THE WORLD BANK
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Mekong Integrated Water Resources Management Project Phase I
Lao PDR: Implementation Support and Additional Financing for Components 2 and 3
April- June 2016
Project ID                      P104806
Total Project Cost:             USD 26.0 million
Loan Amount: (Lao PDR)          USD I8.0 million (IDA-I6750): Components 2 and 3
Credit Amount: (MRC)            USD 8.0 million (IDA-H7620): Component I
Date of Effectiveness           March 8, 2012
Closing Date                    March 31, 2018
Environmental Category:         Category B
Last Mission                    April 25-29, 2016
Date of Last Archived ISR       April 7, 2016
Disbursement (as of July 20, 2016)  IDA-H6750: USD 13.92 million (77%)
IDA-H7620: USD 3.05 million (16%)
Table of Contents:
A. Introduction
B. Main Mission Findings
C. Project Implementation Status
D. Additional Financing Preparation
E. Fiduciary and Safeguards
F. Action Plan
Annex 1: Summary Additional Financing Project Description
Annex 2: Detail Implementation Status and AF Activities Description by Sub-Components
(Submitted Separately)


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A. Introduction
1. A World Bank implementation support and pre-appraisal mission for Additional Financing
(AF) of the Mekong Integrated Water Resources Management Project (M-IWRMP, APL-1) took
place on April 25-29 and June 20-24, 2016, with a number of technical visits in-between.
Component I of APL-1 is implemented by the Mekong River Commission (MRC), while
Components 2 and 3 (hereafter referred to as the "Project.") are implemented by the Government
of the Lao PDR. This aide memoire covers Components 2 and 3, and will be sent to the Lao PDR.
A separate technical note for Component I will be sent to the MRC.
2. The recommendations made in this aide memoire were discussed with the Government of Lao
PDR at the wrap-up meeting on June 23, 2016 chaired by Mr. Chanthanet Boualapha, Director
General Department of Water Resources, Ministry of Natural Resources and Environment
(MONRE), and are subject to review and confirmation by the Bank management. The mission is
gratefll for the kind assistance and hospitality provided by the Lao officials. The mission
appreciated the opportunity to meet with MONRE Vice Minister Mine. Monemany Nhoybouakong
on April 29, 2016 and MAF Vice Minister Mr. Khamphad Sourinphoumy on June 23, 2016 to
discuss the AF. In accordance with the World Bank's Access to Information Policy, this aide
memoire will be publicly disclosed.
B. Main Mission Findings
3. The mid-term review for the Project was completed in March 2016. Disbursements have been
continually accelerating and as of July 20, 2016 account for 77% of the total Lao PDR IDA grant
amount. It is projected the Project will fully utilize available finds by early 2017 for all
subcomponents except for 3.2 (Fisheries). Component 2.2 Water Quality Laboratory Building,
about $200,000 over allocated amount; and Component 2.4 DMH Building, about $270,000 over
allocated amount. The mid-term review noted that there is a funding short-fall of approximately
USD 6 million which would be needed to meet the original project objectives and scope. The
Project has played an instrumental role in helping MONRE start up its water resources management
program, but considerable resources are still needed to consolidate and expand this program. The
World Bank and MONRE therefore agreed to explore options for additional financing for the
Project.
4. Consistent with the mid-term review assessment and the current availability of IDA resources,
the mission analyzed a scenario of USD 18 million for additional financing. MONRE also
submitted additional financing scenarios of USD 22 million and USD 26 million for the mission's
consideration. The mission informed MONRE that the total amount of the IDA Credit is set at USD
18 million, and any increase would be subject to agreement between the World Bank and the
Government of Lao PDR and dependent on overall IDA availability for the country. The mission
1 The mission was comprised of Greg Browder (Task-Team Leader, Lead Water Resources Management
Specialist), Khamphet Chanvongnaraz (Procurement Specialist), Malarak Souksavat (Financial Management
Analyst), Anita Soukhaseum (Program Assistant), Alima Phonvisay (Program Assistant), Viengsamay
Vongkhamsao (Water and Sanitation Specialist), Ashley Halls (Fisheries Management Specialist, Consultant),
Nigel Hayball (Water Resources Management Specialist, Consultant), Zhijun Chen (FAO Irrigation Specialist),
Vansa Chatikavanij (Water Resources Management Specialist, Consultant), and Thongkham Chanthavong
(Program Assistant).
