VIETNAM: TOWARD A SAFE, CLEAN, AND RESILIENT WATER SYSTEM About the Water Global Practice Launched in 2014, the World Bank Group’s Water Global Practice brings together financing, knowledge, and implementation in one platform. By combining the Bank’s global knowledge with country investments, this model generates more firepower for transformational solutions to help countries grow sustainably. Please visit us at www.worldbank.org/water or follow us on Twitter at @WorldBankWater. VIETNAM: TOWARD A SAFE, CLEAN, AND RESILIENT WATER SYSTEM © 2019 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org The boundaries, colors, denominations and other information shown on any map in this work do not imply any judgement on the part of The World Bank  concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Please cite the work as follows: World Bank. 2019. “Vietnam: Toward a Safe, Clean, and Resilient Water System.” World Bank, Washington, DC. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org Cover photo: © Nguyen Duc Hieu, Nguyen Huy Quoc, Nhieu Loc, Viet Anh Manh/World Bank Cover design: WhizWordz International Pte Ltd Table of Contents Preface.....................................................................................................................................................................xiii Study process.....................................................................................................................................................xiii Four complementary studies...............................................................................................................................xiii Structure of this Report...................................................................................................................................... xiv Acknowledgments ......................................................................................................................................................xv Executive Summary.............................................................................................................................................. xvii Boosting efficiency: Rising demand and the need to increase “dong per drop”...................................................xix Reducing threats: Too dirty, too little, too much.................................................................................................xxi Improving governance: Framework, initiatives, and financing..........................................................................xxiii The way forward.............................................................................................................................................. xxvi Acronyms ............................................................................................................................................................... xxxi 1  Water Resources Assessment: How Secure are Vietnam’s Water Resources?.......................................................... 1 1.1 The greatest pressures on water resources come from the speed of economic development and the changing structure of the economy................................................................................................................................1 1.2  Vietnam’s water resources are relatively abundant, but stress and competition are growing...........................3 1.2.1  Water resources are already coming under stress..................................................................................3 1.2.2  Water has great destructive power .......................................................................................................6 1.2.3  Risks are large and growing ................................................................................................................7 1.2.4  Tradeoffs are intensifying.....................................................................................................................9 1.2.5  Water conservation is an emerging priority, but this does not mean loss of economic value..................9 1.2.6  Under business as usual, problems will only grow worse....................................................................10 Notes..................................................................................................................................................................12 Part I  Boosting Efficiency—Rising Demand and the Need to Increase “Dong per Drop”��������������� 13 2  Increasing Water Productivity in Irrigated Agriculture ..................................................................................... 15 2.1  Agricultural water use has to be managed within an overall integrated framework......................................16 2.2  Agriculture depends on irrigation and water control, but performance is deteriorating................................16 2.2.1  The performance of the large stock of irrigation infrastructure is deteriorating .................................17 2.2.2  Constraints are emerging to water supplies for irrigation...................................................................20 2.2.3  Returns to water are low, and the agriculture sector needs to be restructured to boost productivity......21 v vi GO V ER N A N CE F O R WATER S ECU RIT Y 2.3  The way forward..........................................................................................................................................22 2.3.1  Rebalance public spending toward operation and maintenance..........................................................22 2.3.2  Integrate agriculture and water management......................................................................................23 2.3.3  Improving agricultural water use under both water plenty and water scarcity can drive growth........24 2.3.4  The new irrigation strategy seeks to maximize water productivity, farmers’ incomes, and value added.................................................................................................................................26 Notes..................................................................................................................................................................27 3  Water Security and Water Services for Settlements.......................................................................................... 29 3.1  Water security for urban settlements.............................................................................................................30 3.1.1  Climate change and natural disasters pose particular risks to built-up areas......................................30 3.1.2  Water quality for settlements is a growing problem due to pollution in some locations......................31 3.1.3 The urban water network and services have improved greatly, so the focus is now on the more complex challenges.............................................................................................................................31 3.1.4  The quality of water service provision for businesses has declined in recent years, potentially hampering economic growth..............................................................................................................32 3.1.5 Low rates of sanitation services and of domestic wastewater recovery and treatment are major factors in water resource degradation.................................................................33 3.2  Urban development has outpaced the governance needed to support it........................................................33 3.2.1  Urban growth has often outstripped planning, infrastructure, and regulation....................................33 3.2.2  Utilities have corporatized and equitized rapidly, bringing benefits and risks2...................................33 3.2.3  The program to strengthen governance of urban water has stalled.....................................................34 3.3  To ensure cities’ water security, planning and governance need to catch up..................................................34 3.3.1  Integrated and risk-informed urban planning is essential....................................................................34 3.3.2  Efficient and sustainable urban water services require completion of sector reforms..........................35 3.3.3  Applying integrated and risk-informed planning to water..................................................................35 3.3.4  Planning for urban water supply and sanitation services....................................................................36 3.4  Rural water supply and sanitation................................................................................................................36 3.5  Access to water supply and sanitation services among poor and rural people...............................................37 3.6  Priority actions for water in urban development...........................................................................................38 Notes .................................................................................................................................................................40 Part 2  Reducing Threats—Too Little, Too Much, Too Dirty.......................................................... 41 4  Water Pollution: The Hidden Threat to Development and Growth..................................................................... 43 4.1  Water pollution is a growing menace and development hazard.....................................................................43 4.1.1  Risks from water pollution are becoming extreme.............................................................................43 4.1.2  Water pollution is now one of Vietnam’s greatest development challenges and constitutes a massive cost to the economy...........................................................................................................................47 4.2  Reducing pollution requires investment, regulation, and incentives..............................................................49 4.2.1  Underinvestment in treating wastewater is considerable.....................................................................49 4.2.2 The regulatory and incentive frameworks are in principle sound, but implementation and enforcement are weak.............................................................................................................................................49 4.2.3 The root of the agricultural pollution problem...................................................................................51 4.3  Options for reducing water pollution...........................................................................................................51 4.3.1 Focusing on wastewater investment and regulation and on pollution reduction.................................51 4.3.2  Enforcing regulations and improving education and incentives..........................................................52 4.3.3  Learning from other countries............................................................................................................53 Notes..................................................................................................................................................................58 Table of Cont e nts vii 5  Improving Management of Rising Risks.......................................................................................................... 59 5.1  Risks from climate change, natural disasters, and water infrastructure are high and rising...........................59 5.1.1 Risks from climate change and natural disasters are high and costly..................................................59 5.1.2 Risks from vulnerable water infrastructure are high...........................................................................61 5.2  Institutional responses to rising water-related risks are constrained..............................................................62 5.2.1 Institutional problems hamper risk management................................................................................62 5.2.2  Socioeconomic losses will rise sharply if nothing is done....................................................................63 5.2.3  Hydrological challenges are regional..................................................................................................64 5.3  Current institutions for managing risk need to be strengthened....................................................................64 5.3.1  An integrated response is needed for disaster risk management and climate change adaptation.........64 5.3.2  Integrating management of dams, reservoirs, and flows at basin level could reduce risks and increase value from water....................................................................................................65 5.3.3  Risk management is a key function of water resources management best coordinated at the basin scale, including for transboundary water management.......................................................................65 5.4  Priority actions.............................................................................................................................................66 5.4.1 The government should better integrate responses to climate change and disaster risk management and improve resilience........................................................................................................................66 5.4.2  A holistic and integrated approach for structural and nonstructural measures across key sectors is required based on eight “musts”.........................................................................................................67 5.4.3  Improved financial planning will be critical for establishing a robust system for disaster prevention, preparedness and response.................................................................................................................67 5.4.4 Risk management—and dam operations and safety—need to be integrated in basin planning...........68 Notes..................................................................................................................................................................68 Part 3  Improving Governance—Framework, Initiatives, and Financing...................................... 69 6  Vietnam’s Water Governance Framework......................................................................................................... 71 6.1 The legal framework for water management in Vietnam has been established and is gradually being improved .....................................................................................................................................................72 6.1.1 The legal framework for water resources management has developed over the last two decades and is now comprehensive.....................................................................................................................72 6.1.2 The legal framework for environmental protection complements the water resources framework......73 6.1.3 Irrigation and other important water-related mandates are assigned under the legal framework to the Ministry of Agriculture and Rural Development (MARD).................................................................73 6.1.4  Other aspects of the legal framework also affect the water sector......................................................74 6.2  The institutional set-up.................................................................................................................................74 6.2.1  Central ministries and their branches.................................................................................................74 6.2.2  Many responsibilities for water management are decentralized..........................................................75 6.2.3  Water resources management faces some institutional challenges.......................................................75 6.3  Planning for water resources is underway but encountering difficulties and delays.......................................76 6.3.1 Water resources assessments are underway but face implementation problems..................................76 6.3.2  Development of the master plan on water resources is delayed .........................................................77 6.3.3 The sector is now integrating within GoV’s recently adopted ‘unified’ planning approach ................77 6.4 Vietnam has adopted ‘integrated water resource management’ (IWRM) but faces challenges to implement the approach................................................................................................................................................78 6.4.1 The framework provides for integrated water resource management but integrated planning is proving a challenge ...........................................................................................................................78 6.4.2 Vietnam has long tried to establish organizations for planning and management at the basin level, but with limited success. ..........................................................................................................................79 6.5  Financing water resources management........................................................................................................81 6.5.1  Budget for water resources management is insufficient.......................................................................81 viii GO V ER N A N CE F O R WATER S ECU RIT Y 6.5.2 Some fees and charges are levied but they do not contribute enough to cover the costs of water resources management and environmental protection .......................................................................82 6.5.3 Incentives for water conservation and protection activities are provided for in law but still need to be fully enforced.....................................................................................................................................85 Enforcement of water pollution prevention and control is low, with negative impacts on Vietnam’s 6.6  water bodies..........................................................................................................................................85 6.7  Are the mechanisms for handling transboundary issues working?................................................................86 6.8 The basic building block for planning is information; the process has been started, but the data are still lacking .........................................................................................................................................................89 6.8.1  An initial database for water resources has been established..............................................................89 6.8.2 There is a pressing need to strengthen information to allow for informed decision-making................89 Notes..................................................................................................................................................................90 7  Initiatives for Strengthening Water Resources Management............................................................................ 91 7.1  New initiatives in basin planning may show the way forward......................................................................91 7.1.1  Prioritizing the Mekong Delta............................................................................................................91 7.1.2  Implementing the Mekong Delta Plan................................................................................................92 7.2  Scaling up the planning approach.................................................................................................................92 7.3  Stepping up to the priorities.........................................................................................................................93 7.3.1  The integrated management and basin approaches need to be reinvigorated......................................93 7.3.2  Challenges are diverse, requiring adapted, integrated approaches.......................................................94 7.3.3  Multiple demand management measures could ease water stress and help balance supply and demand............................................................................................................................95 7.3.4  Aligning public spending with basin planning....................................................................................97 7.4  Priority actions for government consideration..............................................................................................97 7.4.1  Developing basin-level institutional approaches.................................................................................97 7.4.2  Building a national water information system....................................................................................99 7.4.3  Planning for demand management measures....................................................................................100 7.4.4  Assessing scope for more efficient budget resource allocation...........................................................101 Notes................................................................................................................................................................101 8  Making Investment and Financing More Efficient, and Aligning Incentives with Objectives.............................. 103 8.1  Investment falls short of needs as public financing declines........................................................................104 8.2  Better planning and allocation can get more out of public financing..........................................................104 8.2.1  “More for less”—improving the efficiency of public financing in the water sector...........................104 8.2.2  Improving the quality of spending through innovations in resource planning and budgeting...........105 8.3  There are opportunities to bring in more private financing, but a coordinated policy effort is needed........105 8.3.1  Private financing in the water sector.................................................................................................105 8.3.2  The changing environment for private financing in the water sector.................................................106 8.3.3  It is necessary to attract new sources of financing to the sector .......................................................106 8.3.4  Tapping new and larger sources of finance for water infrastructure.................................................108 8.4  Private financing in irrigation offers entry points, despite challenges..........................................................109 8.5  Incentives need to motivate good behavior to meet policy and fiscal objectives..........................................112 8.6  Options and actions...................................................................................................................................113 Notes................................................................................................................................................................115 9  The Way Forward......................................................................................................................................... 117 9.1  The urgency for action...............................................................................................................................117 9.2  Main recommendations and suggested actions...........................................................................................118 9.3  Sequencing actions and timing impacts: the feasibility and political economy of change2..........................124 Notes................................................................................................................................................................126 Table of Cont e nts ix Annex A  Reforming Water Governance in Vietnam: Lessons from Other Countries............................................... 127 A.1  Drivers of change: Creating momentum for reforming water governance..................................................128 A.1.1  Typical drivers of change in water governance around the world.....................................................128 A.1.2  Introducing best practice water policies: Australia...........................................................................129 A.1.3  Introducing best practice water policies: Israel.................................................................................130 A.1.4  An administrative top-down approach: China’s Three Red Lines.....................................................131 A.1.5  How multi-stakeholder engagement can catalyze change.................................................................131 A.2 In Vietnam, a combination of mounting problems and growing understanding means that the time is propitious for change.................................................................................................................................132 A.2.1  How are decisions taken?................................................................................................................132 A.2.2  The increasing importance of civil society........................................................................................132 A.2.3  Current opportunities for change.....................................................................................................133 Annex B  Vietnam’s Water Governance Framework ............................................................................................ 135 B.1  The legal framework for water resources management and usage .............................................................135 B.1.1  Relevant water-related laws:............................................................................................................135 B.1.2  Sub-laws Decrees:............................................................................................................................136 B.2  Legal documents that remain to be issued..................................................................................................146 B.3  National strategies for water and irrigation................................................................................................147 B.4  Planning for water resources......................................................................................................................147 References........................................................................................................................................................ 149 Boxes Box 1.1: The potential economic impacts of inaction....................................................................................2 Box 1.2: What is water security?...................................................................................................................2 Box 1.3: Hydropower in Vietnam.................................................................................................................4 Box 1.4: Flooding is a growing danger..........................................................................................................6 Box 1.5: The economic effects of the 2016 drought......................................................................................7 Box 1.6: Overexploitation of groundwater and land subsidence in the Mekong Delta..................................8 Box 1.7: Downstream hazards of dams.........................................................................................................9 Box 1.8: Scarcity amid plenty: Regional water supply to settlements in the seven provinces south of the Hau River ....................................................................................................................................10 Box 2.1: Vietnam’s huge irrigation infrastructure........................................................................................18 Box 2.2: Changing flood dynamics in An Gian and Dong Thap are attributed to high dike construction....18 Box 2.3: The Bac Hung Hai irrigation system faces major challenges, including deteriorating system performance, rising competition for water, increasing pollution, and underfunding......................20 Box 2.4: The impact of climate change–induced higher temperature on paddy yields.................................21 Box 2.5: Paying for water in Vietnam: The special case of irrigation service fees.........................................22 Box 2.6: Contrasting experiences with irrigation public–private partnerships in Morocco: Guerdane and the Gharb..............................................................................................................23 Box 2.7: Coping with less water and drought risk in the dry season in Ninh Thuan’s irrigated agriculture......................................................................................................................24 Box 2.8: Introducing the system of rice intensification including alternate wet and dry rice production in Ninh Thuan Province would cost little and would have big economic benefits.............................25 Box 2.9: Vietnam’s new irrigation strategy..................................................................................................26 Box 3.1: Seasonal flooding now inundates half the city of Can Tho every year...........................................30 Box 3.2: Building urban resilience: The Mainstreaming Disaster Resilience in Vietnam Project...................35 Box 3.3: Gender equality in water supply and sanitation needs further improvement, particularly in the poorest households and in ethnic communities.............................................................................38 Box 3.4: A public–private partnership for complex urban development challenges in China.......................39 x GO V ER N A N CE F O R WATER S ECU RIT Y Box 4.1: The huge gains—or losses—to GDP from wastewater treatment..................................................48 Box 4.2: The regulatory framework for pollution control and the protection of water resources................50 Box 4.3: Wastewater treatment and reuse are priority areas for investment................................................52 Box 4.4: China acts to reduce agricultural pollution...................................................................................53 Box 4.5: China’s experiment with making local river chiefs accountable for pollution control....................53 Box 4.6: Examples of civil suits for water pollution in China......................................................................54 Box 4.7: Trading pollution-discharge permits in China...............................................................................54 Box 4.8: Nonpoint source pollution control through water quality trading in New Zealand......................55 Box 4.9: Water pollution control is a priority for public–private partnership investment in China..............55 Box 4.10: Payment for ecosystem services in Vietnam...................................................................................56 Box 4.11: An example of a water fund in the United States..........................................................................57 Box 4.12: Use of water fund approaches to improve water quality in China.................................................57 Box 4.13: US Environmental Protection Agency Clean Water State Revolving Fund (CWSRF).....................57 Box 5.1: Impact on GDP of increased flooding of the Red River.................................................................60 Box 5.2:  Declining paddy yields and economic growth as a result of sea-level rise and land subsidence driven by groundwater over abstraction.......................................................................................63 Box 5.3: Attempting risk management across borders in the Sesan-Srepok River Basin..............................66 Box 5.4: Global experience and response to disasters worldwide and in Vietnam.......................................66 Box 5.5: Innovations in financial planning for disasters..............................................................................68 Box 6.1:  The Ministry of Natural Resources and Environment’s statutory responsibilities and powers under the 2012 Law on Water Resources and 2017 Law on Planning.....................................................72 Box 6.2:  The Ministry of Agriculture and Rural Development (MARD): statutory responsibilities and powers under the 2017 Law on Hydraulic Works.........................................................................73 Box 6.3: Water resources assessment...........................................................................................................76 Box 6.4: Streamlining a plethora of plans...................................................................................................78 Box 6.5: What is integrated water resources management...........................................................................79 Box 6.6: Circular 42 – a template for basin planning..................................................................................79 Box 6.7: Plans for upstream hydropower dam construction on the Mekong River present risks.................88 Box 6.8: World Bank support for water resources information...................................................................90 Box 7.1: Resolution 120 spells out policies for developing the Mekong Delta.............................................93 Box 7.2: Managing water and risks at the basin scale in Ninh Thuan Province...........................................95 Box 7.3:  The emerging gap between supply and demand in the Red–Thai Binh basin through demand management measures in agriculture, municipal, and industrial water use....................................96 Box 7.4: High-impact technical options......................................................................................................97 Box 7.5:  River basin institutions work best when they have representation from multiple sectors and levels of jurisdiction...............................................................................................................................98 Box 7.6: International experience with technical support units and sub-basin entities.................................99 Box 7.7: How the India National Hydrology Project invests in water information.....................................99 Box 7.8: Improving water information in Australia...................................................................................100 Box 7.9: The United States has a national water database accessible through a single website .................100 Box 8.1: Potential investors’ views of investing in Vietnam’s water sector.................................................108 Box 8.2: Maximizing finance for development of Vietnam’s energy sector................................................108 Box 8.3: The World Bank-financed project Vietnam Industrial Pollution Management.............................109 Box 8.4:  Globally, private investment is important in irrigation and has driven water efficiency, incomes, and exports.................................................................................................................................110 Box 8.5: Turkey successfully transferred 2 million hectares of irrigated land to farmers............................110 Box 8.6: Economic and regulatory policy instruments..............................................................................112 Box 8.7:  Building on success, China is scaling up PPPs for water infrastructure, water pollution control, urban water supply, and irrigation..............................................................................................113 Box 8.8: Modernizing agriculture through PPPs........................................................................................114 Box 8.9:  Strengths and weaknesses of China’s use of economic instruments to promote good water policies...... 115 Table of Cont e nts xi Box A.1: Australia’s National Water Initiative: comprehensive reform of water management in an arid country ......................................................................................................................129 Box A.2: Governance and institutions matter: Australia’s experience.........................................................130 Box A.3: A multi-stakeholder process devises a public–private approach to rejuvenating India’s Ganga River .131 Box A.4: Giving voice in water to women, the poor, and minorities...........................................................132 Figures Figure ES.1: The potential economic impact of inaction against water threats .............................................. xviii Figure ES.2: Water withdrawals by sector in Vietnam......................................................................................xix Figure ES.3: Growing demand and emerging water stress by river basin...........................................................xx Figure ES.4: Water productivity per unit of water in selected countries (US$ of GDP) .....................................xx Figure ES.5: The proportion of each river originating in other countries is high, 2017..................................xxiii Figure 1.1: Exploitable water resources and irrigation storage, and national water runoff ...............................4 Figure 1.2: Water withdrawals by sector in Vietnam.........................................................................................5 Figure 1.3: System generated power in 2020-2030 as per revised PDP VII ......................................................5 Figure 1.4:  Water demand by sector in 2016 and 2030 in the dry season in the South East River Cluster basin..............................................................................................6 Figure 1.5:  Water Exploitation Index for key basins—with and without hydropower storage—in the dry season, 2016–2030.......................................................................................................................10 Figure 1.6: Water stress levels in the dry season in 2016 and 2030, excluding hydropower storage................11 Figure 2.1: Distribution of rice-growing area in Vietnam................................................................................17 Figure 2.2: Distribution of coffee- growing area in Vietnam...........................................................................17 Figure 2.3: Distribution of sugarcane-growing areas in Vietnam.....................................................................17 Figure 2.4: Rice export volume and value through years.................................................................................20 Figure 3.1: Water coverage by city size...........................................................................................................31 Figure 3.2: Tariff collection rate by city size, 2015 .........................................................................................32 Figure 3.3: Share of manufacturing firms reporting at least one water outage in the previous year.................32 Figure 3.4:  Share of manufacturing firms reporting at least one water outage in the previous year, by region, 2009 and 2015.............................................................................................................................32 Figure 4.1:  Water quality of rivers, 2011–15: left, chloride levels in Mekong; top, chemicaloxygen demand levels in rivers going through Hanoi city; bottom.........................................................................44 Figure 4.2: Urban wastewater management in Vietnam..................................................................................45 Figure 4.3: Value of pesticide imports into Vietnam 1980-2014......................................................................46 Figure 4.4:  Pollution levels in the Mekong River Basin relative to the standards of the Mekong River Commission, World Health Organization, and US Environmental Protection Agency ..................46 Figure 4.5: Annual maximum chlorophyll concentration in Red and Mekong Rivers ....................................47 Figure 4.6:  Percentage of firms reporting poor water quality as a ‘major’ or ‘very severe’ obstacle to their performance in 2018 ....................................................................................................................47 Figure 6.1: Organizational and institutional structure of Vietnam’s water and wastewater sector...................75 Figure 6.2: Evolution of river basin organizations in Vietnam.........................................................................81 Figure 6.3:  Percentage of average annual surface water flows in river basins originating outside Vietnam......87 Figure 7.1:  Overview of water demand reduction requirements in key economic river basins and associated indicative cost...............................................................................................................................97 Figure 8.1: Forms of public–private partnership ..........................................................................................111 Maps Map 1.1: The 16 main river basins in Vietnam...............................................................................................3 Map 1.2:  Regional overview of annual peak flows and their return period in 2000–17 and with climate change in 2026–45..........................................................................................................................7 xi i GO V ER N A N CE F O R WATER S ECU RIT Y Tables Table 1.1: Water resources in major rivers.......................................................................................................3 Table 1.2: Impact of water shortage on GDP, 2035 (%)................................................................................12 Table 1.3: Impacts of water shortage on key crops for the most water-stressed regions.................................12 Table 2.1: Water productivity in Vietnam, China, and India..........................................................................17 Table 2.2: Gross revenue and margins of rice and alternative crops in the Chau Phu, Mekong Delta, 2012 (millions of dong).........................................................................................................................25 Table 3.1: Access to drinking water, sanitation, and hygiene as of 2015 (percent).........................................38 Table 4.1: Impacts on sectoral GDP from a decline in rice productivity due to discharge of untreated industrial wastewater....................................................................................................................48 Table 4.2: Examples of water-quality market initiatives, outcomes, and status..............................................54 Table 5.1: Proofing against disasters and mainstreaming resilience................................................................67 Table 8.1: Financing irrigation....................................................................................................................111 Table 9.1: Overview of estimated water gap and costs for interventions to achieve low water stress status, 2030......................................................................................................118 Table 9.2: Moving to action: sequencing, timing, feasibility, political economy...........................................125 Table A.1: Is action on water issues a top prospect for reform advocacy?....................................................133 Table B.1: Overview of Technical and Specialized Plans .............................................................................148 Preface T he overall objective of the Vietnam Water (February 2018) brought all the principal actors Governance Study is to analyze the current together to share information and ideas. In parallel, governance of the water sector to inform the the World Bank conducted several analytical assess- development of strategies, provide an integrated view ments that under-pinned the study discussions. In of challenges, and identify the most fundamental shifts March 2018, a series of consultations was held with needed to achieve national water security. In a first, line ministries and the Office of the Government, Ho diagnostic phase, the study analyzes water governance Chi Minh Academy, private sector and civil society systems and identifies key areas for further work. The partners. A second round of consultations followed second phase will be to work with the Government of in May 2018. In November 2018, two private sector Vietnam and stakeholders to identify and develop key roundtables were held in Ho Chi Minh City, focusing policy recommendations. on agricultural water usage and industrial and munic- This is the report on the first phase—the diagnostic. ipal water pollution. During the period of January to This is essentially a scoping exercise to: March 2019, all relevant line ministries were con- sulted on the final draft report and were requested • Analyze current governance structures and asso- to provide comments for finalization. Feedback ciated risks, opportunities, and priorities. and guidance were received from MONRE, MARD, • Assess the economic impact of inaction through MPI, MOIT, MOC, MOT, MOH and MOF and have a rapid analysis of biophysical and economic been incorporated into this Report. It is proposed to aspects. hold more extensive discussions on the findings of • Identify key areas for further analysis in the sec- the Report with a wide range of stakeholders within ond phase of the study. Vietnam. H.E. Minister Ha, Ministry of Natural Resources and Environment, expressed his keen sup- Study process port for the study and for a joint workshop to launch The study is being conducted by the World Bank this report and to discuss the detailed findings and Water Global Practice in cooperation with the 2030 recommendations. Water Resources Group (2030 WRG). The study has been developed with the government and other Four complementary studies stake-holders as a joint, consultative process. The The Vietnam Water Governance Study forms one World Bank team is working directly with the min- of four complementary studies being conducted by istries concerned. Although the first phase was con- the World Bank. In 2017, the 2030 Water Resources ducted largely as a desk study of the very extensive Group issued a report Vietnam: A Hydro-Economic existing knowledge, several missions to Vietnam Framework for Assessing Water Sector Challenges have enriched the findings, and an initial workshop xiii xi v GO V ER N A N CE F O R WATER S ECU RIT Y in Vietnam (2030 WRG 2017). That study found Structure of this Report that the four river basins that generate 80 percent The first phase of the Vietnam Water Governance Study of Vietnam’s gross domestic product—the Red–Thai focuses on the diagnostic assessments, expansion of the Binh, Mekong, Dong Nai, and South East River evidence base, and the options for actions. The findings Cluster—are all expected to face water stress in the are presented in this Report. The second phase focuses dry season by 2030 and that there are further water- on engaging with senior policy makers, private sector related challenges to sustainable socioeconomic and civil society representatives to develop a series of growth, including ground-water overexploitation, policy notes to catalyze actions. surface- and groundwater pollution, aging water The introductory chapter 1 assesses the degree to supply infrastructure, emerging water-sharing con- which Vietnam is water secure. In Part 1, under the flicts, and increasing drought and flood events. The theme of boosting efficiency, chapters 2 and 3 look at study pinpointed the governance challenges, provid- water services to agriculture and to urban settlements. ing an agenda for the present study. The results of the Part 2, through the lens of reducing threats, looks at Hydro-Economic Framework study are incorporated how Vietnam manages water quality and pollution into this Report. issues (chapter 4) as well as climate change adaptation, In parallel, in 2018, the World Bank commissioned disaster risks, and risks from infrastructure gaps and an economic study of the costs of inaction, called vulnerabilities (chapter 5). Part 3 focuses on improv- Water-Related Threats to Vietnam’s Economy (World ing water governance, through the water resources Bank 2018g). That study was conducted by consult- management framework and institutions (chapter 6), ants using a computable general equilibrium modeling initiatives for strengthening governance (chapter 7), framework. Results of that modeling are also reflected and investment, financing and incentives (chapter 8). in the present Report. The fourth study—on the Chapter 9 discusses the way forward, with an assess- impact of water on firms—forms a component of a ment of the likely costs and benefits of action—or global survey covering country case studies, of which inaction—with seven main recommendations of sug- Vietnam is one. The high-level results are presented in gested actions for catalyzing on-the-ground change. this Report. Annex A gives examples of how other countries Besides these studies, all data have been taken from have transformed their water sectors to assure water official reports and peer-reviewed articles – and where security and discusses the political economy of reform possible – were updated by respective line ministries. in Vietnam. It was not within the scope of this study to revalidate Annex B provides more in-depth insights into the and reassess data sources. legal framwork governing water resources and usage. Acknowledgments T his Report, which is the result of close coopera- Resources and their respective staff. The contributions tion between the Government of Vietnam and the of others within government have also been most World Bank, has benefitted from the support of helpful, including those of: Mr. Pham Manh Cuong, senior decision-takers within government, including H.E. Deputy Director, Department of Agriculture Sector Minister Tran Hong Ha, Ministry of Natural Resources Economy, Office of Government; Mr. Hoang Nghia, and Environment, and HE Minister Nguyen Xuan Director of International Cooperation Department, Cuong, Ministry of Agriculture and Rural Development. Ho Chi Minh Academy; and the staff of MOC, MPI, The support of senior management and staff of MOIT, MOT, MOH, and MOF. MoNRE is gratefully acknowledged: Mr. Le Cong During the consultations on the study, invaluable Thanh, Vice Minister in charge of water resource contributions were received from a range of donors management; Mr. Hoang Van Bay, Director General, and international agencies including from the rep- Department of Water Resources; Mdm. Nguyen Thi resentatives of Netherlands, Australia, Germany, Thu Linh, Deputy Director General, Department of Sweden, Switzerland, France, and IUCN, as well as Water Resources; and Mr. Chau Tran Vinh, Deputy from civil society organizations and the private sector. Director General, Department of Water Resources; Within the World Bank the study was commissioned Mr Nguyen Van Tai, General Director of the Vietnam by the Country Director for Vietnam, Ousmane Dione, Environment Administration (VEA); Mr Le Hoai who contributed both guidance and ideas, as did his Nam, Director, Department of Environmental Quality staff, including: Achim Fock, (Portfolio Manager); Management (VEA); Mr. Nguyen Van Thuy, Director, Madhu Raghunath, (Program Leader, Sustainable Center of Environmental Information and Data Development); Sebastian Eckardt, (Program Leader, and former Director of Center for Environmental Economics); Ngan Hong Nguyen, (Communication Monitoring (VEA); Mr Nguyen Minh Cuong, Officer); Quang Hong Doan, (Senior Economist); Deputy Director, VEA; Mr. Pham Phu Binh, Director, Son Duy Nguyen, (Senior Operations Officer), International Cooperation Department; and Mr. Bui Portfolio Unit; and Huong Lan Dao, (Senior Health Du Duong, National Center for Water Resources Specialist). The team was ably supported throughout Planning and Investigation (NAWAPI) and their by Linh Thi Thuy Tran (Program Assistant). respective staff. Also gratefully acknowledged is the The study was carried out by the World Bank’s Water continuous support of senior management and staff Global Practice. Acknowledgement is made of the guid- of MARD: Mr. Hoang Van Thang, Vice Minister; ance and inputs which have been key to the study from: Mr. Le Hung Nam, Deputy Director General, Jennifer Sara (Senior Director); Steven Schonberger Department of Water Resources Planning and Rural (Director); Richard Damania (Senior Economic Water Supply; Mr. Nguyen Van Tuan, Institute of Water Adviser); Sudipto Sarkar (Practice Manager); and Greg Resources Planning; and Mr. Nguyen Tung Phong, Browder (Global Lead, Water Resources Management). Deputy Director General, Vietnam Academy of Water xv x vi GO V ER N A N CE F O R WATER S ECU RIT Y Josette Posadas Vizmanos (Program Assistant) provided 2030 WRG hydro-economic analysis performed for valuable support. Vietnam; Eisse Wijma (Water Resource Management A broad panel of Peer Reviewers provided critical Specialist); Cuong Hung Pham (Senior Water inputs and guidance to the study team. At the Quality Resource Management Specialist); Huong Thi Lan Enhancement stage (QER) the peer reviewers were: Tran (Senior Public Sector Specialist) on governance; Greg Browder (Global Lead, Water Resources Mgt.); Mr Tung Hoang Duong (consultant) on Vietnam’s leg- Victor Vazquez (Sr. Water Supply and Sanitation islative framework; Huyen Thi Phuong Phan; Jason Specialist); Halla Qaddumi (Senior Water Economist); Daniel Russ (consultant) on the survey of firms and Scott Moore (Water Resources Management impact on firms; Dr. Isabelle Learmont; Antonia Specialist); Sergiy Zorya (Senior Economist, GFA02); Ward; Dr. Trinh Hoa (consultant, 2030 WRG) on a Franz Gerner (Lead Energy Specialist, GEE02); wide range of issues, including water quality data; Diji Christoph Jakob (Private Sector Operations Officer, Chandrasekharan Behr (Environmental Specialist); 2030 WRG); Bill Young (Lead Water Resources Quang Hong Doan, who contributed to the CGE Management Specialist, GWA06); and Dzung Huy model; Alexander Danilenko and Aroha Bahuguna Nguyen (Senior DRM Specialist, GSU08). At the stage who contributed to urban water supply analyses; and of the Decision Meeting, further peer review inputs Jenny Jing Chao on the analysis of private sector par- were provided by: Greg Browder (Global Lead, Water ticipation in the water sector in Vietnam. Resources Management); Victor Vazquez (Sr. Water The study team was led by the task team leader Supply and Sanitation Specialist); Halla Qaddumi Abed Khalil (Senior Water Resources Management (Senior Water Economist); and Scott Moore (Water Specialist) and co-task team leader Cuong Hung Pham Resources Management Specialist). (Senior Water Resources Management Specialist). The Further technical inputs, guidance on specific topics report was researched and written by Christopher and support were provided by: Eileen Burke (Senior Ward (Fellow, University of Exeter), Abed Khalil, Water Resources Specialist) on transboundary issues; Richard Damania, Jennifer M. Gulland, Dr Thang Victoria Hilda Rigby Delmon (Senior Counsel) on Nam Do (Visiting Fellow, Australian National private sector participation – PPP; Dr. Dao Trong Tu University), Dr. Trinh Hoa, Cuong Hung Pham, and (Senior Advisor 2030 Water Resources Group); Fook Eisse Wijma. The modelling inputs were provided Chuan Eng (Lead Water Supply and Sanitation spe- by Brent Boehlert, Kenneth Strzbepek, Charles Fant, cialist) on regional water security; Lilian Pena Pereira Robert Davis, and Dirk van Seventer. Weiss (Senior Water Supply and Sanitation specialist) The report was edited by a team at Communications on rural water supply and sanitation; Steven Jaffee Development, led by Bruce Ross-Larson and including (Lead Agricultural Economist) on rice marketing; Joe Brinley, Joe Caponio, Mike Crumplar, Meta deCo- Jennifer M. Gulland (2030 WRG) on integration of the quereaumont, and John Wagley. Executive Summary P rudent economic policies, combined with the ena- planned to expand to 21.6 GW by 2020 and to 25.4 bling conditions created by a high endowment GW by 2030 (Revised Power Master Plan VII). of water, have transformed Vietnam from a low There are, however, risks inherent in the water income to a middle-income country within two decades. resource. With about 10,200 cubic meters (m3) of With annual growth in gross domestic product (GDP) renewable freshwater per capita, Vietnam’s water averaging about 6.4 percent over this period, Vietnam availability is high by regional and global standards, has experienced among the fastest—and most equita- though these resources are unevenly distributed across ble—trajectories of development in the world. Rapid the country and seasons. In addition, two-thirds of economic expansion has been accompanied by strong Vietnam’s water is transboundary and so is beyond export growth, large inflows of investment, improved its direct management. Vietnam is also vulnerable to access to health and education services, and provision water’s great destructive power. With more than 70 of life-sustaining piped water to cities. From the early percent of the population at risk from water-related 1990s, when over half the population lived on less than natural disasters, it is one of the most hazard-prone US$1.90 a day, the rate of extreme poverty has fallen to countries in the East Asia and Pacific region, with a 3 percent—among the fastest declines in poverty ever growing pattern of alternating flood and drought. recorded. This transition has made Vietnam the text- Vietnam aspires to become a modern, industrial- book exemplar of sound development approaches. ized economy by 2035. The many achievements since Vietnam’s abundant water endowment has shaped the launch of the Doi Moi (Renovation) reforms have its development fortunes. With nearly 3,500 rivers of contributed to achieving this ambitious goal. But eco- more than 10 kilometers (km) in length spread across nomic growth will need to adapt to become more 16 major river basins and with plentiful rainfall— resource efficient and to address the consequences almost 2,000 millimeters (mm) a year—the country is of climate change. Unless decisive shifts are made, rich in water resources. Water features extensively in Vietnam will face serious threats as growth is held the country’s history, art, and traditions. Rivers have back by water shortages, businesses lose competitive determined the location of settlements and cities, and edge as supply outages proliferate, farmers are kept they power the country’s industry. Their ample waters poorer by low water productivity, floods and droughts irrigate more than 4 million hectares (ha). A vast net- destroy livelihoods, and the environment and people’s work of 7,500 dams stores and diverts water to thou- health are damaged by mounting levels of pollution. sands of irrigation schemes, making Vietnam one of the Though growth has produced vast benefits, it has world’s rice baskets. Hydropower accounted for about also placed unrelenting pressures on water resources, 37 percent of electricity in 2018, with an installed which in turn lead to economic stresses. Vietnam’s generation capacity of about 17 gigawatts (GW), and economy has grown so rapidly, and its water x vii x viii GO V ER N A N CE F O R WATER S ECU RIT Y endowment is so large, that it has been easy to over- • There is a significant gap between the potential and look the challenges that this success has created: actual value that can be derived from each drop of water. Agriculture could produce much more value • There is an emerging mismatch between supply through greater efficiency, water productivity and and demand in certain locations and seasons, with targeted crop choices, which are essential to boost consequent water stress that inevitably cascades farmers’ incomes and agricultural value added. through the economy. In coming years, these stresses Current resource management arrangements do are likely to intensify, unless action is taken now. not create the incentives needed to generate the • As the economy grows and water development greatest feasible value from water. For example, continues unabated, competition between needs incentivizing farmers to value water through water is intensifying tradeoffs that call for greater scru- charges would promote greater efficiency in water tiny of the way water resources are managed use, while optimizing hydropower cascades on a and allocated. Around 90 percent of water used river as a system could yield significantly higher nationwide is allocated to irrigation and aquacul- power production and higher revenues. ture. Today, increased demand from hydropower, • There is a deterioration in water quality, and pol- coal-fired power plants, industry, municipalities, lution loads are mounting. Pollution is fouling sur- inland water transport and other fast-growing face and groundwater. Very little municipal and and higher-value uses is creating conflicting industrial wastewater is treated, and most sewage, demands, which current water resource manage- industrial effluent, and solid waste find their way ment institutions cannot easily resolve. into watercourses. Some rivers - once clean - in and FIGURE ES.1:  The potential economic impact of inaction against water threats Upstream Sea level rise and Mekong land subsidence damming on fish on agriculture GDP With and Without Threat Impacts production 6% Intensifying 7% seasonal and 650 regional water shortages on agriculture and 600 hydropower 19% 550 Climate-change induced rising 500 temperatures on agriculture 3% 450 Discharge of GDP ($US, billions) untreated Untreated wastewater on industraial 400 human health wastewater on 53% irriagated yields 12% 350 Impacts by Sector 300 Total 6.0% 250 Services 5.6% 200 150 Industry 2.7% 2015 2020 2025 2030 2035 Agriculture 19.3% No Impacts Combined Threat The rising level of water-related threats could reduce GDP by 6 percent by 2035 against a scenario in which steps are taken An economic model developed for this study quantified Even then, these estimates are conservative because the consequences of four key water-related pressures they do not consider the full range of water-related on the economy: spatial and seasonal water shortages, threats and are based on optimistic assumptions urban water pollution, climate change–induced flooding about  the ease with which water and other factors of on the Red River and its impacts on rice yields, and the production can move between sectors in response to effects of flow impediments on fisheries. The greatest economic pressures. economic damage would be from water quality, which could reduce GDP by 4.3 percent annually. Source: World Bank 2018g. Exe cutiv e Sum ma ry xix around major cities have turned into contaminated to meet a growing share of energy demand. The high streams. Rising sea levels, coupled with declining water use of these plants will increase risks both to the river flows, have led to the intrusion of saltwater resource and to the security of energy supply if water into surface water and groundwater. Unregulated shortages arise. Inland waterway transport conveys abstraction of groundwater is “mining” the approximately 48% of the total national tonnage resource, causing land subsidence in some areas. being transported, and with increased competition for • Climate change is increasing the risks and costs from resources may also be impacted. droughts and floods, with recent disasters revealing FIGURE ES.2:  Water withdrawals by sector in Vietnam infrastructure gaps and low levels of resilience. • These vulnerabilities are heightened by obstacles Vietnam: Sector Water Use percent of and shortcomings in institutions, management, Total Withdrawals and infrastructure, constraining water services and forfeiting value through suboptimal alloca- Municipal tion and use of water. 3% Vietnam is rapidly moving further into middle-income Industry status, and if the water sector is to continue to support 5% the nation’s rapidly expanding economy, it will need to Aquaculture overcome three critical challenges: boosting efficiency to 11% meet rising demand and increase income per unit of water consumed (“dong per drop”); reducing threats from Agriculture “too dirty, too little, and too much” water; and improv- 81% ing governance policies, institutions, and financing. To provide insight into the consequences and eco- Source: 2030 WRG (2017). nomic costs of inaction today, a study assessed the Note: Energy water withdrawals are not included. economy wide effects of some projected threats and of the impacts of inaction by 2035. The study modeled Economic and population growth fuel the overall GDP impact of the threats by 2035 com- increased demand for water pared with the scenario in 2035 without the threats If the country continues along its present path— busi- (World Bank 2018g). The overall GDP impacts for the ness as usual—water stress is expected to emerge in different threats range from 0.2 percent to 3.5 percent, regions where the bulk of the country’s GDP is gen- which when conservatively applied to Vietnam’s 2016 erated. Economic growth, changing patterns of con- GDP is between US$400 million and US$7 billion sumption, and demographic pressure will continue per threat impact. When modeled, all threats (except to drive up demand for water. As Vietnam continues increased climate change–induced flooding in the Red growing and industrializing, it will inevitably con- River basin) combined have a total impact on GDP of tinue urbanizing. Nearly two-thirds of the country’s nearly 6 percent annually (see figure ES.1). residents live in the three primary river basins: the Red–Thai Binh, the Mekong Delta, and the Dong Boosting efficiency: Rising demand and Nai. Within 25 years, the population in urban areas is the need to increase “dong per drop” expected to require twice the daily water supply that Economic growth is a thirsty business. With growing current systems can provide. cities, rapid industrialization, and an expanding agri- Rapid increases in demand are projected to bring culture sector, the demand for water will continue to water stress to 11 out of 16 basins in Vietnam by 2030. climb. Water resources are abundant but not limitless, A 2017 report by the 2030 Water Resources Group and water availability varies across regions, years, highlights the challenges that Vietnam will face (2030 and seasons, with variability exacerbated by climate WRG 2017). Under a business-as-usual scenario, the change. By use, 81 percent of surface water goes to report projects a 32 percent increase in water demand agriculture, with a further 11 percent to aquaculture, by 2030 during the dry season. If nothing changes, 5 percent to industry, and only 3 percent to municipal this will lead to all but five river basins facing water uses (see figure ES.2). In addition, energy demand is stress by 2030—with the most severe stress in the key rising and is expected to increase by 2.5 times between economic basins (see figure ES.3, map 1.3). As meas- 2015 and 2035. Coal-fired power plants are expected ured by a common metric of water stress, the Water xx GO V ER N A N CE F O R WATER S ECU RIT Y FIGURE ES.3:  Growing demand and emerging water stress by river basin 70% 2016 2016, with hydropower 60% 2030 2030, with hydropower 50% Water Exploitation Index 40% Severe water stress 25% 30% Irrigation Industry Growth in demand over 2016 exploitable resources (%) 20% Municipal Aquaculture 20% water stress 15% 10% 10% Low water stress 5% 0% 0% South East Mekong Dong Nai Red–Thai Binh Red–Thai Binh Dong Nai South East Mekong River Cluster River Cluster Source: 2030 WRG 2017. Note: The Water Exploitation Index is the ratio of water withdrawals to water availability. Exploitation Index (the ratio of water withdrawals to producer of coffee (after Brazil), and the third-largest water availability), water abstractions in the Red–Thai producer of aquaculture products. Binh, South East River Cluster (SERC), Mekong and However, agricultural productivity typically lags that Dong Nai basins are already fast approaching unsus- in many comparator countries. Agricultural water use tainable levels (see figure ES.3). These basins account follows largely traditional practices. Although yields for 80 percent of Vietnam’s GDP. are quite high, quality and value are low. Already, stress and drought are constraining dry season production. Water productivity is low Projections suggest that with climate change, annual Vietnam could generate far greater economic benefit rice production could be reduced by 3–9 million tons from its water than at present. From each unit (cubic by 2050 and the highly productive coffee plantations meter) of water, Vietnam produces just US$2.37 of could become unsuitable for cultivation. GDP against a global average of US$19.42—almost More efficient rice production and crop diversifica- 10 times as much (see figure ES.4). Where water avail- tion have the potential to boost incomes and gener- ability is limited, a greater emphasis on productiv- ate more value per unit of water used while reducing ity—more value per drop—along with a reduction in total agricultural water demand. Agriculture has con- overall water demand is warranted. siderable scope to improve incomes and value added, particularly through quality improvement in rice and FIGURE ES.4:  Water productivity per unit of water in selected countries (US$ of GDP) through diversification to higher value crops. As dry 86.48 83.20 season water stresses grow and agriculture has to reduce dry season water use, the challenge will be to 37.40 32.90 ensure that farmers have the incentives and means to 28.04 18.17 11.67 get the maximum value out of less water. Agriculture 8.26 8.22 8.10 6.93 6.84 3.58 3.53 2.37 will need not only to use water more productively, e a A il sia ina ne dia ua ia d a es DR am but also to use water in ways that are coordinated az nc ali ov an US es pin rai rag lay oP Ch o tN Br str ld Fra ail on mb Uk Mo ilip Ma ca Th Au Vie La Ind Ca Ni Ph with other sectors and demands such as hydropower, Source: World Bank 2018g. industry, cities, and river transport. As demand grows Vietnam’s agriculture sector has grown rapidly. for other higher-value and growth-inducing uses for Agriculture accounts for 18 percent of GDP and water in industry and cities, mechanisms will need to employs 48 percent of the labor force. Its growth has be established for flood risk mitigation and inter-sec- been strong, particularly in rice, of which Vietnam is toral transfers that protect all stakeholders. the world’s second-largest exporter. Vietnam is also the largest producer of pepper, the second-largest Exe cutiv e Sum ma ry xxi Supply deficits are due to neglected Vietnam has an excellent record in the provision of maintenance water services to settlements: 95 percent of urban dwell- Vietnam has invested heavily in a vast irrigation ers and 70 percent of the rural population have access to infrastructure, but underinvestment in operation and at least “basic” water services. With rapid urbanization, maintenance (O&M) has contributed to deteriorat- however, a new generation of challenges has emerged. ing water service and a loss of productivity. The bulk For one, sourcing water is becoming a problem in some of public spending in agriculture has been on water locations. For example, salinity intrusion is making it infrastructure for rice cultivation, endowing Vietnam hard to secure freshwater supplies for cities in the delta, with a vast irrigation network and dam schemes for and supply costs are likely to rise sharply. Supplies from dry season cultivation and extensive flood defense sys- groundwater are at risk from depletion and pollution. tems for wet season cultivation. A Public Expenditure Corporatization and partial privatization of water utili- Review conducted in 2017 found that public expendi- ties have accelerated, but there are challenges in cost ture on new irrigation investment increased dramati- recovery, affordability, and financial sustainability, and cally between 2009 and 2012 but that the allocation the accompanying program to strengthen governance to O&M declined. The irrigation system is degraded, of urban water has stalled. meeting only about 50–60 percent of its design capac- Unplanned development and poorly coordinated ity (World Bank 2013). Countrywide, only 26 percent infrastructure have left rural and urban centers highly of canal lengths are fully functional, and about 1,500 vulnerable to risks from river flooding, poor drain- small and medium-size dams and reservoirs need to be age, sea-level rise, and sudden-onset coastal flooding. rehabilitated and modernized. Lack of O&M has made In the Mekong Delta, for example, climate change the water infrastructure failure-prone. Deteriorating has created an existential threat to the region, and water service means low value added and a reduction poorly planned urban development has aggravated of income for smallholder farmers. Similar trends of flooding in cities. City plans rarely reflect climate lack of O&M are visible in the inland waterway trans- risks or disaster risk resilience—and the poor are port sector, as well as in water pollution prevention. most at risk. There is scope to rebalance budget allocations Poor water service also hurts businesses. Reliability more toward recurrent expenditure through multiyear of water supply has slumped in recent years, leading to programs and to make farmers pay a larger share of higher business costs. Water outages increased nearly O&M costs. This would reduce the cost burden on threefold between 2009 and 2015, with most occur- the state budget and strengthen incentives to farmers ring in the South East, a region encompassing Ho Chi to increase their water productivity. The legal frame- Minh City, the largest economic center in the country. work for a revival of farmers’ contributions is in place, Water disruptions can have harmful impacts on firms, with a legal basis for an irrigation fee (even though with daily water shocks reducing the revenues of for- an irrigation fee waiver was introduced in 2008, lead- mal firms by 8.7 percent and those of informal firms ing to forgone annual revenue of about US$250 mil- by 34.8 percent (World Bank 2017n). lion at 2012 prices) (UNEP 2015). The 2017 Law on Hydraulic Works calls for reinstating market-based Reducing threats: Too dirty, too little, irrigation service pricing. As irrigation fees are intro- too much duced, impacts on households should be gauged and Both the quality and the quantity of Vietnam’s water conditional fee exemptions to promote other policy resources face growing threats. The country’s rapid objectives could be considered—for example, to pro- development, combined with the emerging threats of mote technology and husbandry practices that would climate change, have created a new constellation of improve water efficiency, as well as to support the threats, particularly costly flooding, worsening pollu- transition from low value, but high water intensive tion, and competition among sectors for water in the crops to high value and low water intensive crops. dry season. If nothing is done to reduce these threats, they could combine to cut GDP by about 6 percent Water is needed for settlements and business annually by 2035, against a scenario without these growth threats (see figure ES.1). These threats will need to be Water is critically important for urban and rural settle- addressed to ensure sufficient and safe water to sup- ments, but second-generation challenges are emerging. port economic growth. xx ii GO V ER N A N CE F O R WATER S ECU RIT Y Too dirty—pollution are not put in place by then. In Vietnam’s southern Pollution is emerging as the greatest water-related key economic zones, the cost estimate for 2010 was threat to the economy. The economic model devel- US$867 million. oped for this study suggests that the main threat is the impact of water pollution on human health, Too little—investment and enforcement which could reduce GDP by 3.5 percent by 2035 Much of the problem results from underinvestment (see figure ES.1). A much smaller impact (0.8 percent) in collection and treatment of wastewater. At the end could come from the effects of declining water qual- of 2018, out of 326 industrial zones planned coun- ity on paddy yields. The model did not quantify the trywide, 251 were in operation. Of these zones, 220 economic consequences of other forms of water pol- (88%) had wastewater treatment plants (MPI, 2019). lution, including the salinization of surface water and However, as mentioned above, it is estimated that these groundwater supplies. facilities were treating less than three quarters (71%) Rapid urban development has led to rising water of the wastewater produced in the zones (Thoi Bao pollution. Urban and industrial wastewater is the larg- Tai Chinh 2018). Most of the remaining wastewater est contributor to water pollution. Only 46% of urban is not treated and is discharged directly to the environ- households have connections to drainage systems and ment. Of the total of 587 operating industrial clusters, only 12.5% of municipal wastewater is treated (MOC, only 55 industrial clusters have centralized wastewater 2019). Over the next 15 years, urban wastewater is treatment facilities, accounting for 9.4% of the oper- expected to account for the largest share of effluents ating industrial clusters (Thoi Bao Tai Chinh 2018). (about 60 percent). Industrial wastewater will account for Most of the wastewater discharged from the 5,000 25–28 percent and rural wastewater for 12–15 percent. craft villages and traditional craft villages goes without Much industrial wastewater is discharged without treatment. In addition, some big industrial factories pretreatment. It is estimated that at the end of 2018, located outside industrial zones as well as the majority centralized wastewater treatment plants were treating of local hospitals and private clinics do not have waste- only about 71% of industrial wastewater (Thoi Bao water treatment facilities (MoNRE 2016) Tai Chinh 2018). The regulatory framework is basically sound, but Agriculture produces vast quantities of waste from enforcement is uneven. The legal framework includes a fertilizers, pathogens, and pharmaceuticals fed to ani- large set of regulations that deal with wastewater man- mals. About 80 million of the estimated 84 million agement, but enforcement remains a challenge. As per tons of livestock waste generated each year enter the Circular No. 35/2015/TT-BTNMT, all businesses and environment untreated, carrying nutrients, pathogens, service establishments have to be connected to the cen- and volatile compounds that compromise water and tralized wastewater treatment plant operating in their air quality and damage soils (Nguyen The Hinh 2017). industrial zone. However, some businesses and service With crop farming intensifying, pollution from fertiliz- establishments are exempted from this requirement, i.e. ers and pesticides has also surged. There is scant moni- if they (a) treat their wastewater in compliance with toring but strong global evidence of the harmful effects environmental, technical regulations and the connection of pollution on health and productivity. Aquaculture, to the centralized treatment plant would cause unrea- a key export industry, is also highly polluting. Neither sonable costs; (b) generate wastewater volumes exceed- regulation nor food safety concerns seem able to halt ing the treatment capacity of the receiving centralized the toxic waste flowing from aquaculture farms. wastewater treatment plant and concurrently apply The costs of this water pollution are high. Due to wastewater treatment measures in compliance with economic activities, in no river basin does surface water environmental technical regulations and (c) treat their meet the organic pollution standards for drinking wastewater in compliance with environmental techni- water established by the World Health Organization. cal regulations and the industrial zone has no central- Waterways flowing past major cities, such as the ized wastewater treatment system (Article 9, para  4). To Lich, Set and Kim Nguu Rivers passing through These exemptions, however, significantly increase the Hanoi, are seriously polluted—a wasted resource and difficulty of controlling and supervising wastewater a risk to human health and natural ecosystems. High generated and discharged from these exempted busi- pollution levels also constrain urban development and nesses and service establishments (MPI, 2019). the sustainability and future growth of industry and For industrial wastewater, there has been a new agriculture. It will cost Vietnam around US$12.4– decree issued in 2016 (154/2016/ND-CP), which US$18.6 million a day by 2030 if treatment measures introduced an environmental protection fee for Exe cutiv e Sum ma ry xxiii wastewater discharges. The environmental protection of the population is exposed to one or more types of fee is based on a fixed component of Dong 1.5 million water-related natural hazards. Models suggest that and a variable component. The variable component climate change will lead to increased severity and fre- applies when discharge is above 20 cubic meters per quency of floods, typhoons, sea-level rise, and associ- day. Although to date there has been no assessment on ated storm surges. Across climate change scenarios, by the actual effectiveness of the environmental protec- the 2040s, dry season runoff nationwide will likely be tion fee, current pollution levels suggest that its impact reduced while wet season peak runoff will increase. on untreated wastewater discharges has so far been At the front line of impacts are the agriculture and limited. aquaculture sectors, though economic damages from flooding in cities could turn out higher. Too much—managing for flows originating Economic losses, currently estimated at 1.5 percent outside the country per year, are predicted to rise sharply. Losses due to Because most of Vietnam’s rivers originate in other water-related natural disasters averaged 1–1.5 percent countries, water supply remains vulnerable to what of GDP over the last two decades. They are predicted happens upstream. Vietnam depends on international to rise to 3 percent by 2050 and to as much as 7 per- rivers, with more than 60 percent of the total average cent by 2100—among the highest in the world. Recent yearly surface water discharge generated outside the events have exposed both an infrastructure design def- country (see figure ES.5). Two of the most economically icit and low levels of resilience. Current infrastructure important rivers depend on water that flows through is often not adequate to cope with the new hazards of international neighbors. Nearly 90 percent of the floods and droughts, a problem compounded by poor Mekong River originates outside the country, arriving maintenance. in Vietnam through Cambodia, and 40 percent of the Prudent water management and basin planning Red River originates in China (ADB, 2009). Vietnam is can be key to building resilience to natural hazards an upstream riparian for the Sesan and Srepok Rivers and protecting lives and assets. The emphasis on flood flowing into Cambodia. As riparian countries continue control systems to protect agriculture has often trans- to develop their water resources, there is need to cooper- ferred the flood risks to adjoining urban areas, where ate on matters of common interest, including increased higher-value assets are located and much of the coun- water extraction, pollution, and dam development. The try’s GDP is produced. The lesson is to integrate water existing agreement on the Mekong has already brought risk into policy making and investment planning in benefits in terms of information, consultation require- a basin context, because this is the geographic scale ments, and identification of beneficial and negative from which risks emanate, have impacts, and can be impacts of proposed development and management. addressed. Environmental flows are dwindling. In some loca- FIGURE ES.5:  The proportion of each river originating in other countries is high, 2017 tions, minimum dry season environmental flows, i.e. as defined by MONRE as a value ranging between the 100 Percent 95% level of flow rate of the lowest months to the average value of the three lowest months, have fallen below 75 Percent the levels needed to preserve the ecology and amenity of the river, and also below the levels needed to ensure 50 Percent 40% that downstream users have access to the water they 30% 25 Percent 22% 17% need. These shortfalls have exacerbated the impact of recent droughts. 