectiveness in Achieving Outcome 9 C. Efficiency in Achieving Outcome and Outputs 9 D. Preliminary Assessment of Sustainability 9 E. Impact 9

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 9

A. Overall Assessment 9 B. Lessons 10 C. Recommendations 11

APPENDIXES

1. Project Framework 12 2. Chronology of Major Events 15 3. Comparison of Planned and Actual Implementation Schedules 17 4. Status of Compliance with Loan Covenants 18 5. Dates of Contract for Investment Loans 24

BASIC DATA A. Loan Identification 1. Country 2. Loan number 3. Project title 4. Borrower 5. Executing agency 6. Amount of original loan 7. Net loan amount 8. Project completion report number

Socialist Republic of Viet Nam 2222 Greater Mekong Subregion: Kunming–Haiphong Transport Corridor—Noi Bai–Lao Cai Highway Technical Assistance Project Socialist Republic of Viet Nam Ministry of Transport SDR4,209,000 ($6.0 million equivalent) SDR3,973,370 ($6.2 million equivalent) PCR: VIE 1188

B. Loan Data 1. Appraisal – Date started – Date completed 2. Loan negotiations – Date started – Date completed 3. Date of Board approval 4. Date of loan agreement 5. Date of loan effectiveness – In loan agreement – Actual – Number of extensions 6. Closing date – In loan agreement – Actual – Number of extensions 7. Terms of loan – Interest rate – Maturity (number of years) – Grace period (number of years) 8. Terms of relending (if any) – Interest rate – Maturity (number of years) – Grace period (number of years) – Second-step borrower

Waived 17 November 2005 19 November 2005 19 December 2005 19 January 2006 18 April 2006 3 October 2006 2 30 September 2008 12 May 2010 2 1.0% during grace period 1.5% thereafter 32 8 Not applicable

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9. Disbursements a. Dates

Initial Disbursement

25 April 2007

Final Disbursement

12 March 2010

Time Interval

34.5 months

Effective Date

3 October 2006

Original Closing Date

30 September 2008

Time Interval

24 months

b. Amount (SDR3,973,370; $6,210,143 [equivalent])

Cat. No.

Category or Subloan

Original Allocation

Partial Cancellations

Last Revised Allocation

Amount Disbursed

Undisbursed Balance

1. 2. 3.

4. 5.

Consulting services Equipment Incremental administration costs Interest charge Unallocated Total (SDR) Total ($ equivalent)

3,578,000 172,000

73,000 70,000

316,000

4,209,000

6,000,000

(163,227) 63,278

13,051

6,528 316,000

235,630

350,704

3,741,227 108,722

59,949 63,472

0

3,973,370

6,210,143

3,741,227 108,722

59,949 63,472

0

3,973,370

6,210,143

0 0 0 0 0 0 0

10. Local costs (financed) - Amount ($) 1,588,445 - Percent of local costs 25.00 - Percent of total cost 20.36 C. Project Data

1. Project cost ($)

Cost Appraisal Estimate Actual

Foreign exchange cost 3,050,000 6,210,143 Local currency cost 4,950,000 1,588,445 Total 8,000,000 7,798,588

2. Financing plan ($)

Cost Appraisal Estimate Actual Implementation Costs Borrower-financed 2,000,000 1,588,445 ADB-financed 6,000,000 6,210,143 Other external financing 0 0

Total 8,000,000 7,798,588

IDC Costs Borrower-financed 0 0 ADB-financed 100,000 99,087 Other external financing 0 0

Total 100,000 99,087

ADB = Asian Development Bank, IDC = interest during construction.

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3. Cost breakdown by project component ($)

Component Appraisal Estimate Actual

1. Consulting services 7,400,000 7,331,288 2. Equipment 350,000 236,991 3. Incremental administrative costs 150,000 131,222 4. Interest charge 100,000 99,087

Total 8,000,000 7,798,588

4. Project schedule

Item Appraisal Estimate Actual

Date of Contract with Consultants

(i) TA design consultant (ii) TA design appraisal consultant

July 2006

...

4 January 2007 27 March 2008

Completion of engineering designs July 2007 31 December 2009 ... = not applicable, TA = technical assistance. 5. Project performance report ratings

Ratings Implementation Period Development

Objectives Implementation

Progress

From 3 October 2005 to 31 December 2005 Satisfactory Satisfactory From 1 January 2006 to 31 December 2006 Satisfactory Satisfactory From 1 January 2007 to 31 December 2007 Satisfactory Satisfactory From 1 January 2008 to 31 December 2008 Satisfactory Satisfactory From 1 January 2009 to 31 December 2009 Satisfactory Satisfactory

D. Data on Asian Development Bank Missions

Name of Mission Date No. of

Persons

No. of Person-

Days

Specialization of Members

Reconnaissance 1–2 July 2004 1 2 a

Fact-finding 22 August– 2 September 2005

4 19 a, b, c

Loan inception 23–27 January 2006 3 13 a, b, e

Loan review 29 November– 1 December 2006

1 4 a

Loan review 3–9 February 2007 1 5 a

Loan review 5–10 March 2007 6 24 a, b, d, f

Loan review 28 May–2 June 2007 1 4 a

Loan review 8–13 October 2007 1 5 a

Loan review 5–14, 21–23 October 2009

3 20 a, d

Project completion review 19–30 August 2010 3 11 a, e, f a = engineer, b = financial specialist, c = economist, d = safeguard specialist, e = project analyst, f = consultant.

I. PROJECT DESCRIPTION

1. The Greater Mekong Subregion: Kunming–Haiphong Transport Corridor—Noi Bai–Lao Cai Highway Technical Assistance Project1 was designed to assist the Government of Viet Nam in preparing the Noi Bai–Lao Cai highway project. The scope of the project included detailed engineering design, updated economic and financial studies, social and environmental studies, and procurement assistance for civil works and construction supervision consulting services for the ensuing project loan.2 2. The project highway is an integral section of the Greater Mekong Subregion (GMS) transport corridor connecting the international port of Haiphong, Ha Noi, and the international airport at Noi Bai, with Kunming in Yunnan Province in the People’s Republic of China (PRC). At the border with the PRC, the project highway will connect to the Kunming–Hekou Expressway via a newly constructed customs and immigration facility. The existing road connecting Ha Noi and Lao Cai is narrow, with several low-capacity bridges and sections of severe alignment. The existing road does not have the potential to meet future increases in traffic demand. The Noi Bai–Haiphong highway link has already been improved with assistance from other development agencies, and the 400-kilometer (km) long Kunming–Hekou Expressway to the border with Viet Nam was partly completed in 2008. 3. The executing agency for the project was the Ministry of Transport (MOT), and the implementing agency was the Vietnam Expressway Corporation (VEC). The VEC formed a project management unit (PMU) for the project highway.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

4. Since the Asian Development Bank (ADB) resumed its operation in Viet Nam in 1993, the government in partnership with ADB and other development partners has been undertaking an extensive program to improve the existing primary and secondary road network. The improvement in the road network and other economic infrastructure has contributed to high economic growth with annual growth of real gross domestic product averaging 7.1% between 1990 and 2009, and a significant fall in the country’s poverty rate, from 53% in 1993 to 25% in 2005. Economic growth and the corresponding reduction in poverty rates are expected to continue, provided there is a continuing high level of investment in economic infrastructure.3 5. The high economic growth has resulted in significant increases in vehicle ownership and freight transport, and the capacity of the recently improved road is insufficient to meet the increased traffic demand. The government, with technical assistance (TA) from ADB, 4 embarked upon an expressway network development plan with the objective of connecting key economic centers, transport facilities, and main border gates. The government’s latest plan 1 ADB. 2005. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the

Socialist Republic of Viet Nam for the Greater Mekong Subregion: Kunming–Haiphong Transport Corridor—Noi Bai–Lao Cai Highway Technical Assistance Project. Manila.

