Greater Mekong Subregion Ben Luc–Long Thanh Expressway ...

Completion Report

Project Number: 41414-043 Loan Number: 2730 December 2020

Viet Nam: Greater Mekong Subregion Ben Luc–Long

Thanh Expressway Project – Tranche 1 This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS

Currency unit – Viet Nam dong (D)

At Appraisal At Project Completion (22 October 2010) (30 June 2019)

D1.00 = $0.00005 $0.00004 $1.00 = D19,475 D23,303

ABBREVIATIONS

ADB – Asian Development Bank CSC – construction supervision consultant EIA – environment impact assessment EIRR – economic internal rate of return EMP – environment management plan FIRR – financial internal rate of return HCMC – Ho Chi Minh City km – kilometer LAR – land acquisition and resettlement MFF – multitranche financing facility MOT – Ministry of Transport O&M – operation and maintenance PCR – project completion review PCU – passenger car unit PPMS – project performance monitoring system SEPMU – Southern Expressway Project Management Unit TA – technical assistance VEC – Vietnam Expressway Corporation VOC – vehicle operation cost

NOTES

(i) The fiscal year (FY) of the Government of the Socialist Republic of Viet Nam ends on 31 December. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2020 ends on 31 December 2020.

(ii) In this report, "$" refers to United States dollars.

Vice-President Ahmed Saeed, Operations 2 Director General Ramesh Subramaniam, Southeast Asia Department (SERD) Director Hiroaki Yamaguchi, Transport and Communication Division (SETC),

SERD Team leader Mohammad Nazrul Islam, Transport Specialist, SETC, SERD Team members Gemma T. Bade, Project Analyst, SETC, SERD

Marie France B. Balawitan, Senior Operations Assistant, SETC, SERD Maria Lorena C. Cleto, Safeguard Specialist (Resettlement), SETC,

SERDa Khoa D. Nguyen, Senior Project Officer (Transport), Viet Nam Resident

Mission, SERD Kyoko Uematsu, Safeguard Specialist, SETC, SERDa

a Outposted to the Viet Nam Resident Mission.

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page BASIC DATA i

I. PROJECT DESCRIPTION 1

II. DESIGN AND IMPLEMENTATION 1

A. Project Design and Formulation 1 B. Project Outputs 2 C. Project Costs and Financing 3 D. Disbursements 4 E. Project Schedule 4 F. Implementation Arrangements 5 G. Technical Assistance 6 H. Consultant Recruitment and Procurement 6 I. Gender Equity 7 J. Safeguards 8 K. Monitoring and Reporting 10

III. EVALUATION OF PERFORMANCE 10

A. Relevance 10 B. Effectiveness 10 C. Efficiency 11 D. Sustainability 11 E. Development Impact 12 F. Performance of the Borrower and the Executing Agency 13 G. Performance of the Asian Development Bank 13 H. Overall Assessment 13

IV. ISSUES, LESSONS, AND RECOMMENDATIONS 14

A. Issues and Lessons 14 B. Recommendations 15

APPENDIXES

1. Design and Monitoring Framework 16 2. Salient Features of the Project Highway 18 3. Project Cost at Appraisal and Actual 19 4. Project Cost by Financier 20 5. Disbursement of ADB Loan Proceeds 22 6. Contract Awards of ADB Loan Proceeds 23 7. Appraisal and Actual Implementation Schedules Compared 24 8. Chronology of Major Events 25 9. Organization Chart for Project Implementation 27 10. Project Contract Packages Financed by ADB 28 11. Summary of Environmental Safeguards Implementation 29 12. Land Acquisition and Resettlement 31 13. Status of Compliance With Loan and Project Covenants 41 14. Economic Reevaluation 52 15. Financial Reevaluation 57 16. Contribution to ADB Results Framework 60

BASIC DATA

A. Loan Identification

1. Country 2. Loan number and financing sources 3. Project title

4. Borrower 5. Executing agency 6. Amount of loan

7. Financing modality

Viet Nam 2730, ordinary capital resources Greater Mekong Subregion Ben Luc–Long Thanh Expressway Project – Tranche 1 Socialist Republic of Viet Nam Vietnam Expressway Corporation MFF: $636.0 million Tranche 1: $350.0 million Multitranche financing facility (MFF 0053)

B. Loan Data

1. Appraisal

– Date started – Date completed

2. Loan negotiations – Date started – Date completed

3. Date of Board approval

4. Date of loan agreements

5. Date of loan effectiveness – In loan agreement – Actual – Number of extensions

6. Project completion date – Appraisal – Actual

7. Loan closing date – In loan agreement – Actual – Number of extensions

8. Financial closing date

– Actual 9. Terms of loan

– Interest rate – Commitment charges – Maturity (number of years) – Grace period (years)

10. Terms of Relending (if any)

– Interest rate – Maturity (number of years) – Grace period (number of years) – Second-step borrower

7 June 2010 22 June 2010 25 October 2010 26 October 2010 22 December 2010 5 May 2011 3 August 2011 1 December 2011 three 30 June 2015 30 June 2019 31 December 2017 30 June 2019 one 5 December 2019 London interbank offered rate (LIBOR)-based 0.15% 27 7 ADB lending rate plus 0.25% on-lending fee 27 7 Vietnam Expressway Corporation

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11. Disbursements

a. Dates

Initial Disbursement 19 December 2014

Final Disbursement 21 November 2019

Time Interval 59 months

Effective Date 1 December 2011

Actual Closing Date 30 June 2019

Time Interval 91 months

b.1 Amount ($ million)

Category

Original Allocation

(1)

Increased during

Implementation (2)

Canceled during

Implementation (3)

Last Revised Allocation (4=1+2–3)

Amount Disbursed

(5)

Undisbursed Balance (6=4–5)

1. Works 254,700,000 254,700,000 160,509,731 94,190,269

2. VEC laboratory equipment

1,100,000 1,100,000 1,100,000

3. Consulting services

9,600,000 9,600,000 9,280,065 319,935

4. VEC incremental administration cost

9,200,000 9,200,000 5,325,605 3,874,395

5. Interest and commitment charge

20,900,000 20,900,000 11,285,421 9,614,579

6. Unallocated 54,500,000 54,500,000 54,500,000

Total 350,000,000 350,000,000 186,400,822 163,599,178

VEC = Vietnam Expressway Corporation. Note: The undisbursed amount was canceled at loan financial closure.

C. Project Data

1. Project cost ($ million)

Cost Appraisal Estimate Actual

Foreign exchange cost

Local currency cost

Total 627.7 383.2

Note: At appraisal, the project costs were not separated by foreign exchange and local currency.

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual

Implementation cost

Borrower financed 277.7 196.8

ADB financed 329.1 175.1

Total implementation cost 606.8 371.9

IDC and other financial charges

Borrower financed

ADB financed 20.9 11.3

Total IDC and other financial charges 20.9 11.3

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

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3. Cost breakdown by project component ($ million)

Item Appraisal Estimate Actual

A. Base cost

1. Civil works 254.7 218.3

2. Expressway facilities

3. Land acquisition 215.7 138.1

4. VEC laboratory 1.1 0.5

5. Unexploded ordnance clearance 4.0 0.4

6. Consulting services 9.6 9.3

7. VEC incremental administration cost 9.2 5.3

Subtotal (A) 494.3 371.9

B. Contingencies 112.5

C. Financial charges during implementation 20.9 11.3

Total (A+B+C) 627.7 383.2

VEC = Vietnam Expressway Corporation.

4. Project Schedule

Item Appraisal Estimate Actual

A. MFF procession

MFF and tranche 1 approval Q4 2010 Q4 2010

Loan signing and effective for tranche 1 Q2 2011–Q2 2011 Q2 2011–Q4 2011

B. Detailed design

Consultant recruitment Q1 2010–Q2 2011 Q1 2010–Q4 2012

Detailed design and appraisal Q4 2010–Q3 2011 Q1 2011–Q2 2013

C. Land acquisition and resettlement

Resettlement plans updating Q4 2010–Q2 2011 Q1 2012–Q3 2013

Implementation Q3 2011–Q4 2012 Q1 2013–Q1 2018

D. Civil works

Procurement Q1 2011–Q1 2012 Q2 2013–Q4 2015

Construction Q2 2012–Q2 2015 Q2 2015–Q2 2021

E. Laboratory and equipment

Procurement Q1 2011–Q2 2011 (no procurement)

Utilization Q3 2011–Q4 2011 Q2 2015–Q2 2021

F. Supervision consultants

Recruitment Q4 2010–Q3 2011 Q1 2013–Q4 2014

Implementation Q4 2011–Q1 2016 Q2 2015–Q2 2019

MFF = multitranche financing facility, Q = quarter.

5. Project performance report ratings

Implementation Period Ratings

From 1 October 2011 to 31 December 2011 Actual problem

From 1 January 2012 to 30 June 2012 Actual problem

From 1 July 2012 to 31 December 2012 On track

From 1 January 2013 to 31 December 2013 Actual problem

From 1 January 2014 to 30 September 2014 On track

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From 1 October 2014 to 31 December 2014 Potential problem

From 1 January 2015 to 31 March 2015 Potential problem

From 1 April 2015 to 30 September 2015 Actual problem

From 1 October 2015 to 31 December 2015 Potential problem

From 1 January 2016 to 31 December 2016 On track

From 1 January 2017 to 30 June 2017 On track

From 1 July 2017 to 30 September 2017 Potential problem

From 1 October 2017 to 31 December 2017 On track

From 1 January 2018 to 30 June 2018 On track

From 1 July 2018 to 30 September 2018 Potential problem

From 1 October 2018 to 31 December 2018 On track

From 1 January 2019 to 31 March 2019 Potential problem

From 1 April 2019 to 30 September 2019 Actual problem

From 1 October 2019 to 31 December 2019 On track

D. Data on Asian Development Bank Missions

Name of Mission Date

No. of Persons

No. of Person-

Days

Specialization of Members

Pre-fact-finding 15–29 January 2010 5 17 t, r, f, t, e

Fact-finding / appraisal 7–22 June 2010 4 31 t, t, a, n

Follow-up 13–17 September 2010 1 5 t

Inceptiona 12–20 January 2012 2 18 t, t

Review 1 22–23 October 2012 1 2 t

Review 2 9–15 January 2013 1 7 t

Review 3 24–26 March 2013 2 6 t, r

Review 4* 3–11 September 2013 2 16 t, t

Special loan administration 27 November–4 December 2013 3 22 t, t, o

Review 5 17–24 March 2014 2 16 t, r

Review 6 23 March–1 April 2015 5 39 t, e, r, t, l

Fact-finding for tranche 2 18–26 June 2015 5 37 t, t, f, e, c

Midterm review 29 February–4 March 2016 4 20 t, r, e, t

Review 7 8–15 May 2017 3 24 t, e, r

Review 8 21–25 May 2018 3 15 t, r, c

Special safeguards review 3-6 July 2018 1 4 e

Review 9 13–15 May 2019 4 12 t, a, r, t

Review 10 5–6 September 2019 2 4 t, g

Completion review 19 June 2020 5 5 t, g, a, r, e, c

Environmental safeguards

review

30 July–7 Aug 2020 1 9 e

a = project analyst, e = environment officer, f = financial specialist, g = program/project officer, c = consultant, n = counsel, o = operation assistant, r = resettlement officer, t = transport specialist. a The mission was combined with other projects in the area.

I. PROJECT DESCRIPTION 1. At appraisal, the lack of river crossing facilities restricted east–west traffic in the south of the greater Ho Chi Minh City (HCMC) and forced the vehicles into the center of HCMC. Therefore, the Government of Viet Nam prioritized the construction of the Ben Luc–Long Thanh Expressway to facilitate east–west traffic in the south of HCMC, reduce traffic congestion in the center of HCMC, and improve the connectivity of cities and towns around HCMC. 2. At the request of the government, the Asian Development Bank (ADB) approved a multitranche financing facility (MFF) totaling $636.0 million on 22 December 2010 for the Greater Mekong Subregion Ben Luc–Long Thanh Expressway Project.1 The project aimed to promote sustainable economic growth and regional cooperation by expanding access to markets, facilitating the movement of goods and people, and helping improve connectivity in the Greater Mekong Subregion (GMS). The anticipated outcome of the project was more efficient and safer movement of goods and people in the greater HCMC area.

3. At appraisal, the project comprised (i) construction of a 57.1 kilometer (km) expressway between Ben Luc and Long Thanh, and (ii) a program to build the project and financial management capacity of the Vietnam Expressway Corporation (VEC). The total investment cost was estimated at $1,608.0 million equivalent, to be financed by ADB loans of $636.0 million, potential cofinancier (Japan) funds of $635.0 million, and government counterpart funds of $337.0 million equivalent. Under the MFF, ADB signed a framework financing agreement on 30 November 2010 and agreed to provide two loans for the project. On 5 May 2011, ADB signed the loan agreement for tranche 1 for constructing the western section of the project expressway to be completed in mid-2015, at the cost of $627.7 million to be financed by the ADB loan of $350.0 million and counterpart funds of $277.7 million equivalent. The middle and eastern sections would be constructed under tranche 2 for completion in mid-2016.

II. DESIGN AND IMPLEMENTATION A. Project Design and Formulation 4. At appraisal, the government prioritized the construction of HCMC ring roads to connect HCMC with neighboring cities through expressway links. In this regard, the project expressway would facilitate east–west traffic in the south of HCMC, divert through-traffic, reduce traffic congestion in the center of HCMC, and improve the connectivity of cities and towns around HCMC. The project expressway would also serve as a freight route to transport grain produced in the Mekong Delta to the rest of the country and overseas by land and sea transport. In January 2010, the Prime Minister of Viet Nam approved a master plan for constructing 16 north–south expressways along the eastern side of Viet Nam, including the project expressway, to be implemented over 14 years (from 2010 to 2023).2 5. At appraisal, ADB’s country strategy and program (CSP) for Viet Nam, 2007–2010 aimed to help the government reduce poverty in accordance with the government’s socioeconomic development plan, through (i) pro-poor business-led economic growth, (ii) social equity and

1 ADB. 2010. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing

Facility to Socialist Republic of Viet Nam for the Greater Mekong Subregion Ben Luc–Long Thanh Expressway Project. Manila. (MFF 0053-VIE and Loan 2730-VIE)

2 The Master Plan was approved by the Prime Minister in 2008 as “Vietnam Expressway Network Developing and Planning until 2020 and the view for post 2020” (Decision No. 1734/QD-TTg).

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balanced development, and (iii) environmental protection and management.3 The CPS promoted good governance and prioritized regional cooperation. The CPS also recognized the need to accelerate improvements in infrastructure, particularly transportation and energy, and in human resource development. 6. To prepare the project, ADB approved technical assistance (TA) in 2008 to design and formulate the project (para. 24). The TA team also identified and addressed the project’s major risks, recommended related measures, and incorporated them in the project design and formulation. ADB considered an MFF to be an appropriate modality to finance the project. Generally, project preparation was adequate to ensure successful implementation. To enhance design and assist with preconstruction activities, ADB approved a loan for TA to carry out detailed designs for three expressway projects in Viet Nam, including the project expressway.

7. During and after implementation, ADB found that the project design was closely aligned with the government’s objectives and ADB’s country strategy. At the completion of tranche 1, the western section of the project expressway would be constructed and opened to traffic, which would significantly improve the connectivity and transport conditions in the project areas and the GMS transport corridor. Project implementation effectively improved the VEC’s capacity. The project generated and will generate substantial socioeconomic impacts during and after implementation. The project has effectively helped meet the government’s objectives and ADB’s country strategy as envisaged. The project’s design and monitoring framework with achievements is in Appendix 1.

B. Project Outputs 8. At appraisal, the project under tranche 1 envisaged (i) constructing the western section of the project expressway (19.8 km) and (ii) improving the VEC’s capacity in project management and financial management. 9. Road density in Ho Chi Minh City increased. This project output was partially achieved. The western section of the expressway (21.1 km) was substantially completed with four lanes, grade-separated, and access controlled. Traffic safety facilities were installed along the expressway as designed. Substantial access roads and overpasses were provided to connect land and communities on either side of the expressway. The completed section and ancillary infrastructure have significantly improved connectivity in the project area. At loan closure of tranche 1, about 14% of physical works, notably the toll plazas construction, remain incomplete because of delayed counterpart budget and pending LAR. The salient features of the project expressway are in Appendix 2. 10. Connection between east and west regions of HCMC enhanced. This output was partially achieved. The operation of the project expressway is expected to commence in 2021 and this will substantially enhance the connectivity between east and west regions of HCMC.