0 Percent Mekong Red-Thai Binh Ma Ca Dong Nai Improving governance: Framework, initiatives, and financing Source: 2030 WRG 2017. Integrated water resources management at the basin scale Climate change–related risks and Policy and the legal framework provide for inte- environmental flows grated management of water resources. The institu- Vietnam is one of the most hazard-prone countries in tional and governance framework for water resources the East Asia and Pacific region. More that 70 percent management has been established and evolved over xx iv GO V ER N A N CE F O R WATER S ECU RIT Y time in response to the growing challenges of sector problem. There is a lack of a united database on water management. Two decades ago, the government adopted resources to be used consistently from the national to integrated water resource management (IWRM) as the the local level. Water data are scattered among min- basis for water resources planning, development, and istries and localities, posing difficulties in manage- management. For example, the 2012 Law on Water ment. Apart from database sharing between MONRE Resources mandates this approach. The National and reservoir operators subject to inter-reservoir Strategy on Water Resources to 2020 confirms that procedures, there has been little information sharing “water resource management must be implemented in on water extraction, use, permit granting, planning an integrated manner on a river basin basis.” and projects in and around rivers among different However, Vietnam has long tried to establish plan- stakeholders. ning and management at the basin level, but with The ministries’ mandates are clear, but imbalances limited success. While river basin organizations are in resources and capacity are evident. MONRE has mandated in the 2012 Law on Water Resources, responsibility for management of the legal and regula- existing river basin organizations have not been fully tory framework, information and resource assessment, empowered as they are not state management agen- water resources strategy and planning, water alloca- cies. As a consequence, many organizations have over- tion and resource management, and pollution control. lapping tasks and accountabilities; and they lack the However, it lacks the human and financial resources to legal authority, institutional capacity, and financial take on this massive task. In addition, it is noted that and physical resources to plan and ensure that the a high degree of delegation of responsibilities, financ- plans are implemented. MONRE is currently propos- ing, and human resources to subnational governments ing to the Prime Minister to establish four river basin can create difficulties in integrating management of organizations for the Hong-Thai Binh, North Central, water resources at the central level. The provincial South Central and Dong Nai basins. departments – DONREs – have to follow two lines While the legal and regulatory framework has of reporting - to MONRE and to the PPCs. While a been established and is gradually being improved, it is DONRE has to follow MONRE in respect to technical not fully implemented. In September 2015, MONRE guidance, it must also follow the instructions of the PPC issued Circular 42 Regulations on Water Resources which allocates resources and appoints DONRE staff. Planning Techniques to spell out implementation More effective coordination between provincial gov- of the ministry’s planning functions under the law. ernments and national ministries, including DONRE However, there is still little comprehensive planning, and MONRE in particular, should be promoted. as the overall Master Plan on Water Resources has not Getting a multi-sectoral approach to water resource yet been approved. In the absence of this Master Plan, management has proved challenging. With so complex provinces have started to develop and approve their an institutional structure, getting a multi-sectoral, own water resources master plans. As these are not cross-institutional approach to planning, develop- coordinated, this may lead to conflicts between the ment, and management presents a particular chal- master plan of upstream and downstream provinces lenge for water management, which straddles sectors in the same river basin and to conflicts with the over- and internal jurisdictions. Its scale can be judged from all national planning. In general, legal and regulatory the recent assessment by the 2030 WRG study, which provisions for water are sound—the problem is imple- found that to reduce water stress in one basin, 24 mentation capacity and accountability, with moni- demand side measures were required from a host of toring and enforcement functions often fragmented different actors, including seven ministries, six pro- across agencies. Some legal documents to implement vincial councils, multiple municipalities, numerous the 2012 Law on Water Resources are yet to be issued irrigation companies and private firms, and millions by MONRE, MOST, MARD and MOF. of farmers and city dwellers. Getting all the sectoral Data on water resources management is a basic and local interests to work together presents a mas- building block for water resources planning and sive challenge of horizontal and vertical coordination monitoring, yet information remains limited and frag- (2030 WRG 2017). mented. While an initial database for water resources While Vietnam is an upstream and downstream planning has been established, limited budgets pre- riparian country, the Mekong River is the only trans- vent required updates, and the database does not yet boundary river in Vietnam with an agreement among meet all the requirements of management agencies and riparian states. For all but one of Vietnam’s trans- society. Further, information sharing is a particular boundary watercourses, there is little or no joint Exe cutiv e Sum ma ry xx v planning or management to optimize water resources To date, however, the revenue generated is received at the basin scale and little consultation among ripar- in the general state budget and is not earmarked for ian countries on proposals or their impacts. Only water-related improvements. It is necessary to review for the Mekong is there a transboundary agreement obstacles and shortcomings of this decree and to issue among Cambodia, Laos, Thailand and Vietnam on relevant correcting and guiding circulars to improve cooperative water use and an organization—the effectiveness of this policy. In addition, other revenue Mekong River Commission (MRC) and the associated policy measures in the water sector can be studied National Mekong Committees. Implementation of the and issued to promote efficiency and to protect natu- Mekong agreement has brought tangible benefits to ral resources and enhance their value in use, as well riparian countries in terms of information and risk as to generate fiscal resources, as provided for in the management. However, despite these arrangements in 2012 Law on Water Resources. This approach could the Mekong, challenges persist. For example, the two apply to water charges; for example, raising the price upper riparian states, China and Myanmar, partici- of irrigation water will at the same time cause water to pate in the MRC as “Dialogue Partners” but are not be more valued and better conserved and key O&M formal members and the construction of mainstream functions such as dam operation and safety and irri- dams has been a contentious issue within the MRC. gation water service to be secured. The policy could However, additional cooperation mechanisms among also apply to pollution charges, with higher charges Mekong riparian states, such as the Lancang-Mekong and strengthened compliance and enforcement. This Cooperation Mechanism, also have the potential to would also raise resources for environmental protec- address water-related challenges. tion. Overall, an incentive framework is needed that is aligned with policy and fiscal objectives and that can The incentive structures drive behavioral changes. The current incentive structure drives many of the neg- ative trends in the sector Public agencies lack coopera- Declining public investment and the scope for tion with one another, either horizontally or vertically. private finance Farmers’ behavior is driven by an investment policy There is a shortfall in water sector investment and skewed toward rice and by perverse economic incen- its financing. Investment in the water sector, largely tives, particularly the absence of water charges, which by the public sector, has been high in the past, with militates against water use efficiency. Investment in more than US$6.4 billion invested in 2006–15 in 140 water utilities may be driven more by the prospect of water programs and projects. Yet investment require- capital gain from land speculation than by planning ments remain high, estimated at as much as US$2.7 for profitable, consumer-responsive service delivery. billion annually for the water and sanitation sector Many regulatory incentives are negative, and moral alone. Actual financing for that sector falls well short hazard is inherent—it is often easier to pay a pollution of these amounts, at about US$1 billion annually, or fine than to invest in a cleaner environment. about 4 percent of total investment in the economy. Some economic instruments have been introduced In the current fiscally constrained climate, there but implementation and incentive mechanisms remain are opportunities for more “value-for-public-money.” limited. Economic instruments include water supply After decades of state-led investment and intervention tariffs, environmental protection fees for wastewater in the economy, government policy now promotes and solid waste, water abstraction fees, irrigation ser- progressive withdrawal of the state from direct eco- vice fees and incentives for water efficient technologies nomic activity and assumption of a more facilitating in industrial production and for small-scale irrigation and regulatory role. This approach is being accelerated systems. However, the implementation process shows by the emergence of severe fiscal constraints, which that these economic policy instruments remain inad- limit the government’s ability to invest and which equate, and far from incentivizing and regulating the have led to a cap on borrowing. These constraints will sustainable exploitation and usage of water as well as potentially have the beneficial effects of encouraging effective prevention and control of water pollution. increased effectiveness of public investment and of Revenue policy needs to be aligned with water promoting more innovative financing. Within a tight- resource management objectives. Regulated by Decree ening budget, the water sector can still improve the 82/2017/ND-CP in 2017, revenues from water quality and efficiency of public spending, for example, abstraction charges have resulted in 7,144 billion by concentrating capital investment and rebalancing VND after one year of implementation (28 Dec 2018). xx vi GO V ER N A N CE F O R WATER S ECU RIT Y budgets between capital and recurrent expenditures to need to adopt integrated basin-wide approaches that get the most out of existing assets. manage water across sectors and protect the environ- Opportunities are there to bring in more private ment, implementation has been lacking. Going for- financing. The scope for private financing in the water ward, greater emphasis will have to be given to policy sector is widening, particularly in urban and rural enforcement and to the incentives needed to assure water and sanitation, but also in irrigation. The recent greater compliance. rapid “equitization” of water supply utilities has dem- The solutions suggested by this analysis are clus- onstrated the feasibility of public–private partnerships tered around sets of seven recommendations. in the sector. Realizing the full potential by attracting 1. Improve water resources management new sources of financing would require tackling multi- institutions. ple obstacles, both economy wide constraints and risks 2. Manage Vietnam’s water at the basin scale specific to water— for example, the need for assured through inclusive governance arrangements. revenue streams in urban water and sanitation. 3. Increase the value produced by water in Mobilizing private finance for water would require agriculture. a major, coordinated policy effort. It could be modeled 4. Give the highest policy priority to reducing the on the framework recently proposed for the energy devastating levels of pollution. sector, which comprises a multiyear program to pre- 5. Improve risk management and disaster response pare and launch projects for public–private partner- and strengthen resilience. ships, work with the enterprises to prepare them to 6. Develop and scale up market-based financing access commercial finance, and actions to boost capi- and incentives. tal mobilization in local currency. A similar program 7. Strengthen water security for settlements. could be designed for the water and sanitation utili- ties and ultimately, perhaps, for the irrigation manage- Recommendation 1. Improve water resource ment companies. management institutions The way forward Further improve the legal framework to allow for efficient and effective water resources manage- Vietnam is confronted by a host of water challenges ment. It is recommended to revise the 2012 Law on that risk jeopardizing future growth. Having achieved Water Resources and 2014 Law on Environmental middle-income status, Vietnam now aspires to moder- Protection in order to improve coordination of state nity, industrialization, and a higher quality of life (WB management of water resources, particularly for the and MPI, 2016). The sustainable growth needed to division of tasks among ministries and provinces as achieve these goals will require a different approach to well as to address overlaps with other regulations and managing water resources. Past policies were shaped to legalize key issues such as river basin organizations. by assumptions of almost limitless growth in public Policies set out in the 2012 Law on Water Resources investment and an endless supply of water. Now, the and in related decrees need to be implemented, notably rapid investment of earlier decades is fiscally unafford- incentives to encourage water saving, recycling, waste- able. Risks from floods and droughts are rising, poor water reuse and water use efficiency. Financial regula- water quality is an economic burden, and the clean tions need to be amended to allow for ring-fencing of and safe water required for economic growth can revenues from economic instruments to allocate them no longer be taken for granted. A business-as-usual to water resource management activities. Economic approach to escalating water demand and degrad- instruments should be further refined to incentivize ing water supplies will inevitably impede economic behavioral changes in water users towards sustain- progress. able water resources management, and they should Meeting these challenges will call for a greater be strictly enforced. Market-based mechanisms which focus on policies and incentives, and for increased fis- allow the consumer to ‘vote’ for sustainably produced cal discipline. Vietnam has sound water policies, but products through their purchases should be further in practice they do not function as intended. Policy developed and promoted. Certification schemes and implementation is uneven, the incentives required consumer education can be key pillars of this initiative. to ensure better policy compliance are inadequate, Enforcement of regulations, particularly related and the institutional foundations needed to address to discharge of wastewater, needs to be strength- the new generation of challenges are insufficiently ened, to ensure strict compliance with environmental developed. Likewise, while there is an acknowledged Exe cutiv e Sum ma ry xx vii regulations. Monitoring and inspection – particularly to each basin situation. In this, Vietnam can learn random inspection - activities need to be increased much from its own ongoing experiences in integrated and penalties firmly imposed. State management from planning: at the largest scale, in the Mekong Delta; at central to local level needs to be strengthened, and the meso scale, in the Sesan and Srepok Rivers; and at active participation of stakeholders, particularly civil the intra-provincial scale, on the Dinh River in Ninh society, should be enabled and encouraged through Thuan. Based on these local test beds and on inter- policies and regulations, in order to support water national experience, lessons may be drawn on how resources management activities, including monitor- to carry out effective integrated basin planning in all ing activities. main basins. Human and financial capacities and resources need Build a national water information system to meet to be enhanced to allow for implementation of impor- the intensifying water management challenges: You tant policy measures. These tasks include the devel- cannot manage what you cannot measure. Water opment of the overall master plan for water resource resources management is a knowledge-based activity basic survey, water resources master plan, river basin that at present is constrained by lack of information planning, establishing and operation of river basin and of access to information. There is little reliable organizations, and inter-reservoir operations. In sup- information or monitoring of the economically most port of these tasks, basic surveys need to be strength- significant problem—water pollution. High quality ened, monitoring stations expanded, information and timely water data are needed to support planning collected, and databases managed as well as increasing and decision taking. That will require expanding and information sharing among ministries and localities. completing investments in data gathering. A national Increasing engagement with civil society. On the water information system also needs to be built, based one hand, educational and communication campaigns on modernized water monitoring and enhanced ana- could increase the awareness of Vietnam’s citizens of lytical tools, with all water data collected into a robust water resource challenges and could offer guidance on and transparent system easily accessible to all as the how to support sustainable water resources manage- building block for good water management. ment. On the other hand, given the scarce resources, civil society could be more actively involved in water Recommendation 3. Increase the value resource management activities, such as monitoring produced by water in agriculture water quality and untreated wastewater discharges. Speed up implementation of the Agricultural Restructuring Plan and of the new irrigation strat- Recommendation 2. Manage Vietnam’s water egy. Growth of incomes and value in Vietnam’s agri- at the basin scale through inclusive governance culture and aquaculture, which use 92 percent of the arrangements nation’s water, will depend on using less water more Move forward on integrated management within productively through innovation, climate-smart agri- basins and across sectors. The 2012 Law on Water culture, and environmentally sustainable measures. Resources sets out the requirements of integrated Experience throughout Vietnam shows that higher- management and basin planning. However, at pre- value cash crops have higher water productivity, and sent, many central, provincial, and local authorities improved irrigation can boost output and incomes and and agencies take decisions on water development proof farming against drought. Up to 25 times more and management without adequate coordination or value and farmer income can be obtained if farmers regard for spatial externalities at the scale where it switch part of their production to higher-value crops matters—the basin. An integrated approach is essen- that return more value per cubic meter. This calls for tial to provide a framework to address inter-sectoral a bundle of complementary policies to reduce agri- and interjurisdictional issues like infrastructure plan- cultural water usage, boost agricultural water pro- ning, water allocation, flow management, pollution, ductivity and promote diversification to higher value flooding, and drought resilience. However, integrated crops. It will require adopting new production sys- approaches are challenging to achieve when mandates tems, such as 1 Must–Do 5 Reductions and System are spread across jurisdictions and agencies. The focus of Rice Intensification (SRI), including Alternative in integration should not necessarily be on administra- Wet and Dry (AWD) techniques, which form an tive architecture but on integrating functions. What is important component of both systems. In addition, needed is a specific timeline and action steps for imple- it will require investments in irrigation systems and menting the 2012 Law on Water Resources, adapted in market linkages and value chain development, with xx viii GO V ER N A N CE F O R WATER S ECU RIT Y farmers and the private sector as leading partners. It Infrastructure, incentives, and regulation must be top will also require incentives to align farmers’ behavior priorities and the focus of a massive national effort with policy and fiscal objectives and other goals such and investment push. as environmental sustainability, pollution control, and Make domestic wastewater collection, treatment, resilience to shocks. Most of these actions are articu- and reuse an investment priority—and a business lated in the 2014 Agricultural Restructuring Plan and opportunity. Vietnam’s performance on domestic in the new irrigation strategy but remain only partially wastewater collection, treatment, and reuse is compar- implemented. atively low in the region. Investments in wastewater Integrate agricultural water management within a have sizable public good characteristics—generating basin planning and management framework. As the large public health benefits—but it is hard to attract major water users, agriculture and aquaculture must private investors without improved revenue streams or actively participate in developing and implementing subsidies. This calls for public investment and regula- integrated basin planning, to ensure efficient alloca- tory efforts to expand wastewater treatment and col- tion and good water service and to mitigate climate lection and for a collaborative effort with the private change and pollution risks. Basin-wide planning and sector to develop financing options to make domestic implementation need to be collaborative between wastewater attractive for investors, either alone or as MARD and MONRE horizontally and with the PPCs public–private partnerships (PPPs). vertically. Sharpen incentives to reduce industrial and agricul- Align public resource allocation in irrigated agri- tural pollution. For industry, there is a need to address culture with policy objectives within a basin frame- the ineffectual effluent tariff regime. A review of the work. Aligning public spending on agriculture and regulatory and incentive structures for industrial pol- water with basin plans could help resolve the chal- lution would reveal why they are not working and lenge of coordinating among sectors and between the what actions would have the most impact. A prior- center and the provinces. More broadly, improving the ity would be to strengthen water quality monitoring, allocation and efficiency of public resources would regulatory and enforcement systems. The construction help boost agricultural growth and farmer incomes. and operation of central wastewater treatment plants There is scope to rebalance budget allocations away in industrial zones has to be closely monitored by from new irrigation systems toward upgrading of the the authorities to prevent any risks and errors dur- existing irrigation systems and toward O&M and to ing the design, construction and operation phases. strengthen agricultural services. New resource plan- Steps should be taken to encourage the expansion of ning and allocation instruments could help this rebal- Eco-Industrial Parks (as per Decree 82/2018/ND-CP) ancing. The Medium-Term Investment Plan and the and particularly to encourage water efficiency meas- Medium-Term Financial and Budgetary Plan could ures and re-use of wastewater as part of the Industrial allow multiyear programming at the basin scale, Symbiosis concept. In agriculture, there is a need to integrating sectoral and subnational priorities with implement the measures in MARD’s Agricultural national priorities within basin plans, improving the Restructuring Plan (2014) to induce a shift in cultiva- fit of investment with needs, and facilitating long- tion methods, including a package of rules and incen- term provision of O&M. In addition, there is scope tives that reduce fertilizer and pesticide use. Smart to replace ‘paddy land’ by ‘agricultural land’ in the fertilizer and pesticide use could produce greater effi- budget allocation formula to promote diversifica- ciency, reduced pollution, and higher incomes. tion and consequent higher water productivity and Test innovative approaches to water pollution higher incomes for farmers.4 An irrigation water pub- control that have been developed in other countries. lic expenditure review could help define both process Vietnam can learn from innovative approaches to and priorities for action. water pollution control globally, including innovative approaches to monitoring and accountability such as Recommendation 4. Give the highest policy monitoring pollution in real time, developing a water priority to reducing the devastating levels of health index, and strengthening local accountability pollution for pollution control. Possible innovative approaches Risks from water pollution are becoming extreme, to financing and incentives include water funds to with impacts on human health, the economy, and the help finance natural capital alternatives to conven- environment posing a massive threat that could cost tional water treatment technologies; environmental nearly 6 percent of GDP by 2035, if nothing changes. quality contracts, which help enterprises and local Exe cutiv e Sum ma ry xxix governments meet water quality targets and target response and recovery needs, mobilizing additional incentives to specific pollution reduction outcomes; private funding from the capital and insurance mar- payment for ecosystem services approaches; and the kets, and trying innovative instruments such as the piloting of a market in trading pollution discharge Catastrophe Deferred Drawdown Option used in the permits. Philippines or Mexico’s Fund for Natural Disasters. Recommendation 5. Improve risk management Recommendation 6. Develop and scale up and disaster response and strengthen market-based financing and incentives resilience Develop a new water sector financing strategy. Against Adopt a phased approach to address both urgent the backdrop of declining public finance, investment needs for managing risks and longer-term needs to and operational needs in urban and rural water and build resilience to all types of risks across key sectors. sanitation must increasingly be met by the private Global experience is that disasters have long-term sector. A new sector financing strategy should aim at macroeconomic impacts and can affect development maximizing private finance for development and at outcomes and that provident preparation is the best introducing financially autonomous operations. The approach. Given the high level of risks that Vietnam recent proposals for developing a financing strategy is facing, there is a strong need to continue proac- for the energy sector could help frame this investi- tively investing in risk reduction, preparedness, and gation (World Bank 2018f). The new decree (Decree long-term resilience. In the short term, this would 63/2018/ND-CP) on Public–Private Partnerships, require resolving the multisector coordination and which came into effect on 19 June 2018, seeks to implementation challenges, improving effectiveness, improve and clarify the enabling environment for and coordinating horizontally across sectors as well such partnerships. However, some outstanding issues, as vertically at national, regional, and provincial lev- including complicated and lengthy procedures for els. In the medium term, the Central Committee for appraisal and approval for PPP projects, and risk allo- Natural Disaster Prevention and Control needs to be cation between the State bodies and private investors, empowered to drive inter-ministerial coordination remain unclear and unaddressed. It is expected and of and serve in an advisory role for integrated disaster importance that these will be addressed by the Law on risk management. In the long term, multi-hazard dis- Investment, which is currently being drafted and will aster risk management and climate change adaptation likely be debated by the National Assembly in 2020 need to be factored into planning for managing natu- or 2021 (KPMG, 2018). Likewise, there is a need for ral resources and land use across all climate-sensitive the government to become a facilitator rather than an sectors. investor in agriculture. Given the neglect of O&M for Implement an integrated approach to disaster risk publicly funded irrigation schemes, bringing in farm- management and resilience building. A recent report ers and professional partners to operate and maintain (World Bank 2017h) highlights four musts for dis- facilities may also increase the reliability and extend aster risk management in Vietnam: (1) an integrated the useful life of these assets. drought and flood monitoring and warning system; Scale up PPPs across all branches of the water (2) a financial protection strategy; (3) strengthened sector. The recent trend in equitization of the water social assistance systems; and (4) locally specific risk utilities and development of private sector–financed and vulnerability analyses. The report also highlights bulk water schemes has demonstrated the potential four musts for building resilience through both struc- to draw domestic and international private financing tural and nonstructural measures across key sectors: and expertise into the water sector. Despite current (1) integrating water resource management with constraints, there could be scope for PPPs throughout climate-sensitive land-use planning; (2) adopting cli- the water sector if the right packages (with risk allo- mate-smart good agricultural practices; (3) employ- cation and incentives) could be tailored. In irrigation, ing inclusive, community-based approaches; and (4) the new Law on Hydraulic Works (Articles 50–52) empowering vulnerable populations to access risk provides for broader participation of farmers and the reduction opportunities. private sector. As in other countries such as China, a Develop a comprehensive disaster risk finance strat- PPP strategy could be developed for each branch of egy. Led by the Ministry of Finance, this would require the sector—water infrastructure, water pollution con- coordinating and combining existing instruments to trol, urban and rural water supply, wastewater, and ensure quick access and disbursement for immediate irrigation. xx x GO V ER N A N CE F O R WATER S ECU RIT Y Assess the overall incentive structure in water to Complete urban water reforms and improve service identify the most important and practical ways to align delivery for all. Strategy and planning for urban water behavior with policy goals and to meet fiscal objec- supply services need to focus on 100 percent access, tives. The government’s policy to reduce the role of the and on the quality and efficiency of services, with an state in most policy areas, including water resources emphasis on improving governance and strengthen- management, points to a much greater role for market- ing autonomous utilities and on developing services based policy instruments. These instruments send pric- in smaller towns. The reform program needs to be ing signals concerning the importance of conservation, carried through to improve governance by accompa- efficient use, and the externalities entailed in different nying completion of the privatization process with water uses. A range of economic policy instruments “contractualization,” institutional development, and can promote efficient water allocation, development, establishment of an independent regulator. Service and sustainable use, including water pricing reforms delivery and utility autonomy need to be sustained by to promote conservation, and water rights assignment improving the financial situation of the utilities, par- and trading to facilitate the re-allocation of water to ticularly by boosting the collection rate, reducing non- its highest-value uses. Incentives for cooperation of revenue water and improving energy efficiency. For both public and private actors within comprehensive rural water, attention is needed to ensure sustainabil- plans are critical. An assessment of the overall incen- ity, close provision gaps between rich and poor, and tive structure in water would help identify the most include women and marginalized groups. important and practical ways to align behavior with policy and fiscal objectives. ***** Policy shifts need to ensure that water is used sustain- Recommendation 7. Strengthen water security ably and more productively for multiple sectors. Water for settlements management policies need to shift water allocation to higher-value uses and increase the value of water Integrate water security for settlements within broader use within sectors. Agriculture needs to be reoriented spatial planning. The rate of urbanization and industri- from its traditional food security focus to a modern alization in Vietnam has outpaced the planning, infra- production system resilient to climate change. Policy structure, and regulation needed to support this rapid enforcement, as well as the incentives needed to ensure growth. Water security for settlements requires risk accountability and compliance across tiers of govern- management, including resilience to climate-related ment, will require greater emphasis. Underlying most risks such as floods and saline intrusion, and resilience of these moves will be a shift in focus to make water to threats to water quantity and quality; develop- and the natural ecology it supports the concern of all, ment and protection of water sources; and provision seeing water as a precious resource that sustains life, of good quality water supply and sanitation services. drives prosperity, and enhances an amenity for recrea- Ongoing planning for the Mekong Delta should show tion today and for future generations. how to integrate urban planning for water manage- ment, hazard mitigation, water supply, and drainage and wastewater into broader spatial planning at local and basin wide levels. This can be replicated for settle- ments throughout the country Acronyms 1M-5R 1 Must—5 Reductions ADB Asian Development Bank AWD Alternate Wet and Dry Method CAT DDO Catastrophe Deferred Drawdown Option CCA Climate Change Adaptation CEM Center for Environmental Monitoring CGE Computable General Equilibrium DoNRE Department of Natural Resources and Environment DRM Disaster Risk Management EBRD European Bank for Reconstruction and Development FAO Food and Agriculture Organization of the United Nations FONDEN Fund for Natural Disasters GDP Gross Domestic Product GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit HCMC Ho Chi Minh City IFC International Finance Corporation IPP Independent Power Producer IWRM Integrated Water Resources Management MARD Ministry of Agriculture and Rural Development MICS Multiple Indicator Cluster Survey MoC Ministry of Construction MoF Ministry of Finance MoH Ministry of Health MoIT Ministry of Industry and Trade MoT Ministry of Transport MoNRE Ministry of Natural Resources and Environment MPI Ministry of Planning and Investment xxxi xxxii GO V ER N A N CE F O R WATER S ECU RIT Y MRC Mekong River Commission MTFP Medium-Term Financial and Budgetary Plan MTIP Medium-Term Investment Plan NAWAPI National Center for Water Resources Planning and Investigation NGO Nongovernmental Organization NTP National Target Program NWIS National Water Information System O&M Operation and Maintenance OEPIW Order on Exploiting and Protecting Irrigation Work PER Public Expenditure Review PCERWASS Provincial Centers for Rural Water Supply and Sanitation PES Payment for Ecosystem Services PIM Participation in Irrigation Management PPC Provincial People’s Committee PPP Public–Private Partnership RBO River Basin Organization SERC South East River Cluster SOE State-Owned Enterprise SRI System of Rice Intensification UN United Nations UNEP United Nations Environment Programme UNICEF United Nations Children’s Fund USGS United States Geological Survey VEA Vietnam Environment Administration WRG 2030 Water Resources Group WRM Water Resources Management WSS Water Supply and Sanitation WUO Water User Organization 1 Water Resources Assessment: How Secure are Vietnam’s Water Resources? How secure are Vietnam’s water resources—now and in the future? • Despite an abundant natural endowment, Vietnam’s water resources are already coming under stress, and the country is also vulnerable to water’s great destructive power. • There are big and growing risks to the quantity and quality of water. • As levels of water development rise, competition between needs is emerging, and tradeoffs have to be made. • Under a “business as usual” approach, problems will only grow worse, with the costs of inaction as much as 6 percent of gross domestic product (GDP) by 2035. 1.1  The greatest pressures on water risks are pervasive. Gains against poverty remain frag- resources come from the speed of ile, and a considerable portion of the population is economic development and the vulnerable (World Bank 2017b, c). Rapid growth has come at the expense of pressure changing structure of the economy on natural resources.1 Rapid growth has put pres- Liberalized economic policies have driven rapid growth. sure on sustainable resource use and environmental In response to slow growth in the 1980s, Vietnam protection. The greatest pressures on water resources embarked after 1986 on a program of economic lib- come from the speed of economic development and eralization and integration—Doi Moi, or Renovation. the changing structure of the economy. Essentially, the Although progression to a market economy is still in development of water infrastructure, the rapid rise in transition, with some 40 percent of GDP coming from water use, and the emergence of growing risks to the the state, liberalization has contributed to remarkable resource such as pollution and climate change have levels of growth in recent years, sometimes exceed- outpaced the ability of water institutions to manage ing 10 percent a year, and has transformed Vietnam and regulate water resource development and use and into a middle-income country. GDP is around US$160 to manage risks. Resource degradation and rising risk billion (2015), or US$1,735 for each of the 92 mil- are likely to put limits on future economic growth lion citizens. Marking this transition, Vietnam gradu- unless there are changes in water governance. ated from the International Development Association Box 1.1, drawn from the preliminary results of a to the International Bank for Reconstruction and computable general equilibrium modeling, indicates the Development in 2017. potential magnitude of the impacts on the Vietnamese Poverty has dropped, although risks remain. economy if nothing is done to alter current trends Economic growth and social transformation have lifted (World Bank 2018g; Blake and Robbins 2016). large portions of society out of poverty. Nonetheless, 1 2 GO V ER N A N CE F O R WATER S ECU RIT Y BOX 1.1:  The potential economic impacts of inaction To provide insight into the consequences and economic costs of inaction today, the study Water-related Threats to Vietnam’s Economy quantifies the economywide effects of selected future threats and of the impacts of inaction by 2035 (World Bank 2018g). The study uses computable general equilibrium modeling of the overall GDP impact of the threats by 2035 compared with the scenario in 2035 without the threats. The overall GDP impacts range from 0.2 percent to 3.5 percent, which conservatively applied to Vietnam’s 2016 GDP is between US$400 million and US$7 billion per threat/ impact. For all threats combined (except for increased climate change–induced flooding of Red River), the total impact on GDP amounts to 5.96 percent annually (see table). Summary of sectoral and GDP impacts by 2035 of threats in case of inaction Change (%) Threat Impact in case of inaction Agriculture Industry Services Total Combined Threat Includes all cumulative threats/ impacts except for 19.34 2.67 5.55 5.96 climate change–induced flooding of Red River Increased climate change–induced Infrastructure damage and loss in crop yields 0.64 0.23 0.37 0.34 flooding of Red River  Loss of capital and land, reduced transport efficiency, cost of reconstruction Sea-level rise and land subsidence Impact on paddy rice production 1.67 0.06 0.29 0.36 due to overabstraction of groundwa-  Reduced paddy yields, loss of agricultural land ter in Mekong and Red River Deltas Intensifying seasonal and regional Impact on agriculture and hydropower 5.37 0.33 1.01 1.25 water shortages  Reduced yields in paddy and other crops, reduced efficiency in hydro-electricity Climate change–induced rising Impact on paddy production 0.90 0.00 0.20 0.20 temperatures  Reduced paddy yields Increased discharge of untreated Impact on irrigated agriculture 3.60 0.10 0.60 0.80 industrial wastewater to surface water  Reduced paddy yields bodies—impact on paddy yields Increased discharge of untreated Impact on human health/childhood development 5.80 2.80 3.60 3.50 municipal and industrial wastewater—  Reduced labor productivity; increased impact on human health expenditure on health Increased damming for hydropower Impact on wild fish productivity 3.28 −0.18 0.27 0.45 upstream of Mekong River  Reduced yield in fishing Source: World Bank 2018g. Water governance and water security are essential change, the government formulated a vision for the components of policy in coming years when institu- next stage of the country’s development. The Socio- tional development will be important for Vietnam’s Economic Development Strategy 2011–2020 calls for economic growth. Governance of environmental “break-throughs” in structural reforms, environmen- sustainability and water security (see box 1.2) are tal sustainability, social equity, and macroeconomic essential to the consolidation of the institutional stability to allow Vietnam to lay the foundations for a underpinnings of development in coming years. Aware modern economy and society. Water governance and of the risks of too rapid economic growth and societal water security are important components. BOX 1.2:  What is water security? The goal of water security is to balance risks and oppor- In addition, the available water endowment is funda- tunities to deliver three positive water-related social, eco- mental for framing the water security challenge. nomic, and environmental outcomes: (1) water resources When water resources are managed efficiently and sus- managed efficiently and sustainably; (2) water-related tainably, water-related risks are appropriately recognized and risks mitigated; and (3) water services delivered effi- mitigated, and water services are delivered reliably, affordably, ciently, sustainably and equitably. These three outcomes and inclusively, a country can be considered water secure. roughly correspond to the three parts of this Report. However, the acceptable levels of many of these charac- Delivering these outcomes depends on the water sec- teristics of sector performance will change with economic tor architecture, that is, on water governance, water and social development, meaning that water security is a institutions, and water infrastructure. dynamic goal reflecting changing societal expectations. Source: World Bank 2018h. Wate r Re source s Asse ssme nt: How Se cure are Vie tnam’s Wate r Re sou r c e s? 3 1.2  Vietnam’s water resources are MAP 1.1:   The 16 main river basins in Vietnam relatively abundant, but stress and competition are growing Bang Giang – Ky Cung 1.2.1  Water resources are already coming under stress Water is Vietnam’s most precious natural resource, Ma but it is not limitless. Vietnam has 16 major river Red–Thai Binh basins and nearly 3,500 rivers in a dense and com- plex river network (MONRE, 2016b; see map 1.1). With ample average rainfall of almost 2,000 millim- Ca Thach Han eters (mm) a year Vietnam appears to be rich in water. & Gianh Surface water and reserves of groundwater provide considerable water resources, and a high proportion Coastal Huong of these resources can be developed. The Mekong, Red–Thai Binh, and Dong Nai rivers account for Thu Bon & Tra Khuc 80 percent of the country’s water resources. The Vu Gia Mekong has a catchment area of 800,000 square Sesan Kone kilometers (km2)—the size of France—spread across six countries. Only 8 percent of the basin’s area Srepok lies within Vietnam. The total water available to Ba Vietnam from this river is more than 500 billion Dong Nai cubic meters (m3), 57 percent of Vietnam’s water resource and exceeding the entire water availability of the Philippines or Australia. The Red–Thai Binh Mekong South East River has a catchment of 155,000 km2 and deliv- River Cluster ers to Vietnam 137 billion m3, more than the entire water resources of the United Kingdom. Overall water availability—9,434 m3 per capita2—is high by regional and global standards. However, much of Vietnam’s water lies beyond its Source: 2030 WRG 2017. direct management. Two-thirds of water resources TABLE 1.1:  Water resources in major rivers flow in from neighboring countries upstream (see table 1.1). As a consequence, Vietnam ranks Catchment area Total volume (billions of cubic meters) low in the region for internal renewable water Total Percent resources—4,200 m³ per person against an average River basin Total area Percent Total generated generated (square kilometers) in Vietnam in Vietnam in Vietnam of 4,900 m³ for Southeast Asia. Water resources are Mekong 795,000 8 508 55.0 11 also highly seasonal, with precipitation and run- Red–Thai Binh 155,000 55 137 80.3 59 off concentrated in a short rainy season followed Dong Nai 44,100 85 36.6 32.6 89 Ma 28, 400 62 20.2 16.5 82 by a long, hot, dry season (see figure 1.1). Thus, Ca 27,200 65 27.5 24.5 89 rivers are in flood during the rainy season, but flows Ba 13,900 100 13.8 13.8 100 Bang Giang – Ky Cung 11,220 94 8.9 7.3 82 are low in the dry season. In addition, rainfall and Thu Bon and Vu Gia 10,350 100 17.9 17.9 100 water resources are unevenly distributed across the Source: WEPA 2018. country. 4 GO V ER N A N CE F O R WATER S ECU RIT Y FIGURE 1.1:  Exploitable water resources and irrigation storage, and national water runoff a.  Exploitable surface water and groundwater resources, and water from b.  National water runoff in dry and wet seasons irrigation storage in the dry season per river basin, 2016–30 Mekong 900 Red - Thai Binh Dong Nai 800 Water resources (billions of cubic meters) Ca 625 650 Water runoff (billions of cubic meters) Thu Bon and Vu Gia 700 Ma Se San 600 Ba 500 Sre Pok Huong Exploitable 400 Tra Khue surface water Kone Exploitable 300 SERC groundwater Bang Giang - Ky Cung Irrigation 200 Gianh storage Dry season Thach Han 0 20 40 60 80 100 120 100 210 200 Wet season 0 bn m 3 bn m 3 2016 2030 Source: 2030 WRG 2017 (left); Vietnam Institute of Water Resource Planning (right). Vietnam has developed and used this precious Hydropower generates 37 percent of the country’s resource of water for the good of its people. With electricity (see box 1.3). Huge investments have over 7,500 dams and reservoirs and 4 million hec- brought clean drinking water to the vast majority of tares (ha) of irrigated area, irrigation brings live- households. Vietnam has a strong cultural tradition lihoods to about half the workforce and their of respect for its precious water resource, and rivers, families, contributing nearly one-fifth of the nation’s streams, and lakes enhance a beautiful countryside income (World Bank 2016b; World Bank 2017b). for people and nature. BOX 1.3:  Hydropower in Vietnam Vietnam has 3,450 rivers of more than 10 kilom- generation) and on pumped storage power stations to eters in length, presenting a high potential for hydro- increase network efficiency. Total projected capacity, power development of about 35,000 megawatts (MW), including small and medium hydropower plants and of which some 26,000 MW can be economically devel- pumped storage stations, is planned to reach 21,600 oped. By 2017, installed capacity was 17,000 MW, MW in 2020, rising to 23,400 MW in 2025 and 25,400 with 54 percent in the northern region, 35 percent in MW in 2030. Because of fast rising demand, other the center, and just over 11 percent in the southern generation capacity will also grow fast and the share region. Hydropower accounted for 37 percent of the of hydropower (including small hydropower plants) electricity mix of Vietnam in 2018. The update of the in the overall national power supply is expected to Power Master Plan VII gives high priority to further decline—to 29 percent in 2020, 20 percent in 2025, hydropower development but focuses on multipur- and 15 percent in 2030. pose projects (flood control water supply, and power Source: GoV 2016; Vietnam National Assembly Committee for Science, Technology and Environment 2013; MoIT 2018. Government’s report at the 6th session, XIV National Assembly Meeting, October 2018. Economic growth is a thirsty business. With grow- 5 percent to industry, and only 3 percent to munici- ing cities, rapid industrialization, and an expanding pal uses (see figure 1.2). In addition to direct water agriculture sector, the demand for water will con- uses, inland waterway transport is estimated to con- tinue to climb. Water resources are abundant but not vey approximately 48% of the total national tonnage limitless, and water availability varies across regions, being transported. Thus, inland waterway transport years and seasons, with variability exacerbated by makes a significant contribution to Vietnam’s econ- climate change. By use, 81 percent of water goes to omy (World Bank, 2013b). agriculture, with a further 11 percent to aquaculture, Wate r Re source s Asse ssme nt: How Se cure are Vie tnam’s Wate r Re sou r c e s? 5 FIGURE 1.2:  Water withdrawals by sector in Vietnam 2016 forced 18 thermal power plants to shut down between a few days to months. As a result, 14 TWh of Vietnam: Sector Water Use percent of thermal energy generation was lost, impacting India’s Total Withdrawals economy and society. The energy loss was the equiva- lent of Sri Lanka’s entire energy demand for one year Municipal (World Resources Institute, 2017). Thermal water 3% pollution is a further challenge which needs to be Industry addressed. Further, Vietnam will use between 45–56 5% million tons of domestic coal a year, with the balance Aquaculture of 100 million tones/ year of coal demand by 2030 11% being imported. Coal mining also requires water and in addition can have implications for water pollution. Agriculture However, to date there seems to be little investigation 81% on the impact on water resources of coal fired ther- mal power production, nor on the impact of water Source: 2030 WRG (2017). resources on coal fired thermal power production and Note: Energy water withdrawals are not included. its potential risks to the economy. Energy demand is rising exponentially, but little is FIGURE 1.3:  System generated power in 2020-2030 as per known about its impact on water resources. The revised PDP VII energy sector plays a significant role in Vietnam’s 800 economic growth. The National Energy Development Plan for the period 2016-2025 with the vision to 2035, developed by MOIT, has forecast that by 2035 600 the total final energy demand under a business as TWh usual scenario will be nearly 2.5 times higher than 400 in 2015. It is expected to increase from 265 TWH in 2020 to 573 TWh by 2030. The highest growth in 200 energy consumption up to 2035 is attributed to the transportation and industrial sectors, with an annual 0 growth of 5.7% and 5% respectively. While the share 2020 2025 2030 of renewable energies contributed to 53% of total primary energy supply in 2000, the share of domestic RE - Small Hydro Power Plant RE - Solar Power supply of hydropower and biomass seems unable to RE - Biomass RE - Wind Power meet increasing demand. Thus, the expected share of Import Others renewable energy is expected to be 32% in 2020, 24% Gas Tubine (includes LNG) Coal - Fired Thermal in 2025 and 23% in 2030. The balance is planned to Power Plant Hydro Power & Pump Storage be met mostly with increased coal fired power plants and gas turbines. Coal fired power plants will contrib- Source: Decision 428/QĐ-TTg dated 18th March 2016. ute 40%, 55% and 53% to the total energy mix by 2020, 2025 and 2030, respectively (Revised PDP VII). Rapid development is beginning to stress the water Most thermal coal fired power plants, require large resource. Although the resource remains abundant volumes of water for cooling processes and power- in most locations, rapid development and growth in ing turbines with steam (World Resources Institute, demand have produced stresses. Two major basins 2018). While most of this water is not consumed by are already experiencing unsustainably high levels of the process and is discharged back into the water extraction, and other economically important basins body, it needs to be considered that the high level of will become stressed if action does not start now. The water withdrawals may pose a potential systematic 2030 Water Resources Group (WRG) study found or network risk, particularly in basins with already that the economically important South East River competing water uses. This situation can be aggra- Cluster (SERC) and Ma basins are already register- vated during times of water shortage and drought. In ing unsustainably high rates of extraction in the dry India, for example, drought related water shortages in season (2030 WRG 2017). 6 GO V ER N A N CE F O R WATER S ECU RIT Y Figure 1.4 shows that dry-season demand in the the economy if nothing is done—and this is without SERC basin of nearly 2 billion m3 is already equal to considering the effect of pollution on water systems. the entire available resource of 1.9 BCM Reducing water stress will be critical, particularly in FIGURE 1.4:  Water demand by sector in 2016 and 2030 in the four major river basins in which about 80 percent the dry season in the South East River Cluster basin of Vietnam’s GDP is generated—the Red–Thai Binh, 3.0 Mekong, Dong Nai, and SERC river basins. Action 44% increase now is already a pressing need (GoV 2018). Dry season water demand by sector (bn m3) 2.5 0.8 Gap: 0.8 bn m 3 2.0 1.9 1.9 0.2 1.2.2  Water has great destructive power 1.5 0.7 0.7 With more than 70 percent of the population at high 1.0 0.1 0.3 risk from water-related natural disasters, Vietnam is one of the most hazard-prone countries in the East 0.5 0.8 1.0 Asia and Pacific region. The costs of these disasters 0.0 2016 2030 have been high—13,000 deaths, property damage of Irrigation Industry Municipal SERC Aquaculture Exploitable water resources over US$6 billion in two decades, and losses of 1–1.5 percent of GDP each year. These disasters have also Source: 2030 WRG 2017. revealed low levels of resilience. Flash floods kill an In coming years, water stress will have considerable average of 50 people each year (see box 1.4). Cities impact on Vietnam’s socioeconomic development and and farms in the Mekong Delta are flooded up to natural capital unless action is taken now. Section 3 meters every year. In addition, more than 30 dam 1.2.6 below describes how rising demand will bring failures in the last five years have led to devastating 11 of Vietnam’s 16 basins into stress by 2030 and regional flooding, loss of human life, and substantial how this stress will have a considerable impact on economic losses. BOX 1.4:  Flooding is a growing danger The narrow and steep topography of the Sesan- Srepok River Basin (and the effect of its develop- ment for hydropower generation—see box 1.8) results in frequent floods and makes forecasting and early warning difficult. Flooding has a heavy human and economic cost. The historical Ketsana storm in 2009 affected 11 provinces in the Central region and Central Highlands, killed 172 people and caused an estimated US$70 million in damage (WHO, 2018). A 2017 flood in the northern and central regions of Vietnam has killed at least 54 people. The picture at right is from Hanoi City in 2008. The floods have killed 17 people in Hanoi and 44 across northern and central Vietnam Picture: GETTY Source: Telegraph 2008; Telegraph 2017. Drought events are increasing in frequency and severity, Some of these disasters stem from land-use changes at a high cost to livelihoods and the economy. Between and poor management, aggravated by climate change. 2014 and 2016, an El Niño event caused Vietnam’s most Vietnam is one of the most vulnerable countries to cli- severe drought in over 90 years, affecting 18 provinces mate change. Climate change is expected to increase (see box 1.5). The drought affected mostly the Central total annual runoff slightly, but more rain in the wet Highlands, the southern coast, and the Mekong Delta season and less in the dry will result in more variabil- (2030 WRG 2017). A recent World Bank global report ity and more extreme events. The likely impacts are found that the impacts of “wet shocks,” such as floods, grim: sea-level rise of up to 30 centimeters by 2050, are more visible but that the impact of “dry shocks,” declining river flows, increasing reliance on cross- such as drought events, can have higher economic costs: border flows,3 rising number and intensity of storms “for firms and cities the cost of dry shocks is four times and floods, more frequent drought conditions, and greater than wet shocks” (World Bank 2017n). increased saltwater intrusion. Wate r Re source s Asse ssme nt: How Se cure are Vie tnam’s Wate r Re sou r c e s? 7 BOX 1.5:  The economic effects of the 2016 drought The total direct economic losses from the 2016 drought The drought hit the Mekong Delta in the critical came to VND15 trillion (US$675 million), representing growing season for rice, requiring farmers to supple- 0.35 percent of GDP and resulting in negative agricul- ment irrigation with groundwater to save their crops. tural growth for the first time in decades. The reduced surface water flows allowed saltwater By early April 2016, discharges of the main riv- to intrude up to 70–90 kilometers (km) upstream, ers in the Central Highlands were reduced by up to 20–30 km further than usual, making the water unfit 90 percent, and water volumes in most reservoirs even for irrigation. Thirteen provinces with some declined to as little as 10 percent of the design capac- 180,000 hectares of irrigated area in the Mekong Delta ity. Seventy percent of the cultivated area experienced (10 percent of the total irrigated area) were seriously severe drought. Freshwater was lacking for about affected by the drought and salinization. Rice produc- 2 million people, and 1.1 million people were obliged to tion fell by 1.1 million tons (2.2 percent of national seek food aid. Impacts continued after the drought was production). Effects from salinization will be felt into over as perennial crops like coffee were affected. the longer term. Source: WPP 2017; World Bank 2016c; World Bank 2017h. 1.2.3  Risks are large and growing in as little as every 20 years or less by 2026–45 (World Flood risks are rising, particularly in the Mekong Bank 2018i). The half of the country south of Danang Delta and in the south and centre of the country. A will be particularly affected (see map 1.2). In Ho Chi recent assessment of flood risk shows that historical Minh City, the area exposed to the risk of a 100- year peak flood flows that used to occur once every- one to flood is projected to increase from 29 percent to 46 five centuries are now expected across half the country percent by 2026–45. MAP 1.2:   Regional overview of annual peak flows and their return period in 2000–17 and with climate change in 2026–45 <20 20–50 No Change 200–500 >500 0–125 125–650 650–1300 1300–2600 2600–6000 6000–25000 >25000 Source: World Bank 2018i. Note: This figure shows the extent of areas with more frequent exposure to extremes: (a) 1 in 100 stream flow (Q100) in cubic meters per second based on data from dataset Climate Forecast System Reanalysis for 1979–1999; (b) the return period of the Q100 in the recent period of 2000–2017; (c) the return period associated with Q100 in 2026–2045 (that is, using Representative Concentration Path 4.5 Community Climate System Model). 8 GO V ER N A N CE F O R WATER S ECU RIT Y Alternating cycles of flood and drought are highlight- month or the average value of the three lowest months. ing infrastructure gaps in some areas. Despite the exten- MONRE and its decentralized departments are respon- sive development of dams, reservoirs, and other water sible for setting the levels, subject to the approval of the control structures, a changing climate and changing pat- concerned provincial people’s committees. Levels are terns of runoff and river flow are revealing problems of announced each year, and hydropower operators, irri- inadequate infrastructure. A recent study of Ninh Thuan gation districts, municipalities, and others withdrawing Province found that fluctuating climate patterns were water are responsible for ensuring that minimum flows contributing to alternating cycles of drought and flood. are maintained. In many locations, minimum dry sea- Reservoirs in the province hold only 8 percent of the son environmental flows, as defined by the MONRE average annual flow and are thus unable either to pre- circular, have fallen below the levels needed to preserve vent damaging flooding in a wet year or to carry over the ecology and amenity of the river and also below adequate water to the dry season to mitigate the impacts the levels needed to ensure that downstream users have of drought in a dry year (World Bank, 2018e). access to the water they need. Pollution is fouling surface water. Only 12.5 per- Risks to the quantity and quality of groundwater cent of municipal wastewater is treated, and country- are also on the increase. Unregulated abstraction of wide most sewage, industrial effluent, and solid waste groundwater is “mining” the resource to the detriment find their way into watercourses (MOC, 2019). While of future generations. This abstraction and use are an water quality remains fair upstream, the downstream unregulated free-for-all that is fast depleting aquifers. and estuary zones are routinely fouled, especially riv- Water tables are dropping in areas of unsustainable ers in and around major cities. over-abstraction, resulting in dwindling quality and Environmental flows are dwindling. The require- quantity of the resource, and in rising costs, and are ments for environmental flows (termed “minimum also one of the causes of land subsidence (see box 1.6). flows” in Vietnam) are set out in the 2012 Law on Further, salt water is flowing into surface water and Water Resources and in a recent circular (64/2017) groundwater. In 2016, salt water flowed almost 100 issued by MONRE. These instruments require flows km up the Mekong—200,000 ha of crops were ruined, to be maintained at least at the level in the lowest and rice and shrimp production plummeted. BOX 1.6:  Overexploitation of groundwater and land subsidence in the Mekong Delta In the rural areas of the Mekong Delta, almost every 0.9 m per year. In Hau Giang, Can Tho Bac Lieu, Dong household owns at least one groundwater well, and Thap, and Vinh Long Provinces, water tables are falling wells are still proliferating. In Ca Mau alone, there are by 0.3–0.5 m a year. more than 138,000 wells producing 400,000 cubic The upshot is that land subsidence is now accelerat- meters (m3) of water daily. Soc Trang has a further ing all across the Mekong Delta. Analysis from spatial 80,000 wells. Groundwater is used not only for domes- data (InSAR) and remote sensing from 2007 to 2010 tic purposes but also for agriculture, animal production, confirms land subsidence of 1–3 centimeters (cm) a and aquaculture. year deltawide. In Ca Mau, for example, the land is Development and pumping are largely unregulated, sinking at 1.9–2.8 cm each year and roads are sinking and water tables are plummeting, leading to land sub- in many spots. According to the World Bank (2018g), sidence and saline intrusion. According to the Ministry land subsidence caused by groundwater extraction in of Natural Resources and Environment, the water table the Mekong Delta is estimated to reach 0.24–0.90 m across the whole delta is dropping by 0.2–0.4 m per by 2035. Groundwater subsidence is expected to have year. The worst depletion occurring is in Long An, Ca 10 times more impact to GDP in 2035 from lost paddy Mau, and Tra Vinh Provinces, ranging from 0.5 m to land than sea level rise alone (WB, 2018g). Source:  National Center for Water Resources Planning and Investigation 2016; Viet Nam News 2017; Erban and others 2013; Erban et al 2014. Dependence on transboundary resources creates vul- (see boxes 1.7 and 5.4). On the Mekong, the highly nerability. With two-thirds of water resources coming seasonal discharge patterns create flood risks that are from outside the country, Vietnam’s high depend- exacerbated by unplanned development. However, ency creates risks. Upstream riparian countries are Vietnam is also an upstream country, for example in developing infrastructure that affects flows, and the Sesan Srepok River Basin, and thus also needs to upstream hydropower dam construction presents risks consider downstream concerns in its planning. Wate r Re source s Asse ssme nt: How Se cure are Vie tnam’s Wate r Re sou r c e s? 9 1.2.4  Tradeoffs are intensifying Vietnam still has ambitious hydropower develop- As water development intensifies, competition among ment plans (see box 1.3), and risks will increase— needs is emerging, creating conflicting demands for including to inland fisheries and to nutrient-rich water resource management. More than 90 percent sediment flows—unless planning and management of the water used nationwide is allocated to irriga- improve. The government is well aware of the chal- tion and aquaculture. Today, increased demand from lenges, and since 2014 the Prime Minister has issued hydropower and other fast-growing and higher-value inter-reservoir operation procedures for the 61 biggest uses is beginning to create conflicting demands, which hydropower and irrigation reservoirs. The total capac- current water resource management institutions can- ity of these reservoirs amounts to 33.3 billion m3, not easily resolve (see box 1.7). For example, some accounting for over 98% of the total capacity of res- small and medium sized hydropower investors pay ervoirs nationwide. Priority objectives of the inter res- more attention to power generation without sufficient ervoir operation procedures in the flooding season are consideration for reservoir operations. This creates ensuring engineering work safety, controlling flood- risks for downstream areas of flooding in the wet sea- ing and protecting downstream and ensuring power son and of water scarcity in the dry season (MONRE, generation efficiency. In the dry season, engineering 2016b). As an example, in 2013 the Central Coast, work safety remains the first priority, followed by the including Da Nang City, faced a severe water shortage requirement of maintaining minimum flow, meeting affecting 1.7 million people and 10,000 hectares of downstream water demand and reservoir water level, agricultural land. A bilateral solution had to be found and lastly the power generating efficiency. The effi- with the dam operator of Dak Mi 4 Hydropower Joint ciency of these procedures, however, still needs to be Stock Co. to release additional water downstream. formally evaluated. BOX 1.7:  Downstream hazards of dams One downstream hazard concerns fish stocks. A 2016 Further negative economic impacts include the inter- assessment estimated that by 2030 the wild fish catch on ruption of nutrient-rich silt flows downstream on which the mainstream of the Mekong River would be reduced Vietnamese flood irrigation has historically depended by 26–42 percent if a potential cascade of 11 large dams (but which were not quantified in the CGE model). The is constructed (ICEM,2010). Analysis using a comput- problem is that reservoirs trap all “bedload,” and the able general equilibrium (CGE) modeling approach supply of sediment downstream is reduced. In the Thu to assess the overall economic effects of the upstream Bon–Vu Gia Basin, for example, 42 hydropower reser- Mekong development on fish catches estimated that— voirs upstream trap silt and sand, reducing the dam sedi- when considering only the impact on fish catches— ment reaching the mouth of the Cua Dai River by about agricultural GDP would decline by more than 3 percent by 40 percent and eroding 100 m of riverbank in the two 2035. This translates into an overall GDP reduction of about decades 1997–2017. The Mekong River Commission a half percentage point (see table and World Bank 2018g). found that existing and proposed dams in the Mekong Impact on GDP from reduced fish production caused by additional Basin are likely to reduce current sediment by 67 percent hydropower development on Mekong River by 2020 and by 97 percent by 2040 (Piman et al, 2017). Sector Percent deviation Mitigation measures should be considered for each dam and for the entire cascade to ensure that sediment Agriculture −3.28 can reach further down the delta to provide floodplain Industry   0.18 fertility. Services −0.27 GDP −0.45 Source: World Bank 2013; World Bank 2018g; MoIT 2018. 1.2.5  Water conservation is an emerging planted in rice. Many farmers—and the nation—could priority, but this does not mean loss of earn more from their water by switching to higher-value economic value products like vegetables, fruits, fish, and live-stock. New technology such as drip irrigation and higher-yielding Agriculture and aquaculture jointly use 92 percent of varieties can give farmers much more income per unit the nation’s water, but much more value could be of water consumed—more “dong per drop.” obtained. At present, two-thirds of the arable area is 10 GO V ER N A N CE F O R WATER S ECU RIT Y In addition, current resource management arrange- is obliging government to transport water over long ments do not optimize the value derived from water. distances for potable supply to settlements throughout Water infrastructure—for irrigation, water supply, the region. and hydropower—is developed and managed by thou- FIGURE 1.5:  Water Exploitation Index for key basins—with and sands of operators without optimization at the level of without hydropower storage—in the dry season, 2016–2030 the basin or stream flow. The government has begun to address this problem for major rivers and infra- 70 2016 structure, but implementation of the 2014 operating 60 2016, with hydropower 2030 principles has been slow (see box 1.7). In addition, the 2030, with hydropower Water Exploitation Index (percent) 50 problem persists for smaller infrastructure and water- courses. This leads to loss of value—for example, opti- 40 Severe water stress mizing hydropower cascades on a river as a system 30 could yield significantly higher power production and higher revenues. Managing flow variance on rivers— 20 Water stress adapting the sequence and timing of high and low 10 Low water stress flows on rivers—could optimize value and minimize tradeoffs among hydropower, fisheries, agriculture, 0 Red - Thai Binh Dong Nai South East Mekong and transportation. River Cluster Source: 2030 WRG 2017. 1.2.6  Under business as usual, problems will only grow worse If business continues as usual, problems will inten- sify.5 Economic growth, changing patterns of con- Even today, the four river basins where 80 percent of sumption, and demographic pressures will continue Vietnam’s GDP is produced are facing water stress to boost demand. The 2030 WRG study (2017) pro- in the dry season. Applying the Water Exploitation jected an approximate 30 percent increase in total Index—the ratio of mean annual total abstraction water demand between 2016 and 2030,6 with sig- of freshwater divided by long-term average “renew- nificant regional consequences in the dry season. If able” freshwater resource availability—to Vietnam’s demand is unchecked and there is no change in poli- river basins, reveals that the Red–Thai Binh, Mekong, cies or practices, all but five river basins are expected and Dong Nai basins already face water stress, while to face water stress in the dry season by 2030, with SERC even faces “severe” water stress (see figure 1.5).4 the SERC and Ma River Basins facing severe water Even where rivers are not currently stressed in quan- stress (see figure 1.6). 2030 WRG further projected tity, problems of water quality or groundwater over- that SERC—under business as usual—would be una- abstraction may spell shortages of water for supply to ble to meet 28 percent of its water demand in the dry settlements. Box 1.8 illustrates how there is plenty of season. water in the seven provinces south of the Hau River but the declining quality of water from local sources BOX 1.8:  Scarcity amid plenty: Regional water supply to settlements in the seven provinces south of the Hau River There is no shortage of water south of the Hau River. the Hau River sufficiently upstream to be safe from However, the reliability of sources of drinking water salinity intrusion problems for the foreseeable future supply are deteriorating due to declining groundwater (see map). The total capital cost was estimated at resources, saline intrusion to both surface and ground- about US$1.7 billion. The initiative is to be developed water, and pollution. The Mekong Regional Water in a multiphased manner. The government is explor- Supply Master Plan to 2030 and a pre-feasibility ing additional options that consider a combination of study commissioned by the Ministry of Construction surface water, groundwater, and desalination to sup- in 2015/16 concluded that the most viable future ply various parts of the region, taking into account water supply to settlements in the seven provinces least-cost sustainable solutions and source diversifica- south of the Hau River is through regional/interpro- tion to increase the security of supply. vincial bulk water supply, with water sourced from (Box continues next page) Wate r Re source s Asse ssme nt: How Se cure are Vie tnam’s Wate r Re sou r c e s? 11 hydropower storage, making water temporarily una- BOX 1.8:  (Continued) vailable for other users. Attention needs to be given to the management of hydropower storage and trade- offs between water users, particularly in the Red– Thai Binh, SERC and Dong Nai River Basins, where around three quarter of Vietnam’s GDP is generated (see figure 1.5). The impact on the economy of sticking to business as usual is expected to be great. The CGE modeling shows that the overall impact of water shortages by 2035 if nothing is done would be equivalent to a reduction of GDP below trend of 1.25 percent versus a future without water shortages (see table 1.2)—and this is a lower-bound estimate (WB 2018g). The agri- cultural and hydropower sectors would be particu- larly affected, with up to 30 percent of water demand unmet. Hydropower production could be reduced by 3 percent in 2035 compared with 2012. Nationwide, rice production could be cut by 22 percent, with up to half of production lost in key rice production areas (see table 1.3). These projections are conservative as the modeling framework assumes that there are close Source: (GoV, 2016, Decision 1240/QD-Ttg). substitutes for water. In more realistic modeling sce- Water allocation conflicts between hydropower and narios, the consequences of water scarcity are much other users could further increase water stress. Water higher. allocation conflicts can arise in the dry season due to FIGURE 1.6:  Water stress levels in the dry season in 2016 and 2030, excluding hydropower storage Dry Season Water Exploitation Index (WEI) Basin 2016 2030 Bang Giang - Ky Cung 1% 2% 2016 2030 Red - Thai Binh 19% 27% Ma 35% 44% Ca 9% 12% Gianh 2% 3% Thach Han 5% 6% Huong 23% 28% Thu Bon & Vu Gia 11% 15% WEI Tra Khuc 13% 16% < 10% Kone 19% 23% 10–20% Ba 19% 24% 20–40% Dong Nai 19% 28% > 40% SERC 41% 58% Sesan <1% 1% SrePok 5% 6% Mekong 19% 22% Key Source: 2030 WRG 2017. Note: green = no stress, amber = low stress, brown = stressed, and red = severely stressed. 