2 ADB. 2007. Report and Recommendation of the President to the Board of Directors: Proposed Loans to the Socialist Republic of Viet Nam for the Greater Mekong Subregion: Kunming–Haiphong Transport Corridor—Noi Bai–Lao Cai Highway Project. Manila (Loan 2391-VIE, $896,000,000; and loan 2392-VIE[SF], SDR127,373,000; approved on 14 December).

3 Government of Viet Nam. 2006. Socio-economic Development Plan 2006–2010. Ha Noi. 4 ADB. 2005. Technical Assistance to the Socialist Republic of Viet Nam for Expressway Network Development Plan

Project. Manila (TA 4695-VIE).

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defined 22 expressways with the total length of 5,873 km. 5 The project highway is an essential part of the Northern Expressway Network, in which seven radial expressways from Ha Noi are defined. The project highway is considered by the government to be a flagship project.

6. The GMS Kunming–Haiphong Corridor contains three transport modes: road, rail, and inland waterways via the Red River. 6 The existing road and rail connections are in poor operating condition which results in very long travel times. Economic and financial analyses7 have shown that substantial economic benefits will accrue from upgrading both the road and rail systems. The analyses also revealed that improvement of the road system showed high financial viability if appropriate tolls were charged. The improvement of the corridor will enhance the link between the rapidly expanding economy of the PRC’s Yunnan Province and Haiphong (the nearest international container port), through the nation’s capital, Ha Noi. 7. The project was the first TA loan to be prepared in Viet Nam. This modality has proved highly effective in giving ownership to the executing and implementing agencies. The VEC has been efficient and effective in selecting the consultants and managing the services. As this was the first such loan, there has been a high level of supervision and review by the ADB project staff, with six missions being fielded in the first 6 months of the consulting services.8 This intensity of review greatly contributed to the early resolution of implementation problems that could have affected progress. It also greatly contributed to good communications and the establishment of a good relationship between the consultant and the VEC. 8. The project was implemented over a 48-month period (January 2006–December 2009) although at appraisal the project period was estimated at 21 months. The 27-month delay in implementation is typical of the start-up phase of projects in Viet Nam and is a lesson learned from previous ADB country portfolio review missions. The potential for late implementation was the primary rationale for implementing the preparation phase through a smaller TA loan and not through the much bigger investment project loan. Assistance through a TA loan was therefore fully justified by the substantial savings to government in commitment charges and other finance costs that would have been incurred had project preparation been financed under the investment loan. B. Project Outputs

9. The feasibility study for the project highway confirmed its economic and financial viability. Under the project the government was provided with preparatory work for the highway construction and commissioning. The scope of the project included (i) detailed engineering design; (ii) updated economic and financial studies based on the detailed engineering designs and costs; (iii) social and environmental studies, including environmental impact assessment and resettlement and ethnic minority development plans; and (iv) procurement assistance for civil works, so that related contracts would be ready for award when project loans become effective. Procurement was undertaken in line with ADB’s Anticorruption Policy (1998), Guidelines on the Use of Consultants (2007, as amended from time to time), and Procurement Guidelines (2007, as amended from time to time). A secondary output of the project would be a

5 Government of Viet Nam. 2008. Approvals of Vietnam Expressway Network Developing and Planning until 2020

and the View for Post-2020. Ha Noi (Decision 1734/QD-TTg). 6 ADB. 2005. Regional Cooperation Strategy and Program Update (2008). The Greater Mekong Subregion-Beyond

Borders. Manila. 7 ADB. 2005. Technical Assistance to Socialist Republic of Viet Nam for Preparing the Kunming–Haiphong Transport

Corridor Project. Manila (TA 4050-VIE). 8 The number includes the missions for the investment loan.

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significantly strengthened VEC with the capacity to manage the subsequent highway project and develop similar projects in the future. 10. The loan was closed in May 2010 as the vast majority of the assignment was completed. However, at the loan closure the consultant had unfinished activities: The updated resettlement and ethnic minorities development plans (REMDPs) had not been completed; this was due to a substantial delay in data collection by the project districts. Also, approved bidding documents for equipment contract packages B-1 and B-2 had not been submitted; this was due to the timing of the procurement, because the procurement for these equipment packages cannot be commenced until the civil works are nearly complete.9 In retrospect, the detailed design and preparation of bidding documents for the equipment packages should have been included in the investment loan. 11. ADB, VEC, and the consultant agreed that (i) the responsibility for the remaining REMDPs would be passed to the supervision consultant under the investment loan so that the supervision consultant could be familiarized with the REMDPs and smoothly support their implementation; and (ii) equipment packages would be completed, and some equipment would be used for operation and maintenance of another expressway to improve the capacity of the VEC before the completion of the project highway. 12. Due to the size and complexity of the highway project, the VEC, with concurrence from ADB, engaged an international consulting firm from the loan to appraise the detailed highway design and recommend acceptance to the MOT. The appraisal consultant was quickly procured and funded in a small assignment financed from the loan contingency. Appraisal was successfully carried out over a 3-month period at a cost of $199,995. C. Project Costs

13. The actual project cost was $7.8 million, compared with the appraisal estimate of $8.0 million. The actual and appraised foreign and local costs are given in Table 1, and these are broadly similar. At loan closing, ADB’s actual disbursement of $6.21 million financed 80% of project costs, and the government’s actual disbursement of $1.59 million financed the remaining 20%. Overall, actual costs and financing were similar to those estimated at appraisal.

Table 1: Project Cost and Financing ($ million) Appraisal Actual

Item Foreign Local Total

Ratio (%)

Foreign Local Total Ratio (%)

ADB 2.945 3.055 6.00 75 3.180 3.030 6.21 80

Government 0.105 1.895 2.00 25 0 1.590 1.59 20

Total 3.050 4.950 8.00 100 3.180 4.620 7.80 100

ADB = Asian Development Bank. Sources: Asian Development Bank and Vietnam Expressway Corporation.