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informed MONRE that the World Bank has set a closing date of March 31, 2020; MONRE
requested the Bank to consider an extension of the closing to December 31, 2020. The overall
Project AF processing was reviewed, with the appraisal mission scheduled for late September
2016, negotiations in October 2016, and a Board date in December 2016. The mission stressed the
need to maintain these dates and ensure efficiency in the processing of the AF.
5. The ratings for progress towards the Project Development Objectives (PDO) and
Implementation Status remain sati.sictoly.2 The mission is particularly pleased to see progress in
the Fisheries component (3.2) which has been upgraded to moderately satis/ctory.
C. Project Implementation Status
6. Annex 2 contains details on the current implementation status of each sub-component, and
specific issues are highlighted below. The Department of Fisheries is to be commended for its
significant improvements in the implementation of Component 3.2 which is now rated as
moderately satisfactory. Both the Component 3.1.2 (Irrigation) and Component 2.4 (Hydro-Met)
are rated as highly satisfactory.
Summaiy Status of Sub-Components as of June 2016 (USD)
Component         Budget    Rating      Component         Budget     Rating
(Agency)      I(% Utilized)   111_      (Agency)       (% Utilized)
2. National WRM            S     3. Floodplain/Aquatic Management   S
2.1 Water Law          626,000    MS     3.1.1 River Basin    2,079,000     S
(DVR)                 (69%)             Mgit                 (88%)
(DWR + Provinces)
2.2 Water Quality     1,239,000    S     3.1.2 Irrigation     5,289,000    HS
(NREI)                 (77%)             (DOI + Provinces)     (92%)
2.3 Water Mode ling    592,000     S     3.2 Fisheries        4,912,000    MS
(NREI)                 (46%)             (DoF + Provinces)     (28%)
2.4 Hydromet          1,870,000    HS
(DMH)                  (91%)
2.5 Proj. Management  1,393,000    S
(DWR)                  (81%)
7. Water Law: The draft Water Law is progranmed to be submitted to the National Assembly
in late 2017. The World Bank Group (WBG), including the International Finance Corporation
(IFC), has been assisting MONRE in drafting the Law since 2012. An advanced version of the Law
was connented on by MOJ in mid-2015 and then subsequently revised by DWR and shared with
the WGB in May 2016. In the opinion of the WBG, there have been some changes in the draft Law
which require fturther review and clarification, and it was therefore agreed to have a workshop by
August 31 to review the adjusted draft WVater Law.
2 Components 2 and 3 of the Project are rated as satisfactory. Component I of the Project, which is implemented
by the Mekong River Commission, is considered moderately satisfactory. The overall Project rating in the World
Bank system is therefore rated as moderately satisfactory.
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D. Additional Financing Preparation
8. AF Budget Allocation: A preliminary allocation of funds based on the USD 18 million
scenario was made during the mission based upon the status and needs of the various sub-
components. These allocations may potentially be adjusted during the finalization of the
preparation process.
AF Bud get Allocation (USD)
Sub Component       Original     To Cover Budget   To Cover         Total
Allocation       Shortfall     Expansion of    Additional
Scope        Financing
2.1 -Water Law       626,000            0              0              0
2.2-WQM             1,239,000        788,616        1,300,000      2,088,616
2.3-WR Modelling     592,000         189,116         800,000        989,116
2.4-Hydro-Met       1,870,000        1,291,783      3,765,000      5,056,783
2.5-Groundwater        0                0              tbc            tbc
2.6-Project Mang.   1,393,000        331,444         600,000        931,444
3.1.1 -RBM          2,079,000        899,041        3,035,000      3,934,041
3.1.2-Irrigation    5,289,000       2,500,000       2,500,000      5,000,000
3.2-Fisheries       4,912,000           0              0              0
TOTAL               18,000,000       6,000,000      12,000,000    18,000,000
9. AF Scope: Annex 1 summarizes the activity and the scope of AF. The World Batik team is
working with each sub-component management agency to define the detailed work plan, cost
estimates, procurement plan, and indicators for the additional financing activities under the
different financing scenarios. The details are submitted tinder Annex 2 of the Aide Memoire.