12 GO V ER N A N CE F O R WATER S ECU RIT Y TABLE 1.2:  Impact of water shortage on GDP, 2035 (%) where appropriate. For more detailed informa- Combined* Paddy rice Other crops Electricity tion on the water resources and water demand Agriculture −5.37 −4.70 −0.67 −0.07 situation, as well as on water-related challenges, see 2030 WRG (2017). Industry −0.33 −0.18 −0.01 −0.14 2. Based on 884 billon m3 renewable water Services −1.01 −0.83 −0.09 −0.09 resources (FAO Aquastat database) and 93.7 GDP −1.25 −1.02 −0.13 −0.11 million people in 2017 (estimation of Vietnam Source: WB (2018g). Note: The percentage change is that from the reference path, that is, no additional General Department—Ministry of Planning and future water shortages. Investment). *Combined column is the reduction in GDP from all impacts (paddy, other crops, and electricity). These estimates include substitution of goods and sector interactions, so 3. Cross-border inflows to Vietnam are expected to the sum of the three categories may not total to the “combined” values. increase by 5–10 percent by 2045. TABLE 1.3:  Impacts of water shortage on key crops for the most water-stressed regions 4. The WEI marks the following levels of water stress: no stress, less than 10 percent; low stress, Basin Dry season lost rice (%) 10 percent to less than 20 percent; stressed, Red River 39 20 percent to less than 40 per-cent; and severe Dong Nai and South East River Cluster 52 water stress, more than 40 percent. North Central Coast 53 5. Business as usual refers to expected water Source: WB (2018g). demand and supply if no significant changes are made to policy or practice. Assumptions for Notes water demand growth rates per sector and water supply considering climate change can be found 1. This chapter is based on several reports, includ- in 2030 WRG (2017). ing 2030 WRG (2017), World Bank (2017a) 6. Water demand projections consider changes and World Bank (2018g). The chapter also uses in water demand for agriculture, aquaculture, material from the recent World Bank (2018i) industry, municipalities, and hydropower. Water assessment of climate change and flood risk, resources projections include climate change the ADB Water Sector Review (ADB 2009), the impacts. Details on the assumptions for these Mekong Delta Integrated Climate Resilience projections can be found in 2030 WRG (2017). Project (World Bank 2016f), and numerous other studies. Specific references are indicated Part I Boosting Efficiency—Rising Demand and the Need to Increase “Dong per Drop” With growing cities, rapid industrialization, and an expanding agriculture sector, the demand for water will continue to climb. Water resources are abundant but not limitless, and water availability varies across regions, years, and seasons, exac- erbated by climate change. Vietnam could generate far greater economic benefit from its water than it does. Agricultural productivity typically lags that in many comparator countries. Despite heavy investment in a vast irrigation infrastructure, underinvestment in operation and maintenance has contributed to deteriorating water service and a loss of productivity. And while basic water supply coverage has been achieved in urban areas, second-generation challenges related to the reliability and quality of water supply services are emerging. © Nguyen Huu Thong / World Bank 2 Increasing Water Productivity in Irrigated Agriculture Agriculture depends on irrigation, but constraints and risks are emerging • Vietnam’s successful agriculture sector is the main user of water (81 percent), but the government has overem- phasized expansion of the vast irrigation infrastructure to the comparative neglect of operation and mainte- nance (O&M), leading to deterioration in performance. • There are also emerging constraints and risks to the supply of irrigation water, particularly from seasonal shortages and competition from other sectors and from pollution and salinization. The agriculture sector is increasingly vulnerable to climate variability and extreme events. Improving agricultural water productivity would boost incomes and value added • Rice is the predominant irrigated crop, and there is scope to improve value added, particularly through improving quality, and to strengthen resilience against increased water variability and shocks. • The sector has been diversifying to higher-productivity, less water-intensive crops. Continuing this trend would increase value from water and incomes further and would help boost farmer incomes and value added even as dry season water availability becomes a growing constraint. Planning, resource allocation, and incentives in irrigated agriculture need to be aligned with policy objectives and integrated in a basin framework • Improving the allocation and efficiency of public resources in agriculture and sharpening the incentive struc- ture for farmers would boost agricultural growth and farmers’ incomes. • Agricultural investment and water management also need to be better integrated in the basin planning and management framework. New resource planning and allocation instruments such as the Medium-Term Investment Plan (MTIP) and the Medium-Term Financial and Budgetary Plans (MTFP) could help. • There could also be scope for public–private partnerships (PPP) in irrigation. The government’s strategy for irrigated agriculture is sound: the challenge is to accelerate implementation • The government has devised the 2017 Law on Hydraulic Works to improve the efficiency and productivity of irrigated agriculture and to introduce a participatory governance model and more efficient asset management. The 2014 Agricultural Restructuring Plan and the new irrigation strategy support this approach. Priorities for action • Implementing the 2014 Agricultural Restructuring Plan and the new irrigation strategy. • Factoring irrigation and irrigation infrastructure management into integrated basin planning. • Accelerating adoption of improved rice-husbandry systems. (Box continues next page) 15 16 GO V ER N A N CE F O R WATER S ECU RIT Y • Promoting water efficiency and water productivity and strengthening drought resilience. • Improving resource allocation and revenue raising in irrigation, with better asset management, less emphasis on new infrastructure, and a review of the budget formula prioritizing paddy. • Looking at possible innovations in private financing for irrigated agriculture. • Reassessing the overall incentive structure for farmers to align their behavior more closely with policy goals— and to articulate options for charging irrigation service fees not only as a fiscal measure but as incentives for optimal farming practices 2.1  Agricultural water use has to be factor—but attention is needed to downstream managed within an overall integrated impacts. Wet season rice production typically requires framework flood-control structures that in some cases transfer flood risk to urban areas. Rice production also gener- Agriculture is the dominant user of water, and its per- ates water quality impacts due to the application of formance determines the availability of water to other fertilizers, pesticides, and herbicides (see chapter 4). users, with consequences throughout the economy. Agriculture accounts for 81 percent of water with- 2.2  Agriculture depends on irrigation drawals, contributes about 17–18 percent of GDP and and water control, but performance is employs 45 percent of the workforce. As the largest user of water, agriculture determines much else in deteriorating the water sector, and so agricultural diversions need Vietnam’s agriculture sector has made enormous to be coordinated with other priority demands, not strides but at an environmental cost that is growing only hydropower, industrial and human use but also more visible and with impacts that cascade through ecosystem, amenity, and navigational uses. Agriculture the economy. Vietnam is the top global producer of is also particularly vulnerable to climate-related risks pepper, the second-largest of coffee (after Brazil), the that are largely channeled through uncertain changes third-largest of aquaculture products, and the fifth- in water availability, suggesting the need for “no- largest of tea (see figures 2.1–2.3). Performance on regrets” water management approaches that build agricultural yields, output, and exports, however, has resilience to possible future threats. Water pollution is been more impressive than gains in efficiency, farmers’ another threat that has emerged as perhaps the over- welfare, and product quality. Some of the gains have arching problem in the water sector. Agriculture is been won at an increasing environmental cost, with a affected by poor water quality from cities while also growing pollution footprint and increasing levels of being the major contributor to nonpoint source pollu- water consumption. Agricultural water use is largely tion, which is responsible for much of the eutrophica- traditional and is overwhelmingly dedicated to water- tion of Vietnam’s rivers. Finally, as demand for other, intensive, low-value crops, notably rice, of which higher-value uses for water grows, there will be a need Vietnam is the world’s second-largest exporter (World for mechanisms for intersectoral transfers of water Bank 2016b). that protect the interests of all stakeholders. Although rice is the dominant irrigated crop and Scarce water resources could be used and allocated yields are high, value added lags behind that of major more efficiently during periods of seasonal water competitors.1 Although Vietnam has high rice yields— shortages. Agricultural water use during the dry sea- around 6 tons per hectare—the quality and price reduce son could be reduced by diversifying away from rice the value farmers and the country get from rice pro- toward higher-value, less water-intensive crops and duction. Vietnam has the second lowest rice price in by adopting more efficient irrigation methods. The the world, at $0.36/kilogram (kg) while China and the current low levels of agricultural water productivity Philippines achieve almost US$ 1.00/kg. Largely as a in Vietnam show that there is considerable scope for result of these quality issues, the value of rice output per both increasing revenues and reducing water use in the unit of irrigation water in Vietnam is only half that in dry season. Agricultural water savings could then help China and one-third that in India (see table 2.1). While meet growing urban and industrial demands through Vietnam has a global comparative advantage in the a well-functioning water allocation system. production of rice, especially when compared to arid Vietnam is ideally positioned to grow rice in the wet countries, more efficient rice production could boost season, when water is abundant and not a constraining output and incomes, and save water (GoV, 2014c). Incre asing Wate r Product ivit y in Irrigate d Agric u lt u r e 17 About 58 percent of the area under irrigation is used harvests a year. In 2014, total rice production was 45 for rice production, and 96 percent of the rice area is million tons (GoV, 2014c). Recognizing the need to irrigated. Rice is produced mainly in three regions: The diversify production and risks, the government has Southern Delta, which includes the Mekong Delta and proposed a cap on the expansion of rice cultivation. accounts for about 50 percent of total rice produc- The target is to produce 41–43 million tons in 2020 tion; the Northern Delta; and the Northern Highlands and 44 million tons in 2030 (GoV, 2009, Resolution (see figure 2.1). With irrigation, rice can be produced 63/NQ-CP). This would continue to meet expected in any of four growing seasons. Almost 45 percent domestic demand and leave a large although declin- of Vietnam’s irrigation water is used in the Mekong ing surplus for export. The challenge then would be to River Basin, almost exclusively for paddy rice. In the increase revenues from lower exports through atten- Mekong delta, one plot can produce up to three rice tion to quality and through diversification. FIGURE 2.1:  Distribution of rice- FIGURE 2.2:  Distribution of coffee- FIGURE 2.3:  Distribution of sugarcane- growing area in Vietnam growing area in Vietnam growing areas in Vietnam Total Rice Paddies (’000 ha) Other Provinces 13% of production North 19,504 ha Gia Lai North Central 12% of production 65,240 ha Total Rice Paddies (’000 ha/yr) South Central < 100 Dak Lak 69,882 ha 100 - 200 36% of production 200 - 300 Central Highlands 300 - 400 39,780 ha Dak Nong > 400 14% production South East 31,119 ha Lam Dong 25% production Mekong River Delta 44,375 0 50 100 200 kilometers 0 50 100 200 kilometers Source: 2030 WRG 2017. TABLE 2.1:  Water productivity in Vietnam, China, and India Apples 4,163 1.20 Output Output per Per Unit of India Rice 988 0.09 Country Cropping pattern service area Irrigation (US$/ha) Water (US$/ Rice/Chilli/Cotton 1,206 0.12 cubic meter) Sugarcane 1,844 0.17 Vietnam Rice 654 0.03 Coconut and sugarcane 2,165 0.12 Rice and vegetables 1,051 0.11 Source: Burke and others 2015. Rice and sugar 3,603 0.34 Note: Sample of irrigation schemes larger than 5,000 hectares. Vegetables 4,862 0.49 2.2.1  The performance of the large stock of China Rice 1,541 0.06 irrigation infrastructure is deteriorating Rice and rapessed 1,546 0.38 Even though Vietnam is endowed with a vast irrigation net- Wheat/Corn 2,491 1.46 work and supplies of easily diverted water, it faces the dual 18 GO V ER N A N CE F O R WATER S ECU RIT Y problem of deteriorating dams and more variable water and modernized, including restored and increased storage flows. Rainfall is limited to a wet season lasting only a and outflow capacities. Siltation of reservoirs is a further few months, and irrigation is essential during the long, problem. Increased precipitation and inflows—reflecting dry months. An immense network of about 7,500 dams changes in climate—create risks of flooding. Even if the and reservoirs store and divert water to several thou- dams were in perfect condition, the increased flows from sand irrigation schemes, increasing the amount of water upstream would be difficult to store. available during the dry season and helping smooth flow In addition, impacts from upstream development variability (see box 2.1). However, many dams have dete- and changed flow regimes due to climate change riorated due to neglect and lack of maintenance, with the require changes and replacements in existing irriga- result that storage has decreased. About 1,500 small and tion works, which lead to increased investment and medium-size dams and reservoirs need to be rehabilitated production costs BOX 2.1:  Vietnam’s huge irrigation infrastructure Vietnam has developed a vast infrastructure network • 13,400 large electrical pumping stations. for irrigation, hydropower, water supply, and hydraulic • 5,500 large drains, 235,000 kilometers (km) of water management, including drainage, flood control, canals, and 26,000 km of dikes. and prevention of salinity intrusion. It includes: The country has 97 water resource works exploitation com- • 904 diversion structures serving more than 200 hec- panies, three of which are directly under the Ministry of tares (ha) of irrigated area (110 of which can serve Agriculture and Rural Development and 94 under provincial more than 2,000 ha). control. There are also 21,000 local water resource organiza- • 6,336 irrigation reservoirs (in operation) with a volume tions. Together, these organizations manage 7.48 million ha of >50,000m3 and the height of dam >5m, with a total of paddy land; 1.64 million ha for higher-value crops (fruit, storage capacity of 14.5 billion m3. These include 851 vegetables, industrial crops); water supply for 1.3 million ha; big reservoirs, 1,532 medium reservoirs and 3,950 small salinity control on 870,000 ha; alum treatment for rehabilita- reservoirs, distributed across 45 cities and 63 provinces. tion on 1.6 million ha; drainage on 1.72 million ha of agricul- • 238 hydropower reservoirs. tural land; and water supply to aquaculture on 400,000 ha. Source: Ministry of Agriculture and Rural Development (2018). Multiple, new water management pressures have bulk of public spending on agriculture has supported emerged that need to be addressed if agriculture is to a “food security strategy” aimed at generating ever- improve or even sustain its past performance. Three increasing quantities of rice. However, this policy has key challenges stand out: (1) poorly maintained infra- resulted in low value addition and an overemphasis on structure that operates below design capacity; (2) building large irrigation schemes for rice cultivation growing and multiple threats to the rivers and water- (see box 2.2; World Bank 2017a; World Bank 2017b). sheds that underpin the irrigation infrastructure, and Irrigation systems often perform well below their (3) increasing competition for water resources from design capacity. Despite the high levels of public capital other users, especially cities. investment over the last four decades, the irrigation sys- With a government focus on infrastructure growth tem is seriously degraded and meets only about 50–60 and expansion of irrigation, public spending on opera- percent of its design capacity (World Bank 2013). tion and maintenance (O&M) has often received lower As a consequence, costs of irrigation in Vietnam are priority. A Public Expenditure Review conducted among the highest in Southeast Asia (HCMUAF, 2013). in 2017 found that between 2009 and 2012 public Countrywide, only 26 percent of canals (by length) are expenditure on new irrigation investment shot up, but fully functional—slightly more for main and tertiary the allocation to O&M declined. More generally, the canals and slightly less for secondary canals. BOX 2.2:  Changing flood dynamics in An Gian and Dong Thap are attributed to high dike construction. The Mekong River Delta is Vietnam’s most important cultivation possible. There are 30,000–40,000 kilom- rice growing region, contributing 50 percent of total eters of interconnected canals within the delta alone. national rice production. The vast network of dike Farmers cultivate three crops of rice each year (winter, and irrigation systems makes year-round rice spring, and autumn). The spring crop accounts for (Box continues next page) Incre asing Wate r Product ivit y in Irrigate d Agric u lt u r e 19 BOX 2.2:  (Continued) more than 50 percent, autumn accounts for 45 per- results in terms of rice production. The adverse impact is cent, while winter accounts for 5 percent of the total that more areas are losing their flood deterrence capac- rice production of the delta. Spring and autumn rice ity, further increasing the vulnerability of urban areas contribute 53–79 percent of national output. to floods. Half of all available rice lands in the Mekong Delta For two recent large flood events (2000 and are submerged by floodwaters during the period in 2011), simulations reveal that for the central delta which the late autumn crop is sown (July/August). Due an increase of 9–13 centimeters in flood peak and 15 to trends associated with subsidence, sea level rise, and days in duration can be attributed to the development rainfall variability, low lying areas are hard to cultivate of high dikes. The study confirms the claims that dike for part of the year. Satellite images show the highest development has raised the flood hazard downstream. area expansion in provinces close to the Cambodian The study notes that changes in tidal levels caused by border (An Gian, Dong Thap, Long An, and Ben Tre). sea level rise in combination with the widely observed Vietnam’s program to increase rice acreage by protect- land subsidence and the temporal coincidence of high ing larger land areas from seasonal flooding is delivering water levels and spring tides have even larger impacts. Existing dikes Dike system change Di erence Flood event 2000 (a) (b) (c) Flood event 2011 (d) (e) (f) Inundation duration Change in inundation duration < 10 days 60-90 days Decrease > 20 days Increase < 10 days 10-30 days 90-120 days Decrease > 10-20 days Increase 10-20 days 30-60 days > 120 days Decrease > 10 days Increase > 20 days no change Source: Triet and others 2017. Declining storage capacity, coupled with deteriorating Bac Hung Hai irrigation system, where irrigation ser- irrigation infrastructure, has reduced the volume of water vice and water quality are getting worse, due in part to for farmers while increasing irrigation costs. Degrading inadequate budgets. Compounding the problem is that watersheds and deferred canal and dam maintenance farmers pay little or nothing for their water, reducing the have reduced the storage capacity of most dams. Box accountability of service providers and making services 2.3 illustrates the example of the massive 125,000 ha dependent on government transfers. 20 GO V ER N A N CE F O R WATER S ECU RIT Y BOX 2.3:  The Bac Hung Hai irrigation system faces major challenges, including deteriorating system performance, rising competition for water, increasing pollution, and underfunding Drawing its water directly from the Red River, the Bac is leading to illegal encroachment and increasing com- Hung Hai irrigation system is the largest irrigation and petition for water, with growing demand from urban drainage system in northern Vietnam. Constructed in areas, industry, and aquaculture. At the same time, irri- the 1950s, it includes 11 head works, 231 kilometers of gation fees have not been collected from farmers since main canals, 400 large pumping stations, and thousands 2008, and no move has been made to reintroduce them, of small pumping stations. despite a recent policy change to that effect and fee pro- The system irrigates almost 125,000 hectares (ha), visions in the new Law on Hydraulic Works. The state provides drainage for over 190,000 hectares, supplies has to provide a subsidy, but this barely covers regular water for 3 million people, and serves as an inland operation and maintenance and provides no funds for waterway. The system has been the motor of develop- major repairs or system improvement. ment and source of livelihood for the area. The predomi- What is needed is investment in the system to adapt nant crop is rice, with annual production of up to 6–6.5 to current challenges and changing demand. The main tons per hectare and total production of 1.23  million requirements are modernization to restore system func- tons a year. The system also supports cash and industrial tionality, provide improved water control, and allow crops, livestock, and aquaculture. transition of some paddy land, where appropriate, to This massive and productive system is facing con- pressurized irrigation and higher-value cash crop pro- siderable challenges, however. After 60 years of opera- duction; drainage improvement and dredging of all tion, structures are degraded, canals and drains are filled rivers in the system; separation of wastewater from rain- with sediment, and water service has deteriorated. Water water drainage systems and collection, treatment, and quality is declining, with 300,000 cubic meters of largely reuse of wastewater; and investment in human resources untreated wastewater flowing into the system every day to improve irrigation water service and increase from urban areas, craft villages, and industrial parks, as value added by upgrading farming systems and water well as inflows from upstream agricultural fertilizers, productivity. pesticides, and animal waste. Development in the area Source: MARD 2017; Information provided by Mr. Dang Duy Hien, Director General of the Bac Hung Hai Irrigation system; and working note compiled by Dr. Dao Trong Tu, February 22, 2018. 2.2.2  Constraints are emerging to water risk to agriculture, channeled primarily through supplies for irrigation changes in the hydrological cycle (through droughts, Problems of poorly maintained infrastructure are floods, and erratic rains). The El Niño climate compounded by multiple threats to degrading river event of 2016 affected rice production significantly ecosystems. Climate change remains the overarching (see figure 2.4). Modeling shows that under the hottest FIGURE 2.4:  Rice export volume and value through years. Rice export volume and value (2009 -2016) Average export price 9.0 8.0 (US$/tonne) 8.0 2016 Billions 6.9 7.1 6.6 6.8 7.0 6.0 6.0 5.2 2014 5.0 4.6 4.6 4.7 3.9 2012 4.0 3.7 3.7 3.0 2.9 2.7 3.2 3.0 2.8 2.3 2010 2.0 1.7 1.0 1.3 1.5 2008 0.0 2006 - 150 300 450 600 Export quantity (kg) Export value (US$) US$/tonne Source: Food and Agriculture Organization database and United Nations Commodity Trade Statistics Database. Incre asing Wate r Product ivit y in Irrigate d Agric u lt u r e 21 climate change scenario, paddy yields could decline affected by increasingly polluted water that compro- by as much as 11 percent, with significant impact on mises yields, particularly downstream of major set- the agricultural economy (see box 2.4; World Bank tlements. Near the coast, seawater inflows reaching 2016b; World Bank 2018g).2 The poor condition of further up estuaries are a growing problem, leading water infrastructure has increased vulnerability to to a loss of productive land along the country’s 3,000 these climate risks, which are projected to become km coast. Agricultural pollution in irrigation drainage more frequent and intense. Management of flood and water is also a hazard to downstream water quality drought risks may require better storage—and better (see chapter 4). With no effective regulation or incen- management of storage—integrated in planning at the tive framework, agricultural chemicals are polluting basin level (see chapters 6 and 7). Irrigators are also both surface water and groundwater. BOX 2.4:  The impact of climate change–induced higher temperature on paddy yields Rising temperatures under climate change are projected to decrease in all three scenarios, with a maximum decrease to reduce agriculture yields. Rice, for example, has been of some 11 percent in the hot scenario (see figure 1). shown to be sensitive to high temperatures. By building The computable general equilibrium modeling was on the relationship between temperatures and paddy rice used to assess the overall economic impacts of rising yields (Oh-e and others 2007), a statistical approach was temperatures on paddy rice yields by 2035 against the used to estimate the decrease of rice production for the his- historical climate baseline. Not surprisingly, the impact torical climate and for three future climate scenarios—dry, on agricultural GDP is the largest among all sectors wet, and hot. The hot future climate scenario is based on across all scenarios. The overall impact amounts to a the General Circulation Model that produces the highest 0.1–0.3 percent reduction of GDP, with the hot future temperature in Vietnam by 2035. Rice yields are expected scenario having the largest impact (see table 1). FIGURE 1:  Impact of temperature on rice production for TABLE 1:  Impact on GDP of reduced rice yields due to the historical climate (baseline) and three climate scenarios rising temperature effects in 2035 (%) (percent of baseline mean production) in 2035 Scenario Sector Dry Wet Hot 0 Agriculture −0.9 −0.6 −1.6 Baseline Industry −0.0 −0.0 −0.1 -5 Services −0.2 −0.1 −0.3 Wet GDP −0.2 −0.1 −0.3 Dry Future -10 Note: The values show the deviation from historical climate, the reference path. Future Hot -15 Future Source: World Bank 2018g. 2.2.3  Returns to water are low, and the and abstraction are largely unregulated, and the incen- agriculture sector needs to be restructured to tive framework encourages a “race to the bottom.” In boost productivity some coffee areas, over-abstraction of groundwater is depleting the resource and reducing the scope for sup- As the economy grows, the demand for water from plementary and dry season groundwater irrigation. multiple sectors outside agriculture has surged (see With the fixed supplies of land and water now chapter 1). In some basins, surface water supply for under greater stress, future expansion of agriculture irrigation will be heavily constrained in coming years. will need to be based on improvements in efficiency For example, in the South-East River Cluster (SERC) that generate “more for less.” Agriculture growth has basin, demand from aquaculture is increasingly com- slowed, and diversification remains low. There is con- peting with irrigation demand, and the amount of siderable scope to increase the productivity of water water available to agriculture may dwindle—water use (see table 2.1), especially for rice. Rice now faces saving and demand management measures may there- growing domestic competition—from cities, industry, fore have to be introduced. Groundwater development and services—for labor, land, and water. Downstream 22 GO V ER N A N CE F O R WATER S ECU RIT Y value-added creation remains low, and food safety irrigation and shift resources to measures that: increase concerns are rising. Going forward, Vietnam’s agricul- the efficiency of water service on existing schemes; ture sector needs to generate more value and jobs in improve on-farm water management to increase water a broader agri-food industry. The priority is to boost productivity; and strengthen other functions, such as farmer incomes and agricultural value added within the agricultural services, to promote higher productivity. As growing constraints. This requires investment in more part of this strategy, the regional allocation of resources productive agriculture that will give farmers more could also be reviewed to focus more spending on, for income from the same quantities of land and water. example, high-potential farming areas like the Mekong The measures required are well-known and form part Delta, which could substantially increase production of of Vietnam’s agricultural strategy of improving value higher value-added products, such as marine products added from rice cultivation and promoting diversifica- and fruit (World Bank 2017a). tion and investment in improved technology. To improve efficiency and accountability, farmers should be encouraged to pay a larger share of O&M 2.3  The way forward costs. This would reduce the cost burden on the state budget and sharpen incentives to increase water pro- 2.3.1  Rebalance public spending toward ductivity. Higher cost recovery would also gradually operation and maintenance increase the budgets of irrigation management com- panies, which would lead to better service. The legal There is wide scope for rationalizing public service deliv- framework for a revival of farmer contributions is in ery in agriculture without jeopardizing service quality. place (see box 2.5). As irrigation fees come into prac- Rebalancing the composition of public spending within tice, impacts on households should be gauged and the the sector would give an opportunity to bring spend- possibility of conditional fee exemptions considered— ing into line with policy objectives for boosting incomes for example, to promote technology and husbandry and growth. This “public expenditure for incomes and practices that improve water efficiency. growth” approach would reduce investment in new BOX 2.5:  Paying for water in Vietnam: The special case of irrigation service fees According to Decree No. 143/2003/ND-CP, which Exemption from the surface irrigation fee to support implements the Ordinance on Exploitation and irrigation programs and household exemptions resulted Protection of Irrigation Works, agricultural and aqua- in an estimated reduction in production costs of 5–10 culture users of water provided by irrigation manage- percent. This cost is borne by the state (VND3,000 ment companies are to be charged fees. For food crops, billion annually) and provinces (VND3,400 billion) fees are area based and differ per region and irrigation (FFTC, 2013). equipment. For nonfood crops, they are volumetric. In 2017, the Law on Hydraulic Works (see box 6.3 in However, Decree No. 115/2008/ND-CP abolished the chapter 6) provided for the reintroduction of irrigation irrigation service fee payments on management and service fees for users. Irrigation prices will comply with exploitation of irrigation systems. Decree 67/2012/ the provisions in the Law of Price and will include man- ND-CP further amended Decree No. 143/2003/ agement costs, operations and maintenance expenses, ND-CP and replaced Decree No. 115/2008/ND-CP – it depreciation charges, and other reasonable expenses, exempts individuals and households from the irrigation allowing for profits deemed suitable to the marketplace. fee, if they use surface water for agricultural purposes. Affordability will be considered when setting the price Decision No 1580/QD-TTg and Circular No. 41/2013/ level. The state will determine the price of irrigation TT-BTC further guide the implementation of Decree services and products; the road map for adjusting these 67/2012/ND-CP. Many observers have commented on has already been approved by the relevant state agencies the inefficiency of this policy, as farmers have no incen- (Article 34). Decree 96/2018/ND-CP provides the guide- tive to conserve water or to maximize water productiv- lines for prices of irrigation products and services and ity, and the irrigation management companies depend financial support for use of public irrigation products on government subsidies. and services, but still has to be implemented. Source: GoV 2017a; Thang and Linh 2015; 2030 WRG 2017. With constraints on public finances, there is further scope The four major river basins in Vietnam will need nearly to “crowd in” private sector financing through targeted US$6.3 billion in new investment between now and public–private partnership investments in irrigation. 2030 (2030 WRG 2017). Much of this investment will Incre asing Wate r Product ivit y in Irrigate d Agric u lt u r e 23 be in irrigated agriculture—dam and canal rehabilitation models are enhanced management contracts, such as and modernization; improved management of water the Megech-Seraba irrigation scheme in Ethiopia, which services; and on-farm investment in pressurized irriga- combines a fixed management fee with incentive rewards tion, crop and variety choice, crop husbandry, and so on. and penalties, and build-own-operate arrangements, such Current fiscal constraints and general government policy as one that proved successful with commercial farmers to encourage more private sector involvement point to in Morocco (see box 2.6). These encouraging examples greater private investment. Around the world, various show that, where projects are well structured with clear forms of public–private partnerships in irrigation have revenue streams, public-private partnerships can be an been tried, with mixed results. The two most successful effective option for irrigation. BOX 2.6:  Contrasting experiences with irrigation public–private partnerships in Morocco: Guerdane and the Gharb A public–private partnerships (PPP) project in Guerdane, and operations and maintenance of the irrigation net- Morocco, was designed to overcome the challenge of work. Implementation went smoothly and farmer com- decreasing water availability and its effects on liveli- mitment was total: all farmers connected to the supply. hoods in the Souss Massa Draa region, Morocco’s sec- Second-round benefits were in technology transfer ond most important economic province. Climate change, financed by the private sector and in the successful test- water scarcity, and groundwater depletion were threat- ing of a model that could be replicated in similar PPP ening the survival of farmers’ livelihoods and incomes. irrigation projects in the region. The project brought water 60 miles from a reservoir The conditions of success were strong government to an irrigated command area of 10,000 hectares (ha) commitment and subsidies (about 60 percent in total); farmed by about 2,000 commercial citrus farmers, who government assumption of most downside risks, includ- produce about 50 percent of Morocco’s citrus output. It ing that water would not be available; and good profit- brought water to farmgate hydrants, where farmers then ability of the production operation. bought volumetrically metered water. It was the world’s A PPP proposal in the Gharb was very different and first PPP irrigation project investment of any consider- had a very different outcome. The Gharb was a large able size. undeveloped public area of 55,000 ha in the command The transaction process for the build-own-operate area of a new dam. The government declared a willing- arrangement was well designed (with the help of the ness to share development costs 50:50 with the poten- International Finance Corporation [IFC]) and had a tial beneficiaries or other investors. IFC was asked to successful outcome. The transparent and competitive develop a formula for private participation for develop- bid process resulted in a lower than expected unit water ment and operations. However, there was no interest price. A 30-year concession was awarded to a Moroccan- from investors, and in the end the government devel- French conglomerate for the construction, cofinancing, oped the scheme. Source: IFC 2010; World Bank 2006. 2.3.2  Integrate agriculture and water Vietnam has a strong national disaster network management (see chapter 5), but it could be reinforced by an inte- Mechanisms are needed to integrate agricultural water grated approach to hazard risk management. Local use within an overall planning framework at the basin protection and response plans could be developed for level. Given agriculture’s dominance in water use, each geographic area. Integrated planning requires irrigation needs to be central in integrated basin plan- cross-institutional collaboration between MARD and ning. Climate change impacts need to be factored into MONRE horizontally and the provincial people’s integrated planning. To mitigate such impacts, flood committees (PPCs) vertically. It also requires inte- and drought risk management may require better stor- grating hydro-meteorological monitoring, river basin age and better management of storage. These impacts planning, and operational management of structures are likely to require increases in water storage capac- and diversions along the river within a practical plan- ity of as much as to 40–50 percent according to one ning and management framework and with the allo- estimate. This will require a combination of restor- cation of the financial resources that underpin joint ing existing reservoir capacity (through silt removal planning, investment, and management. or physical rehabilitation) with constructing new New resource planning and allocation instruments reservoirs. will allow multiyear programming, improving the fit of 24 GO V ER N A N CE F O R WATER S ECU RIT Y investment with needs, and facilitating long-term pro- conditions of both plenty and scarcity, particularly sea- vision of O&M. The 2017 Public Expenditure Review sonal scarcity. The challenge for agricultural water is (PER) identified new resource allocation instruments— twofold. For the wet season the challenge is to improve the Medium-Term Investment Plan (MTIP) introduced water control and husbandry for rice in order to opti- in 2014 and the Medium-Term Financial and Budgetary mize yields and to invest in adding value through crop Plan (MTFP) introduced in 2015—as key instruments and post-harvest management to increase value from for improving resource allocation. They allow the allo- rice for farmers. Investment in improved water control cation of capital investment to be linked to the MTIPs to irrigate higher-value fresh fruit and vegetables and agreed to on the basis of development and infrastruc- industrial crops is also a priority. For the dry season, ture gaps. They also allow the multiyear programming where water stress and drought are growing problems and the gradual increases in O&M expenditure that are and where there may ultimately be a need for agricul- essential to preservation and efficient use of assets. These ture to transfer water to other higher value uses, the planning improvements could eventually be accompa- challenge is to maximize returns to the scarce factor by nied by improvements in the budget process, particularly increasing returns per cubic meter of water consumed a move toward results-based budgeting. Finally, the PER while ensuring that less water is used, not more.3 underlines the need for sound sector strategy to underpin The priority in water-short or drought-prone areas both long-term fiscal planning and shorter-term budget in the dry season will be to manage scarcity and risk at requests. These new approaches may create an oppor- the basin level and to manage the fact of less water at the tunity for joint work between MONRE and MARD on irrigation scheme and farm level by producing less dry irrigation development and management within basin season rice and by diversifying into crops that deliver plans, along the lines suggested above. Decree 84/2015/ higher value per cubic meter of water. Measures to ND-CP aims at improving monitoring and evaluation in accompany dry season water management will likely investments. While it still has to be made fully opera- include not only extension and support to investment tional, the introduction of results-based management has but also measures to reduce uncertainty and risk for the potential to significantly improve the effectiveness of farmers—for example, by allocating fixed quantities public interventions (World Bank 2017a). of dry season water based on expected minimum dry season availability (see box  2.7). The reintroduction 2.3.3  Improving agricultural water use under of water charges also opens possibilities of allocating both water plenty and water scarcity can drive water in the dry season on a pay-per-use basis, pos- growth sibly supported by metering water at hydrants or by The goal in agriculture is not so much water saving monitoring evapotranspiration. Abundant experience per se—although this may become important in the with these approaches is available, for example from future —but improving incomes and value added under neighboring China. BOX 2.7:  Coping with less water and drought risk in the dry season in Ninh Thuan’s irrigated agriculture A recent study in Ninh Thuan suggested two means of allow water to be allocated annually. Records show that coping with reduced and uncertain dry season water in a certain number of years—say 28 of 40—it can be availability for irrigated agriculture. The first is simply assumed that reservoirs will be full and normal levels of to reduce irrigation water demand in the dry season at dry season irrigation can be ensured, but in 12 years of the farm level, relying on the water saving and income the 40 years (30 percent of the time) there will be a sup- boost from switching to a system of rice intensification ply deficit. Based on these assumptions, a guaranteed and alternate wet and dry production and switching part volume of water could be assigned in the dry season to of the area from rice cultivation to higher value crops. perennial tree crops, with the maximum allocation The second, complementary, approach is to manage determined by the lowest level of supply anticipated scarcity at the basin and irrigation district level through (year 39 in the figure). Second, a balance—to be deter- firm dry season allocations to each district along the mined based on forecasts and actual reservoir levels each river, with each district making firm allocations to per- year—could be assigned to seasonal crops like rice or ennial crops, and annually variable allocations for sea- vegetables. Based on good water information, this kind sonal crops, depending on water availability. of planning could be conducted for each of Ninh Thuan’s With water allocation managed at the basin level, irrigation districts. forecasts of water availability in the dry season would (Box continues next page) Incre asing Wate r Product ivit y in Irrigate d Agric u lt u r e 25 BOX 2.7:  (Continued) FIGURE:  Ordered sequence of optimal annual irrigation volumes 900 800 700 deficit Annual Volume (in Mcm) 600 500 400 Volume reserved for seasonal crops (e.g.: rice, vegetables) 300 200 100 Volume reserved for perennial crops (e.g.:fruit trees) 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 Source: World Bank 2018e. Irrigated agriculture will need to up its game by raising Flower 170 118.15 efficiency and productivity. The priority is to drive up Rice the efficiency of water delivery and water productiv- Winter/Spring season 36.61 17.26 ity (“dong per drop”), particularly in the dry season, Spring/Autumn season 33.38 13.39 by improving O&M, shifting cropping and husbandry “Autumn/Winter season 39.63 20.2 techniques, and boosting value added and farmers’ Source: Le Canh Dung 2012. incomes. These steps will raise agricultural productiv- Technology, too, can be important. Much more value ity and growth and make agriculture more sustain- and higher incomes could be obtained if more rice farm- able. The incentives and potential gains for farmers are ers adopted improved husbandry systems, such as the 1 strong, with higher-value cash crops yielding gross mar- Must-5 Reductions (1M-5R) Program for rice produc- gins ten times or more that of rice (see table 2.2). Much tion in the south and the system of rice intensification of the benefits will come from increased efficiency in (SRI) program in the north4. The alternate wet and dry irrigation water service—getting water in a more effi- (AWD) method is an integral part of both programs, cient and timely fashion to the plant roots—and from which can save 30–40 percent of water on paddy land. agronomic choices and water management practices To scale up adoption, the government would need to that can bring farmers higher incomes and increase modify irrigation and water control systems and on- agricultural value added (World Bank 2017b). farm irrigation, facilitate field leveling, bring information TABLE 2.2:  Gross revenue and margins of rice and technology solutions to reduce additional labor costs alternative crops in the Chau Phu, Mekong Delta, 2012 (millions of dong) associated with AWD (smart sensor technologies already exist in Vietnam), and strengthen water user groups (as Crop Gross revenue Gross Margin AWD adoption requires collective action). The cost need Bean 300.97 173.3 not be exorbitant: the estimate for conversion of 30,000 Chili 341.69 202.66 ha in Ninh Thuan was VND300 billion (US$13.6 mil- Gourd 159.94 133.84 lion) over five years, and economic rates of return were Lotus 631.07 461.2 very high, exceeding 35 percent (see box 2.8). BOX 2.8:  Introducing the system of rice intensification including alternate wet and dry rice production in Ninh Thuan Province would cost little and would have big economic benefits Ninh Thuan Province is experiencing water stress, with not Vietnam has encouraged farmers to apply advanced enough water in the basin to meet growing demand and techniques through SRI and 1M-5R programs. These with more frequent and severe drought events. Still, a mod- techniques reduce the use of fertilizer and pesticides eling study showed that the province could live within its by 30 percent, increase yields by 10–20 percent, and water budget and cope with risks while farmers increased reduce greenhouse gas emissions by 30 percent. 1M–5R their income. This outcome depends on improved water has been successfully introduced as a sustainable and allocation and management and on the massive adoption yield-increasing farming method in northern and parts of the system of rice intensification (SRI), which includes of central Vietnam. SRI increases economic returns and the alternate wet and dry method for rice production. has the potential to enable farmers to adapt to climate (Box continues next page) 26 GO V ER N A N CE F O R WATER S ECU RIT Y BOX 2.8:  (Continued) change. Researchers and farmers need to work together The study concluded that what was needed was to explore this potential. largely a matter of knowledge and behavioral change In Ninh Thuan Province, 62 percent of water use is and that the measures could be put in place incremen- for irrigating rice. The modeling study found that SRI tally and without massive structural changes. Over five including the alternate wet and dry method could be years the total cost—largely for extension services— adopted on about three-quarters of the rice area in the would be only about VND300 billion (US$13.6 million). province, that the value of output would go up by 10 per- The resulting economic rate of return of this program cent, and that farmers’ income would increase by 30 per- was estimated at 35 percent and the net present value cent. Irrigation time and water use would decrease by 20 at VND1.2 trillion (US$52 million), using a 10 percent percent, and the water productivity of rice would rise by discount rate. These results, although highly positive, are 50 percent. This would save around 45 million cubic still conservative since the benefits of saving water were meters of water in the province. not quantified. Source: WPP 2017. 2.3.4  The new irrigation strategy seeks to irrigation and drainage services can support a more maximize water productivity, farmers’ incomes, diversified agricultural economy that increases value and value added and boosts both farmers’ incomes and national growth. The key change recommended is in line with The government, with World Bank assistance, devised the budget changes proposed in the Public Expenditure a new irrigation strategy in 2017 to address many of Review —a move toward a less subsidized model and these challenges (see box 2.9). The strategy seeks to a more autonomous and participatory approach to improve the efficiency and productivity of irrigated service provision, with greater emphasis on efficient agriculture and proposes a participatory governance asset management and less on expanding irrigation model and asset management model. The underly- networks. ing philosophy is that more efficient and sustainable BOX 2.9:  Vietnam’s new irrigation strategy The new irrigation strategy proposes a paradigm shift emphasizes decentralization, user participation, from water infrastructure to a demand-responsive and asset management rather than construction. approach. It includes: • Reforming irrigation management companies to become independent, pay-for-service providers, • Devolving power and responsibility to farmer financed by service payments from water user organizations to operate and maintain larger sec- organizations and other water users and building tions of the irrigation network and to pay the full their capacity to provide efficient water service. costs of water service provision. • Building participatory irrigation management • Shifting the planning, financial, and management with legal and effective water user organizations. focus from infrastructure construction to rehabili- tation, maintenance, and modernization of exist- Rehabilitating, modernizing, and developing irrigation ing schemes. and drainage systems • Increasing farmers’ incomes by increasing on- • Prioritizing rehabilitation and modernization of farm water productivity and boosting down- main and secondary canals and water control stream value added. structures, as well as completing the on-farm To implement this strategy, four sets of actions are systems, with user participation, to improve the proposed: functioning and sustainability of irrigation and drainage systems. Institutional reforms and capacity building at three levels • Increasing storage by removing silt and minimiz- • Building the capacity of the Ministry of Agriculture ing future siltation of reservoirs; building new and Rural Development at all levels to plan multipurpose reservoirs (irrigation, flood control, and guide a demand-responsive approach that water supply, hydro, and so on); and improving dam safety. (Box continues next page) Incre asing Wate r Product ivit y in Irrigate d Agric u lt u r e 27 BOX 2.9:  (Continued) Improving irrigation water service on a fully participa- • Increasing water productivity by adopting the tory basis system of rice intensification and alternate wet • Launching performance-based asset management and dry technologies for rice production. and irrigation service plans and budgets. • Promoting higher on-farm value added • Moving to full financing by users, with payment through farm consolidation, technology trans- of fees only for services received. fer services, modern irrigation (including drip • Increasing local investment (including farmers’ or sprinkler irrigation), and demand-respon- investment), with “smart” subsidies. sive water service. • Gradually empowering water user organizations • Increasing value added downstream through to operate and maintain larger sections of the irri- rural small-scale industry and marketing ser- gation network. vices run by cooperatives and the private sector. Increasing water productivity and farm incomes • Switching 10–12 percent of the current rice area to higher-value production (vegetables, fruits, fishponds, livestock). Source: World Bank 2017b. Notes 3. Some attempts across the world to reduce agri- cultural water use by investing in “more $ per 1. Productivity in terms of yield per hectare is drop” husbandry and technology have resulted above average when compared to peer countries. in more water use, not less, bearing out the 2. Note that the computable general equilibrium “Jevons paradox”— that increasing returns to a modeling results do not take account of impacts factor of production will result in more use not on crops other than paddy. In addition, there less, as it is more profitable. may be some shifts from paddy to higher value 4. A management practice developed to adapt rice aquaculture, for example, where there is sea- production to climate change. The “1 must” level rise and increasing salinity in the Mekong refers to the use of certified seeds, and the “5 Delta. For the possible impacts of groundwater reductions” refer to the reductions in seed rate, depletion, land subsidence, and sea-level rise on nitrogen application, pesticide use, water use, agricultural output and on the economy, see box and post-harvest losses. 5.3 in chapter 5. © Thuong Nhut Pham / World Bank 3 Water Security and Water Services for Settlements Water security for urban settlements is at risk • Water security for urban settlements requires risk management, development and protection of water sources, and provision of quality water supply and sanitation (WSS) services. Climate change and natural disasters, particularly floods, now pose increasing risks to built-up areas. • Pollution from untreated wastewater is a massive problem and a huge cost to the economy. • The pace of urbanization and industrialization has been rapid, creating the risk that development could out- pace the planning, infrastructure, and regulation required. • Urban development needs to reflect basin plans and to apply the principles of integrated and risk-informed urban planning. There is room to improve WSS services, including for women and marginalized groups • Urban water network access and services have improved vastly, but there is still some way to go in access, cost recovery, affordability, and financial sustainability. • Sourcing water for settlements is becoming a problem in some locations. • Corporatization and partial privatization of utilities have accelerated, bringing new risks. The accompanying program to strengthen governance of urban water has stalled. • Sanitation and wastewater have been neglected compared with water supply, and pollution and health risks are growing. • Progress on rural WSS has been good, but there are questions of sustainability. • Gaps in access and quality of service persist between the rich and the poor and between town and country, with women and marginalized groups the most vulnerable. Priorities for action • Integrating risk-informed urban planning—for water management, hazard mitigation, water supply, and drainage and wastewater—into broader spatial planning. • Completing sector reforms for efficient and sustainable urban water services. • Maximizing finance for WSS services and for a new business model for wastewater. 29 30 GO V ER N A N CE F O R WATER S ECU RIT Y 3.1  Water security for urban settlements of the drainage systems in Ho Chi Minh City and Hanoi are ongoing. To date, about 69% (4,176km out Achieving water security in urban settlements requires of a planned 6,000km) of drainage canals and sew- risk management, the development and protection of ers have been constructed, following the Master Plan water sources, and the provision of quality WSS services. of Ho Chi Minh City’s drainage system until 2020 Water security for urban settlements requires three (approved by the Prime Minister in Decision No. 752/ things: (1) management of water-related risks, includ- QD-TTg dated 16 June 2001). In Hanoi, 60% (2,285 ing resilience to climate-related risks such as floods km) out of a planned 3,800 km of sewers have been and saline intrusion; (2) adequate and sustainable constructed, following the Hanoi Capital Drainage quantity and quality of water resources for domes- Plan until 2030 and Vision towards 2050 (approved tic, commercial, and industrial needs; and (3) access by the Prime Minister in Decision No. 725/QD-TTg to equitable, sustainable, and affordable WSS services dated 10 May 2013) (MOC, 2019). Ho Chi Minh City through viable, regulated institutions. and Hanoi – among other urban areas – experience 3.1.1  Climate change and natural disasters flooding in heavy rainfall events. The main causes are found to include: (1) the current status of the drain- pose particular risks to built-up areas age system; (2) effects of climate change leading to an Unplanned development and poorly connected infra- increase in rainfall and fluctuations in tidal waves; (3) structure have left urban centers highly vulnerable to effects of urbanization resulting in increased concrete risks from river flooding, poor drainage, sea-level rise, surfaces reducing permeability and reduced water and sudden-onset coastal flooding. storage areas; (4) effects of encroached canals and Combined drainage systems are the most common garbage dumping into the urban sewer system caus- systems in residential areas in big cities, i.e. domestic ing localized flooding and (5) land subsidence caused wastewater and runoff are discharged into the same partially by over-exploitation of groundwater (MOC sewers, canals and ditches, and are then discharged – 2019). with or without treatment - into the main water bod- In the Mekong Delta, climate change and rapid ies. As most drainage systems were developed locally urbanization have created an existential challenge and lack proper maintenance, the drainage systems to the region, and poorly planned urban develop- lack synchronization and operate below their design ment has aggravated flooding in cities (see box 3.1). capacity. While some new urban areas have invested in City plans rarely reflect climate risks or boost disas- separate systems in runoff and domestic wastewater, ter risk resilience, and poor people are most at risk. these are mostly localized and not connected to the There are institutional challenges of mandates and overall network of the urban area. The construction interagency coordination, with several government BOX 3.1:  Seasonal flooding now inundates half the city of Can Tho every year Can Tho City faces the same hazards as the larger drainage systems. Rapid and uncontrolled urbanization Mekong Delta. The city is susceptible to flooding caused has encroached on many natural canals, significantly by Mekong alluvial overflow, high tides, and extreme reducing capacity of the city drainage system. Urban rainfall. With almost the entire city less than one meter flooding from rainfall and high tides is therefore now a above sea level, seasonal flooding typically covers 30 regular occurrence and is expected to worsen from pro- percent of the city area, and this has recently increased jected climate change. to 50 percent (World Bank 2016c). The economic and human costs are high The causes of flooding are many and complex Recent flooding in Can Tho has affected more than Multiple factors contribute to the flooding, including two-thirds of the area and more than 200,000 people heavy rainfall, tidal increase, poor drainage in built-up a year. Direct economic damages are estimated to be urban areas, and land subsidence. The core urban area is US$130  million–US$190 million annually. Direct and affected by high tides and heavy rains during the flood indirect losses are put at almost US$650 per household season. Increased flooding is made worse by morpholog- each year, or 11 percent of average household income. ical changes of the Hau River and probable land subsid- Yet the city does not have a strategy or specific instru- ence. In addition, sewer systems in the city are generally ments to manage these costs or reduce the negative old and of insufficient capacity to deal with high rain- development impacts from flooding. fall levels, while many parts of the city do not yet have Source: World Bank 2016c. Wate r Se curit y and Wate r Se r vice s for Se ttl e m e nts 31 agencies involved in flood risk management and FIGURE 3.1:  Water coverage by city size urban development, often with overlapping mandates 100 Percent and authority. 80 Percent 60 Percent 40 Percent 3.1.2  Water quality for settlements is a growing 20 Percent problem due to pollution in some locations 0 Percent 0 n 00 Though water is available to most cities in abundance, 00 llio 0 ies ,0 00 0, mi 00 cit 50 0, the quality is often unfit for safe consumption. There 1 –1 e <5 0– 0– rg 00 00 00 La ,0 are threats to both surface water and groundwater 0, 0, 50 50 10 sources. Salinity intrusion is already making it hard 2013 2014 2015 to secure freshwater supplies for cities in the Mekong Source: Ministry of Construction Management Board of Technical Infrastructure Delta. Two-fifths of urban water is sourced from Development Projects of Vietnam. groundwater, typically a higher-quality source of pota- Although tariffs cover operating costs, this ade- ble water. However, rapid extraction for water supply quacy may conceal underspending on operations and and other uses is depleting groundwater in some areas, maintenance (O&M). On average, generally afford- leading to declining quantity and quality and contrib- able tariffs cover operating costs with a 50 percent uting to land subsidence. Groundwater in the shallow margin. However, this coverage rate has fallen over aquifers in Hanoi, Ho Chi Minh City (HCMC), and the last decade, threatening financial sustainability. In some other urban areas is showing signs of contami- addition, relatively low operating costs may suggest nation by organic compounds. In some areas—the underfinancing of O&M as much as they suggest effi- delta, for example—dwindling groundwater and dete- ciency. Consumers would probably be prepared to pay riorating quality are dramatically raising the costs of more, but there is political reticence to raise tariffs. supply, as needs for transport and treatment increase Given that in many parts of the country, quality of (2030 WRG, 2017). raw water is deteriorating, water utilities will likely need to move to more expensive sources or treat- 3.1.3  The urban water network and services ment processes, driving up the costs of production have improved greatly, so the focus is now on and transportation of water. This could further strain the more complex challenges cost recovery and keep utilities from expanding water Expansion of piped water to urban households has access. been rapid, and piped water reached 86 percent of the Levels of nonrevenue water have fallen sharply, population, with a total design water supply capacity but a declining tariff collection rate could threaten of 9.8 million m3/day in 2018 (MOC, 2019). Most of financial sustainability. Nonrevenue water, previ- the remaining urban population not now connected ously high, is being progressively reduced and is is likely to be connected by 2025. Average per capita now 21.5 percent, comparable to levels in other consumption of just over 100 liters a day is compara- countries in the region, although well above levels ble to that in other countries in the region. in developed countries (MoC 2019). The Central Most utilities ensure water supply for 14–20 hours Highlands is the region with the highest non-revenue a day, and water quality is generally good. At present, water, amounting to 29.2%, while the North Central many people who are not connected in urban areas and Central Coast region is the best performing resort to buying tanker water. In Ho Chi Minh City, region with 20.9% . The percentage of nonrevenue 2 million people depend on tanker water as their pri- water differs widely among provinces within each mary source. In smaller cities and towns, access to region, with the province of Gia Lai in the Central piped water is often available to up to 70 percent of Highlands performing worst (43.8%) and the prov- the population (see figure 3.1). Though the ambitious ince of Binh Duong in the South East region per- government targets for 2020 of 95% percent cover- forming best (6.2%) (MOC, 2019). A declining rate age urban areas categorized as grade IV or above and of collecting tariffs could, however, spell cash-flow 120 liters a day average residential consumption will and liquidity problems, particularly for the larger be missed, they could largely be met by 2025 (GoV, cities where rates are lowest (see figure 3.2). The 2016b; Prime Minister in the Decision No. 2502/ Vietnamese government recognizes the importance QD-TTg dated December 22, 2016). and potential benefits of reducing NRW and has set 32 GO V ER N A N CE F O R WATER S ECU RIT Y a target of reducing NRW to 18% by 2020 (Prime average for countries in the region (see figure 3.3; Minister Decision 2147/2010/QD-TTg). However, World Bank, 2015c). due to low tariffs and consequent budgetary con- FIGURE 3.3:  Share of manufacturing firms reporting at least straints and a lack of technical capacity in water util- one water outage in the previous year ities, achieving the targets for NRW is challenging 30 Percent (World Bank, 2018l). 25 Percent FIGURE 3.2:  Tariff collection rate by city size, 2015 20 Percent 15 Percent 100 Percent 10 Percent 95 Percent 5 Percent 90 Percent 0 Percent 85 Percent 80 Percent Vie na (2 3) Gu (2 ) Ma ea 15) La sia ( 5) Re PDR 15) Re nal a 16) My l a e Vie ar( ge ) Ca es 5) ) Mo nida 16) a 4) Th m ( 2) Ind and 09) ia 6) ) ew este 15 Ph tnam 016 od 15 15 na rag Ch (201 1 pin (201 oli 1 tna 01 es 1 m a a N r-L (20 in 0 lay (20 20 0 mb (20 I (20 ng (20 ail 20 on (20 (20 an ver gio ve gio (2 2 75 Percent ia pu o s Pa Tim land i o s ilip nI mo n llio 0 lo s 00 00 So itie 00 mi 0, ,0 ec ,0 1 50 00 0– rg 0 0– –1 <5 La 00 00 00 Source: World Bank Enterprise Surveys and authors’ calculations. 0, ,0 0, 50 10 50 Reliability of the water supply has declined in Source: Ministry of Construction Management Board of Technical Infrastructure recent years, increasing business costs. In 2009, only Development Projects of Vietnam. 3.2 percent of firms in Vietnam reported experienc- Improving energy efficiency can be an important ing water outages in a similar Enterprise Survey. The tool for utilities to reduce operational expenditures nearly threefold increase by 2015 occurred through- and thus move towards achieving full cost recov- out the country, but was most dramatic in the South ery. However, governance, technical knowledge, and East, a region encompassing HCMC, the largest eco- financing constraints remain barriers to the active nomic center in Vietnam (see figure 3.4) pursuit of energy opportunities by utilities. There is FIGURE 3.4:  Share of manufacturing firms reporting at a lack of capacity for utilities to identify and develop least one water outage in the previous year, by region, 2009 energy improvement projects, and limited financ- and 2015 ing resources are available for the up-front capital 14 Percent expenditure. In addition, significant gaps in informa- 12 Percent Percent of firms reporting at least one tion and data remain in the sector. With the excep- 10 Percent tion of nonrevenue water, other measures for energy 8 Percent water outage efficiency in the water sector are not yet included in 6 Percent 4 Percent the benchmarking of system performance. Even for 2 Percent nonrevenue water, the reliability of the data may be 0 Percent questioned (World Bank, 2019). Vietnam average Mekong River Delta North Central and Central Red River Delta South East Coastal Areas 3.1.4  The quality of water service provision 2009 2015 for businesses has declined in recent years, Source: World Bank (2015c) Enterprise Surveys and authors’ calculations. potentially hampering economic growth. Corruption in the sector is low, and firms are gener- While water is typically thought of as important for ally able to obtain water connections quickly. In 2015, health, hygiene, and agriculture, it is also vital for about 5 percent of firms reported the need to give an businesses, especially in manufacturing. Water dis- informal gift or payment to receive a water connection. ruptions can have heavy impacts on revenues, with a This is considerably lower than in other East Asia and daily water shock reducing revenues of formal firms Pacific countries, where the average is 32 percent. It is by 8.7 percent and those of informal firms by 34.8 also lower than in India, where 52.5 percent of firms percent (World Bank 2017n). According to the 2015 report the need to make informal payments. Receiving World Bank Enterprise Survey for Vietnam, about a water connection is relatively quick in Vietnam, tak- 8 percent of manufacturing firms reported expe- ing on average less than 13 days, compared with 23 riencing at least one incident of insufficient water days in the region (World Bank, 2015c). supply in the preceding year, a rate slightly below the Wate r Se curit y and Wate r Se r vice s for Se ttl e m e nts 33 3.1.5  Low rates of sanitation services and 3.2.2  Utilities have corporatized and equitized of domestic wastewater recovery and rapidly, bringing benefits and risks2 treatment are major factors in water resource A reform to allow private shareholders to hold equity degradation shares in utilities, under way since 2002, proceeded Infrastructure for urban sewerage and drainage is slowly until recently. Urban water services are cor- limited and, coupled with rapid industrial and urban poratized, and a reform is under way to strengthen growth, has generated a serious pollution problem. their autonomy and open them to private investors, Vietnam’s performance on wastewater collection, with the objectives of relieving the fiscal burden and treatment, and reuse is the worst in the region. Only improving access and service quality. Since 2005, 46% of urban households have connections to drain- urban water supply companies have been in the pro- age systems and only 12.5% of municipal wastewa- cess of equitization. There are now only 10 companies ter is treated (MOC, 2019). In 2018, there were 45 out of a total 111 companies not yet equitized (9%), centralized wastewater treatment plants in operation, including companies in Hanoi and Ho Chi Minh City with a total capacity of 960,000 m3/day. Currently (VWSA, 2018). Further, about 100 private enterprises the construction of an additional 50 wastewater treat- have been mobilized in 63 provinces and cities to ment plants, with a total capacity of about 2,200,000 invest in urban water supply works, while several hun- m3/day is planned (MOC, 2019). With the low rate of dred private enterprises invested in rural water supply collection and treatment and the prevalence of leaky works (MOC 2019). septic tanks, contamination of water resources— The early phase was hampered by perceived risks surface water and groundwater—is widespread.1 that slowed the process of equitization. Constraints Cost recovery and fee collection could be part of to equitization included perceived high financial the problem. The domestic wastewater tariff is set at risks due to insufficient tariffs and inadequate a maximum of 10 percent of the water supply tariff, revenues. Lack of transparency in the asset valua- whereas in practice the costs of collecting, treating, and tion system led to the perception that assets were disposing of wastewater can be several times the cost overvalued and that utility management and staff of supplying water. This low level of cost recovery has were not committed to the reforms. Private sec- created disincentives to invest in sewerage networks tor reluctance also reflected the absence of a clear and treatment; at least one wastewater treatment contractual relationship between provincial gov- plant has gone out of business (ADB 2009). But more ernments and the utilities. And corporate risk was generally, there is a public good imperative to collect raised by the requirement that private equity always and treat wastewater, which is hazardous to human be the minority partner because water supply was health. Hence, there remains the need for appropri- perceived as a partially “public” rather than “com- ate policies and regulations to align private incentives mercial” good. Further, utilities are expected to be with public health and environmental objectives. brought to the market via auction. Limited transpar- ency, accountability, and advertisement of oppor- 3.2  Urban development has outpaced the tunities reduce the credibility of the process. Since governance needed to support it expertise in water operations is not required for potential investors, investors without any knowl- 3.2.1  Urban growth has often outstripped edge of water utilities may become shareholders, planning, infrastructure, and regulation potentially hindering operations and the credibility The pace of urbanization and industrialization has of the process (World Bank n.d.b). been rapid, creating the risk that development could Recent changes in policy and practice have acceler- outpace the planning, infrastructure, and regulation ated progress in equitization but with attendant risks. needed to support it. By June 2017, there were 805 cit- In 2017, the government eliminated the state share- ies, and the urbanization rate was approximately 35.7 holding requirement and opened the utilities to 100 percent. In particular, land and water spatial planning percent private ownership. Provincial water service to guide the spread of settlements has often lagged. companies were listed in the 2017 budget among the The infrastructure and institutions to provide flood state-owned enterprises slated for full privatization. As protection; supply of water services; water resources a result, most utilities are now equitized, with a trend protection and management; and wastewater collec- toward majority or full private ownership. However, tion, treatment, and disposal have struggled to catch this process faces some challenges. Some deals involved up with urbanization in many locations. 34 GO V ER N A N CE F O R WATER S ECU RIT Y significant inducements to private sector investors by setting out the functions and obligations of each. The the provinces, such as grants of permission to develop intention of this contractualization requirement is to land, rather than commitments to increase tariffs to specify performance standards and monitorable indi- support revenue. There has been limited focus on pro- cators, service and investment obligations and financial fessional commitment to quality service provision. In commitments, and mechanisms for dispute resolution. addition, although equitization has provided a much- Specifically, Decree 117 stipulates that agreement on needed injection of private capital, it is not clear that the implementation of water supply services should efficiency gains have followed. be signed between the People’s Committee or an Privately owned utilities are largely unregulated, authorized agency and the water supply unit (Article while those that are majority province-owned remain 31, Clause 1). Further, the water supply service area under the regulatory umbrella of the Ministry of shall be subject to adjustment, if required (Article 32, Construction (MoC) and are subject to oversight by Clause 4). In addition, water supply units are obliged provincial people’s committees (PPCs). This works to to prepare and submit an annual and long-term water the detriment of consumers, who are not assured of supply development plan in the service areas to the service standards, and of the utilities, whose tariffs People’s Committee for approval. The existence of a are still set by the PPCs. In the case of one major clear contractual relationship was expected to pro- utility, for example (in Ho Chi Minh City), services vide incentives and safeguards to investors, assurance and performance are reported to have deteriorated to PPCs that quality services would be provided, and since privatization. This finding matches earlier stud- protection to consumers. However, the reform has ies, which had found scant efficiency gains from not yet been implemented. As a result, all parties— equitization. consumers, PPCs, and privatized utilities—are exposed The difficulties of privatization are unsurprising to risks, and many parties seem dissatisfied (World because water supply services are a natural monopoly. Bank 2014b). Water distribution services are characterized by high The government’s reforms also call for establish- capital costs and relatively high barriers to entry due ment of an independent regulator and for independ- to the capital-intensity of operations. Capital costs are ent public regulation in line with global good practice high enough to make duplication of infrastructure eco- for a natural monopoly, but this has not yet occurred. nomically unviable in virtually any circumstances. The Regulation is intended to cover five interrelated fac- resulting lack of competition means that the operator, tors that are crucial to performance: sustainable whether publicly or privately owned, has no incentive tariffs and funding structures, business planning, to invest in improving efficiency or service quality, asset management and development, financial plan- especially if that detracts from earning higher profits. ning, and capital investment (World Bank 2014b). The role of the government in these circumstances is However, the proposed independent regulator has to recognize these disincentives and to design regula- not yet been set up. tions and service contracts to ensure that affordability and quality services go hand in hand with a fair and 3.3  To ensure cities’ water security, normal rate of return to the service provider. Missing planning and governance need to this balance renders a city vulnerable to poor service catch up quality, whether by a private or a public operator. 3.3.1  Integrated and risk-informed urban planning is essential 3.2.3  The program to strengthen governance Urban development needs to reflect basin plans and of urban water has stalled to apply the principles of integrated and risk-informed In recent years, Vietnam has accelerated the implemen- urban planning. What are needed are holistic solutions, tation of the policy of “equitization” of water supply; with planning done in an integrated manner and not however, the enforcement of the regulations binding in sectoral silos. Urban infrastructure planning needs the roles and responsibilities of local authorities and to integrate resilience measures within basin plans by the obligations of the water supply units (Decree No. promoting the connectivity of networked infrastruc- 117/2007/ND-CP) has not been adequately imple- ture as a means to plan for and mitigate disaster risks, mented yet. especially flooding. This will require moving from To protect all stakeholders, Decree 117 mandates the current sector-specific, uncoordinated model of contracts between local governments and the utilities Wate r Se curit y and Wate r Se r vice s for Se ttl e m e nts 35 urban planning to an integrated and risk-informed Recent initiatives indicate ways forward. The approach, integrating water resources management government has recognized these problems, and (WRM) at the wider, basin scale as well as incorpo- recent extreme events, especially flooding disasters rating responses to climate change and disaster risks. in several basins, have raised national awareness of For example, flood prevention solutions at the tertiary the risks. The Mekong Delta has been particularly infrastructure level (such as in low-income areas) need affected, which has driven activities to strengthen to be combined with broader measures to systemati- urban resilience (see box 3.2). The Mekong Delta cally reduce flood risks, such as prevention from tidal Plan under preparation (see chapter 7) will address inundation, maximization of storm water storage, and land and water spatial planning, institutional organi- provision of drainage capacity in the larger catchment zation, and infrastructure needs from a basin-wide area (World Bank 2015a). perspective. BOX 3.2:  Building urban resilience: The Mainstreaming Disaster Resilience in Vietnam Project A component of this World Bank–supported project across the delta—Enhancing Resilience of Mekong is identifying ways to build resilience for cities in the Delta Region Secondary Cities. The synthesis study Mekong Delta. City-specific analysis reports are being will draw on the analysis carried out in the seven prepared for seven Mekong Delta secondary cities, city-level studies to provide cross-cutting lessons on incorporating sector-specific analysis of urban planning, urban transformation and risk-informed planning land use planning, urban transportation, water manage- in secondary cities of the Mekong Delta. Given the ment, disaster risk management, climate change, institu- growing importance of secondary cities in Vietnam, tional capacity, and geospatial data infrastructure, with the study has the potential to provide valuable les- economic and financial analysis. sons for resilience planning in secondary cities more An overarching synthesis study has also been initi- broadly throughout the country. ated to look at ways of scaling up urban resilience Source: World Bank 2018b. 3.3.2  Efficient and sustainable urban water to be paid to improving cost-recovery rates, particu- services require completion of sector reforms larly in the larger utilities, where financial viability is Sector performance would improve if completion of threatened by recovery rates falling as low as 80 per- equitization were accompanied by contractualization, cent of amounts billed (World Bank 2014b). institutional development, and targeted investment. Independent regulation is a key requirement where Priority activities for the reform agenda and improved utilities are autonomous and partly or fully privat- sector performance include completing the equitiza- ized. Independent regulation is needed to protect tion of the remaining state-owned utilities; profes- stakeholder interests and to promote improved per- sionalizing the sector by strengthening commercial, formance, while establishing a clear methodology and operational, and financial management and plan- process for setting tariffs. Based on international best ning; establishing contractual relationships between practice and on lessons from Vietnam’s electricity sec- PPCs and water utilities, complete with monitorable tor, regulation by contract with a national regulator key performance indicators; prioritizing investment is the most appropriate approach for Vietnam (World in the utilities that offer the highest improvements in Bank 2014b). operating or financial effectiveness and can deliver 3.3.3  Applying integrated and risk-informed improved service to customers; and tapping new and larger sources of finance for infrastructure from pri- planning to water vate sources and public–private partnerships (PPPs) Integrated planning methods—at the local and basin- (World Bank 2014b). wide scale—should be developed and applied across Reducing leaks and improving cost recovery are all key basins. The key lessons for urban planning the key operational requirements for most utilities. are that an integrated and risk-informed approach to Aware that reducing water losses is the cheapest way water needs to be applied and that, beyond local water to increase supply, the government launched a nation- issues, city planning needs to be set in the context of wide leak reduction program. This needs to be pur- integrated land and water resource planning and man- sued with greater vigor. In addition, attention needs agement, taking account of basin-wide infrastructure 36 GO V ER N A N CE F O R WATER S ECU RIT Y and management connectivity. The ongoing compre- so that there is a secondary revenue stream to partially hensive planning for the Mekong Delta should indi- cover costs. cate methodologies for accomplishing this. 3.4  Rural water supply and sanitation 3.3.4  Planning for urban water supply and Coverage of WSS services has improved sharply in sanitation services rural areas.3 Access to safe water supplies and hygienic Strategy and planning for urban water supply services sanitation facilities in rural areas of Vietnam was his- need to focus on universal access and service qual- torically among the lowest in East Asia. In 2000, only ity and efficiency. Planning for urban water services 10 percent of rural households had access to improved needs to identify, manage, and protect sustainable water. By 2016, the Vietnam Household and Living water sources. On the service delivery side, invest- Standards Survey found that 70 percent of rural res- ment and financing need to keep up with urbanization idents had access to improved water (20 percent to and reach 100 percent coverage. A particular focus piped water) and 77 percent of rural households had is required on smaller towns and on poorer parts of access to improved toilets. This was achieved through larger towns to identify the constraints to extending a dedicated sector program for rural Vietnam, the services there. Where funding is an obstacle to invest- National Target Program for Rural Water Supply and ment, consideration will need to be given to increasing Sanitation. Focused on developing water infrastruc- customer tariffs to recover operational and investment ture, the National Target Program was launched in costs (World Bank 2014b). The Government has rec- 2000 and closed in 2016 after three funding rounds ognized these challenges and has initiated a National (the last allocated more than US$1.5 billion to rural Program to ensure safe water supply with the dura- water supply, channeled through the PPCs). Since tion of 2016-2025 (Decision No. 2502/QD-TTg 2000, an estimated 16,200 piped water schemes have dated December 22, 2016). WHO has supported the been constructed. In 2016, the government launched Ministry of Construction in designing and implement- a New Rural Development National Target Program, ing the safe water supply plan, and has supported which encompasses 19 sectors, including rural water. training of water supply units. To date, the plans have The water supply and sanitation sector has made been deployed in 43 provinces and cities; including much progress in setting up the legal and institutional the management of water source risks, water supply framework for rural water service delivery. Several plants and pipeline networks. central government institutions have responsibility for Strategy and planning also need to focus on formulating policies. The Ministry of Finance sets and improved governance and strengthened autonomous approves the policies for tariffs and for incentivizing utilities. The reform program needs to carry through private sector participation in water infrastructure to improve governance, with a focus on the compo- development and management. In practice, though, nents that will protect stakeholders and ensure effi- PPCs have the final say in tariffs effectively applied. The cient and affordable services—contractualization and Ministry of Construction sets construction standards regulation. The constraints to implementing these two and also participates in the approval of tariffs submit- reforms need to be identified. Service delivery and ted by PPCs and service providers. Responsibility for utility autonomy need to be sustained by improving formulating and implementing the strategy for rural the financial situation for the utilities, particularly water falls to the Ministry of Agriculture and Rural through customer tariff levels, the collection rate, and Development. At a lower level, Provincial Centers for reduced nonrevenue water (World Bank 2014b). Rural Water Supply and Sanitation (PCERWASS) are Resolving the major environmental issues will usually formed to implement government strategy, require a new business model for wastewater. The new and they have been the lead institutions implement- model should incentivize municipalities, households, ing the rural water interventions under the National industries, and the private sector to invest in wastewa- Target Program. ter collection, treatment, and reuse. Actions are needed Sustainability, however, has lagged. The National to strengthen the legal framework and its application Target Program and the New Rural Development and to better incentivize private investment in the sec- National Target Program are robust structures to tor under PPP arrangements. One possible win–win deliver infrastructure and increase access to water solution, particularly in water-stress hot spots, would supply. However, arrangements for the provision of be to invest in wastewater reuse as well as treatment, quality water services and sustainable O&M are unde- veloped. As of June 2016, the Ministry of Agriculture Wate r Se curit y and Wate r Se r vice s for Se ttl e m e nts 37 and Rural Development reported that 10 percent of For comprehensive and sustained improvements piped water schemes were not functional, while 15 in rural water (to serve remote and ethnic-minority percent functioned below their design capacity. In areas), the following policy recommendations are mountainous and ethnic-minority areas, an estimated suggested: 33–48 percent of piped water schemes are entirely out • Formulate new responsibilities for PCERWASS of use or operating poorly. Six main factors explain related to promotion, oversight, and sustain- these shortcomings: ability of water service delivery, including sup- • Little to no attention to building the capacity of port for professionalizing community-based service providers, particularly if they are local management. communities, to manage water schemes. • Introduce regulatory mechanisms to incentivize • Limited participation of users in the design, adequate asset management and overall opera- implementation, and O&M of the schemes. tional and financial performance, which could • Poor application of tariff policies (which call for increase private sector participation. full cost recovery), so that water is highly afford- • Ensure that future schemes are demand-respon- able but many schemes need subsidies. sive to increase the population’s ownership and • Limited funds allocated to promoting the value participation in water systems management of safe drinking water and so increasing con- (including paying tariffs to move towards cover- sumers’ willingness to pay. ing at least O&M costs). • Absence of financial mechanisms to ensure that • Explore alternative support structures for com- funds are earmarked for asset maintenance, par- munity-based organizations, such as bringing in ticularly in schemes managed by local govern- the private sector to provide routine or ad hoc ments and communities. support or forming associations of community • A weak regulatory framework that inhibits par- organizations to offer technical assistance and ticipation of professional operators, including services. private ones. • Design and pilot PPP contracts for rural water supply. The government, increasingly seeing the Community-based management is the predomi- private sector leading in the water sector, should nant model for rural water services. It accounts for provide further guidance to PPCs, including a 77 percent of total piped water schemes, generally at menu of potential PPP arrangements. the village level. PCERWASS and private operators usu- ally manage multi-commune schemes covering large 3.5  Access to water supply and sanitation rural areas. PCERWASS face two main challenges: (1) too few human resources (often decentralized) to services among poor and rural people assist all villages and (2) limited revenue from tariffs, Despite appreciable progress in nationwide access which are not ring-fenced and can be reallocated to to basic WSS services, gaps between rich and any other provincial activity. Private sector participa- poor persist. Access by the poorest 40 percent has tion in rural water services remains slight (less than increased considerably, but a large and widening 4 percent of schemes) and comes in various forms. gap between the poor and non-poor remains. Only Nonetheless, the World Bank–financed Program for 7 percent of the poor have piped water against 40 Results Rural Water Supply and Sanitation Project percent of the non-poor, only 40 percent of the poor under the National Target Program in eight Red River have access to improved water against 81 percent Delta provinces shows promising private participa- of the non-poor, and only 30 percent of the poor tion in infrastructure investments and in the O&M of have access to improved toilets against 88 percent larger rural water schemes. From 2013 to 2017, about of the non-poor. 133,000 connections (40 percent) were financed or The picture is similar for urban and rural house- co-financed by private investors and about 650,000 holds (see table 3.1). Only 20 percent of rural people (26 percent) were served with sustainable ser- residents have piped water against 86 percent of vices managed by private entities.4 However, the ena- urban residents, 70 percent of rural residents have bling environment, particularly regulation, remains access to improved water against 96 percent for unattractive for scaling up and diversifying private urban residents; and 77 percent of rural residents sector partnership arrangements, especially for smaller have improved toilets against 96 percent of urban schemes in remote areas.5 residents. 