9 Details of the contract packages under the investment loan are in Appendix 5.

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D. Disbursements

14. The project had an implementation period of 21 months and a disbursement period of 24 months at appraisal. The actual annual disbursements are shown in Table 2. The loan was disbursed more slowly than initially envisaged because of project implementation delays incurred in procurement of the consultant, survey, design, and especially in preparation of updated resettlement plans and civil works procurement packages. 15. Payments to the consultant were initially disrupted by two areas of contention: (i) whether a proportion of the contingencies in the lump sum contract could be claimed in the advance payment, and (ii) the liability for payment of value-added tax (VAT) on the national subconsultant inputs. It took 8 months to resolve these issues by preparing a contract amendment that identified the proportion of work allocated to national consultants and the VAT liability. It is known that similar problems have arisen on other consultancy services contracts. It is recommended that, in future, procurement document and services contracts offer clear guidance on these issues. 16. Despite initial difficulties, 75% of the original contract sum was disbursed within 13 months of the commencement of services. The consultant adopted a flexible approach to accelerating progress in order to provide necessary input to the project. The additional duties resulted in the contract variations with the total increased contract amount of 4%, for which funds were reallocated in October 2008 to utilize surplus loan proceeds. Loan proceeds were disbursed in accordance with ADB’s Loan Disbursement Handbook (2001) and through an imprest account. On 6 January 2010 the last withdrawal application was finalized, and the loan account was closed on 12 May 2010. An undisbursed loan balance of SDR235,629.88 ($350,704 equivalent) was cancelled at closure.

Table 2: Actual Annual Disbursements ($ million, %) Annual Disbursement Cumulative Disbursement Year

($ million) (%) ($ million) (%) 2006 0 0.0 0 0.0 2007 2,612,605 42.1 2,612,605 42.1 2008 2,100,575 33.8 4,713,180 75.9 2009 903,828 14.6 5,617,008 90.4 2010 593,135 9.6 6,210,143 100.0

Source: Asian Development Bank.

E. Project Schedule

17. There were 17–30 month delays in project implementation from the date planned at appraisal to the actual award of civil works contracts. These delays were not due to poor performance by the consultants. They were due to an unrealistic project schedule set at appraisal and unexpected approval procedures in the local government. The delays in government approval were caused by the unexpectedly low capacity of project provinces and districts to update the REMDPs. The consultant’s contract period of 15 months and the budget were inadequate to achieve the services described in the terms of reference. The periods provided for resettlement planning and land acquisition activities were particularly inadequate. The contracted consultant was granted six variation orders, including two extensions of contract period. The contract was extended to December 2009, although unfinished services extended into 2010. The total extension was 20 months, which was greater than the original contract period of 15 months.

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18. The bulk of the survey and detailed design of civil works, including the cost estimates, was completed in a very reasonable period of 12 months, and this represented the bulk of the consultant input as contracted. Maintaining this good progress was, no doubt, assisted by this being a lump-sum contract. The civil works design continued to be refined during the much-extended resettlement planning and civil works procurement periods. Preparation of civil works bidding documents, including approval by the VEC, took a total of 27 months after substantial completion of the survey and design. 19. The schedules at appraisal assumed that design and documentation activities, and resettlement and land acquisition activities, would all be completed at the same time, thus permitting all civil works contracts to be procured at the same time. However, due to a sharp price escalation during the preparation phase, there was high risk of project cost overrun. The VEC, in close coordination with ADB, decided not to bid-out eight civil works packages at one time, but to make phased arrangements for the procurement. As a result, the civil works contracts were procured over an 8-month period. The planned and actual implementation schedules are summarized in Table 3 and Appendix 3.

Table 3: Project Implementation Schedules and Delays Expected and Actual Completion Delay (months)

Milestones Appraisal

Consultant Contract

Actual From

Appraisal From

Contract Consultant selection

July 2006 ... January 2007 6 ...

Surveys and detailed design

March 2007 January 2008 Not completed at

loan closurea,b 38+ 27+

Completion of updated REMDPs

October 2007 August 2008 Not completed at

loan closureb 31+ 21+

Procurement of civil works, first contract award

October 2007 September 2008 March 2009 17 6

Procurement of civil works, last contract award

October 2007 August 2008 April 2010 30 20

Effectiveness of investment loan

March 2008 ... March 2009 12 ...

... = not available, REMDP = resettlement and ethnic minority development plan. a The majority of this work was completed in the first 12 months. b The loan was closed in May 2010. Source: Asian Development Bank. F. Implementation Arrangements

20. The MOT was the executing agency and the VEC was the implementing agency. The VEC established a dedicated PMU in January 2006 responsible for implementation of the Noi Bai–Lao Cai highway project. The PMU was established initially with eight staff, and was later strengthened by the recruitment of four environmental and other specialists. Senior staff of both the MOT and VEC had significant experience in implementing large-scale road development projects. The implementation arrangements were entirely satisfactory, although the PMU suffered a number of staff changes during the course of the project. This lack of continuity affected archiving and retrieval of project information. It is recommended that a management information system (MIS) be established by consultants employed under the investment loan. For complex multicontract projects, the installation of a functioning MIS should be included in

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the scope of works and financed under the loan. Had this occurred, the VEC would have been greatly assisted in formulating and retrieving reports despite the staff changes. 21. An international consulting firm was employed to appraise designs due to the size and complexity of the highway project (para. 12). This avoided design approval delays. 22. In the original scope of the project, the consultants were to prepare only a general REMDP. Due to the delay in the engagement of the supervision consultant under the ensuing investment loans, the VEC, with concurrence from ADB, requested the consultant to prepare the district-level updated REMDPs and provide the VEC with TA. An addendum to the contract was signed on 28 November 2008 between the VEC and the consultant. However, these services proved to have been severely underestimated. Surveys, data filing, and documentation by the project provinces and districts were time-consuming for 244 km of new alignment through undeveloped and relatively isolated areas containing a considerable ethnic minority population. The province and district government staff were not deeply involved when the general REMDP was prepared. VEC staff might have misunderstood that land acquisition and resettlement would be carried out using VEC procedures because the VEC was going to finance them. ADB also engaged an individual consultant to assist the local governments and the VEC with these issues. G. Conditions and Covenants

23. Prior to 2008, the minister of transport was legally required to conduct and approve a domestic feasibility study as a condition precedent to granting loan effectiveness. This domestic feasibility study was an additional procedure and needed to be more detailed than the feasibility studies conducted under the donor-funded TA. The domestic feasibility study for this project was conducted under MOT and VEC financing. 10 This additional procedure caused two postponements to the date of loan effectiveness. In 2008, the government issued new guidelines on preparation of feasibility studies,11 and ADB accepted these. The new guidelines require only one feasibility study to be undertaken for acceptance by both parties as a condition for loan effectiveness. Now, implementation delays caused by differences in legal requirements regarding acceptance of the feasibility study can be avoided.