11. Capacity of project management of VEC improved. This output was achieved. The project enhanced the VEC’s project management capacity, especially in resettlement, environment management, and compliance with ADB’s safeguard policies. During implementation, the construction supervision consultants (CSC) provided substantial training to VEC staff and local authorities, building their capacity. The CSC also helped the VEC prepare the

3 ADB. 2006. Country Strategy and Program: Viet Nam 2007–2010. Manila; and Government of Viet Nam, Ministry of

Planning and Investment. 2005. The Five-Year Socio-Economic Development Plan 2006–2010. Ha Noi.

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toll structure for the whole expressway to ensure the project expressway’s operating efficiency and financial sustainability. The VEC staff also participated in training conducted by ADB every year, mainly on safeguard compliance and financial management.

12. During implementation, the project under tranche 1 had the following major scope changes:

(i) After the detailed design, the boundary of western and middle sections of project expressway shifted from Km20+400 to Km21.743, based on reasonable engineering stops, which increased the cost for western section (para. 14).

(ii) VEC removed the establishment of the VEC’s laboratory and procurement of equipment from the project scope. Instead, the use of the VEC’s existing laboratory was included with the VEC’s own financing source.

13. Financing management capacity of VEC improved. This output was achieved. The financing management capacity of VEC has been improved. The government has established a funding mechanism to develop the national expressway network, utilizing public-private partnership modalities.4 C. Project Costs and Financing 14. At appraisal, the estimated project cost under tranche 1 was $627.7 million equivalent, including local taxes, contingencies, and financial charges for the loan. Upon detailed design, the estimated civil works cost increased substantially, mainly because of price escalation and engineering enhancement, as well as adjustment of the boundary of the western and middle sections. 5 However, the bids received for the civil works contracts were much lower than estimated (para. 27). At project completion, the project cost under tranche 1 was $383.2 million equivalent, about 39.0% lower than that at appraisal. In comparison with the cost estimates at appraisal, the actual costs were $36.4 million lower (14.3%) for the civil works; $77.6 million lower (36.0%) for land acquisition and resettlement (LAR); 42.1% lower for incremental administration (only loan proceeds of $5.3 million was disbursed); $9.6 million lower for financial charges (46.0%) because of lower interest rates applied and lower disbursements from the loan (para. 16). In addition, the establishment of the VEC laboratory was removed from the project scope.6 Appendix 3 shows the project cost comparisons at appraisal and actual. 15. At appraisal, the project financing under tranche 1 comprised the ADB loan of $350 million (55.8% of the total cost) and counterpart funds of $277.7 million equivalent (44.2%). The counterpart funds were to finance the costs for LAR, unexploded ordnance clearance, and some contingencies. The ADB funds were to finance the rest of the cost categories. In early stages of implementation, the project experienced a shortage of counterpart funds for LAR (para. 18). Because of overall implementation delays, the ADB loan was closed while the civil works was not fully completed and only part of the loan proceeds were disbursed (para. 16). Counterpart funds covered the costs that occurred after the loan closing.7 The original loan allocation for the VEC laboratory was canceled from ADB financing, and the loan allocation for the administration cost

4 MOT established an internal department to advise on PPP financial structuring and to oversee the implementation

and management of PPP contracts. 5 Upon detailed design, the estimated civil works cost under tranche 1 increased from $254.7 million to $439.5 million.

Considering the available budget, VEC modified the detailed design with the civil works cost of $326.7 million for the western section.

6 For the uncompleted civil works contracts, VEC used the updated contract costs. At appraisal, the LAR cost estimation of $215.7 million covered the whole expressway.

7 Some project costs after the loan closing for tranche 1 were financed by the loan savings for Tranche 2 (mainly for consulting services). For simplifying the actual project financing, the loan for Tranche 2 was temporarily treated as the counterpart funds at the project completion for Tranche 1.

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was only partially disbursed. Upon completion of the western section, the project financing was revised to $186.4 million from the ADB loan (48.6% of the total cost) and $196.8 million from the counterpart funds (51.4%). Appendix 4 shows the comparisons of the project financing at appraisal and actual. D. Disbursements 16. The ADB loan for tranche 1 was approved on 22 December 2010, signed on 5 May 2011, and became effective on 1 December 2011.8 The central government on-lent the ADB loan to the VEC with terms acceptable to ADB.9 The Ministry of Finance and the VEC signed a subsidiary financing agreement on 18 November 2011. The ADB loan proceeds were disbursed in accordance with ADB’s Loan Disbursement Handbook (2007, as amended from time to time). As arranged at appraisal, the direct payment procedure was used for the loan disbursements to contractors and consultants based on approved contracts. The VEC established and administered a loan advance (imprest) account under ADB’s advance account procedures, which limited the VEC to providing funds for the costs of incremental administration, external monitoring, and external auditing. The statement of expenditure procedure was used to reimburse eligible expenditures and liquidate advances to the advance account. The disbursement arrangement was modified under the updated Facility Administration Manual when tranche 2 was approved in May 2016, so that the VEC could use the advance account for payments to contractors and consultants after tranche 2 took effect in May 2017. 17. Because of initial implementation delays, there was no disbursement for the loan in 2012 and 2013. The first loan disbursement was made on 19 December 2014 for the advance payment to the CSC. As the project progressed, loan disbursements started to build up and reached their peak in 2016 with $38.6 million and 2017 with $58.3 million. Upon financial closure of the loan account, ADB disbursements totaled $186.4 million, about 53.3% of the original loan amount. The undisbursed loan amount of $163.6 million was canceled at loan closure. The actual disbursements of the ADB loan proceeds are in Appendix 5 and the actual contract awards are in Appendix 6.

E. Project Schedule 18. At appraisal, the western section of the project expressway was planned to be implemented over 4 years and completed in mid-2015. ADB approved advance procurement on 5 May 2010. By ADB’s project inception mission in January 2012, the detailed design was substantially completed. As a result, the civil works cost for the ADB-financed sections increased by 43.3%, which led VEC to consider reducing the project scope and/or the engineering standard, as well as postponing the overall project implementation. Accordingly, the detailed design was revised with a lower civil works cost (footnote 5). Because of delays in updating the resettlement plans and a shortage in counterpart funds for the LAR (para. 35), the project’s physical and financial progress was delayed by more than 1 year. The project performance was rated actual problem in 2013 because no contract was awarded. To solve the implementation issues, ADB fielded a special loan administration mission in November 2013 to update the project implementation schedule and the loan disbursement projections.

8 The loan effective date was extended three times because of the late submission of the legal opinion on the loan

agreement and signing of the subsidiary loan agreement required by the loan agreement. 9 The on-lending terms were the general terms for the ADB loans plus a 0.25% loan administration fee collected by

the central government.

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19. After appraisal for the modified detailed design and partial availability of counterpart funds, the recruitment for the CSC and the procurement for the civil works contracts started in mid-2013, a delay of about 2 years from the original schedule. The project implementation experienced further delays because of late completion of some district-level updated resettlement plans. Eventually, VEC awarded the contract for the CSC in November 2014, the first civil works contract in December 2014, and the rest of the civil work contracts in early 2015, except for the contract for the A4 package, which was awarded in late 2015. The project performance was rated actual problem again in mid-2015 because of delayed contract awards and low loan disbursements. Furthermore, the civil works progress suffered from delayed LAR activities. The ADB mission in April 2016 assessed that the civil works could be mostly completed by the end of 2018 or in early 2019, assuming that the LAR could be achieved by December 2016. After the land was handed over to the contractors, the civil works started to catch up in 2017. However, some land was still not ready for handover at the interchanges for the contracts for A1 and A2-2, and the contractor for the A4 package had serious financial problems. The ADB mission agreed to use the advance procedure to improve the contractor’s cash flows. Upon loan closing for tranche 1, two civil works contracts were mostly completed, but the other three contracts were far behind schedule. The overall project implementation delays mainly resulted from initial delays in achieving counterpart funds, slow LAR activities, delayed recruitment of consultants and procurement of civil works contracts, longer than expected monsoon rains, and protracted decision-making process by the VEC. At the ADB project completion review (PCR) mission in June 2020, two civil works contracts (A2-1 and A3) were substantially completed. VEC scheduled the A4 contract to finish in late 2020 and the two remaining contracts to finish in middle 2021.10 20. Because of overall project implementation delays, ADB extended the loan closing date by 18 months from 31 December 2017 to 30 June 2019, but project implementation was still not complete by the extended loan closing date. The VEC requested a second extension of the loan closing date, but the government did not submit the official request to ADB by the deadline. Hence, the loan was closed on 30 June 2019. The loan financial account was kept open for a winding-up period to liquidate the advance account and process final withdrawal applications, which was extended once and finally closed on 5 December 2019.

21. The actual implementation schedule compared with the schedule at appraisal is in Appendix 7, and a chronology of the main events is in Appendix 8.

F. Implementation Arrangements 22. As arranged at appraisal, the Ministry of Transport (MOT) established a project review committee led by a deputy minister and comprising deputy director generals from government agencies. The VEC was the executing agency for the project, with overall responsibility for the project implementation and correspondence with the line ministries, ADB, the cofinancier, and the provincial authorities. VEC headquarters was responsible for approval of detailed design, procurement activities, withdrawal of loan proceeds, and supervision of project implementation. 23. In 2011, VEC established a Ben Luc–Long Thanh Expressway project management unit for day-to-day project implementation with the assistance from the CSC, which was renamed the Southern Expressway Project Management Unit (SEPMU) in August 2017. The SEPMU focused on (i) managing civil works on the project sites, (ii) supervising the consultants and contractors, (iii) ensuring compliance with ADB safeguard policy and implementing related plans, (iv) preparing necessary documents for loan withdrawals, (v) preparing periodic monitoring reports, and (vi)

10 VEC planned that the entire project expressway would be completed and opened to traffic in June 2023.

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ensuring close communication and coordination with related local governments. The SEPMU was led by a project director and deputy directors, who were assisted by highway engineers, environmental specialists, resettlement specialists, financial accountants, and an adequate number of qualified administration staff. During implementation, the SEPMU coordinated closely with the provincial and district governments on civil works, environmental management, LAR activities, and the livelihood development and income restoration program. This implementation arrangement was generally adequate for delivering project outputs and outcomes. During implementation, VEC and SEPMU staff gained substantial experience and improved their capacity to implement such projects, especially in procurement, financial management, and compliance with ADB safeguards policy. An updated organization chart for project implementation is in Appendix 9. G. Technical Assistance 24. To prepare the project, ADB approved a TA in 2008 to design and formulate the project,

which focused on (i) feasibility studies; (ii) engineering, economic and financial analysis; and (iii) environmental and social studies.11 The TA study compared alternatives of the expressway alignment and engineering and their construction costs. The TA team identified and addressed the project’s major risks, including (i) delays in project commencement, (ii) delays in land acquisition and resettlement, (iii) cost overrun, and (iv) the VEC’s vulnerable financial condition. The TA team recommended related measures and incorporated them in the project design and formulation. The team considered an MFF an appropriate modality to finance the project as a large stand-alone project to be implemented under the master plan. The team completed the TA in February 2010 with the delivery of a TA final report. To enhance the technical design and assist with preconstruction activities, ADB approved a TA project to carry out detailed designs for three expressway projects in Viet Nam, including the project expressway.12 H. Consultant Recruitment and Procurement 25. As arranged at appraisal, consulting services to the project included (i) construction supervision for ADB-financed sections, (ii) external environmental monitoring for the entire project, (iii) external resettlement monitoring for the entire project, and (iv) financial statement auditing.13 All consultants were engaged in accordance with ADB’s Guidelines on the Use of Consultants (2010, as amended from time to time). 26. Delays in the detailed design and a shortage in counterpart funds led to delays in recruiting the CSC. The CSC was engaged using quality- and cost-based selection procedures and the contract was awarded in November 2014. Per the terms of reference, the CSC acted as the engineer to manage the civil works contracts and supervise the civil works; helped the VEC undertake environmental management, LAR, the income restoration program, and social development activities; and developed VEC staff skills on project and corporative financing management. The CSC established a main office in HCMC and two site offices with required staff and facilities. Because of project delays and the need for better supervision of both the western and eastern sections of the project expressway, the CSC contract was amended to extend the

11 ADB. 2008. Technical Assistance to the Socialist Republic of Viet Nam for Preparing the Ben Luc–Long Thanh

Expressway Project. Manila (TA 7155-VIE; $1.5 million, funded by the Japan Special Funds). 12 ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Socialist

Republic of Viet Nam for the Greater Mekong Subregion Ha Long–Mong Cai and Ben Luc–Long Thanh Expressways Technical Assistance Project. Manila (Loan 2460-VIE; $26.0 million).

13 The cofinancier financed the middle section of the expressway and recruited and financed a separate construction supervision consultant.

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service period until June 2019.14 However, the CSC had staffing problems at the beginning, and did not fully implement the required task on the project performance monitoring system (PPMS). Overall, the performance of the CSC was rated satisfactory.

27. At appraisal, four civil works packages (A1–A4) were designed under tranche 1. The size of the A4 package was adjusted upon the detailed design (the boundary of A4 and J1 was shifted). The procurement documents for the civil works contracts were prepared under the TA loan and updated by the VEC. Considering the size of contract A2, it was split into two contracts (A2-1 and A2-2), and the procurement plan was updated accordingly. 15 The procurement used the international competitive bidding procedure in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time). Procurement started in March 2013 for the A1–A3 contracts. Procurement for the A4 package was postponed because of the potential cost overrun estimated at detailed design. During procurement, the bids were much lower than the estimates. Bid evaluation took longer than projected and the VEC recommended disqualifying the lowest-priced bidder for the A2-1 contract. Eventually, VEC awarded contracts in late 2014 and early 2015 for A1–A3, and in late 2015 for A4. The total contract price for A1–A4 was only about 70% of the cost estimates of the modified detailed design. 28. The mobilization of the civil works was delayed, and progress was very slow at the beginning mainly because of lack of availability of the required land. During implementation, the contractors mobilized key technical staff and laborers to the sites, established laboratories, installed safety facilities, and prepared site-specific environment management plans. In the early stages, the project found that all civil works contractors lacked technical capacity, financial capability, equipment and work force, with poor performance of the subcontractors.16 The VEC and the CSC closely supervised project implementation and updated the implementation schedule as required. Although all contractors received extension periods to complete their works, the CSC issued substantial letters to the contractors to instruct the works and expedite implementation. In parallel, to accelerate the disbursement process and improve VEC’s overall cash flow, ADB agreed with VEC’s recommendation to use the advance procedure in processing payments to contractors. With joint efforts, the contractors improved their performance and started to catch up with the revised work schedule. Upon loan closing in June 2019, two civil works contracts (A2-1 and A3) were mostly completed, but the other three contracts were still undergoing. The performance of the civil works contractors was rated satisfactory, except for the A4 contractor, whose performance was rated partially satisfactory.17 Appendix 10 summarizes the ADB-financed project contracts under tranche 1.

I. Gender Equity 29. At appraisal, the project was categorized some gender elements. ADB requested the VEC to incorporate provisions in all project contracts to the effect that contractors shall (i) comply with Viet Nam’s applicable labor laws and related international treaty obligations and not employ child labor; (ii) provide safe working conditions, water, and separate sanitation facilities for male and female workers; (iii) provide equal wages to male and female workers for work of equal value; (iv) provide day care services for female workers; and (v) carry out HIV, illicit drug, and human trafficking prevention programs in construction campsites, with such programs held in coordination with government programs and other initiatives.

14 After the loan was closed for tranche 1, some staff of the CSC were still retained and financed by the ADB loan for

tranche 2. 15 In Viet Nam, the reasonable contract price for civil works is about $50 million. 16 The main contractors for the civil works under tranche 1 used a total of 44 subcontractors. 17 The contractor for A4 had serious financial problems and some disputes with subcontractors.