38 GO V ER N A N CE F O R WATER S ECU RIT Y TABLE 3.1:  Access to drinking water, sanitation, and hygiene as of 2015 (percent) Drinking water Sanitation Hygiene Quality of National Rural Urban National Rural Urban National Rural Urban service Basic service 91 91 92 78 72 91 86 82 93 Limited 3 1 6 4 4 4 13 16 7 service Unimproved 5 7 2 14 19 3 — — — No service 0 1 0 4 5 2 2 2 1 Source: WHO and UNICEF (2018). Differences particularly affect women and eth- water and the problem of lack of adequate sanitation nic groups. Women—especially in poor and ethnic (see box 3.3). There are also wide differences across house-holds—still suffer the drudgery of collecting regions and ethnic groups. BOX 3.3:  Gender equality in water supply and sanitation needs further improvement, particularly in the poorest households and in ethnic communities By Vietnamese social norms, the gender division of labor average of less than 4 percent (MICS 2014, table WS.3). typically assigns women the tasks of securing water for Ethnic-minority households also lag on access to household needs such as drinking and washing; cooking improved sanitation, with only 24 percent using a sep- and overall household food security; and caring for chil- tic tank against 71 percent of households among Kinh dren, the elderly, and the ill. Poor water supply and sani- and Chinese groups (MICS 2014, table WS.4). These tation (WSS) services severely affect poor women’s time, inequalities have not declined. physical security, nutritional status, overall productivity, In addition, poor sanitation and water supply have income-generating capacity, opportunities for adult edu- wide effects on girls at school. Lack of privacy in sani- cation, and overall health and well-being. tation leads to menstruating girls missing school (for The government is strongly committed to gender example, in India, one in four girls do not attend school equality—see, for example, the Law on Gender Equality while menstruating because of the lack of adequate toi- adopted in 2006. The National Rural Clean Water lets). Lack of sanitation can also expose women and Supply and Sanitation Strategy to 2020, developed in girls to physical violence (for example, one in four girls 2000 and updated 2010, emphasizes the need for spe- say they never feel comfortable using school latrines). cial attention to gender issues. The strategy requires that Women’s involvement in WSS-related decision mak- both men and women participate in decision making ing leads to benefits in better procurement, O&M, cost and in water user groups. recovery, and hygiene awareness, as well as in improved Nonetheless, statistics on household access to basic WSS project performance. It also includes economic ben- infrastructure from the Multiple Indicator Cluster efits, such as more time for income-generating activities. Survey (MICS) of 2014 suggest that, while 68 per cent of Quality of life benefits include freedom from the drudg- households in the richest quintile enjoyed piped water at ery of water collection and management, which enables home, only 6 per cent of households in the poorest quin- children, especially girls, to go to school; increased con- tile did. Thus, particularly in poorer households, women venience, comfort, and privacy for women from proper are still enduring the drudgery of collecting water, and sanitation facilities; and women’s empowerment. their families are at risk from unsafe water. There are three methods for integrating gender into The burden of water collection falls disproportion- WSS programs in Vietnam: context-specific information ately on ethnic-minority women and girls. Water col- and data; consultation, advocacy, and decision mak- lection is a daily, time-consuming activity (at times ing; and actions to promote gender-sensitive organiza- requiring more than 30 minutes a trip) in 20 percent tions. All these have been detailed in a September 2017 of ethnic-minority households compared with a national Guidance Note on Gender Inclusion. Source: World Bank 2017g. 3.6  Priority actions for water in urban • Integrating urban planning for water manage- development ment, hazard mitigation, water supply, and drainage and wastewater into broader spatial Among the many issues affecting water in urban devel- planning. The initiative led by the Ministry of opment and the provision of WSS services, the follow- Planning and Investment (MPI) for integrated ing are priorities for further investigation and action: Wate r Se curit y and Wate r Se r vice s for Se ttl e m e nts 39 cross-sectoral and multi-institutional planning be incentivized to propose cheaper, innovative in the Mekong Delta may indicate pathways sustainable solutions for water and wastewater for city planners to work within a comprehen- treatment sive spatial and socioeconomic context basin- • Developing a new business model for waste- wide. In smaller basins, the question will be water. Given the high cost of retrofitting sew- how to fit urban water-related planning within erage networks and treating wastewater, and broader basin plans—for example, in urban given likely consumer unwillingness to pay, a settlements in Ninh Thuan Province within a new business model is required. There may be basin plan for the Cai River (see box 7.2 in opportunities for new technology or for off-grid chapter 7). solutions for wastewater collection and treat- • Maximizing finance for development of urban ment that are cheaper to implement and easier WSS services, and for broader urban develop- to operate and maintain than those currently ment. Equitization of urban water supply utili- used. There is an opportunity to learn from the ties essentially transfers the onus for mobilizing experiences of other countries that have suc- new investment finance to the private sector. cessfully met this challenge. Developing a new Well-run utilities in Vietnam can access bank business model calls for a detailed assessment finance, but this often requires them to use their of the economic prospects of reuse, especially assets as collateral, because banks are concerned where supply deficits are driven by deteriorat- that revenue streams are unstable. There are ing water quality. One approach in India is to many constraints to expanding access to invest- require power plants in water-stressed areas ment finance (see chapter 8) and tapping private within a specified radius of a water reuse plant finance would require a major coordinated pol- to take reused water. In Singapore, industry is icy effort. A strategy could be developed along required to use reused water rather than pota- the lines of that proposed for Vietnam’s energy ble water for their processing requirements. For sector (see box 8.2). The private using new such policies to work, there would need to be technologies. Beyond WSS services, experience stringent reused water quality rules and strict from other countries shows that sector could enforcement. BOX 3.4:  A public–private partnership for complex urban development challenges in China Rapid urbanization and poor water management and The PPP started in 2014, when the Chizhou munici- drainage are large issues in China. In 2013, more than 230 pal government signed a cooperation agreement with cities were affected by flooding. With cities getting bigger Shenzhen Water (Group) Co. Ltd., a Shenzhen city gov- and climate change threatening to bring more extreme ernment–owned company, for urban sewage treatment weather, China has embarked on the “sponge city” initia- and municipal drainage facility operations. tive to construct cities that soak up almost every raindrop Because the city’s financial resources were insufficient and capture that water for reuse. Instead of funneling rain- to cover the costs of the project, the government set up a water away, a sponge city retains it for use within its own PPP, splitting the project into three components: sewage boundaries. The recycled water can be used to recharge and municipal drainage, restoration of the Qingxi River, depleted aquifers and irrigate gardens and urban farms. and sponge city construction measures including public When properly treated, the recycled water can replace parks and natural recreation areas. The three compo- drinking water, flush toilets, or clean homes. nents together leveraged CNY 2.28 billion, split among A public–private partnership (PPP) project was contributions from the central government, municipal launched in Chizhou City in Anhui Province for a sponge government, and the private partners. The project was city pilot program to improve resilience to extreme so successful that in 2016 the city announced the expan- weather and simultaneously improve the Qingxi River sion of the PPP. Basin environment. This very successful PPP is often referred to as the “Chizhou model.” Source: DRCSC 2017. 40 GO V ER N A N CE F O R WATER S ECU RIT Y Notes 4. Sustainable water services are defined within this Program for Results as providing clean water (as 1. The consequences for pollution of the poor per Ministry of Health standards), and contin- performance on municipal wastewater are dis- ued supply of at least 22 hours a day, 7 days a cussed in chapter 4. week, having O&M costs covered by operating 2. Although the urban utilities are performing rela- revenue from tariffs, nonrevenue water below tively well, there is wide variation among them. 25 percent, and operated under a recognized Management and governance improvements management model. needed for many include defined and agreed 5. PPCs are not always implementing the Circular service standards, asset management plans, 54 with regard to tariffs subsidies, creating investment planning, O&M planning, business uncertainties as to the responsibility for financ- planning, and standardized and consistent tariff ing full cost-recovery. methodologies 3. This section is based partly on World Bank 2017c, World Bank 2017k, and the Vietnam Household and Living Standards Survey, 2016 Part 2 Reducing Threats—Too Little, Too Much, Too Dirty Water is a vital factor of production, so it is no surprise that too little water, too much water, or water that is too dirty translates into slower growth and darkened economic prospects. Both the quality and the quantity of Vietnam’s water resources face growing threats. The country’s rapid development, combined with climate change, threaten costly flooding, worsening pollution, and increasing competition among sectors for water in the dry season. The greatest economic impact is from the health effects of water pollution. If nothing is done to avert these threats, they could combine to reduce GDP by about 6 percent annually by 2035. © Hoang Minh Tran / World Bank 4 Water Pollution: The Hidden Threat to Development and Growth Water pollution and environmental damage are massive problems • Risks from water pollution are becoming extreme. Industry is generating huge amounts of highly polluting wastewater, and the toxicity and complexity of pollution are increasing. • The impact of untreated wastewater on human health and on the economy is a massive threat, potentially costing nearly 4 percent of GDP by 2035. • Water pollution from agriculture is getting worse, and water-related development and activities are harming Vietnam’s environment. Solving the pollution problems requires regulation, incentives, and investment Pollution presents considerable challenges. The nation needs to make regulation, incentives, and investment a top priority and the focus of a mammoth national effort. Needed measures include: • Assessing and adjusting the regulatory and incentive structures. • Trying innovative approaches to water pollution control used in other countries. • Assessing the scope for commercializing wastewater collection, treatment, and reuse. • Reducing agricultural pollution through education and incentives, as well as the regulatory framework. • Using innovative financial mechanisms to support investments in natural capital and reduce nonpoint source pollution. 4.1  Water pollution is a growing menace income and better nutrition and housing. It was not and development hazard until major reforms improved the quality of water supply and sanitation (WSS) that life expectancy and 4.1.1  Risks from water pollution are becoming child survival increased (Cutler and Miller 2005). A extreme similar trend has been observed across the world (see, Water pollution has emerged as the greatest water- for instance, Cutler and Miller 2005, Watson 2006). related economic threat to Vietnam. Experience has Vietnam today confronts a dual development consistently shown that few other interventions bring burden from its water quality problems. The pollut- as great and immediate development benefits as the ants generated by rapid industrialization have intro- provision of clean water. For example, child mortal- duced new diseases and risks to productivity and ity increased in Great Britain for most of the second growth, before the country could fully address prob- half of the 19th century, despite a doubling of average lems related to underdevelopment, such as diarrhea 43 44 GO V ER N A N CE F O R WATER S ECU RIT Y and undernutrition caused by poor sanitation. In Urban wastewater is the largest contributor to the past, poor water was thought to affect primar- water pollution, with only 12.5 percent of municipal ily human health, through diarrhea and other infec- wastewater treated before discharge into water bodies. tious diseases. More recent research indicates a host This is a consequence of a long history of neglect of of new contaminants with multiple pathways affect- sewerage and wastewater treatment by municipalities ing economic outcomes as well, ranging from labor (see figure 4.2). Due to the prevalence of combined productivity (the intensive margin), to labor supply sewer systems (carrying both wastewater and storm (the extensive margin) and agricultural productivity water), domestic wastewater accounts for 30 percent (Humphrey 2009). of the discharge to lakes, canals, and rivers. Cities like Water quality in Vietnam has deteriorated worry- Hanoi and Ho Chi Minh City (HCMC) discharge to ingly, with a trail of toxicity generated by cities, indus- the ecosystem some 700,000–900,000 cubic meters of try, and agriculture. Waterways flowing past major sewage a day. All this is the upshot of the low rate cities are seriously polluted. Groundwater in many of connection to sewerage networks; widespread regions has been contaminated with a range of surface underinvestment in effluent collection, treatment, and pollutants, while over-abstraction has increased con- disposal; neglect of wastewater reuse potential; low centrations of pollutants and of salt (see figure 4.1). tariffs that do not cover costs; and a dysfunctional In the Mekong and Red Rivers, these problems are regulatory system. compounded by seawater intrusion. FIGURE 4.1:  Water quality of rivers, 2011–15: left, chloride levels in Mekong; top, chemicaloxygen demand levels in rivers going through Hanoi city; bottom mg/L 2011 2012 2013 2014 2015 QCVN 08:2008 A1 QCVN 08:2008 B1 1 0.8 0.6 0.4 0.2 0 gon river con uence Cầu Tố ng Lê Chân Ba Son Company Rach Chiec and Sai Tan Thuan port Dau Tieng Lake Hoa Phu pumping Phu Cuong bridge Ben Suc Bridge Dau Tieng Bridge Phu Long Bridge Thu Dau Mot Town Tha La Bridge Binh Trieu Bridge Thi Tinh river estuary station 2015 2014 2013 2012 2011 150 100 50 0 Phuong Liet Nghia Do Cau Moi Tuu Liet Set Bridge Dinh Cong Source: (Data provided by Centre for Environmental Monitoring (CEM), MONRE, 2011-2015). Wate r Pollution: The Hidde n Thre at to De v e lopme nt and G r owth 45 FIGURE 4.2:  Urban wastewater management in Vietnam Much industrial wastewater is discharged without pre-treatment, damaging the environment. It is esti- Direct Sewerage mated that at the end of 2018, centralized wastewa- (no Septic Tank) wastewater Total 5% safely wastewater ter treatment plants were treating only about 71% of collected treated 10% industrial wastewater (Thoi Bao Tai Chinh 2018). Septic Tanks with sewerage Water pollution from agriculture is growing. Uraban Wastewater 55% Annually, Vietnam consumes approximately 11 mil- Septage Septage safely desposed/ lion tons of fertilizer, of which inorganic fertilizers safely Septic Tanks No sewerage collected treated account for 90% and organic fertilizers for 10% 4% 22% (World Bank 2017m). The average amount of ferti- Septage+ wastewater lizer application amounts to 195-200 NPK kg/ha, Other On site 18% unsafely while it varies greatly depending on crop type, vari- desposed ety, location, soil types and forms of application. Rice Source: World Bank 2014b. uses 65% of total fertilizer consumed in Vietnam and Solid waste from municipalities poses another it is found that most rice farmers apply fertilizers well threat to surface waters. Illegal dumping, unsanitary above recommended rates (World Bank 2017m, Doan and badly managed dump sites near waterways, and 2015). Only about 45–50 percent of fertilizer is used a lack of solid waste collection allow solid waste to effectively; the rest is washed out in runoff. reach waterways. Though Vietnam has 660 operat- As with fertilizers, Vietnam saw a strong increase ing landfills, only 203 are sanitary (MONRE 2017). in pesticide consumption in the past decades, owing to The remainder do not collect and treat leachate—the the intensification of the agricultural sector. In 1981- liquid that drains from landfills and pollutes soil and 86 Vietnam imported around 6,500-9,000 tones of water. Reliable municipal solid waste collection rates pesticide active ingredients (ai), which amounts to an are difficult to track down, but they were estimated to average of 0.3 kg ai/ha. Between 2001-2010 33,000– be 86 percent in urban areas in 2018 (MOC, 2019) 75,000 tons/year were imported, which amount to while 2004 figures suggest rates below 20 percent in an average of 2.54 kg ai/ha – a dramatic sevenfold rural areas and among the urban poor. About 70% increase. In 2015, the pesticide import amounted to of the solid waste collected was landfilled in 2018 around 100,000 tons, indicating a further increase (see (MOC, 2019). A recent report suggests that the vol- figure 4.3). Over the past ten years (2000-2011) the umes of waste from Vietnam are disproportionately number of pesticides registered and used in Vietnam large for its size: 60 percent of the plastic that enters has increased tenfold. The current mix of pesticides the world’s seas originates in just five countries, one of is also found to be highly toxic, with 31% of the pes- which is Vietnam (Ocean Conservancy and McKinsey, ticides used by farmers in the Red River Delta being 2015). This highlights the gravity of Vietnam’s solid categorized within the WHO classification as ‘highly waste situation (Möller-Gulland, 2017). hazardous’, while 54% were categorized as ‘moder- Industry generates huge amounts of potentially ately hazardous (World Bank 2017m). These high highly polluting wastewater, much of it from chemi- numbers can be explained by several factors: cals, which is difficult to treat. With rapid industrial • A removal of import restrictions in 1991 growth, the demand for water is increasing. Industrial allowed prices of chemical fertilizers, pesticides, production is already highly polluting, and the toxic- and other inputs to drop by 50 percent in the ity and complexity of pollution are rising as indus- following few years, resulting in farmers moving try expands. The state sector, which still accounts for from traditional organic and farm manure ferti- about 40 percent of GDP, bears much responsibility, as lizers to imported chemical fertilizers in order to many state enterprises are among the most polluting increase yields (World Bank 2004); industries in the country. Water pollution from craft • Farmers tend to use older, less expensive and villages is also a serious and growing problem (2030 non-patented pesticides that can be manufac- WRG 2017). The more than 5,000 craft villages are tured or blended domestically – these are found distributed mainly in the Red River Delta, and the to be more toxic and persistent than others North Central Coast and Central Coast regions. The (World Bank 2017m, Pham et al. 2012); 1,300 craft villages of Hanoi alone discharge an aver- • Low and unreliable quality of many pesticides age of 156,000 cubic meters a day of untreated waste- and fertilizers leads farmers to apply more to water (Thanh Hien, 2017). 46 GO V ER N A N CE F O R WATER S ECU RIT Y ensure that they take effect. A study in 2013 and people. Crop farming is the second largest source found that 54 percent of NPK fertilizers in the of greenhouse gas emissions in Vietnam. Correction of market were of low quality (World Bank 2017m, fertilizer and pesticide use would produce greater effi- Phạm and Nguyễn 2013). ciency, reduced pollution, and higher incomes. • The availability of cheap fertilizers and pesti- Livestock, particularly pigs and poultry, pro- cides in local markets and their advertisement in duce 84.5 million tons of waste a year charged with local mass media are encouraging farmers to use nutrients, pathogens, and pharmaceuticals, and two- more of these (World Bank 2017m). thirds of this waste enters the environment untreated (Nguyen The Hinh, 2017). Despite rising productiv- Water pollution from pesticides and fertilizers was found ity, the pressure of livestock production on the envi- to be mainly due to discharge of agrochemicals and pes- ronment has not diminished. Pigs and poultry are the ticides into canals and rivers. A study in 2010 found that most polluting, with the Red River Delta, the South 69,238 kg and 43,574 liters of pesticides and 69,640 kg East, and the Mekong Delta generating the most ani- of chemical packages (including paper and nylon bags) mal waste. There is scant monitoring but strong evi- are released into the surrounding environment without dence of pollution and of its harmful effects on water proper treatment annually (World Bank 2017m, Khanh and health in rural areas. Livestock production is also and Thanh 2010). Besides causing an environmental a major contributor to greenhouse gas emissions from risk, pesticide residues on agricultural products are still the agriculture sector. (MONRE, INDC 2015). common and high, thus causing a risk to public health. A study from MARD’s Department of Plant Protection FIGURE 4.3:  Value of pesticide imports into Vietnam 1980-2014 found that pesticide residues on cash crops were more than 10–26 percent higher than the maximum allow- able level in Hanoi and 10–30 percent in Ho Chi Minh City (cited by Truo ̛ g 2015 in WB 2017 m). ̛ n Overall, with the intensification of crop farming, agricultural pollution has soared. Fertilizer overuse is the major contributor, particularly in the Mekong Delta (see figure 4.4) and in the Central Highlands. Chlorophyll concentration, a proxy for nitrogen and phosphorous pollution, has risen rapidly (see figure 4.5). Pesticide overuse and related pollution are now rampant in certain parts of Vietnam, resulting in expen- Source: Based on FAOSTAT data. sive and ineffective pest control and hazards to wildlife FIGURE 4.4:  Pollution levels in the Mekong River Basin relative to the standards of the Mekong River Commission, World Health Organization, and US Environmental Protection Agency Nitrate-nitrite milligrams per liter 8 2012 2013 2014 6 MRC Guidelines 4 WHO 2 US-EPA 0 Ban Don Can Tho Chau Doc My Tho My Thuan Ploscu Tan Chau Thong Binh Tinh Binh Tu Thuong Source: MRC. Wate r Pollution: The Hidde n Thre at to De v e lopme nt and G r owth 47 Aquaculture, too, is highly polluting. This sector FIGURE 4.6:  Percentage of firms reporting poor water has developed rapidly, especially in the Mekong Delta. quality as a ‘major’ or ‘very severe’ obstacle to their performance in 2018 Regulation has failed to stem the high levels of pollu- tion due mainly to discharge of untreated wastewa- ter into local water bodies. Food safety concerns have affected sales but are also beginning to drive improve- ments in standards (World Bank 2017m). FIGURE 4.5:  Annual maximum chlorophyll concentration in Red and Mekong Rivers Annual Maximum (milligrams/cubic meter) 35 Red River Delta 30 25 Mekong River Delta 20 15 10 5 0 2008 2010 2012 2014 2016 2018 Source: Moderate Resolution Imaging Spectroradiometer (MODIS) satellite. More broadly, water-related development and activi- ties are harming Vietnam’s economy and environment. Natural ecosystems and biodiversity are under threat from water-related activities, while deforestation and land use changes are affecting the water cycle. Vietnam’s environment is reported to be at the thresh- Source: World Bank (2019b). old of tolerance. The government’s “green growth” The cost to the economy of untreated wastewater is strategy focuses on more efficient and sustainable high and rising. Untreated industrial wastewater can use of natural resources and on climate adaptation, have significant impacts on the downstream economy. low carbon policies, and disaster risk management. For example, one study estimates that paddy yields However, environmental regulations are not well downstream of industrial parks in the Mekong River enforced, in particular in some local governments Delta in Can Tho Province are reduced by 12 percent (World Bank 2016d; Audinet et al, 2008; GoV 2012b, due to discharge of untreated industrial wastewater Decision 1393/QD-TTg). (Kai and Yabe 2012). Based on a pollution index, Can Tho was the tenth most polluted province in Vietnam 4.1.2  Water pollution is now one of Vietnam’s (ICEM 2007). To estimate the impact on the economy greatest development challenges and of reduced paddy yields due to industrial pollution, a constitutes a massive cost to the economy study assessed the 10 most polluted provinces and the Poor water quality poses one of the biggest water- provinces downstream from them using a comput- related challenges to businesses. A recent World able general equilibrium (CGE) model (World Bank Bank (2019b) survey, covering 1,032 formally reg- 2018g). These provinces jointly account for 30 percent istered firms in Vietnam, found that 14% of ques- of Vietnam’s rice production. GDP is expected to be tioned companies stated poor water quality as a reduced by 0.8 percent annually from reduced rice yields ‘major’ or ‘very severe’ obstacle to their perfor- alone if untreated industrial wastewater continues to be mance. Firms that reported water quality to be a discharged (see table 4.1). Agricultural GDP is hit the ‘major’ or ‘very severe’ obstacle, had 48% lower hardest, with an estimated 3.6 percent decline. Even this sales than similar firms reporting water quality as is a very conservative estimate, as only the 10 most pol- being a ‘moderate’, ‘minor’ or ‘no’ obstacle. Firms in luted provinces and the provinces downstream of them the Mekong Delta and Red River Delta were found were considered. Further, the impacts on the quality of to be substantially more impacted by poor water rice (and thus its market price) or on farmers’ health, quality (see figure 4.6). such as skin diseases, were not included in the analysis. 48 GO V ER N A N CE F O R WATER S ECU RIT Y TABLE 4.1:  Impacts on sectoral GDP from a decline in rice productivity and increased health costs. This can be productivity due to discharge of untreated industrial wastewater manifested as lower effort on the job or days lost to Shares (%) sickness and higher mortality affecting the size of the Sector 2012 2035 2035 workforce. In addition, reduced health places a higher Deviation from Base Base SIM D01 base in 2035 (%) burden on the health system. Thus, there is a double Agriculture 15.2 12.4 12.1 −3.6 shock: workers can be off work (reducing output) and Industry 44.8 44.8 45.1 −0.1 drawing on health services. Services 39.9 42.8 42.9 −0.6 Action on wastewater treatment could boost GDP by GDP 100.0 100.0 100.0 −0.8 2.3 percent, but inaction could lower GDP by 3.5 percent. Source: World Bank 2018g. The CGE modeling shows that the impact of decreased Note: The values show the deviation from the reference path, that is, no additional discharge of untreated industrial effluent from the baseline of 2012. or increased productivity has huge consequences for the economy: the difference between action and inaction is There are broader impacts beyond agriculture. 5.8 percent of GDP (see box 4.1). Vietnam’s water gov- Untreated wastewater can harm human health, which ernance should therefore be improved—and enforced— in turn affects the economy through reduced worker to enable full treatment of wastewater. BOX 4.1:  The huge gains—or losses—to GDP from wastewater treatment Untreated domestic and industrial wastewater con- TABLE 1:  Change in labor productivity by 2035 resulting tributes significantly to disease occurrence, especially from inaction or action on wastewater diarrhoea, through secondary exposure, i.e. expo- Change in labor pro- Scenario sure other than through ingestion of primary drink- ductivity, 2035 (%) ing water (Ferrer and others 2012). The impact on Inaction (10% municipal wastewater treated) (−7) health reduces workers’ productivity, and thus that Action (100% municipal wastewater treated) 4.7 of the economy at large. WHO (2004) estimates that Under the inaction scenario, GDP in 2035 is 3.5 per- Southeast Asia loses 5.4 billion productive days a year cent below what it would otherwise have been (see table (which equates to about 3.5 days per worker a year in 2). In contrast, under the action scenario, GDP is 2.3 per- Vietnam) due to diarrhoea caused by untreated waste- cent higher than what it would have been. Agriculture is water, all of which can be avoided by full treatment the most affected sector in both scenarios. of wastewater. In addition, poorer health can place a higher burden on the health system. In Vietnam, hos- TABLE 2:  Impacts on GDP of labor productivity by 2035 pitals are already overcrowded, average length of stay and health cost changes resulting from inaction or action and rate of hospital admissions are higher than the on wastewater regional average, and out-of-pocket health expenses GDP (percentage change) push many Vietnamese into poverty (World Bank Inaction (10% of Action (100% 2008, 2016). Sector municipal wastewater of municipal treated) wastewater treated) The economic impacts of lower labor productiv- Agriculture −5.8% 3.7% ity and increased health costs due to the discharge of Industry −2.8% 1.8% untreated wastewater were assessed in a computable general equilibrium model. The analysis differentiates Services −3.6% 2.4% between the economic impacts of inaction by 2035, that GDP at factor cost −3.5% 2.3% is, business as usual where only 12.5 percent of munici- Note: The values show the deviation from the reference path of current munic- pal wastewater is treated, and action, that is, 100 per- ipal wastewater treatment levels. cent of municipal wastewater is treated. This analysis shows that even when the full costs for By 2035, labor productivity is expected to be wastewater treatment are taken into account, the overall reduced by an additional 7 percent if current rates of positive economic impact is substantial—that is, a dif- municipal wastewater treatment continue (see table 1). ference of 5.8 percent of GDP when comparing the inac- However, if municipal wastewater were 100 percent tion and action scenarios. treated, labor productivity would increase by 4.7 per- This assessment is conservative, as only the impact of cent by that year. untreated municipal wastewater was considered, not the In the case of inaction, additional health expenditures impact from untreated industrial wastewater or diffuse amount to 0.7 percent of government expenditures. agricultural pollution, which also have significant effects on human well-being. Source: World Bank 2018g. Wate r Pollution: The Hidde n Thre at to De v e lopme nt and G r owth 49 4.2  Reducing pollution requires related to water pollution have been issued since investment, regulation, and incentives 1993. In addition, since the Party Central Committee’s Resolution on strengthening environmental protection 4.2.1  Underinvestment in treating wastewater in the period of industrialization and modernization is considerable of the country dated 15/11/2004, considerable finan- Much of the pollution problem results from under- cial resources of one per cent of the state budget for investment in industrial wastewater treatment. This environmental expenditure have been allocated annu- underinvestment is leading to widespread pollution ally for state management of the water environment. and contamination. At the end of 2018, out of 326 However, despite over 20 years of implementing industrial zones planned countrywide, 251 were in environmental enforcement, non-compliance rate operation. Of these zones, 220 (88%) had wastewater remains high. Illegal discharge of untreated is wide- treatment plants (MPI, 2019). However, as mentioned spread, as is discharge of treated wastewater that is not above, it is estimated that these facilities were treat- compliant with regulations and standard for waste- ing less than three quarters (71%) of the wastewater water. Up to 31% of inspected facilities in 2017 were produced in the zones (Thoi Bao Tai Chinh 2018). found to be non-compliant (VEA 2018). Up to 60% Most of the remaining wastewater is not treated and of discharge from FDI enterprises exceeds permitted is discharged directly to the environment. Of the total effluent standards (Thien Nhien 2016). The underly- of 587 operating industrial clusters, only 55 indus- ing cause for this low compliance rate is insufficient trial clusters have centralized wastewater treatment incentive to comply and limited institutional capacity facilities, accounting for 9.4% of the operating indus- to enforce (2030 WRG 2017, CECR 2018). trial clusters (Thoi Bao Tai Chinh 2018). Most of the Law enforcement is uneven, and pollution is wors- wastewater discharged from the 5,000 craft villages ening. Monitoring, inspection, and enforcement are and traditional craft villages goes without treatment. inadequate, and the environmental protection fee is In addition, some big industrial factories located out- often not assessed. More monitoring and public dis- side industrial zones as well as the majority of local closure are required to understand the full extent of hospitals and private clinics do not have wastewater urban and rural water pollution. Further, only certain treatment facilities (MONRE 2016) pollutants are currently regulated and monitored  - COD, TSS, mercury, lead, arsenic and cadmium. 4.2.2  The regulatory and incentive frameworks However, new pollutants are emerging, such as chemi- are in principle sound, but implementation and cals found in pharmaceuticals, personal care products, enforcement are weak pesticides, industrial and household products, metals, The legal framework is basically sound, but implemen- surfactants, industrial additives and solvents. In addi- tation and enforcement of regulations lag. Vietnam has tion, there is the increasing challenge of solid waste in many regulations on wastewater management, such as waterways. Further action needs to be taken to meet for treatment and disposal of wastewater (see box 4.2), these emerging challenges. and these regulations were rationalized and strength- Human resources for environmental enforcement ened by the 2012 Law on Water Resources and by the remain inadequate. The total number of environmen- 2014 Law on Environmental Protection (LEP). In fact, tal officers at the end of 2017 was 5,728, of which water environmental protection has been an essential 613 were at the national level, 2,901 at the provincial part of the environmental legal framework. The LEP level and 2,214 at the district level (GOV 2018). There in all three versions - 1993, 2005 and 2014 - has spe- are no environmental officers at the commune level. cific sections and articles on addressing water pollu- Of these staff, only 650 are inspectors (140 at the tion. Vietnam has applied all key policy instruments as national and 510 at the local level) and these inspec- internationally recommended to address water pollu- tors need to cover not only environmental protection tion in Vietnam such as environmental impact assess- but also mineral resource mining and land administra- ment, water ambient environment standards, effluent tion. On average, each province has only eight inspec- standards, effluent charge, inspection and penalties, tors, too few to cover the wide range and number of monitoring, incentives for environmental protection regulatory tasks. via soft loans and tax and land preferential condi- The penalty structure is not conducive to com- tions, certificates of completion of environmental pro- pliance. For industrial wastewater, as regulated in tection works, and education and awareness raising Decree 154/ND-CP, the tariff has a fixed compo- campaigns. Some 38 laws and Government decrees nent of VND 1.5 million and a variable component 50 GO V ER N A N CE F O R WATER S ECU RIT Y that applies for discharge volumes above 20 cubic inadequate. The penalties for violation regarding meter/day and the concentration of key pollutants water resources are set out in Decree 33/2017/ND-CP, (see chapter 6). Moreover, the tariffs1 are too low to and those relating to environmental protection are achieve cost recovery and do not provide financial set out in in Decree 155. Penalties for violation are incentives for industrial companies to invest in com- high (a maximum VND 250 million for one violation mon effluent treatment plants. Provinces hesitate to as per Decree 33 and VND 1 billion as per Decree increase fees for fear of losing investors. Industries 155), and there are other mandatory measures such are often reluctant to pay even these low tariffs. as restoring the initial condition of the environment (ADB 2009; Nguyen 2013). Although no study on or cancellation of permits. However, these stiff penal- the effectiveness of the wastewater fee has been car- ties have not deterred violations, posing the question ried out, the increasing pollution levels suggest that whether penalty levels are high enough or enforce- the current fee is either too low or fee collection is ment adequate. BOX 4.2:  The regulatory framework for pollution control and the protection of water resources The discharge of wastewater is regulated by the 2012 settlement on environmental issues (Decree 149/2004/ Law on Water Resources, the Law on Environmental ND-CP). One objective of discharge permits is to con- Protection of 2014, the 2014 decree on wastewater trol the pollution of water sources and to regulate and drainage and treatment; and the 2015 decree on waste reduce the use of toxic chemicals in industrial and agri- and materials management. cultural production. The decrees state that “wastewater must be collected, Assessment of the receiving capacity for wastewater treated, reused, or transferred to functional units suit- discharge and nutrient loading limits of water bodies: able for reuse or treatment up to environmental technical Circular 76/2017/TT-BTNMT, which took effect on standards before being discharged into the environment.” March 1, 2018, provides guidelines for the assessment Further, industrial zones are obliged to have wastewater of the capacity of water sources to receive wastewa- treatment systems to treat the entire wastewater gener- ter discharge and the load-bearing capacity of water ated from operations, except for operations which are sources. The guidelines include direct, indirect, and exempted from discharging their effluent to the central modeling-based methods to estimate the capacity of wastewater treatment plant. As per Circular No. 35/2015/ receiving waters for wastewater discharge based on TT-BTNMT, all businesses and service establishments maximum loading of surface water quality parameters, have to be connected to the centralized wastewater treat- flow rate, and quality of river water. The Ministry of ment plant operating in the industrial zone. However, Natural Resources and the Environment (MONRE) some businesses and service establishments are exempted is responsible for approving the assessed capacity of from this requirement, i.e. if they (a) treat their waste- receiving water bodies and subsequent discharged water water in compliance with environmental and technical of international and interprovincial rivers and lakes. The regulations, and the connection to the centralized treat- People’s Committees of central-affiliated cities and prov- ment plant would cause unreasonable costs; (b) generate inces are responsible for the approval for the same of wastewater volumes exceeding the treatment capacity intra-provincial rivers and lakes. Carrying capacity of of the receiving centralized wastewater treatment plant receiving waters is one of the bases for issuing discharge and concurrently apply wastewater treatment measures permits. However, limited water quality monitoring in compliance with environmental technical regulations makes it difficult to implement this circular. and (c) treat their wastewater in compliance with envi- Payment for wastewater treatment: Organizations ronmental technical regulations and the industrial zone and individuals, aside from those identified as exempt, has no centralized wastewater treatment system (Article pay for the treatment of discharged wastewater. The 9, para 4). Companies outside of industrial zones must payment is based on an annual fixed amount plus the also have wastewater collection and treatment systems volume of water used (for domestic consumption) and (Article 37, 2012 Law on Water Resources). the pollution content of discharge due to industrial, agri- Permits for wastewater discharge: All wastewater cultural, and service activities. Water supply and drain- discharges must be licensed by an authorized govern- age companies, with provincial, district, and commune ment office (Article 37 Water Resources Law and Article people’s committees, are responsible for collecting the 26 OEPIW). Provincial people’s committees (PPCs) are charges and transfering them to the state treasury, which responsible for licensing and issuing permits for waste- uses them for environmental protection activities water discharges. PPCs are also responsible for dispute (Decree 154/2016/ND-CP). (Box continues next page) Wate r Pollution: The Hidde n Thre at to De v e lopme nt and G r owth 51 BOX 4.2:  (Continued) Monitoring water quality and applying sanctions: Protection of water sources from pollution: MoNRE In theory, MoNRE and the Department of Natural has a shared responsibility (with PPCs and other stake- Resources and Environment (DoNRE), in cooperation holders) for protecting water resources, identifying areas with the Environmental Police (under the Ministry of being polluted or depleted, assessing the status of water Public Security), are responsible for monitoring water quality, and monitoring and supervising water resource quality and identifying violations. Once a violation quality and discharge of sewage into water sources. The is identified, the PPC is informed and assesses fines 2012 Law on Water Resources controls abstraction of and, depending on the violation, may issue a warn- groundwater that affects the quantity or the quality of ing, demand compensation, request restoration, strip the source. licenses/permits, or a combination of those measures (Decree 155/2016/ND-CP). Implementation of these procedures remains uneven. Source: 2030 WRG 2017; Nguyen 2013. 4.2.3  The root of the agricultural pollution There is a need to better incentivize investment in problem wastewater services, but it is not clear that the benefits Shortcomings in regulation and the incentive structure can be monetized. In Vietnam at present wastewater are at the root of agricultural pollution. Agricultural services are treated as a public good. They are pro- pollution remains rampant due to these failings cou- vided and paid for largely by municipal bodies, either pled with insufficient capacity and will to enforce reg- by the water utility or by a separate wastewater com- ulations. Government policies such as cheap fertilizer pany or a municipal department. Since 2013, 18 dedi- and pesticides may even be driving some polluting cated wastewater service companies have been set up. activities. Structural changes are also needed in sector The challenge is that there are few investors willing development policies, to move to less-polluting tech- to risk capital in a market that offers limited returns. nologies (World Bank 2017m). The scope for commercializing industrial waste- water collection, treatment, and reuse needs to be 4.3  Options for reducing water pollution assessed. This assessment could identify possible busi- ness models, regulatory reforms needed to underpin 4.3.1  Focusing on wastewater investment and such models, and ways to bring in private investors, regulation and on pollution reduction either alone or in public–private partnership (PPP) Despite the adoption in 2007 of a program for compre- arrangements. hensive reform of water pollution (Decree 88/2007), it Reusing treated wastewater could provide some is only getting worse. The major issues are: income. Government policy aims to reuse 20–30 per- • Pollution from domestic and industrial waste- cent of treated wastewater from domestic properties water, as well as from craft villages. (Decision 1930/QD-TTg, November 20, 2009; Prime • Agricultural diffuse pollution, as well as dis- Minister in the Decision No. 2502/QD-TTg dated charge of agrochemicals and pesticides into December 22, 2016). The Government also issued canals and rivers. Decree 54/2015/ND-CP to provide incentives for • The dysfunctional regulatory system. water conservation improvements. According to this • The low rate of connection to sewerage networks. decree, activities related to reuse of treated wastewa- • Underinvestment in collection, treatment, and ter, which has been treated to meet national technical effluent and sludge disposal. regulations for the purpose of reuse, can benefit from • Neglect of the potential for wastewater reuse. concessional loans and reduced or exempted business • Low tariffs that do not come close to covering income taxes. However, as specific guidance docu- costs. ments have not been issued yet by relevant line minis- tries, there has been no update yet on these incentives One key area of investigation is why the regulatory (see section 6.5.3). The 2030 Water Resources Group and incentive structures are so ineffectual. This would report identified wastewater treatment and reuse as determine which actions would have the most impact a priority for investment (2030 WRG 2017), and on the devastating pollution of Vietnam’s environment. this could be attractive if the benefits— for example, 52 GO V ER N A N CE F O R WATER S ECU RIT Y of reusing treated wastewater—could be monetized. in industry could make treatment a commercial propo- The report argues that reusing treated municipal waste- sition (see box 4.3) and suggests three avenues: lever- water has the potential to reduce Ho Chi Minh City’s aging wastewater investments from public and private water stress to “low stress” status by 2030. This has organizations under PPP arrangements; working with certainly a value, but it is yet unclear how this can be infrastructure development companies on commercial- monetized and the regulatory framework needs to be izing treatment plants and industrial water reuse sys- amended. Similarly, treating wastewater from industrial tems; and requiring (in certain circumstances) industry clusters along the Nhue-Day River close to Hanoi can to use treated wastewater for their processes. One pos- considerably improve surface water quality, but again sible win–win solution, particularly in water-stress hot the benefits would have to be paid for (2030 WRG spots, could be to invest in wastewater treatment and 2017). The 2030 WRG (2017) report argues that reuse reuse (2030 WRG 2017). BOX 4.3:  Wastewater treatment and reuse are priority areas for investment • Reusing treated municipal wastewater has the poten- • Treating wastewater from industrial clusters along tial to reduce water stress in Ho Chi Minch City to the Nhue-Day River close to Hanoi could considera- “low” by 2030. The potential for reuse as nonpota- bly improve surface water quality. This would involve ble water is up to 3.7 million cubic meters daily. The the treatment of 22 million cubic meters of industrial additional cost of upgrading the planned wastewater wastewater annually; the associated cost of the treat- treatment works to meet suitable nonpotable water ment plants has been estimated at US$97 million in standards is estimated at US$0.25 per cubic meter. 2010. Infrastructure development companies may be This could be an area for private investment under interested in commercializing treatment plants and public–private partnership arrangements. investing in industrial water reuse systems. Sources: 2030 WRG 2017. Considering the direct impact on water quality and 2020 and to 970,000 m3/day by 2030 (at a cost ecosystem health, it is crucial to consider solid waste of 60,000 billion VND). management as part of sustainable water resources Further, the Ministry of Construction has submitted management. For example, leakage points in the col- “The National Program on Investment in Wastewater lection system, such as illegal dumping or unsanitary Treatment for the Immediate Future for Big Cities dump sites near waterways, need to be closed; waste and River Basins following a reasonable schedule” to collection rates need to be increased; technologies to the Prime Minister for approval in 2018 (No. 51/TTr- treat waste, such as waste-to-fuel and waste-to-energy, BXD dated 5 November 2018). need to be introduced; and low-value plastic waste needs to be converted into refuse-derived fuel. 4.3.2  Enforcing regulations and improving Recognizing the importance of this challenge the education and incentives Government has started to take action. The Prime To counter agricultural pollution, the regulatory Minister has approved three Drainage and Wastewater framework has to be enforced, and education and Treatment Plans for three key polluted rivers systems, revised incentives brought in. The government is namely (1) Dong Nai River Basin; (2) Nhue-Day River well aware of the issues of agricultural pollution and (3) Cau River. According to these plans, the fol- and, through the Ministry of Agriculture and Rural lowing improvements are required: Development’s Agricultural Restructuring Plan of • Dong Nai River Basin: 51 projects, increasing 2014, has embraced the need to reduce the sec- total wastewater treatment capacity to 2,500,000 tor’s environmental impacts. A recent World Bank m3/day by 2020 and to 4,000,000 m3/day by report on agricultural pollution recommended 2030 (at a cost of 168,000 billion VND). that farmers be offered better technical options • Nhue-Day River: 23 projects, increasing total and that the incentive structure—positive and wastewater treatment capacity to 900,000 m3/ negative—be revised to encourage non-polluting day by 2020 and to 1,100,000 m3/day by 2030 behaviors (World Bank 2017m). Government pro- (at a cost of 190,000 billion VND). grams promote good practice, but monitoring and • Cau River: 28 projects, increasing total waste- enforcement are needed, supported by interagency water treatment capacity to 500,000 m3/day by cooperation. Good agricultural practices that have Wate r Pollution: The Hidde n Thre at to De v e lopme nt and G r owth 53 already been developed need to be scaled up. With pollution, and higher incomes. International expe- the right packages and their dissemination, cor- rience, for example, in China (see box 4.4), shows rection in fertilizer and pesticide use could pro- the value of these approaches. duce win–win results—greater efficiency, reduced BOX 4.4:  China acts to reduce agricultural pollution In China’s major river basins, nonpoint source pol- Agriculture announced that it would encourage farmers lution is estimated to account for over 70 percent to use fertilizers more precisely, which typically require of total pollutant loads, with 50 percent of the total smaller applications, and set a target to effectively cap arising from agricultural pollution alone, especially national fertilizer and pesticide use by 2020. pesticides and fertilizers. During 1991–2008, use The Water Pollution Prevention and Control Action of synthetic nitrogen fertilizers increased by over Plan—a landmark State Council directive formulated 50 percent and pesticide use by 120 percent. Much with input from 12 ministries—singled out pesticide of this rapid growth was due to a combination of production and nitrogen fertilizers for more stringent subsidies and policies encouraging farmers to boost enforcement and technological improvements to reduce yields, which had the unwanted effect of dramatically pollutant emissions. The plan also included other steps increasing organic pollution. related to agricultural pollution, including the reloca- The Chinese government has addressed these issues tion of livestock industries outside urban source water in recent regulatory reforms. In 2015, the Ministry of regions. Sources: Xu 2015; Guowuyuan 2015. 4.3.3  Learning from other countries wider range of ecological water requirements and could Vietnam may be able to learn from innovative approaches be used to monitor whether water quality and other to water pollution control in countries that face the same environmental water requirements are being met. pollution challenges. These approaches cover monitor- Strengthening local accountability for pollution ing and accountability, financing and incentives, and control. At present, PPCs and lower-level councils are financial mechanisms to support natural capital invest- responsible for regulating pollution and administering ments and reduce nonpoint source pollution. sanctions, but the responsibility is spread among sev- eral agencies, including the Department of Agriculture Innovative approaches to monitoring and and Rural Development and the Department of Natural accountability Resources and Environment. One possibility would be Developing a water health index. A target such as a water to strengthen local accountability by designating one health index measuring the quality of water in specific office as responsible for regulation and for ensuring spe- water bodies would allow easy monitoring of levels and cific outcomes against targets. Box 4.5 describes how changes in water quality. It could also incorporate the local “river chiefs” are accountable in China in this way. BOX 4.5:  China’s experiment with making local river chiefs accountable for pollution control In December 2016, the government created a new sys- level are also responsible for dealing with interjurisdic- tem of river chiefs (hezhang) for the country’s water- tional issues. ways. A revision of the 2008 Water Pollution Prevention The river and lake chief system effectively makes and Control Law, scheduled to take effect in 2018, codi- the leaders of each province, city, county, and town- fies the responsibility of river chiefs to supervise water ship responsible for core water management functions, quality, enforce pollution regulations, and oversee eco- supported by a dedicated office at the county level and logical restoration efforts. above. This system names a single person—typically a senior The creation of these positions reflects the fact that official at the local, county, or provincial level—to be these policy priorities have often been hindered by inter- responsible for each stretch or section of every major jurisdictional and intergovernmental coordination prob- lake and waterway. These officials are responsible for lems. The river and lake chiefs are expected to ensure meeting environmental protection and water-quality tar- that officials of various departments under their control gets in their jurisdictions. River chiefs at the provincial work together to achieve key water policy objectives. Source: China Water Risk 2017; Xu 2017. 54 GO V ER N A N CE F O R WATER S ECU RIT Y Allowing civil society to litigate. At present, all the enforcement. As in the US model, specific provisions burden of regulation and enforcement falls on the allowing for such civil society suits could be included Vietnamese government. The experience of the United in legislation to encourage appropriate entities to States and of China (see box 4.6) indicates that giv- enforce water pollution regulations. However, this ing civil society and even individual citizens standing approach can only be a complement to regulatory to sue can be important for promoting environmental approaches.2 BOX 4.6:  Examples of civil suits for water pollution in China In China, civil society action has helped enforce water lawsuits to prevent water pollution, as the case was pollution regulations. In 2014, for example, the courts in brought by a nongovernmental organization formed Taizhou—one of the first cities to establish a dedicated explicitly to bring it to trial. environmental court—ordered six local enterprises to The same year, PetroChina—a large state enter- pay some US$26 million in damages because of their prise—was ordered by a court to pay the inland city of illegal discharge of acid into the city’s waterways. This Lanzhou about CNY 100 million in damages as a result award, one of the largest ever issued against a Chinese of a benzene spill, which interrupted water supplies to company, was widely viewed as a landmark for citizen the city’s residents. Source: Stern 2014; Wilson 2015; Zhang 2014, 2017. Innovative approaches to finance and incentives US$300 million (see table 4.2). Trading pollution- discharge permits has been practiced in China since Piloting markets in trading pollution discharge the mid-2000s (see box 4.7) and is now regulated. permits. International experience in trading per- However, transaction costs for many water quality mits is promising in many cases, although transac- trading programs remain high, and administrative tion costs are high. In the United States, localized and regulatory capacity is needed to ensure func- water quality trading programs have achieved tioning markets. Considerable investments would reductions in pollutant loads at lower cost than be needed in capacity if Vietnam were to set up a command-and-control approaches. In Long Island water quality trading platform. Ideally, this would Sound, for example, a water-quality trading pro- start with multiple pilot programs that can offer gram achieved a 65 percent reduction in nitrogen lessons for full-scale trading platforms, as needed. loading from 79 sewage treatment plants, saving TABLE 4.2:  Examples of water-quality market initiatives, outcomes, and status Example Outcome Issues Long Island Sound, Achieved 65 percent reduction in nitrogen loading from 79 sewer Transaction costs are high. United States treatment plants between 2002 and 2014. Saved US$300 million. Lake Taupo, New Zealand Achieved 16 percent nitrogen reduction goal from farmers as of 2012 Transaction costs are high. from 32 trades. Farmers became increasingly supportive of manage- ment interventions. Hunter River, Australia Reduced salinity pollution from farms well below target of 900 micro- Occasional overshooting of salinity targets have seimens per centimeter. occurred; however, these are largely attributed to natural or diffuse sources. South Nation, Canada Phosphorus reduction targets are being achieved. While water quality Ongoing monitoring and assessment is needed to trends show a reduction of instream phosphorus, it is not possible to verify phosphorus reductions. attribute this solely to the Total Phosphorus Management program. BOX 4.7:  Trading pollution-discharge permits in China China has experimented with water-quality trading, which pollution-discharge permits. According to implemen- promises to achieve pollution control limits at lower com- tation guidance issued by the State Council in 2000, pliance costs in much the same way as water rights trading China’s Water Pollution Prevention and Control Law attempts to achieve water consumption limits, namely by requires all entities discharging certain categories of establishing a cap and allocating rights under it. pollutants into waterways, including total phosphorous For several decades, a major element of China’s and organic nitrogen, to obtain a permit from local envi- water quality control regime has been the issuance of ronmental protection authorities. (Box continues next page) Wate r Pollution: The Hidde n Thre at to De v e lopme nt and G r owth 55 BOX 4.7:  (Continued) Because total pollutant loads are capped in any given Implementation Scheme for Pollutant Emission Permit jurisdiction and waterway, a market for buying and sell- Control, which explicitly allows the creation of markets ing pollutant permits has existed for some time. Trading in tradable pollutant emissions permits. pollutant permits has been allowed in China since the As of 2013, total covered allowances in water late 1980s, and a pilot program was initiated in the Tai quality markets were 175,600 tons of chemical oxy- Lake Basin in the mid-2000s. Growing enthusiasm for gen demand (of which 15,000 tons were via trades), market-oriented policy tools has led to the promulgation 10,000 tons of total phosphorous (of which 1 ton was of new regulations intended to provide a stronger basis via trade), and 160,000 tons in ammonia nitrogen (of for compensated transfers of pollutants. which 200 tons were via trades). Relative to the scale Most notably, in 2014, the State Council issued its of such pollution nationwide, however, these trading Guiding Opinions on Further Piloting the Paid Use of volumes are small. Trading Emission Permits, followed in 2016 by the Source: DRCSC 2017a. Controlling nonpoint source pollution through pollution cap can be achieved more cheaply and effi- water quality trading. In several countries, including ciently by allowing point source polluters to buy and New Zealand and the United States (see box 4.8), sell water quality credits from nonpoint source pol- water quality trading has demonstrated some suc- luters, who may be able to reduce pollution more cess in reducing nonpoint source pollution while cheaply, for example, by changing farming prac- lowering compliance costs. The logic of using water tices. Alternatively, nonpoint source polluters can quality trading is that it establishes a cap on pollut- take measures, such as stream bank restoration, that ants from both point and nonpoint sources within reduce runoff from fields or into waterways, thereby a given region. Because it is often easier to reduce creating water quality credits that can likewise be point source pollutants, compliance with an overall bought or sold. BOX 4.8:  Nonpoint source pollution control through water quality trading in New Zealand New Zealand’s Lake Taupo water quality trading water quality credits directly from farmers. Since 2009 program, launched in 2011, set up the Lake Taupo when the Trust operated to June 2014, 37 trades had Preservation Trust as the party responsible for reduc- occurred involving some 147 tons of NDAs (Nitrogen ing nitrogen emissions below a cap. This could be done Discharge Allowances) purchased. The total land area either by buying farmland and converting it to forest to converted from pastoral land into forestry (less Nitrogen reduce nitrogen runoff into the lake or by purchasing used) increased rapidly to 7,000 ha in 2013. Source: DRCSC 2017a; Sandra Barns and Justine Young, 2012. Designating water pollution control as a priority for the World Bank-financed Da Nang Sustainable City PPP investment. Domestic wastewater collection and Development Project. However, China, for example, treatment is still mainly funded through the GoV has sought extensive private investment in pollution budget and ODA loans. Private investment in this sub- control (see box 4.9). sector is limited to date. One example of PPP is under BOX 4.9:  Water pollution control is a priority for public–private partnership investment in China In September 2016, the National Development and and urban–rural development, environmental protec- Reform Commission issued a list of 17 water qual- tion, and agriculture designating water pollution control ity enhancement projects worth CNY 20 billion. The as a priority area for public–private partnerships and emphasis on pollution control has been strengthened by proposing measures to accelerate private investment. a July 2017 joint directive from the ministries of housing Source: China Public Private Partnerships Center 2017. 56 GO V ER N A N CE F O R WATER S ECU RIT Y Targeting incentives at specific pollution reduction some estimates suggest that it accounts for 68–83 outcomes. Water pollution targets need not be the percent of total pollutant loads. Yet nonpoint source same everywhere but should be set on a zone basis. pollution is notoriously hard to control by regulatory Targets should specify total pollutant loads for differ- mechanisms alone. Some countries have experience ent waterways or water bodies, depending on whether with innovative financing mechanisms to reduce non- they are zoned for source water protection, environ- point source pollution, particularly market-oriented mental protection, industrial use, or other water uses. approaches facilitating payments between ecosys- Targets should be matched by investment in sewage tem service providers and beneficiaries, which can and effluent treatment, strict control of pollution- work especially well when the links are clear. Market discharge permits, and the imposition of differenti- approaches include water quality trading, which can ated fees depending on pollutant type. In principle, achieve higher quality standards and reduce the cost wastewater-discharge permits and treatment fees of compliance (discussed above), as well as payment should be set at the level needed to support capital for ecosystem services approaches; water funds to help costs and O&M costs of wastewater collection and finance natural capital alternatives to conventional reuse. Preferential pricing could be introduced for water treatment technologies; environmental quality users accepting treated wastewater.3 contracts, which help enterprises and local govern- ments meet water quality targets; and revolving funds. Innovative financial mechanisms to support natu- Payment for ecosystem services. Payment for eco- ral capital investments and reduce nonpoint source system services can align incentives in natural resource pollution management. The approach has already been tried in Nonpoint source pollution remains a major problem Vietnam (see box 4.10), and it could be applied to other in many countries. In the United States, for example, cases in the water sector where there are externalities. BOX 4.10:  Payment for ecosystem services in Vietnam Payment for ecosystem services occurs when a benefi- hydropower operators, and the tourism industry pay ciary or user of an ecosystem service makes a direct or farmers and households for conserving and managing indirect payment to the provider of that service. A typi- forests upstream. cal application in the water sector is when a downstream Overall, results have been mixed (UNEP 2015). user of water pays upstream communities to manage the While successful in providing a source of revenue for watershed and control pollution, to reduce siltation and the state for forest protection, challenges include high maintain water quality. transaction costs, distribution of funds, and legal status Vietnam was the first country in Southeast Asia to of communities involved in the scheme (To and others introduce a national payment for ecosystem services 2012; Suhardiman and others 2013; de Silva 2014). law (2008), targeting forest protection. Water utilities, Source: UNEP 2018; 2030 WRG 2017. Water funds. A water fund provides a vehicle to quality and other ecosystem services. Box 4.11 illus- finance investments in environmentally sensitive areas trates an example from the United States, and box so as to change farming practices in water source 4.12 describes four recent examples from China. regions, or to promote reforestation or other measures Environmental quality contracts. Under this model, that naturally abate nonpoint source pollution. Water major polluting enterprises or local governments funds can be structured around a variety of payment enter into contracts with third-party environmental mechanisms, including fees or contributions paid by management companies that ensure compliance with downstream water users who benefit from improved water quality standards. Experience so far has been water quality. By putting the financial burden on bene- largely with point source pollution, but the model ficiaries of the desired ecosystem services, water funds could be expanded to nonpoint sources. The approach can create a win–win situation for all investors. These has been used in China and was officially endorsed schemes need to be supported by strong evidence- in a 2015 State Council directive encouraging “third- based research on how changes in land use and other party environmental governance.” Management con- interventions directly contribute to improving water tracts to ensure river basin environmental quality are Wate r Pollution: The Hidde n Thre at to De v e lopme nt and G r owth 57 offered by several Chinese firms, with options to help mechanisms improve compliance with water quality enterprises comply with standards, including natural standards while reducing the regulatory burdens for capital investments, land management, and agricul- enterprises. The model needs to be paired with strong tural pesticide and nutrient control. These contract oversight and monitoring (Xia 2016). BOX 4.11:  An example of a water fund in the United States Effluent from wastewater treatment plants in the upgrading of onsite septic systems and the planting of Chesapeake Bay catchment in Maryland is one of the cover crops to further reduce nitrogen loading into the bay. top contributors of nutrient loads in the bay. To support The fund is financed through fees collected from each improvements to water quality, the Bay Restoration Fund domestic, commercial, and industrial user of the wastewa- was established in 2004. The fund finances upgrades to ter treatment plants and septic systems in the watershed. wastewater treatment plants so that they can improve the These funds are also used to back the issuance of bonds quality of wastewater effluent. This program also supports to generate financial resources to invest in these upgrades. Source: Maryland Department of the Environment. BOX 4.12:  Use of water fund approaches to improve water quality in China Water Fund for Longwu Reservoir. Longwu Reservoir siltation by offering a subsidy to farmers to switch from (Hangzhou, Zhejiang Province) is used primarily to supply water-intensive rice cultivation to corn. These subsidies are domestic water to the villages of Qingshan and Cibi. The funded by Beijing urban residents. bamboo industry covers some 60 percent of the total catch- Payment for environmental services Laishihai Nature ment. Fertilizers and herbicides used in bamboo production Reserve and Lijiang Old City. This pilot program are major contributors to nutrient pollution in the reser- charges fees to tourists for visiting Lijiang Old City and voir. In 2015, with the support of the Nature Conservancy, the Laishihai Nature Reserve to be used to compensate a water fund was established allowing local government, upper watershed farmers adjacent to Laishi Lake for farmers, nongovernmental organizations, and a trust com- changing their land use practices. The Laishi Lake is a pany to collaborate on environmental management of pol- key part of the Lijiang Basin from which various rivers lution around the reservoir. flow through and around Lijiang Old City. Beijing’s Paddy Land–to–Dry Land program. Miyun Beijing watershed management. Under a five-year agree- Reservoir is the main surface water source for Beijing. Over ment between Beijing and the city of Chengde, Hebei Province, the years, nonpoint source pollution from agriculture in the signed in 2005, the two cities agreed that Beijing would pay catchment has degraded water quality. The program aims Chengde CNY 20 million per year to abate soil erosion in to reduce agricultural nutrient and chemical runoff and upstream watersheds. The agreement was extended in 2011. Sources: Bennett 2009; World Bank 2017p. Revolving funds. Financing of water quality improve- Protection Agency Clean Water State Revolving Fund ments can also be directly addressed through a offers a model that Vietnam could experiment with dedicated revolving fund. The US Environmental (see box 4.13). BOX 4.13:  US Environmental Protection Agency Clean Water State Revolving Fund (CWSRF) This federal fund was established in 1987 to provide The program functions like an infrastructure bank by financial assistance to a wide range of water infrastruc- providing low-interest loans. As money is paid back into ture projects. Loans are provided to eligible recipients to the state’s revolving loan fund, the state makes new loans construct municipal wastewater facilities, control non- to other recipients for high-priority water quality activities. point sources of pollution, build decentralized wastewa- Under the federal fund, states may also purchase or ter treatment systems, create green infrastructure projects, refinance debt, provide guarantees and insurance, and protect estuaries, and fund water quality projects. The provide additional subsidies. For example, a Green Environmental Protection Agency provides grants to all Project Reserve targets critical green infrastructure, 50 states to capitalize a state fund, with states contribut- water and energy efficiency improvements, and other ing an additional 20 percent to match the federal grants. environmentally innovative activities. (Box continues next page) 58 GO V ER N A N CE F O R WATER S ECU RIT Y BOX 4.13:  (Continued) Since 1988, US$ 126 billion have been cumulatively US$ 7.4 billion in funding. The weighted average inter- used for more than 38,441 assistance agreements, est rate for CWSRF loans is below the market interest which cover a wide range of water quality infrastruc- rate and dropped to 1.4% in 2017 – a historic low. ture projects. In 2017, the CWSRF has provided over Source: US EPA 2018. Notes financial penalties. Judges have been found to be uninformed about environmental issues, which 1. As established in Decree 154/2016/ND-CP com- is why some countries have set up environmen- prise of a fixed amount of Dong 1.5 million and tal courts. a floating amount. The floating amount applies 3. Some cities in China have introduced preferen- when discharge is above 20 cubic meter/day. It is tial pricing for reclaimed water to encourage estimated based on concentration levels for six its use. As of 2010, 37 cities and counties in 18 major pollutants. provinces had introduced a preferential price for 2. There are free rider problems that deter litigants reclaimed water (Moore 2015). from bringing lawsuits. A loss may imply heavy 5 Improving Management of Rising Risks Risks are high and rising from climate change and natural disasters and from vulnerable infrastructure • Risks from climate change and natural disasters are high and costly, revealing an infrastructure deficit and low resilience. • Risks from vulnerable water infrastructure (dams, irrigation structures as well as dykes for river and sea, rail- road, road etc.) are also high. The seasonal discharge patterns of Vietnam’s transboundary rivers have both upsides and downsides. Institutional responses to rising water-related risks are struggling • If nothing is done, socioeconomic losses due to water-related natural disasters—currently 1.5 percent of GDP—are predicted to rise to 3 percent by 2050 and to 7 percent by 2100, which would be among the highest in the world. • However, institutional problems, including gaps, overlaps, weak capacity, and low resources, hamper risk management. Vietnam needs to continue investing in risk reduction, preparedness, and long-term resilience • A phased approach that includes structural and nonstructural measures across key sectors is the way to address urgent needs for managing risks and longer-term needs for building resilience. • Improved financial planning will also be critical to establishing a robust system for disaster preparedness and response. Water-related risks need to be tackled in a basin-wide planning framework • Managing risk is a key function of water resources management and is best coordinated with other natural disaster risk management functions at the basin level, including for transboundary water. • Integrating the management of dams, reservoirs, and flows at the basin level could reduce risks and increase value from water; basin planning could also contribute to long-term solutions for dam safety. 5.1  Risks from climate change, natural of the most hazard-prone countries in the East Asia disasters, and water infrastructure are and Pacific region (see chapter 1). The country is high and rising regularly subjected to typhoons, floods, drought, and landslides, and its 3,260 kilometer (km) coastline is 5.1.1  Risks from climate change and natural eroding. A recent climate risk index placed Vietnam disasters are high and costly in the top 10 countries most affected by extreme Disaster risk management and climate resilience are weather events over the past 20 years (Kreft, Eckstein, core development issues for Vietnam. Vietnam is one and Melchior, 2016). More than 70 percent of the 59 60 GO V ER N A N CE F O R WATER S ECU RIT Y population and their livelihoods are exposed to risk in assets are at risk, yet only about 5 percent of assets from natural hazards. With climate change, the fre- in the country are insured (World Bank 2017h). Based quency and intensity of such events are expected to on a computable general equilibrium model, it was increase further. Climate change adaptation is crucial found that the likely increased incidence of damaging to prevent the impact from potentially more frequent floods in the Red River basin alone could lower GDP and more severe natural disasters. A World Bank study by 0.34 percent from the baseline (see box 5.1; World of 84 coastal countries ranked Vietnam in the top tier Bank 2018g). of countries most at risk of sea-level rise for impacts Recent events have revealed an infrastructure def- on population, GDP, urban extent, and wetland area icit and little resilience. These levels of damage and (World Bank, 2007). cost indicate a critical infrastructure challenge from Extreme weather events and disasters have high the increased variability in the water cycle that most socioeconomic impacts, which translate into substan- of the country’s infrastructure is not equipped to han- tial costs to the country, estimated at 1.5 per-cent of dle. Inadequate and deteriorating infrastructure has GDP a year, excluding costs due to business interrup- increased risks from both floods and droughts, reduc- tions (World Bank, 2013c). The recent post-disaster ing capacity to deal with variability in rainfall and rapid assessment in Khanh Hoa Province estimated river flows. Floods, typhoons, and droughts have hurt that the impact of Typhoon Damrey would reduce people’s livelihoods and assets, making it difficult for GDP growth in 2018 by 0.9 percent. A 2017 risk affected households to bounce back and recover, par- assessment carried out by the government with World ticularly poorer households, which are the least resil- Bank technical support estimated that US$1.3 trillion ient (World Bank 2017h). BOX 5.1:  Impact on GDP of increased flooding of the Red River Flood events are expected to increase in the Red River to each inundated cell depending on the land use type Basin due to climate change. To understand the addi- (see table 1). These are then translated to changes in tional impact from intense future floods (once in 100- infrastructure depreciation rates, which are used in year floods) compared with the present impact, two the economic modeling. scenarios were developed: TABLE 1:  Total area of flood damages, by land use, for 1. Baseline flood: identical to the historic flood baseline and climate change–induced floods (%) of 1971 but with the current flood protection Baseline flood Climate change–induced flood in place, which was designed to withstand the Land use National Red River only National Red River only 1971 flood. 