10. AF Consultations and Safeguards: The project will continue to be classified as a "Category
B." The small-scale physical works that will be implemented under the AF are identical to the on-
going Project and thus the existing framework documents can be maintained: i) Environmental and
Social Management Framework (ESMF); ii) Ethnic Groups Development Framework (EGDF);
and (iii) Compensation and Resettlement Policy Framework. However, there is a need to update
these documents to take into account the updated Project description with AF, and also to mention
the specific manuals that have been prepared during the Project which include safeguard
considerations, namely: the Rural Infrastructure Guidelines (for 3.1.1 and 3.2), the Livelihood
Enhancement Guidelines (3.2), and the Fishery Management Guidelines (3.2).
11. It was agreed that the three safeguard fi-amework documents would be updated and disclosed
by August 1, 2016. The documents would be updated in both English and Lao languages, and
disclosed locally and in the World Bank Info-Shop prior to public consultations. Public
consultations should be held in late July/early August. There should be one consultation in
Vientiane which includes government entities, civil society, and NGOs, and one consultation in
Pakse (or similar location) which can focus more on local stakeholders. It was agreed that the
consultations shall be completed by September 1, 2016.
12. The original Project triggered the Bank's Operational Policy on International Waters (OP7.50)
and the two tipper riparian countries (China and Myanmar) were notified in 2010 by the Bank. The
MRC approved the overall Mekong IWRM program in 2009, thus fulfilling the notification
requirements for the lower four riparian countries (Lao PDR, Thailand, Cambodia, and Vietnam).
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It was agreed that by August 15, 2016 the World Banik iill ifbrn the governments of China and
Adjamnar of theI proposed Aekong I AF, and AJOVRE will send an official leller to the MRC CEO.
13. AF Project Management Arrangements: The on-going Project is guided by the Project
Implementation Plan (PIP) which was approved in 2011. The PIP has a number of annexes which
describe how the sub-components will be managed as well as the start-up implementation plan. 11
ivas agreed that a new "Project Operations Adanual" (POM) will be prepared by August 15, 2016,
which will include the updated project description, organizational arrangements as well as general
procurement and financial management procedures. MONRE was encouraged to utilize the AF
preparation process, and consult with MAFFRD, to make necessary changes to the project
management arrangements in order to enhance project management.
E. Fiduciary and Safeguard Issues
14. Financial Management: As of July 20, 2016 overall disbursement was USD 13.9 million,
which represents approximately 77% of the total IDA grant amount of USD 18 million. All sub-
components, with the exception of Component 3.2 (Fisheries), are expected to fully utilize their
allocations by late 2016 or early 2017. The calendar year 2015 independent Audit Report was
submitted to the World Bank on June 29, 2016 thus meeting the Project legal requirements. The
Bank will provide a response letter following its review of the audit report.
15. Procurement: To date 75% of contracts in the Procurement Plan have been awarded (detail
outlined in table below). The mission visited Component 3.2 office in Champasak and found that
there is an improvement in the procurement post review process including well prepared RFQ and
sufficient staff capacity to handle the job. The mission advised the agency to prepare a procurement
schedule for community level activities.
Component     Description      No. of    No. of Awarded   %
Contracts     Contracts  Completed
Goods/Works           4            4          76.9%
C2         Consulting Services   13           to
Goods/Works                         1         22.2%
C2.1        Consulting Services  9             2
Goods/Works           6            4
C2.2        Consulting Services  6             2
Goods/Works           5            3          75.0%
C2.3        Consulting Services  4             3
Goods/Works          14            9100.0%
C2.4        Consulting Services  4             4
Goods/Works          19            15         50.0%
C3. 1.1    Consulting Services   12            6
Goods/Works           97           93         733%
C3.1.2     Consulting Services   15            11
Goods/Works           35           18         632%
C3.2        Consulting Services  19           12
Total                263          197         74.9%
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16. Safeguard Issues: The Bank has provided a no-objection to the Rural Infrastructure
Guidelines for Components 3.1.1 (River Basin Management) and Components 3.2 (Fisheries). The
Livelihood Enhancement Guidelines and Fishery Co-Management Guidelines for Component 3.2
are in an advanced stage of preparation. It was agreed that these two guidelines wi/I be completed
by August 1, 2016. The mission was informed that the Department of Fisheries is preparing the
Environmental Management Plan (EMP) for the new Fish Hatchery, with first (raf(t to be submitted
to the Bank by August 15, 2016. This date is a delay from the original agreed date (May 2016) due
to slow recruitment of international fishery management advisor.