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30. During implementation, the bidding documents made provisions for the contractors to encourage employment of the poor, particularly women, and not to differentiate wages between men and women, particularly for work of equal value. The VEC, the SEPMU, the CSC, and the contractors paid adequate attention to gender issues. In the CSC team, an international HIV/AIDS and human trafficking specialist and a national social development specialist were engaged to monitor the implementation of gender measures. The project conducted training on resettlement and livelihood for women and women-headed households in all districts in close cooperation with women’s unions in various organizations. The committees of the income restoration program included the representatives of woman unions in the project districts. As with other expressways in the project area, the project expressway operation will also employ many female staff, mainly toll collectors. The fast-growing public transport in the project area has helped and will help women to travel further and therefore participate more in socioeconomic activities. Empowerment of women in the project areas has improved. J. Safeguards 31. Environmental safeguards. The environmental classification for the project was Category A. The VEC prepared the environment impact assessment (EIA) report, covering all sections of the project expressway, in accordance with ADB’s Safeguard Policy Statement. While preparing the EIA, the project conducted a number of public consultations involving stakeholders such as affected households and local officials in communes and related districts. The project was not anticipated to adversely affect the biosphere reserve.18 Accordingly, an environment management plan (EMP) was prepared, which specified a range of mitigation and pollution control measures to minimize the anticipated negative impacts arising from the project. The EMP was updated twice in 2017 and 2018. 32. The VEC took overall responsibility for implementing the EMP. For each civil works contract, the contractor prepared a site-specific EMP, which was approved by VEC before construction. A grievance redress mechanism was established. The CSC was staffed with an environmental group and conducted regular site inspections along the expressway alignment, off-site borrow, spoils, and disposal areas, as well as construction camps and plants. The project designed and implemented substantial training for increasing the environmental management capacity. The VEC, with assistance from the CSC, took action if any noncompliance was found. The VEC submitted periodical environmental monitoring reports to ADB. A total of 14 environmental monitoring reports for tranche 1 were disclosed on the ADB website.19 As planned, the VEC engaged an external environmental monitoring consultant team in 2015 to review and verify the accuracy, breadth, depth, and relevance of information, and to determine if the EMP provisions were conducted in a thorough and timely manner. The monitoring and analysis concluded that (i) the implementation of the EMP by the contractors were generally satisfactory; and (ii) the VEC, with assistance from the CSC, complied with ADB’s environment safeguard policy. 33. Under the project, 7,000 square meters of mangrove area was cleared for the western section. However, VEC had not yet implemented the mangrove reforestation plan to offset the impact as of September 2020. ADB mission requested VEC to take necessary actions immediately. Noise pollution modeling of the EIA indicated that in 2036, without mitigation, noise levels would exceed the standard at sensitive receptors along the expressway. The updated EMP

18 The mangrove forests in Can Gio district of HCMC was declared a biosphere reserve by UNESCO. The expressway

alignment would run through 6 km of the transition zone of the biosphere reserve where no mangrove forests exist. 19 Some of the environment monitoring reports were for both tranches 1 and tranche 2.

9

requires installation of noise barriers. Noise barriers had been installed under contract A2-1, but not under the other contracts. ADB requested the VEC to ensure that noise barriers would be installed. A summary of environment safeguards implementation is in Appendix 11. 34. Involuntary resettlement. The project was Category A for involuntary resettlement. At appraisal, a resettlement plan for the entire expressway was prepared and project information brochures were disseminated to the people affected by the project. The resettlement plan was updated based on the detailed design. District-specific resettlement plans for all project-affected districts were prepared, which were accepted by ADB. According to law, the provincial governments were responsible for reviewing and approving the resettlement plans and directing the lower level governments in implementing the resettlement plans.

35. In the early stages, the implementation of the resettlement plans experienced serious problems: (i) the government had difficulty in providing sufficient counterpart funds for the LAR,20 and (ii) establishment of safety zones to restrict land development conflicted with ADB’s safeguard policy.21 ADB missions requested the MOT to waive the safety zone requirements. Solving the issues of counterpart funds and safety zones substantially postponed project implementation. The ADB mission in March 2013 found that the VEC had requested some districts to start the LAR and compensation, although ADB had not approved the updated resettlement plans for these districts. The ADB mission requested VEC to suspend the LAR activities and prepare corrective action plans. With the available counterpart funds, the LAR activities started to build up. The ADB mission in April 2015 found that the LAR progressed well and was completed for most of the western section. However, the required counterpart funds were still not adequate, and the MOT permitted the VEC to use toll revenue of other expressways for the LAR temporarily. Nevertheless, the land was still not available for handover at some interchange locations (A1 and A2-2), which was a main reason for the overall project implementation delays. As of the loan closing, a total of 218.4 hectares of land was handed over (99.1% of the total land required), a total of 1,766 affected households were compensated (99.25%), and 5 resettlement sites were developed with full infrastructure and facilities for most locations. As of June 2020, VEC completed the income restoration program in some districts and was still implementing it in others, like Binh Chanh, Can Giuoc, and Nha Be. 36. Grievance redress mechanism. In general, the grievance redress mechanism was well established and functional in all project districts. Households were aware of the grievance redress mechanism and knew how and where they should lodge their complaints. The SEPMU and local authorities at all levels cooperated closely and endeavored to address grievances. Under tranche 1, a total of 489 complaints were lodged at different levels. Many of these complaints were lodged by the same households several times to various levels of the grievance redress mechanism. By project completion, there were 17 outstanding grievances in Binh Chanh district, 10 of which are being handled by the court. As arranged at appraisal, the VEC engaged an external monitoring agency to ensure that the resettlement plan was implemented properly but did not do so as originally scheduled because of delayed LAR activities. A total of 21 social monitoring reports were disclosed on the ADB website. A summary of the LAR implementation is in Appendix 12. 37. Indigenous peoples. At appraisal, the project impact to indigenous people was assessed as Category C in accordance with ADB’s Safeguard Policy Statement. The project would affect

20 At appraisal, it was arranged that the government would provide counterpart funds to fully cover the land acquisition

and resettlement costs. The total estimated counterpart funds requirements were D6,424.5 billion, but the VEC received only D487.4 billion in 2012 and D620.0 billion in 2013.

21 Decree No. 11 prescribes requirements for establishment of safety zones outside of the standard right-of-way of highways and expressways, in which land development by landowners is restricted.

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only two ethnic minority households that were already well integrated into the wider socioeconomic and cultural community. During implementation, the envisaged strategy for indigenous people remained unchanged.

K. Monitoring and Reporting 38. ADB monitored project progress and achievements through regular project progress reports. As requested, the VEC, assisted by the CSC, monitored safeguards compliance. VEC recruited external monitoring consultants to ensure that the project properly complied with ADB safeguards policies. VEC submitted the required monitoring reports to ADB generally on a timely basis. However, the borrower did not prepare and submit the required borrower’s project completion report to ADB in a timely manner.22 39. The borrower and the executing agency complied with most loan covenants for the project, which enabled the VEC to carry out the project with due diligence and efficiency, and in conformity with sound administrative, financial, engineering, environmental and social practices. During implementation, the VEC provided adequate oversight, coordination, and financial support to project implementation. The SEPMU was fully operational with adequate staff and resources. The VEC procured civil works contracts and engaged consultants in accordance with ADB’s guidelines and procedures. Measures for environmental and social aspects were incorporated in the contracts and implemented accordingly. The VEC submitted audited project financial statements to ADB generally on time.23 However, the required counterpart funds were not adequate at the beginning and the PPMS program was not fully implemented.24 Appendix 13 shows the status of compliance with the loan and project covenants.

III. EVALUATION OF PERFORMANCE

A. Relevance

40. At both appraisal and completion, the project was rated relevant because it was an integral part of the government strategy for economic growth and poverty reduction. The project supported the government’s development plans at appraisal—and their later updates—on developing a network of high-capacity and high-speed expressways in the country. The project was also in line with ADB’s priorities for Viet Nam.25 ADB provided substantial technical and financial support to help the MOT implement the plan, of which the project expressway was an integral part. At completion, the project remained aligned with ADB’s country partnership strategy for Viet Nam, especially in road sector development.26 B. Effectiveness

41. The project had four outcome performance targets: (i) travel time and costs reduced by 80% for east–west traffic in the southern HCMC area, (ii) number of trucks on general roads and highways in HCMC reduced by 30%, (iii) traffic accident rate per vehicle in the project area reduced by 10%, and (iv) traffic volume of international cargo to and from Cambodia via the GMS

22 ADB received a draft borrower’s project completion report in May 2020. 23 The first APFS submitted for the project was for FY 2013 which covered the period starting from the beginning of the

project, i. e, loan effectiveness to end of FY 2013. The APFS for 2019 was received on 19 August 2020, which is still under ADB’s review.

24 The SCS conducted a baseline survey in 2015, which was updated in 2017, but no follow-up survey was conducted. 25 ADB. 2006. Country Strategy and Program: Viet Nam, 2007–2010. Manila. 26 ADB. 2016. Country Partnership Strategy: Viet Nam, 2016–2020. Manila.

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SEC is tripled. 42. The western section was rated less than effective in achieving its outcome and outputs. The project implementation was substantially delayed, which significantly postponed and reduced the project effectiveness. Once opened to traffic in 2021, the western section of the project expressway would significantly improve the connectivity in the project areas. The government forecast that the traffic on the western section of the project expressway would be about 23,107 passenger car units (PCU) in 2022 (the first year of full operation). The vehicle travel time would drop at least 50% compared with local highways. The vehicle operating cost (VOC) would fall by 30% on average because of better road conditions. Hence, the operation of the project expressway would well support fast-growing traffic in the project areas as well as on the Greater Mekong Subregion transport corridor. However, some targets were not achieved because (i) it is impossible to reduce the travel time and cost by 80% by comparing the designed speeds for the project expressway and general highways, (ii) the number of trucks on the general highway keeps growing due to fast socioeconomic development in the project areas. The target of reducing truck traffic by 30% on general highway in HCMC will not be achieved; (iii) the traffic accident rate per vehicle in the project area was not available, and (iv) the data on cross-border traffic is also not available. During implementation, the resettlement plans were updated and implemented to minimize negative impacts of the project. The VEC’s capacity in project management and procurement, safeguard compliance, and corporative finance and operation and maintenance (O&M) have significantly improved. C. Efficiency

43. The western section was rated efficient in achieving its outcomes and outputs. The ADB PCR mission reevaluated the economic internal rate of return (EIRR) of the western section using similar methodology as that at appraisal and updated data. 27 The economic benefits were recalculated by comparing the “with-project” and “without-project” cases, including reductions in VOC and savings in travel time costs. The EIRR was lower at completion—19.4% compared to 25.5% at appraisal—mainly because of longer construction period, lower traffic level, and higher O&M costs. Since the recalculated EIRR is above the ADB recommended discount rate of 12% at appraisal, the western section is still economically viable. The sensitivity analysis indicated that the western section was economically viable for all tested scenarios. If a 20% maintenance cost increase was combined with a 20% benefit reduction, the EIRR would still be 17.0%. The details of economic reevaluation are in Appendix 14.

44. During implementation, the project implementation experienced initial delays. Subsequently, slow LAR activities and poor performance of the contractors further postponed the implementation progress. Upon ADB’s PCR mission in June 2020, some civil works contracts were still undergoing. According to the latest schedule, the actual completion for the western section will be in 2021 or about 6 years later than planned at appraisal. This implementation delay reduced the project efficiency.

D. Sustainability

45. The western section was rated likely sustainable. In 2004, the MOT established the VEC mainly to raise funds and construct and manage expressways nationwide. The VEC’s capacity in highway construction, project management, and expressway O&M was strengthened significantly

27 The EIRR evaluation is based on the latest traffic forecast data provided by VEC, since the project expressway has

not been opened for traffic at the time of evaluation.

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during project implementation. Currently, the VEC has invested in four expressways with a total length of 485 km and is constructing one expressway in the country (the project expressway). A permanent subsidy mechanism for expressway projects has been established and the government is using a diversified financing modality to develop the national expressway network. The VEC has established a tolling scheme for the expressways with basic toll rates and a regular adjustments scheme. The basic toll rate for a passenger car ranges from VND1,250 per km to VND2,000 per km.28 The traffic on the operational expressways increased very fast, about 10%–20% annually in recent years. The toll revenue collected has ensured that the VEC has sufficient financial capability to finance the ongoing projects and pay back the debt.

46. It is expected that the project will fully complete in mid-2021 for the western section and in 2023 for the entire expressway. For the O&M of the project expressway, the VEC intends to procure an operating entity by competitive bidding in accordance with Vietnamese regulations. The operating entity shall be equipped with vehicles and facilities for emergency rescue, regular patrolling, and routine maintenance for the expressways. The project expressway is designed with an electronic toll collection and traffic information and monitoring system, which is now constructed under tranche 2. The toll plazas will operate 24 hours a day and employ over 400 toll collectors, 60% of whom will be female. To control overloaded trucks, the expressway will install weighing equipment at all entries.

47. During the ADB PCR mission, the financial internal rate of return (FIRR) of the western section was reevaluated at 6.12% before tax and 5.41% after tax, based on actual capital costs, prevailing O&M cost, and estimated revenue. The recalculated FIRR was higher than the weighted average cost of capital of 2.22% recalculated at completion. Therefore, the western section is still considered financially viable. Additionally, the FIRR was subject to sensitivity tests. Combining a 20% increase in O&M costs and a 20% decrease in revenue, the FIRR was at 4.51% before tax and 3.85% after tax. Appendix 15 has the details of the financial reevaluation.

E. Development Impact

48. The project’s development impact was satisfactory. The project had two impact targets. One was achieved and the other is being achieved. In 2017, the average GDP per capita was VND128.9 million in HCMC, VND60.2 million in Long An, and VND94.0 million in Dong Nai Province. These figures represent an increase of about 70%, 95% and 80%, respectively, over 2011 and are well in excess of the target of 30%. Total trade with Cambodia has increased by $3,795 million in 2017, which is a 29% increase over 2011, and is expected to achieve the target of 50% at completion of the entire expressway.

49. At appraisal, a project impact assessment focused on poverty, gender, LAR, indigenous people, health, and labor. Accordingly, a design and monitoring framework was designed as part of the project appraisal document. During implementation, the CSC conducted a baseline survey in 2015, which was updated in 2017. However, there was no more follow-up monitoring and evaluation after that. During ADB’s PCR mission, some data on the development status in the project areas were collected. In comparison with the baseline in 2011, (i) the gross domestic product per capita in 2018 reached VND138.8 million for HCMC, VND68.6 million for Long An, and VND102.3 million for Dong Nai Province; (ii) the monthly average income per capita in 2018 reached VND6.2 million for HCMC, VND4.2 million for Long An, and VND5.3 million for Dong Nai Province; (iii) the foreign trade with Cambodia reached $4.8 million in 2018; (iv) the number of businesses increased by 95% for HCMC, 83% for Long An, and 78% for Dong Nai Province; (v)

28 The basic toll rate for the Ho Chi Minh City–Long Thanh–Dau Giay Expressway is D2,000 per km.

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large amount working opportunities were provided by the project, totaling 38,414 person-months; (iv) the poverty rates fell from 0.3% to 0.01% for HCMC, from 6.3% to 5.0% for Long An, and from 3.7% to 0.8% for Dong Nai Province; and (vii) the road accidents in the project areas reduced significantly by about 51%.

F. Performance of the Borrower and the Executing Agency

50. The overall performance of the borrower and the executing agency was satisfactory. The borrower was the Socialist Republic of Viet Nam and the executing agency was the VEC. The related government agencies, mainly the Ministry of Finance and the MOT, actively participated in coordinating and supervising the project. The VEC made adequate institutional arrangements for project implementation. The SEPMU was fully staffed with the expertise required for the project implementation and was delegated adequate technical and administrative authority for expeditious field-level decisions. The project implementation complied with most loan and project covenants. The VEC, assisted by the consultants, implemented all aspects of project management and safeguard monitoring. During project implementation, the VEC substantially increased its capacity to design and implement large expressway projects. However, some project components need to improve. The counterpart funds for LAR were not available in a timely and adequate manner at initial stage, which led to substantial delays in the implementation. The required project specific webpage needs to be established and the required monitoring of the PPMS indicators needs to be fully implemented.