2. Climate change–induced flood: future flood event Agriculture 1.3 10.5 1.8 14.5 derived from the Representative Concentration Hotels 0.4 2.6 1.5 10.6 Path run from the Geographical Fluid Dynamics Residential 0.1 2.3 1.2 24.2 Laboratory Global Climate Model Version 3 0.1 1.5 0.3 3.4 Industry (GFDL-CM3) that was downscaled to a daily Commerce 0.1 0.4 0.8 4.6 flow time series using the same 1971 flood, mak- Education 0.0 0.0 1.6 11.8 ing both scenarios comparable. The modeling attempts to capture both the direct The biophysical effects were analyzed with a effects on the flooded areas and indirect effects on the Hydrologic Engineering Center–River Analysis rest of the economy. The direct effects include disrup- System (HEC-RAS) flood model (from the US Army tion and destruction of public infrastructure and pri- Corps of Engineers). River runoff from the Climate vate industrial capital, reduced production, and to Runoff (CLIRUN) rainfall-runoff model is used as destruction of residential housing. Indirect conse- input to the HEC-RAS model. The maximum inun- quences arise because activities in affected and unaf- dated area under each climate scenario (baseline and fected areas are connected through their supply climate change–induced) is overlaid on land use layers chains. Industries in non-flooded areas might lose to determine inundated area (and depth), distinguish- production if they cannot source inputs from flooded ing between industrial, commercial, and residential areas, and they can lose demand if they have areas and roads. Depth damage functions are applied (Box continues next page) Improv ing Manage me nt of Rising R isk s 61 BOX 5.1:  (Continued) industrial and final customers in the flooded areas. capital will need to be higher than normal, and if the Activities in unaffected areas can also be affected resources for such investment are constrained, recon- directly if, for example, their transport routes have struction can divert investment from other sectors, been destroyed in the flooding. affecting their growth and that of the economy. The short-term costs depend on the extent and The impacts on GDP from climate change–induced duration of flooding. However, the costs of recovery flooding by 2035 by sector are shown in table 2. Overall, after the flooding might have longer-term repercus- the increased flooding reduces GDP by 0.34 percent sions. Investment in the affected infrastructure and compared with baseline flooding. TABLE 2:  Impacts on GDP from climate change–induced flooding, 2035 (%) Scenario Full scenario Capital loss Land loss Transport productivity Housing reconstruction Construction boom Agriculture −0.64 −0.18 −0.25 −0.04 −0.28 0.05 Industry −0.23 −0.08 −0.02 −0.03 −0.17 0.03 Services −0.37 −0.13 −0.06 −0.05 −0.23 0.04 GDP −0.34 −0.12 −0.07 −0.04 −0.21 0.04 Source: World Bank 2018g. 5.1.2  Risks from vulnerable water capacity problems mean that dam safety and O&M infrastructure are high are often neglected. The technical risks are largely in Until recent years, Vietnam’s investment in water small hydropower facilities and in the 1,500 small and infrastructure—dams, irrigation structures and inland medium-size irrigation dams that are in urgent need waterway transport—was effective for ensuring water of rehabilitation or upgrading (see section 2.2.1 in security and meeting historical demands. Today, how- chapter 2). The large hydropower dams are reported ever, infrastructure is subject to growing stresses. as comparatively safe (Tu, 2015). Many of the small and medium-size reservoirs built Public awareness of the risks and costs is high. The in the 1960s–1980s were constructed with little prior loud public outcry over recurrent flooding and dam technical investigation, inadequate design, and poor failure has been echoed by the media and has led to quality, problems that have been compounded by civil society campaigns, which have raised awareness neglect of operations and maintenance (O&M). Many of this problem in all spheres of government (World dams have degraded, with structural and nonstruc- Bank 2015a). tural safety often falling below acceptable interna- Dam operations have not been coordinated at the tional standards. These dams now pose a substantial basin level, posing a risk of loss of value and height- risk to human safety and economic security. The ened flood risk. The impacts associated with natural dams’ deterioration is exacerbating uncoordinated flooding have been exacerbated by dam operations. operational procedures. Coupled with increased risks Where there are cascades of dams in individual river and uncertainties arising from hydro-logical variabil- basins, cooperation in their operation has remained ity due to climate change and rapid upstream develop- a big challenge. There is limited capacity for timely ment, this deterioration has placed many reservoirs at monitoring and forecasting of high flows, particularly risk (World Bank 2015a). in the narrow and steep topography of the Central Multiple costly dam failures have exposed high Highlands. To address this issue, MONRE has advised risks of dam safety. Dam failures have caused consid- the government to issue 11 inter-reservoir opera- erable loss of life and have incurred high economic tion procedures in the basin rivers of Hong, Ma, Ca, costs (see section 1.2.2 in chapter 1). Although a sound Huong, Ba, Tra Khu, Kon-Ha Thanh, Srepok, Sesan, legal and regulatory framework is in place, budget and Vu Gia- Thu Bon and Dong Nai (see Annex B). These regulations are regularly reviewed and revised to suit 62 GO V ER N A N CE F O R WATER S ECU RIT Y practical conditions. However, as inter-reservoir oper- levels. Legal and illegal sand mining pose additional ation involves numerous agencies and localities, close challenges to maintaining siltation levels and river cooperation is a key to effective enforcement of these beds (MOT, 2019). Reliable logistic networks and regulations. competitive transport options are required to allow The development of civil works, infrastructure and for further market development. The uncertainty transportation facilities does not always comply with of siltation levels of waterways also limits invest- the requirements on natural disaster prevention and ments in larger vessels by companies, thus forgoing control (as specified in Article 19 of the Law on Natural the opportunity to increase the economical ship size Disaster Control and Prevention). This increases the and so make IWT more cost-efficient. Currently, the risks caused by floods. The construction of houses and road sector is the main recipient of public spending other constructions along the river bank and coast allocated to transport – 80% of budgets are devoted has increased in both quantity and scale. This leads to expanding and maintaining the road network. to the destabilizing of the river bank and coast which (World Bank, 2013b). causes landslides, especially in the Mekong river delta. Further, facilities for road and waterway transporta- 5.2  Institutional responses to rising water- tion, as well as tourism infrastructure and resorts, related risks are constrained and river dykes have been constructed along the river 5.2.1  Institutional problems hamper risk banks and coasts, but these often do not comply with management the Master Plan. All this has an impact on the river Fragmented sectoral approaches and institutional and coastal flows, increasing the risk of river bank and arrangements—gaps, overlaps, weak capacity, and coastal landslides. low resources—are curtailing Vietnam’s ability to Inland waterway transport (IWT) accounts for manage risks. Despite considerable investment in shipping approximately 48% of the domestic trans- disaster risk management, there are gaps in the port tonnage in Vietnam, yet insufficient invest- capacity of government and communities to manage ments are posing challenges to future transport. risks and impacts. These gaps include institutional Vietnam’s high economic growth over the past fragmentation and lack of coordination; underpow- twenty years is closely linked to transport demand. ered agencies, with fragmented approaches; and As Vietnam targets further ambitious economic weak integration of resilience needs in socioeco- growth rates, it faces challenges in increasing the nomic development planning (World Bank 2017h). efficiency and reliability of multi-modal transpor- For example, the management and licensing of tation, storage, handling and value-added services sand mining in and close to a river involves various to remain competitive. Further, in Vietnam’s effort authorities, leading to overlapping and inconsist- to reduce carbon emission, rail and barge transport ent functions. Further, a better understanding needs produce less. carbon dioxide (CO2) emissions per to be gained on the actual capacity and financial ton-kilometer (ton-km) than road transport. On resources at province, district and commune level to average barge transport is 3.5-4 times more fuel prevent, alert and respond to natural disasters, such efficient than truck transport. Yet IWT faces signifi- as floods and droughts. cant underinvestment in terms of both capital and Despite large investments in better planning, the maintenance expenditures to expand, improve and government still faces funding gaps after disasters. The preserve Vietnam’s waterborne transport networks. country’s current financing capacity meets only about The Vietnam Inland Waterways Administration, 21 percent of the estimated need just for emergency Ministry of Transport, estimated that approxi- reconstruction and recovery. Vietnam could see losses mately US$2,000 per kilometer of fairway would be of over 4 percent of GDP after a major disaster. In required to allow for proper maintenance especially the next 50 years, Vietnam has a 40 percent chance for dredging and river bank protection (World Bank, of experiencing an event affecting more than 39 mil- 2013). However, only approximately US$ 1,000 lion people, with economic losses exceeding US$6.7 per kilometer is allocated from the central budget, billion. which is only 50% of the operation and mainte- Funding from the state budget is insufficient to nance requirement. In addition, there is a lack of up- manage areas prone to dangerous and very dangerous to-date navigational charts, which define siltation Improv ing Manage me nt of Rising R isk s 63 river bank and coastal landslides and erosion. The pol- 5.2.2  Socioeconomic losses will rise sharply if icy on supporting the resettlement of people affected nothing is done by erosion can be further improved to reduce delays in Current economic losses of 1.5 percent a year are pre- project implementations. Some projects could not be dicted to rise sharply. Losses due to water-related nat- implemented because of resettlement issues and had ural disasters averaged 1–1.5 percent of GDP over the to be re-approved, which caused delays in construc- last two decades and are predicted to rise to 3 percent tion and implementation, affecting overall investment by 2050 and to as much as 7 percent by 2100—among efficiency. the highest in the world. Currently, there is no national program on river Agricultural losses due to a complex of climate- bank protection and coastal erosion prevention. related and anthropogenic effects could be massive. In Further, river training, coastal erosion prevention and predominantly agricultural areas, complex effects may natural disaster prevention need to be integrated into combine to greatly reduce output, including a combi- Sectoral Development Plans and the Socio-Economic nation of sea-level rise and land subsidence driven by Development Plan. groundwater over abstraction (see box 5.2). BOX 5.2:  Declining paddy yields and economic growth as a result of sea-level rise and land subsidence driven by groundwater over abstraction Paddy production in Vietnam’s key production areas— Three sea-level rise scenarios (low, median, and high) the Mekong and Red River Deltas—is expected to be were analyzed. When only the impact of sea-level rise in hit by climate change-induced sea-level rise, and by the Red River and Mekong Deltas is considered, 0.5 per- land subsidence caused by groundwater over abstrac- cent of Vietnam’s rice production is predicted to be lost tion. Land subsidence in the Mekong Delta—assuming in the low scenario, 0.8 percent in the median scenario, current rates of groundwater over-abstraction—is and 1.1 percent in the high scenario. expected to be 0.24–0.9 meters by 2035 (World Bank, When the impact of land subsidence due to ground- 2018g). water over abstraction in the Mekong Delta is also A computable general equilibrium model was used to included, the lost rice production increases in all scenar- understand the impacts of sea-level rise alone in the Red ios by a staggering 900 percent. Thus, the lost rice pro- River and Mekong Deltas and of sea-level rise with land duction in the Red River and Mekong Deltas is expected subsidence in the Mekong Delta (World Bank, 2018g). to amount to between 5.15 percent and 11.01 percent Projections for sea-level rise and inundation predictions of Vietnam’s rice production, depending on the scenario are based on MoNRE’s estimates (MoNRE 2016). (see table 1). TABLE 1:  Impacts of sea-level rise and land subsidence driven by groundwater over abstraction on rice production by 2035 compared with 2012 (tons per year) Sea-level rise only scenarios Sea-level rise with subsidence scenarios Area High (95th Low (5th percentile) Median Low (5th percentile) Median High (95th percentile) percentile) Red River Delta 63,837 102,138 140,440 63,837 102,138 140,440 Mekong Delta 151,950 243,119 334,289 2,181,561 2,813,440 4,660,238 Total 215,786 345,258 474,729 2,245,397 2,915,579 4,800,678 Percent of Vietnam’s total rice 0.49 0.79 1.09 5.15 6.69 11.01 production Source: World Bank 2018g. Note: The impact of land subsidence is analyzed for the Mekong Delta only because data are lacking for the Red River Delta. The values in the table show the deviation from the reference path, that is, without sea-level rise and land subsidence. The sea-level rise scenario on its own does not have a –0.61 percent, depending on the sea-level rise scenario. major impact on GDP, with values ranging from –0.03 Across all scenarios, all major sectors decline relative percent to –0.06 percent in 2035. However, the GDP to the reference path without sea-level rise and land impact is 10 times larger when sea-level rise and land subsidence, with agriculture most affected and industry subsidence are considered jointly. In this case, the least (see table 2). reduction in GDP in 2035 ranges from –0.28 percent to (Box continues next page) 64 GO V ER N A N CE F O R WATER S ECU RIT Y BOX 5.2:  (Continued) These findings are of high policy relevance. Because subsidence driven by groundwater overabstraction— sea-level rise is essentially outside Vietnam’s control, this can be reduced through changes in water governance driver can be considered inevitable. However, the driver and enforcement. with far greater impacts than sea-level rise alone—land TABLE 2:  Impact on GDP of sea-level rise and sea-level rise in combination with land subsidence in 2035 (%) Sea-level rise only scenarios Sea-level rise with subsidence scenarios Low High Low High Sector Median Median [5th percentile?] [95th percentile?] [5th percentile?] [95th percentile?] Agriculture −0.12 −0.19 −0.26 −1.28 −1.67 −2.83 Industry 0.00 −0.01 −0.01 −0.05 −0.06 −0.11 Services −0.02 −0.03 −0.05 −0.22 −0.29 −0.50 Total −0.03 −0.04 −0.06 −0.28 −0.36 −0.61 Source: Adapted from World Bank 2018g. Note: The impact of land subsidence is analyzed for the Mekong Delta only because data are lacking for the Red River Delta. The values in the table show the deviation from the reference path, that is, without additional sea-level rise and land subsidence from the baseline, 2012. These are conservative estimates. For example, land impact on paddy yields was assessed; it is likely that subsidence due to over abstraction of groundwater may other crops will also be negatively affected. However, in also be a challenge in the Red River Delta. But as no some areas, farmers might switch to aquaculture, which solid evidence on the rate of land subsidence was found, could have a positive effect on their household income. this was not included in the analysis. Further, only the 5.2.3  Hydrological challenges are regional Vietnam will have major consequences on the down- The highly seasonal discharge patterns of Vietnam’s stream reaches within the country. Taken together, transboundary rivers create benefits and risks. The climate change and upstream development will regional hydrological challenges are best illustrated affect the quantity and quality of water and sedi- for the Mekong River. The Mekong and many of its ment flowing to Vietnam, altering the flow regime, tributaries have highly seasonal discharge patterns, triggering salinity intrusion, and threatening cur- creating rich wetlands and estuaries, supporting bio- rent agriculture production and economic activities diversity and abundant capture fisheries, and enrich- (World Bank 2013).1 ing the soil for rice and other crop cultivation with silt. However, floods and droughts are also threats 5.3  Current institutions for managing risk to livelihoods, particularly in poor rural communi- need to be strengthened ties. The Mekong Delta—Vietnam’s rice bowl— is 5.3.1  An integrated response is needed for expected to receive less rainfall during the dry season disaster risk management and climate change and receive more rainfall in rainy seasons. Overall, adaptation total annual rainfall is set to increase 0.3% in 2020 Much has already been done, but a more holistic and 0.7-0.8% in 2050 compared to the period 1980- approach is required that would institutionalize plan- 1990 (MoNRE, 2010). ning for resilience and address specific vulnerabilities The risks have been exacerbated by develop- and their causes. A recent report found that, although ment. Additional challenges are emerging, including Vietnam has invested considerably in disaster risk man- upstream development, which will affect water and agement and climate change adaptation, the country sediment flow patterns, and climate change, which needs an integrated approach that not only addresses is projected to increase the frequency of extreme crises but also institutionalizes mechanisms to pro- weather events, change temperature patterns, and mote longer-term resilience and address the country’s result in less predictable weather patterns. In the vulnerabilities to drought and floods and other hydro- Mekong, for example, the impact of these changes meteorological hazards (World Bank 2017h). in the 90 percent of the catchment that lies outside Improv ing Manage me nt of Rising R isk s 65 An integrated approach has certain implications has been developed to identify other basins where for water management in basin planning. Disaster the approach could have substantial impacts. The risk is a function of exposed assets and livelihoods approach has shown effectiveness and should be and their vulnerability to hazard events. This risk scaled up. (World Bank 2015a). can be managed instead of being treated as a shock Dam safety is a top priority, and dam operations over which the country has no control. The lesson need to be optimized at the basin scale. Since 2003, is to be prepared. A comprehensive multidimen- the government has implemented a program for sional approach is needed that integrates risk into dam safety that includes structural and nonstruc- policy making and investment planning and sets tural measures. What is important is setting dam risk management within a basin context, combin- operation and safety in a basin context, resolving ing structural measures with nonstructural meas- the technical problems, crafting effective regulation, ures like improved information and early warning. improving data collection platforms and interinsti- In fact, for most basins, new structural measures tutional information management, and coordinat- are only a small part of the response needed (World ing dam and reservoir operations at the basin scale Bank 2017h). (World Bank 2015a). Long-term commitment to integrated water Basin planning could also contribute to long-term resources management and land-use planning within solutions to dam safety. Dam safety has become vul- a basin framework is thus key to building climate resil- nerable because of inadequate regulation and the ience alongside economic growth. The comprehensive underfinancing of O&M, particularly for smaller planning process now beginning for the Mekong Delta irrigation dams and private hydropower dams. is exemplary in this regard, as it incorporates risk The government’s program includes a multiyear management into planning in a basin context from the investment program to improve dam safety, with a outset. This kind of planning, at both basin and local frame-work approach to identify risks and prioritize levels, should help “waterproof” settlements and their actions. However, long-term solutions lie in improv- livelihoods, economies, and infrastructure and thereby ing institutional mechanisms for regulation and reduce the socioeconomic impacts of extreme weather putting in place measures to generate the needed rev- events, rainfall variability, and uncertainty (World enues from users to finance optimal levels of O&M Bank 2017h). (World Bank 2015a). At present, MONRE is devel- oping a national water resources master plan which 5.3.2  Integrating management of dams, includes dam safety. reservoirs, and flows at basin level could reduce risks and increase value from water 5.3.3  Risk management is a key function of A river basin approach to managing dams and reser- water resources management best coordinated voirs can optimize value and ensure downstream pro- at the basin scale, including for transboundary tection. The government has mandated a river basin water management approach to dam operations to optimize value and Multiple risks along a river need to be managed in protect downstream areas from flooding by issuing an integrated way, with institutional mechanisms for inter-reservoir operation procedures. The 2012 Law coordination and implementation across sectors and on Water Resources (see box 6.1 in chapter 6) assigns agencies. The government has attempted integrated responsibility to the Ministry of Natural Resources management in a variety of ways but results have and the Environment for inter-reservoir operations in not met expectations (see chapter 6). MONRE is basins with cascades of dams, including responsibil- attempting to apply an integrated approach in the ity for ensuring environmental flows. Dam safety is Sesan-Srepok River Basin that addresses internal as the responsibility of the operator.2 The objective of well as upstream and downstream transboundary the river basin approach is to achieve efficiency gains risks (see box 5.3). In addition, MONRE is propos- and safety improvements by enhancing inter-sectoral, ing to the Prime Minister to establish river basin inter-provincial, and inter-reservoir operations. The commissions as well as operational protocols for approach has been tested in the Ca, Thu Bon, and the National Water Resource Council chaired by a Vu Gia River Basins, and a multi-criteria framework Deputy Prime Minister. 66 GO V ER N A N CE F O R WATER S ECU RIT Y BOX 5.3:  Attempting risk management across borders in the Sesan-Srepok River Basin The upper Sesan-Srepok River Basin is shared by The Mekong River Commission has identified the fol- Cambodia and Vietnam and is one of the most critical lowing as priority transboundary water resource man- tributary basins of the Mekong River for water flow, agement issues: sediment, and biodiversity. The major water resource- • Monitoring and assessment of flow. related issues in this basin are: • Flood forecasting, flood control, and flood warning • Drought and flood risk management. mechanisms. • Conflicts among water users. • Communication and coordination mechanisms on • Major and small hydropower development, cascade information and data sharing. operations, and impact mitigation. • Mitigation measures to address social and environ- • Benefit sharing among developers and local people. mental impacts. • Water pollution control. • Institutional and technical capacity to improve trans- • Coordination with Cambodia, the downstream boundary coordination and cooperation. riparian, on issues of integrated water resources man- To address these issues, the Ministry of Natural Resources agement, such as release of water from hydropower and the Environment aims to set up a river basin organi- stations, water quality, disaster risk management, zation, establish a water resources monitoring system, and sedimentation. and develop modeling and management tools. Source: World Bank 2013; MRC 2017c. 5.4  Priority actions macroeconomic impacts and can affect development outcomes; provident preparation is the best approach 5.4.1  The government should better integrate (see box 5.4). Given the high risks that Vietnam is fac- responses to climate change and disaster risk ing, it needs to continue investing in risk reduction, management and improve resilience preparedness, and long-term resilience. If it does not, Vietnam needs to continue investing in risk reduc- opportunities for social, economic, and environmental tion, preparedness, and long-term resilience. Global progress will be diminished for years to come (World experience shows that disasters have long-term Bank, 2018j). BOX 5.4:  Global experience and response to disasters worldwide and in Vietnam Disasters have long-term macroeconomic impacts and risk management, committing about US$6 billion each shape development outcomes. Each year, disasters cost year to support resilience (World Bank 2017). The the global economy US$520 billion and push some World Bank also supports countries with a package of 26 million people into poverty. They severely affect wide-ranging technical and financial support, combined a household’s earning potential through impacts on with global project experience, to enhance the capacity human capital (health, education, and nutrition). of implementing agencies. Investments in risk reduction and disaster preparation In Vietnam, the World Bank has contributed to dis- can help save lives and minimize impacts. Investments in aster risk management and resilience. Since 2008, the disaster risk mitigation can significantly reduce damage World Bank has contributed US$1.7 billion for hydro- and economic losses. Improved early warning systems meteorological modernization, disaster early warning and swift access to funds are essential. Ensuring that the systems, key disaster prevention infrastructures, and government has access to sufficient resources for rapid dam rehabilitation. Additionally, it mobilized US$10.0 emergency response is a key step to reducing the human million in trust funds through the Global Facility for impact of disasters (World Bank, 2017i). Disaster Reduction and Recovery to strengthen govern- In response to disaster risks worldwide, the World ment policies and legal frameworks on disaster risk man- Bank is partnering with many countries on disaster risk agement and to promote knowledge exchange between management. Learning from global experience, it devel- Vietnam and other countries. The next priority area will oped an integrated approach to disaster risk manage- be to integrate resilience planning into investments in ment, including a strong policy framework, investments urban development, transport, agriculture, and water in risk reduction, and disaster risk financing. In five resources management (World Bank, 2018j). years, the World Bank tripled its financing for disaster Improv ing Manage me nt of Rising R isk s 67 A phased approach is needed for managing urgent risks coordination and serve in an advisory role for inte- and longer-term risks by building resilience to all types grated disaster risk management. In the long term, of risks. Vietnam needs strategic planning and coordi- multi-hazard disaster risk management and climate nated implementation of critical measures and recov- change adaptation measures need to be mainstreamed ery efforts to tackle the impacts of drought, floods, into planning for managing natural resources and land and other climate-related risks and to work toward use across all climate-sensitive sectors. greater climate resilience. One goal is to ensure that A better understanding of risks is required to allow current and future development activities are sustain- for targeted responses. Continued research on the able and climate resilient. Planning must be backed causes and preventative measures for land subsidence by sound knowledge and scientific understanding in is required. Further, continued research and baseline order to target and prioritize investments in technol- surveys are required to better understand soil condi- ogy development and adoption, infrastructure, and tions and to thus better predict, avoid or respond to capacity building. river bank and coastal landslides and erosions. The phased approach would include actions for the short, medium, and long terms. A first step in the short 5.4.2  A holistic and integrated approach for term would be to evaluate and try to resolve the multi- structural and nonstructural measures across sector coordination and implementation challenges by key sectors is required based on eight “musts” improving effectiveness and coordination horizontally The report Toward Integrated Disaster Risk across sectors as well as vertically at national, regional, Management in Vietnam highlights four “musts” for and provincial levels. In the medium term, the Central disaster preparedness, response, and recovery, and four Committee for Natural Disaster Prevention and Control for building resilience. These are for the short, medium, needs to be empowered to drive inter-ministerial and long terms (see table 5.1; World Bank 2017h). TABLE 5.1:  Proofing against disasters and mainstreaming resilience Short term: Design, pilot, and standardize proven practices Medium/long term: Scale up and institutionalize practices Smarter disaster preparedness, response, and recovery Tools for building resilience in development 1. Integrated drought monitoring and warning systems for 1. Systems to enable integrated water resources manage- linking hydrometeorological systems to preparedness and ment (supply and demand sides) and climate-sensitive response procedures. land-use planning at river basin, coastal zone, and water- 2. Financial protection strategy for effective financing of shed levels. response and recovery. 2. Climate-smart good agricultural practices for crops, livestock, 3. Adaptive social assistance systems for supporting vulnerable aquaculture, and other productive assets. households. 3. Inclusive, community-based approaches for disaster risk man- 4. Risk and vulnerability analysis for providing location-specific agement and climate change adaptation measures, and skilled and effective last-mile delivery of support target areas and human resources to implement them. populations. 4. Empowerment of vulnerable populations to access risk reduc- tion opportunities to enhance risk resilience and livelihoods. Source: World Bank 2017h. 5.4.3  Improved financial planning will be better manage the costs of disasters and ensure that critical for establishing a robust system funding will be channeled efficiently and at the right for disaster prevention, preparedness and time. Further, the budget allocation between disas- response ter risk prevention, response and recovery should be revisited, increasing the focus on disaster risk preven- The Ministry of Finance could take the lead in finan- tion. Combining financial instruments can allow the cial planning for disasters by crafting a comprehensive government and communities to mobilize, access, and disaster risk management finance strategy. Although disburse financing from public and private sources some financing instruments are available to the gov- quickly. Given fiscal constraints, the government ernment, there is too much reliance on government could also look to the capital and insurance markets budgets at all levels to finance disaster risk prevention, to secure funding from the private sector, alleviating post-disaster response and recovery. Improved coordi- the burden on the state budget and/ or include mecha- nation of these instruments could help the government nisms which allow for mobilization of private sector 68 GO V ER N A N CE F O R WATER S ECU RIT Y and civil society support.3 In addition, innovative the unpredictability of natural disasters and climate instruments should be developed to help cope with change (see box 5.5). BOX 5.5:  Innovations in financial planning for disasters The Catastrophe Deferred Drawdown Option (CAT more than 90 percent of cities and municipalities, with DDO) in the Philippines combines reforms in disaster budget and staffing allocations. risk management policies with innovative financial tools, Another innovation was the establishment of a Fund allowing subnational governments to access financing for Natural Disasters (FONDEN) in Mexico to support in a timely manner. The country opened a CAT DDO disaster relief and reconstruction. FONDEN resources, contingent line of credit in 2017 that helped achieve leveraged with market-based instruments, allow for fundamental disaster risk management reforms while transfer of risks through insurance and other mechanisms providing quick-release financing for disaster recovery such as catastrophe bonds. In 2011, FONDEN secured and reconstruction. In 2013, the CAT DDO enabled indemnity cover for government assets and low-income the Philippine government to mobilize US$600 million housing with a US$400 million excess-of-loss reinsurance just days after the Haiyan tropical cyclone. Disaster risk treaty. FONDEN now provides one of the most sophisti- management offices were set up in 80 provinces and in cated disaster financing vehicles in the world. Source: World Bank 2018j. 5.4.4  Risk management—and dam operations resilience to recurrent floods and droughts but also and safety—need to be integrated in basin boost economic productivity and support better socio- planning economic development planning (World Bank 2018a). An integrated basin-wide approach could not only Notes strengthen disaster response and resilience but also boost economic productivity. The 2017 report Toward 1. In 2013, the government initiated a major study Integrated Disaster Risk Management in Vietnam rec- of impacts of upstream development on the ommends finding solutions to the multisector coor- Mekong Delta. dination and implementation challenge (see section 2. The 2012 Law on Water Resources Articles 5.4.1), by “improving effectiveness and coordination 53.2 and 60.5 assign to the Ministry of Natural horizontally across sectors as well as vertically at Resources and the Environment responsibility national, regional, and provincial levels” (World Bank for flow management and approval of inter-res- 2017h). As this is also the challenge for integrated ervoir operations (GoV 2012). The 2017 Law water resources management, the solution at the basin on Hydraulic Works assigns to the Ministry of level could be found in the same approach, that is, in Agriculture and Rural Development and the basin planning steered by a basin organization or by provincial people’s committees responsibility for functional arrangements for interagency collabora- dam safety: “Before the start of an annual rainy tion, perhaps with budget resource allocations aligned season, the Ministry of Agriculture and Rural with basin plans. This same institutional setup could Development and provincial-level people’s com- also provide for coordinated management of dam mittees shall organize the safety assessment of operation and safety within each basin. In addition, dams and reservoirs; and decide on water stor- the hydro-meteorological and water resources infor- age plans of reservoirs and solutions to ensur- mation system being established across Vietnam (see ing safety for dams and reservoirs under their chapter 6) could then serve a triple purpose, again in management.”(GoV 2017a, Article 45). basin plans: flood and drought warning; basin plan- 3. A good example of this public–private partner- ning; and river management, including oversight of ship approach is the recent effort spearheaded dams. A recent study in Ninh Thuan Province shows by the Ministry of Finance to introduce insur- how an integrated basin-wide approach, including ance for public infrastructure through the revi- coordinated planning of reservoirs and advanced tech- sion of the Public Assets Management Law. nologies for water savings, could not only strengthen Part 3 Improving Governance— Framework, Initiatives, and Financing Whether Vietnam can improve policy implementation and effectiveness will determine whether it can sustain its growth and protect its water resources, on which so much of its development depends. Addressing the newly emerging challenges—such as pollution, climate change, and service provision to agriculture and settlements—calls for complex policy reforms to tackle entrenched inefficiencies and diverging interests. This will require paying greater attention to the spatial dimension of policies through basin-level planning, raising adequate finance in a period of fiscal stringency, and emphasizing accountability and incentives to comply with regulations. © Hoang Minh Tran / World Bank 6 Vietnam’s Water Governance Framework Vietnam’s water governance framework is sound, but institutions are facing difficulties in tackling rising stress levels • The legal framework for water management in Vietnam has been established and is gradually being improved • The institutional set-up is mostly clearly defined by law. However, getting all the sectoral and local interests to work together constitutes a massive challenge of horizontal and vertical coordination. All agencies, including MoNRE which has lead responsibility for water resources management, are under-resourced. • Planning for water resources is underway but encountering difficulties and delays. The nationwide assessment of Vietnam’s water resources is still not complete. There is as yet no overall plan, and ministries and provinces are preparing their own, creating risks of an unintegrated or piecemeal approach. • Vietnam’s water governance framework aims to integrate planning and management at the basin level but organizations set up for planning and management at the basin level have so far met with limited success. Much remains to be done to empower these organizations, to give them adequate resources and to make them representative of stakeholder interests. • Financing for water resources management is insufficient and fees and charges levied contribute little to cover- ing costs or to incentivize good behavior. • Incentives for water conservation and protection activities are provided for in law, but their effectiveness is yet to be assessed. • Enforcement of water pollution prevention and control is low, with negative impacts on Vietnam’s water bodies. • Mechanisms for handling transboundary issues have brought tangible benefits but challenges persist. Because of Vietnam’s high dependence on transboundary flows, cooperative arrangements should be negotiated on other rivers too. • The basic building block for planning is information; the process has been started, but the data are still lacking and information sharing is a particular problem. Investments in data gathering need to be completed, and data need to be transformed into information. 71 72 GO V ER N A N CE F O R WATER S ECU RIT Y 6.1  The legal framework for water groundwater; and (iv) providing financing for water management in Vietnam has been resources management (see Annex B) established and is gradually being MoNRE has issued a number of decrees and circu- lars to apply key provisions of the 2012 Law on Water improved Resources. These instruments (see Annex B) cover: 6.1.1  The legal framework for water resources water resources assessment, planning and management; management has developed over the last two water resources protection and conservation, includ- decades and is now comprehensive ing minimum flow requirements; encouraging invest- The institutional and governance framework for ment in water and the environment; setting out water water resources management has evolved over time in abstraction charges; regulating groundwater exploita- response to the growing challenges of sector manage- tion; and specifying penalties for violation of the law. ment. In 1998, Vietnam’s first water law – the Law on According to MoNRE, a number of further legal Water Resources – assigned responsibility for water instruments are under preparation to spell out fur- resource management to MARD and then MoNRE ther measures for applying the 2012 Law on Water when this ministry was established in 2002. The Resources. These concern (see Annex B): (a) the Law set out the basic policies to ensure an integrated national water master plan and arrangements for water approach. These policies were confirmed by a series resources inventory and information; (b) arrange- of decrees and circulars (see Annex B). In 2012, the ments for water resources planning between provinces Law on Water Resources was updated to strengthen and within provinces; (c) supplementary conservation the integrated approach to water resource manage- measures for water resources, water bodies and river ment and to allocate responsibilities for key functions banks; and (d) further provisions for wastewater man- under the overall direction of MoNRE (see box 6.1). agement and reuse. The main provisions of the revised law were: (i) set- In addition, further instruments are required from ting out the requirements for assessment, strategy other ministries: from MoST on standards for water and planning for water development; (ii) defining saving technology; from MARD on water saving prac- specific provisions for protection and sustainability tices and on reuse of drainage and wastewater; and of water quality and quantity; (iii) regulating water from MoF on fiscal and financial supports to invest- resources allocation and use, including protection of ment in water conservation (see Annex B). BOX 6.1:  The Ministry of Natural Resources and Environment’s statutory responsibilities and powers under the 2012 Law on Water Resources and 2017 Law on Planning Legal and regulatory framework • Preparation of Master Plans at national and inter- provincial basin levels for approval by the Prime • Issuance of legal documents, regulations, and stand- Minister (15–24) ards based on the Water Resources Law (70.2 (a)) • Provisions for water conservation (39–53) • Secretariat of the National Council of Water Resources; • Coordination of river basin organizations, provincial host of the Vietnam Mekong River Commission, and people’s committees, ministries and agencies in water river basin organizations (RBOs) (70.2 (k)) resources development and management (72.2 (c)) • Monitoring and advising on transboundary water issues (67.2) Water allocation and resource management Information and resource assessment • Water allocation and licensing of uses (54–56) • Flow management and preparing the development of • Data gathering, database and information system inter-reservoir operations for approval by the Prime management, and data dissemination (13.2, 70.2 (h)) Minister (53.2, 60.5) • Water resources assessment (10.2–13.1) • Groundwater management and regulation (35–36, 52, 56) • Water resources monitoring (28) • Protection zones and minimum flows (70.2 (c)) • Early warning on extreme and harmful events (70.2 (g)) • Disputes and violations (70.2 (i)) • Public awareness and education (70.2 (d)) Pollution control Water resources strategy and planning • Pollution control and clean-up of major rivers (27.4) • Water resources strategy (14.4) • Discharge permits (37) Source: GoV (2012); references are to sections of the 2012 Law on Water Resources. Improv ing Manage me nt of Rising R isk s 73 6.1.2  The legal framework for environmental state budget is allocated for environmental expenditure, protection complements the water resources including water environment expenditure. framework 6.1.3  Irrigation and other important water- The 2012 Law on Water Resources is complemented related mandates are assigned under the legal by the 2014 Law on Environmental Protection. The Government of Vietnam acknowledged the impor- framework to the Ministry of Agriculture and tance of environmental protection in the early days of Rural Development (MARD) the country’s reform process (Doi Moi, see chapter 1). MARD’s role in water is subject to a series of laws. In The first Law on Environmental Protection (LEP) was 2017, these instruments were completed by the Law promulgated in 1993 and was revised in 2005 and on Hydraulic Works. A series of laws and application 2014 to meet changing circumstances. Water environ- decrees and circulars govern MARD’s role in irrigation mental protection has been an essential element of this and related water management. The Law on Dykes policy and legal framework. (2006) spells out MARD’s role in maintaining dykes The Law on Environmental Protection in all three and flood protection. The Law on Natural Disaster versions - 1993, 2005 and 2014 - has specific sections Prevention and Control (2013) provides for MARD’s and articles addressing water pollution. The laws and role in the coordination of disaster risk planning and its implementing decrees and instruments (see Annex B) disaster response. The 2017 Law on Hydraulic Works provide for the full range of policy instruments to details MARD’s role in planning, construction and man- address water pollution. These include: environmental agement of hydraulic works and related water manage- impact assessment, water ambient environment stand- ment tasks as well as provisions for cost recovery and ards, effluent standards, effluent charges, inspection financing (see box 6.2). The 2017 Law on Hydraulic and penalties, monitoring, certificates for completing Works also spells out how MARD will cooperate with environmental protection works, incentives for envi- MoNRE and with the PPCs. The Government subse- ronmental protection via soft loans and tax and land quently issued five decrees and three circulars guiding preferential conditions, and education and awareness the implementation of the 2017 Law on Hydraulic raising campaigns. Annually about one per cent of the Works (see Annex B). BOX 6.2:  The Ministry of Agriculture and Rural Development (MARD): statutory responsibilities and powers under the 2017 Law on Hydraulic Works Water resources management (WRM): Cooperation • PPCs have the same responsibilities at the provin- between the Ministry of Natural Resources and cial level, and they must report annually to MARD Environment (MoNRE) and the Ministry of Agriculture (57). and Rural Development (MARD) Planning for hydraulic works: MARD and PPC • Plans and works under this law must be within an responsibilities integrated water resources management framework • Baseline surveys for hydraulic works, including cli- and conform to master plans for water resources (12). mate change forecasts, and so on (9.2). • Structures must be efficient and promote water con- • Hydraulic works strategy (30-year horizon, updated servation and productivity (25). every decade) (10). • Water resources for hydraulic works are allocated • Hydraulic works master plans for basins and and licensed by MoNRE and by provincial people’s regions (20-year horizon, updated every 5–10 committees (PPCs) at their level (58). years) (11). • MoNRE (and PPCs) issue discharge permits, but dis- • MARD responsible for master plans and works cov- charge of wastewater into hydraulic structures must ering more than one province (PPCs at the intra-pro- comply with the Law on Hydraulic Works (58). vincial level) (14.1). • For hydraulic structures, MARD is the focal point • National hydraulic works master plan approved by for plans, standards, regulations, and issues with the Prime Minister (14.2). drought, water shortage, saline intrusion, flood, and • MARD approves interprovincial and intra-provincial so on, and for distribution of subsidies; and interna- hydraulic works plans (14.2). tional cooperation (56). (Box continues next page) 74 GO V ER N A N CE F O R WATER S ECU RIT Y BOX 6.2:  (Continued) Management of hydraulic works: MARD and PPC Cost recovery and financing responsibilities • Cost recovery can include depreciation and profit • MARD manages large and interprovincial works; within Ministry of Finance ceilings (34). PPCs manage smaller works (21). • Cost recovery for state structures is also based on • Farm irrigation units (registered as coops) and their socioeconomic conditions and payment capability unions can manage infrastructure and can receive (34). state support (50–52). Source: GoV (2017a); references are to sections of the 2017 Law on Hydraulic Works. 6.1.4  Other aspects of the legal framework the Department of Water Resources Management; also affect the water sector the Vietnam Environment Administration; the Twelve additional laws and their corresponding ordi- National Center for Water Resources Planning and nances and decrees complement the 2012 Law on Investigation; the Institute of Water Resources; and Water Resources and 2014 Law on Environmental the Mekong River Commission (Vietnam). The Protection. These legal instruments deal with flood Department of Water Resources Management under protection, disaster risk management, dam safety and MONRE has established branches in three regions, environmental protection. The relevant instruments namely North, Central and South. At the local level, and decrees are discussed in detail in Annex B. there are Provincial Departments of Natural Resources and Environment (DoNRE). 6.2  The institutional set-up Ministry of Agriculture and Rural Development (MARD) is responsible for irrigation, aquaculture In the early decades of the Vietnamese republic, water and associated hydraulic infrastructure, river training, resources and irrigation were managed together. In flood control, rural water supply and sanitation, and 1962, a Ministry of Water Resources was established coordinating disaster response, including management with both these responsibilities, and in 1995 this min- of river bank and coastal landslide and the system of istry was merged with agriculture and rural develop- dikes for flood control. ment in a single Ministry of Agriculture and Rural Ministry of Industry and Trade (MoIT) is responsi- Development. In 2002, Vietnam recognized a key prin- ble for hydropower and water for industry ciple of integrated water resource management by sepa- Ministry of Construction (MoC) is responsible for rating water resources management from water users. water supply for urban areas and industrial zones, Under this approach, MoNRE assumed the overall drainage and wastewater treatment in urban areas water resource management function while other min- and concentrated rural residential areas, and solid istries were responsible for the water using sectors. The waste management in urban areas and concentrated set-up today is described in the following paragraphs. rural residential areas. 6.2.1  Central ministries and their branches In addition, the Ministry of Transport (MOT) is responsible for managing and developing navigation, In Vietnam, responsibility for water is divided hori- inland waterways and ports; the Ministry of Science zontally among multiple sectoral ministries and their and Technology (MoST) is responsible for setting local branches. Four principal ministries are responsi- water quality standards and for promoting techno- ble for water (see figure 6.1): logical innovation. The Ministry of Health (MOH) Ministry of Natural Resources and Environment is responsible for providing technical guidance for (MoNRE) is responsible for water resource manage- urban and rural water supply and for inspections ment, water environment protection and pollution (including medical facilities); the Ministry of Finance control. MoNRE sets and enforces environmental tech- (MOF) issues guidelines on taxes and fees related to nical regulations. MoNRE is also national focal point water, wastewater and drainage; and the Ministry of for international treaties on water and environment. It Planning and Investment (MPI) synthesizes investment is the standing agency of the Vietnam Mekong River projects on water resources, provides the budget plans Commission and of the National Water Resources and submits these to the government for approval. Council, and oversees the river basin organizations. Each of these ministries has branches at provincial Within MoNRE, there are five units at central level: and district levels. Improv ing Manage me nt of Rising R isk s 75 FIGURE 6.1:  Organizational and institutional structure of Vietnam’s water and wastewater sector Central Government Mekong River Commission National Water Resources Council Coordination and direction MONRE MARD MoIT MoC MoST MoT MoH MoF MPI MoPS Overall water Dyke and irrigation Hydro Water supply for urban Appraising Waterway Water State budget for Overall Pollution crime resource works manage- power; areas and industrial zones, and setting transport quality for waterprojects, planning Investigation management; ment; ood water for drainage and wastewater water quality drinking water and waste and investment and prevention water volume & control; disaster industry treatment in urban areas standards; taxes and fees quality risk management and concentrated rural water monitoring, rural water supply residential areas, solid technology wastewater & drainage; water waste management in innovation technical for aquaculture urban areas and concentrat- license regulations management of ed rural residential areas setting and river bank and enforcement, coastal landslide Provincial People’s Committee pollution control Coordination and direction DONRE DARD DoIT DoC DoST DoT DoH DoF DPI MoPS Direct water Irrigation works Hydro Urban Contributing Management Monitor State Overall Pollution resources management; power; water to water of waterway water budget for planning investigation management; ood control; Water for supply and quality transport quality for water and and water volume, disaster risk industry drainage standards drinking projects investment monitoring monitoring management; development; rural water water supply & technology drainage; water innovation for aquaculture license management of river bank and coastal District People’s committee landslide Monitor and protection of water resources; response to water related incidents Commune People’s committee Monitor and protection of water resources; response to water related incidents Source: 2030 WRG 2017. 6.2.2  Many responsibilities for water 6.2.3  Water resources management faces some management are decentralized institutional challenges Responsibility for water resources and services within Getting all the sectoral and local interests to work provinces is decentralized to local authorities. Vietnam together requires horizontal and vertical coordination. is notable for an exceptionally high degree of delega- With so complex an institutional structure, ensuring tion of responsibilities, financing, and human resources a multi-sectoral, cross-institutional approach to water to subnational governments. Subnational spending now planning, development, and management is particu- accounts for over 70 percent of total public investment. larly difficult because water management straddles This decentralization is reflected in responsibilities for sectors and internal jurisdictions. The scale of the water. At the subnational level, provincial people’s com- challenge can be judged from the 2030 WRG (2017) mittees (PPCs)—and under them the district councils—are study that found that reducing water stress in one responsible for developing and managing water resources, basin required 24 measures, which jointly required water services and irrigation within their jurisdiction. The support from seven ministries, six provincial councils, ministries directly manage only responsibilities that cross multiple municipalities, numerous irrigation compa- provincial lines, such as larger projects. More than 70 per- nies and private firms, and millions of farmers and cent of the irrigation budget, for example, is managed by city dwellers. the PPCs, not by MARD. Local authorities have varying Capacity for water resources management at the capacity for planning and management. The local depart- decentralized level is quite weak, particularly below ments of the central ministries are in principle accountable the provincial level. Some capacity in water resources to local authorities, but the reporting lines are confused as planning and management exists at provincial level these units are also accountable to their parent ministries but most provinces have not issued detailed guid- (World Bank 2017a). ance for decentralization to district and commune 76 GO V ER N A N CE F O R WATER S ECU RIT Y levels. Human resources for the management of water and flood control, water supply for downstream areas, resources, particularly at local levels, are not yet suf- domestic consumption and salinization prevention. ficient and adequate in quantity and quality. Efforts to promote water resources management and environ- 6.3  Planning for water resources is mental protection at the grassroots level need to be underway but encountering difficulties increased. and delays Although MoNRE has lead responsibility for water 6.3.1  Water resources assessments are resources management, it is relatively under-resourced underway but face implementation problems for the task. MoNRE’s ambitious water resources man- Despite considerable progress since the 2012 Law date faces significant implementation challenges as the on Water Resources, the nationwide assessment of ministry lacks the human and financial resources to take Vietnam’s water resources is still not complete. The on this massive task. Capacity in the key Department 2012 Law on Water Resources requires MoNRE to of Water Resources Management is limited. Staffing is prepare a nationwide water resources assessment restricted - about 157 staff at the central level (of whom as the basis for water strategy, planning, allocation, only 60 are permanent) and only a half dozen staff licensing, management and coordination (see box 6.3). in a typical provincial DONRE. Staff qualifications Implementation measures are being undertaken and training levels are relatively low. In some offices within the National Strategy for Water Resources at the local level there are no staff in charge of water resources at all and tasks have to be accomplished by for 2010 and the National Action Plan 2014-2020 meteo-hydrology officers. Investment resources are also (see Annex B). Under the 2014 National Action Plan, inadequate to meet needs related to water resource MoNRE has issued a number of circulars and much management at both central and local levels. of the information has been collected at provincial The ministries’ mandates are mostly clear, however level and consolidated. In 2018, MoNRE submitted there are some overlaps in tasks, and coordination to the Prime Minister’s office a ‘master plan’ for sur- between ministries within an integrated framework is veying and monitoring water resources up to 2030, weak. The task division on water resources planning and a 2019 MoNRE ministerial decision spells out has resulted in each ministry developing their own how the assessment is to be conducted and completed. planning without an overall integrated framework. However, budgets for surveys and monitoring are lim- For example, MARD develops irrigation planning, ited. As a result, there is a serious lack of data and MOIT develops hydropower planning, and MOT information on water resources and on their exploita- develops inland water transport planning. A lack of tion and use on a nationwide scale. For the time being, cooperation among the ministries has led to water the required annual and five-year water resources use conflicts, increasing water scarcity and pollution. reports are not yet published, and ministries and PPCs Conflict of interest remains between power generation continue to rely on their own surveys. BOX 6.3:  Water resources assessment MONRE has implemented programs for the basic survey However, the overall plan for a nationwide water on water resources at the central level, and many prov- resources survey has not yet been issued, causing coordi- inces proactively invest in surveys. On the central level, nation challenges across ministries and government lev- the programs for the basic survey include the survey for els. The 2012 Law on Water Resources provides that evaluation of surface and groundwater resources; the MONRE is responsible for organizing the development status of exploitation and use of water and discharge of the overall plan for a nationwide survey of water of wastewater into the water sources; and mapping of resources and for submitting it to the Prime Minister for the river basins. Much of the information and data have approval. However, to date, no overall plan has been been collected and updated, serving as the basis for man- approved by the Prime Minister. In 2017, MONRE agement. Many provinces have proactively arranged a approved the task to develop the overall plan on national local budget to invest in projects on survey, study and level survey of water resources (Decision 2057/ evaluation of water resources, the status of exploitation, QĐ-BTNMTT). By the end of 2018, MONRE submit- use and discharge of wastewater into the water sources, ted the overall plan on the national level survey on water and local development of the master plan on water resources by 2030 and the vision for 2050 to the Prime resources and database on water resources. Minister. MONRE’s action plan on implementing the (Box continues next page) Improv ing Manage me nt of Rising R isk s 77 BOX 6.3:  (Continued) Government’s Resolution 01/NQ-CP dated 1/1/2019 01/ disseminated. For the period of some years, there have NQ-CP (MONRE’s decision 12/QD-BTNMT) specifies been no inventory reports on water resources. Many major tasks for water resources management for the agencies and provinces have not carried out the sur- year 2019. These include finalizing the overall plan on vey for reporting the status of water usage, which they national level survey of water resources and water should have submitted to MONRE. resources planning. Due to the absence of the overall plan for basic sur- Due to a lack of the overall plan on basic survey of vey of water resources, budgets for water resources water resources, concerned ministries and PPCs have basic survey and monitoring remain limited at both the conducted their own basic survey planning without national and provincial levels. As a result, there is a seri- overall coordination and planning. ous lack of data and information on water resources, The periodical five-year water resources reports and exploitation, and use of water resources on a nationwide annual thematic water resources reports have not been scale. Source: MoNRE. 6.3.2  Development of the master plan on of upstream provinces and those of downstream prov- water resources is delayed inces in the same river basin. The 2012 Law on Water Resources specifies the need Similarly, the sectors have developed their own for three types of water resources master plans. These plans without overall coordination – particularly in are (1) the national level master plan, (2) the inter- irrigation. The 2012 Law on Water Resources requires provincial river basin management master plans, and that water-related sectoral master plans such as master (3) provincial master plans. The law specifies that the plans on irrigation, hydropower, water supply, inland master plan should be updated every ten years and waterway transportation and other related mas- should include both surface water and groundwater. ter plans developed by ministries, sectors and prov- The law also outlines the principles for master plan- inces must be in line with the overall national water ning, the obligations of each agency, and the contents resources master plan. Thus, in principle many plans of the master plan. The Law clearly specifies responsi- related to the activities of exploitation and use of bilities - MONRE takes the main role and coordinates water resources depend on the national master plan. with MARD, MOIT, MOC and other related minis- While the national plan is delayed, other ministries tries to develop the national level overall master plan and agencies have gone ahead with their planning. For to submit to the Government for approval. example, MARD has approved 22 irrigation master However, it was not until 2017 that a start was plans to meet the requirements for irrigation. As the made on the overall national master plan for water Water Resources Master Plan is still under develop- resources. One reason for the deferred start is that ment, these irrigation master plans are not coordi- water resources planning involves numerous sectors nated with it. and localities, requiring agreements on data and meth- The same risk of incoherence has arisen in river odologies while many major water works have been basin planning. For example, MONRE is to develop operating for many years. Another reason is a lack of the master plans for water resources of river basins human and financial resources for planning. but as these are not yet available, MARD has pressed As there is not yet an overall plan, some provinces on with developing river basin irrigation planning. have prepared their own, creating risks of an uninte- (Source: National Assembly’s Economic Chair Vu grated or piecemeal approach. The law requires that Hong Thanh remarks on the Bill for Planning 2017). the provincial master plans have to be in line with 6.3.3  The sector is now integrating within the overall national master plan and with the inter- provincial river basin master plans. In principle, the GoV’s recently adopted ‘unified’ planning PPCs have to obtain written opinions from MONRE approach when developing their plans. However, as there is as A further challenge is the need to streamline planning yet no national overall master plan, the provinces have and to integrate water resources planning with overall developed and approved their own provincial plans. master planning. To address the problem of having too This may result in conflicts between the master plans many master plans – there were nearly 20,000 in exist- ence (see box 6.4) – the National Assembly approved a 78 GO V ER N A N CE F O R WATER S ECU RIT Y Law on Planning in 2017 to streamline and unify plan- are to develop sectoral master plans for the period ning. This required amendment of a total of 37 plan- 2021-2030, with a vision for 2050. Under this provi- ning-related laws to try to create a more unified legal sion, MONRE is responsible for the Water Resources framework for planning activities. Many of the laws Plan, the Environmental Protection Plan, and the amended are water-related, including the Law on Water Biodiversity Conservation Plan. MARD is responsible Resources, Law on Hydro-meteorology, Law on Urban for the Plan on the Prevention and Control of Natural Planning, Law on Hydraulic Works, and the Law on Disasters and for the Irrigation Plan. In case of con- Dikes. The Law on Amending and Supplementing a flicting water uses between ministries, there is no Number of Articles of 37 Laws related to the 2017 Law formal process yet on how to settle issues. It is likely on Planning was passed in the sixth session of the 14th that MPI will provide guidance, while the cases will National Assembly in November 2018. be brought to the Prime Minister for his decision. This The new law makes water resources planning an ‘unified’ planning approach is essential – and requires integral part of national sector planning. Ministries dedication to implement. BOX 6.4:  Streamlining a plethora of plans In 2017 and 2018, Vietnam adopted two laws designed to Thus, a high percentage of the completed plans had no streamline a plethora of plans of one kind or another that practical value, and even contributed to overall low sec- had been developed in the past: the Law on Planning and tor performance, actually hindering development. the Law on Amending and Supplementing a Number of Key objectives of the 2017 Law on Planning Articles of 37 Laws related to the 2017 Law on Planning. • Put top priority on integration of state management The necessity for the 2017 Law on Planning and on efficiency of national resources utilization. Put Before the 2017 Law on Planning was passed, there were an end to fragmented sectoral and local management. 19,285 master plans in all sectors - not even including • Establish a transparent mechanism in planning, product plans such as the cassava and tilapia plans. The enhance the role of communities and people, and number of plans increased six-fold between 2001 and improve the accountability of leadership. 2011. For the period between 2001-2010 there were • Reduce the total number of plans from 19,285 to 3,114 plans, while these increased for the period between 11,413. This includes a 97% reduction of plans at 2011-2020 to 19,285 plans. Among the 19,285 master national, regional and provincial levels (from 4,362 plans, there were 2,326 urban plans and 9,864 con- plans to 110 plans). Sectoral, industrial and product struction plans. Over 8,000 billion VND were spent to plans will be reduced from 3,372 plans to 38 plans. develop these plans. (Source: Dai Doan Ket Newspaper, • Apply modern, consistent and efficient method of May 25, 2017). multidisciplinary integrated planning, following The plans were found to be overlapping, at times even international trends. Create a unified information contradictory and they lacked cohesion. At times the system and national planning database from central plans were not connected to implementation resources. to local levels. Source: MoNRE. 6.4  Vietnam has adopted ‘integrated resources management and river basin-based manage- water resource management’ (IWRM) ment, stipulating that “water resources management but faces challenges to implement the shall be carried out using a river basin approach” and that “water resources shall be managed in an approach integrated manner, bringing together quality and 6.4.1  The framework provides for integrated quantity, surface and ground water, inland water and water resource management but integrated estuary and marine water, upstream and downstream, planning is proving a challenge and integrated with other natural resources manage- Vietnam has long recognized the importance of ment”. The National Strategy on Water Resources to integrated water resources management (IWRM). 2020 and the Strategic Orientations for Vietnam’s Two decades ago, the government adopted IWRM Irrigation Development to 2020 confirm that water (see box 6.5) as the basis for water resources plan- resources management “must be implemented in an ning, development, and management. The 2012 Law integrated manner on a river basin basis” (Decision on Water Resources emphasizes integrated water 81/2006/ QĐ-TTg). Improv ing Manage me nt of Rising R isk s 79 BOX 6.5:  What is integrated water resources management Integrated water resources management (IWRM) bal- of different sectors. It includes different stakeholders ances social, environmental, and economic concerns; in transparent decision making. IWRM is accepted as upstream and downstream perspectives; and the interests global best practice in river basin management. Source: Authors. The legal framework provides for basin planning The development of intra-provincial river basin plan- between provinces sharing the same river basin. ning remains slow. So far, many provinces have approved Decree No. 120/2008/ND-CP on river basin man- water resources master plans. However, they are strug- agement mandates the preparation of basin-level gling to develop intra-provincial river basin planning, “framework plans” to identify key objectives and due to a lack of capacity and resources. Some planning management issues and actions for a basin. It also at basin level has begun, typically with external support. called for preparation of specific “component For example, for two river basins (Ky Cung River in the plans” for a river or a groundwater area. Following North and Srepok in the Central Highlands), basin plans the 2012 Law on Water Resources, MoNRE issued are at the final stage of the approval process. MARD Circular No. 42/2015/TT-BTNMT on the regula- has prepared basin plans but only for irrigation devel- tions for Water Resources Planning Techniques to opment. MONRE is currently preparing water resource clarify MoNRE’s planning functions (see box 6.6, plans for the river basins of (1) Bang Giang – Ky Cung, MONRE 2015b). (2) Red-Thai Binh, and (3) Sesan- Srepok. BOX 6.6:  Circular 42 – a template for basin planning In September 2015, the Ministry of Natural Resources • Assessment of flood, drought, and saline intrusion and Environment (MoNRE) issued Circular 42/2015/ risks and risk mitigation measures. TT-BTNMT: Regulations on Water Resources Planning • A water resources monitoring framework. Techniques to spell out implementation of MoNRE’s basin • Preparation of plans and maps. planning functions under the law. The circular covers: On this basis, MoNRE has started implementa- • Water resources assessment and mapping. tion of basin planning, delegating planning for the • Current uses, projection of demand, and possible Sesan-Srepok basin (supported under the World future water allocations. Bank–financed Mekong Integrated WRM Project) to • Identification of infrastructure development the National Center for Water Resources Planning priorities. and Investigation (NAWAPI). The work in the • Protection requirements for quantity and quality of basin is coordinated with other ministries and local surface water and groundwater. authorities. Source: MoNRE 2015b. 6.4.2  Vietnam has long tried to establish related damage in the rivers. After the 1998 Law on organizations for planning and management at Water Resources came into effect, MARD established the basin level, but with limited success. eight RBPMBs for major river basins or sub basins: Red- Thai Binh basin; Ca river; Huong river; the Vu Gia - Thu Beginning two decades ago, Vietnam has tried three Bon rivers; Srepok river; Dong Nai river; Cuu Long river; approaches to establishing river basin management. and two ‘sub-RBPMBs’ for the two basins of Nhue-Day During the period up to 2008 when MARD was and Cau rivers (within the Red-Thai Binh Basin). responsible for water resources, it established eight river During the period 2008-2012, legal provision was basin planning management boards (RBPMBs) which made for setting up full-fledged river basin organi- exist to this day. The Law on Water Resources 1998 zations. After MoNRE assumed responsibility for (Article 64) provided for ‘river basin planning man- river basin management, a decree was issued (Decree agement boards’ (RBPMB) as ‘service providing enti- 120/2008/ND-CP on river basin management dated ties’ under MARD. Their essential role was to manage 01/12/2008) with a chapter on river basin organiza- river basin planning. There was no provision for these tions and a chapter on responsibilities of ministries organizations to coordinate and supervise water protec- and provinces in river basin management. According tion, extraction and use or to prevent and restore water 80 GO V ER N A N CE F O R WATER S ECU RIT Y to Decree 120, the Prime Minister was responsible With the effectiveness of the new law, Decree 120 for establishing major river basin organizations while was cancelled. A new 2013 decree (Decree 201/2013/ MONRE was mandated to establish other interprovin- NĐ-CP) gives some guidance on implementation of cial river basin organizations. The organizations were the law and provides that the Prime Minister shall to be represented by a ‘river basin office’ established by establish river basin organizations for the Hong-Thai MONRE. Binh and the Mekong, following the proposal of However, in practice, MoNRE focused on establish- MONRE, while MONRE shall establish other inter- ing river basin environmental protection commissions provincial river basin organizations. The evolution of (RBEPCs) to combat the growing pollution menace. In river basin organizations is illustrated in figure 6.2. the period 2008-2013, due to increasing water pollu- The biggest challenge is that the existing organiza- tion, master plans for environmental protection of the tions – the RBPMBs and the RBEPCs - have not been three river basins of Cau, Nhue-Day and Dong Nai fully empowered as they are not state management were issued. Three river basin environmental protec- agencies. These organizations have evolved over time tion commissions were established to assist the imple- under varying legislation, mandates and authority. As mentation of these master plans.2 a result, many of these organizations have overlap- These environmental protection commissions have ping tasks and accountabilities, and they lack the legal played an important role in implementing the master authority, institutional capacity, and financial and plans for environmental protection of the three river physical resources to plan and ensure that the plans basins, coordinating environmental protection and are implemented. Coordination remains limited. developing provincial-specific environmental protec- The River Basin Environmental Protection tion plans. Through this means, over 200 environmental Commissions (RBEPCs) are chaired by the chairper- projects have been commissioned, including 31 projects sons of the PPCs involved on a rotating basis, so the for six provinces in Cau River Basin, 55 projects for five chairpersons are constantly changing. Members of the provinces in Nhue Day River Basin, and 120 projects for Commissions are key officials of the ministries and pro- 11 provinces in Dong Nai River Basin. Under the work vincial administrations working on a part-time basis, plans of the environmental protection commissions, the with limited time and incentives. MoNRE and the PPCs provinces in the three river basins have developed detailed lack the time and resources to adequately supervise or environmental protection plans, monitoring plans and assess the Commissions performance. In general, it environmental protection rules for craft villages and appears that the Commissions have not so far identified industrial clusters, together with measures for seriously concrete actions for interprovincial problems. Their dis- polluting entities. The provinces have also implemented cussions have been mainly on financial resources. Even pollution inventories, inspections and supervision and on that point their conclusions are only advisory and exchanged information among the provinces. hence do not lead to legal decisions on resource alloca- Since 2013, river basin management and river basin tion. Participation of line ministries in the Commissions organization, coordination and supervision have been is insufficient. regulated under the 2012 Law on Water Resources. The organizations have no separate source of rev- The revised Law on Water Resources spelled out enue and are dependent on annual budget allocations the mandate of river basin organizations and the from different central agencies. River Basin Planning role of MoNRE, the PPCs and other ministries and Management Boards are dependent on MARD for agencies. According to this law, interprovincial river their budget; River Basin Environment Protection basin supervision and coordination are carried out by Commissions are dependent on the Vietnamese MONRE and river basin organizations with the coop- Environment Agency within MoNRE; and River Basin eration of Provincial People’s Committees. Committees are dependent on the Department of Article 72 of the 2012 Law on Water Resources Water Resources Management within MoNRE. Staff specifies the role of river basin organizations in water are seconded from different agencies. management in Vietnam: “River basin organizations The implementation of river basin measures faces recommend water allocation and balance, supervise challenges. It has often proved difficult to establish water extraction, use and protection, and ensure the a firm legal basis for environmental protection in a prevention and restoration of water damage in one or basin. Where there has been an attempt to issue regula- several interprovincial river basins.” tions limiting or prohibiting some production or trade Improv ing Manage me nt of Rising R isk s 81 activities in the river basin – for example, sand and gravel these organizations have lacked the power, resources, extraction – this may turn out to conflict with investment and character for integrated river basin planning and regulations. It has also proved difficult to strengthen the management and have had little influence in driving roles and status of the RBEPCs because there is no legal an integrated approach to water resources manage- provision for giving administrative powers to interpro- ment (Blake and Robbins 2016). vincial organizations of this kind. In the light of these issues, MONRE is develop- Overall, much remains to be done to empower these ing a program to establish a new generation of river organizations, to give them adequate resources and to basin organizations under the provisions of the 2012 make them representative of stakeholder interests. One Law on Water Resources. MoNRE has submitted to assessment concluded: “these organizations are not the Prime Minister a proposal to establish four river independent entities in the form advocated by interna- basin organizations, covering Hong-Thai Binh, North tional models and do not have the state management Central, South Central and Dong Nai. The proposed functions to devise and implement basin plans or to functions of these organizations are to supervise resolve basin conflicts.” In addition, not all stakehold- water use and water use cooperation, identify water ers are represented. For example, local communities, resources-related issues, and work out feasible solu- nongovernmental organization (NGOs), and research tions and recommendations for the government. bodies do not have a formal place at the table. Overall, FIGURE 6.2:  Evolution of river basin organizations in Vietnam 2001 2006 8 River Basin Planning Management Boards (RBPMBs) established by MARD with international 3 River Basin Environment support from 2001-2006 Protection Committees 2008 2014 (RBEPCs) (with greater environmental focus) established by MONRE and In 2008, the Prime Minister In 2014, a new Division of located in VEA since 2006. of cially assigned MONRE to River Basin Management coordinate water resources under MONRE’s Department management in river basins, of Water Resources including River Basin management was Organizations (RBOs). established to coordinate MONRE has since prepared water resources manage- to instate a River Basin ment and monitoring at river Committee (RBC) for basin scale, including the coordinating basin-scale establishment of new RBOs. water resources manage- ment. Source: Authors. 6.5  Financing water resources management in water resources management and environmental protection. 6.5.1  Budget for water resources management Budget constraints limit water resources assess- is insufficient ments and regular monitoring activities. The Currently, finance for the management of water resources Government has approved a master plan for a sys- mostly comes from the public budget at both central tem of monitoring of natural resources and the envi- and decentralized levels. At the provincial level, there ronment (Prime Minister’s Decisions 16/2007 and is a shortfall in budget allocations for water resources 90/2017). This plan sets out the investment required management in almost all provinces. Each year, PPCs for monitoring stations and equipment. However, decide on the allocation of budgets for the provin- the budget allocated to date is far from adequate to cial DONRE but these budgets are typically small implement the plan. Many river basins lack automatic and have to cover the whole range of DoNRE tasks monitoring systems and often, due to a lack of budget 82 GO V ER N A N CE F O R WATER S ECU RIT Y for maintenance, equipment breaks down after years of abstraction for surface water and depth of aqui- of service. As a result, many activities such as basic fer for groundwater, abstraction volume and duration surveys and routine monitoring are constrained and of abstraction. Abstraction charges apply for: hydro- can only be conducted in a limited and fragmented power; business activities and service provision; non- fashion. This makes it impossible to provide the timely agricultural production, including water for cooling and comprehensive data needed to develop the various machinery and equipment, or for generating steam; master plans required under the 2012 Law on Water and groundwater abstractions for perennial industrial Resources or to fulfill other water resource manage- crops, aquaculture and livestock. Other non-industrial ment tasks. agriculture, such as paddy rice farming, is excluded from the water abstraction charge. 