24. The status of compliance with loan covenants is summarized in Appendix 4. The loan covenants were all relevant and standard for this type of project, and no covenant was modified, suspended, or waived. All covenants have been realized and complied with. The updated REMDPs for some districts were not completed within the project period, and their compliance with the covenants cannot be assessed. However, the completed REMDPs meet the requirements of ADB’s respective policies. It is intended that the completion of the REMDPs will continue under the investment loan. Submission and approval is anticipated by the end of 2010, and this will further enhance full compliance with the loan covenants. H. Consultant Recruitment and Procurement

25. Consulting services were implemented by recruitment of an international consulting firm in association with national consultants, and using the quality- and cost-based selection procedures with full technical proposal. The recruitment by the VEC was in accordance with

10 Transport Engineering Design. 2005. Feasibility Study Report of Noi Bai–Lao Cai Highway Project. Ha Noi. 11 Prime Minister of Viet Nam. 2008. Decision 48/2008/QD-TTg: General Guidelines on Official Development

Assistance Project Feasibility Study Preparation. Ha Noi.

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ADB’s Guidelines on the Use of Consultants (2005). The terms of reference in the request for proposals were extremely comprehensive and showed a budget of $6.4 million, but provided only 15 months to complete the comprehensive services. 26. Recruitment of consultants was advertised in September 2005 in advance of signing the loan agreement, and an individual consultant was engaged under separate TA to assist the VEC in reviewing expressions of interest and preparing the short list and the request for proposals (footnote 4). Despite these actions, the recruitment process took a full 12 months from loan signing as opposed to the 6-month period programmed in the request for proposal. The request for proposal was issued to the short-listed firms in March 2006. The consultant recruitment activity monitoring procedures were used to schedule and monitor recruitment, and procurement was completed in October 2006. A further 3-month delay occurred, and the consultant’s contract was signed in January 2006. The delay was due to a discrepancy in the evaluation of technical proposals between the VEC and ADB. This discrepancy was resolved by making it a condition for one of the consultants to submit an additional proposal on the incomplete items in the technical proposal once the firm was invited for negotiation. Both ADB and the VEC were very active and responsive during the consultant selection process. 27. An international consulting firm was engaged to appraise the detailed highway design (para. 12). The consultant was selected following the consultant qualification selection procedure. The recruitment of consultants was advertised on ADB’s website on 20 December 2007; the contract was signed on 3 April 2008. I. Performance of Consultants, Contractors, and Suppliers

28. The international design consultant had broad experience in Viet Nam on infrastructure projects financed by ADB and development partners. The associated national consultant was well staffed and also had broad experience in working with the international consultant. 29. The lump-sum contract provided the consultant with an incentive to complete the consulting services quickly, and gave the consultant flexibility with expert assignments. The consultants quickly mobilized and commenced surveys. The progress of the consultants in the first 12 months of the assignment was commendable, as was the quality of their reports, designs, and bid documents. Great efforts by the consultant enabled ADB to process the investment loan in 2007. 30. The contract assignment of 15 months extended to more than 35 months. The additional 20 months were mainly required for land acquisition and resettlement activities and preparation of the bidding documents for civil works contracts (paras. 17–19). During this extension period the consultant maintained staff, sometimes at its own expense, to respond to the queries of the VEC. 31. The consultant was engaged in finalizing design documents for the equipment packages up until the time of loan closure. Bidding of these packages lagged behind implementation of the civil works packages and was not critical to commencement of the civil works. Implementation of these packages is dependent upon substantial completion of the civil works. Arrangements have been made to complete these packages (paras. 10–11). 32. The consultant’s performance can be rated satisfactory for survey, detailed design and bid document preparation, resettlement, and social planning.

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33. The appraisal consultant successfully carried out the required services. This consultant’s performance can also be rated satisfactory. J. Performance of the Borrower and the Executing Agency

34. The performance of the borrower, represented by the State Bank of Vietnam and the MOT, was generally satisfactory. These bodies have the benefit of a large experience base built upon similar projects. The performance of the VEC would have been greatly improved if these bodies reformed the systems for granting approval to designs and bid documents. While nominally these duties are by decree wholly assigned to the VEC by the MOT, in fact, the MOT retains some of the authority to approve. This approval system consumes a considerable amount of time. 35. The State Bank of Vietnam was required to intervene and rule upon the conditions of VAT payments on work assigned to national consultants (para. 15). This took a considerable time to resolve and had an initial effect on disbursement. It would be useful if the State Bank of Vietnam was able to make a clear ruling on VAT for contracts involving national and international service providers. This can be incorporated in request for proposals so that short-listed consultants have a clear understanding of payment requirements for incorporation into their financial proposals. K. Performance of the Asian Development Bank

36. The performance of ADB was satisfactory to highly satisfactory. The project team mounted frequent missions during the project, including the ones for ensuing investment loans. The frequency of the review and monitoring missions considerably contributed to the timely solving of problems likely to affect the project’s implementation and cost. Approvals of contract variations were quickly given, as were comments on the prepared bidding documents. 37. ADB provided specific and timely advice to the VEC and to the consultant on preparation of the REMDP and bidding documents for civil works. However, the initial schedule for completion of those was overly optimistic and unrealistic. The employment under the loan of the independent design appraisal consultant, which was initiated by ADB, contributed considerably to timely appraisal by the VEC.

III. EVALUATION OF PERFORMANCE

A. Relevance

38. No changes were made that affected the relevance of the project. The project was relevant and consistent with the government’s development objectives, ADB’s country development objectives, and GMS regional transport objectives. The project prepared for the planned highway that will lead to reduced travel times and travel costs for regional and international traffic. The project highway will stimulate economic activity in, and improve access to, an underdeveloped and relatively isolated region of Viet Nam.

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B. Effectiveness in Achieving Outcome

39. Five outcome items were set in the project’s design and monitoring framework (Appendix 1). However, two items12 are unachievable at the completion of the project and should have been considered as outcomes for the ensuing highway project. Another item13 is external, even for the highway project, and can only be included in the assumptions and risks of the highway project. The project enhanced the capabilities of the VEC in managing and implementing the highway construction (item 5) and thus was effective in achieving two outcome items, i.e., items 1 and 5. C. Efficiency in Achieving Outcome and Outputs

40. There were delays in achieving major milestones largely due to an unrealistic time scale at appraisal and unexpected approval procedures in the government (para. 17). Improvements in efficiency would have been obtained had the VEC established an MIS (para. 20).