G. Performance of the Asian Development Bank

51. ADB’s overall performance was satisfactory. ADB headquarters, with close assistance from the country resident mission, undertook the project administration and was closely involved in identifying and resolving issues during project implementation through regular review missions and tripartite project review meetings. During implementation, ADB fielded 17 project review missions, including the inception mission in 2012, the midterm review mission in 2016, and the completion review mission in 2020. The ADB missions analyzed implementation issues and provided substantial inputs in preparing action plans and technical support to expedite project implementation. The ADB project team and experts provided regular training and handholding support to VEC and SEPMU staff, the consultants, and the contractors, and thus built their capacity. Document approval during loan processing and project implementation was timely, and all claims for payment were promptly processed. ADB extended the loan closing date by 1.5 years and used the advance account procedure to improve the financial performance of the civil works contractors. The role of the ADB missions in providing timely advice and technical support was well recognized by the government. H. Overall Assessment

52. Overall, the western section of the project is rated successful. The project was relevant to both the government’s development objectives and the ADB’s country partnership strategy. The project was designed appropriately and implemented with some changes in scope to meet actual needs. The project’s outputs and outcomes demonstrate that it was an effective intervention for sustainable economic growth, regional cooperation, and capacity development in the project areas. The western section was rated less than effective in achieving its outcomes because of substantial delays. The western section was rated efficient in achieving its outcomes and outputs by considering its robust economic viability. The western section was rated likely sustainable because of the institutional and financial arrangements for the sector development, expressway O&M, fast growth in traffic and toll revenue collected, and its socioeconomic impacts. At full

14

completion, VEC expects the project expressway will substantially improve connectivity, support fast socioeconomic development, and bring significant socioeconomic benefits in the project areas and the GMS transport corridor.

Overall Ratings Criteria Rating

Relevance Relevant

Effectiveness Less than Effective

Efficiency Efficient

Sustainability Likely Sustainable

Overall Assessment Successful

Development impact Satisfactory

Borrower and executing agency Satisfactory

Performance of the Asian Development Bank Satisfactory

Source: the Asian Development Bank.

IV. ISSUES, LESSONS, AND RECOMMENDATIONS

A. Issues and Lessons

53. Counterpart funds. At appraisal, it was arranged that the government counterpart fund would fully finance the cost for LAR. However, the government was not able to provide adequate and timely counterpart funds. The significant financing gap raised several serious issues and concerns and postponed project implementation for at least 2 years. Despite repeated requests from the ADB missions, counterpart funds were still not timely available. The counterpart fund availability was not only a project- or sector-specific concern, but a system-wide problem in Viet Nam. In future projects, the counterpart funds should be well and firmly arranged at project preparation, including the fund sources, budgeting, financial management, and coordination among the central government, the VEC, and the local governments.

54. Procurement. In 2011, the Office of Anticorruption and Integrity conducted a proactive integrity review on another expressway project in Viet Nam, which identified some issues. In 2016, the follow-up review determined that 16 of the 21 recommendations had been implemented. 29 During implementation of the western section of the project, some of the issues still remained, like inadequate procurement capacity, significant implementation delays, and weak subcontractors. The government should pay adequate attention to the ADB’s policy and procedure, as well as improve its capacity in procurement. Meanwhile, ADB should strengthen project preparation, including providing more training.

55. Land acquisition and resettlement. Aside from delays caused by the shortage of funds, the LAR activities were very slow, especially at some interchange locations for civil works. Eventually, the LAR activities were substantially completed in March 2018, about five years later than planned. Expressway projects require large amounts of land, which also lead to substantial resettlement. There are many concerns and challenges on the LAR in the country, like legal and policy framework, fund sources and financial management, institutional arrangement among government agencies, LAR planning and implementation monitoring, compensation, and income restoration programs. Both ADB and the government should pay adequate attention and make reasonable arrangements during project preparation.

29 ADB. 2012. Project Procurement-Related Review Report: Greater Mekong Subregion: Kunming–Haiphong Transport

Corridor—Noi Bai–Lao Cai Highway Technical Assistance Project. Manila (Loans 2391 and 2392-VIE).

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56. Project preparation and cost estimation. Upon detailed design, the estimated civil works cost increased substantially mainly because of price escalation and engineering enhancement. Considering the budget availability, the detailed design was modified with a lower civil works cost and the procurement for one civil works contract was postponed. However, the bids for the civil works contracts was much lower than estimated, about 30%. Such uncertainty and fluctuation in project cost caused many concerns and wasted a lot of time in project design, approval, financing, procurement, and contract management. The project preparation should be strengthened to avoid excessive unexpected changes during implementation.

B. Recommendations

57. Future monitoring. The required monitoring of the PPMS was not fully conducted and the western section has also not opened to traffic. Hence, the development impacts of the project were not able to be properly and adequately assessed. However, at completion of the entire expressway under the MFF by 31 December 2023, an in-depth analysis of the development impacts of the project should be carried out.30 Measures to minimize the negative socioeconomic impacts and maximize the benefits to the local people should be proposed and incorporated into the on-going and future expressway projects in the country.

58. Further action or follow-up. At ADB’s PCR mission, some contracts under tranche 1 were still ongoing. Noise barriers had not been installed at some residential areas. Implementation of mangrove reforestation plan to offset the impact of mangrove forest clearance had not been initiated. Upon full completion, the achievement and impacts should be well assessed. The lessons learned should be adequately summarized and incorporated into the design and implementation of future projects, especially the common and continuous issues and risks for the expressway projects in the country.

59. Timing of the project performance evaluation report. The project performance evaluation report may be prepared in 2024 when entire project expressway has been fully completed and has been into operation for some time. By then, the traffic development, expressway O&M, physical condition, benefits attained, and socioeconomic impacts can be better assessed.

30 On 19 October 2020, the ADB Board approved an extension of the MFF availability period from 14 December 2020

to 31 December 2023. This extension will enable completion of remaining works under the MFF, while the MFF’s aggregate implementation progress is 71.5% as of 29 October 2020.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance

Indicators and Targets Project Achievements

Impact Increased competitiveness of the regional economy along the SEC in southern Viet Nam and the GMS countries

By 2017 compared to the baseline data of 2011: (i) GDP increased by 30% in

HCMC and provinces in which the project expressway is constructed; and

(ii) the value of cross-border trade

between Viet Nam and Cambodia increased by at least 50%

• Achieved In 2017, the average GDP per capita was VND128.9 million in HCMC, VND60.2 million in Long An, and VND94.0 million in Dong Nai Province, which were about 70%, 95% and 80% higher than that in 2011. • Not Achieved. The total trade with Cambodia was $3,795 million in 2017, which was about 29% higher than that in 2011.

Outcome A more efficient and safer movement of goods and people in the greater HCMC area

By 2017 compared to the baseline data of 2011: (i) travel time and costs reduced by

80% for east–west traffic in the southern HCMC area;

(ii) the number of trucks on general

roads and highways in HCMC reduced by 30%;

(iii) traffic accident rate per vehicle

in the project area reduced by 10%; and

• Not Achieved The designed speed of the project expressway is 120 km per hour. The average traveling time on the project expressway is about 50% less than that on the local highways. The vehicle operation cost (VOC) would reduce about 30% if using the project expressway than that on the local highways. • Not Achieved. Along with fast socioeconomic development in the HCMC areas, the road traffic increased fast. Although large number of trucks will divert to the project expressways, the remaining truck traffic on the local roads and highways will be still significant and likely more than that before the project. • Achieved. The total road accidents in the project areas reduced from 2,747 cases in 2011 to 1,358 cases in 2017.

Appendix 1 17

Design Summary Performance

Indicators and Targets Project Achievements

(iv) the traffic volume of international cargo to and from Cambodia via the GMS SEC is tripled.

• Achieved. The foreign trade between Viet Nam and Cambodia increased by 29%. Most of the cargo was transported via the GMS transport corridors.

Outputs 1. Road density of HCMC increased 2. Connection between east and west regions of HCMC enhanced 3. Project management capacity of VEC improved 4. Financing management capacity of VEC improved

Construction work to construct the 57.1 km of 4-lane Ben Luc-Long Thanh Expressway completed by 2016 Resettlement plan implemented, addressing all resettlement impacts EIA and EMP implemented, minimizing adverse environmental impacts through mitigation measures Permanent subsidy mechanism for expressway projects established by government Diversified financing modality established to develop national expressway network

• Partially Achieved. Under Tranche 1, 21.1 km expressway with 4 lanes will be constructed, which is now scheduled to fully complete in middle 2021. The entire project expressway will be completed in middle 2023. • Partially Achieved. The operation of the project expressway will substantially enhance the connectivity between east and west regions of HCMC. • Achieved. A resettlement plan (RP) for the entire project was prepared, which was updated based on the detailed design. The RP was implemented to address all resettlement impacts.

• Achieved. Environment impact assessment (EIA) was carried out at appraisal. Accordingly, an environment management plan (EMP) was made and implemented to minimize the adverse environmental impacts identified. • Achieved. A permanent subsidy mechanism for expressway projects has been established by the government. • Achieved. The government is using diversified financing modality to develop the national expressway network.

ADB = Asian Development Bank, EIA = environment impact assessment, EMP = environment management plan, GDP = gross domestic product, GMS = Greater Mekong Subregion, HCMC = Hu Chi Minh City, RP = resettlement

plan, SEC = southern economic corridor, VEC = Vietnam Expressway Corporation. VOC = vehicle operation cost.

Source: The Asian Development Bank’s project completion review mission.

18 Appendix 2

SALIENT FEATURES OF THE PROJECT HIGHWAY

Section Length Lanes

Carriage Width

Bridge Over/under

Pass Culvert

Service Area

Toll Plaza

(km) (no.) (meter) (no.) total (km) (no.) (no.) (no.) (no.)

Western section 21.14 4 25 13 9.3 5 70 4

Middle section 10.71

Eastern section 25.25 4 25 5 4.6 7 30 1 2

Total 57.10

18 13.9 12 100 1 6

km = kilometer, no. = number Note: the western and eastern sections are financed by ADB. Source: the Ben Luc–Long Thanh Expressway Project Management Unit.

19 Appendix 3

PROJECT COST AT APPRAISAL AND ACTUAL ($ million)

Appraisal Estimate Actual

Item Tranche 1 Cost

% of Total Tranche 1

Cost % of Total

A. Base Costs

1. Civil works 254.7 40.6% 218.3 57.0%

2. Expressway facilities

3. Land acquisition 215.7 34.4% 138.1 36.0%

4. VEC laboratory 1.1 0.2% 0.5 0.1%

5. Unexploded ordnance clearance 4.0 0.6% 0.4 0.1%

6. Consulting services 9.6 1.5% 9.3 2.4%

7. VEC incremental administration cost 9.2 1.5% 5.3 1.4%

Subtotal (A) 494.3 78.7% 371.9 97.1%

B. Contingencies

1. Physical 24.7 3.9%

2. Price 87.8 14.0%

Subtotal (B) 112.5 17.9%

C. Financial Charges during Implementation 20.9 3.3% 11.3 2.9%

Total (A+B+C) 627.7 100.0% 383.2 100.0%

VEC = Vietnam Expressway Corporation Source: Asian Development Bank’s loan financial information system, the Ben Luc–Long Thanh Expressway Project Management Unit.

20 Appendix 4

PROJECT COST BY FINANCIER

Table A4.1: Project Cost at Appraisal by Financier ($ million)

ADB Government/VEC

Total Cost item Amount

% of Cost Category

Amount % of Cost Category

A. Base Costs

1. Civil works 254.7 100.0% 254.7

2. Expressway facilities

3. Land acquisition 215.7 100.0% 215.7

4. VEC laboratory 1.1 100.0% 1.1

5. UXO clearance 4.0 100.0% 4.0

6. Consulting services 9.6 100.0% 9.6

7. VEC incremental administration cost 9.2 100.0% 9.2

Subtotal (A) 274.6 55.6% 219.7 44.4% 494.3

B. Contingencies

1. Physical 13.7 55.5% 11.0 44.5% 24.7

2. Price 40.8 46.5% 47.0 53.5% 87.8

Subtotal (B) 54.5 48.4% 58.0 51.6% 112.5

C. Financial Charges during Implementation 20.9 100.0% 20.9

Total (A+B+C) 350.0 55.8% 277.7 44.2% 627.7

Percentages of the Total Cost 55.8% 44.2%

ADB = Asian Development Bank, UXO = unexploded ordnance, VEC = Vietnam Expressway Corporation Source: Project appraisal document (Report and Recommendation of the President).

21 Appendix 4

Table A4.2: Project Cost at Completion by Financier ($ million)

ADB Government/VEC

Total Cost item Amount

% of Cost Category

Amount % of Cost Category

A. Base Costs

1. Civil works 160.5 72.4% 57.8 26.5% 218.3

2. Expressway facilities

3. Land acquisition 138.1 100.0% 138.1

4. VEC laboratory 0.5 100.0% 0.5

5. UXO clearance 0.4 100.0% 0.4

6. Consulting services 9.3 100.0% 9.3

7. VEC incremental administration cost 5.3 100.0% 5.3

Subtotal (A) 175.1 46.7% 196.8 52.9% 371.9

B. Contingencies

1. Physical

2. Price

Subtotal (B)

C. Financial Charges during Implementation 11.3 100.0% 11.3

Total (A+B+C) 186.4 48.2% 196.8 51.4% 383.2

Percentages of the Total Cost 48.6% 51.4%

ADB = Asian Development Bank, UXO = unexploded ordnance, VEC = Vietnam Expressway Corporation Source: Project appraisal document (Report and Recommendation of the President); ADB Loan Financial Information System; Vietnam Expressway Corporation

22 Appendix 5

DISBURSEMENT OF ADB LOAN PROCEEDS

Table A5: Annual and Cumulative Disbursement of ADB Loan Proceeds ($ million)

year

Annual Disbursement Cumulative Disbursement

Amount % of Total

Amount % of Total

($million) ($million)

2012 0.74 0.4% 0.74 0.4%

2013 0.53 0.3% 1.27 0.7%

2014 10.12 5.4% 11.39 6.1%

2015 20.81 11.2% 32.20 17.3%

2016 38.62 20.7% 70.81 38.0%

2017 58.28 31.3% 129.10 69.3%

2018 37.43 20.1% 166.53 89.3%

2019 19.87 10.7% 186.40 100.0%

Total 186.40 100.0%

ADB = Asian Development Bank. Source: ADB loan financial information system.

Figure A5: Projection and Actual Disbursement of ADB Loan Proceeds ($ million)

Note: the projected loan disbursement is for the whole project (Tranche 1 and Tranche 2). ADB = Asian Development Bank. Source: ADB loan financial information system.

Appendix 6 23

CONTRACT AWARDS OF ADB LOAN PROCEEDS

Table A6: Annual and Cumulative Contract Awards of ADB Loan Proceeds

year

Annual Award Cumulative Award

Amount % of Total

Amount % of Total

($million) ($million)

2014 36.29 20.7% 36.29 20.7%

2015 137.28 78.4% 173.56 99.1%

2016 173.56 99.1%

2017 1.53 0.9% 175.09 100.0%

2018 0.02 0.0% 175.12 100.0%

Total 175.12 100%

ADB = Asian Development Bank. Source: ADB loan financial information system.

Figure A6: Projection and Cumulative Contract Awards of ADB Loan Proceeds ($ million)

Note: the projected contract award is for the whole project (Tranche 1 and Tranche 2). ADB = Asian Development Bank. Source: ADB loan financial information system.

24 Appendix 7

APPRAISAL AND ACTUAL IMPLEMENTATION SCHEDULES COMPARED

MFF = multitranche financing facility Source: Southern Expressway Project Management Unit; Asian Development Bank project completion review mission.

Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4

At appraisal At actual

Update of resettlement plan

Implementation

Implementation

A. MFF Procession

B. Detailed Design

Loan signing and effective for Trance 1

Detailed design and appraisal

Recruitment

Procurement

Construction

C. Land Acquisition and Resettlement

D. Civil Works

F. Supervision Consultants

E. Laboratory and Equipment

Procurement

2021

Laboratory utilization

2019

Approval of MFF and Tranche 1

Consultant recuitment

Item2010 2012 2013 2014 2015 20172011 2016 2018 2020

Appendix 8 25

CHRONOLOGY OF MAJOR EVENTS

Date Main Event

2010

15–29 January ADB project pre-fact-finding mission

7–22 June ADB project fact-finding mission

13–17 September ADB project follow-up mission

8 October Basic design was approved by MOT’s Decision No. 2925/QD-BGTVT

30 November Signing the framework financing agreement

30 November First periodic financing request from the government

22 December ADB Board approval of the MFF and the Loan 1

2011

5 May Signing loan agreement for Loan 1

17 September Loan effective date in the Loan Agreement

18 November Signing the Subsidiary Financing Agreement between the Ministry of Finance and Vietnam Expressway Corporation

1 December Actual loan effective date for Loan 1

2012

12–20 January ADB project inception mission

22–23 October ADB project review mission

2013

9–15 January ADB project review mission

24–26 March ADB project review mission

25 March VEC advertised invitation for prequalification of the civil works contractors for Tranche 1

3–11 September ADB project review mission

27 November–4 December ADB special loan administration mission

2014

17–24 March ADB project review mission

3 October Signing contract for the external environment monitoring consultants

12 November Signing contract for the construction supervision consultants

2 December Signing contract for civil works Package A2-2

19 December Initial disbursement for Loan 1

2015

12 February Signing contracts for civil works Package A1, A2-1 and A3

23 March–1 April ADB project review mission

16 May Signing contract for the financial auditor

18–26 June ADB project fact-finding mission for Tranche 2

30 June Original project completion date for Tranche 1

1 December Signing contract for civil works Package A4

2016

29 February–4 March ADB project midterm review mission for Tranche 1

2017

8–15 May ADB project review mission

31 December 2017 Original loan closing date in the Loan Agreement for Loan 1

26 Appendix 8

Date Main Event

2018

9 February Signing contract for the external resettlement monitoring consultants

3–6 July ADB safeguards review mission

21–25 May ADB project review mission

2019

13–15 May ADB project review mission

30 June Actual loan closing date for Loan 1

8 November ADB approval on extension of the winding-up period for Loan 1 from 31 October 2019 to 15 November 2019

21 November Final disbursement of the loan proceeds for Loan 1

5 December Financial closure for Loan 1

2020

19 June ADB project completion review mission

30 July – 7 August 2020 ADB environmental safeguards review mission

ADB = Asian Development Bank, MOT = Ministry of Transport Source: ADB project completion review mission.

Appendix 9 27

ORGANIZATION CHART FOR PROJECT IMPLEMENTATION

ADB = Asian Development Bank, EA = executing agency, ITS = intelligent tolling system, JICA = Japan International Cooperation Agency Source: Southern Expressway Project Management Unit.

Ministry of Transport (MOT)

Vietnam Expressway Corporation (EA)

Ben Luc–Long Thanh Expressway Project Management Unit

ADB

Planning, Land Acquisition & Social Department

ITS Developers Land Acquisition and Resettlement Civil Works Contractors Equipment Suppliers

Technical, Inspectional and Environmental Department

Accounting Department

Board of Director

Administration Department

Local governments Construction Supervision Consultant

Field Office Field Office

External Monitoring Consultants

JICA

Env. Monitoring Consultants

28 Appendix 10

PROJECT CONTRACT PACKAGES FINANCED BY ADB

CQS = consultant’s quality selection, ICB =international competitive bidding, NCB = national competitive bidding, QCBS = quality and cost-based selection, VND = Viet Nam dong Source: Asian Development Bank’s loan financial information system. Vietnam Expressway Corporation

Currency Original Amount Actual Amount

VND 1,422,249,525,602 1,502,793,870,273

$ 3,438,564

VND 715,150,287,587 715,150,287,587

$

VND 973,816,376,934 973,816,376,934

$

VND 695,253,205,967 736,023,228,423

$ 1,740,536

A4 Package A4: (Km18.713-Km21.740)JV Kukdong Eng.&Cons. Co., Ltd., Dong Me

Kong Construction and Trading Service Co. Ltd. ICB 01/12/2015 VND 1,011,540,596,850 1,048,676,159,539 30,837,353

Subtotal (A) 160,509,731

B-1 VEC's laboratory building NCB

B-2 VEC's loaboratory equipment ICB

Subtotal (B)

VND 93,840,054,000 64,132,322,211

$ 10,505,864 6,049,557

C2 External environment monitoringInstitute for Environmental Science and

Development (VESDEC)CQS 03/10/2014 $ 159,253 122,831 122,831

C3-1 External resettlement monitoring Association of Investconsult Group CQS 09/02/2018 $ 120,000 22,877 22,877

C4 External auditing Deloitte VeitNam Company Ltd. CQS 16/05/2015 VND 4,034,212,183 3,646,614,585 161,816

Subtotal (C) 9,280,065

Incremental administration Veitnam Expressway Corporation Others 29/09/2015 VND 85,652,906,160 3,797,005

Incremental administration Veitnam Expressway Corporation Others 31/08/2017 VND 34,288,049,394 1,528,601

Subtotal (D) 5,325,606

Total (A+B+C+D) 175,115,401

Description/Nature of WorksADB

Financing ($)

Contract Cost

A. Civil Works

ICB

JV Halla Corp–Vinaconex Eng.Cons.&Invest.

JSC.

JV Kukdong Eng.Consut. Co.–Trung Chinh T.C.

Package

No.Contractor/ Consultant/Supplier

Procurement

Method

Contract

Date

JV Samwhan Corporation–Vạn Cuong ICB

D. Incremental management

Package A1: (Km 0.600-Km7.900)

Package A2.1: (Km7.900-Km11.200)

Pacakge A2.2: (Km11.200-Km16.600)

Package A3: (Km16.600-Km18.713)

Construction supervision for ADB

financed section

A1

A2-1

A2-2

A3

C1

C. Consulting Service

B. Equipment

JV Halla Corp–Vinaconex

Eng.Cons.&Invest.JSC.

JV Dasan Consultants Co. QCBS 12/11/2014

12/02/2015

12/02/2015

02/12/2014

12/02/2015

47,936,267

26,846,808

27,190,579

27,698,725

8,972,540

ICB

ICB

Appendix 11 29

SUMMARY OF ENVIRONMENTAL SAFEGUARDS IMPLEMENTATION

1. Categorization. The environmental classification for the project was Category A in accordance with ADB’s Safeguard Policy Statement (2009). 1 The Environmental Impact Assessment (EIA) report was prepared by VEC, approved by the Ministry of Natural Resources and Environment, and disclosed on the ADB website in September 2010. The EIA identified the expressway alignment would run through 6 km of the transition zone of a biosphere reserve where no mangrove forests exist2, while the project was not anticipated to adversely affect the biosphere reserve.

2. Predicted environmental impacts during construction included emission of elevated levels of dust and noise due to site works, operation of equipment and vehicles, transportation of construction materials and spoils, detrimental effect on aquatic resources due to acidification of rivers, streams and aquaculture ponds in the vicinity of the project site caused by disturbance of Acid sulfate soils (ASSs),3,4 and pollution of water resources and the surrounding environment due to earthworks and generation of construction and domestic wastes.

3. Impacts during operation were expected to be noise levels at residential areas along the expressway which are likely to exceed ambient standards. Air quality would be worse due to increased traffic activity; however, the results of the air quality modeling indicate that air quality worsen by the predicted volume of vehicles in 2036 would not exceed the permissible limit of the national standard and IFC (WHO) Guideline for Ambient Air Quality.

4. Environmental Management Plan (EMP) was prepared accordingly by VEC. The EMP was updated two times in (i) September 2017 during the detailed design for Tranche 2; and (ii) October 2018 to update the monitoring arrangement5. Both updated EMPs are disclosed on the ADB website.

5. During the preparation of the EIA, a number of public consultations were conducted involving stakeholders such as affected households and local officials in communes and districts traversed by the expressway alignment. The environmental concerns raised by the stakeholders are documented in the EIA and suitable mitigation measures have been included in the EMP to adequately address their concerns.

6. During the construction stage, ADB noted non-compliances on the project under Tranche 1 in terms of poor housekeeping especially at bridges and concrete batching plant, excessive noise and vibration at night, lack of access control to sites, unsecured work at heights, and low surface water quality. In addition, external environmental monitoring consultant (ExEMC) team identified a number of issues such as dust, public traffic safety risk, absence of HIV/AIDS prevention program, non-compliance of environmental requirements at asphalt batching plant, absence of safety sign at construction sites, lack of environmental, health and safety (EHS) training, poor waste management, flooding of canals, damage on local roads, lack of personal protective equipment (PPE) for workers, absence of separate sanitary toilet for male/female

1 ADB. 2009. Safeguard Policy Statement. Manila. 2 Mangrove forests in Can Gio district of HCMC was declared as a biosphere reserve by the United Nations

Educational, Scientific and Cultural Organization (UNESCO) on 21 January 2000. 3 ASSs constitute almost 37% of the project area (about 30% are potential ASSs and 7% actual ASSs). 4 ASS was not identified at the construction site of the project under Tranche 1. 5 During a special safeguards review mission in July 2018, VEC advised that the CSC contract did not include

environmental effect monitoring (EEM), thus such monitoring could be conducted by the contractors only. VEC added that MOT would challenge any variation order for the CSC contract if EEM is included. The mission advised to update the EMP accordingly.

30 Appendix 11

workers, and poor communication with local authorities. Corrective actions were implemented by the contractors and improvements were noted during follow-up ADB missions and/or through Environmental Monitoring Reports (EMRs) or Special Report on Corrective Actions (February 2017).

7. Mangrove. 7,000 m2 of mangrove area6 was cleared for the project under Tranche 1. To offset the clearance of mangrove area (145,600 m2 in total including the area cleared for the project under Tranche 2), a Mangrove Reforestation Plan was prepared by a contractor of the project under Tranche 2 (Package A7 contractor) and approved by Dong Nai Provincial People’s Committee in August 2018. According to the plan, mangrove trees will be planted in one area of 15 ha within Phuoc An forest in Phuoc An commune, Nhon Trach district, Dong Nai province. The mangroves need to be planted between July and October (rainy season before the northeast wind season) by an expert team (Long Thanh Protection of Forest Management Board) employed by Package A7 contractor, at a ratio of 2,500 trees/ha based on Decision No.5365/DQ-BNN-TCLN by Ministry of Agriculture and Rural Development. The status of the planted mangroves will be monitored for 3 years every 30 days (first monitoring will be conducted 1.5 months after the planting). If more than 10% (based on Decision No.5365/DQ-BNN-TCLN) or 3 consecutive trees are not surviving, additional trees will be planted. Maintenance of the mangrove area (i.e. collection of waste around the area, reinstallation of piles around planted trees for stabilization as necessary, and removal of oysters and larvae clinging to trees) will be carried out for four (4) years, every 30 days during the first three (3) months and every 2-4 months afterward.

8. The Mangrove Reforestation Plan was submitted with its cost estimates for VEC approval twice on 5 November 2019 and on 12 June 2020. However, as of September 2020, the cost estimate was not approved by VEC, therefore the implementation of the plan has not initiated. VEC is requested to take necessary actions immediately such that mangrove reforestation is implemented within 2020 and the monitoring of the replanted mangroves can be completed by 2023 when Tranche 2 is closed.

9. Noise impact during operation. Noise pollution modeling conducted as part of EIA indicated that in 2036, without noise barriers, noise levels within 300m from the road centerline would exceed the Vietnamese and IFC (WHO) permissible limit for sensitive receptors (hospital, office, schools etc.) both in daytime and nighttime. The EMP updated in October 2018 requires installation of noise barrier under Packages A1 (272 m in total at 2 locations), A2-1 (272 m at one location), A2-2 (50 m at one location) under Tranche 1. Noise barrier has been installed under Package A2-1, but not under the other Packages. VEC is requested to ensure that noise barriers will be installed before the relevant contractors are demobilized.

10. Environmental Monitoring Report (EMR). A total of 8 internal EMRs were prepared by VEC and the SEPMU with the CSC’s support between 2015 and 2019 during the construction stage (quarterly in 2015 and semi-annually between July 2016 and June 2019). In addition, 5 external EMRs were prepared by an ExEMC team until June 2019. Eight internal EMRs and 4 external EMRs are disclosed on the ADB website.

6 3,000 m2 between the eastern bank of Ong Com canal and the western bank of Ba Lao river (under Package 2) and

4,000 m2 between the eastern bank of BA Lao river and the eastern bank of Soai Rap River, assuming 54-m width Right-of-Way (RoW)

Appendix 12 31

LAND ACQUISITION AND RESETTLEMENT

A. Categorization. 1. The Project is Category A for involuntary resettlement and C for indigenous people’s safeguards. The applicable ADB safeguards policies for addressing adverse social impacts of the project was the Involuntary Resettlement Policy of the Safeguard Policy Statement (SPS) 2009.LAR activities were financed through government counterpart funds. B. Preparation and approval of safeguards documents. 2. A resettlement plan was prepared during project preparation (July 2010) covering the land acquisition and resettlement impacts of whole project road in 03 provinces (Long An, Ho Chi Minh city and Dong Nai) and disclosed on the ADB website. For tranche 1 1 , during project implementation, five (05) updated resettlement plans were prepared based on the detailed engineering designs and the results of detailed measurement surveys for three districts in Ho Chi Minh City and two districts in Long An province in the period 2013–2014, and all were disclosed on the ADB website. 3. During the Mid-term Review Mission in 2015, a resettlement due diligence report (DDR) was required to assess and confirm whether implementation of land acquisition and compensation payments to AHs in Tranche 1 complied with the project resettlement policy. 4. During implementation of Package A1, the requirement of an access road for construction was identified. ADB’s agreement was recorded in an MOU from March 2016. One (01) resettlement plan addendum for internal road T14 was then prepared and cleared by both ADB and Government in 2018. 5. Construction activities required the relocation of 11 transmission lines and 33 towers (110 kV, 220 kV and 500 kV) located in Binh Chanh and Nha Be districts, HCM City; Nhon Trach district, Dong Nai province; and Ben Luc district, Long An province. In order to facilitate road construction, relocation of the transmission lines was initially carried out by contractors based on negotiation with affected households, after which VEC and District Compensation Assistance and Resettlement Councils (DCARCs) of concerned districts provided compensation payments for the affected households based on the project resettlement policy, but without preparation of a resettlement plan for these unanticipated impacts. Due Diligence on implementation of land acquisition, resettlement, compensation and assistances for the AHs affected by the relocation of transmission lines, therefore, was requested by ADB for concerned districts. Two (02) DDRs to cover LAR for the relocation of transmission lines in Binh Chanh and Ben Luc districts were prepared for the project and were cleared by ADB from Jan-April 2020. Due to the technical adjustment of project road in some locations in three provinces, VEC and local authorities discussed and agreed that additional land would be required in some areas along the highway; as such, Addendums to the agreed 2013-2014 URPs for all districts were required. Two resettlement plan addendums were prepared: one covering all districts in Ho Chi Minh City, and one for all districts in Long An province. These addendums were cleared in April 2020. At present, the resettlement plan addendum for Long An province is being revised to address ADB comments. It is targeted for finalization within September 2020.

1 Regarding to resettlement safeguard, scope of land acquisition impacts for tranche 1 comprises the impacts of

western section financed by ADB and the impacts of middle section financed by the Japan International Cooperation Agency within the administration boundary of Long An province and Ho Chi Minh city, including internal road T14 and transmission line in Long An and HCMC (except transmission lines from Nha Be to Dong Nai).

32 Appendix 12

C. Anticipated and Actual Land Acquisition and Resettlement Impacts. 6. During project appraisal in 2010 and based on the census of APs, an inventory of loss (IOL) was conducted from early June to end of October 2009 in three provinces for both Tranche 1 and Tranche 2. It was estimated that the project would affect 2,558 households (approximately 11,195 affected persons), 1,835 of whom would be severely affected due to significant loss of productive assets. There were 736 AHs identified as needing to relocate. Likewise, the resettlement plan at appraisal estimated that approximately 362 hectares of land would be acquired. 7. The draft resettlement plan for Tranche 1 indicated that 1,375 households would be affected. 1,024 of these households were identified as severely AHs due to significant loss of productive assets, 413 AHs would be relocated, and 194 hectares of land would be acquired. During updating and subsequent implementation of the resettlement plans, the final tally of the AHs of Tranche 1 (sections in Long An province and Ho Chi Minh city) reached 2,350 AHs by the end of December 2019 and almost all AHs impacted by Tranche 1 (main road, transmission lines and T14 internal road) had received compensation and assistance. This drastic increase in the count of the AHs was due to (1) inaccurate identification of AHs in the IOL: local people sold and granted their land to others many times, thus the collected information about ownership, e.g. number of affected households, vulnerable, and relocating households etc. at the resettlement plan preparation period was not accurate; (2) adjustments of the engineering design of road alignments during project implementation; (3) some work items were not included in the design, e.g. T14 internal road. The total amount of permanently acquired land for tranche 1 was 257.17 hectares. Table 12.1 below presents a comparison of anticipated versus actual land acquisition and resettlement of tranche 1.