6.5.2  Some fees and charges are levied but At the end of 2018, 330 organizations and indi- they do not contribute enough to cover the viduals had been granted water abstraction licenses costs of water resources management and by the Department of Water Resources (MONRE) environmental protection at national level, with a total of annual receivables of over VND 7,144 billion. Of this amount, a little Vietnam has introduced some economic policy instru- over 10% - approximately VND 877 billion – was ments - both charges and subsidies – for the man- collected for 2018. In the provinces, DONRE (for agement of water resources. These include: water PPC) granted nearly 750 organizations and individu- abstraction charges, water supply tariffs, wastewater als water abstraction licenses, with a total of annual tariffs, irrigation fees, environmental protection fees, receivables of over VND106 billion. Of this, nearly and subsidy schemes for water saving technologies in VND 20 billion – about 20% - was collected in 2018 industrial production and small-scale irrigation. (MONRE, 2019).2 The low collection rates in the first However, the implementation process shows that these economic policy instruments do not yet generate year suggest the need to monitor the collection rates adequate resources for sector management. While the over the coming years and take action in case they do charges generate some revenue, it is inadequate – and not increase. insufficiently ring-fenced - to underwrite sustainable According to the Decree, a maximum of 15% water resources management. According to the Law of the total collected revenues from water abstrac- on Fees and Charges, these revenues are supposed to tion charges are to be used to cover expenditures be returned to the sector to support the management, for water resources protection activities, for defining exploitation and use of water resources as well as pro- the boundaries of water source protection corridors, tection of the environment. However currently, most for supervising water exploitation activities, and for of the revenues are simply absorbed by the central water pollution prevention and control. However, as budget, without being returned to be used for water there are no detailed guidelines on the usage of these resources and protection of the environment. The spe- revenues available yet, thus the collected revenues are cific economic instruments are discussed below. allocated to the general State budget, despite the need In addition, while the foundation for these eco- for considerably larger budgets for water resources nomic instruments has been established, they are not management. yet designed to incentivize and direct water users’ Water supply tariffs are based on full cost recovery. behavior to socially desirable outcomes. The incentive The clean water selling price must be set such that structure is far from incentivizing and regulating the all reasonable production costs and total costs aris- sustainable exploitation and usage of water as well as ing in the production, distribution and consumption effective prevention and control of water pollution. are covered (Article 3, Joint Circular 75/2012/TTLT- On the role of economic incentives, see Chapter 8 BTC-BXD-BNNPTNT). In case the PPC approves a (box 8.6). water supply tariff lower than that suggested by the Those licensed to directly exploit water resources MOF/DOF to achieve cost recovery, the PPC needs must pay water abstraction charges. Once organiza- to pay the price difference to the local water supplier. tions and/ or individuals have received a license to Charges are based on the volume of water used as exploit and use surface water and/ or groundwater, measured by a water meter. The fee is determined by they must pay a charge to do so. The water abstraction the PPC of central-affiliated cities and provinces and charge is calculated based on water usage, water qual- is paid directly to the water supply company. The fee ity, type of water (surface or groundwater), location has to be within the price brackets for urban and rural water supply4: Improv ing Manage me nt of Rising R isk s 83 • Special urban areas, urban areas in Class 1: setting the price level. The state determines the price of minimum VND 3,500/m3 and maximum VND irrigation services and products. 18,000/m3 Irrigation fees will be either charged by VND/ha/ • Urban areas in Class 2, Class 3, Class 4 and crop or by VND/ m3. Drainage of water for agri- Class 5: minimum VND 3,000/m3 and maxi- cultural production in rural and metropolitan areas mum VND 15,000/m3 (except in urban areas) is charged as VND/task/ year. • Clean water in rural areas: minimum VND If tasks cannot be specified, the fee will be charged as 2,000/m3 and maximum VND 11,000/m3 VND/ha of drainage basin, but will not exceed 5% of the public irrigation product (Decree 96/2018/ Previously exempted, farmers must, from 2018, pay ND-CP). irrigation service fees. Water from irrigation works MARD is currently working on a roadmap to is used for agricultural activities, including aquacul- implement Decree 96/2018/ND-CP. However, there ture, as well as for non-food production or indus- are significant challenges which need to be addressed trial purposes. Fee related to this source of water in order to be able to charge irrigation fees, notably the includes a fee for water resources use and the costs predominance of smallholders and the lack of water for the operation and management of the irrigation measurement technologies to name but two. Further, works the question needs to be asked whether the irrigation In 2013 the Ministry of Finance issued Circular fee should only target cost recovery, or whether it 41/2013/TT-BTC which basically exempted all should also take on an incentive function to promote users from the irrigation fee and made irrigation water use efficiency and sustainability. water free to use. Farmers only had to manage and Environmental protection fees are levied on waste- pay for connecting their fields to the irrigation sys- water discharges. This fee aims to limit environmental tem. The companies responsible for the manage- pollution caused by industrial and domestic waste- ment, operation and maintenance of the irrigation water; to promote water conservation; and to create works would be paid by the state budget through a funding source for the Environmental Protection a contract for irrigation service provision. Thus, Fund. The fee concerns the discharge of wastewater the management, administration, cleaning, dredg- into water bodies and is regulated by Decree 154/2016/ ing and repair of the irrigation network down to ND-CP4. Entities discharging wastewater into cen- the lowest level of canal was paid by the state, and tralized treatment systems and which have paid for farmers only paid for any costs of transferring wastewater treatment services are exempted (Article water to their fields. 4). The fee rate for domestic wastewater amounts to However, it was found that the subsidy policy 10% of the selling price of clean water per m3, VAT affected farmers’ awareness of the value of water, excluded (Article 6). For industrial wastewater, the fee while at the same time there was a lack of funds which rate is composed of a fixed fee of VND 1,500,000/ resulted in irrigation works not being rehabilitated, year and a variable fee that is calculated on the basis managed and upgraded in a timely and efficient man- of the total volume of effluent, and on the basis of ner. This led to rapid deterioration of the irrigation the concentration and type of pollutants discharged. system and to challenges around equality of distrib- The variable fee rate (VND/kg) applies to the follow- uting funds across irrigation schemes – in the same ing pollutants: COD, TSS, mercury, lead, arsenic and region and across regions. A further challenge was the cadmium. Industries discharging on average less than timely distribution of these funds to allow for opera- 20m3/ full day are exempted from the variable fee and tion and maintenance works. only have to pay the fixed fee. The Law on Hydraulic Works introduced the basic The Environmental Protection Fee for Domestic principle that irrigation services now need to be paid Wastewater is collected by the water supplier, and if for by the users. Irrigation prices are to comply with water is self-extracted, by the PPC. DONRE collects the provisions stated in the Law of Price and should the fees for industrial wastewater. The water sup- include management costs, operation and mainte- plier and/ or the PPC shall retain 10% and 25% of nance expenses, depreciation charges, and other rea- the collected fees for domestic wastewater respec- sonable actual expenses, and also allow for profit tively to cover the fee collection expenses. DONRE margins which are deemed suitable to the market- retains 25% of the total collected fee from industrial place. Affordability for users is to be considered when wastewater to cover expenses for the fee collection, as 84 GO V ER N A N CE F O R WATER S ECU RIT Y well as for the measurement, sampling and analysis of both surface and groundwater. Waste generators of wastewater samples to verify the fee declarations; are to pay for waste collection, transportation and and for periodic and ad hoc inspection of industrial treatment service as prescribed by law (Decree No. wastewater. The remainder of the collected fees are 38/2015/ND-CP). However, for solid waste from remitted to the local state budget. The fees are to be households and public places, expenses for collection, used for environmental protection, financing of the transportation and storage of household solid wastes local environmental protection fund for the purpose are offset by local budgets (Article 25). Households of prevention, mitigation and control of environmen- are required to cover only the solid waste disposal ser- tal pollution caused by wastewater; and implementa- vice (Article 26). Based on the practical situation of tion of wastewater treatment methods and technology the disposal and destruction of solid wastes in locali- (Article 9). ties, PPCs decide on adequate environmental protec- In practice, fees are not always charged or allo- tion charges. The government sets a ceiling on fees for cated as prescribed in the Decree. Taking Bến Tre in households or individuals to cover part of the costs 2016 as an example, the distribution of the collected for collection of waste and transport to the transfer fees did not reflect the requirements of Article 9. points. The fees are limited to 3,000 VND/person or The revenues from the environment protection fees 20,000 VND/family per month. The remaining costs, for domestic wastewater amounted to VND 5.1 bil- i.e. the costs for transporting wastes from the transfer lion. Of this VND 4.6 billion (90%) was transferred points to the waste treatment place/landfill and the to the state budget, while approximately VND 510 waste treatment costs are borne by the government. million (10%) was retained in the local environ- Given the very low fees, the government essentially mental protection fund. The revenues for industrial provides subsidy for all the transportation and treat- wastewater amounted to VND 1.8 billion. Of this, ment of wastes. Because the revenue base is so weak, approximately VND 1.47 billion (82%) was trans- only 85% of urban domestic waste and 40-55% rural ferred to the state budget, while approximately VND domestic waste is collected and very little is treated 330 million (18%) was retained in the local environ- properly. However, the application of environment- mental protection fund. Thus, there was insufficient friendly waste treatment technologies is encouraged in local budget for the mandated activities (PPC Ben the Decree (Article 4). Tre, 2017). Vietnam was the first country in Southeast Asia to Fines are levied on discharge of untreated waste- introduce a national Payment for Ecosystem Services water into the environment. MONRE/ DONRE, in (PES) law and has applied PES schemes to hydro- cooperation with the Environmental Police set up power and water supply (UNEP 2015). Article 74 under the Ministry of Public Security, are responsible of the Biodiversity Law 2008 states that “organiza- for monitoring water quality and identifying viola- tions and individuals using ecosystem services related tions to regulations. Once a violation is identified, the to biodiversity shall pay charges to service provid- Provincial People’s Committee is informed and takes ers”. Thus, water utilities, hydropower and the tour- action. Depending on the nature of the violation, a fine ism industry pay farmers and households located and additional penalties may be imposed, including a on forested land for the ecosystem services pro- requirement for restoration or a suspension of oper- vided. In 2016, the existing decree on payment for ating licenses or permits, or a combination of these environmental service was adjusted to provide for measures. As per Decree 155/2016/ND-CP, Article 4, an increased fee of PES for hydropower and water the maximum fine that can be imposed on an indi- supply (2030 WRG 2017). vidual for a violation of regulations on environmental The implementation of the scheme needs clarity protection is VND 1 billion, and for an organization on operational procedures. UNEP (2015) found that VND 2 billion. The maximum fines for a violation of while PES was successful in providing a source of regulations on water resources, as stipulated in Decree revenue for the state for forest protection, there were 33/ND/2017 is VND 250 million for an individual challenges of high transaction costs, distribution of and VND 500 million for an organization. funds, and the legal status of communities involved in Environmental protection charges for solid wastes the scheme (To et al., 2012; Suhardiman et al., 2013; are low, resulting in low waste collection rates and de Silva, 2014). In addition, as the companies pay unhygienic landfills and causing serious pollution PES fees directly to the government, benefit sharing Improv ing Manage me nt of Rising R isk s 85 mechanisms with community and affected households 6.6  Enforcement of water pollution need to be further clarified (To et al, 2012). prevention and control is low, with negative impacts on Vietnam’s water 6.5.3  Incentives for water conservation and bodies protection activities are provided for in law but Self-monitoring of wastewater discharge is required but still need to be fully enforced. fewer than half of industrial parks have installed the rel- Decree 54/2015-ND-CP provides for incentives for evant equipment. Enterprises are required to self-moni- water conservation activities for state agencies, organ- tor their discharges and report these to VEA/ DONRE. izations, households and individuals. Water conser- Industrial clusters and zones, and other industries vation activities covered under the Decree include which have access to centralized wastewater collec- measures and technologies to recirculate or reuse tion and treatment systems and which have discharge water, to collect rainwater, to tum brackish water and of at least 1,000 m3/day and night, must be equipped saline water into freshwater for use, and to conserve with an automatic and continuous monitoring system water in production, business and residential activi- (Article 5 and 18, Circular 31/2016/TT-BTNMT). ties. Actors who engage in these water conservation While the installation of the automatic monitoring sys- activities are eligible to receive benefits in the form of tems is mandatory, the installation is still ongoing, with soft loans in accordance with the law on State invest- industrial clusters being fined if found without. It is ment credit, together with exemption or reduction in estimated that by 2018 about 42% of industrial parks business income tax in accordance with the law on had installed automatic monitoring systems (Thoi Bao taxes (Article 7). Tai Chinh 2018). The data have to be shared with To implement this decree, the Government assigned DONRE. However, not all DONREs have the physical tasks for relevant line ministries to issue guidance infrastructure or human resources, to receive, evaluate documents but these have not yet been published. For and act upon the monitoring results. example, MOF is to issue guidance on concessional The level and quality of inspection needs to be loans and tax reduction and exemption, MOST is to improved to strengthen compliance with regulations issue standards for water saving equipment and tech- on wastewater discharge. Currently, routine inspec- nology, and MARD is to issue technical indicators and tions need to follow the guidelines of the Law of measures for water saving in agriculture. However, Inspection. These state that there can be a maximum although the Decree has been in effect for over three of one inspection per enterprise per year. These inspec- years, these detailed guidance documents have not yet tions are planned in advance and the enterprises and been issued. Therefore, water saving activities have local government must be informed of the impending not been encouraged and promoted. inspection. Thus, even if these enterprises were to be Furthermore, provisions regarding water reuse and non-compliant all year round, it is possible that they recycling have not been consistent between regula- could pass the inspection simply by showing compli- tions on water resources and those on environmen- ance on the inspection day. This can incentivize enter- tal protection. Enterprises are hesitant to apply water prises to leave their wastewater treatments plants reuse measures for fear of being fined for violating dormant during the year to save O&M costs. environmental regulations. Besides routine inspections, ad hoc inspections are Similarly, enabling policies for municipal waste- possible in case of specific directions by the authorized water treatment, environmentally friendly products high-level officials. These unannounced inspections and recycling facilities as regulated in the 2014 Law may be triggered by media reports of non-compliance on Environmental Protection have not been detailed. or by complaints by the community. These inspec- Therefore, there has been little incentive for enter- tions, however, need to be conducted sparingly in prises to protect and reuse water. order to avoid duplication of onerous inspections by In addition to Decree 54/2015-ND-CP, the multiple agencies which would create an excessive Government also issued Decree No. 77/2018/ND-CP burden on enterprises. As a result, these provisions on water conservation in agriculture, providing for the have not proved very effective. In addition, while the development of small-scale irrigation, on-farm irriga- public have the option to raise a complaint to the PPC, tion, and advanced and water-saving irrigation and there is no clear mechanism to escalate the complaint advanced irrigation.  However, to date it has not yet to higher levels in case there is no action following the been operationalized. complaint. 86 GO V ER N A N CE F O R WATER S ECU RIT Y Environmental policing is largely reactive. In addi- Permits for direct discharges to water bodies are granted tion to DONRE, the Environmental Police, a special- by MONRE, while permits for discharge to irrigation ized People’s Public Security force, have the function of systems are granted by DARD/MARD. Thus, while preventing, detecting, stopping and combating environ- MONRE is mandated to regulate environmental pollu- mental crimes and environment-related administrative tion of water bodies, some discharges are beyond its con- violations; and of taking the initiative and coordinating trol and coordination and data sharing on the regulation with other forces in preventing and combating crimes of discharges between MARD and MONRE is limited. and violations related to natural resources and envi- Some legislative documents overlap or do not allow ronment-related food safety. The Environmental Police for effective and efficient implementation. Decree and DONRE are required to coordinate with each 03/2015/ND-CP provides a formula to calculate the other. However, the Environmental Police may only take compensation for environmental damage caused. action when signs of crime or administrative violation However, due to its complexity, no environmental are directly detected, or when they receive reports on damage compensation cases have been conducted. In crimes or administrative violations (Article 7, Ordinance another example, Article 101 of the Environmental No. 10/2014/UBTVQH13). Thus, for the Environmental Protection Law (2014) states that enterprises with- Police to take action, either the monitoring of wastewa- out connection to a centralized treatment system ter quality by DONRE has to show a violation (with the have to have their own wastewater treatment plant. challenges discussed above) or the impact on the envi- Particularly for small and medium sized companies, ronment has to be so obvious that complaints can be the requirement to install their own wastewater treat- made by the public in general or by officials. ment plant, rather than having the option to share a The current institutional structure may – in some wastewater treatment plant or buying the services of a provinces – make it difficult for DONRE to fully per- larger wastewater treatment plant, is often too costly. form its tasks for control and prevention of water pol- As a result, compliance is limited. lution. DONRE has to follow two lines of reporting The sources of finance for the Vietnam Environmental - to MONRE and to PPC. DONRE follows MONRE Protection Fund (VEPF) need to be strengthened. Article in respect to technical guidance, but must refer cases 149 of the 2014 Law on Environmental Protection stip- of non-compliance to the PPC for action. Increasingly ulates that funding sources for the VEPF include state the PPC is found to value environmental compliance budget, environmental protection fees and environmen- and protection alongside economic development. This tal damage compensation (see section 6.5). However, should be increasingly promoted and incentivized to the Law on State Budget (2015) states that VEPF is a avoid a conflict of interest in which a PPC may favor non-state budget financial fund. Therefore, VEPF is hav- economic growth over environmental compliance. ing difficulty in accessing resources. It is proposed that As the PPC allocates the resources and appoints the 2014 Law on Environmental Protection should be DONRE staff, DONRE may not be in the position to revised by 2020, and strengthening of the VEPF could be insist on enforcing environmental regulation. DONRE’s included in this new legislation. role needs to be strengthened to be able to reinforce the implementation of the law, monitor compliance, and 6.7  Are the mechanisms for handling take swift action in case of any non-compliant behavior. transboundary issues working? Limited surface and groundwater quality monitoring While Vietnam is an upstream and downstream ripar- stations and databases do not allow for systematic iden- ian country, the Mekong River is the only transbound- tification of non-compliant polluters. The water qual- ary river in Vietnam with an agreement among riparian ity monitoring network is under-resourced and suffers states. Vietnam depends heavily on international riv- from considerable under-investment. To cut costs, water ers, with more than 60 percent of its total average quality samples are only taken twice a year from existing yearly surface water discharge generated outside the monitoring stations – once in the dry season and once in country (see figure 6.3). For all but one of Vietnam’s the wet season. Lack of monitoring limits the assessment transboundary watercourses, there is little or no joint on compliance of wastewater discharges, as well as the planning or management to optimize water resources at ability to calculate the carrying capacity of water bodies the basin scale and little consultation among riparians and to optimize the issue and regulation of wastewater on proposals or their impacts. Only for the Mekong discharge permits based on this (MONRE, 2018). is there a transboundary agreement, signed in 1995 by Some environmental mandates of line ministries are Cambodia, Laos, Thailand and Vietnam on cooperative overlapping, which creates challenges in enforcement. water use, together with an organization—the Mekong Improv ing Manage me nt of Rising R isk s 87 River Commission (MRC) and the associated National transboundary impacts (MRC, 1995). There is a risk Mekong Committees—to support implementation. The that further development will affect water management Mekong Agreement commits the countries to “cooper- in Vietnam (see box 6.7), particularly change and uncer- ate in all fields of sustainable development, utilization, tainty over the timing of flows. In the longer term exten- management and conservation of the water and related sive development could have significant adverse impacts resources of the Mekong River Basin.” The Agreement on the riverine ecology—the Mekong is the second most also contains important provisions for joint strategic biodiverse river globally— and on ecosystem services planning, as well for notification and prior consulta- more broadly. Strengthening mechanisms between the tion on planned projects. Mekong countries and finding new ways to broaden FIGURE 6.3:  Percentage of average annual surface water the dialogue among all riparian countries should be flows in river basins originating outside Vietnam explored, as should ways to share benefits and minimize adverse impacts. This includes further bilateral work 100 Percent 95% between Vietnam and Cambodia to find ways to address local water resources management issues in the Mekong, 75 Percent given Vietnam’s unique role as an upstream and down- 50 Percent 40% stream neighbor to Cambodia. As development of the 30% river increases, joint management and operation of the 22% 17% 25 Percent river will be increasingly important, and mechanisms for joint management should be investigated (MRC 2017a). 0 Percent Mekong Red-Thai Ma Ca Dong Nai Additional cooperation mechanisms among Binh Mekong riparian states, also have the potential to Source: ADB 2009. address water-related challenges. The Lancang- Mekong Cooperation Mechanism, covering China, Implementation of the Mekong agreement has brought Cambodia, Lao People’s Democratic Republic, tangible benefits to riparian countries in terms of infor- Myanmar, Thailand, and Vietnam, was officially mation and risk management. For example, in August launched in 2016 and has established a “three + five” 2000, discharge from the Yali Fall Dam on the Sesan mechanism of cooperation, referring to the three River caused damaging floods in Cambodia. As a result, cooperation pillars – political and security issues, Vietnam agreed to change its release patterns, con- economic and sustainable development, and cultural structed the Sesan 4A regulating reservoir, and now and people-to-people exchanges – and the five key shares planned releases with Cambodia during the priority areas of connectivity: production capacity, flood season to prevent and mitigate potential impacts cross-border economic cooperation, water resources, on Cambodia. There is also sharing of hydro-meteor- agriculture, and poverty reduction. Based on the ological information for flood forecasting and for use Lancang-Mekong river area, the Mechanism has in river basin planning through a shared basin model also set up the Water Resources Cooperation Center, (MRC, 2017). Through the MRC, Vietnam and the Lancang-Mekong Environmental Cooperation Center other riparian countries have engaged in developing joint and the Global Mekong River Studies Center, to pro- basin plans, as well as joint studies of impacts of pro- tect the water resources and environment in the region posed development of infrastructure along the Mekong. (CSIS 2018; Xinhua Net, 2018). In addition, in 2014 Cambodia and Vietnam are also engaged in identifying Vietnam ratified the Convention on the Law of the joint water management issues along their border areas Non-Navigational Uses of International Watercourses. in the Sesan, Srepok, and Mekong Delta areas and plan Because of Vietnam’s high dependence on trans- to agree on institutional mechanisms through which the boundary flows, cooperative arrangements should be issues can be further explored and resolved. negotiated on other rivers too. For Vietnam, the risk of However, despite these arrangements in the Mekong, dependency on other countries is greatest in the Mekong challenges persist. The two upper riparian states, China and Red–Thai Binh Basins because such large propor- and Myanmar, participate in the MRC as “Dialogue tions of river water are outside Vietnam’s control. There Partners” but are not formal members. The construc- is a need to establish transboundary mechanisms on the tion of mainstream dams has been a contentious issue Red–Thai Binh and other shared river basins, look- within the MRC. However, there has been formal consul- ing at benefit-sharing arrangements that involve water tation for the latest proposed mainstream dam with an availability (quantity) and benefits beyond the river agreed-upon approach to addressing potential adverse (including hydropower and flood control). 88 GO V ER N A N CE F O R WATER S ECU RIT Y BOX 6.7:  Plans for upstream hydropower dam construction on the Mekong River present risks Upstream riparian countries on the Mekong River have high short-term adverse impacts are expected in the invested in many infrastructure projects and are planning dry season due to drawdowns for maximum power more, particularly hydropower projects that will change production and to dam hydropeaking operations. the flow regime and reduce quantities through evapora- • Sediment and nutrient deposition are predicted to tion. The 11 hydropower dams planned in Cambodia decrease by up to 65 percent at Kratie and Tan Chau- and Lao People’s Democratic Republic, in addition to Chau Doc - downstream of Sambor Dam - and by those planned in China, will have additional adverse smaller amounts off the mainstream. This can poten- impacts on river flows, sediment loads, and fish biomass. tially cause a substantial decline in biological pro- Aside from evaporation from the reservoir pool, the ductivity, a reduction in agricultural production, an risk from hydropower dams is not an overall reduction increase in erosion, and a decrease in the build-up of of river flows from the mainstream dams, as the dams riparian and coastal sites. As a result, salinity intru- are not for consumptive use. In fact, the production of sion is expected to increase in some coastal areas. hydropower actually gives an incentive to pass the water • Mainstream and tributary routes for migratory fish downstream rather than to consume it for irrigation. are likely to be obstructed, leading either to their The issue is more the change in timing of water flows. extinction or to a collapse such that they would no The Mekong River Commission (MRC) completed a longer be considered an important catch by fisher- cumulative impact study in 2017 on the consequences ies. These fish account for about 74 percent of the of current and planned water resources development catch of the 10 most important commercial fish spe- projects in the Lower Mekong Basin (MRC, 2017a). It cies. Cumulated with other impacts from the hydro- assessed three main water resource development sce- power cascade, this would cause about a 50 percent narios over a 24-year period: 2007 early development loss in fish yields for Cambodia and Vietnam, with scenario (baseline); 2020 definite future scenario, which implications for food security and livelihoods of includes all existing, under-construction, and firmly large segments of the population. In addition, sev- committed developments; and 2040 planned develop- eral species would die out in the river, including the ment scenario, which includes developments planned last of the 100 or so remaining Irrawaddy dolphins, for implementation by 2040, in addition to the 2020 a bellwether species that reflects the health of the developments. river. The study predicted that hydropower development • Agricultural productivity is expected to be affected in plans will increase energy security and contribute to eco- areas along the mainstream branches of the Mekong nomic growth but that these benefits will also cause sub- due to retention of sediment and nutrients by the stantial losses in ecosystem services, many of which are hydropower dams. transboundary. The highest sectoral GDP growth comes • Losses from agriculture and fisheries would amount from hydropower development, driving 43–49 percent to over US$760 million (VND15.8 trillion) annu- of the economic benefits. However, the negative effects ally in Vietnam alone. Households are expected to on fisheries cuts the hydropower gains by about 26 per- be affected either directly through reduced income cent in the 2020 scenario and by about 41 percent in (farmers, fishers) or indirectly through reduced pro- the 2040 scenario. Potential mitigation measures for all tein (fish) availability. The impact on the incomes planned dams could reduce the negative effects on fish- of affected producers is estimated at around 50 eries to 11 percent. percent. A report from MoNRE prepared by Henningson, Close cooperation between the MRC member coun- Durham and Richardson and the Danish Hydraulic tries is key for reducing potential negative impacts of Institute in 2015 quantified the impacts of the proposed any given project. The MRC states that benefit-sharing 11 hydropower projects for the Mekong Mainstream agreements should be designed as cross-sectoral mecha- in the Lower Mekong basin as follows (HDR&DHI, nisms and not as compensation schemes across countries 2015): because the winners (for example, energy companies) • While low to moderate changes in the flow regime are and losers (for example, fishing house-holds) are in all expected in a normal hydrological year, high to very four countries. Source: Mekong River Commission (MRC) 2017a; Mekong River Commission (MRC) 2017b; HDR and DHI 2015. Improv ing Manage me nt of Rising R isk s 89 6.8  The basic building block for to regular monitoring systems, ongoing automatic planning is information; the process monitoring networks have been upgraded at both has been started, but the data are still national and provincial levels. There are 23 surface water real time automatic monitoring stations at the lacking national level and 80 stations at the provincial level. 6.8.1  An initial database for water resources A wastewater discharge database is in place for has been established three inter-provincial basins and there are plans for In 2017, MONRE issued Circular 47/2017/ its expansion. The Vietnam Environmental Agency TT-BTNMT on supervising extraction and use of under MONRE has established wastewater discharge water resources. This circular specifies requirements databases for the interprovincial river basins of Cầu, for developing a database shared between the national Nhuệ - Đáy, Đồng Nai. The databases are available and local levels and within river basins. The circular in the VEA portal.5 Although some data have been requires timely and continuous provision of integrated collected for other interprovincial river basins, a data- data between national and local levels, together with base has not been established comparable to those for sharing of information and data between water extrac- the three river basins mentioned. In early 2018, the tion organizations, water users, and state management Prime Minister issued Decision 140/QD-TTg dated agencies. 26/1/2018 approving the project called ‘Inventory, MONRE is responsible for investing and devel- assessment, classification and development of national oping database management systems at the national database of waste discharging sources’, which is to level, and PPCs at the local level. At present, MONRE be implemented between 2018 and 2020. Its objec- is developing an online system to monitor and man- tives include establishing reliable, updated, sufficient, age surface water and groundwater resources and timely, united databases nationwide, connected to the their extraction and use. The system is also designed to environmental database for state management and monitor water discharge into auxiliary water courses scientific purposes. in order to supervise compliance with water resources Databases on other water-related activities are also licenses and to support management and guidance maintained. In addition, databases on water extrac- relating to water resources. This system is estimated to tion works, activities discharging into waterbodies, commence its operation by the end of 2019. PPCs are permits (water extraction permits, discharge permits) responsible for the database at the local levels. Water and projects on the rivers and riverbanks have been extraction organizations are responsible for investing developed. in and installing equipment for connecting and trans- mitting data to the monitoring database systems. 6.8.2  There is a pressing need to strengthen A database on water quantity and quality is being information to allow for informed constituted. Between 2013 and 2018, water quality decision-making and quantity monitoring has been strengthened at Water resources management is a knowledge-based both national and local level. At the national level, activity constrained by lack of information. Vietnam MONRE maintains regular surface water monitoring lacks the data and modern modeling and management in 360 stations with a frequency of 4-5 times per year. tools needed to manage its water resources. Virtually These stations are located in nine river basins, namely all water planning tasks have come up against the lack Cau, Nhuệ - Đáy, Hồng – Thái Bình, Mã Chu, Cả - La, of reliable data and of the skills and tools needed to Vu Gia – Thu Bồn, Sesan – Srepok, Đồng Nai, and the turn data into information to support planning and Southwest region. There are seven cross-border water decision making. The 2012 Law on Water Resources monitoring stations between China and Vietnam. In assigns several data-related tasks to MONRE addition, MONRE maintains about 820 groundwater (see box 6.1). monitoring stations (MONRE 2019b). Other minis- Even if data exist, information sharing faces chal- tries conduct ambient environment quality monitor- lenges. Two key bottlenecks have emerged: the wide- ing with about 100 surface water monitoring stations spread reluctance of organizations to share what data in urban areas and industrial zones with a frequency they have3 and the requirement under the 2012 Law of 3-6 times per year. At the local level, most provinces on Water Resources that users of information on have approved environmental monitoring systems or water resources pay for it (see paragraph 8.3). There provincial action plans for environment monitoring, is a lack of a united database on water resources to be including surface water and groundwater. In addition used consistently from the national to the local level. 90 GO V ER N A N CE F O R WATER S ECU RIT Y Water data are scattered among ministries and locali- made available to everyone who needs it. There has ties, posing difficulties in management. Except from been external support for collecting data, including to database sharing between MONRE and reservoir MoNRE’s hydro-meteorological network and centers operators subject to inter-reservoir procedures, there (see box 6.8). However, the networks remain incom- has been little information sharing on water extrac- plete and do not cover the full range of hydro-meteor- tion, use, permit granting, planning and projects in and ological, surface water, and groundwater monitoring around rivers among different stakeholders. A strong requirements. Due to limited budgets, the database knowledge base, sound management tools, and more is not updated and lacks necessary data input, failing open access need to be developed for water resources to meet demands from management agencies and the management up to the basin scale. society. Chapter 7 (7.4.2) below makes recommenda- Investments in data gathering need to be completed, tions on strengthening the national water information and data need to be transformed into information and system. BOX 6.8:  World Bank support for water resources information Under the 2012 Mekong IWRM Project (US$26.59 developed in 2016, and equipment is being acquired million), significant investments are being made to (meteo stations, rain and water gauges, flow and sedi- construct the water resources monitoring network and ment monitors). A high-capacity computer system is water resources management database in the Sesan- being installed and a forecasting model and integrated Srepok basin, to measure water flow and quality. The forecast and early warning tools are being developed. investment is in the mainstream Mekong, Sesan, and The Dam Rehabilitation and Safety Project is install- Srepok as well as 10 other major tributaries shared ing hydro-meteorological stations in the Vu Gia–Thu with Cambodia. The project is also establishing a water Bon and Ca basins. resources information system for the Mekong Delta and The Vinh Phuc Flood Risk and Water Management supporting regional integration of forecasting and early Project will establish water monitoring and hydro-mete- warning in the Lower Mekong. orological systems in the Pham basin. The 2012 Managing Natural Hazards Project (US$ The Mekong Delta Integrated Climate Resilience 150 million) is supporting the national hydro-mete- Project will support the Ministry of Natural Resources orological center and all nine of the regional hydro- and Environment’s surface water and groundwater mon- meteorological centers. The architecture and design for itoring as well as a water information function embed- an integrated hydro-meteorological system have been ded in the proposed Mekong Delta Center. Source: World Bank 2013; World Bank 2018c. Notes 3. Charges are based on Decree 117/2007/ ND-CP on Clean Water Production, Supply and 1. See Prime Minister’s Decisions 171/QD-TTg Consumption and Decree 124/2011/ND-CP dated 14/11/2007 for Cau River Basin, 1404/ which amends and supplements some articles of QD-TTg dated 31/8/2009 for Nhue-Day River Decree 117/2007/ND-CP, as well as on Circular Basin, and 157/QD-TTg dated 1/12/2008 for 88/2012/TT-BTC from the Ministry of Finance Dong Nai River Basin. 4. It was previously regulated by Decree 67/2003/ 2. Decree 201/2013/ND-CP, Article 28, specifies ND-CP and was replaced when Decree in what instances MONRE or PPC provide 154/2016/ND-CP came into effect in 2017. licenses and thus also charge the water abstrac- 5. The portal can be accessed via http://lvscau.cem. tion charge. gov.vn 7 Initiatives for Strengthening Water Resources Management Key issue • Under the business-as-usual approach, stresses will grow worse, with the costs of inaction climbing to as high as 6 percent of GDP by 2035. Actions, feasibility, and priorities • Integrated water resources management has been adopted to deal with solving the extreme water-related risks to which the Mekong Delta is vulnerable. Now, Vietnam needs to move forward on integrated management and the basin approach, adapting them to the challenges of each basin. • Science, information, and institutional capacities need to be strengthened, with all stakeholders involved. • The region-wide planning approach being pursued for the Mekong Delta may produce valuable lessons for other basins. • Nationwide, multiple demand management measures could ease water stress and help balance supply and demand. • Aligning public spending with basin planning could facilitate integrated approaches. 7.1  New initiatives in basin planning may river basin basis without division by administrative show the way forward boundaries”. Recent initiatives in the Mekong Delta are testing pathways toward a multi-sectoral IWRM Vietnam has long recognized the importance of inte- approach but are also revealing considerable remain- grated water resources management (IWRM).The ing challenges (World Bank 2016a; GoV 2017b). institutional and governance framework for water resource management has evolved in response to 7.1.1  Prioritizing the Mekong Delta growing challenges. Two decades ago, the govern- ment adopted IWRM as the basis for water resources IWRM has been adopted as an approach to solving the planning, development, and management (see section extreme water-related risks to which the Mekong Delta 6.4.1 in chapter 6). The legal framework supports is vulnerable. The Mekong Delta—almost 40,000 integrated management. The 2012 Law on Water square kilometers (km2), the size of Switzerland or the Resources mandates integrated management of the Netherlands—is home to 17 million people. The delta resource. The National Strategy on Water Resources produces most of the rice grown in Vietnam and is one to 2020 confirms that “water resource management of the largest rice production areas in the world. But must be implemented in an integrated manner on a it is highly vulnerable to water-related risks, including 91 92 GO V ER N A N CE F O R WATER S ECU RIT Y droughts, water pollution, landslides, and river bank • In the delta peninsula, the priority is to protect and coastal erosion, as well as to the impacts of cli- coastal areas. The objective is to address the mate change. It faces rising sea levels, a decrease in challenges of coastal erosion, groundwater man- river discharge, saline intrusion, falling water tables, agement, sustainable aquaculture, and improved and periods of drought and water shortages (2030 livelihoods. WRG 2017). The government has determined that The Mekong Delta Climate Resilience and IWRM can offer a solution and is developing a more Sustainable Livelihoods Project takes a pragmatic holistic and spatially integrated vision by trying to approach. Its water sector components take a good develop multi-sectoral long-term plans for managing practice, multi-sectoral, participatory approach water and land resources in the delta (World Bank based on sound science to demonstrate how stra- 2016a; GoV 2017b). tegic, evidence-based multi-sectoral solutions can Planning has been under way since 2011. be planned and implemented from a basin perspec- Recognizing the scale of the challenges, the govern- tive. The Ministry of Natural Resources and the ment began the Mekong Delta Plan in 2011 (GoV Environment (MONRE) implements the knowledge 2014). Over 2011–2013, a team of international and component to enhance the information systems local consultants financed by the Dutch government needed to support evidence-based planning and worked under the guidance of the Mekong Delta decision making. This includes monitoring systems Committee (MDC) and the Deputy Prime Minister, and decision support tools. Building on this knowl- Mr. HE Hoang Trung Hai, to prepare the plan. At edge base, MoNRE will develop the institutional a total cost of €1.3 million, the Mekong Delta Plan arrangements and road map for building provin- describes the strategic vision for the delta until 2100 cial and district planning capacity for sustainable and calls for the industrialization of agriculture, the delta wide water resources management and devel- sustainable use of land and water, and planning based opment. The Ministry of Agriculture and Rural on a shared framework. The plan was adopted as a Development (MARD) will mount climate-resilient reference document, meaning that it is not legally economic projects, seeking opportunities for “low- binding. regret” investments and scaling-up of smaller, suc- cessful pilots. This approach is expected to scope 7.1.2  Implementing the Mekong Delta Plan out possible longer-term development options (to be Given the major constraints of inadequate knowl- financed under future phases) and to demonstrate edge and the inherent difficulties of a multi-sectoral how multi-sectoral solutions can be implemented. approach, the government negotiated the US$387 mil- Implementation has begun. MoNRE, with support lion Mekong Delta Climate Resilience and Sustainable of consultants, is preparing a decision support sys- Livelihoods Project with the World Bank in 2016 to tem and a comprehensive water resource inventory support water sector planning and investments within (Delta Atlas). MARD, with support from consultants, a broader delta-wide planning process. A significant is identifying candidate pilot projects. However, pro- challenge is the sheer complexity of the problems, gress is slowed by the budget constraints related to the which are very different in the three hydro-ecological national debt ceiling. zones in the delta: • In the upper delta, the main challenge is manag- 7.2  Scaling up the planning approach ing floods. The primary objective is to reclaim The government has put in place new arrangements and protect the benefits of controlled flooding for coordinating and incentivizing development while increasing rural incomes and protecting across provincial lines. In April 2014, to improve high-value assets. coordination of development of the Mekong Delta, • In the delta estuary, the current system of polders the Prime Minster issued Decree 593 providing for to control saline water intrusion has become region-wide planning and cross-provincial invest- unsustainable because of reduced dry-season ments that are targeted to receive a supplementary water availability and sea-level rise. The main 10 percent of the required investment budget as an objective is to address salinity intrusion and incentive. coastal erosion while promoting sustainable Subsequently, the government designated the aquaculture and climate-smart agriculture. Ministry of Planning and Investment (MPI) to Initiativ e s for Stre ngth e ning Wate r Re source s Manage m e nt 93 coordinate development planning for the delta. for the delta. At the request of MPI, World Bank Resolution 120 of November 2017 (GoV 2017) spells financing of US$10 million was included under the out the policies for developing the delta: green growth Mekong Delta Climate Resilience and Sustainable and private financing for production and infrastruc- Livelihoods Project to finance integrated master ture projects, with public finance reserved for public planning for the delta region across all sectors. MPI good and interprovincial projects (see box 7.1). A new is the implementing agency for this component of the element is the assignment of specific roles to each sec- project. Consultation on the integrated master plan tor ministry and a coordinating role to MPI. has begun with a workshop; terms of reference are Under this coordinating role, MPI is launching under preparation. a comprehensive multi-sectoral planning exercise BOX 7.1:  Resolution 120 spells out policies for developing the Mekong Delta The Ministry of Planning and Investment (MPI)  is to chains; and promote on-farm and post-harvest value develop the framework to encourage private investment added. and prioritize public investment. To support mobiliza- The Ministry of Industry and Trade (MoIT) will sup- tion of private finance, MPI will develop mechanisms port green industries and low carbon and renewable for mobilizing resources such as mechanisms of capital energy. MoIT will prioritize the development of green, borrowing, issuance of bonds, and public–private part- low-emission industry; limit new coal-fired facilities in nerships, and will encourage participation of enterprises the delta; convert existing plants to cleaner technologies; and people in infrastructure development. That requires and promote renewable sources of energy. prioritizing state capital sources for inter-regional and In addition, MARD will develop the following plans: interprovincial projects, multipurpose projects, projects • Plan for Coastal Protection, which consolidates and combining transportation and irrigation, and projects upgrades the coastal dyke system and prevents and promoting smart use of water to mitigate the effects controls coastal erosion, with a focus on immediate of climate change and tackle water-related natural handling of serious river bank landslide and coastal disasters. erosion. The Ministry of Agriculture and Rural Development • Master Plan on River Training, which is associated (MARD) is to support agricultural modernization with the Master Plan on Land Use along the river, and attract private investment. MARD will develop designed to save space for flood drainage and con- “breakthrough” policies and mechanisms to develop struction of traffic works associated with dykes. large-scale, highly competitive agricultural produc- • New rural area development plans to reduce expo- tion; encourage private investment; develop value sure to flood and erosion near critical river stretches. Source: GoV 2014b; GoV 2017b. This region wide approach holds considerable prom- 7.3  Stepping up to the priorities ise for integrated water planning and management. 7.3.1  The integrated management and basin Among the innovations: approaches need to be reinvigorated • Inter-sectoral and inter-ministerial planning Despite lackluster past performance, there is a good is being piloted by MPI that is also linked to case for setting up empowered river basin organiza- the government’s financial resource allocation tions (RBOs), starting with the Sesan-Srepok Basin. nexus. Such initiatives in the past have had little success. • Incentives are offered to the 13 provincial peo- Today, with the rapid increase in problems and risks, ple’s committees (PPCs) in the delta to buy into there is a good case for setting up empowered RBOs, multi-provincial investments. and the government has plans for this on the table. • Water sector planning is set within the larger The most advanced is the proposal for the Sesan- framework of region-wide spatial and socio- Srepok basin, in the pipeline since 2013 and supported economic planning. under a World Bank-financed project. The design of 94 GO V ER N A N CE F O R WATER S ECU RIT Y the proposed RBO is now complete, and a decree set- to meet the demands of settlements, agriculture, and ting out the framework for RBOs has been prepared industry; contaminated return flows and pollution; and and is awaiting approval by the Prime Minister. The emerging environmental risks such as salinization, saline next step is implementation. intrusion, and groundwater depletion. Lessons from the Mekong Delta on integrated plan- Institutional arrangements to manage this complexity ning could be applied to other basins. With World are equally demanding. There are a host of central and Bank support, the government is embracing the mas- decentralized political and executive bodies, each with its sive challenge of basin planning in the Mekong Delta. own vision and powers. The challenge of developing an If this challenge is met, it should show the way to integrated approach to land and water management in meeting other, lesser challenges. The Mekong Delta a river like the Mekong which stretches across six coun- Initiative (along with that for the Sesan-Srepok) needs tries and 13 Vietnamese provinces is formidable. to be followed closely, with lessons applied elsewhere. Many of the challenges result not from exogenous The science needs to be strengthened—“you can- factors like climate change but from past choices not manage what you cannot measure.” High-quality about development and management of natural and timely water data need to be built up to support resources. In these vast basins, there is an impact planning and decision making. Areas for consideration from naturally occurring changes such as increased include strengthening the hydro-meteorological system variability in the intensity and timing of precipitation. and linking it to basin and national water information However, the challenges and risks are predominantly systems, with open access; building a data and infor- human-caused, resulting from choices about develop- mation program for climate change (including regional ment and management of the resource and the institu- cooperation); and developing a national water research tional mechanisms established to implement them. As plan. This knowledge base could be accompanied by an illustration, the disastrous flooding in the Mekong developing or strengthening decision-support tools, Delta in 2008 occurred in a year when precipitation including models and tools for integrated management throughout the basin was no different from the long- of river flows. Much has been done. Still needed is com- term average. The floods resulted not from climate pletion of networks, at least in priority areas; real-time change but from patterns of development of land and monitoring; and strengthening of national and regional water and the failure of institutional measures to man- hydro-meteorological centers, with information man- age the resulting risks (World Bank 2013). agement and open access—for example a public portal. Smaller basins face less complex problems but Institutional capacity building is needed, and all have greater vulnerability to risks from scarcity and water stakeholders at the central and decentralized extreme events. Many of Vietnam’s rivers have much levels need to be involved. RBOs, whatever their form, smaller catchment areas than the Mekong. While less need to be adequately staffed and financed. Capacity complex, the challenges and risks of these smaller of public organizations for basin planning needs to be basins are equally pressing for the local population built at central and decentralized levels. The capacity and their livelihoods. Box 7.2 illustrates the chal- of stakeholders at the local level to participate, particu- lenge of the relatively small Cai River Basin (4,000 larly local government and communities, also needs to km2, about the size of Rhode Island). This is a steep- be developed by providing means for their participation sided basin, descending from 1,600 meters right down and mobilizing and empowering them to participate in to sea level over a short distance, rainfall is largely sustainable water development and management. concentrated as relief rainfall in the upper part of the catchment, and downstream areas are highly sensitive 7.3.2  Challenges are diverse, requiring to variations in precipitation and runoff. Variations in adapted, integrated approaches rainfall patterns have resulted in a series of droughts Vietnam’s four largest rivers—Mekong, Red–Thai Binh, and floods that have had a severe impact on liveli- SERC and Dong Nai—which account for 80 percent of hoods and assets downstream (WPP 2017). the country’s water resources, face challenges and risks Smaller basins also face different institutional chal- of extraordinary complexity. The high level of develop- lenges. Almost the entire catchment of the Cai River ment, the large size of the population, and the socioeco- lies within a single province (Ninh Thuan). Thus, nomic importance of the Mekong raise complex issues of public awareness of the problems is directly linked international cooperation; watershed management; spa- to their physical causes. The PPC responsible for tial planning; complex hydropower cascades (there are water management is highly motivated but lacks the more than 7,000 dams on the river); massive diversions skills and resources to respond adequately. The local Initiativ e s for Stre ngth e ning Wate r Re source s Manage m e nt 95 departments of MONRE, MARD, and the Ministry of very large basins, the approach has to work across Construction (MoC) provide varying levels of support international and interprovincial jurisdictions to and interagency cooperation. Even in a basin as small respond to extraordinarily complex challenges of land as Cai, solutions are complex and the PPC will need and water development and management. Within considerable assistance to implement them. smaller basins, challenges, technical responses, and The lesson is that integrated management is the administrative delivery are less complex, but no less appropriate approach in all cases but that responses vital to socioeconomic development. have to be adapted to the challenges. At the scale of BOX 7.2:  Managing water and risks at the basin scale in Ninh Thuan Province The principal river of Ninh Thuan Province is the Cai (or With World Bank support, the province has been Dinh) River, with a drainage area of 3,958 square kilom- studying ways to improve the situation. The emerging eters. The watershed, which lies almost entirely within the (provisional) recommendations are: province, descends from 1,600 meters to sea level over a • Strengthen water governance by better defining short distance. Development has been extensive, with six the roles and responsibilities of agencies and get- hydropower plants and 21 irrigation dams and reservoirs ting them to work together within an integrated supplying 77,500 hectares of irrigated agriculture. plan. There is not enough water in the basin to meet grow- • Improve water resources monitoring and develop ing demand. It is also vulnerable to two contrasting a water resources information system and flood climate-related risks. High flows in the rainy season and drought forecasting and early warning result in devastating flash floods in the lower section of system. the basin, causing heavy impacts on the fragile urban • Improve the operational capacity of reservoirs infrastructure and on risk-prone settlements along the to ensure drought and flood preparedness and coast. Since 2014, the province has also suffered cycles develop new storage capacity upstream to better of severe drought, which adversely affect agricultural manage drought and flood risk. production, economic development, and the daily life • Improve agricultural resilience and boost farm- of its inhabitants. In 2015, reservoirs dried up almost ers’ incomes by increasing water productivity and completely, with water levels falling below 10 percent managing risks of water scarcity. This involves of their design capacity. Farmers abandoned the sum- changing cropping patterns, with less water mer-autumn rice crop on over 10,000 hectares, many devoted to rice and more to higher-value crops, livestock perished, and thousands of households experi- and adopting water-saving technology, notably enced drinking water shortages. drip irrigation. Source: Water Partnership Program (WPP) 2017. In all cases, the right balance between institutional and supply– demand gaps and reduce water stress at the basin infrastructural responses needs to be found. Infrastructure scale (2030 WRG 2017). The study identified four responses may be only part of the solution, and dams and major basins where demand was growing and likely reservoirs do not necessarily require large, multiannual to outstrip supply in the dry season by 2030: Red– storage capability. In the case of Ninh Thuan, for exam- Thai Binh, the South East River Cluster (SERC), ple, the optimal patterns are relatively large inter-annual Dong Nai, and Mekong. It examined the possible impact storage upstream and small, local inter-seasonal storage of 24 agricultural, municipal, and industrial measures close to the irrigation perimeters in the lower reaches. In to identify the most cost-effective solutions to close the other areas, increased conjunctive use and recharge of identified water supply–demand gap in SERC and to aquifers may be the least-cost solution. move all four basins to a low water stress status. The study also made a rough estimate of possible costs 7.3.3  Multiple demand management measures (see figure 7.1). The study found that in three of the four could ease water stress and help balance basins, demand management measures could keep the supply and demand basin resources in balance through to 2030 and that only The 2030 Water Resources Group (2017) study in the SERC Basin would supply enhancement measures found that an IWRM approach applying up to 24 also be needed (see box 7.3). The study also described four demand management measures could close emerging technical options with potential high impact (see box 7.4). 96 GO V ER N A N CE F O R WATER S ECU RIT Y BOX 7.3:  The emerging gap between supply and demand in the Red–Thai Binh basin through demand management measures in agriculture, municipal, and industrial water use The Red–Thai Binh is a diverse river basin with 15 per- thus allows policy makers to prioritize the demand cent of Vietnam’s rice irrigation. It is home to booming management measures that will save water most industrial areas, craft villages, and large urban conurba- cheaply. tions such as the capital, Hanoi. In the Red–Thai Binh Basin, agricultural measures The 2030 Water Resource Group study forecast are the most cost effective (with costs ranging from that under business as usual the Red–Thai Binh zero to less than US$0.1 per cubic meter), including basin would be water stressed (Water Exploitation sprinkler irrigation, alternate wet and dry (AWD) rice Index  =  27  percent) during the dry season by 2030. management practices, no-till agriculture and irriga- The study forecast that a reduction in water demand of tion scheduling, management of evapotranspiration 4.9 billion cubic meters annually would be required to using quotas, and system of rice intensification prac- move to a low water stress status. tices. If all these measures were applied throughout The study calculated a cost curve that ranked fea- the basin, the study estimates that around half the sible measures to reduce demand in the basin. The water gap could be closed. Less cost-effective munic- least-cost measures are on the left in the figure below ipal and industrial interventions, at an estimated and the costliest are on the right. The width of each US$0.2–US$0.4 per cubic meter, are required to fully column measures how much water the measure would close the annual water gap. Reducing the basin’s save, and the height of the column measures the cost water stress level to low would cost an estimated for each cubic meter of water saved. The cost curve US$2 billion in all. Red–Thai Binh River basin cost curve of solutions to reduce water stress in the dry season in 2030 S/m3 Induced 3.0 WEI gap in 2030 = 4,860 million m3 water stress Cost to close the gap = 2,000 USD million Zero discharge 2.8 (industrial parks) 2.6 2.4 2.2 Drip irrigation 2.0 Cost of additional water availability 1.8 Mulching Irrigation scheduling 1.6 Institutional capacity Agricultural Faucets (new building for industries 1.4 and retro t) Industrial Dual ush (retro t) Pressure management Municipal Municipal 1.2 Industrial metering wastewater 1.0 of non revenue water treatment Use of quotas -0.8 Municipal Irrigation leakage -0.6 scheduling (satellite data) -0.4 Soil -0.2 techniques Incremental 0 2,500 5,000 Canal lining Availability -0.2 Water recycling Million m3 Rainwater harvesting AWD rice (industrial parks) with fertigation -0.4 management Precision Municipal wastewater reuse farming Sprinkler Industrial wastewater irrigation Rice intensi cation(SRI) treatment Source: Adapted from 2030 WRG 2017. Note: WEI is the Water Exploitation Index. Initiativ e s for Stre ngth e ning Wate r Re source s Manage m e nt 97 BOX 7.4:  High-impact technical options The 2030 Water Resources Group study examined in annually), while increasing farmers’ profits. AWD depth four technical options that can be expected to could be applied on up to 4 million hectares. have a high impact on reducing water stress: • Reuse of treated municipal wastewater, which has the potential to increase urban water supply and • Improved irrigation scheduling, for example, reduce both pollution and water stress in some cities “induced water stress” for coffee. This has the poten- to low levels. tial to reduce total water demand for coffee by up to • Treatment of wastewater from industrial clusters in 25 percent while sustaining or even increasing yields specific “hot spots,” which can considerably improve and farmers’ incomes. surface water quality and also create scope for pub- • Alternate wet and dry (AWD) rice management lic–private partnerships, for example, by commercial- practices, which have been shown to reduce water izing central effluent treatment plants and industrial demand for the country’s most water-intensive crop water reuse systems. by 30 percent (saving up to 20 billion cubic meters Source: Adapted from 2030 WRG 2017. FIGURE 7.1: Overview of water demand reduction they work best when there are clear sector strategies, requirements in key economic river basins and associated a consolidated investment framework (also with clear indicative cost sector priorities), and well-prioritized principles and 3,000 3,000 guidelines. 2,000 2,000 This approach could help in prioritizing investment ($ million) Cost 1,000 900 650 0 3, 000 planning. Although improved water management -1,000 -650 will depend on the kinds of governance improve- 6,000 4,860 ments discussed in this Report, strategic investment reduction reqiremment (million cubic meters) 5,000 Water demand 4,000 3,000 2,520 will also be needed. Even in the Ninh Thuan basin 1,770 1,850 2,000 1,000 770 (see box 7.2), new storage capacity may be required 0 alongside management measures. Streamlining pub- 80 65 lic spending in basin plans could help prioritize the Water demand reduction 60 further infrastructure investments that will certainly requirement 40 29 30 27 be needed. (%) 20 10 0 South East River Cluster South East River Cluster Red-Thai Binh WEI Gap Dong Nai WEI Gap Mekong WEI Gap 7.4  Priority actions for government Water Gap WEI Gap consideration Source: 2030 WRG 2017. The government may wish to consider the following Note: WEI is the Water Exploitation Index. priority actions in four key areas. 7.3.4  Aligning public spending with basin 7.4.1  Developing basin-level institutional planning approaches Aligning public spending on water with basin plans Experiences in several river basins could show the way could ease coordination challenges among sectors to effective basin governance arrangements. Vietnam and between the center and the provinces. The use in is acquiring experiences of basin institutions and plan- the water sector of instruments recently adopted for ning, at the largest scale in the Mekong Delta, at the planning public expenditures could facilitate a multi- meso scale in the Sesan-Srepok Delta, and at the intra- sectoral approach in well-constructed basin plans. provincial scale in the Cai River in Ninh Thuan. An The government is adopting a more unified plan- evaluation of these efforts could allow Vietnam to ning and budgeting process to make horizontal and define the institutional and technical methodology for vertical integration easier for planning and manage- effective institutional arrangements and planning at ment. In particular, the new five-year Medium-Term basin level, perhaps starting with hot spots and prior- Investment Plan could help integrate sectoral and ity basins. subnational priorities with national priorities in basin plans. Experience with these instruments shows that 98 GO V ER N A N CE F O R WATER S ECU RIT Y More effective basin-level governance institu- institutional structure, clarity on the roles and tions could be built up from these experiences. responsibilities of the ministries is needed, in Basin- and watershed-level governance institu- particular for integrated management of water tions provide a forum and framework to address quantity and environmental health. inter-sectoral and inter-jurisdictional issues like • Providing technical support to the organiza- infrastructure planning, water allocation, flow tions: An RBO needs professional technical management, pollution, and flooding. Vietnam’s support for planning, monitoring, policy mak- existing institutions already do some of this, but ing, and oversight and regulation (see box 7.5). further institutional development could strengthen For example, a technical function is needed to effectiveness in key areas. ensure that water quality improvement targets There are international good practices in develop- are met. ing a multi-stakeholder framework for horizontal and • Setting up decision making structures at sub- vertical collaboration in integrated planning. basin or provincial level: Many basins have sub- Essentially, an institutional structure is needed basins or straddle administrative jurisdictions. to serve as a forum to improve policy coordina- Whatever structure is established will need to tion and cooperative action—horizontally across have sub-basin structures—councils, commit- sector agencies and vertically between central and tees, or other decision making structures—to local governments—to achieve common basin reflect basin-wide policies, plans, and decisions objectives and targets. Vietnam could consider at local level (see box 7.6). six key points in developing this institutional • Linking basin and sub-basin level structures structure: to national policy: Each basin-level institution needs to be linked to national policy and plan- • Establishing or reconfiguring multi-stake- ning organizations so that basin-level policy and holder RBOs: Existing structures (see chapter plans reflect national strategies. This will also 6) could be strengthened or new ones created encourage basin-level institutions to function with expanded representation, for example, to in a more interagency manner and allow them include provincial and local government repre- to better arbitrate and navigate interagency or sentatives, industry, commerce, irrigators, and interjurisdictional issues. civil society stakeholders such as environmental • Developing integrated plans for each basin: nongovernmental organizations (see box 7.5). MONRE, through the National Center for The role of these organizations vis-a-vis territo- Water Resource Planning and Investigation, is rial jurisdictions—provinces, districts, munici- initiating comprehensive and integrated plan- palities— would need to be defined, and their ning for the Sesan-Srepok basin. This initiative legal standing and powers in the basin defined could open pathways to basin planning across and strengthened. Vietnam within a multi-stakeholder basin gov- • Defining the roles of the different minis- ernance framework. tries within RBOs: Within the basin and the BOX 7.5:  River basin institutions work best when they have representation from multiple sectors and levels of jurisdiction A key element of most river basin management institu- political jurisdictions that share the basin are represented tions is that they feature mandated representation from and that there is a platform for consensus building. multiple sectors and often leaders from different juris- Similarly, the Brazil Water Law (1997) prescribes the dictions within a river basin. river basin as the territorial unit for management. River For example, Australia’s Murray-Darling Basin basin committees include representatives of unions, Authority is governed by a council consisting of rep- states, districts, municipalities, water users, and civil resentatives from six basin states as well as the federal society. Thus, the law provides for wide participation government. These arrangements are stipulated in the horizontally and vertically. Federal Water Act (2007). This structure ensures that Source: Jaspers 2003. Initiativ e s for Stre ngth e ning Wate r Re source s Manage m e nt 99 BOX 7.6:  International experience with technical support units and sub-basin entities Water management is often technical and local. Thus, many Mississippi River Commission) has been designed to water management commissions are supported by strong provide greater local participation. It was formed in technical units organized at sub-basin level. In France, for 1981 to facilitate dialogue and cooperation on water instance, the Seine-Normandy Basin Committee has four and related land resource issues specific to the upper technical committees handling aquatic environments, portions of the Mississippi River Basin. It serves as a coasts and the ocean, territorial policy, and land-use plan- regional forum for the cooperative planning and man- ning. Since 2004, the committee has also included a scien- agement of river-related issues of common concern to tific council, an assembly of 21 external multidisciplinary the states of the upper Mississippi River basin. The technical experts, to advise on issues concerning long-term association also provides a forum to develop regional projects envisaged in the basin. positions on river resource issues and serves as an In the United States, the Upper Mississippi River advocate of the basin states’ collective interests before Basin Association sub-basin entity (within the larger federal agencies. Source: World Bank 2017p. 7.4.2  Building a national water information management, Vietnam needs to strengthen water system resources information by reinforcing and broadening Vietnam needs to modernize water monitoring, data gathering and building water information sys- enhance analytical tools, and invest in water knowl- tems.1 Box 7.7 shows one approach in India, which edge. To underpin water resources planning and risk could provide a model. BOX 7.7:  How the India National Hydrology Project invests in water information Vietnam faces many of the same water challenges the approach to the national level, supporting multi- as India, pointing to lessons from the development state coordination for river basin planning, flood of the India-wide hydrological monitoring net- management, and reservoir operation in large multi- work under the National Hydrology Project and its state basins, as well as for cross-boundary aquifer predecessors. management. A four-pronged strategy has been India took as its starting point that water knowl- adopted: edge would underpin integrated management of water • Modernizing monitoring by establishing com- resources at the river basin level. Investments have been prehensive, automated, real-time monitoring in developing state-level hydrological information sys- and data management systems nationwide for tems, with automatic real-time monitoring and data surface water and groundwater, for both qual- transmission; using data for river basin planning, infra- ity and quantity. structure design, and operation of key reservoirs; and • Enhancing analytical tools for water resources disseminating data through online real-time informa- assessment, hydrological and flood inundation tion systems. forecasting, water infrastructure operations, The benefits have been clear. The hydrological infor- groundwater modeling, and river basin and mation systems, with modern software tools, have investment planning. supported river basin planning and development and • Transforming knowledge access, using the improved structural design of infrastructure. Real-time internet, mobile devices, social media, and information for reservoir operation and flood manage- other communication tools to support a ment has given much earlier warning and avoided loss web-enabled spatial water resources infor- of life and damage. Decision makers have become con- mation system, with access to and visualiza- vinced of the need for a basinwide approach and of the tion of customized water information by all key roles of accessible water information and institu- stakeholders. tional capacity. • Modernizing institutions through investments The latest phase of investment—the National in people and institutional capacity. Hydrology Project (negotiated in 2017)—scales up Source: World Bank 2016f. 100 GO V ER N A N CE F O R WATER S ECU RIT Y A priority is to collect all water data into a robust, of how information powers good water manage- easily accessible, and transparent national water ment. Creation of the system would facilitate the information system. At present, data are not col- sharing of information across government agencies lected in a standardized way, often residing in sev- and enhance the integrated management of water eral databases and not in a central location that is resources, increasing the evidence base underpin- easy for provincial officials, agencies, and the public ning water policies and investment and management to see. A single national water information system decisions; help agencies and stakeholders collaborate with open real-time access via a data portal could more effectively; give policy makers a more inte- be created, and government agencies collecting data grated view of the challenges and potential solutions on water could be obliged to share their data on this in WRM; provide consistent information for bench- platform. marking the performance of managed water systems An information system catalyzes good water man- over space and time; and support real-time drought agement, drawing on the adage “you cannot man- and flood forecasting. All this will lead to greater age what you cannot measure.” Boxes 7.8 and 7.9 certainty in water resources planning and improved (as well as 7.7) give examples from other countries community understanding of WRM. BOX 7.8:  Improving water information in Australia In 2004, the Council of Australian Governments incor- included issuing national water information stand- porated a directive into the National Water Initiative ards, collecting and publishing water information, (2004) to develop water resource accounting, requiring conducting regular national water resources assess- water data to be identified, quantified, reported, and ments, publishing an annual National Water Account, published for the public. providing regular water availability forecasts, advising Australia’s Water Act (2007) gave statutory respon- on matters relating to water information, and enhanc- sibility to the Bureau of Meteorology for collecting ing understanding of Australia’s water resources. The and disseminating water data across Australia. The act also requires the bureau to “annually publish the same year, Australia launched the AUD 450 million National Water Account in a form readily accessible 10-year Improving Water Information Program. This by the public.” Source: Australian Government Bureau of Meteorology n.d. BOX 7.9:  The United States has a national water database accessible through a single website The United States Geological Survey (USGS) main- specific conductance, pH, nutrients, pesticides, and vola- tains a distributed network of servers for the acqui- tile organic compounds. sition, processing, review, and long-term storage of Water Data for the Nation is the USGS public web water data, called the National Water Information interface to much of the data stored and managed within System (NWIS). The NWIS is the principal reposi- NWIS. The goal of the site is to provide USGS, USGS tory of water resources data for the United States. It cooperators, and the general public with a geographi- includes data from more than 1.5 million sites in all cally seamless and easy-to-use interface to most of the 50 states. Some of these sites have been in operation USGS water data maintained in the NWIS. for more than 100 years. USGS also developed the web site WaterWatch, NWIS integrates stream-flow information with many which displays maps, graphs, and tables describing real- other types of water data, including historic water-qual- time, recent, and past streamflow conditions for the ity data from rivers and aquifers, historic groundwater- United States. The real-time streamflow maps highlight level data, and real-time water quality, precipitation, flood and high flow conditions. The seven-day average and ground-water levels. Data are collected on gauge streamflow maps highlight below-normal and drought height (stage) and streamflow (discharge), temperature, conditions. Source: USGS 2016, 2018. 7.4.3  Planning for demand management become necessary. The recent report by 2030 WRG measures (2017) highlighted the fact that four major basins, As demand grows and local scarcities increase, which together generate 80% of Vietnam’s GDP, are demand management measures will increasingly expected to face water stress, or even severe water Initiativ e s for Stre ngth e ning Wate r Re source s Manage m e nt 101 stress, by 2030. As discussed above (7.3.3), the report As discussed in section 2.3 in Chapter 2, the 2017 concluded that the high water stress levels in all but PER identified the MTIP introduced in 2014 and the one river basin could be reduced to low or no water MTFP introduced in 2015 as key instruments for stress with cost-effective water demand management improving resource allocation. They allow the alloca- measures alone. The total cost of moving towards low tion of capital investment to be linked to the MTIPs or no water stress is expected to amount to about US$ agreed to on the basis of development and infrastruc- 2 bn for the Red Thai Binh River Basin and to about ture gaps. They also allow the multiyear programming US$ 650 mn for the Dong Nai River Basin. In the and the gradual increases in O&M expenditure essen- Mekong River Basin, water demand measures would – tial to preservation and efficient use of assets. These besides moving towards low water stress – even allow planning improvements could eventually be accompa- for savings of US$ 650 million. In the SERC River nied by improvements in the budget process, particu- Basin, however, the report found that water demand larly a move toward results-based budgeting. Finally, measures would need to be complemented by invest- the Public Expenditure Review underlines the need for ments to increase water supply in order to achieve low sound sector strategy to underpin both long-term fis- or no water stress levels. The cost curve methodol- cal planning and shorter-term budget requests. Decree ogy discussed in box 7.3 indicates entry points to a No.84/2015/ND-CP aims at improving monitoring demand management strategy.