D. Preliminary Assessment of Sustainability

41. The VEC’s financial sustainability is of major concern to the sustainability of the highway project. A financial assessment of the VEC was carried out during the project. The projected debt–equity ratio was considered high compared to other public service providers such as electricity companies. Financial projections of future accumulated revenue streams, however, did indicate an overall satisfactory operational efficiency and future debt service capability. The continuing financial viability of the VEC is the largest threat to sustainability of the project highway, as operations and maintenance will be funded from toll revenue. The financial analysis showed that a toll rate of D1,000 per km for a passenger car is required to cover operation and maintenance costs and repayment of ADB loans, and that government subsidy is required to reduce the VEC’s financial burden incurred by issuing bonds. E. Impact

42. The project has prepared poverty, economic, financial, environmental, social, gender, ethnic minority, and resettlement plans to mitigate impacts of the land acquisition, land clearance, construction, and future operations of the expressway. The impacts can only be assessed on completion of the investment project and commissioning of the first phase highway. Implementation and monitoring of these plans are included in the duties of the VEC and the provincial governments, together with the construction supervision consultant and the civil works contractors. Covenants covering these mitigation and awareness plans are included in the loan agreement of the highway project.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

43. The project closely followed the implementation conceived at appraisal except for project duration and level of effort required. Adequate and timely remedial measures were taken in the form of issuing variation orders and providing appropriate ADB support to ensure that the

12 Item 2: Enable 1-day transport between Kunming and Haiphong upon completion of the highway between Noi Bai

and Lao Cai; and item 3: Generate revenue for VEC through income from the highway. 13 Item 4: Create a new freight transport link between Yunnan province in the PRC and Ha Noi–Haiphong port.

10

project framework objectives were fully achieved. The project framework is reviewed in Appendix 1. The project is rated successful. B. Lessons

44. The use of a TA loan for project preparation rather than including project preparation in the investment loans is fully justified because (i) it enabled project costs, revenues, and social and environmental impacts to be more accurately assessed before preparation and signing of the investment loan; and (ii) it reduced the borrower’s commitment charges caused by implementation delays of 20 months. 45. The multitranche financing facility (MFF) mode was mainstreamed into ADB’s financial operations in July 2008.14 TA and investment loans can be combined in an MFF as separate tranches. However, use of an MFF should not be recommended for large and complex projects such as the project highway because there is high risk of project cost overrun. The estimated total cost increased from $620 million at the TA loan appraisal to $1,216 million at the investment loan appraisal. The project cost would have considerably exceeded the maximum financing amount if an MFF had been used. However, if an MFF had been used the borrower could have benefited from the flexibility in timing of ADB financing and ADB’s early commitment to the investment loans without incurring the commitment charges. 46. Senior staff of both the VEC and MOT had significant experience in implementing large-scale road development projects. Both agencies had sufficient capacity to carry out the project, and the capacity was further enhanced through the project. The delays in resettlement planning were mainly caused by low capacity of project provinces and districts but not of the executing or implementing agencies. The project provinces and districts should be involved from the early phases of REMDP preparation. Terms of reference for the consultant should be more realistic in predicting the project period, particularly for new infrastructure projects with considerable social and resettlement impacts, and multiple works procurements. 47. In any project implementation, it is much more efficient to identify and correct problems in the initial part of the project period. The frequency of ADB review missions in the initial phase of the project achieved this efficiency and did a great deal to prevent further delays. The lesson is to have a higher frequency of review missions in the early phase of project implementation. 48. In a fixed-fee services contract, inclusion of the value of the project contingency in calculation of the advanced payment should be carefully explained in the request for proposals. Similarly, the regulations applied to VAT duties on national subconsultancy services should be clearly stated. 49. The status of completion should be carefully examined before loan closure. In the event that there are outstanding activities, the contractual arrangements for completion should be carefully defined and committed before loan closure. It is a risk to assume that completion can take place under another loan with an unknown time frame and be dependent on a third-party consultant. Preparation of detailed design and bidding documents for the equipment packages should not have been included in the scope of the TA loan (para. 11). 50. The employment of an independent design appraisal consultant has been expedient and has avoided delays (para. 12). Consideration should be given to the inclusion of an independent

14 The MFF was introduced in August 2005.

11

appraisal consultant in future large and complex design preparation projects with an underresourced implementing agency. C. Recommendations

1. Project Related

51. Future monitoring. Monitoring of the project implementation and performance will continue under ADB’s investment loan. Monitoring of the VEC’s financial condition should take place, particularly if ADB is to finance further expressways in Viet Nam. 52. Covenants. The investment loan contains adequate covenants for implementation. 53. Further action or follow-up. Actions required to complete the project include (i) completion of the updated REMDP and its final approval by ADB, and (ii) completion of bidding documents for the equipment contract packages and their final approval by ADB. 54. Additional assistance. Additional assistance on project implementation and performance monitoring is given under the investment loan. 55. Timing of the project performance evaluation report. The project performance evaluation report should be carried out when the highway project is completed so that all the outcomes set in the design and monitoring framework can be measured.

2. General

56. During the implementation of the investment loans, the VEC was responsible for managing eight civil works contracts, an electrical and tolling equipment contract, an operation and maintenance equipment and vehicles supply contract, and the construction supervision contract. These contracts total over $700 million. In addition, the VEC is required to implement the REMDP and social programs, coordinate the activities for land acquisition and utilities diversions, and liaise with the provincial governments, environmental authorities, and, not least, with ADB. While the VEC has the capabilities to do all of this, its efficiency would be greatly enhanced if it had installed an MIS database, and staff were trained in the use of that system. The system could be extended to include all other activities and contracts of the VEC. An MIS would greatly enhance the VEC’s ability to manage and control projects and to produce reports. Such systems are now standard in large complex project management situations. The relatively modest cost of installing an MIS and providing training in use would be more than repaid by greatly improved efficiencies in VEC management and reporting. ADB should review whether such a system can be implemented under the investment loans.

12 A

ppendix 1

PROJECT FRAMEWORK

Design Summary

Performance Targets/Indicators

Data Sources/ Reporting

Mechanisms

Assumptions and Risks

Evaluation

Impact 1. Promotion of economic growth in the project area and GMS by strengthening connectivity with neighboring countries and increasing competitiveness 2. Reduced poverty in the project area

Average per capita income in Phu Tho, Vinh Phuc, Yen Bai, and Lao Cai provinces will reach the national average by 2015 Total trading volume with PRC will double by 2015 Poverty rate is aimed to drop 15–18% by 2015

National statistics on population, income, trade, and industry Provincial statistical reports Household living standard survey

Assumption • Streamlined cross border operation and no barriers to trading and mobility Risks • Reduction in economic growth • Barriers for decentralization of social and economic activities, and public sector’s services

These results will be realized on completion of the investment project and commissioning of the first phase highway.