F. Action Plan
17. The following priority actions were discussed during the mission and recorded in this aide
memoir:
Action                      Date              Responsible
Safeguard Documents Updated and Disclosed  August 1   DWR/PMU
Fishery Guidelines Completed: Livelihood  AugIst 1   Department of Fisheries
Enhancement and Fishery Co-Management
Fish Hatchery Environmental Management Plan  August 15  Department of Fisheries
Project Operations Manual                August 15    MONRE/DWR
Notify Upper Riparians of Mekong I AF    August 15    World Bank
Notify MRC of Mekong I AF                August 15    MONRE/DWR
Complete Mekong I AF Consultations       September I  MONRE/MAFFRD
Water Law Workshop                       August 31    Department of Water Resources
World Bank Appraisal Mission             Mid/Late     World Bank/MONRE/MAFFRD
September
IDA Credit Negotiations                  October      World Bank/Lao PDR
World Bank Board Presentation            Dec. 13,     World Bank
2016
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Annex 1: Draft Sunimmary Description of Additional Financing for the Mekong Integrated
Water Resources Management Project Phase 1: Components 2 and 3 for Lao PDR
Introduction: The government of the Lao PDR is requesting Additional Financing (AF) in the
amount of approximately USD 22 million for the Mekong Integrated Water Resources
Management Phase I Project. Component I of the project is implemented by the Mekong River
Commission (MRC), while Components 2 and 3 are implemented by (he Government of Lao PDR.
The AF will support the consolidation and expansion of activities under Components 2 and 3 of
the Project. Hereafter, the term "Project" will only refer to components implemented by the Lao
PDR.
The World Bank approved the USD 18 million Project on February 8, 2012. The Project is part of
the Mekong Integrated Water Resources Management (IWRM) Series of Projects which in
consists of three associated projects: Mekong IWRM Phase I Project (Lao PDR); Mekong IWRM
Phase 2 Project (Vietnam); and Mekong IWRM Phase 3 Project (Cambodia). The overall objective
of the Mekong IWRM SOP and the Project is "to establish examples of improved integrated water
resource management practices in the Lower Mekong Basin.3"
Rationale for Additional Financing: The Project was designed to help (lie Lao PDR establish a
modern water resources management system. In 2011, the Lao PDR created the Ministry of
Natural Resources and Environment (MONRE) - the first time natural resources management was
consolidated inder a single ministry. In early 2016, MONRE presented the Natural Resources and
Environment Strategy 2025 (NRES) which outlines MONRE's vision, aims, and strategy and an
action plan for 2016-2020. MONRE will require significant support, some of which will be
provided through the proposed AF activities, in order to strengthen institutional structures and
technical capacity to effectively implement the NRES. It is expected that a new Water Law will
be passed in 2017, which will provide MONRE with the legal authority to take a more proactive
and authoritative role in management of the nation's water and related resources.
Significant progress has been made under the Project, however additional financing is required to
cover financing short-falls and help the Lao PDR consolidate and expand the development of its
vater resource management system. The following sections present the status of current activities
under the Project and the proposed activities moving forward with AF financing.
Component 2: National Water Resources Management Scale tip activities to strengthen
institutional and technical capacity for IWRAM especially through:
3 This is the proposed, simplified, new PDO. The original PDO was "to establish key examples of
integrated water resource management practices in the Lower Mekong Basin at regional, national, and
sub-national levels, thus contributing to more sustainable river basin development in the lower
Mekong."
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2.1 Support fir refining a legal fiamework enabling integrated waler resources management
including updating the current Water Resources Law which is currently in an advanced stage,
developing priority implementing regulations and supporting their implementation. The draft
Water Law is programmed to be presented to the National Assembly in late 2017 and MONRE
intends to develop priority implementation regulations and test their implementation on a pilot
basis under the Project. The priority regulations tentatively identified include: i) groundwater
management; ii) data and water resource information management; iii) wetland management; iv)
service charges and water resources use fees; v) water quality and vastewater discharge standards;
and vi) flood and drought management. The implementing agency for this sub-component is the
MON RE Department of Water Resources.