 and evaluation in investments. While it still has to be Planning related to disaster risk control and preven- made fully operational, the introduction of results- tion needs to be updated and streamlined into existing based management has the potential to significantly plans. A Master Plan for river management and river improve the effectiveness of public interventions. bank protection of critical canals is required. This These new approaches may create an opportunity should be integrated with the planning of residen- for joint work between MONRE and MARD on irri- tial areas to ensure protection of resettlement areas gation development and management to integrate the against flood and erosion. Further, the planning for predominant agricultural water use within an overall irrigation and for infrastructure to protect against nat- planning framework at the basin level. ural disaster should take into account climate changes, Further, the new Irrigation Strategy seeks to improve sea level rise and land subsidence. Spatial planning, the efficiency and productivity of irrigated agriculture, sand mining, coastal management, mangrove forests – maximizing farmers’ incomes and value added, and all these aspects will need to be integral elements of proposes a participatory governance model and asset the planning exercise and will need to be streamlined management model. The underlying philosophy is that into Sectoral Development Plans and into the Socio- more efficient and sustainable irrigation and drainage Economic Development Plan. services can support a more diversified agricultural Planning for the strategic orientation of irrigation economy that increases value and thereby boosts development needs to be aligned with other water both farmers’ incomes and national growth. The key related plans to avoid future water sharing conflicts. change proposed is in line with the budget changes A draft on adjusting the strategic direction of the proposed in the Public Expenditure Review —a move National Strategy of Irrigation is expected to be sub- toward a less subsidized model and a more autono- mitted by MARD for approval to the Government in mous and participatory approach to service provision, the third quarter of 2019. It is crucial that this strat- with greater emphasis on efficient asset management egy is aligned and integrated with other water use and less on expanding networks. strategies. Notes 7.4.4  Assessing scope for more efficient 1. A global study identified that a US$1 billion budget resource allocation investment in hydro-meteorological networks At a time when public resources are dwindling, would yield total benefits of about US$4 bil- increasing how efficiently they are used to meet invest- lion–US$36 billion per year, with benefit–cost ment needs and allowing for long-term provision of ratios between 4 and 36 (Hallegatte 2012). O&M is imperative. The 2017 Public Expenditure Review (World Bank, 2017a) noted the need to make spending more efficient and identified some budgetary tools that could help. © Gatgu / World Bank 8 Making Investment and Financing More Efficient, and Aligning Incentives with Objectives Investment in water falls short of needs, public financing is declining, yet more value needs to be obtained • A shortfall in water sector investment financing needs to be filled by more effective public investment and more innovative financing. New opportunities can bring in more private financing with a coordinated policy effort • Although limited in the past, the opportunities for private financing in the water sector are expanding. • Even so, a major coordinated policy effort is required to address the multiple constraints and risks faced in mobilizing private finance for water and widening entry points for private finance in irrigation. To meet policy and fiscal objectives, incentives in the water sector need to motivate “good behavior” • Responses to growing stresses, conflicts, and risks require institutional and individual behavioral changes. Incentives—positive and negative—are needed to guide these changes and to align behavior with sectoral policy and fiscal objectives. • Revenue policies need to be brought into line with these objectives. Priorities for action • In the nearer term, there is much that Ministries and Provincial People’s Committees might do to improve the quality and efficiency of spending and to mobilize new sources of official development assistance. • In the longer term, new resource planning and allocation instruments can improve multiyear programming, strengthen the fit of investment with needs, and facilitate long-term operations and management. • Vietnam should investigate new water sector financing strategies, including scaling up public–private partner- ships across all branches of the water sector. • Greater private financing and more user involvement should be explored as part of the strategy to modernize irrigated agriculture. • An assessment of the overall incentive structure in water would help identify the most important and practical ways to align behavior with policy and fiscal objectives. 103 104 GO V ER N A N CE F O R WATER S ECU RIT Y 8.1  Investment falls short of needs as 8.2  Better planning and allocation can get public financing declines more out of public financing The water sector has received strong—mainly 8.2.1  “More for less”—improving the efficiency public—investment in the recent past.1 Between of public financing in the water sector 2006 and 2015, Vietnam invested more than US$6.4 Given a tightening budget, the water sector can still billion in 140 water programs and projects, largely improve the efficiency of public spending. Public in water supply and sanitation (WSS) (55 percent), financing for the water sector is set in a context of irrigation (21 percent), and institutional devel- shrinking public resources, with consistently high opment and capacity building (7 percent). These budget deficits, rising public debt, and falling official investments were predominantly publicly financed development assistance. At the same time, demand by the central budget, state development agen- from other sectors for public resources has risen cies, and international assistance. Some investment sharply. The challenge for the water sector is there- was made by the private sector, largely in WSS fore to improve the efficiency and quality of spending, (ODI 2015). rather than the amount—to get more for less. Investment requirements remain high, particu- One way to do this is to focus capital investment larly for WSS, pollution control, inland waterway and look to the private sector to propose whole-of-life transport and multipurpose water control, but output-based solutions to achieve operating efficien- actual financing is well short of needs. Vietnam’s cies. Current investment spending is probably spread investment requirements are as much as US$2.7 too thinly across too many projects. The balance of billion annually for WSS alone. Expanding the spending needs to shift from new infrastructure to get- sewerage network and wastewater treatment and ting more out of existing assets, particularly by increas- disposal facilities—and improving onsite sanitation ing operations and maintenance (O&M) expenditures and septage removal and treatment would require and investing in higher productivity (see chapter 2). higher levels of investment. However, there has been Another way is to rebalance budgets between capi- chronic underinvestment: actual investment in WSS tal and recurrent expenditures. Proper maintenance of (new infrastructure and maintenance) is estimated existing assets to maximize their value and enhance at less than half the “need”—about US$1 billion investment efficiency is one priority. In irrigation, a annually, about 4 percent of total investment in the linked priority would be to rebalance spending from Vietnamese economy. In line with the normal trajec- infrastructure development to improving asset and tory of middle-income countries and in response to water productivity, including promoting agricultural the alarming levels of pollution, the next big infra- services and revising the incentive structure to encour- structure push should be control of water pollution, age crop diversification and to get more “dong per including municipal and industrial wastewater treat- drop” (see chapter 2). For inland waterway transport, ment (see chapter 4). Requirements are also steep operation and maintenance costs are expected to be for investment in hydropower, in inland waterway 50% short of required funds to maintain competitive transport, and in multipurpose water control and waterway transport. Reliable waterways are essen- storage which can both generate economic benefits tial to allow for further investment and thus increas- (electricity, irrigation) and protect against risks of ing Vietnam’s competitiveness in world markets (see flood and drought. chapter 5). In the current financially constrained climate, Nonetheless, major public infrastructure invest- increased investment effectiveness and more inno- ments in water will remain essential, and have to be vative financing could help. The challenges on the managed under exceptionally high budget decentrali- investment side are to prioritize investments and zation. Protecting and developing a natural resource implement them cost-effectively; to find innova- like water is a key public responsibility that requires tive solutions and technologies that could reduce major investment in large infrastructure and O&M. life-cycle costs; and to improve the productiv- However, Vietnam faces a key budgetary challenge in ity of existing investments. On the financing side, aligning subnational spending with national priori- the challenges are to improve the quality of pub- ties, because almost three-fourths of capital spending lic spending; to ensure that there are revenues to is now decentralized. For example, the Ministry of service debt; and to mobilize private finance to the Agriculture and Rural Development (MARD) con- maximum possible. trols only a fifth of irrigation sector spending, with Makin g In ves tme nt and Financing More Efficie nt, and Aligning Ince ntive s with Obj e ct ive s 105 four-fifths directly managed by subnational govern- sectoral ministries and the PPCs, creating challenges of ments. This decentralization has resulted in a shift competence in project development and implementa- from major infrastructure projects to small, local ones tion and possible conflicts of interest. One suggestion and limited the scope for major water sector infra- is combining independent review of project apprais- structure investments (World Bank 2017a). als with final project approval by the Ministry of Integrated investment planning is constrained by Planning and Investment. This institutional arrange- this decentralization and by the lack of an interagency ment has proven beneficial in many countries, includ- coordinated approach. This massive decentralization ing Canada and Chile (Jenkins and others 2017). It of investment resources—and more generally, the lack could also address the challenge of low capacity of of an interagency approach—make it very hard to appraising agencies within line ministries and local plan and invest in water infrastructure and manage- governments, as highlighted by the World Bank Public ment in an integrated way or at the basin scale. Expenditure Review (PER) report (2017a). 8.2.2  Improving the quality of spending 8.3  There are opportunities to bring in through innovations in resource planning and more private financing, but a coordinated budgeting policy effort is needed New resource planning and allocation instruments will, in the longer term, allow multiyear programming, 8.3.1  Private financing in the water sector improving the fit of investment with needs and facili- Financing in the water sector to date has been pre- tating long-term O&M. Improved planning could, dominantly public. Vietnam’s traditional financing also in the longer term, receive support from improve- model has relied mostly on public investment, either ments in the budget process. The government is grad- directly by the government and the PPCs, or by state ually introducing output-based budgeting, and each enterprise borrowing backed by government guaran- sector could prepare a road map for this. However, tees. The majority of investment needs are still covered currently there are more than 19,000 plans and mas- by direct or indirect state transfers, often supported ter plans economy-wide. A plethora of targets and by official development assistance. Almost 90 percent programs inevitably leads to overlap, unpredictability, of investment in the water sector is estimated to be and management inefficiency. The water sector should publicly financed. streamline plans and make them more realistic. Although public finance will remain important, In the nearer term, Ministries and Provincial there is scope for more private participation. As a People’s Committees (PPCs) could improve the effi- matter of national policy, Vietnam is aiming to pro- ciency and quality of spending, including in integrated gressively reduce public investment as a share of total approaches. Top-down improvements in the overall investment while progressively increasing private par- budget and planning process may offer some prospect ticipation in services, mobilizing user payments for of improved resource allocation and increased value public services, increasing private equity investment in for money, but the fruits are likely to appear only in water supply utilities through equitization, and reduc- the medium to longer term. In the near term, the best ing subsidies for public services. These policy orienta- options for the water sector are bottom up: tions should not obscure the imperative that strategic, • To work on integrated multi-sectoral plans at large-scale public investments are essential to protect the local (PPC) and basin level. Vietnam’s precious natural capital and to put it to • To prepare investment programs that implement its best use for socioeconomic development. There local and basin plans in a prioritized and phased is, nonetheless, a need to mobilize private finance way. in the water sector. The potential is principally in • To adjust the balance between capital and O&M hydropower and water supply and sanitation (WSS), expenditure to get the best out of assets. including in small-town and rural projects, and also in • To prepare quality investment projects and irrigated agriculture. improve procurement and implementation. Apart from the recent partial equitization of water supply utilities and some foreign direct investment The quality of investments could be improved by return- in bulk water, private financing of water infrastruc- ing some quality control and decision-making powers ture and service has been limited. Until recently, there to the center. Decentralization has placed responsibil- was scant domestic and international private sector ity for project preparation and decision-making on 106 GO V ER N A N CE F O R WATER S ECU RIT Y participation. The most significant innovation over be limited fiscal space either for direct public borrow- the past two decades has been the private injection of ing or for government-guaranteed borrowing that equity into water supply utilities. After a long drawn- counts toward the statutory limit. At the same time, out history (see chapter 3), equitization has recently Vietnam’s middle-income status is reducing the avail- accelerated, and major, largely domestic, private capi- ability of concessional funding. tal has now been invested in most utilities. But pro- However, water sector reform may be creating gress is slowed by relatively low tariffs, uncertainty new opportunities. The current equitization of urban in valuation of assets and about the equitization pro- water supply utilities is not just a one-time injection cess, and a lack of oversight of utility performance, of capital. It essentially transfers to the private sec- causing investors to think hard before investing in the tor the responsibility for financing the development of sector. While government targets for equitization and water services, creating opportunities to explore new private and PPC financing of water service companies approaches to financing and to developing bulk water, are high, they have yet to be uniformly realized. Some water supply, sanitation solutions, and wastewater of the urban utilities, including well-run non-equitized collection, treatment, and reuse. The government utilities, are already tapping commercial bank loans, is looking to improve the enabling environment for and there is some private investment in bulk water private participation in the rural water sector. In the and rural water schemes. However, banks typically irrigation sector, the reintroduction of water charges require a lien on the utility’s assets, because they are could create an opportunity to build revenue streams not confident that tariff levels will ensure adequate that could attract private financing and management. revenue (ODI 2015). The government has made provision for private Even so, the number of public–private partner- sector participation in the WSS sector and for a ship arrangements in water supply has been growing. framework for PPPs. In addition to equitization of In the urban water sector, five “private participation the utilities, investment incentives include income tax in infrastructure” (PPI) investments have been made, exemptions and access to concessional finance from all in water supply and mostly for bulk water supply the Vietnam Development Bank. In 2015, the govern- treatment plants, where the state or the utility pays the ment also issued Decree 15/2015/ND-CP and set up investor/operator directly for water. Foreign commer- an ambitious PPP facility to co-finance major infra- cial banks have provided debt finance for some build- structure projects. On 4 May 2018, Decree 15/2015/ operate-transfer projects under PPP arrangements. In ND-CP was replaced by Decree 63/2018/ND-CP, the rural water sector, there are significant investments which enhances the PPP framework. In addition, being made through privately financed and operated Decree 54/2015/NĐ-CP on encouraging and facili- schemes, PPPs, and publicly funded schemes that are tating water saving and efficiency has been issued to transferred to a private operator for O&M, with the promote private sector involvement in water resources debt service obligations passed to the operator. management. Wastewater, by contrast, is still seen more as a pub- lic good. By law, wastewater services are classed as 8.3.3  It is necessary to attract new sources of a public good and thus are eligible for subsidy. Most financing to the sector wastewater services are still financed by public invest- Some of these constraints are common to all sectors, ment or official development assistance, but there including those affecting all PPPs (World Bank 2018d): are some examples of finance by PPPs. For industrial wastewater, the polluting company is responsible for • An ambiguous legal framework. Vietnam payment, and here examples of PPPs can be found. adopted an integrated legal framework for PPPs: Decree 63/2018/ND-CP. However, up to now, 8.3.2  The changing environment for private government agencies in other sectors (for exam- ple energy), have preferred to use Investment financing in the water sector Law provisions that are less stringent for the The changing macroeconomic and sectoral context preparation of feasibility studies and the appli- means that the traditional approach to financing the cation of competitive procurement. water sector is no longer sustainable and needs to • Uncertain government support. Although the be reconsidered. Vietnam’s public debt ceiling, set legal framework allows for government co- by the National Assembly in 2016, is approaching financing and subsidies and does not count that the 65 percent of GDP statutory limit (Resolution support toward the country’s statutory public 25/2016/QH14). For some years to come there will Makin g In ves tme nt and Financing More Efficie nt, and Aligning Ince ntive s with Obj e ct ive s 107 debt ceiling, the government may be unwilling • The risk that utilities or irrigation manage- to provide the level of support required by inves- ment companies might not qualify for corporate tors. There is currently no clear and transparent finance. Some are large enough that they might, policy on the provision of government support in principle, be able to raise their own corporate and on the fiscal implications. finance based on the strength of their balance • Questions over foreign exchange convertibility. sheet without recourse to government guaran- Despite Vietnam having removed controls on tees. However, few have a credit rating, and they currency convertibility, foreign investors remain might have problems obtaining finance in view concerned about the availability of foreign of the high degree of risk. exchange and usually require government com- These sector-specific investment risks would need to mitment for future currency conversions. be met through mitigation provisions. To attract for- There also are economy wide constraints affecting local eign expertise and potentially cheaper cross-border capital markets. Despite sizable domestic savings of capital to Vietnam, the government would have to US$60 billion annually, deficiencies in the local banking allocate risks in line with international best practice sector and capital markets limit the extent to which these (World Bank 2018d). resources can be channeled into water projects, which Added to these risks are constraints to investing in require long-term and fixed-interest debt. A recent World equitized utilities. Although the equitized utilities pre- Bank (2018d) report highlights the following: sent the most likely case to attract private investors, they feature significant disincentives: • Domestic commercial banks. These have out- standing loans of US$250 billion, heavily skewed • The financial risk of declining revenues stem- toward short- and medium-term lending (up to ming from low tariffs subject to political deci- three years’ maturity), reflecting the lack of long- sions and from a declining collection rate. term deposits and the flat yield curve by deposit • Restrictions on the proportion of equity that pri- duration. There is also a lack of technical capacity vate investors can hold. in the banking sector to evaluate water projects • The absence of clear contractual relations and lending against revenue streams. Where loans between utilities and local authorities (or a clear are provided, collateral is typically required, and licensing regime with an independent regulator). for smaller borrowers, interest rates are high. • A lack of clarity in equitization. • Stock exchange. While there is a stock exchange • The absence of independent regulation or simi- in Vietnam, market liquidity is low, and the mar- lar mechanisms for monitoring financial and ser- ket is dominated by state-controlled companies. vice performance of utilities. • Bond market. The corporate bond sector remains There are also limited protections to ensure that the in its infancy, with total issuances under 1 per- equitized companies deliver services, given that the cent of GDP and a shortage of suitable large cor- performance regime is unclear and the monitoring of porates that could issue bonds. service delivery is limited. Checks and balances are • Institutional investors. Resources controlled by also few (unlike in England & Wales, and Chile, which longer-term investors, such as pension funds and have privatized water companies) that would ensure insurance companies remain modest (US$25 bil- that the companies focus on their core business, do lion), and their investments are mostly confined not invest in risky sectors, and do not sell off assets to government bonds. critical to water and wastewater service. There are risks specific to investing in the water sector. The biggest and most pervasive risk is uncer- tainty over revenue streams. Many investors are These include: deterred by the low tariffs and the uncertain envi- • The risk that water is perceived as a human right ronment for enforcing collections. While national or entitlement, which often makes tariff setting policy targets cost recovery, affordability concerns and collection a vexed affair. make it politically challenging for PPCs to increase • The risk that the quantity and quality of water tariffs. Private investors themselves have had the required will not be available and that alterna- opportunity to express their views on the advan- tive sources will be more expensive to access and tages and pitfalls of investing in Vietnam’s water treat. sector (see box 8.1). 108 GO V ER N A N CE F O R WATER S ECU RIT Y BOX 8.1:  Potential investors’ views of investing in Vietnam’s water sector Investors are well aware of the pros and cons of invest- intervention in economic activity, lack of information, ing in Vietnam’s water sector human resources, and the pitfalls of investing in water in Vietnam, as learned from experience. In a workshop convened by AusAid during the VietWater 2016 exhibition, potential investors identified a range of The workshop also pinpointed areas where Vietnam could positive and negative issues around the business environ- act to attract more private investment in the water sector ment in Vietnam. The positives included business oppor- Potential investors identified a range of needs around tunities, expected future market growth, low labor cost, three themes: (1) efficient regulation, (2) clear institu- strategic location, sociopolitical stability, and reform tional and market structures, and (3) scope for inno- commitments. The negatives included inadequate infra- vation and collaboration. A strong message was that structure, corruption, low productivity, weak-nesses in limited information and transparency about the sector legislation and policy, lack of transparency, and bureau- typically reduce investors’ confidence. The conclusion cracy. The workshop also identified challenges for invest- was that action on these themes would enhance the ing in the water sector that revolved around government attractiveness of the water sector for private investment. Source: Austrade 2016. 8.3.4  Tapping new and larger sources of the energy sector to prepare and launch projects for finance for water infrastructure PPPs, to work with companies to prepare them for To mobilize significant private finance for water would accessing commercial finance, and to take steps to require a major coordinated policy effort. It could be improve the mobilization of capital in local currency modeled along the multiyear program proposed for (see box 8.2). BOX 8.2:  Maximizing finance for development of Vietnam’s energy sector The recent World Bank report Maximizing Finance for Companies could work toward improving their Development of Vietnam’s Energy Sector proposed a financial performance. Having brought in private sector three-part plan to tap new and larger sources of private financing and expertise through full or partial privatiza- finance for energy sector investment. tion, they may subsequently obtain credit ratings with the objective of gradually being able to raise their own A PPP/IPP (independent power producer) program to debt finance without state support. build investor confidence Rationalizing pricing policies, as well as introducing To scale up PPP/IPP, a well-designed programmatic the regulatory and governance frameworks, will be criti- approach is required, to be rolled out over the next few cal to achieving such creditworthiness. In the transition years. While Vietnam has recently made progress in har- period, targeted concessional and development institu- monizing and integrating the legal framework for PPPs, tion financing will continue to be required for funding the effort still falls short of what is needed to kick-start a critical infrastructure investments. new PPP/IPP program big enough to address energy sec- Improve the availability of local currency finance tor investment. Many critical elements are missing from the enabling environment. There is a pressing need to strengthen the domestic com- Moreover, to maximize interest, the government mercial banking sector while deepening and broaden- should consider crafting a multiyear PPP/IPP program ing domestic capital markets. Both project finance and for a substantial project pipeline with competitive bid- corporate finance structures could benefit from greater ding. This would establish a strong track record of availability of longer-term lower-cost local currency speedily and competitively implemented PPP/IPP pro- financing through the domestic capital markets. jects that will gradually reduce the need for government At present, however, these advantages are out- support as investor confidence increases. weighed by high interest rates and constraints on the availability of capital in the banking sector. Addressing Prepare companies to access commercial finance these obstacles will call for a concerted effort to deepen Corporate finance will remain a central channel for and broaden Vietnam’s capital markets, particularly the funding investment into the sector, but this will increas- domestic corporate bond market as an alternative chan- ingly need to be on the strength of the company’s own nel of finance. balance sheet without recourse to the state. Source: World Bank 2018d. Makin g In ves tme nt and Financing More Efficie nt, and Aligning Ince ntive s with Obj e ct ive s 109 Using performance-based loans – in combination investors to comply with environmental regulations with institutional and regulatory support - to finance during the operation phase. Failure to do so could the construction and expansion of Central Effluent result in reductions in the loan repayment term if Treatment Plants (CETPs) to maximize the impact of discharge violations occur. Together with improved scarce resources. Traditional CETP financing (either enforcement pressure and improved technical capac- concessional or commercial) has focused solely on ity of CETP investors, performance-based conces- CETP construction but paid little attention to actual sional financing is expected to improve compliance of performance of CETPs. A performance-based loan Industrials Zones with wastewater effluent standards repayment schedule can be used to incentivize CETP (see box 8.3). BOX 8.3:  The World Bank-financed project Vietnam Industrial Pollution Management The World Bank-financed project Vietnam Industrial TABLE 1:  IZs compliance level in four project provinces Pollution Management aimed to help the country at project start and at project end manage industrial pollution issues by improving com- Year IZs in IZs with IZs in pliance with industrial wastewater treatment regula- operation (#) CETPs (%) compliance (%) tions in four of the most industrialized provinces in Vietnam. 2012 34 60% < 30% The project addressed the multifaceted issues of 2018 43 98% 72% industrial wastewater pollution by piloting a holistic The project helped change the culture away from an approach, focusing not only on institutional arrange- enforcement-driven approach where DONRE was tasked ments and the regulatory framework, but also: (i) with detecting non-compliance, towards a self-monitoring providing concessional financing and technical assis- approach in which the IZs were tasked with proving compli- tance for CETP design, construction and operation, ance. An enforcement-driven approach based on DONRE and environmental monitoring and enforcement; making regular visits to IZs to manually collect wastewater (ii) providing investments in the AMS network; (iii) samples had proved problematic, especially given the ease supporting improved capacity for monitoring and with which wastewater discharge flow can be managed enforcement; (iv) promoting information disclo- and since DONRE was required to announce their visits in sure among agencies and the public; and (v) sup- advance. A self-monitoring approach underpinned by con- porting the introduction of sizeable fines in case of tinuous 24-hour monitoring with online data transfer to non-compliance. provincial authorities and supported by independent analy- As a result, compliance with wastewater treat- sis and verification of lab results turned out to provide the ment regulations of the industrial zones of Dong best conditions for improving compliance and protecting Nai, Ba Ria Vung Tau, Ha Nam, and Nam Dinh against wastewater contamination of the river basins. provinces improved significantly between 2012 and The Industrial Zones have financed 5% of the invest- 2018 when the project was completed (see table 1). ments in the CETPs, thus contributing to private sector financing. Source: World Bank (2019) Implementation completion and results report for the Vietnam Industrial Pollution Management Project. 8.4  Private financing in irrigation offers • Large-scale irrigation has many public good entry points, despite challenges aspects: water resource allocation; the multi- functional nature of many projects that often Although private finance accounts for at least half include hydropower, water supply, and flood the irrigation investment globally, irrigation sectors management; and the multiple externalities that like Vietnam’s—predominantly large-scale irrigation cannot easily be internalized, such as down- for smallholders—have historically found it hard to stream effects, waterlogging, and pollution. attract private finance. Irrigated farming throughout • Most large-scale irrigation has been developed the world—and in Vietnam—is overwhelmingly a pri- for smallholders, often with very small farms. vate sector activity, and globally more than half of irri- Tariffs have often been based on the capacity to gation investment is private (see box 8.4). However, pay rather than on the need to generate a rev- large-scale irrigation investment for smallholders has enue stream to pay for services and remunerate always been dominated by the public sector, for four capital. reasons (FAO/EBRD 2017). 110 GO V ER N A N CE F O R WATER S ECU RIT Y • Large-scale irrigation is typically a large, long- The few private or PPP investments in large-scale term, and relatively slow-return investment, irrigation have therefore been based on risk-sharing beyond the terms typically of interest to private arrangements heavily dependent on government sup- capital markets. port. Box 2.6 in Chapter 2 illustrates a successful • Multiple risks are attached—of water scarcity, of example from Morocco. environmental impacts, and so on. BOX 8.4:  Globally, private investment is important in irrigation and has driven water efficiency, incomes, and exports Privately managed schemes account for more than half privately owned even before reforms began to shift con- the irrigated area worldwide, and private investment trol of publicly funded irrigation districts to water user accounts for at least half of total investment. Private associations in the early 1990s. Following the reforms, investment has been the rule in small-scale irrigation, private investment increased dramatically. In Chile, with while farmers worldwide have invested in groundwater one of the most privatized irrigation sectors in Latin extraction, by far the fastest-growing irrigation activ- America, farmers must by law contribute as much as ity in recent years. In the Arab world and in India and 75 percent to new development, so only the most profit- Mexico, more than two-thirds of groundwater develop- able schemes are built. Private investment in all aspects ment has been financed entirely by the private sector. of irrigation in Chile has increased water efficiency and In Mexico, around 40 percent of the irrigated area was contributed to the boom in agricultural exports. Source: FAO/EBRD 2017. Even so, there are multiple entry points for private • Leasing. The water system remains in public finance in irrigation—and for PPPs in large-scale ownership but is leased to private operators. irrigation (see table 8.1, and boxes 8.4 and 8.5). In fact, Leasing is most common in French-speaking globally, the private sector has been attracted to irrigation countries. development with diverse means of participation, • Concessions. Assets remain in public ownership, ranging from individual farmers installing their own but use of the system is transferred to private irrigation systems to the development of large-scale operators for a lengthy period, such as 20–25 schemes. The main types of possible private involvement years. The contract typically requires the private include (see figure 8.1, Global Water Partnership 2017): partner to invest in specified improvements and perhaps in expansion. • Contracting out (outsourcing). Specific func- • Build-own-operate-transfer and build-operate- tions are subcontracted to private firms, such transfer are concessions, usually for new facili- as canal maintenance. This is the simplest, most ties. After a specified number of years, the facility often used, and least controversial form of pri- is handed over to a public organization. vate sector involvement. • Divestiture or privatization, in which full owner- • Irrigation management transfer. Responsibility ship of assets is transferred to private sharehold- and ultimately ownership of irrigation schemes ers. Stringent public regulation is required. is handed over to farmer groups (see box 8.5). BOX 8.5:  Turkey successfully transferred 2 million hectares of irrigated land to farmers Turkey has emerged as a world leader in new For irrigation management transfers to succeed, approaches to irrigation and has conducted a largely they require strong political commitment from the successful program, transferring management of more government irrigation agency. A clear legal frame- than 2 million hectares of irrigated land to users since work is essential, as are funds and resources to estab- 1980. The results are largely positive: fiscal outlays lish and support water user associations. Recent on these schemes are zero, and irrigation efficiency initiatives have sought to introduce more professional on transferred schemes averages 59 percent, against management approaches, sometimes through the pri- 23 percent in non-transferred schemes (World Bank vate sector. 2013). Source: FAO/EBRD 2017. Makin g In ves tme nt and Financing More Efficie nt, and Aligning Ince ntive s with Obj e ct ive s 111 Where irrigated agriculture is commercial, mobi- scheme level for major works, paid for by increased lizing private finance becomes easier. As irrigation water charges—and at farm level, where a multi- becomes increasingly commercial, this creates the plicity of sources of finance can be made available revenue streams that can attract finance, both at (see table 8.1). TABLE 8.1:  Financing irrigation Typical financing source Type of irrigation For working capital For investment Larger-scale commercial • Local commercial banks • Local commercial banks irrigation • Specialized agricultural credit agencies • Specialized agricultural credit agencies • Supplier’s credit • Supplier’s credit • Buyer’s credit (for example, outgrower • Buyer’s credit (for example, outgrower arrangements) arrangements) System development and • Irrigation service charges, public subsidies • Subsidies modernization for large-scale • Loans and guarantees from international financial irrigation institutions • Grants • Municipal bond issues • Cost sharing • PPP contracts Smallholder irrigation • Credit unions • Same as for working capital • Cooperative savings and loan • Special government programs (for example, social • Nongovernmental organization schemes funds) • Money lenders and traders • Project-specific credit • Microfinance Source: FAO/EBRD 2017; Winpenny 2005; World Bank 2006. FIGURE 8.1:  Forms of public–private partnership Performance-based Concession Maintenance contract • contractor takes over • for example for an asset and provides existing road services • government pays • receives revenues from • conditional on road Operations and Lease user charges plus any quality Maintenance (o&m) • contractor take over subsidies, less any Contract existing asset and Existing assets concession fees • for example for existing provides services • responsible for capital hydroelectric plant • receives revenues from expenditure and o&m • government-owned off user charges plus any taker pays for electricity subsidies, or less any supplied lease fees • responsible for o&m Management contracts Services contracts Privatization and regulation “Pure public” “Pure private” Construction contracts Licensing and regulation Turnkey contracts Build, transfer, operate Design, build nance, Build, own, operate, • contractors designs, Maintain contract Transfer New assets Builds and operates asset • for example for a new • contractor design, nances, • receives payment form School building builds and operates new asset service users • government pays • receives payment from • asset nanced by • conditional on availability service users government • asset transferred to • ownership transferred on government to contract end construction Key: Core ppp types Other type of private sector involvement Source: World Bank Institute 2013. 112 GO V ER N A N CE F O R WATER S ECU RIT Y 8.5  Incentives need to motivate good incentives are almost entirely negative and moral haz- behavior to meet policy and fiscal ard is inherent—that is, they oblige individuals and objectives corporations to do what they would not otherwise have an incentive to do. So, they are much less effi- Responding to growing stresses, conflicts, and risks cient than economic incentives, and require a battery requires institutional and individual behavioral of regulatory authorities and sanctions. changes, and incentives—positive and negative— Vietnam’s water sector illustrates the challenge of are needed to guide these changes. Incentives influ- using incentives to align behavior with policy objec- ence human behavior and are the prime instruments tives. Designing and applying incentives is challenging, for encouraging citizen and corporate behavior to as preventing industrial pollution in Vietnam shows, comply with government policies (see Box 8.6). For because enforcement is weak and the pollution fine example, public and private agencies need to be may be less than the cost of treating the wastewater. incentivized to cooperate on integrated basin plans; Bringing about agricultural change definitely requires farmers, to adopt sustainable water management positive economic incentives, ideally through market measures; and dam operators, to manage their dams signals, since negative incentives and regulation are in a cascade. largely impracticable. In municipal water supply, the Economic incentives are the most efficient. Incentives water tariff can finance services and investment and are of various types, with some more directly within promote water-saving investment and behavior, but the control of government than others. The most effi- there is generally political reticence to raise tariffs to cient are economic instruments, which send costless the required level. and easily grasped signals. Most economic incentives An incentive framework is needed, aligned with are market-determined—the prices of goods and ser- policy and fiscal objectives and able to drive behavio- vices in a free market economy. Government can, ral changes. Revenue policies in the water sector can nonetheless, have considerable influence over positive be designed to protect natural resources and enhance and negative economic incentives—by offering subsi- their value in use, and to generate fiscal resources. For dies or tax holidays, or by increasing or reducing the example, raising the price of water for irrigation will fees and charges. One of the most common economic raise the value and promote the conservation of water, incentives in water is the application (or not) of water and at the same time secure key O&M functions such pricing, such as groundwater abstraction charges, irri- as dam operation and safety and irrigation water ser- gation service fees, and municipal water tariffs. vice. The policy could also apply to pollution charges, Less efficient but also essential are regulatory incen- where higher charges and efficient regulation would tives. In the water sector, these include regulations on deter harmful behavior and raise resources for envi- water abstraction, water quality, pollution, the envi- ronmental protection. ronment, and service delivery standards. Regulatory BOX 8.6:  Economic and regulatory policy instruments Broadly speaking, there are three policy instru- Economic instruments are incentive-based mecha- ments for changing individual and corporate behav- nisms, with the objective of changing behavior by ior of water users: regulatory instruments, economic providing positive or negative incentives to comply in instruments and education and influence. pursuit of desired outcomes. Water-related economic Regulatory instruments are often referred to as instruments include, water tariffs, environmental ‘command and control’ instruments as their purpose taxes, subsidies on products and practices, tradable is to enforce the compliance of all parties with the abstraction or pollution permits etc. These instru- goals and measures the regulation lays down, regard- ments can have the advantage of raising revenue, less of the parties’ circumstances or compliance costs. although they may also have a fiscal cost – e.g. in the Once goals are reached, there is no incentive to fur- case of subsidy programs like encouraging the adop- ther improve performance. Regulatory instruments tion of drip irrigation or low-flush toilets by subsidiz- include, emission/ effluent limits, input specifica- ing their price. But the principal objective is to modify tions, technology requirements and location/ timing behavior rather than raise revenues. They are usually activities. more efficient than regulatory instruments as they: (Box continues next page) Makin g In ves tme nt and Financing More Efficie nt, and Aligning Ince ntive s with Obj e ct ive s 113 BOX 8.6:  (Continued) –– Can usually be introduced by government by a –– Should reduce compliance costs so that firms have a simple decision and can typically be implemented positive incentive to comply and fewer of the less effi- through conventional means– e.g. raising water cient firms go out of business because of high compli- supply tariffs, reducing import tariffs, or increasing ance costs. the cost of energy for groundwater pumping. They Education and influence includes tools targeted at do not require a detailed and expensive compli- changing behavior. Examples are: (1) education and ance-checking mechanism. The incentives reach the public awareness campaigns; (2) behavior by opinion- intended target effortlessly through the unseen hand formers as role models; (3) lobbying and advocacy by of pricing. leaders or interest groups; (4) advertising, use of social –– May promote dynamic efficiency by providing incen- media etc.. This approach can be highly effective, if tives for firms or individuals to modify their behavior properly designed. (for example, to pollute less) to reduce costs or get benefits, and to continue to improve thereafter 8.6  Options and actions addition, mechanisms for financing for smallholders— for example, for conversion to pressurized irrigation, Vietnam should investigate the scope for a new water greenhouse agriculture, and production of high-value sector financing strategy. A new strategy would aim cash crops—could be developed (see chapter 2). at maximizing finance for development, including pri- The scope for scaling up PPPs across all branches vate investment, particularly in water supply services of the water sector should be investigated. The recent and in irrigation, but also in wastewater. The strat- rapid equitization of water supply utilities has demon- egy would also aim at alternative sources of public strated the feasibility of PPPs in the water sector. For finance such as green growth financing and increased water supply and wastewater projects, some of the grant aid for policy reform and institutional develop- impediments are being overcome by infrastructure sub- ment (rather than borrowing in the capital markets). sidies and incentives from land development. Vietnam The proposals for developing a strategy for maxi- might learn from China’s current program for scaling mizing finance for development in the energy sector up PPPs across the water sector (see box 8.7). could help frame this investigation (see box 8.2). In BOX 8.7:  Building on success, China is scaling up PPPs for water infrastructure, water pollution control, urban water supply, and irrigation Several forms of PPP have been critical in China’s water financed in part through a PPP agreement with China sector development over the past 20 years. Since China Water Environment Group (a private investment com- opened its water sector to private participation in 1995, pany under China International Trust Investment international and domestic private companies, as well Corporation’s Industrial Foundation), uses an advanced as state-owned enterprises (SOEs), have powered a dra- anaerobic-anoxic-oxic treatment technology to purify matic expansion in water and wastewater provision, water and meet discharge standards. The municipal gov- from serving less than 1 percent of the population in ernment applied the PPP model to improve the govern- 1990 to about 40 percent in 2015. ment’s managerial capacities and test new approaches, These partnerships, which include O&M contracts, rather than for financial reasons. build-operate-transfer arrangements, and joint venture A 2016 Asian Development Bank study surveyed mechanisms, were initially dominated by multinational some 300 state-run and PPP utilities in China and found companies, but the market has become indigenized as that, overall, PPPs were significantly more efficient than local private companies and SOEs now are 9 of the 10 state-run utilities. PPP-run utilities were more fiscally largest players. sustainable, featuring 5–16 percent higher total factor In several cases, PPPs have helped introduce new productivity, a 1 percent lower subsidy rate, and 6 per- technologies and practices and thus helped improve cent lower labor costs. water supply and wastewater service delivery. Shanghai’s PPP-run utilities also usually featured better outcome Nanxiang Wastewater Treatment Plant, for example, indicators, including larger service areas, lower leakage (Box continues next page) 114 GO V ER N A N CE F O R WATER S ECU RIT Y BOX 8.7:  (Continued) rates, better bill collection rates, and lower energy con- emphasis on pollution control was strengthened sumption. But while such performance indicators are by a July 2017 directive designating water pol- compelling, tariff rates remained generally below cost- lution control as a priority area for PPPs and recovery rates, reducing the attractiveness of PPPs for proposing measures to accelerate private sector private investors. investment. To signal the importance of PPPs in the water sector, Urban water supply, which previously enjoyed •  the Chinese government has identified four priorities for high levels of private investment. In 2011, 309 investment: urban water utilities featured some private invest- ment, for a total of US$8.2 billion, and there is • Dam and reservoirs. 12 large water infrastructure strong potential to increase this total further. projects are in the pipeline. Irrigation. Even though the lack of high water •  • Water pollution control. In September 2016, the prices is an impediment to irrigation PPPs, China’s National Development and Reform Commission first PPP in irrigation is in its pilot stage, spon- issued a list of 17 water quality enhancement sored by the Dayu Water Conservancy Group. projects, worth a total of CNY 20 billion. The Source: DRCSC 2017. Greater private financing and more user involvement Hydraulic Works provides for broader participation should be explored as part of the strategy to mod- of farmers and the private sector in irrigation (arti- ernize irrigated agriculture. The new policy orienta- cles 50–52). Irrigation management transfer could tions of the Vietnamese government and the text of follow. In addition, there is scope to link smallholder the 2017 Law on Hydraulic Works suggest that there irrigated farming to markets through innovative PPP may be scope for building on current moves toward approaches (see box 8.8). more water user involvement. The 2017 Law on BOX 8.8:  Modernizing agriculture through PPPs The World Bank has worldwide experience in supporting to drip irrigation through a design-build-operate-transfer/ demand-driven productive alliances: investment programs hybrid annuity arrangement. The contract was awarded that facilitate the formation of links between associations to two private companies at a cost of US$130 million. of farmers with aggregators (outgrower schemes, proces- Around 70 percent of the contract was paid upon com- sors, exporters, financing institutions, and so on), where pletion of civil works, while the balance is paid at 6 per- matching grants can leverage private funds for investments cent annually over a period of five years, during which required to support planting high-value crops. the contractors provide O&M services. Under a memo- In Karnataka, India, the 2030 Water Resources Group randum of understanding, 14 private sector companies helped create a “Drip-to-Market Agro Corridor,” cata- buy the high-value produce and build farmers’ capacity lyzing adoption of drip irrigation in sugarcane. A multi- in best practices. Ramthal is currently the world’s largest stakeholder platform consisting of the private and public community-driven drip irrigation system. sectors as well as civil society was formed under the lead- Following the successful pilot, this project is being ership of Karnataka’s chief secretary. The corridor is a scaled up. Private players are fully on board because large-scale initiative that connects farmers adopting drip they have been involved throughout, and both they and irrigation with assured markets for high-value produce. the farmers are enjoying substantially increased incomes The initiative began with a pilot on 24,000 hectares in at reduced risk. Ramthal, where 15,000 farmers were helped to convert Source: World Bank 2018e; 2030 WRG 2017; World Bank 2017l. An assessment of the overall incentive structure in management, requires a much greater role for market- water would help identify the most important and based policy instruments. These instruments help send practical ways to align behavior with policy and fiscal pricing signals on the importance of conservation, objectives. The government policy to reduce the role of efficient use, and the externalities entailed in different the state in most policy areas, including water resource water uses. A range of economic policy instruments Makin g In ves tme nt and Financing More Efficie nt, and Aligning Ince ntive s with Obj e ct ive s 115 can promote efficient water allocation, development, critical (see sections 2.3, 4.2, 6.5 and 8.5). It would and sustainable use, including water pricing reforms be useful to carry out a comprehensive assessment of (to promote conservation) and water rights assignment the existing overall incentive structure and of options and trading (to facilitate the reallocation of water to for better aligning incentives with policy goals. Box its highest-value uses). Incentives for cooperation of 8.9 illustrates how China is progressively making this public and private actors in comprehensive plans are alignment. BOX 8.9:  Strengths and weaknesses of China’s use of economic instruments to promote good water policies China has enjoyed considerable success in leveraging for example, has instituted a tiered pricing structure that economic policy instruments to pursue water policy charges users a progressively higher tariff, encouraging objectives. The reforms are broadly on the right track water conservation. Different prices have been set for and should be expanded. Water prices, taxes, and fees different water uses, with special uses like golf courses could in some cases be better structured to promote charged a much higher tariff. This structure helps direct conservation, especially in the agriculture sector, and to water to its highest-value uses. move toward greater cost recovery. Urban and rural water users are also charged at dif- The overall incentive structure is aligned in policies ferent rates, helping to ease the financial burden on for water conservation, environmental protection, pol- poorer farmers and rural residents. To promote waste- lution reduction, and fiscal sustainability. The price that water reuse, 37 cities and counties in 18 provinces had, users pay for water in China is designed to promote by 2010, introduced a preferential price for reclaimed efficiency and conservation, in line with the vision of water. a water-saving society. In addition to pricing, various The system needs further strengthening. Current sig- taxes and fees are also used to both encourage water nals are not yet strong enough to completely achieve the conservation and finance water infrastructure. water use control, allocation, and efficiency objectives set out in the “Three Red Lines” (see annex A). In many • In general, water resource fees (shuiziyuanfei) are cases, this entails further raising prices, fees, and taxes to levied to cover capital and O&M costs associated send stronger signals, and to improve fiscal sustainabil- with water supply and delivery. ity for water service providers and wastewater treatment • Water resource taxes (shuiziyuanshui) are intended operators. to capture environmental externalities associated The system strengthening aims particularly to control with particular water uses and are often levied on pollution better and further protect the environment. groundwater withdrawals. Recent moves to replace separate wastewater treatment • Wastewater treatment fees (wushuichulifei) sup- fees with environmental protection taxes and water port capital and O&M costs associated with resource taxes with natural resource taxes to better cap- wastewater treatment plants. ture environmental externalities represent a promising Prices vary by policy goal. Many localities in China have direction and should be expanded. Agricultural water used economic instruments to promote sustainable water prices, in particular, should be raised. use, pollution control, and poverty reduction. Beijing, Source: Moore 2013; Moore 2015. Notes paper on private finance (ODI 2015); and the energy sector financing publication Vietnam: 1. This chapter is based the Vietnam Public Maximizing Finance for Development (World Expenditure Review (World Bank 2017l); The Bank 2018f). Other references are noted in the Status of Infrastructure Services in East Asia and text. the Pacific (World Bank 2017f); the 2015 ODI © Huy Quoc Nguyen / World Bank 9 The Way Forward T o provide a sense of urgency for action, this reduces agricultural productivity along the chapter first summarizes the principal water- Mekong and Red rivers. related threats and costs that Vietnam faces • Surface waters face serious pollution, with only (see section 9.1). Then, section 9.2 summarizes seven 12.5 percent of municipal wastewater treated main recommendations and some suggested actions (MOC, 2019). Rivers in and around major cities for consideration of the government. Finally, section are seriously polluted. Surface water pollution 9.3 sequences the suggested actions to understand in turn increases groundwater dependence and when they can start and when they will have an impact. over-abstraction. Untreated wastewater is used for irrigation downstream, threatening food 9.1  The urgency for action safety and public health. As previous chapters detail, Vietnam already faces • Piped water supply and sanitation infrastruc- myriad water-related challenges—all expected to ture and services reach only a fraction of the become more severe under an inaction (business as population. usual) scenario and projected climate change trends. • Rapid expansion of hydropower is risking the The key markers of the looming crisis are: safety of small dams during flood season, can worsen downstream water stress in the dry sea- • Vietnam’s four river basins in which 80 percent of son, and may lead to water-sharing conflicts. GDP is generated—the Red–Thai Binh, Mekong, Further, reduced sediment loads in rivers endan- Dong Nai, and South East River Cluster (SERC) ger agricultural productivity. basins—are all expected to face water stress in • Droughts are increasing in frequency and sever- the dry season by 2030. The severely stressed ity, affecting livelihoods and agricultural pro- SERC River Basin is expected to be unable to duction. The El Niño event between 2014 and meet even 28 percent of water demand in the dry 2016 caused the most severe drought Vietnam season by 2030. experienced in over 90 years, severely affecting • Overexploitation of insufficiently monitored livelihoods and the economy. groundwater resources is one of the causes for • A recent assessment of flood risk shows that his- lowering groundwater levels, contributing to torical peak flood flows that used to occur every land subsidence in Hanoi, Ho Chi Minh City one to five centuries are now expected to return (HCMC), and Da Nang, as well as localized across half the country every 20 years or less by water shortages in the dry season, for exam- 2026–45 (World Bank, 2018i). ple along the Mekong (where 50 percent of Vietnam’s rice is produced) and in the Central To provide some insight into the economic cost of Highlands (where 88 percent of Vietnam’s cof- these water-related challenges, six selected threats were fee is grown). Saline intrusion to aquifers further assessed for their economic impact using a CGE model 117 118 GO V ER N A N CE F O R WATER S ECU RIT Y (see box 1.1). These six threats alone are expected to Recommendation 1. Improve water resources cause an approximate reduction of 6 percent of GDP management institutions annually by 2035. Given that only selected threats and 1.1  Further improve the legal framework to impacts were assessed in selected areas, the expected allow for efficient and effective water resources GDP impact is expected to exceed 6 percent annually. management Taking decisive action now is therefore essential for Vietnam’s sustainable socioeconomic development, Revising the 2012 Law on Water Resources and 2014 especially as infrastructure and demand management Law on Environmental Protection would improve solutions to avert the impending water crisis are at hand coordination of state management of water resources, and feasible. 2030 Water Resources Group (2017) has particularly for the division of tasks among min- assessed the most cost-effective demand-side solutions istries and provinces. A revision could also help to to reduce water stress levels in the four largest river address overlaps with other regulations and resolve basins (see table 9.1).1 Demand-side interventions key legal issues such as the status and powers of river from the agricultural, industrial, and municipal sec- basin organizations. In addition, the policies set out tors were prioritized based on their cost-effectiveness in the 2012 Law on Water Resources and in related in US dollars per cubic meter. Implementing those decrees need to be implemented, notably incentives to solutions requires an enabling environment—govern- encourage water saving, recycling, wastewater reuse ance and mobilization of finance. and water use efficiency. Financial regulations need to be amended to allow for ring-fencing of revenues TABLE 9.1:  Overview of estimated water gap and costs for interventions to achieve low water stress status, 2030 from economic instruments to allocate them to water resource management activities. Economic instru- River basin Estimated water gap (2030),a Total estimated cost of ments should be further refined to incentivize behav- million cubic meters interventions to close the gap (US$, millions) ioral changes in water users towards sustainable water Red–Thai Binh 4,860 2,000 resources management, and they should be strictly Dong Nai 1,850 650 enforced. Market-based mechanisms which allow the Mekong 2,520 (−650)b consumer to ‘vote’ for sustainably produced products SERC 1,170 3,000 (+)c through their purchases should be further developed Source: 2030 WRG 2017. and promoted. Certification schemes and consumer a.  The water gap is defined as the amount of water required to move from a severe education can be key pillars of this initiative. or high level of water stress to a low level (as defined by the Water Exploitation Index). b.  As the most cost-effective interventions in the Mekong River Basin generate Suggested action: Revise the 2012 Law on Water cost savings, required interventions result in overall savings. c.  Water demand management solutions assessed for this basin in the study were Resources and 2014 Law on Environmental not sufficient to achieve a status of low water stress—further interventions at ad- Protection to improve coordination and collabo- ditional cost are required. ration amongst institutions, to streamline syner- gies with other legislation, and to resolve issues 9.2  Main recommendations and outstanding from the 2012 provisions. Implement suggested actions key provisions of the existing laws, with particu- Based on the diagnostic in this report, seven main rec- lar focus on water conservation and efficiency. ommendations are made: Sharpen economic incentives to promote greater 1. Improving water resources management sustainability, and amend financial regulations to institutions allow for ring-fencing of revenues to support water 2. Manage Vietnam’s water at the basin scale resource management activities. through inclusive governance arrangements. 3. Increase value and incomes from water in 1.2  Enforcement of regulations, particularly agriculture. related to discharge of wastewater, needs to be 4. Give top priority to reducing the high levels of strengthened, to ensure strict compliance with pollution. environmental regulations 5. Improve risk management and disaster response, Monitoring and inspection – particularly random and strengthen resilience. inspection - activities need to be increased and penal- 6. Develop market-based financing and incentives. ties firmly imposed. State management from central 7. Strengthen water security for settlements. to local level needs to be strengthened, and active par- ticipation of stakeholders, particularly civil society, The Way F or wa r d 119 should be enabled and encouraged through policies the role of MoNRE. The 2017 Law on Hydraulic and regulations, in order to support water resources Works sets out the responsibilities of the Ministry management activities, including monitoring activities. of Agriculture and Rural Development (MARD). However, at present, many central, provincial, and Suggested action: Strengthen institutions, particu- local authorities and agencies take decisions on water larly for monitoring and inspection tasks, the use of development and management without adequate incentives – both positive and negative, and partici- coordination at the scale where it matters—the basin. pation of civil society to improve water resources Building basin governance arrangements is essential management and reduce pollution. for providing a forum and framework to address 1.3  Human and financial capacities and inter-sectoral and inter-jurisdictional issues such as infrastructure planning, water allocation, flow man- resources need to be enhanced to allow for agement, pollution, flooding, and drought resilience. implementation of important policy measures Preparation for establishing an inclusive organi- Legislation and policy provides for a full range of zation in Sesan-Srepok and other basins has been instruments for integrated water resources manage- moving to a conclusive stage. In addition, lessons on ment, but there has been delay in their development integrated planning emerging from the Mekong Delta and use. In addition data collection and information could be applied to other basins. sharing do not at present adequately support planning and management. Suggested action: Develop a timeline for specific steps to implement integrated management and Suggested action: Develop and implement the the 2012 Law on Water Resources, adapted to the overall master plan for water resource basic situation of each basin. Evaluate the evolving expe- survey, water resources master plan, river basin riences: at the largest scale, the Mekong Delta; at planning. Establish river basin organizations and the meso scale, the Sesan-Srepok; and at the intra- inter-reservoir operations. Strengthen basic surveys, provincial scale, the Cai (or Dinh) River in Ninh expand monitoring stations, increase information Thuan. Prepare practical plans for effective basin collection, and database management, increase governance arrangements in all main basins, build- information sharing among ministries and localities. ing on local and international experience. 1.4  Increasing engagement with civil society 2.2  Build a national water information system Active participation of stakeholders, particularly civil to support good water management society, should be enabled and encouraged. On the one Water resources management (WRM) is a knowledge- hand, educational and communication campaigns could based activity currently constrained by lack of infor- increase the awareness of Vietnam’s citizens of water mation. High-quality and timely water data need to resource challenges and could offer guidance on how to be gathered to support planning and decision mak- support sustainable water resources management. On ing. Based on these data, likely impacts of inaction the other hand, given the scarcity of resources, civil soci- should be assessed, and priority actions decided upon. ety could be more actively involved in water resource Investments in data gathering need to be completed, management activities, such as monitoring water qual- and data need to be transformed into information and ity and untreated wastewater discharges. made available to all who need it. Suggested action: Facilitate and encourage active par- Suggested action: Modernize water monitoring, ticipation of stakeholders, particularly civil society. enhance analytical tools, and invest in water knowl- edge. Collect all water data into a robust, easily Recommendation 2. Manage Vietnam’s water accessible, and transparent water information sys- at the basin scale through inclusive governance tem as the foundation of good water management. arrangements 2.1  Move forward on integrated management 2.3  Improve the efficiency of public and the basin approach by establishing water expenditures on water in a basin framework governance at river basin level Aligning public spending on water with basin plans could The 2012 Law on Water Resources sets out the require- help resolve coordination challenges among sectors and ments of integrated management, basin planning, and between the center and provinces. The approach could also rebalance public expenditures toward operations 120 GO V ER N A N CE F O R WATER S ECU RIT Y and maintenance (O&M), away from the current over- agriculture, and environmental sustainability. To emphasis on capital spending. More infrastructure may achieve this, it is essential to link agricultural policy not always be the answer, especially in times of public and water policy at the national and river basin levels. finance constraints. 2030 WRG (2017) found that in Suggested action: Strengthen and accelerate implemen- three of the four major basins, water stress could be tation of the government’s Agricultural Restructuring reduced and resilience strengthened without any new Plan (2014) and the new demand-responsive irriga- infrastructure to increase supply. tion strategy (2017), improving water service to maxi- Suggested action: Review the patterns and pro- mize farmers’ incomes and value added. cesses of public resource allocation in water through a water public expenditure review to help 3.2  Factor irrigation and irrigation prioritize the use of scarce resources, better inter- infrastructure management into integrated basin connect the use of budgets between the center and planning subnational levels, and rebalance budgets between Agricultural water management challenges—pollu- capital and O&M expenditures. Use the new five- tion, water stress, water service, and flood and drought year medium-term investment plan to integrate mitigation—abound. Many farmers could obtain much sectoral and subnational priorities with national more value from their water. Agricultural investment priorities within basin plans, encourage multiyear and water management need to be better integrated programming, improve the fit of investment with in the basin planning and management framework. needs, and facilitate long-term O&M. Climate change risks need to be planned for. For exam- ple, flood and drought risk management may require 2.4  Strengthen arrangements for transboundary more storage and better storage management, with planning and operations national and local disaster risk planning for irrigated Implementation of the Mekong agreement has brought agriculture. As the major water user, irrigation needs to palpable benefits to the riparian countries in terms of actively participate in integrated basin planning. information and risk management, but issues remain, and Suggested action: Incorporate agriculture and transboundary issues are emerging on other rivers, too. aquaculture into basin plans prepared and imple- Suggested action: Strengthen existing mechanisms mented collaboratively, factoring in MARD and among the Mekong riparian countries and find the MONRE horizontally and Provincial People’s new ways to share benefits and minimize adverse Committees (PPCs) vertically. Integrate agricultural impacts. Prioritize bilateral work between Vietnam investment into plans to optimize value and water and Cambodia, given Vietnam’s unique position as allocation and use at the basin scale, and factor both upstream and downstream riparian. in climate change impacts. Pilot the approach in Ninh Thuan, where planning for agriculture in a Recommendation 3. Increase value and basin framework can boost farmers’ incomes and incomes from water in agriculture increase drought resilience. 3.1  Strengthen and accelerate implementation of the Agricultural Restructuring Plan and of the 3.3  Accelerate adoption of improved rice new irrigation strategy husbandry systems Much greater value and higher farmers’ incomes can Using 92 percent of the nation’s water, Vietnam’s be obtained where farmers convert to alternate wet successful agriculture and aquaculture depend on and dry (AWD) for rice production, as part of the 1 good water service but face increasing challenges. Must–5 Reductions (1M–5R) program or system of Expanding infrastructure has been overemphasized, rice intensification (SRI). AWD can save 30–40 percent and O&M comparatively neglected. Now perfor- of water on paddy land. The investment required is not mance is deteriorating, with emerging constraints and excessive, and rates of return and the boost to farm- risks, particularly from seasonal shortages, climate ers’ incomes are high. AWD and improved irrigation variability, and extreme events. Agricultural growth for coffee are part of Vietnam’s Intended Nationally has slowed, and diversification is still low, contributing Determined Contributions (INDC) and thus provides to persistent rural poverty. Vietnamese agriculture is at a clear synergy to climate change related actions. a turning point where restructuring is needed to gener- ate “more for less” through innovation, climate-smart The Way F or wa r d 121 Suggested action: Scale up adoption of 1 M-5R and 3.6  Develop private financing for irrigated SRI programs, including AWD as a key component agriculture and the value chain, and empower and support irrigation improvement, land leveling, farmers to take more responsibility for their own and collective actions by farmers. development As the government increasingly becomes a facilita- 3.4  Promote water efficiency and water tor rather than an investor, there is enormous scope productivity, and strengthen drought resilience to increase private financing. Private capital or man- Experience throughout Vietnam shows that higher- agement could support large-scale irrigation through value cash crops have higher water productivity, and public–private partnership (PPP) arrangements, co- improved irrigation can boost output and incomes finance irrigation improvement and intensification and proof farming against drought. Up to 25 times for smallholders, and strengthen links and financing more crop value and farmers’ income can be obtained along the value chain. if farmers switch part of their cropping to higher-value crops that return more value per cubic meter. Suggested action: Develop a strategy jointly with farmers and the private sector for increased PPP and Suggested action: Support investment in irrigation for alliances and links between farmer associations systems, farms, and market links and value chain and aggregators. Facilitate links between smallholder- development, with farmers and the private sector irrigated farming and markets through innovative as leading partners. PPP approaches. Explore options for irrigation man- agement transfer. To help commercialize agriculture, 3.5  Align public resource allocation in irrigated consider revisions to the current land law, for example, agriculture with policy objectives, in a basin to lift the ceiling of maximum landholding size, allow framework transfer of paddy land to non-farmers, and remove the Improving the allocation and efficiency of public limit of 50 years for long-term agricultural land use. resources in agriculture and sharpening the incentive structure for farmers would help boost agricultural 3.7  Reassess the overall incentive structure for growth and farmers’ incomes. In particular, there is farmers scope to rebalance budget allocations more toward To align farmers’ behavior with economic and fiscal rehabilitation, asset management, and operations. objectives, and with other policy goals such as envi- Also, asking farmers to pay a larger share of O&M ronmental sustainability, pollution control, and resil- costs would increase incentives and accountability and ience to shocks requires a balance between nonmarket help finance operations. New resource planning and and market incentives. allocation instruments could help this rebalancing. Suggested action: Conduct a review to determine The medium-term investment plan and medium-term the optimal mix of positive and negative incentives financial and budgetary plan could allow multiyear to help farmers progress toward water-efficient and programming at the basin scale, improving the fit clean agriculture. Use this comprehensive incentive of investment with needs and facilitating long-term approach to articulate options for charging irriga- O&M. In addition, there is scope to replace paddy tion service fees not only as a fiscal measure, but as land by agricultural land in the budget allocation for- an incentive for optimal farming practices. mula to promote diversification and thus higher water productivity and higher incomes for farmers. Recommendation 4. Give top priority to Suggested action: Progressively shift the balance reducing the devastating levels of pollution of public financing from new irrigation systems 4.1  Review the regulatory and incentive toward upgrades of existing irrigation systems, structure for industrial wastewater O&M, and strengthened agricultural services. Pilot these innovations in preparation for the budget/ Risks from water pollution are becoming extreme, medium-term investment plan for 2019, starting and the impact on human health, the economy, and with the two provinces identified as pilots, namely the environment is a massive threat that could cost Dong Thap and Lam Dong. nearly 6 percent of GDP by 2035 when comparing the inaction and action scenarios. The nation needs to 122 GO V ER N A N CE F O R WATER S ECU RIT Y make infrastructure, incentives, and regulation priori- to greater efficiency, reduced pollution, and higher ties in a massive national effort and investment push. incomes. Suggested action: Assess the regulatory and incen- Suggested action: Implement the recommendations tive structures for reducing industrial pollution to of the recent World Bank report on agricultural determine why they are currently ineffectual and pollution to: promote and scale up good agricul- what actions would have the most impact. As a tural practices by offering farmers education and priority, strengthen water quality monitoring and better technical options; implement the regulatory regulatory systems to control industrial pollution. framework through monitoring and enforcement, supported by interagency cooperation; and revise 4.2  Test innovative approaches to water the incentive structure to encourage nonpolluting pollution control that have been developed in behaviors (World Bank 2017m). other countries Vietnam can learn from innovative approaches to 4.5  Use innovative financial mechanisms to water pollution control in countries around the world support natural capital investments and reduce that face the same challenges. nonpoint source pollution Although nonpoint source pollution is notoriously Suggested action: Study and test innovative hard to control, some countries have introduced inno- approaches to monitoring and accountability, such as vative financial mechanisms, particularly market- monitoring pollution in real time, developing a water oriented approaches facilitating payments between health index, strengthening local accountability for ecosystem service providers and beneficiaries. These pollution control, and allowing civil society to litigate. can work well, especially when the links are clear. Also study and test innovative approaches to finance and incentives: piloting a market in pollution-dis- Suggested action: Study and test innovative mar- charge permits, designating water pollution control as ket approaches including: water quality trading, a priority for PPP investment, and targeting incentives which can achieve higher quality standards and at specific pollution reduction outcomes. reduce the cost of compliance; payment for eco- system services (PES) approaches; revolving funds 4.3  Make domestic wastewater collection, and water funds to help finance natural capital treatment, and reuse an investment priority— alternatives to conventional water treatment tech- and a business opportunity nologies; and environmental quality contracts, Vietnam’s performance on domestic wastewater col- which help enterprises and local governments lection, treatment, and reuse is the worst in the region. meet water quality targets. Only 46 percent of urban households are connected to a sewerage network, and only 12.5% of urban waste- Recommendation 5. Improve risk management water was treated in 2018 (MOC, 2019). However, and disaster response, and strengthen investments in wastewater have sizable public good resilience characteristics—large public health benefits—while 5.1  Adopt a phased approach to address urgent attracting private sector investors poses challenges. needs for managing risks and longer-term needs Suggested action: Redirect public investment and to build resilience across key sectors regulatory efforts toward this priority development Disasters have long-term macroeconomic impacts and challenge. Work with the private sector to develop affect development outcomes. Provident preparation financing models, assured revenue streams, and is the best approach. Given the high risks that Vietnam options to monetize treated wastewater that will faces, it should continue investing in risk reduction, make domestic wastewater attractive for investors, preparedness, and long-term resilience (World Bank either alone or in PPP arrangements. 