Outcome 1. Enable the Implementing Agency (VEC) to construct the Noi Bai-Lao Cai Highway 2. Enable 1-day transport between Kunming and Haiphong upon completion of the highway between Noi Bai and Lao Cai 3. Generate revenue for VEC through income from the highway 4. Create a new freight transport link between Yunnan province, PRC,

Civil works contracts to be awarded will be ready when the ensuing loan becomes effective The highway will be completed by 2010 EIRR of the highway project will be higher than 12%, and project FIRR in real terms after tax will be higher than WACC A substantial proportion of freight originating in Kunming going to ports in PRC will be diverted to the Kunming-

Reports of review missions Progress reports made by construction supervision consultants Financial statement, audit report, and financial projection of VEC Custom and immigration statistics Traffic count and origin-destination surveys Interview with forwarders in Kunming and Haiphong Port Authority

Assumptions • The highway is constructed based on the outputs of the TA • ADB finances the highway project • Lao Cai-Hekou border is operated based on GMS Cross-Border Transport Agreement • Trade and transport security in destination countries is ensured • Counterpart financing and human resources are available to carry out the Project Risks • Construction of the highway is delayed

The VEC is constructing the highway under ADB loans. Its capabilities to manage and implement the highway construction were strengthened under the project. Outcomes 2, 3, and 4 will be realized upon commissioning of the first phase highway. The ongoing investment project includes social awareness programs for human trafficking, illicit drugs, and HIV/AIDS to mitigate the risks.

Appe

ndix 1 13

Design Summary



Mechanisms


Evaluation

and Hanoi-Haiphong port 5. Strengthen VEC’s project management capability

Haiphong corridor • Toll revenue is lower than expected due to low traffic demand or lower than expected toll rates • Trafficking of women and children and prevalence of HIV/AIDS are expanded through the project highway

Outputs 1. Detailed design of the highway and related facilities 2. Update of detailed economic and financial analysis of the Project and financial assessment of VEC 3. Planning for environmental mitigation measurements, land acquisition and resettlement, and social development 4. Procurement documents for civil works and assistance in procurement exercise 5. Preparation of investment loan for the highway

Detailed design documents will be completed by March 2007 Economic and financial viability of the Project and financial capability of VEC will be confirmed; safeguard plans will be approved by ADB by April 2007 Procurement of civil works will start by March 2007 and bid evaluation will be approved by ADB by December 2007 Pre-physical activities for land acquisition and resettlement will be fully completed by March 2008 Loan for the investment project will become

Reports of review missions Inception, monthly progress, and project completion reports prepared by consultants Consultation with project stakeholders, including MOT, VEC, provincial governments along the highway, and project affected peoples Review of EIA, SEIA, RP, EMDP, procurement documents, and prequalification and bid evaluation reports

Assumptions • Consultants deliver high quality output • Adverse social and environmental issues are mitigated • Financial and project management capacity of VEC is developed Risks • Land acquisition and resettlement are delayed • Procurement of civil works and construction supervision consultants for the investment project is delayed

High-quality detailed designs for the highway have been completed. Bidding documents for toll and operation and maintenance equipment were not accepted by the VEC. Updating of REMDPs was not completed in some districts. All other outputs were delivered.

14 Appen

dix 1

Design Summary



Mechanisms


Evaluation

6. Provision of training in highway design, procurement, and safeguard arrangements for PIU

effective before March 2008

Activities with Milestones 1.1 Engineering surveys (by Sep 2006) 1.2 Detailed design of road alignment and structures and information system, cost estimate and contract packaging (by Jan 2007) 1.3 Drawings of the Noi Bai-Lao Cai Highway (by Mar 2007) 2.1 Economic and financial assessment of the Project (by Mar 2007) 2.2 Financial capability analysis of VEC (by Mar 2007) 3.1 EIA, SEIA, RP, and EMDP (by April 2007) 3.2 Update of the RP (by Oct 2007) 4.1 Procurement documents for civil works (by Jan 2007) 4.2 Prequalification evaluation (by Apr 2007) 4.3 Bidding evaluation (by Sep 2007) 4.4 Contract award (by Oct 2007) 5.1 Consultant recruitment documents for construction supervision services for the investment project (by Mar 2007) 5.2 Selection of construction supervision consultants (by Oct 2007)

Inputs • ADB: 75% of cost of consulting services (about 90 person-months for international consultants and about 240 person-months for domestic consultants); engineering, traffic, social, and environmental surveys; and 70% of equipment and incremental administration cost. • MOT and VEC: 25% of cost of consulting services, all taxes, and 30% of equipment and incremental administration cost (including full-time counterpart staff)

All the activities have been completed, with the exception of 3.2 (update of the resettlement plan), but none of the milestone dates were achieved. The actual inputs were 80% ADB and 20% MOT/VEC.

ADB = Asian Development Bank, EIA = environmental impact assessment, EIRR = economic internal rate of return, EMDP = ethnic minority development plan, FIRR = financial internal rate of return, GMS = Greater Mekong Subregion, HIV/AIDS = human immunodeficiency virus/ acquired immune deficiency syndrome, MOT = Ministry of Transport, PIU = project implementation unit, PRC = People’s Republic of China, REMDP = resettlement and ethnic minority development plan, RP = resettlement plan, SEIA = summary environmental impact assessment, TA = technical assistance, VEC = Vietnam Expressway Corporation, WACC = weighted average cost of capital. Source: Asian Development Bank.

Appendix 2 15

CHRONOLOGY OF MAJOR EVENTS Year Date Event 2004 1–2 July Reconnaissance mission 2005 22 Aug–2

September Fact-finding mission

13 September Project environmentally classified as C. 29 September Management review meeting.

Increase in loan amount from $4.0 million to $6.0 million and waiver of appraisal approved.

September Advertise for consultants recruitment 15 November VEC letter dated 15 November 2005 advising ADB of the

establishment of the project implementation unit and appointment of project director and financial specialist.

17–19 November Loan negotiations 22 November Minutes of loan negotiations 19 December Loan approval 2006 12 January Loan signing 23–27 January Loan inception mission 8 February VEC’s CSC meeting short-listed seven firms 27 February VEC requested approval of short list and RFP 13 March ADB’s CSC meeting to approve short list and RFP 23 March ADB approved short list and RFP 18 April Government requested an extension of loan effectiveness to 18 July

2006 27 April ADB approved request for extension of loan effectiveness to 18 July

2006 21 June ADB follow-up letter for loan effectiveness 22 June ADB letter advising VEC of the reduced loan financing 19 July ADB approved extension of loan effectiveness to 30 November 2006 8 August VEC sent submission 2 (evaluation of technical proposals) 21 August ADB sent clarification and comments to submission 2 3 October Loan declared effective 11 October ADB’s CSC meeting to review evaluation of technical proposals 16 October ADB approved VEC’s evaluation of technical proposals 17 November ADB’s CSC meeting to review financial evaluation and final ranking 22 November ADB approved financial evaluation and overall ranking of consultants 29 November–

1 December Contract negotiations with consultants; loan review mission

2007 16 January Contract signed with the consultant for $6,673,754.04 23 January ADB fax advising VEC of the change in the TOR of the poverty

study. 3–9 February Loan review mission 26 February ADB fax to VEC giving clarification on the use of contingency

amount in the consultant’s contract. 5–10 March Loan review mission 13 April ADB fax to VEC on the proposal for the inclusion of the design of

highway operational center. VEC to include land acquisition and resettlement for the construction of the building.