2.2 Support for Water Quality and Eco-System Health: The implementing agency for this sub-
component is NONRE's Natural Resources and Environment Institute (NREl). The construction
of a new national water quality laboratory financed under the project will be completed in late
20 16, and NREI had conducted initial water quality sampling in the Xekong, Xai Bang Hlieng, and
Nam Ngum basins. Additional financing will support the purchase of additional laboratory
equipment, expand the water quality monitoring network into additional basins, and initiate a water
quality-based bio-monitoring program.
2.3 Support fbr Water Resources Modelling: This component is implemented by NREI. The
Project has supported the development of basic rainfall-runoff, water balance, and hydraulic
models for the Xai Bang Fai, Xai Bang Hieng, Xekong, and Xedong. With additional financing,
NREI will develop comprehensive models for additional models, as well as develop more
sophisticated Decision Support Systems (DSS) for basins that undertaking basin planning and
management activities under Component 3. 1.1.
2.4 Support Jbr Hydrological and AMeteorological (lydro-Met) Network Upgrading: This
component is implemented by MONRE's Department of Meteorology and Hydrology (DMI4).
The Project has financed the construction of National Early Warning Center and provincial DMH
offices, the expansion of hydro-met stations in the Xekong and Xedong basins. With additional
financing DMH will expand the hydro-met network in other parts of the Lao PDR. The Project
will also support developing the technical and financial capacity of DMH to operate and maintain
the newly expanded hydro-met network in order to ensure sustainability.
2.5 Groundwater Management and Monitoring: This a new sub-component which will be
implemented by MONRE's Department of Water Resources and will support the construction of
monitoring wells, installing measurement devices on existing wells, groundwater aquifer studies,
and community based groundwater management. The sub-component will help pilot MONRE's
new groundwater regulations in the Xai Bang Fai and the Xai Bang Hieng basins and other high-
priority locations.
2.6 Project Management: MONRE will continue to be the responsible Ministry for the Project and
will support the implement of the Project by providing overall project administration and oversight
utilizing its existing structures as outlined the updated Project Operations Manual. The Ministry
of Agriculture, Forestry, and Rural Development (MAFFRD) will continue to be responsible for
implementing Component 3.1.2 (Irrigation) and Component 3.2 (Fisheries).
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Component 3: Improved Floodplain and Aquatic Resource Management: The objectives are
to: (i) support sustainable river basin and floodplain management by balancing ecological and
community livelihood interests with water resource development goals; and (ii) fisheries co-
management in key spawning and feeding habitats of regional signficance.
3. 1.1 River Basin Mkmagement: This component is implemented by MONRE's Department of
Water Resources. The Project has supported stake-holder driven water resource management
excercises in the Xai Bang Fai and the Xai Bang Hieng basins including formulating river basin
profiles and action plans for groundwater management in Xai Bang Fai and welland management
in Xai Bang Hieng. With additional financing, the Project will intensify its activities in these two
basins, as well as expand river basin management activities into the Nam Ngum and Nam Niep
basins.
3.1.2 Sustainable hri4gation and Drainage: As a complement to the river basin management
activities in the Xai Bang Fai and Xai Bang Hieng basins, the MAFFRD's Department of Irrigation
is implenting a series of upgrades to existing small-scale irrigation systems which involve:
constructing fish-friendly gates; modernizing existing infrastructure through improved pumping
stations and canal distribution systems; working with local farmer groups to establish water user
groups and production "user groups;" and promoting sustainable rice intensification (SRI). With
additional financing, the upgraded area will increase from 50% to 75% of the total "command
area" of approximately 30,000 hectares in the XBF and XBH river basins.
3.2 Fisheries Managemen: This subcomponent is providing support for improved management of
critical habits for aquatic resoruces in the southern Lao provinces of Pakse and Chanpasak. The
Project includes support for: (i) establishing community-managed fisheries management
organizations; (ii) developing local fishery management plans; (iii) supporting alternative
livelihood activities to reduce reliance on capture fisheries; (iv) supporting small-scale village
level infi-astructure to enhance economic opportunities; and (v) developing the capacity of the
provincial and national fishery agencies. With additional financing, these activities will continue
and be intensifed within the existing project areas.
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