Table 12.1: Anticipated versus Actual Land Acquisition and Resettlement of Tranche 1

Particulars Unit of

measurement Anticipated

(at project appraisal) Actual

Affected households Number 1,375 2,350

Severely affected households (loss of productive land)

Number 1,024 2,043

Relocating AHs Number 413 502

Land Permanently acquired Ha 194 257.17

D. Resettlement Implementation, Consultation and Grievance Redress 8. Consultations and Information Disclosure. During project preparation and prior to the IOL, VEC and PPTA team organized two rounds of consultations. During the first round of consultations, VEC with the assistance of PPTA resettlement team held meetings with district officials and project stakeholders on project design (technical design alternatives), the compensation and resettlement policy proposed for project, and relevant issues of compensation and relocation. The second round of consultation was organized with commune officials and affected persons (APs), wherein project information brochures were distributed. Subsequently, small group meetings with APs were held during the IOL and census. Follow-up consultations were held after completion of the IOL to disclose the results of the initial impact survey and to discuss the project resettlement policy. During resettlement plan updating, the District Center for Land Fund Development (DCLFD) in project districts of Long An province, District Compensation

Appendix 12 33

and Site Clearance Council (DCSCC)2 in project districts of Ho Chi Minh city, and Ben Luc-Long Thanh PMU, now called the Southern Expressway Project Management Unit (SEPMU), conducted several rounds of consultation before and after conducting the SES, detailed measurement survey (DMS) and drafting the updated resettlement plans. The DMS results, and draft and final compensation plans were disclosed publicly at hamlet information boards. The updated resettlement plans were discussed with stakeholders, local authorities, and APs. After ADB clearance of the updated resettlement plans, addendums of updated resettlement plans and DDRs, the documents were disclosed to the AHs through the distribution of an updated PIB3 (first distributed in 2010), as needed, and the posting of these safeguard documents on local government offices and websites, and the ADB website. 9. Detailed Measurement Survey (DMS). The DMS process in each province followed the same general process: the local population was notified by District Peoples Committees (DPC) on land recovery, after that DLFDCs carried out the DMS. With the aid of the approved detailed engineering design, this activity involved the finalization and/or validation of the results of the inventory of losses (IOL), severity of impacts, and list of APs earlier done during draft resettlement plan preparation. The AH’s representative also participated in the DMS process. When the AHs agreed with the result of DMS, they signed the DMS sheet, and were provided a copy of the DMS result. 10. Replacement cost survey. VEC engaged a qualified price appraiser to carry out replacement cost survey for land and non-land assets in project districts. The PPCs and its advisory professional departments reviewed and approved those replacement costs, which ensured that payments to the AHs were at replacement cost at the time of compensation. The replacement costs used for the Project were much higher than compensation rates stipulated by PPCs in same period. External monitoring reviews did not find any issue with the compensation rates used for the project. 11. Payment of compensation and land hand over. Except compensation payment to the AHs in Can Gio and Can Giuoc district, commenced since June and December 2012 respectively prior to clearance of the updated resettlement plans (cleared by ADB in October 2013), compensation payment to the AHs of other districts of Tranche 1 were carried out right after the updated resettlement plans were cleared by ADB, from April 2013. The table below illustrates the coordination between LAR implementation and the progress of civil works packages under Tranche 1.

2 Farmer’s Union representatives were part of the District Compensation and Site Clearance Committees during

resettlement and income restoration program implementation. 3 The PIB includes the following information: (1) a brief background of the Project, specifically the civil works to be

undertaken in the district and the adverse social impacts; (2) DMS plan, with a statement that detailed information is available at the commune office; (3) principle of replacement cost as basis used for asset valuation, stating also that detailed information is available at the commune office; (4) the entitlements due to the AHs; (5) timing of payments and the schedule of displacement; (6) grievance redress mechanism; and (7) contact persons at VEC and the local authorities.

34 Appendix 12

Table 12.2: Milestones of safeguard document preparation, compensation payment, civil works contract awarding and commencement of packages under Tranche 1

District/ Package

URPs were cleared by

ADB

Civil works contract awarded

Timing of compensation & assistance payments

Notice to proceed

Commencing Completion Ben Luc/ Pack A1

April 2013 May 2015 April 2013 Up to May 2015, the completion of compensation was about 99.5%.

May 26, 2015

Can Giuoc/ Pack A1, A2-1

Oct 2013 May 2015 Dec 2012 The compensation payment was finished in January 2015.

May 19, 2015 for pack A2-1

Binh Chanh/ Packages A1, A2-1, A2-2 and A3

May 2014

May 2015

April 2014 Up to May 2015, the completion of payment of compensation was 81% and 75% in pack A1 and pack A2-1 respectively. Up to August 2015, the completion of payment of compensation was 65% in Pack A2-2. Compensation payment for package A3 was completed in May 2015.

August 15, 2015 for Pack A2-2; May 19, 2015 for Pack A3.

Nha Be/ Packages A3 & A4 & J1

April 2014 February 2016

Dec 2013 Compensation payment for package A3 was completed in May 2015 while for package A4 in August 2015.

February 17, 2016 for Pack A4 April 1st 2016 for Pack J1

Can Gio Packages J1, J2 and J3

March 2014 NA June 2012

April 2014

October 28, 2014 for Pack J2 January 4, 2016 for Pack J3

12. Delay in land acquisition and resettlement (LAR) led to corresponding delays in civil works progress because compensation and assistance payments were generally completed before land handover (except in one case where an AH’s compensation amount was adjusted and so the AH is still waiting for the payment while they already agreed to hand over the affected land). The delays in LAR were due to : (i) Untimely allocation of funds leading to delay of disbursement and compensation payment to AHs; (ii) Time-consuming process of solving the complaints of affected households related to compensation price, property ownership dispute, etc. 13. As of project completion, the progress of compensation payment in Tranche 1 achieved 99.25%. There were no pending cases related to compensation payment in Ben Luc and Can Gio districts as confirmed by internal and external monitoring reports. Land acquisition was fully completed in some construction packages of the project (in the three districts Ben Luc, Nha Be and Can Gio), with overall completion rate of 99.2%. At present, 19 AHs in civil works packages A1, A2-2 (17 HHs in Binh Chanh district) and T14 road (02 HHs in Can Giuoc district) have not handed over land for the project and have not yet received compensation and support. The reasons for the delay in land handover are that these households have disputes with other households on the affected area or have complaints on administrative decisions related to compensation payment, and these grievances are being addressed either by the courts or by local authorities. In addition, two (02) households in Nha Be district are still waiting to receive compensation after adjustment of the compensation amount, but agreed to hand over the affected land. The status of land acquisition and resettlement is presented inTable 12.3 below.

Appendix 12 35

Table 12.3 Status of land acquisition and resettlement of Tranche 1 by 30 June 2019

Province/City Districts

Total of affected

households

Total area (ha)

Total households who received

payment

Total households who handed over

land

Total households who didn’t yet

handed over land

HH % HH % HH %

LONG AN 565 40.78 563 99.6% 563 99.6% 2 0.4%

Ben Luc 321 34.40 321 100.0% 321 100.0% 0 0.0%

Can Giuoc 244 6.38 242 99.2% 242 99.2% 2 0.8%

HCMC 1,785 216.38 1,766 98.9% 1,768 99.0% 17 1.0%

Binh Chanh 1,164 126.09 1,147 98.3% 1,147 98.7% 17 1.6%

Nha Be 417 47.26 415 99.5% 417 100.0% 0 0.0%

Can Gio 204 43.03 204 100% 204 100.0% 0 0.0%

TOTAL 2,350 257.16 1,766 99.25% 2,331 99.2% 19 0.8%

14. Grievance Redress Mechanism (GRM). The AHs were informed about the GRM during community meetings, and through the PIB. The information about GRM was also broadcasted on the radio of communes, hamlets, and disclosed on the information board of CPC Office and in hamlets or public places where AHs were living. The Project GRM involved 4 stages, beginning with the commune, and proceeding to the District and Provincial People’s Committee levels before being elevated to the court of law as a last resort. The GRM was well established and fully functioned. All of the AHs were aware of the GRM and knew how and where to lodge their complaint. Commune and district were the key levels in addressing complaints. SEPMU/CSC worked closely with the local government. The database on complaints was established and maintained by VEC/SEPMU and local governments (DPC, CPC, LFDC and district inspectorate). The complaints and grievance redress results also were detailed in the monitoring reports of the external monitoring agency (EMA) and quarterly progress reports prepared by VEC with support from the project supervision consultant. In August 2019, it was recorded that 65 complaints had been lodged at different levels. At present, 46 cases have been addressed while there are 19 pending complaints: two in Ben Luc District and seventeen in Binh Chanh District. The timing for resolution of pending grievances varied as this depends on many factors such as time to verify the facts of each case, accuracy of information and supporting documents provided by households as well as relevant agencies, e.g. for cases which were resolved by the Inspectorate, it took about six (6) months; while cases handled by the Court took about two (2) years or more. The main reasons of complaints were:

(i) Eligibility for receiving land plot in resettlement sites;

(ii) Civil disputes on inherited land;

(iii) Compensation rates;

(iv) Request for changing land use purpose of remaining land to residential land for

relocated households;

(v) Request to receive land plot in collective resettlement site after first registering for

self-relocation;

E. Relocation and Income Restoration 15. Relocation. 502 AHs were relocated for the Project. Five collective resettlement sites were proposed to affected households in five districts including Hai Son resettlement site (RS) in

36 Appendix 12

Can Giuoc district, Long An; Vinh Loc B and An Ha resettlement sites in Binh Chanh district; Nhon Duc RS in Nha Be district; and Go Dau RS in Can Gio district. However, majority of AHs preferred self-relocation 457 households), while only 45 households opted to receive land plots in resettlement sites. All resettlement sites were developed with basic infrastructure and have by now been in operation for 2 to 6 years. The size of a resettlement plot ranges from 60m2, 80m2, 100m2, with maximum 150m2. Based on the area used for living purposes to be acquired by project, DCLFD or DCSSC organized a lottery for land plots of similar size in the resettlement sites. The average cost for each plot depends on the resettlement site, and the location of the plot in each area of the resettlement site, e.g.: in Vinh Loc resettlement site, the average price is VND8,000,000/m2.

16. By project completion, two households had received resettlement plots, in which one household received land plot in Hai Son RS, Can Giuoc District in 2015 and one household received land plot in Nhon Duc RS, Nha Be District. Binh Chanh district is considering land plots for 18 households and have approved land plots in RS for 27 households but these households have not built their new houses yet. In Binh Chanh district, the reason for late allocation of land plots is that, at the time of consultation on relocation alternatives in 2014, relocating households opted for self-relocation because they had other places to live in the district or were still living on their remaining agricultural land. At the end of 2018, these households realized the potential value of land plots in the city resettlement site, then changed their mind and opted to receive land plot in the resettlement site. By this time, however, HCMC PC had already allocated the land plots to households affected by other projects. As a result, in 2019, Binh Chanh DPC had to resubmit the proposal for allocating land plots in resettlement sites to HCMC PC. 17. Besides the compensation and support for resettlement as per regulations, the affected households were supported as follows: i) Households to be relocated in the locality and out of locality was supported with VND6,000,000 and VND10,000,000 per household respectively; ii) Households whose houses were class 4 4 and temporary houses, were supported with VND4,000,000 per household; iii) households who had built new houses on their remaining land were supported at a level of 50% of the above-mentioned cases; iv) For households who moved to other places: during the construction of their new houses, they were supported for leasing temporary houses for a period of 6 months. 18. In Nha Be and Binh Chanh districts, several relocated HHs previously opted self-relocation, but moved back and rebuilt their house on agriculture land. The communal authority authorized the HHs to move back and the District authority is tolerating the situation. However, the houses built by the households on agriculture land remain on an illegal status. If the households will be affected by government projects later on, they may not be fully compensated based on government regulations. Households are asking the local authority to allow them to change the land use purpose from agricultural to residential land. CPCs have proposed this to DPC to ensure these households have full legal title for their land and house. However, the request was rejected, as it may not comply with the master plan of the city on land use. This issue was mentioned in the Corrective Action Plan (CAP) submitted by VEC in July 2020, and SEPMU will follow up the resolution of HCM City People Committee and DPCs. By end of June 2020, payment of rental allowance for self-relocating HHs in all districts of Tranche 1 are pending issuance of official decisions of Long An PPC and HCMC-PC. While this issue had first been flagged in 2018 with follow-up letters issued by ADB, SEPMU/VEC was not able to address this in coordination with local authorities during the life of the project. SEPMU is closely following up with HCMC and Long An Province to facilitate resolution of this issue as described in the CAP.

4 Class 4 house is one ground floor house with tile roof and brick wall, no sanitation facility inside.

Appendix 12 37

19. Vulnerable households about 44 vulnerable households were affected by project.

Assistance was provided to VAHs as specified in the approved URP. Besides compensation, and

assistance payments, they were eligible to participate in the Livelihood and Income Restoration

Program (LIRP).

20. Income restoration. The Livelihood and Income Restoration Program (LIRP) was participated in by SAHs5 and vulnerable households6. The IRP was divided into two main phases; namely, (1) needs assessment; (2) and full implementation. As per updated resettlement plans in 2013 and 2014, a total of 2008 affected households were identified as eligible for participation in the LIRP. By end of 2015, only 860 households had registered for the LIRP. During implementation of project, additional LAR was required for transmission lines, T14 road and adjustment of alignment of main road. As a result, 16 additional households were identified as severely affected households and eligible for the LIRP. 21. Based on job demand, plans for human resource development, and the economic development plan in project districts, suitable income activities for AHs were proposed in the LIRP: (i) Cultivation model (vegetable, mushroom, ornamental, orchid); (ii) Livestock raising and husbandry model (chicken, pig, cow); (iii) Handicraft, garment processing, embroidery and knitting, aluminum and glass, etc. preparation model; (iv) Vocational training and job introduction; and, (v) Trade and service activities (cooking, open bars/restaurants, beauty services, grocery store) model. According to the updated resettlement plans the total cost for the LIRP in Tranche 1 was VND21.9 billion and the support amount per household was VND9,000,000. 22. LIRP was fully implemented in 2015 in Can Giuoc district, Long An province. In 2018, LIRP was completed in Ben Luc and Can Giuoc districts. However, at present, there are 43 additional HHs in Can Giuoc who belatedly registered to participate in LIRP. Such households did not register the need for income restoration when Can Giuoc DPC carried out the needs. After witnessing the success of LIRP, these AHs expressed interest in participating in the LIRP. Can Giuoc DPC has developed supplemental program but is waiting for the budget transfer from VEC. As mentioned in the July 2020 CAP, it is expected that the budget will be allocated to the districts in Q1 2021, and the LIRP will be implemented within 2021. 23. In HCM City, LIRP was completed in Can Gio district in 2016 while it is ongoing in Nha Be and Binh Chanh districts. In Nha Be district, LIRP was completed for 102 HHs out of 137 HHs. In Binh Chanh district, by end of 2019, LIRP team has conducted the needs assessment for 229 HHs. In June 2020, district CLCC was finalizing the registration of the HHs. According to the July 2020 CAP, it is expected that LIRP will be completed in Nha Be district by the end of 2020. In Binh Chanh district, LIRP budget will be disbursed in Q1 2021 and LIRP will be completed that same year. 24. The delay in implementing LIRP in districts is due to: i) lack of human resources in district CLCC e.g. change of DPC leader and district CLCC members; ii) difficulties in contacting HHs

5 This refers to AHs who (1) lost 10% or more of their total productive land and/or assets, (2) had to relocate; and/or

(3) lost 10% or more of their total income sources due to the Project. 6 These are distinct groups of people who might suffer disproportionately or face the risk of being further marginalized

by the effects of resettlement and specifically include: (1) female headed households with dependents, (2) disabled household heads, (3) households falling under the generally accepted indicator for poverty, (4) children and the elderly households who are landless and with no other means of support, (5) landless households, and (6) indigenous people or ethnic minorities.