16 Appendix 2

Year Date Event 19 April ADB fax to VEC providing cost estimates to VEC on the proposal of

engaging a consulting firm to assist VEC in developing financial information system and training.

28 May–2 June Loan review mission 17 September ADB fax to VEC requesting extension of the consultant’s contract to

28 September 2008 to assist in the land acquisition and resettlement activities and the income restoration program.

8–13 October Loan review mission 23 October ADB requested VEC to extend the social and resettlement study 25 October ADB’s no-objection to financing up to $200,000 for the proposed

consulting services for appraisal of the detailed highway design 21 November ADB fax to VEC giving no-objection to inclusion of the proposed

staking works of the land acquisition markers in the ongoing contract and financing up to $300,000 (75% of $400,000) from the consulting services category

2008 2 February ADB approved a minor change in scope to engage a consulting firm to undertake a detailed cost appraisal of the detailed designs using consultant’s qualifications selection method.

27 March Contract signed with the appraisal consultant firm for $119,955 to do detailed design appraisal.

28 July ADB fax to VEC approving variations 3 and 4 14 July Letter from the consultant requesting modification of contract (name

change) 9 October Extension of loan closing date to 30 June 2009 2009 5–14, 21–23

October Loan review mission

2010 19–30 August Project completion review mission ADB = Asian Development Bank, CSC = consultant selection committee, RFP = request for proposals, TOR = terms of reference, VEC = Vietnam Expressway Corporation. Source: Asian Development Bank.

Appendix 3 17

COMPARISON OF PLANNED AND ACTUAL IMPLEMENTATION SCHEDULES

Figure A3.1: Implementation Schedule at Appraisal

Task 2006 2007 2008 2009 2010 2011

Consultant selection


Resettlement planning and implementation

Procurement of civil works

Construction (phase 1) Complete October 2010


Figure A3.2: Implementation Schedule in Consultant’s Contract

Task 2006 2007 2008 2009 2010 2011





Construction (phase 1) Complete March 2012


Figure A3.3: Actual Implementation Schedule

Task 2006 2007 2008 2009 2010 2011


Surveys



Design appraisala


Construction (phase 1) a The majority of this task was completed within the first 12 months (solid line). b Design appraisal was an additional approval procedure added during the project implementation. Source: Asian Development Bank.

18 Appendix 4

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Covenant

Reference in Loan/Project Agreement

Status of Compliancea

The selection, engagement and services of the consultants shall be subject to the provisions of this Schedule and the provisions of the "Guidelines on the Use of Consultants by Asian Development Bank and Its Borrowers" dated January 2005 (hereinafter called the Guidelines on the Use of Consultants), as amended from time to time, which have been furnished to MOT and VEC.

Para. 2, Schedule 5, Loan Agreement

Complied. The consultants were selected following the Guidelines on the Use of Consultants.

The consultants shall be selected and engaged as a firm by VEC using the quality-and-cost-based selection method in accordance with the following procedures. The invitation to submit technical and financial proposals (hereinafter called the Request for Proposals or RFP) and all related documents shall be approved by ADB before they are issued. For this purpose, three copies of the draft RFP, the names of consultants to be short-listed, the proposed criteria for evaluation of both proposals, a draft consultancy contract, and other related documents shall be submitted to ADB. A period of at least 45 days shall be allowed for submission of both proposals. A copy of the final RFP as issued, together with all related documents, shall be furnished to ADB for information promptly after issuance. The validity period for the technical and financial proposals as provided in the RFP shall usually not exceed three months from the date specified for submission of the technical and financial proposals. The approval of ADB shall be obtained for any request to extend such validity period. Except as ADB may otherwise agree, the validity period, including any extensions, shall not exceed a maximum total period of six months. If the contract is not signed within the validity period in accordance with the Guidelines on the Use of Consultants, the selection shall be invalid and the selection and engagement process as provided in this paragraph shall be followed again.

Para. 3 (a), Schedule 5, Loan Agreement

Complied. The selection and engagement process in the covenant was followed.

Immediately after the technical proposals have been evaluated and scored, approval of ADB shall be obtained to the evaluation and scoring of the technical proposals. For this purpose, ADB shall be furnished with three copies of the technical proposals.

Para. 3 (b), Schedule 5, Loan Agreement

Complied. The process in the covenant was followed.

Appendix 4 19

Covenant



The financial proposals of the firms whose technical proposals meet the minimum qualifying technical score shall be opened publicly after adequate notice is given to such firms or their representatives to attend the opening of the financial proposals.

Para. 3 (c), Schedule 5, Loan Agreement


After the financial proposals have been evaluated and scored, the ranking of the technical and financial proposals shall be made. Before negotiations are started with the first ranked consultants, approval of ADB shall be obtained to the evaluation and scoring of the financial proposals and the ranking of the technical and financial proposals. For this purpose, ADB shall be provided with three copies of (i) the evaluation and scoring of the financial proposals and (ii) the ranking of the technical and financial proposals.

Para. 3 (d), Schedule 5, Loan Agreement


After the conclusion of negotiations but before the signing of the contract, ADB shall be furnished with the contract as negotiated for approval. Promptly after the contract is signed, ADB shall be furnished with three copies of the signed contract. If any substantial amendment of the contract is proposed after its execution, the proposed changes shall be submitted to ADB for prior approval.

Para. 3 (e), Schedule 5, Loan Agreement


The Borrower shall ensure that all ADB-financed contracts with consultants contain appropriate representations, warranties and, if appropriate, indemnities from the consultants to ensure that the consulting services provided do not violate or infringe any industrial property or intellectual property right or claim of any third party.

Para. 4, Schedule 5, Loan Agreement

Complied. The contracts contained the corresponding clause.

VEC shall make available, promptly as needed, the funds, facilities, services, equipment, and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Technical Assistance.

Sect. 2.02, Article II, Project Agreement

Complied. VEC promptly provided necessary inputs.

In the carrying out of the Technical Assistance, VEC shall employ competent and qualified consultants and contractors, acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB.

Sect. 2.03 (a), Article II, Project Agreement

Complied. VEC employed two consulting firms under the Technical Assistance.

20 Appendix 4

Covenant



VEC shall carry out the Technical Assistance in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to ADB. VEC shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.


Complied. VEC submitted relevant design standards and other material to ADB.

VEC shall take out and maintain with responsible insurers, or make other arrangements satisfactory to ADB for, insurance of Technical Assistance facilities to such extent and against such risks and in such amounts as shall be consistent with sound practice.


Complied. VEC followed the covenant.

Without limiting the generality of the foregoing, VEC undertakes to insure, or cause to be insured, the goods to be imported for the Technical Assistance and to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such goods.

Sect. 2.05 (b), Article II, Project Agreement


VEC shall maintain, or cause to be maintained, records and accounts adequate to identify the goods and services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Technical Assistance, to record the progress of the Technical Assistance (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.