2018j). Suggested actions: In the short term, resolve the 4.4  Cut agricultural pollution multisector coordination and implementation MARD’s 2014 Agricultural Restructuring Plan has challenge, improving effectiveness and coordi- embraced the need to reduce the sector’s environ- nation horizontally across sectors and vertically mental impacts. With the right packages for farmers, at national, regional, and provincial levels. In corrections in fertilizer and pesticide use could lead the medium term, empower the existing Central The Way F or wa r d 123 Committee for Natural Disaster Prevention and Recommendation 6. Develop market-based Control to drive inter-ministerial coordination financing and incentives and advise on integrated disaster risk management 6.1  Develop a new water sector financing (DRM). In the long term, mainstream multi-hazard strategy DRM and climate change adaptation into planning for managing natural resources and land use across Develop a new water sector financing strategy. Against all climate-sensitive sectors. the backdrop of declining public finance, investment and operational needs in urban and rural water and 5.2  Implement a holistic and integrated sanitation must increasingly be met by the private approach to disaster risk management sector. A new sector financing strategy should aim at maximizing private finance for development and at The report Towards Integrated Disaster Risk introducing financially autonomous operations. The Management in Vietnam highlights four “musts” for recent proposals for developing a financing strategy DRM in Vietnam, incorporated here as suggested for the energy sector could help frame this investi- actions. gation (World Bank 2018f). The new decree (Decree Suggested actions: Complete and operate an inte- 63/2018/ND-CP) on Public–Private Partnerships, grated drought and flood monitoring and warn- which came into effect on 19 June 2018, seeks to ing system; develop a financial protection strategy; improve and clarify the enabling environment for strengthen social assistance systems; and conduct such partnerships. However, some outstanding issues, locally-specific risk and vulnerability analyses. including complicated and lengthy procedures for appraisal and approval for PPP projects, and risk allo- 5.3  Build resilience through structural and cation between the State bodies and private investors, nonstructural measures across key sectors remain unclear and unaddressed. It is expected and of The same report also highlights four “musts” for importance that these will be addressed by the Law on building resilience. Investment, which is currently being drafted and will likely be debated by the National Assembly in 2020 Suggested actions: Integrate water resources or 2021 (KPMG, 2018). Likewise, there is a need for management and climate-sensitive land-use plan- the government to become a facilitator rather than an ning; adopt climate-smart good agricultural prac- investor in agriculture. Given the neglect of O&M for tices; work through inclusive, community-based publicly funded irrigation schemes, bringing in farm- approaches; and empower vulnerable populations ers and professional partners to operate and maintain to access available risk reduction opportunities to facilities may also increase the reliability and extend enhance risk resilience and livelihoods. the useful life of these assets. 5.4  Develop a comprehensive disaster risk Suggested action: Develop a water sector financing finance strategy strategy prioritizing: private investment and exper- tise; citizens’ responsibility for payment for services; Improved financial planning will be critical to estab- special financing mechanisms for smallholders, lishing a robust system for disaster preparedness and rural water supply and sanitation, and poor and response. The Ministry of Finance could take the lead marginalized populations; alternative sources of in financial planning for disasters by developing a finance such as green growth financing; and a more comprehensive disaster risk finance strategy. strategic role for public finance, focused more on Suggested actions: Improve coordination of exist- policy reform and institutional development than ing instruments and combine financial instruments on capital investment. to allow government and communities to mobilize, access, and disburse financing from public and private 6.2  Scale up PPPs across all branches of the sources quickly for immediate response and recov- water sector ery. Look to capital and insurance markets to secure The recent trend in equitization of the water utili- additional sources of funding from the private sector, ties and development of private sector–financed bulk alleviating the burden on the state budget. Study and water schemes has demonstrated the potential to test innovative instruments such as the Catastrophe draw domestic and international private financing Deferred Drawdown Option used in the Philippines and expertise into the water sector. Despite current or the Fund for Natural Disasters in Mexico. 124 GO V ER N A N CE F O R WATER S ECU RIT Y constraints, there could be scope for PPPs throughout as floods and saline intrusion; resilience to threats to the water sector if the right packages (with risk allo- water quantity and quality; development and protec- cation and incentives) could be tailored. In irrigation, tion of water sources; and provision of quality WSS the new Law on Hydraulic Works (Articles 50–52) services. provides for broader participation of farmers and the Suggested actions: Based on ongoing planning for private sector. the Mekong Delta, integrate urban planning for Suggested action: Develop a PPP strategy for each water management, hazard mitigation, water sup- branch of the water sector: water infrastructure, ply, and drainage and wastewater into broader spa- water pollution control, urban and rural water sup- tial planning both at local and basin-wide levels. ply, wastewater, and irrigation. Learn from other countries’ successful PPP strategies, such as China’s. 7.2  Complete sector reforms and improve service delivery for urban water supply 6.3  Conduct a comprehensive assessment of the Urban water network access and services have overall incentive structure in water improved vastly, but there is still some way to go in Assess the overall incentive structure in water to identify access, affordability, cost recovery, and financial sus- the most important and practical ways to align behavior tainability. Corporatization and partial privatization with policy goals and to meet fiscal objectives. The of water supply utilities have accelerated, bringing new government’s policy to reduce the role of the state in risks, and the accompanying program to strengthen most policy areas, including water resources manage- governance of urban water has stalled. ment, points to a much greater role for market-based Suggested actions: Focus strategy and planning for policy instruments. These instruments send pricing urban water supply on 100 percent access, qual- signals concerning the importance of conservation, ity, and efficiency of services, including in smaller efficient use, and the externalities entailed in different towns. Improve governance and strengthen utility water uses. A range of economic policy instruments autonomy and accountability through contractu- can promote efficient water allocation, development, alization, institutional development, and targeted and sustainable use, including water pricing reforms investment. Establish independent regulation. to promote conservation, and water rights assignment and trading to facilitate the reallocation of water to its 9.3  Sequencing actions and timing highest-value uses. Incentives for cooperation of both impacts: the feasibility and political public and private actors within comprehensive plans economy of change2 are critical. Table 9.2 categorizes the recommended actions Suggested action: Carry out a comprehensive according to whether they can practically be taken in assessment of the existing overall incentive struc- the near or longer term. Practicality is a combination ture and of options for better aligning incentives of readiness—Can the action be taken within existing with policy objectives. institutional and financial frameworks?—and political economy—Is there a solid constituency for change, Recommendation 7. Strengthen water security and are there political, institutional, or public con- for settlements cerns that would impede change? (see table 9.2) 7.1  Integrate water security for settlements The table also considers the timing of impacts, both within broader spatial planning as an indication of where action is needed right away The rate of urbanization and industrialization in to secure a better water future in five or fifty years’ Vietnam has outpaced the planning, infrastructure, time, and as a guide to the lag between the moment and regulation needed to support this rapid growth. of action and the flow of benefits, a key consideration Water security for settlements requires risk manage- in the eyes of both political decision makers and the ment, including resilience to climate-related risks such public. The Way F or wa r d 125 TABLE 9.2:  Moving to action: sequencing, timing, feasibility, political economy Immediate actions with quick impacts Immediate actions with lon- Longer-term actions with quick Longer-term actions with lon- ger-term impacts impacts ger-term impacts 1: Improving water resources management institutions Develop and implement the overall Establish river basin organizations Amend financial regulations to allow Revise the 2012 Law on Water master plan for water resource basic and inter-reservoir operation [1.3] for ring-fencing of revenues from Resources and 2014 Law on En- survey, water resources master plan, economic instruments towards wa- vironmental Protection in order river basin planning [1.3] Issue outstanding policies ter resource management activities. to improve coordination of state regulated in the Law on Water [1.1] management of water resources, Increase monitoring and inspection – Resources and related decrees particularly for the task divisions particularly random inspection [1.2] [1.1] Refine and further develop among ministries and provinces economic incentives Issue water as well as to address overlaps Facilitate and encourage active par- efficient certification schemes and with other regulations and to ticipation of stakeholders, particularly increase consumer education. [1.1] legalize key issues such as river civil society [1.4] basin organizations [1.1] Strengthen basic surveys, expand monitoring stations, increase infor- mation collection, and databases management, increase information sharing among ministries and localities. [1.3] 2: Manage Vietnam’s water at the basin scale through inclusive governance arrangements Begin establishing water governance at the river basin level [1.1] Improve the efficiency of public Strengthen arrangements for expenditures on water in a basin transboundary planning and Build a national water information framework [1.3] operations [1.4] system [1.2] 3: Increase value and incomes from water in agriculture Factor irrigation and irrigation infra- Strengthen and accelerate im- Develop private financing for ir- structure management into integrat- plementation of the Agricultural rigated agriculture and the value ed basin planning [2.2] Restructuring Plan and of the chain, and empower farmers to new irrigation strategy [2.1] take more responsibility for their Promote water efficiency and own development [2.6] productivity and strengthen drought Accelerate adoption of improved resilience [2.4] rice husbandry systems [2.3] Align public resource allocation in Reassess the overall incentive irrigated agriculture with policy objec- structure facing farmers [2.7] tives in a basin framework [2.5] 4: Give top priority to reducing the high levels of pollution Test innovative approaches to water Review the regulatory and pollution control that have been incentive structure for industrial developed in other countries [3.2] wastewater [3.1] Make domestic wastewater collection, Cut agricultural pollution [3.4] treatment, and reuse a business opportunity [3.3] Use innovative financial mechanisms to support natural capital investments and reduce nonpoint source pollution [3.5] 5: Improve risk management and disaster response, and strengthen resilience Adopt a phased plan for managing Implement a holistic and inte- Build resilience through both risks and building resilience [4.1] grated approach to DRM [4.2] structural and nonstructural measures across key sectors [4.3] Develop a comprehensive disaster risk finance strategy [4.4] 6: Develop market-based financing and incentives Develop a new water sector financing Scale up PPPs across all branches of strategy [5.1] the water sector [5.2] Conduct an assessment of the overall incentive structure in water [5.3] 7: Strengthen water security for settlements Complete urban water sector reforms Integrate water security for set- [6.2] tlements within broader spatial planning [6.1] 126 GO V ER N A N CE F O R WATER S ECU RIT Y Notes 2. See annex A.2 for a discussion of the political economy of change in Vietnam’s water sector. 1. More information, as well as detailed cost curves, are available in the 2030 WRG (2017) report. Annex A Reforming Water Governance in Vietnam: Lessons from Other Countries A lthough reform processes and governance minimum standards for water use efficiency, and estab- reforms around the world have varied, change lish clear limits on pollutant loads. Employing com- everywhere has been driven by a combination prehensive monitoring and evaluation, the system has of growing need and rising awareness produced demonstrable results. Experience from elsewhere in the world can One overall lesson is that reform is driven by a show how a program of following best practices in combination of mounting problems and growing the water sec-tor can be decided and implemented under-standing in both government and society of by consensus. In Australia, reform was driven the need for change, factors present in Vietnam today. by a fast-deteriorating water situation and fol- Water is a major preoccupation for all Vietnamese, lowed an inclusive and evidence-based process of making this a propitious time to press ahead with study and discussion. Based on sound science, the change. As issues and risks grow, there is consider- nation developed a comprehensive reform program able concern within government about water at the through debate leading to consensus. The resulting central, provincial, and local levels. Government is program of change won acceptance because of its committed, with major programs and reform efforts policy coherence and the improved water govern- already under way across the water sector and with ance arrangements proposed. growing concern about climate change and disaster In Israel, reform built on a water-respecting culture risk challenges. In addition, water has been climb- and a sense of national commitment and partner- ing the national agenda. Media coverage is extensive, ship between government and citizens, backed by a awareness of problems is growing and an increasing perception enshrined in law that water belonged to number share participants in the debate. An inclusive, the nation. Reform was begun when extreme water multi-stakeholder approach could work well, bring- short-ages loomed and was driven both by popular ing in all levels of government and all branches of sup-port and by strong technocratic and scientific society, building on existing social capital, academic inputs. Information and planning were key to good expertise, the media, and concerned advocates. Water water management, with a commitment to measuring reform is also an opportunity to give more voice to and monitoring and to rolling 30-year plans. Public women, the poor, and minorities. and private sectors were encouraged to work together A second lesson is the need for a structured evidence- to foster innovation and make it profitable. based process. Vietnam has an impressive array of A very different example of reform is China’s Most institutional competences in government, universities, Stringent System for Water Resource Management and civil society for analyzing needed reforms. This (known as the Three Red Lines). Mounting water forms the foundation for a national debate leading to shortages and pollution drove the top-down setting consensus on the shape of the reform program. of targets that limit total national water use, specify 127 128 GO V ER N A N CE F O R WATER S ECU RIT Y Creating momentum for reforming water govern- that in the past favored supply increase and tended to ance requires, first, an understanding of the drivers of skew demand through subsidies and protection have change and of the interests of different constituencies. moved more toward concerns for efficiency, environ- Successful change programs respond to imperatives mental protection, and a lighter fiscal burden. such as severe water shortages and disputes among Across the globe, serious water problems have, lit- sectors and may be catalyzed by decisive moments. tle by little, become the subject of concern and open Many such processes are evidence-based, systemati- discussion. The problems are everywhere, but they cally using data, science, and knowledge, and the prac- differ from place to place. For many countries, the tical application of economics. A process of this kind, problem is pressing scarcity. In others, it is extreme founded on an inclusive process of study and debate, events like flooding and drought. Often the ground- can lead to consensus on a national water reform water revolution has led to unmanageable overex- agenda and coherent policies. ploitation. In many countries, the rapid expansion of Section A.1 describes how momentum for change supply investments has created an inflexible pattern of may be generated, looking first at typical drivers of rights and expectations, with over-allocation to agri- change in water governance around the world and culture giving rise to the challenge of water-short cit- then at change processes in one country that has suc- ies. Everywhere, climate change is introducing costs cessfully completed a difficult water sector reform— and risks that are hard to manage. There is aware- Australia. The section also looks at the key factors that ness that management of environmental degradation have made Israel a top performer in water develop- has been neglected. Public and private investments in ment and management and have fostered its status as water infrastructure are altering water rights, in some a world-leading technological innovator. And it exam- cases increasing inequity. Almost everywhere there are ines the top-down approach used in China. Section deficiencies in water supply and sanitation services A.2 then looks at the political economy of water gov- and worsening pollution. ernance reform in Vietnam, asking how decisions are There is an awareness that water sector institu- taken, what actors might help move reform along, and tions have not always adapted to this changing con- what would be the right time and the right catalyst for text. New technology and the development of water reform. resources have outstripped the governance mecha- nisms that should have regulated them. More gener- A.1  Drivers of change: Creating ally, there is a sense that governments have developed momentum for reforming water the resource and allocated water among sectors and governance to users but have not developed the flexible and par- ticipatory institutional mechanisms and account- A.1.1  Typical drivers of change in water ability structures needed to respond to changing governance around the world demand, create accountability, or resolve conflicts. Drivers of change have multiple origins. Although each There is an understanding, too, that access to water country context is different, it is possible to identify is not always equitable and that vulnerable and mar- changes in attitudes, awareness of problems, and insti- ginalized groups are most at risk since they lack the tutions and power relations that, in combination, have resources to man-age the systemic factors that con- created momentum for change in water governance. tribute to poverty. The evolution of thinking and awareness about the All these developments create a context recep- need for change among the population and within tive to change, which may be sparked by some deci- governments is a common driver. In many countries, sive moment. Crisis can focus attention on lingering demographics and economic growth have led to rapid problems, and sudden, dramatic events can trigger urbanization and increased consumption of water and beneficial change. For example, riots in Algeria in of water-intensive food products. As a result, urban 2002–04 were a stimulus to water reforms. Conflict in constituencies are an important voice in the water Iran has demonstrated the need for a more consulta- debate. Accompanying this change are increasing tive approach to relocation issues. Successive severe education levels and broader social change, includ- droughts in Morocco in the early 1980s stimulated ing change in the status of women, which have led to water policy reform, including the passage of the 1995 more emphasis on potable water and safe sanitation Water Law. A long interruption in urban water supply and less on water for agriculture. The thinking within in Ta’iz, Yemen, in 1995 triggered a national debate governments has usually evolved in parallel. Policies and the start of water sector reform. Re forming Wate r Gove rnance in Vie tnam: Le ssons from Othe r Co u nt r ie s 129 A.1.2  Introducing best practice water policies: stresses between sectors competing for water. Over Australia a decade, Australia debated its water problems and Australia developed a comprehensive reform program developed a comprehensive reform program. Box A.1 through science and debate leading to consensus. At shows the main elements in the Australian reform pro- the end of the last century, Australia was experiencing gram and identifies the elements that contributed to serious water problems, particularly shortages, and its success in improving water management. BOX A.1:  Australia’s National Water Initiative: comprehensive reform of water management in an arid country Driven by growing water stresses and conflict, Governance and institutions Australia conducted an inclusive study and debate to • Invest in knowledge about water and build capac- arrive at consensus on its National Water Initiative. ity for good water management. This comprehensive reform plan incorporates the fol- • Improve water data collection and water lowing principles: accounting. Resource management Water services • Return all water systems to sustainable levels of • Improve the management and security of urban extraction. water supplies. • Manage groundwater sustainably. • The initiative has led to greatly improved water • Respect needs for environmental water. management by building: Water allocation • Certainty for water investors and communities. • Science and evidence as foundations for water • Provide secure water entitlements for irrigators. management. • Provide secure water entitlements for the • Markets in the water sector. environment. • The environment as central to water management. • Introduce water sharing plans with legal force. • The private sector as a participant in the water Demand management sector. • Capacity for good water management. • Encourage open trading of water rights. • The national infrastructure program as a contrib- • Introduce water pricing based on economics. utor to water management. • Ensure support for affected communities where • A national narrative for water reform. irrigation supplies are reduced. Source: Adapted from Matthews 2011. What elements enabled Australia to bring about such • Policy coherence. The National Water Initiative sweeping reforms? There are five key factors: contained the right suite of policies to achieve the policy objectives and the right measures to • An imperative for reform. Australia was expe- tackle the many water challenges within a coher- riencing severe water shortages and over-allo- ent, integrated national plan. cation to agriculture, and climate change was • Good water governance arrangements. The making the situation worse. These realities reforms established the right institutions, with became drivers of change—the triggers that clear authority, the necessary resources, and sta- drove policy action and led to agreement that bility (see box A.2). something had to be done. • An evidence-based process. The National Water • An inclusive process of study and debate leading Initiative was based on the systematic use of to consensus on a national water reform agenda. data, science, and knowledge and on the practi- A long process of study, national debate, and cal application of economics, taking account of political discussion led to agreement on objec- key concerns such as property rights and intro- tives and on a national water reform agenda, ducing the discipline of markets. the National Water Initiative, which served as a blueprint for the changes. 130 GO V ER N A N CE F O R WATER S ECU RIT Y BOX A.2:  Governance and institutions matter: Australia’s experience Australia’s National Water Initiative adopted the princi- • Can suggest new reform needs (for example, ple: “Governance and institutions are always critical to groundwater, water data, water science). good water management and to the success of reform.” • Advocates reform and change. As a result, institutional change and strengthening were • Invests in reform and better water management. at the heart of Australia’s water sector reform. Other specialist institutions, all administratively sepa- Reform of government agencies comprised: rate, were set up or strengthened: • A federal water department and legislation, both • Basin management authorities. unprecedented. • Environmental water managers. • A new independent authority for the Murray • Irrigation and urban supply utilities. Darling Basin. • Environmental regulators. • Intergovernmental coordination committees. • Health regulators. • Oversight by the Council of Australian • Water market regulators. Governments (prime minister and state premiers). There was emphasis on institutions to build capacity for • An independent public assessor of progress (the data, information, and knowledge: National Water Commission). • A major new agency and funding for water data The National Water Commission, as independent (the Bureau of Meteorology). assessor: • Major investments in water science. • Is required by law to report on reform progress. • National Water Commission inputs to public • Reports to the prime minister. debate and understanding about water. • Publishes assessments and reports. Source: Adapted from Matthews 2011. Note: The National Water Commission is no longer active. A.1.3  Introducing best practice water policies: resources are under threat, and the time to act is now. Israel Not taking action means opting for potentially terrible A 2017 analysis of Israel’s water governance concluded environmental consequences. that a number of policy choices had driven what many The incentive structure is also conducive to good observers consider excellent performance (Siegel 2017). water management. Most important is the paradox Good water management reflects Israel’s political that cheap water is expensive. In the Israeli view, water economy and public attitudes. Israel has a water-respect- has a real cost and users have to pay. Thus, the costs of ing culture: there is a sense of national commitment supply are covered but, more important, Israel became and a partnership between government and citizens on a water-conserving nation, with scientists and entrepre- water. From this has come a perception enshrined in neurs looking for ways to make water use ever more law that water belongs to the nation: water resources In efficient. Reflecting this is the policy of using water Israel are treated as public goods, not private property, charges for water—charging full cost but reserving allowing the nation to plan for water and to allocate it the revenues to finance operations and to improve and based on highest value best use. This national solidarity extend water systems. In addition, public and private also drives a preference for regulators, not politicians: sectors work together to foster innovation and to make Israelis view issues of water planning as long-term it profitable—with a government-financed incubator issues and water tariffs as business issues, not political that has launched more than 200 water-based start-up choices. Israel created a Water Authority as a techno- companies and a billion-dollar export industry. cratic decision maker and regulator and also set up an Information and planning are seen as key to good water independent nonpolitical bulk water supplier and local management. There is a strong practice of measuring and water utilities. The notion of water as the concern of monitoring: metering allows proper billing and rapid leak all, not just of the government, has created vocal and detection, and measurement is critical for basin planning, respected water advocates who persuade politicians river flow management, flood control, and drought man- to give water the focus and funding required. Finally, agement. Finally, because Israel recognizes the imperative high levels of public awareness and commitment feed a to plan today for long into the future, it works on rolling sense of urgency: the need for water is growing, natural 30-year plans for water management. Re forming Wate r Gove rnance in Vie tnam: Le ssons from Othe r Co u nt r ie s 131 A.1.4  An administrative top-down approach: The target-setting process relies on a comprehensive China’s Three Red Lines monitoring and evaluation system established in 2014 China’s Three Red Lines have been effective, but could they that measures progress on several key indicators: total be adapted to Vietnam’s very different political economy? water quantity use, industrial water productivity, agricul- The single most important element of China’s cur- tural water use efficiency, and water quality. Two more rent water governance system is the Most Stringent indicators were added in 2016: domestic water use pro- System for Water Resource Management, also known ductivity and total pollutant loads (DRCSC 2017). as the Three Red Lines. At the core of this system are A.1.5  How multi-stakeholder engagement can targets that limit total national water use, specify min- imum standards for water use efficiency, and establish catalyze change clear limits on pollutant loads. Experience from around the world shows that inclusive The experience thus far with this system has been approaches are also useful in moving from identifying largely positive with demonstrable results. Under problems to formulating and implementing solutions. China’s hierarchical water management system, the One example is the development of a public–pri- targets are disaggregated by province and local juris- vate partnership approach to solving one of the diction in a detailed, formulaic process. The Ministry thorniest of development challenges—the pollution of Water Resources also sets targets for each of China’s of a major waterway (see box A.3). The process fol- six major watersheds. lowed an inclusive participatory model developed by 2030 WRG. BOX A.3:  A multi-stakeholder process devises a public–private approach to rejuvenating India’s Ganga River For years the government of India has attempted to reju- develop partnership approaches. The best-evaluated venate the Ganga River. The basin covers more than a option was for sewage treatment and reuse infrastruc- quarter of India’s area and is home to more than one- ture based on a hybrid annuity-based public–private third of its population—450 million people. The river is partnership (PPP). Under the proposed model, the gov- highly polluted and increasingly prone to seasonal water ernment would pay 40 percent of the project cost based shortages. on construction milestones, with the remaining 60 per- In 2015, with support from the 2030 Water cent to be paid over 15 years as annuities to the private Resources Group, India started a multi-stakeholder col- concessionaire, along with operational and maintenance laboration among official agencies; central, state, and expenses. This balance between payment on delivery local governments; the private sector; and civil society. A and the subsequent annuities aligned incentives as the multi-stakeholder platform was established to diagnose project was profitable for the concessionaire, while the the problem and assess options. The process followed performance-linked payments ensure accountability and an inclusive participatory model developed by the 2030 the sustainability of the investment. WRG: With all stakeholders agreeing that this was the best model, the government adopted PPP solutions as the basis • Analyze: Stakeholders analyze the problem to be for a Clean Ganga Program, tendering the first three PPPs solved as the basis for subsequent discussions. in Mathura, Varanasi, and Haridwar. The tender resulted • Convene: Stakeholders from the public and pri- in a strong market response with multiple bids. The first vate sector as well as from civil society come two concession agreements were signed with private com- together on a common platform to create aware- panies in October 2017, providing wastewater treatment ness, trigger action, and build momentum for capacity of 132 million liters per day. change. Stakeholders identify and agree on priori- Key to the success of this initiative was the joint devel- ties and forge partnerships based on trust and a opment of the program by multiple stakeholders, which shared commitment to transform the water sector. allowed all interests to be balanced, resulting in an out- • Transform: Through the common platform, stake- come-oriented model that takes into account both the holders draft concrete proposals, develop new market realities of the private sector and the concerns of policies, and prioritize investments tailored to the civil society. This process created a feeling of ownership problem and the country situation. of the project and project outcomes for all stakeholders, In India, after long debate, studies were launched which provides the base for a sustainable project. to identify the scope of needed interventions and to Source: 2030 WRG 2017. 132 GO V ER N A N CE F O R WATER S ECU RIT Y A.2  In Vietnam, a combination of on water, in cooperation with government officials mounting problems and growing and the private sector. understanding means that the time is The number of Vietnamese NGOs has grown consider- ably in the past decade. There are now over 2,000 issue- propitious for change based organizations in Hanoi and Ho Chi Minh City A.2.1  How are decisions taken? alone. Some NGOs have also formed in other provinces. The locus of decision making in Vietnam is broader Some have formed their own networks, with varying lev- and deeper than just the central government. Since the els of effectiveness; some of the more established networks start of Doi Moi, decision making has been increas- are reaching out to other parts of Vietnam. For example, ingly delegated to the implementing agencies of the Vietnam Rivers Network is now coordinated by a government and away from the center toward the group based at a university in Hue and includes a strong provincial and local levels. In particular, the transfer sub-network in the Mekong River Delta. of budgetary control directly to the provinces together Media are key to attracting public support. with state retreat from direct control have contrib- Vietnamese media are state-owned, but the landscape uted to greater decentralization of decision making. In is far from uniform and has been developing rapidly. addition, citizens have considerable liberty of choice There are now around 800 newspapers and maga- and action. Essentially, governance has shifted from zines. Advocates can turn to sympathetic journalists a centralized to a more dispersed system of authority. and media outlets. Use of the internet and social media This dispersion of decision making creates possibil- is opening up new spaces in the media. The internet, in ities for community participation, but also poses chal- particular, offers many opportunities, especially blogs. lenges. Dispersion of decision making creates space for Academic institutions can be important partners. socio-political organizations for change and creates The main universities, located in the major cities, are numerous opportunities for advocates. Communities state-owned. Professors and other intellectuals are have, for example, assisted in detecting violations and held in high esteem. Academics can be important part- creating pressure for compliance of polluting indus- ners in social organizations, since they have technical trial enterprises (Vedan, Sonadezi). On the other hand, knowledge and links to authorities while still remain- dispersion may also create obstacles and risks. It is, ing separate from official structures. for example, not always clear who the main decision Public opinion is also a power. Public opinion mat- makers are or how to reach them. ters greatly in Vietnam, since authorities want to be seen as responsive to public concerns. A.2.2  The increasing importance of civil society Water reform is an opportunity to give more voice to Vietnamese civil society includes organizations and women, the poor, and minorities. Women are closely individuals working cooperatively for change on issues involved in water issues at household, farm, and com- of public concern. Civil society in Vietnam includes munity levels, yet they lack voice (see box A.4). Concerns not only nongovernmental organizations (NGOs) but are similar for the poor and for ethnic minorities. The water also traditional village associations, religious groups, reform process is an opportunity to correct exclusions and print and online media, intellectuals, and academics. to improve outcomes through more inclusive approaches at Each of these has the potential to influence decisions all levels, from households to the policy level. BOX A.4:  Giving voice in water to women, the poor, and minorities Women have lead responsibility for nutrition, child rear- Water sector reform is an opportunity to raise aware- ing, sanitation, and much of the country’s agricultural ness among local community leaders, local government work. From these responsibilities flow women’s keen officers, extension workers, heath workers, and oth- interest in water, sanitation, environmental health, and ers about the implication of gender inequality. Public agricultural water management. Poor people and ethnic services and messages about water need to be directed minorities work predominantly in agriculture related explicitly to women. There is also a need for gender-sensitive sectors where their voice is poorly represented. Women mapping and vulnerable group targeting, to raise aware- and the poor are more vulnerable than men to water- ness of gender-sensitive issues, develop a gender-specific related shocks such as flood losses and damages. Yet response plan, and mainstream gender concerns in ser- women, the poor, and minorities are largely absent from vice provision. decision making. Re forming Wate r Gove rnance in Vie tnam: Le ssons from Othe r Co u nt r ie s 133 A.2.3  Current opportunities for change gaining strength, though there are countervailing limits. Water is a major preoccupation for all Vietnamese. The dispersion of decision making among numerous Table A.1 sets out reasons why action on water issues institutions ensures the presence of coalition allies within could be a top prospect for reform advocacy. at least some official structures. As government officials Now could be a good time to raise issues about water and National Assembly delegates gain more experience management. There are significant openings (as well and comfort working with civil society groups and social as challenges) for social organizations. Civil society is organizations, cooperation is likely to increase. TABLE A.1:  Is action on water issues a top prospect for reform advocacy? Does water governance reform have the potential for positive impact on a Water is a basic necessity and critical to human, social, and economic large number of people? development. Would water reform be likely to have a positive effect on social equity (in- Action on water and sanitation, irrigation, and pollution will benefit the cluding gender equality and benefits marginalized groups) and therefore poor and marginalized. Access by poor minority populations is well below fit with broad societal goals? the national average, while their exposure to pollution is often greater than average. Is water governance reform relevant to central or local government policy, Government has major programs and reform efforts already under way concerns, and practice? across the water sector and is deeply concerned about climate change and disaster risk challenges. Recent legislation demonstrates the govern- ment’s proactive attitude to water issues. Locally and nationally, extreme events and emerging water scarcity have become major issues. Is an advocacy coalition likely to influence policy? Water has been climbing the national agenda, and advocacy could help trigger further important reforms. Is there a critical mass of civil society stakeholders interested and involved? A number of NGOs, including the influential Vietnam River Network, are involved in water issues. Is there diversity of stakeholders across government, the private sector, Within government, there is considerable concern about water issues and the population at large interested and involved? at the central, provincial, and local levels. In the private sector and the population at large there is strong interest, particularly in water supply and sanitation, pollution control, and irrigated agriculture. Is there potential for forging or strengthening a broad-based coalition? The potential is high, given the extent of media coverage, the awareness of problems, and the number of active participants in debate. Is there need for more donor resources, or for other types of donor aid? Donor involvement to date has been largely in infrastructure develop- ment. At this juncture, donor aid will be critical, particularly grant aid, to help reform and strengthen governance. © Khanh Van Ngoc Duong / World Bank Annex B Vietnam’s Water Governance Framework B.1  The legal framework for water resources management and usage B.1.1  Relevant water-related laws No. Name Code number Date of issuance Being effective from Comments 1 The Law on Water Resources 17/2012/QH13 1/1/2013 Replacing the Law on Water Resources 1998 2 The Law on Inland Waterway 23/2004/QH11 15/6/2004 1/1/2005 Transport 3 The Law on Biodiversity 20/2008/QH12 11/13/2008 7/1/2009 4 The Law on Environmental Protection 55/2014/QH13 6/26/2014 1/1/2015 Replacing the Law on Environmental Protection 2005 5 The Law on Construction 50/2014/QH13 6/18/2014 1/1/2015 Replacing the Law on Construction 2003 7 The Law on Hydrology and meteo- 90/2015/QH13 1/23/2015 7/1/2016 rology 8 The Law on amendment and sup- 48/2014/QH13 1/1/2015 plementation of some articles of the Law on Inland Waterway Transport 9 The Law on Charges and Official Fees 97/2015/QH13 11/25/2015 1/1/2017 Replacing the Ordinance on Charges and Official Fees 10 The Law on Irrigation 08/2017/QH12 6/19/2017 7/1/2018 11 The Law on Master Planning 21/2017/QH12 11/24/2017 1/1/2019. The provisions of this Law on develop- ment, appraisal of the national, regional and provincial master plans became effective from 01/3/2018 12 The Law on amendment and sup- 35/2018/QH12 11/20/2018 1/1/2019 plementation of some articles of 37 Laws relating to master planning 135 136 GO V ER N A N CE F O R WATER S ECU RIT Y B.1.2  Sub-laws Decrees B.1.2.1  The 2012 Law on Water Resources B.1.2.1.1 The decrees (Ministry of Environment and Natural Resources is responsible for taking lead in implementation) No. Name of decree Code number Date of issuance Date of effectiveness Main contents 1 Provisions on some articles of the 201/2013/ 27/11/2013 1/2/2014 Provisions on details of some articles of Law on Water Resources NĐ-CP the Law on Water Resources 2 Provisions on the development 43/2015/NĐ-CP 6/5/2015 1/7/2015 Provisions on the development and and management of corridors for management of corridors for protect- protecting the water sources ing the water sources for water sources regulated under Article 31 of the Law on Water Resources 3 Provisions on incentives for the 54/2015/NĐ-CP 8/6/2015 1/8/2015 Provisions on incentives for borrow- economical and effective use of ings, tax reduction and exemption for water the economical and effective use of water 4 Provisions on some conditions for 60/2016/NĐ-CP 1/7/2016 1/7/2016 Provisions on some conditions for investment and businesses in the investment and businesses in the area area of natural resources and envi- of water resources, minerals and envi- ronment (Chapter II. Conditions for ronmental protection, including: investment and businesses in the a) Conditions to grant license for prac- areas of water resources) ticing ground water exploitation; b) Conditions on capacity of the institu- tion organizing the basic investigation of water resources, consulting on water resource master planning; conditions on the capacity of the consulting institutions and individuals making project proposal, reports in the dossier applying for water resource licenses; 5 Provisions on the calculation 82/2017/NĐ-CP 17/7/2017 1/9/2017 Provisions on the calculation method, method, level of fees for granting level of fees for granting WR ex- WR exploitation right. ploitation right with regards to state regulators and related institutions and individuals 6 Handling of administrative 33/2017/NĐ-CP 3/4/2017 20/5/2017 Provisions on acts subject to punish- violations in water and mineral ment and levels of punishment in the resources area of water and mineral resources 7 Provisions on limited exploitation 167/2018/ 26/12/2018 1/2/2019 Provisions on limited exploitation of of ground water NĐ-CP ground water in fresh water containing region within the territory of Socialist Republic of Vietnam. 8 Amendment of some articles of 136/2018/ 5/10/2018 5/10/2018 Amendment, annulment of some decrees relating to the conditions NĐ-CP articles of Decree No.60/2016/NĐ-CP for investment and business in dated 01 /7 /2016 of the Govern- the area of natural resources and ment providing for some conditions environment (which amend Article on investments and business in 4 and Article 6 of Decree 60/2016 the area of natural resources and relating to water resources) environment: Conditions for grant- ing licenses for practicing ground water drilling; conditions for the professional staff of the institutions taking part in implementation of the projects and plan on basic investiga- tion, consultants for water resources master planning. B.1.2.1.2  Decisions of the Prime Minister Between 2015 and 2018, MoNRE set out the legal requirements for inter-reservoir operations on main rivers. The National Assembly passed resolutions on strengthening planning, construction investment and operation of hydropower works. The objectives were to: reduce flooding in downstream areas; increase water use efficiency; and ensure sufficient water was available for production in downstream areas in the dry season. To implement these resolutions, MONRE submitted 11 draft decisions on inter-reservoir operation procedures and these were issued by the Government as Prime Ministerial Decisions. The list of decisions of the Prime Minister for the inter-reservoir regulating process Vie tnam’s Wate r Gove rnance Fr am e w or k 137 No. Name of river No. of Decision Date of issu- Being effective from ance 1 Srepok river Decision 1201/2014-TTg 7/23/2014 15/8/2014 2 Vu Gia Thu Bồn river Decision 1537/2015-TTg 9/7/2015 7/9/2015 3 Red river Decision 1622/2015-TTg 9/7/2015 7/9/2015 4 Ca river Decision 2125/2015-TTg 12/1/2015 1/12/2015 5 Huong river Decision 2482/2015-TTg 12/30/2015 30/12/2015 6 Ma river Decision 214/2018-TTg 2/13/2018 1/3/2018 7 Sesan river Decision 215/2018-TTg 2/13/2018 13/2/2018 8 Dong Nai river Decision 305/2017-TTg, 3/24/2016 24/3/2016 Decision 471/2016-TTg 9 Ba river Decision 787/2018-TTg 7/18/2018 1/9/2018 10 Tra Khuc river Decision 911/2018-TTg 7/25/2018 1/9/2018 11 Kon - Ha Thanh river Decision 936/2018-TTg B.1.2.1.3 Circulars No. Name of river Code number Date of issuance Date of effectiveness Main contents 1 Regulation on techniques for inves- 12/2014/ 17/2/2014 7/4/2014 providing for the contents of investi- tigation and assessment of surface TT-BTNMT gation, assessment of surface water water resources resource and guiding the techniques for investigation and assessment of surface water resources 2 Regulation on conditions of capac- 56/2014/ 24/9/2014 10/11/2014 This Circular provides for conditions of ity of institutions and individuals TT-BTNMT capacity of institutions and individuals involving in basic investigation of carrying out basic investigation of water resources, consultants making water resources pursuant to Clause water resources master planning, 4 Article 13; conditions of capacity of development of project, reports consultants making water resources in the dossiers applying for water master plan pursuant to provisions in resources license Article 23 of Water Resources Law and provisions on capacity of institutions and individuals making plans and reports in the dossiers applying for water resources licenses pursuant to Clause 2 Article 20 of Decree No. 201/2013/NĐ-CP 3 Regulation on WR master planning 42/2015/ 29/9/2015 1/1/2016 Providing for the details of tech- techniques TT-BTNMT niques, products of the obligations of water resource master planning; development of master plan for water resources with regards to: Inter-pro- vincial river basin; inter-provincial water source; water resources of the provinces and cities under central management 4 Master plan on identification and 24/2016/ 9/9/2016 25/10/2016 providing for the identification and publication of sanitation protection TT-BTNMT publication of sanitation protection area for domestic water sanitation. area for domestic water, responsibili- ties of organizations and individuals in implementation 5 Regulation on supervising the 47/2017/ 7/11/2017 22/12/2017 providing for the supervision of exploitation and use of water TT-BTNMT the exploitation and use of water resources resources: formality for supervision, system of supervision, responsibilities of stakeholders 6 Regulation on determination of 64/2017/ 22/12/2017 5/2/2018 providing for methods for determi- minimum flows of rivers, streams TT-BTNMT nation of minimum flows of rivers, and downstreams of reservoirs, streams, canals, ditches (hereafter weirs. referred to as rivers, streams) and downstreams of reservoirs, weirs (hereinafter referred to as reservoirs) 138 GO V ER N A N CE F O R WATER S ECU RIT Y 7 Regulation on techniques for 65/2017/ 22/12/2017 2/2/2018 providing for techniques for deter- determination of minimum flows TT-BTNMT mination, review and regulation of on the rivers, streams and develop- minimum flows on the rivers, streams ment of inter-reservoir operational where there has not any reservoirs processes. and weirs; after reservoirs, weirs and development, review and modifi- cation of inter-reservoir operational processes. 8 Regulation on the evaluation of 76/2017/ 29/12/2017 1/3/2018 providing for the evaluation of recep- receptive capacity of waste water, TT-BTNMT tive capacity of waste water, loading loading capacity of river and pond capacity of water source of rivers, water source. streams, canals, ditches and ponds ( commonly called receptive capacity of waste water, loading capacity of river and pond water source). 9 Regulation on contents, tem- 31/2018/ 26/12/2018 10/2/2019 providing for contents, templates, plates, reports in the area of water TT-BTNMT reports in the area of water resources, resources including: national water resources report, thematic report on water re- sources, report on the use of water re- sources and report on the exploitation and use of water resources, discharge of waste water to the water sources. 10 Promulgation of technical and eco- 01/2015/ 9/1/2015 24/2/2015 nomic norms for monitoring and TT-BTNMT forecast of water resources 11 Promulgation of technical and eco- 15/2017/ 21/7/2017 7/9/2017 nomic norms for master planning TT-BTNMT and modification of water resources master plan 12 Promulgation of the technical re- 16/2017/ 25/7/2017 15/9/2017 quirements and the economic and TT-BTNMT technical norms for surveying, eval- uating the status of water resources exploitation and usage. 13 Promulgating the economic and 30/2017/ 11/9/2017 26/10/2017 technical norms for surveying, TT-BTNMT evaluating water resources. 14 Promulgating the technical 36/2017/ 6/10/2017 21/11/2017 requirements and the economic TT-BTNMT and technical norms for surveying, measuring the water resources, and evaluating and forecasting the wa- ter resources with river flow models. 15 Promulgation of the technical 37/2017/ 6/10/2017 21/11/2017 requirements and the economic TT-BTNMT and technical norms for surveying, evaluating the status of discharge of waste water to the water source. 16 Promulgation of economic and 71/2017/ 2/2/2017 12/2/2017 technical norms for determination TT-BTNMT of minimum flows on the rivers, streams and development of in- ter-reservoir operational processes. 17 Regulation on techniques for map- 08/2014/ 7/4/2014 7/4/2014 ping the ground water quality with TT-BTNMT scale of 1:25,000 18 Regulation on techniques for map- 09/2014/ 17/2/2014 17/4/2014 ping the ground water quality with TT-BTNMT scale of 1:50,000 19 Regulation on techniques for map- 10/2014/ 17/2/2014 17/4/2014 ping the ground water quality with TT-BTNMT scale of 1:100,000 20 Regulation on techniques for map- 11/2014/ 17/2/2014 17/4/2014 ping the ground water quality with TT-BTNMT scale of 1:200,000 Vie tnam’s Wate r Gove rnance Fr am e w or k 139 21 Techniques for investigation and as- 13/2014/ 17/2/2014 7/4/2014 sessment of ground water resources TT-BTNMT 22 Regulation on registration of 27/2014/ 30/5/2014 15/7/2014 ground water exploitation, TT-BTNMT templates of dossiers for grant- ing, extension, modification and re-granting of water resources licenses 23 Regulation on practicing the 40/2014/ 11/72014 26/8/2014 ground water drilling TT-BTNMT 24 Protection of ground water in 25/2015/ exploitation and drilling TT-BTNMT 25 Regulation on handling and filling 72/2017/ 29/12/2017 12/2/2018 of the unused wells TT-BTNMT 26 Regulation on the protection of 75/2017/ 29/12/2017 12/2/2018 groundwater in drilling, excavation, TT-BTNMT exploration and exploitation of groundwater. 27 Techniques for investigation and as- 34/2018/ 26/12/2018 2/10/2018 sessment of ground water resources TT-BTNMT 28 Techniques for laboratory water 08/2015/ 26/2/2015 15/4/2015 pumping in groundwater investiga- TT-BTNMT tion and assessment 29 Techniques for drilling in ground- 59/2015/ 14/12/2015 05/02/2016 water investigation, assessment and TT-BTNMT exploration 30 Issuing indicators for assessing qual- 19/2018/ 5/11/2018 20/12/2018 ity of public services in operating TT-BTNMT inter-reservoirs in inter-provincial river basins B.1.2.2  The Law on Irrigation 2017 B.1.2.2.1  Decrees on Irrigation (chaired by Ministry of Agriculture and Rural Development) Name of decree Code number Date of issuance Date of effectiveness Main contents 1 Regulation on management, use 129/2017/QH12 16/11/2017 1/1/2018 providing for the management, and exploitation of irrigation infra- use and exploitation of irrigation structure asset infrastructure assets invested and managed by the State. 2 Regulation on handling of ad- 104/2017/QH12 14/9/2017 1/11/2017 ministrative violations in the area of natural calamities prevention; exploitation and protection of irrigation works; dykes 3 Regulation on budget support in 62/2018/QH12 02/5/2018 2/5/2018. Deadline the use of products and services of for providing bud- irrigation public utilities get support for the use of products and services of irrigation public utilities: from 01/ 01/2017 till the end of 30/ 6/ 2018 4 providing for details of some arti- 67/2018/QH12 14/5/2018 1/7/2018 cles of the Law on Irrigation 5 Regulation on support to the devel- 77/2018/QH12 16/5/2018 1/7/2018 Regulation on support to the devel- opment of small irrigation, internal opment of small irrigation, internal field irrigation and water-saving and field irrigation and water-saving and advanced irrigation advanced irrigation, including: Invest- ments in new construction of water storage works, system of advanced and water-saving irrigation, power pumping station, drainage and canal consolidation, meeting the require- ments for agriculture restructuring, linking with new rural development. 140 GO V ER N A N CE F O R WATER S ECU RIT Y 6 On management of dam safety, 114/2018/ 4/9/2018 4/9/2018 Provisions on management of dam reservoirs NĐ-CP safety, reservoirs for the dams having height from at least 5m or reservoirs having total volume of at least 50,000 m2 and safety for dam's lowlands . B.1.2.2.2  Circulars on Irrigation No. Name Code number Date of issuance Date of effectiveness Main contents Detailed provisions of some articles 05/2018/QH12 15/5/2018 1/7/2018 This Circular provides or the of the Law on Irrigation development, promulgation and implementation of the irrigation work operation process; points of hand-over of irrigation products and services; planting landmarks scoping the protection area of the irrigation works; management, exploitation of the small irrigation works, internal field irrigation. B.1.2.3  Law on Environmental Protection 2014 B.1.2.3.1  Decrees (chaired by MONRE) No. Name of decree Code number Date of issuance Date of effectiveness Main contents 1 Regulations on conditions of the 127/2014/QH12 12/31/2014 15/2/2015 This Decree provides for conditions for organizations operating in environ- operating in environment monitoring ment monitoring services services; dossiers and procedures for granting, extension, modification of contents, re-granting, temporary sus- pension of the validity, revocation and annulment of Certificate for eligibility for operation of the environment monitoring services, including mon- itoring and analysis of surface water, waste water 2 Regulation on environmental 18/2015/QH12 14/2/2015 1/4/2015 protection master planning, stra- tegic environmental assessment, environmental impact assessment and environmental protection commitments 3 Detailed provisions of some articles 19/2015 14/2/2015 1/4/2015 Detailed provisions on some articles of the Law on Environment Protec- of the Law on Environment Protection, tion including articles relating to protec- tion of vocational village environment; incentives and support or protection of environment; community participa- tion in environment protection 4 Waste and wasted material man- 38/2015/QH12 24/4/2015 15/6/2015 providing for management of types of agement; wastes, including liquid wastes, waste water. 5 Regulation on handling of admin- 155/2016/QH12 18/11/2016 2/1/2017 Providing for acts of administrative istrative violations in the area of violation, types of punishment, levels environmental protection. of punishment, measures of remedy for acts of administrative violations, power for making minutes of admin- istrative violations, power for handling of administrative violations; responsi- bilities and coordination mechanisms in examination, inspection and handling of administrative violations in environmental protection, including waste water Vie tnam’s Wate r Gove rnance Fr am e w or k 141 B.1.2.3.2  Circulars on environment No. Name of circular Code Date of issuance Date of effectiveness 1 Detailed regulation on appraisal of 19/2015/QH12 23/4/2015 9/6/2015 the conditions for operation in envi- ronmental monitoring and template of certificate 2 On strategic environmental 27/2015/QH12 29/5/2015 15/7/2015 Detailed regulation on contents, pro- assessment, environmental impact cedures and sequences of strategic en- assessment and environmental vironmental assessment, environment protection plan impact assessment and environmental protection plan, including requirements on water quality. 3 Protection of environment of eco- 35/2015/QH12 30/6/2015 17/8/2015 Provisions on protection of environ- nomic zones, industrial zones, export ment, including provisions on waste processing zones, high-tech zone water of economic zones, industrial zones, export processing zones, high- tech zone 4 On hazardous waste management 36/2015/QH12 30/6/2015 1/9/2015 Regulations on hazardous waste man- agement, including waste water 5 Reports on environment status, 43/2015/QH12 23/9/2015 1/12/2015 Regulations on structure and contents environmental indicator set and of environment status reports, environ- management of environmental mental indicator set and management monitoring data of environmental monitoring data, including water environment 6 On protection of environment of in- 31/2016/QH12 4/10/2016 1/12/2016 Detailed regulations on environmental dustrial clusters, central services and protection, including waste water of business areas, vocational villages industrial clusters; central business and and production, trading and services services areas; 2. Protection of environ- premises ment of vocational villages; protection of environment of production, trading and services premises 7 Promulgation of technical and 20/2017/QH12 8/8/2017 1/10/2017 Technical and economic norms for economic norms for monitoring of monitoring of environment, including environment monitoring of environment of conti- nent surface water, groundwater, rain water, sea water 8 Technical regulation on Environmen- 24/2017/QH12 1/9/2017 15/10/2017 Technical regulation for monitoring of tal Monitoring environment, including periodic mon- itoring of environment of continent surface water, groundwater, rain water, sea water, waste water Regulations on ensuring quality and controlling quality in periodic environment monitoring. Regulations on basic requirements and technical specifications of the automatic and continual waste water monitoring system. Requirements on receipt, transmission and management of data with regards to the automatic and continual environment monitoring. Regulations on management and use of environment monitoring equipment. B.1.2.3.3  Environment standards No. Name Code number Date of issuance Date of effectiveness Main contents 1 National technical standards on 01/2015 31/3/2015 1/6/2015 waste water from natural rubber preliminary processing 2 The National Technical Standards on 08/2015 21/12/2015 1/3/2016 surface water quality 3 The National Technical Standards on 09/2015 21/12/2015 1/3/2016 groundwater quality 4 The National Technical Standards on 10/2015 21/12/2015 1/3/2016 sea water quality 142 GO V ER N A N CE F O R WATER S ECU RIT Y 5 National technical standards on 11/2015 21/12/2015 1/3/2016 waste water from fishery processing 6 National technical standards on 12/2015 31/3/2015 1/6/2015 waste water from paper and pulp industry 7 National technical standards on 13/2015 31/3/2015 1/6/2015 waste water from textile and dying industry 8 The National Technical Regulation on 14/2015 domestic waste water; 9 National technical standards on 25/2009 16/11/2009 1/1/2010 waste water from landfills 10 The National Technical Regulation on 28/2010 16/12/2010 6/2/2011 healthcare waste water; 11 National technical standards on 29/2010 16/12/2010 6/2/2011 waste water from petroleum and gas shop and storage. 12 The National Technical Regulation on 40/2011 26/12/2011 15/2/2012 industrial waste water; 13 National technical standards on 52/2013 25/10/2013 1/1/2013 waste water from steel manufactur- ing industry 14 The National Technical standards on 62/2016 29/4/2016 15/6/2016 waste water from animal husbandry; B.1.2.4  The Law on Inland Waterway Transport 2004 and the Law on amendment and supplementation of some articles of the Law on Inland Waterway Transport B.1.2.4.1  Decrees (chaired by Ministry of Transport) No. Name of decree Code Date of promulgation Date of effectiveness Main contents 1 The decree provides for details 24/2015 27/2/2015 1/5/2015 Providing for details and mea- and measures of enforcement of sures of enforcement of some some articles of the Law on Inland articles of the Law on Inland Waterway Transport and the Law Waterway Transport and the on amendment and supplementa- Law on amendment and sup- tion of some articles of the Law on plementation of some articles Inland Waterway Transport. of the Law on Inland Waterway Transport, including: Scope of corridor for protection of inland waterway routes. 2 Regulation on handling of admin- 132/2015 25/12/2015 1/7/2016 istrative violations in the area of inland waterway transport. B.1.2.4.2 Circulars No. Name of circular Code Date of issuance Date of effectiveness Main contents Regulation on inland waterway 15/2016/QH12 30/6/2016 15/9/2016 Regulation on inland waterway management. management, including: classi- fication, authority for deciding on the technical levels of the inland waterway; publication of opening, closing of routes and flow of special used inland waterway; landmarks for pro- tection of the inland waterway transport infrastructure; projects for investments and construc- tion of works relating to inland waterway transport and limit of inland waterway transport Vie tnam’s Wate r Gove rnance Fr am e w or k 143 B.1.2.5  The Law on Hydrology and Meteorology 2015 B.1.2.5.1  Decrees (chaired by MONRE) No. Name of decree Code Date of Date of Main contents issuance effectiveness 1 Detailed provisions of some articles 38/2016 15/5/2106 1/7/2016 Detailed provisions of some articles of the Law of the Law on Hydrology and on Hydrology and Meteorology, including: Meteorology 1. Monitoring of hydrology and meteorology of owners of facilities, and the supply of information and data of hydrology and meteorology monitoring. 2. Technical corridor of hydrology and meteo- rology facilities 3. Forecast and warning of hydrology and me- teorology by organizations and individuals outside the national hydrology and meteo- rology forecast and warning system. 4. Exploitation and use of hydrology and mete- orology information and data. 5. Exchange of information and data of hydrol- ogy and meteorology, supervision of climate changes with international organizations, foreign organizations and individuals who are not party to international treaty to which Vietnam is a member. B.1.2.5.2 Circulars No. Name of circular Code Date of issuance Date of effectiveness Main contents 1 Contents of hydrology and meteo- 05/2016/QH12 13/5/2016 1/7/2016 rology monitoring with regards to stations under the national hydrolo- gy and meteorology station network 2 Regulation on technical and 36/2016/QH12 8/12/2016 1/26/2017 economic norms for operation of the hydrology and meteorology network 3 Technical and economic norms for 52/2017/QH12 30/11/2017 15/1/2018 forecast and warning of hydrology and meteorology 4 Technical regulation on monitoring 30/2018/QH12 26/12/2018 11/2/2019 Technical regulation on moni- and supply of information and data toring and supply of information of hydrology and meteorology with and data of hydrology and me- regards to special used hydrology teorology with regards to special and meteorology stations used hydrology and meteorolo- gy stations B.1.2.6  The Law on Construction B.1.2.6.1 Decrees No. Name of decree Code Date of issuance Date of effectiveness Main contents 1 On production, supply and con- 117/2007/QH12 11/7/2007 1/8/2007 Regulation on activities in pro- sumption of clean water duction, supply and consump- tion of clean water under the central comprehensive water supply schemes in urban areas, rural areas and industrial zones, export processing zones, high- tech zones, economic zones (referred to as industrial zones); rights and obligations of organizations and individuals and households involving in production, supply and consumption of clean water in the territory of Vietnam. 2 Amendment, supplementa- 124/2011/QH12 28/12/2011 20/2/2012 tion of some articles of Decree No.117/2007/NĐ-CP dated 11 /7 /2007 of the Government on pro- duction, supply and consumption of clean water 144 GO V ER N A N CE F O R WATER S ECU RIT Y B.1.2.7  The Law on Charges and Official Fees B.1.2.7.1 Decrees No. Name of decree Code Date of Date of Main contents issuance effectiveness 1 On Environment protection 154/2016 16/11/2016 1/1/2017 Regulation on subjects of charges, cases of charge charges for waste water exemption, charge submission persons, level of charges, registration and declaration, submission, management and use of the environmental protec- tion charges for waste water 2 Detailed regulation on prices of 96/2018/QH12 30/6/2018 1/7/2018 Detailed regulation on prices of irrigation prod- irrigation products and services, ucts and services (including prices of public and support of fees for use of utility irrigation products and services and public utility irrigation products prices of other irrigation products and services); and services subjects, scopes, methods; level of supports of fees for use of public utility irrigation products and services. B.1.2.7.2 Circulars: Guidelines on official fees and 02/2014/QH12 12/1/2014 17/2/2104 Guidelines on official fees and charges under the charges under the decision decision authority of People’s Councils of provinces authority of People’s Councils of and cities under central management (hereinafter provinces and cities under central called provincial level), including the List of fees management. under the authority of provincial People’s Councils (including fees for appraisal of projects, reports on exploration, exploitation and use of ground water; exploitation and use of surface water; discharge of waste water to the water sources, irrigation works (for the appraisal conducted by local agencies); fees for appraisal of the reports on exploration and eval- uation of ground water reserves (for the appraisal conducted by the local agencies); fees for appraisal of dossiers, conditions for practicing ground water drilling (for the appraisal conducted by the local agencies); 1 Guiding the use of financing 73/2018/QH12 15/8/2018 1/10/2018 Guiding the use of financing sources, manage- sources in management and ex- ment and use of financial sources, accounting ploitation of irrigation works using and mechanism of financial reporting, examina- state funds tion, supervision with regards to units involving in exploitation of irrigation works using state funds pursuant to Article 38 of the Law on Irrigation. B.1.2.8  The Law on Biodiversity B.1.2.8.1  Decrees: not yet in place B.1.2.8.2  Circulars: not yet in place B.1.2.9  Healthcare: (Clean water) B.1.2.9.1  Decrees: not yet in place B.1.2.9.2 Circulars No. Name of circular Code Date of issuance Date of effectiveness Main contents National technical standards 41/2018/QH12 14/12/2018 15/6/2019 Replacing Circular 50 and regulations on examination, supervision of clean water quality used for domestic purposes. Vie tnam’s Wate r Gove rnance Fr am e w or k 145 B.1.2.10  Industry and Trade (Hydropower) B.1.2.10.1  Decrees: not yet in place B.1.2.10.2 Circulars No. Name of circular Code Date of issuance Date of effectiveness Main contents 1 regulations on management 43/2012/QH12 27/12/2012 10/2/2013 Regulations on some contents of hydropower project master on management of hydropower planning, investments and master planning, manage- construction, and operation ment of hydropower project and exploitation of hydropower investments and construction, works and operation and exploitation of hydropower works in the territory of Vietnam. B.1.2.10.3  Under preparation: Ministry of Industry and Trade is drafting the circular regulating the management of dam safety, hydropower res- ervoirs having heights of at least 05m, hydropower reservoirs having total volume of at least 50,000m3. B.1.2.11 Finance B.1.2.11.1 Decrees B.1.2.11.2 Circulars No. Name of circular Code Date of issuance Date of Main contents effectiveness 1 Tariff for domestic clean water 88/2012/QH12 28/5/2012 11/7/2012 Pursuant to the clean water tariff, People’s consumption Committees of the provinces and cities under central management decide on their specific domestic water prices in line with regulation 2 Regulation on management, use 54/2013/QH12 4/5/2013 1/7/2013 Regulation on management, use and ex- and exploitation of the central ploitation of the central rural water supply rural water supply schemes schemes, including: a)  Clean water supply schemes for rural people are invested wholly or partly by state budget, or originating from state budget; state ownership is established over the schemes. b)  Clean water supply schemes for rural people and urban people are invested from the following funds: - National Target Program for Rural Water Supply and Sanitation; - Program providing supports of agri- cultural land, residential land, house, and water for domestic uses to poor/ difficult ethnic minority households (referred to as Program 134); - Program for socio-economic develop- ment in specially difficult communes in the ethnic minority and mountainous areas (referred to as Program 135); - New Rural Development National Target Program; - Water Resources National Strategy. 3 Amendment, supplementation 76/2017/QH12 26/7/2017 10/9/2017 of some articles of Circular No.54/2013/NĐ-CP dated 04 /5 /2013 of Ministry of Finance on regulating the management, use and exploitation of central rural water supply schemes 146 GO V ER N A N CE F O R WATER S ECU RIT Y 4 On maximum price of public utili- 1050a/QĐ-BTC 30/6/2018 1/7/2018 Maximum price of public utility irrigation ty irrigation products and services products and services period 2018-2020 period 2018-2020 during the state budget stabilization period 2017-2020 as follows: 1. Maximum tariff of public utility irriga- tion products and services for paddy cultivation land. 2. Maximum tariff for areas used for planting rice seed, vegetables, farm produce, short-period industrial plants including winter plants calculated as 40% of land areas for paddy cultiva- tion. 3. Maximum tariff applicable to salt production is calculated as 2% of salt product value. 4. Maximum tariff for water supply for animal husbandry, fishery cultivation and supply of water to long term industrial plants, fruit trees, flowers and pharmaceutical trees. B.1.2.12  The Law on Master Planning • Interprovincial integrated river basin planning: Decrees (chaired by Ministry of Planning B.1.2.12.1.  MONRE has developed and approved this for and Investment): not yet in place two specific river basins, namely Hong-Thai B.1.2.12.2  Circulars: not yet in place Binh and Sesan-Srepok. The remaining ones B.1.2.12.3 Under preparation: MPI is under drafting still need to be developed and approved (as per process of the decree Article 21 (1b)). • Water restoration plan: The issuance by the B.2  Legal documents that remain to be Prime Minister is still pending (as per Article 7). issued • List of lakes, ponds and swamps not allowed to Government has inventoried a number of legal docu- be filled up: This list has not yet been issued. ments that remain to be issued to implement outstand- • Protection of interprovincial river banks: This ing provisions of the 2012 Law on Water Resources has not yet been issued. and related Decrees. Two items regulated by Decree 201/2013: MoNRE • Water resources inventory. Decree 201/2013 The following legal documents under MONRE’s requires MONRE to carry out a water resources responsibility have not yet been issued: inventory every five years and prepare an inven- Six items regulated by the 2012 Law on Water tory report based on forms issued by MONRE. Resources: Circular No. 31/2018 regulates the form of • A ‘master plan on the basic survey’ is required reports on water resources including a five year under Article 10. This is effectively a national national water resources report. However, the water resources assessment. A draft has been inventory report still has to be completed. prepared by MONRE and is being reviewed by • Water resources database standards: These have other ministries. It is yet to be finalized and sub- not yet been issued. mitted to the Prime Minister for approval (as One item regulated by Decree 43/2015 per Article 10). To date, a few separate water resources surveys were carried out, subject to • Guidance on water protection corridors has not budget constraints, but not yet the master plan. yet been issued • A plan for the protection, exploitation and use One item regulated by Decree 54/2015 of inter-country water sources. This is currently • Determining freshwater scarcity zones and saline being prepared by MONRE, and still needs to be intrusion zones has not yet been issued submitted to the Prime Minister for approval (as per Article 21 (1a)). Vie tnam’s Wate r Gove rnance Fr am e w or k 147 Other ministries • overseeing implementation of the strategic orien- tation, reviewing the implementation every five The following legal documents under the responsibil- years, and proposing adjustments of the strate- ity of other line ministries also remain to be issued gic orientation to the Prime Minister to adapt to (regulated by Decree 54/2015- Annex 9): changing circumstances • MOST: one item related to water saving technol- A draft proposal for adjusting the strategic direction ogy standards of the National Strategy of Irrigation is expected to be • MARD: two items related to: (i) agricultural submitted by MARD for approval to the Government water saving technology standards and (ii) meth- in the third quarter of 2019. ods for determining water recycling • MOF: three items on (i) preferential conditions; B.4  Planning for water resources (ii) concessional loans; and (iii) tax reductions and exemptions. In 2017, Vietnam adopted two laws designed to clean up the mass of plans of one kind or another that B.3  National strategies for water and had built up: the Law on Planning and the Law on irrigation Amending and Supplementing a Number of Articles of 37 Laws related to the 2017 Law on Planning. In 2006, the National Strategy on Water Resources for 2020 was approved. The necessity for the 2017 Law on Planning This Strategy was adopted by a Decision of the Before the 2017 Law on Planning was passed, there Prime Minister (81/2006/QD-TTG). To achieve the were 19,285 master plans in all sectors - not even goals outlined in this strategy, the Prime Minister including product plans such as the cassava and tilapia subsequently approved the National Action Plan plans. The number of plans increased sixfold between 2014-2020 (Decision 182/2014). The Plan targets 2001 and 2011. For the period between 2001-2010 improvement of the effectiveness of integrated water there were 3,114 plans, while these increased for the resources management, protection, and use of water period between 2011-2020 to 19,285 plans. Among resources. It specifies seven priority programs, of the 19,285 master plans, there were 2,326 urban which four were assigned to MONRE to lead: plans and 9,864 construction plans. Over 8,000 bil- • Developing water resources planning lion VND were spent to develop these plans. (Source: • Grand inventory of national water resources (to Dai Doan Ket Newspaper, May 25, 2017). be issued in 2015, with an update in 2020) The plans were found to be overlapping, at times • Surveying, assessing and mapping water even contradictory and lacked cohesion. At times the resources in river basins, water scarcity areas plans were not connected to implementation resources. and key areas Thus a high percentage of the completed plans had no • Developing water resources information, data- practical value; and even contributed to overall low base and monitoring systems in river basins sector performance, actually hindering development. In 2009 the strategic direction of the National Strategy Key objectives of the 2017 Law on Planning for Irrigation was approved. • Put top priority on integration of state manage- The Strategy was adopted by Decision No. 1590/ ment and on efficiency of national resources uti- QD-TTg, dated 9 October 2009. Under it, MARD lization. Put an end to fragmented sectoral and was assigned the prime responsibility for ensuring local management. implementation of the Strategy, with specific respon- • Establish a transparent mechanism in planning, sibilities for: enhance the role of communities and people, and improve the accountability of leadership. • guiding, inspecting and promoting implementa- • Reduce the total number of plans from 19,285 to tion of the strategic orientation 11,413. This includes a 97% reduction of plans • acting as a national coordinator for contact with at national, regional and provincial levels (from international organizations in its domain 4,362 plans to 110 plans). Sectoral, industrial • drawing up specific action plans to define priori- and product plans will be reduced from 3,372 ties, and assigning implementation tasks to sec- plans to 38 plans. tors and localities • Apply modern, consistent and efficient method of multidisciplinary integrated planning, 148 GO V ER N A N CE F O R WATER S ECU RIT Y following international trends. Create a unified Law amending and supplementing a number of Articles information system and national planning data- of 37 Laws related to the 2017 Law on Planning base from central to local levels. To implement the 2017 Law on Planning, a number of Overview of national planning under the 2017 Law articles of 37 related laws had to be amended and sup- on Planning plemented. This is provided for in the Law amending and supplementing articles of 37 Laws related to the • National Plans include the following: 1) National 2017 Law on Planning. Master Plan, 2) National Marine Spatial Plan, 3) National Land-Use Plan, 4) National Sector • The amended articles of the 2012 Law on Water Plan. Resources include the following: • The National Sector Plan must be in line with • The Water Resources Plan is now defined the National Master Plan, National Maritime as a National Sector Plan Spatial Plan and National Land-Use Plan. In • The Master Plan on Fundamental Survey case the National Sector Plan contradicts the on Water Resources is now defined as a mentioned plans, it must be amended and imple- Specialized and Technical Plan mented accordingly. • The Master Plan for inter-provincial • Ministries and ministerial-level agencies river basins and inter-provincial water develop the components of the National Sector sources will be based on: Water Resource Plan and submit these to the Prime Minister for Strategy (submitted by MONRE for Prime approval. Minister’s approval); Water Resources • MONRE is responsible for the Water Plan; natural and socio-economic char- Resources Plan, the Environmental acteristics, as well as specific conditions Protection Plan, and the Biodiversity of each river basin and each region; Conservation Plan. actual potential of water resources; fore- • MARD is responsible for Plan on the cast impacts of climate change on water Prevention and Control of Natural resources; water demand by sectors, locali- Disasters and for the Irrigation Plan. ties and environmental protection; and on Overview of technical and specialized planning under the results of the Fundamental Survey on the 2017 Law on Planning Water Resources • Technical and Specialized Plans concretize • The amended articles of the 2017 Law on national plans, regional plans and provincial Hydraulic Works include the following: plans. • The Irrigation Plan is defined as a Technical • The table provides an overview of the tech- and Specialized Plan, concretizing the nical and specialized plans that contribute to national plan and regional plan devel- the Water Resources Plan and to the Plan on oped and submitted by MARD for Prime Prevention and Control of Natural Disasters Minister’s approval and Irrigation. • The Irrigation Plans include the follow- TABLE B.1:  Overview of Technical and Specialized Plans ing: Irrigation Plan for Inter-provincial Name of plans Regulatory documents River Basins; Irrigation Plans on Irrigation Infrastructure involving two or more Master plan on inter-provincial Law on amendments to some river basins and inter-provincial articles concerning 2017 Planning provinces water resources Law No. 35/2018/QH14 Plan on protection, exploita- Law on amendments to some tion, utilization of international articles concerning 2017 Planning water resources Law No. 35/2018/QH14 Master plan on basic survey on Law on amendments to some water resources articles concerning 2017 Planning Law No. 35/2018/QH14 Irrigation plan Law on Hydraulic Works No. 08/2017/QH14 References 2030 WRG (Water Resources Group). 2017. 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