38 Appendix 12

who had moved; iii) long process of selecting suppliers; iv) budget for implementing LIRP was not available in a timely manner; v) husbandry and planting crop models were not suitable with condition of locality7 and the LIRP team had to carry out another needs assessment for remaining AHs. Regarding the budget issue, VEC is the entity that has responsibility to arrange the budget for this activity as per updated resettlement plans, as well as resettlement plan addenda. According to the road map for project and loan extension of MFF 0053-VIE and Loan 3391-VIE in the July 2020 CAP, the disbursement plan for LIRP will tentatively take place within 1st Quarter, 2021. G. Monitoring and Evaluation 25. VEC was assisted in its internal monitoring of resettlement implementation by the project supervision consultants. They organized a Resettlement and Social Development Group that regularly submitted quarterly internal monitoring reports to ADB. The latest internal monitoring report for Q1 2019 was disclosed, while the Q2 2019 report submission was delayed and will be finalized to address ADB comments within August 2020. VEC also recruited two External Resettlement Monitoring Consultants (ERMCs). First ERMC conducted the resettlement monitoring for the period from 2013 to 2015 with 03 monitoring sessions. Second ERMC carried out monitoring from 2018 to 3rd quarter of 2019 with 06 periods (quarterly) monitoring missions. The last monitoring report of 2nd EMRC is a Post-Resettlement Implementation Evaluation Study carried out for 6-12 months following completion of resettlement activities – this report is pending, since LAR activities have not yet been completed for the Project. VEC rated the ERMCs performance as satisfactory. Consulting services under Loan 2730 have not been completed yet. It is expected that the consultants will complete remaining consulting service after completion of loan extension process. H. Pending Issues and Time-bound Action Plan 26. Implementation of LAR encountered several issues during the project, including shortages of counterpart funds that persisted until after the March 2015 ADB Mission, and extremely delayed action by local authorities on pending LAR issues despite repeated meetings and requests by ADB. The lack of funds due to the long process for extension of the loan led to absence of disbursement and the slowdown of all LAR activities. SEPMU has reported to relevant agencies for the timely allocation of funds for payment to the remaining affected households. Simultaneously, SEPMU has continuously coordinated and followed up concerned local authorities to solve affected households’ remaining complaints. At present, VEC is working with relevant ministries to conclude the loan extension process to be able to allocate budget to local government so that remaining LAR activities can be completed. At this time, pending activities are: (i) resolution of remaining grievances (outlined in the table below); (ii) provision of rental allowance to self-relocating HHs; (iii) payment of interest due to delay in payment to remaining AHs in Binh Binh District; (iv) and need to complete LIRP implementation. Binh Chanh, Nha Be and Can Gio District (HCMC) have yet to complete the list of eligible HHs and confirm the budget for payment of rental allowance for self-relocating HHs. 27. Details of the pending complaints are described in the table below.

7 In 2017- 2018: In Binh Chanh and Nha Be districts, husbandry models were not suitable because communes were

implementing new rural development directives and were urbanizing, with corresponding changes in the urban environment.

Appendix 12 39

Table 12.4: Pending complaints of Tranche 1

No District Type of complains Number of complaints

Status of Resolution

1 Can Giuoc Requesting to change the remaining land to residential land

02 cases in T14 road

DPC is studying the cases.

2 Binh Chanh

Disputes between households on inherited assets.

03 cases

District Court is collecting the supporting documents from relevant parties. After supporting documents are provided adequately, the court will be opened according to regulations. HCMC PC sent letter to the Court to accelerate the judgment process.

Disputes between husband and wife on common assets

02 cases

Binh Chanh Court is handling this case. Asset is being held due to debt with the Bank. District Civil Judgment Enforcement Authority is requesting to undertake judgment execution to recover debt from household.

Disagree with: - Administrative decision of DPC on compensation and assistance plans. - Compensation rates.

05 cases The AHs were requested to provide the relevant documents and information to the Court.

Disagree with the compensation rates

07 cases The Inspector of the District is reviewing the complaints.

28. A time bound action plan for pending issues was developed and agreed by VEC/SEPMU and presented in CAP (July 2020).

I. Conclusions and Lessons Learned 29. The Project involved many AHs with significant impacts and was implemented in a complicated area. Implementation of LAR was carried out mostly in compliance with the project resettlement policy. This was confirmed by EMRC monitoring reports. However, as discussed above, some pending issues need to be resolved. 30. The delay in completing LAR activities for the Project, which are now recommended to be completed as part of Tranche 2 of the MFF, result in several important lessons that can be carried forward in the design and implementation of LAR for future projects:

• LIRP implementation was significantly delayed. Although incorporated in the updated resettlement plans, the LIRP only commenced in 2016 and, in some districts, even later in 2018 and in 2020. To be able to meet the project resettlement policy objective of minimizing impacts on the standards of living of the affected, the LIRP must be in place before the AHs are displaced from their assets.

40 Appendix 12

• During preparation of the resettlement plan, the consultation and agreement on policy should be clearly defined via official letter from PPCs avoid issues in implementation such as the case of delayed transition allowance in HCMC.

• EAs should ensure administrative requirements for allocation of adequate counterpart funds are met in a timely manner to avoid delays in compensation payment which then require payment of interest and cause corresponding delay in LIRP implementation.

• Human resources in DCLCC shall be allocated adequately and timely to avoid the interruption in LAR implementation.

• Adequate political will is needed at the level of city and provincial authorities, and timely guidance should be provided to district authorities to carry out LAR efficiently and in compliance with project resettlement policy. Project EAs should coordinate closely with relevant local authorities on issues identified together with ADB and follow up on actions agreed during review missions. Project EAs should give timely responses to ADB correspondences on identified issues and follow through on the requested actions. It should be recognized that delays on addressing identified issues can severely compromise achievement of project objectives.

Appendix 13 41

STATUS OF COMPLIANCE WITH LOAN AND PROJECT COVENANTS

Covenant Reference in Loan/Project Agreements

Status of Compliance

Particular Covenants

(a) The Borrower shall cause VEC to carry out the Project with due diligence and efficiency and in conformity with sound applicable technical, financial, business, and development practices.

(b) In the carrying out of the Project and operation of the Project facilities, the Borrower and VEC shall perform, or cause to be performed, all obligations set forth in Schedule 5 to this Loan Agreement.

LA, Artl. IV Sec. 4.01 PA, Artl. II Sec. 2.01

Complied with. VEC and the BTTL-PMU carried out the project with due diligence and efficiency. Complied with. The project implementation and operation performed all obligations set forth in the Loan and Project Agreements.

The Borrower and VEC shall make available, promptly as needed, the funds, facilities, services, land and other resources, as required, in addition to the proceeds of the Loan, for the carrying out of the Project.

LA, Artl. IV Sec. 4.02 PA, Artl. II Sec. 2.02

Partially complied with. The Borrower provided all necessary support to VEC. But the funds for the LAR was not adequately and timely provided.

The Borrower shall ensure that the activities of its departments and agencies with respect to the carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures.

LA, Artl. IV Sec. 4.03

Complied with. The related government agencies, mainly the MOF and the MOT, actively participated in the coordination and supervision of the project implementation, as well as well coordinated among ADB, JICA, and related government line agencies.

The Borrower and VEC shall enable ADB's representatives to inspect the Project, the Goods and Works, and any relevant records and documents.

LA, Artl. IV Sec. 4.04 PA, Artl. II Sec. 2.10

Complied with. The Borrower and VEC enabled ADB’s representatives to inspect the project.

The Borrower shall take all actions which shall be necessary on its part to enable VEC to perform its obligations under the Project Agreement, and shall not take or permit any action which would interfere with the performance of such obligations.

LA, Artl. IV Sec. 4.05

Partial complied with. The Borrower took all necessary action to perform its obligations under the loan agreement. But the counterpart funds were not adequately and timely provided at beginning.

(a) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such a manner as to protect the interests of the Borrower and ADB and to accomplish the purposes of the Loan.

(b) No rights or obligations under the Subsidiary Loan Agreement shall be assigned, amended, abrogated or waived without the prior concurrence of ADB.

LA, Artl. IV Sec. 4.06

Complied with. The ADB loan was relent to VEC at acceptable terms and conditions to ADB. Complied with.

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

(b) Except as ADB may otherwise agree, all Goods, Works and Consulting Services to be financed out of the proceeds of the Loan shall be procured in accordance with the provisions of Schedule 4 to the Loan Agreement. ADB may refuse to finance a contract where Goods, Works or Consulting Services have not been procured under procedures substantially in accordance with those agreed

PA, Artl. II Sec. 2.03

Complied with. During implementation, qualified consultants and contactors were selected, which were approved by ADB. The recruitment of the consultants and procurement of the civil works contracts were carried out in accordance with ADB’s guidelines. All Goods, Works and Consulting Services, financed out of the proceeds of the Loan, were procured in accordance with the provisions of Schedule 4 to the Loan Agreement

42 Appendix 13

Covenant Reference in Loan/Project Agreements

Status of Compliance

between the Borrower, VEC and ADB or where the terms and conditions of the contract are not satisfactory to ADB.

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

PA, Artl. II Sec. 2.04

Complied with. VEC implemented the project in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to ADB.

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

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

PA, Artl. II Sec. 2.05

Complied with. VEC maintains with responsible arrangement satisfactory to ADB.

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

PA, Artl. II Sec. 2.06

Complied with. VEC maintains records and accounts adequate to identify the Goods, Works, Consulting Services and other items of expenditure financed out of the proceeds of the loan.

(a) ADB and VEC shall cooperate fully to ensure that the purposes of the Loan will be accomplished.

(b) VEC shall promptly inform ADB of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement or the Subsidiary Loan Agreement, or the accomplishment of the purposes of the Loan.

(c) ADB and VEC shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, VEC and the Loan.

PA, Artl. II Sec. 2.07

Complied with. ADB and VEC cooperated during implementation to ensure that the purpose of the loan would be accomplished. The Subsidiary Loan Agreement between the MOF and VEC was signed after reviewed by ADB.

(a) VEC shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the Loan and the expenditure of the proceeds thereof; (ii) the Goods, Works, consulting Services and other items of expenditure financed out of such proceeds;

PA, Artl. II Sec. 2.08

Partial complied with. VEC prepared and submitted most of the required reports to ADB, including periodical progress reports and safeguard monitoring reports. But the required Borrower’s project completion report was not prepared and

Appendix 13 43

Covenant Reference in Loan/Project Agreements

Status of Compliance

(iii) the Project; (iv) the administration, operations and financial condition of VEC; and (v) any other matters relating to the purposes of the Loan.

(b) Without limiting the generality of the foregoing, VEC shall furnish to ADB quarterly reports on the execution of the Project and on the operation and management of the Project facilities. Such reports shall be submitted within 30 days of the end of each quarter in such form and in such detail as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter. Such quarterly reports shall include updated implementation, financial and procurement-related information, as well as reports submitted by the external monitoring agencies for environment and resettlement activities.

(c) Promptly after physical completion of the Project, but in any event not later than 6 months thereafter or such later date as ADB may agree for this purpose, VEC shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by VEC of its obligations under this Project Agreement and the accomplishment of the purposes of the Loan.

submitted to ADB timely. (a draft borrower’s PCR report was submitted to ADB in May 2020)

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

PA, Artl. II Sec. 2.09

Complied with. VEC maintained separate financial accounts for the project. Audited financial statements of the project were submitted to ADB generally on time as required. The first APFS covered the period from loan effectiveness date to the end of FY2013 without an approved deferment memo. The project audit reports were qualified by the independent auditors for FY2013 and the qualified matters were cleared in the succeeding APFS. A loan advance (imprest) account was established and administrated by VEC under ADB’s imprest account procedures.

44 Appendix 13

Covenant Reference in Loan/Project Agreements

Status of Compliance

ADB shall from time to time reasonably request.

(b) VEC shall enable ADB, upon ADB's request, to discuss VEC’s financial statements and its financial affairs from time to time with the auditors appointed by VEC pursuant to Section 2.09(a) hereabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of VEC unless VEC shall otherwise agree.

(a) VEC shall, promptly as required, take all action within its powers to maintain its corporate existence, to carry on its operations, and to acquire, maintain and renew all rights, properties, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its business.

(b) VEC shall at all times conduct its business in accordance with sound administrative, financial, environmental, and expressway construction and maintenance practices, and under the supervision of competent and experienced management and personnel.

(c) VEC shall at all times operate and maintain its plants, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound administrative, financial, engineering, environmental, expressway construction and maintenance, and maintenance and operational practices.

PA, Artl. II Sec. 2.11

Complied with. VEC was established in 2004 mainly to raise funds, construct and manage expressways nationwide. Under the capacity building programs, VEC’s capacity in highway construction, project management, and expressway operation and maintenance (O&M) was strengthened significantly during the project implementation. Currently, VEC has invested four expressway projects and is constructing another one expressway in the country.

Except as ADB may otherwise agree, VEC shall not sell, lease or otherwise dispose of any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement.

PA, Artl. II Sec. 2.12

Complied with. VEC did not sell, lease or otherwise dispose of any of its assets.

Except as ADB may otherwise agree, VEC shall apply the proceeds of the Loan to the financing of expenditures on the Project in accordance with the provisions of the Loan Agreement and this Project Agreement, and shall ensure that all Goods, Works and Consulting Services financed out of such proceeds are used exclusively in the carrying out of the Project.

PA, Artl. II Sec. 2.13

Complied with. VEC applied the proceeds of the loan to the financing of expenditures on the project in accordance with the provisions of the Loan Agreement and the Project Agreement.

Except as ADB may otherwise agree, VEC shall duly perform all its obligations under the Subsidiary Loan Agreement, and shall not take, or concur in, any action which would have the effect of assigning, amending, abrogating or waiving any rights or obligations of the parties under the Subsidiary Loan Agreement.

PA, Artl. II Sec. 2.14

Complied with. VEC duly performed all its obligations under the Subsidiary Loan Agreement.

VEC shall promptly notify ADB of any proposal to amend, suspend or repeal any provision of its Charter and shall afford ADB an adequate

PA, Artl. II Sec. 2.15

Complied with.

VEC notified ADB of specific proposals if any occurred during implementation.

Appendix 13 45

Covenant Reference in Loan/Project Agreements

Status of Compliance

opportunity to comment on such proposal prior to taking any action thereon.

Implementation Arrangement

The Borrower and VEC shall ensure that the Project is implemented in accordance with the detailed arrangements set forth in the FAM. Any subsequent change to the FAM shall become effective only after approval of such change by the Borrower and ADB. In the event of any discrepancy between the FAM and this Loan Agreement, the provisions of this Loan Agreement shall prevail.

LA, Sche. 5 Para. 1

Complied with VEC implemented the project in accordance with the detailed arrangement set forth in the FAM and its update.

Institutional Development

The Borrower shall cause MOT and its line agencies to implement the guidelines to be (a) developed under ADB’s technical assistance for Strengthening Institutional and Financial Arrangements, Operation and Maintenance, and Governance in Road Transport; and (b) jointly agreed between ADB and the Borrower. In particular, MOT and its line agencies shall adopt and carry out (a) efficient management of (i) the Directorate for Roads in Viet Nam, and (ii) upon its establishment, the Vietnam Expressway Management Administration; (b) financial arrangements of expressway projects and financial empowerment of VEC; (c) flexible design standards; and (d) improved framework for governance of the road sector.

LA, Sche. 5 Para. 2

Complied with. The MOT and the other line agencies implemented the guidelines developed under ADB’s TA for Strengthening Institutional and Financial Arrangement, Operation and Maintenance, and Governance in Road Transport.

Environment

The Borrower and VEC shall ensure that the Borrower’s laws and regulations governing environmental impact assessments, as well as ADB's Safeguard Policy Statement (2009) are followed. If there is any discrepancy between the Borrower’s laws and regulations, and the Safeguard Policy Statement, the requirements under the Safeguard Policy Statement shall apply.

LA, Sche. 5 Para. 3

Complied with. The project implementation followed the Borrower’s laws and regulations governing environmental impact assessments. The ADB’s environment policy was complied with.