VEC shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the Loan and the expenditure of the proceeds thereof; (ii) the goods and services and other items of expenditure financed out of such proceeds; (iii) the Technical Assistance; (iv) the administration, operations and financial condition of VEC as is relevant to the Technical Assistance; and (v) any other matters relating to the purposes of the Loan.



Appendix 4 21

Covenant



Without limiting the generality of the foregoing, VEC shall furnish to ADB monthly reports on the execution of the Technical Assistance and on the operation and management of the Technical Assistance facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the month under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following month.

Sect. 2.08 (b), Article II, Project Agreement


Promptly after physical completion of the Technical Assistance, but in any event not later than three (3) months thereafter or such later date as ADB may agree for this purpose, VEC shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Technical Assistance, including its cost, the performance by VEC of its obligations under this Project Agreement and the accomplishment of the purposes of the Loan.

Sect. 2.08 (c), Article II, Project Agreement


VEC shall (i) maintain separate accounts for the Technical Assistance and for its overall operations; (ii) have such accounts and related financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than 6 months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the financial covenants of the Loan Agreement as well as on the use of the procedures for imprest account/statement of expenditures), all in the English language. VEC shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.


Complied. VEC followed the covenant, but submission of audited financial statement for fiscal year 2007 was overdue.

22 Appendix 4

Covenant



MOT shall be the Technical Assistance Executing Agency and shall oversee the overall implementation of the Technical Assistance, including formal correspondence with the line ministries and relevant government offices (i.e., Office of the Government, Ministry of Finance, State Bank of Viet Nam, Ministry of Planning and Investment, and Ministry of Natural Resources and Environment), relevant provincial governments and ADB.

Para.1, Schedule 6, Loan Agreement

Complied. MOT worked closely with VEC to oversee the project.

VEC shall be the implementing agency with responsibility for day-to-day Technical Assistance implementation under MOT's supervision.


Complied. VEC implemented the project under MOT’s supervision.

VEC shall establish a PIU, headed by an experienced Director and suitably staffed. VEC shall be responsible for managing the consulting services, through the consultants' team leader.


Complied. Noi Bai–Lao Cai Expressway Project Management Unit was established.

The Borrower shall provide, or cause the VEC to provide: (i) counterpart staff to the consultants under this Technical Assistance and (ii) the consultants and any staff involved with this Technical Assistance access to all financial and operational information concerning the Technical Assistance.


Complied. Sufficient counterpart staff was provided.

MOT shall ensure that VEC prepares, with adequate public consultation, an EIA and a SEIA for the Proposed Project, which shall include an environmental management plan in accordance with the requirements of ADB's Environment Policy (2002), and submit them to ADB for approval. MOT shall ensure that the contract documents for the Proposed Project include specific measures as indicated in the SEIA and EIA and in accordance with ADB's Environment Policy to mitigate negative environmental impacts caused by the highway construction and to give due consideration to prevention of damage to the natural environment in the design, construction, operation, and maintenance of the highway facilities.


Complied. EIA and SEIA were prepared in accordance with ADB’s Environment Policy.

MOT shall ensure that VEC prepares a resettlement plan for the Proposed Project in accordance with the requirements of ADB's Policy on Involuntary Resettlement (1995) and submits the resettlement plan to ADB for approval.


Complied and ongoing. Resettlement plans have been combined with EMDPs as REMDPs. Updating of REMDPs for some districts was still ongoing at the loan closure.

Appendix 4 23

Covenant



MOT shall ensure that VEC prepares an EMDP for the subsequent investment project if impacts on the ethnic minorities living in the geographic area covered by the Proposed Project are significant. The determination whether the Plan is needed and its preparation shall be in accordance with ADB's Policy on Indigenous Peoples (2003).


Complied and ongoing. EMDPs have been combined with resettlement plans as REMDPs. Updating of REMDPs for some districts was still ongoing at the loan closure.

During implementation of the Technical Assistance, MOT shall ensure VEC utilizes sound financial management, financial reporting, internal controls and internal auditing systems acceptable to ADB.


Complied. Financial reporting and others were accepted by ADB.

Without prejudice to the generality of Section 4.02 of this Loan Agreement, the Borrower shall ensure that a separate accounting system for Technical Assistance expenditures is maintained in accordance with sound accounting principles. VEC and all Technical Assistance accounts, including financial statements, statements of expenditures and account records, shall be audited annually as part of the regular audit of accounts and financial statements by an independent auditing firm acceptable to ADB. The Reference in consolidated audit reports (in English) shall be submitted to ADB in accordance with the requirements and within the deadlines stated in Section 4.02(a) of this Loan Agreement. The audit opinion shall include (i) a detailed description of the source of funds and expenditures made; (ii) an assessment of the adequacy of accounting and internal controls systems within VEC and with respect to Technical Assistance expenditures and other financial transactions, and to ensure safe custody of Technical Assistance financed assets; (iii) a determination as to whether the Borrower, MOT, and VEC have maintained adequate documentation for all financial transactions, specifically including the SOE and imprest account procedures; and (iv) confirmation of compliance with this Loan Agreement's financial requirements.


Complied. VEC engaged Auditing and Informatic Services Company Limited as an independent auditor and submitted audit reports and together with audit opinions.

ADB = Asian Development Bank, EIA = environmental impact assessment, EMDP = ethnic minority development plan, MOT = Ministry of Transport, PIU = project implementation unit, RFP = request for proposals, REMDP = resettlement and ethnic minority development plan, SEIA = summary environmental impact assessment, SOE = statement of expenditures, VEC = Vietnam Expressway Corporation. Source: Asian Development Bank.

24 Appendix 5

DATES OF CONTRACT FOR INVESTMENT LOANS

(Loans 2391-VIE and 2392-VIE: Greater Mekong Subregion: Kunming–Haiphong Transport Corridor—Noi Bai–Lao Cai Highway Project)

Contract Details Date of Contract

A-1 Civil works (Ha Noi City, Vinh Phuc Province; Km 0–Km 27)

24 March 2009

A-2 Civil works (Vinh Phuc Province; Km 27–Km 49)

20 October 2009

A-3 Civil works (Phu Tho Province; Km 49–Km 80)

9 November 2009

A-4 Civil works (Phu Tho Province; Km 80–Km 110)

6 April 2010

A-5 Civil works (Yen Bai Province; Km 110–Km 151)

6 April 2010

A-6 Civil works (Yen Bai Province; Km 151–Km 190)

9 November 2009

A-7 Civil works (Lao Cai Province; Km 190–Km 218)

9 November 2009

A-8 Civil works (Lao Cai Province; Km 218–Km 244)

9 November 2009

B-1 Equipment (electrical, communication, and tolling systems and associated facilities)

To be determined

B-2 Equipment (operation and maintenance equipment and vehicles)

To be determined

C-1 Consulting services (project supervision)

6 November 2009

Km = kilometer. Source: Asian Development Bank.

viet nam: greater mekong subregion: …...the noi bai–haiphong highway link has already been...

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