The Borrower shall cause VEC to ensure that the required environmental measures in the EMP are appropriately incorporated in bidding and contract documents for Works. VEC shall ensure that Works contractors to be financed under the Project prepare the relevant site-specific environmental management plans on the basis of the measures indicated in the EMP.

LA, Sche. 5 Para. 4

Complied with. Provision was included in the bidding documents for implementation of the EMP. Site-specified EMPs for each civil works contract was prepared by the contractors, which were approved before construction. Grievance redress mechanism was established.

The Borrower shall cause VEC to ensure that (a) VEC allocates sufficient staff resources for implementation and monitoring of the EMP; and (b) the Project complies with best environmental practices and meets the mitigation and monitoring requirements in a timely manner, as required in the EMP. The Borrower shall ensure that VEC is responsible for internal monitoring of the EMP resettlements and will submit progress reports on environmental activities to ADB on a quarterly basis, as part of the Project progress reports.

LA, Sche. 5 Para. 5

Complied with. With the assistance from the consultants, VEC allocated sufficient budget and staff resources for the EMP implementation and monitoring. The Project complied with best environmental practices and met the mitigation and monitoring requirements in a timely manner, as required in the EMP. VEC with the assistance from the CSC carried out internal monitoring and submitted the regular monitoring reports to ADB.

The Borrower and VEC shall ensure that the provisions of the EIA and EMP as well as any

LA, Sche. 5 Para. 6

Complied with.

46 Appendix 13

Covenant Reference in Loan/Project Agreements

Status of Compliance

requirements under the Safeguard Policy Statement also apply to the expressway sections of the Project to be financed by the Borrower and the JICA Loan.

The provisions of the EIA and the EMP were applied to the whole project, including all sections financed by ADB and JICA,

The Borrower shall ensure that VEC engages qualified and experienced external expert(s), acceptable to ADB. Such experienced external expert(s) shall (a) review and verify the accuracy, breadth, depth, and relevance of information provided by VEC to ADB with regard to implementation of the EMP; (b) determine if provisions under the EMP are being carried out in a thorough and timely manner and in accordance with budget identified within the EMP; and (c) undertake monitoring annually and shall submit corresponding report to VEC and ADB on a timely basis.

LA, Sche. 5 Para. 7

Complied with. As planned, VEC engaged an external monitoring agency in 2014 to review and verify the accuracy, breadth, depth, and relevance of information provided by VEC with regard to the EMP implementation, and to determine if the EMP provisions were conducted in a thorough and timely manner.

The Borrower shall cause VEC to establish an environmental grievance redress mechanism, acceptable to ADB, through which it receives and facilitates resolution of affected peoples' concerns, complaints, and grievances about the Project's environmental performance. VEC shall (a) make public the existence of this grievance redress mechanism through public awareness campaigns; (b) review and address environmental grievances of stakeholders in relation to the Project, any of the service providers, or any person responsible for carrying out any aspect of the Investment Project; and (c) proactively and constructively respond to such grievances.

LA, Sche. 5 Para. 8

Complied with. Environmental grievance redress mechanism was established during implementation, which was acceptable to ADB.

Resettlement

The Borrower and VEC shall ensure that the RP is updated, on a district by district basis, upon completion of detailed designs and is submitted to ADB for review and concurrence. No land acquisition or site clearing shall commence until (a) the RP has been updated and agreed between VEC and ADB; and (b) provisions of such updated RP have been implemented. In case of differences between the Borrower’s laws and regulations and the Safeguard Policy Statement, the Safeguard Policy Statement shall prevail. The Borrower shall ensure that VEC is responsible for internal monitoring of resettlement and will submit progress reports on resettlement activities to ADB on a quarterly basis, as part of the Project progress reports.

LA, Sche. 5 Para. 9

Partially complied with. The RP was updated based on the detailed design. District-specific RPs for all project-affected areas were prepared, which were accepted by ADB. During implementation, VEC requested Can Biuoc, Nha Be, and Can Goi districts to start compensation and land acquisition by using the counterpart funds available, although the updated RPs for these districts had not been approved by ADB. Due Diligence Report was subsequently prepared and updated RPs were cleared by ADB.

The Borrower shall ensure that an EMA, acceptable to ADB, is engaged within 1 month of the commencement of updating RP. The budget provided to the EMA shall include funds sufficient, in the opinion of ADB, to adequately perform its functions. The Borrower and VEC shall provide to the EMA, at no cost, all documents necessary to monitor the resettlement process. Such documents shall include, among other things, the RP, detailed measurement survey documents and

LA, Sche. 5 Para. 10

Partially complied with. An external monitory agency was engaged in April 2018 to monitor the resettlement process. However, the external monitoring agency was not engaged as originally scheduled due to delayed LAR activities. .

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Covenant Reference in Loan/Project Agreements

Status of Compliance

all associated documents which may be reasonably requested by the EMA.

The Borrower shall ensure that VEC does not issue a notice of possession of site for any expressway section until its head of District Compensation and Site Clearance Committee has officially confirmed in writing that (a) payment has been fully disbursed to the affected persons and rehabilitation measures are in place as per the RP and its updates; (b) already-compensated affected persons have cleared the area in a timely manner; and (c) the area is free from any encumbrances.

LA, Sche. 5 Para. 11

Complied with.

Notices of possession of project sites were given after such confirmations were issued.

The Borrower shall ensure that (a) the counterpart funds for land acquisition, resettlement and monitoring activities specified in the RP are provided to the relevant agencies on timely basis; (b) any unforeseen obligations in excess of the initial RP budget estimate shall be fulfilled; and (c) the counterpart funds for compensation and entitlements under the RP are fully provided directly to affected persons prior to their displacement from housing and prior to loss of land, livelihood, income or other assets.

LA, Sche. 5 Para. 12

Partial complied with. At appraisal, it was arranged that the government would provide counterpart funds to fully cover the acquisition and resettlement costs. However, the government was not able to provide adequately and timely the counterpart funds required for the LAR. The total estimation for counterpart funds requirements were VND6,424.5 billion. But VEC received only VND487.4 billion in 2012 and VND620.0 billion in 2013.

The Borrower and VEC shall ensure that the provisions of the RP as well as any requirements under the Safeguard Policy Statement also apply to the expressway sections of the Project to be financed by the Borrower and the JICA Loan.

LA, Sche. 5 Para. 13

Complied with. The RP was prepared and implemented for the whole project, including all sections financed by ADB and JICA.

Social Protection

The Borrower shall cause VEC to ensure that all Works contracts incorporate provisions and allocate budgets, so that such contractors shall: (a) comply with the Borrower’s applicable labor laws and related international treaty obligations and do not employ child labor; (b) provide safe working conditions, and water and separate sanitation facilities for male and female workers; (c) provide equal wages to male and female workers for work of equal value; (d) provide day care services for female construction workers; and (e) carry out programs on prevention of HIV/AIDS, illicit drugs and human trafficking in the respective construction campsites with such programs being held in coordination with the Borrower’s programs and other initiatives. VEC and Works contractors shall conduct the programs on prevention of HIV/AIDS, illicit drugs and human trafficking during construction in the construction camps, towns, and rural areas of provinces where the Project is implemented.

LA, Sche. 5 Para. 14

Complied with. During implementation, the bidding documents made provisions for the contractors to encourage employment of the poor, particularly women, and not to differentiate wages between men and women, particularly for work of equal value. A social and gender specialist was engaged under the CSC to monitor the gender strategy implementation.

Operation and Maintenance

The Borrower shall ensure that at least 6 months prior to the transfer of any one of Project expressway sections to VEC from a Works contractor, VEC shall have developed an internal department responsible for the Project expressway’s operations and maintenance management. If appropriate, VEC shall select an

LA, Sche. 5 Para. 15

To be complied with. For the O&M of the project expressway, VEC intends to procure an operating entity by competitive bidding in accordance with the Vietnamese regulation.

48 Appendix 13

Covenant Reference in Loan/Project Agreements

Status of Compliance

appropriately experienced entity to carry out operations and maintenance works on the Project expressway in an appropriate manner thereafter.

Financial Matters

For the purposes of this paragraph, all financial calculations, ratios, and financial covenants shall be applied in respect of VEC’s Operations only. (a) Except as ADB shall otherwise agree, the

Borrower shall ensure that VEC does not incur any Debt unless a Reasonable Forecast of the revenues and expenditures of VEC shows that the estimated Net Revenues of VEC for each Fiscal Year during the term of the Debt to be incurred shall be at least 1.2 times the estimated Debt Service Requirements of VEC in such year on all Debt of VEC including the debt to be incurred and no event has occurred since the date of the forecast which has, or may reasonably be expected in the future to have, a material adverse effect on the financial condition of future operating results of VEC.

LA, Sche. 5 Para. 16

Partially complied with. The debt coverage ratio was not explicitly reported for AEFS FY2011-2018 but it has been calculated, reported and certified by the auditor for FY2019 which complies with the requirement of “estimated Net Revenues of VEC for each Fiscal Year during the term of the Debt to be incurred shall be at least 1.2 times the estimated Debt Service Requirements of VEC in such year” Along with fast traffic increase in the country, the toll revenue of the expressways also increased rapidly. This ensured that VEC has adequate income to cover the debt service for the project.

For the purposes of this paragraph, all financial calculations, ratios and financial covenants shall be applied in respect of VEC’s Operations only. (a) Except as ADB shall otherwise agree, the

Borrower shall ensure that VEC does not incur any debt, if after the incurrence of such debt the estimated ratio of debt to equity becomes greater than 90 to 10 beginning with Fiscal Year 2020.

LA, Sche. 5 Para. 17

To be complied with. (Not due yet).

If it appears that VEC will not meet requirements provided in paragraphs 16 and 17 above by its own revenues from its properties, the Borrower shall review financing reports of VEC and the feasibility of each project, and take necessary measures for VEC to meet the above requirements.

LA, Sche. 5 Para. 18

Complied with. VEC has established a tolling scheme for the expressways with basic toll rates and regular adjustments, which are approved by related government agencies. The basic toll rate for a passenger car is ranged from VND1,250 per km to VND2,000 per km.1 The traffic on the operational expressways increased very fast, about annually 10%-20% in recent years. The toll revenue collected has ensured VEC to have sufficient financial capability to finance the ongoing projects and pay back the debt.

The Borrower shall cause VEC, when establishing the toll rates, to ensure that they are sufficient to satisfy VEC’s minimum debt service coverage ratio and debt to equity ratio as described in paragraphs 16 and 17 above while also taking into account the Project’s social objectives. VEC will carry out periodic reviews (every three to five years as deemed appropriate) of the toll structure (i.e., vehicle classifications) and toll levels (i.e., amounts) to adjust for inflation or unanticipated costs.

LA, Sche. 5 Para. 19

Complied with. Upon fully completion of the project expressway, toll rates will be established, which will be based on the proposal from VEC and approval from the MOF. The toll rates are normally by five vehicle types. Generally, the toll rates are adjusted every 5 years to reflect inflation and unanticipated costs.

The Borrower shall ensure that by using the internal financial information and management

LA, Sche. 5 Para. 20

Complied with.

1 The basic toll rate for the Ho Chi Minh City–Long Thanh–Dau Giay Expressway is VND2,000 per km.

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Covenant Reference in Loan/Project Agreements

Status of Compliance

system, VEC produces a financially sustainable expressway investment plan utilizing monitoring and planning, cost recovery tariff levels, traffic forecast planning, and preparing projected financial statements and debt management strategies.

VEC has produced a financial sustainable expressway investment plan, which was submitted to ADB.

The Borrower shall ensure that VEC maintains a separate set of records for incremental administration costs, and VEC shall submit to ADB: (a) within 3 months prior to the start of each applicable fiscal year, an annual operating plan, projected financial statements, anticipated debt obligations, and estimated incremental administration costs for charging to the Project and which estimates are based on an acceptable standard costing method; and (b) an audited statement in the annual audit of accounts confirming that the charged services were duly provided to the Project.

LA, Sche. 5 Para. 21

Complied with. VEC produced and submitted to ADB annual operating plans for each fiscal year which included major items of projected financial statements, anticipated debt obligations, and estimated incremental administration costs for charging to the Project. VEC maintained separate financial accounts for the project. Audited financial statements of the project were submitted to ADB as required. The first APFS submitted for the project was for FY 2014 which covered the period starting from the beginning of the project, i.e, loan effectiveness to end of FY 2014. The audit reports were reviewed by the independent auditors and related matters were cleared in the succeeding APFS. (The APFS for 2019 was received on 19 August 2020, which is still under ADB’s review)

Governance

The Borrower and VEC shall comply with ADB’s Anticorruption Policy (1998, as amended to date) and the Combating Money Laundering and the Financing of Terrorism Policy (2003). The Borrower (a) acknowledges ADB’s right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project; (b) agrees to cooperate fully with, and to cause VEC to cooperate fully with, any such investigation and to extend all necessary assistance, including providing access to all relevant books and records, as may be necessary for the satisfactory completion of any such investigation; and (c) agrees to refrain, and cause the VEC to refrain, from engaging in money laundering activities or financing of terrorism and shall allow, and cause VEC to allow, ADB to investigate any violation or potential violation of these undertakings.

LA, Sche. 5 Para. 22

Complied with. VEC and the SEPMU complied with ADB’s Anticorruption Policy and adopted the financial management system developed with ADB’s assistance and established a project specific webpage to disclose the project information to public.

The Borrower shall ensure that VEC conducts periodic inspections on the contractors’ activities related to fund withdrawals and settlements, and the Borrower and VEC shall ensure that all contracts financed by ADB in connection with the Project include provisions specifying the right of ADB to audit and examine the records and accounts of all contractors, suppliers, consultants and other service providers as they relate to the Project.

LA, Sche. 5 Para. 23

Complied with. VEC and the SEPMU conducted periodic inspections on the contractors’ activities related to fund withdrawals and settlements to ensure contracts financed by ADB in connection with the project included provisions specifying the right of ADB to audit and examine the records and accounts of VEC, and all contractors, suppliers, consultants and other service providers as they relate to the project.

The Borrower shall ensure that VEC publicly discloses on VEC website the information

LA, Sche. 5 Para. 24

Partial complied with.

50 Appendix 13

Covenant Reference in Loan/Project Agreements

Status of Compliance

regarding (a) procurement contract awards, including for each such contract (i) the list of participating bidders, (ii) name of the winning bidder, (iii) basic details on bidding procedures adopted, (iv) amount of the contract awarded, (v) list of Goods and/or services purchased, (vi) intended and actual utilization of Loan proceeds under each contract; and (b) internal and external resettlement reports. The website shall be updated within 2 weeks after: (a) each award of contract; (b) each submission of the EMA’s quarterly resettlement report; (c) each submission of VEC’s internal quarterly environmental reports, as described in paragraph 5 above; and (d) each submission of VEC’s internal quarterly resettlement reports, as described in paragraph 9 above.

During implementation, VEC adopted the financial management system developed with ADB assistance. But the required project specific webpage was not established.

Project Performance Monitoring and Evaluation

The Borrower shall cause VEC to ensure the implementation of a systematic Project performance monitoring and evaluation system for use throughout the Project period and thereafter as needed. Such systematic Project performance monitoring and evaluation system indicates: (a) the effectiveness of Project implementation activities, including (i) the precise nature, timeliness, cost and quality of physical infrastructure implemented in the Project, (ii) the integrity of resettlement and related programs, and (iii) the extent to which the programs as referred to in paragraph 14(e) above are implemented as planned, and their impacts; and (b) the effectiveness of the Project with regard to its anticipated effect on economic and social development relative to the baseline prior to its implementation as indicated by at least the following indicators: (i) per capita income in the Project area, (ii) level of cross-border trade at Moc Bai, (iii) passenger and freight vehicle operating costs and poverty rate on the Project expressway and between key locations, (iv) cost for freight and fare for passenger movement between selected locations that indicate the impact of the Project on the community, (v) traffic volume at selected locations and travel time between the selected locations; (vi) number of traffic accidents; and (vii) number of new small and medium businesses and employment of local people. The impacts of development on low income households resulting from improved road access shall receive particular attention with regard to consideration of the effectiveness of the Project.

LA, Sche. 5 Para. 25

Complied with. The required project performance monitoring system (PPMS) was established with a set of indicators to be monitored during implementation. A baseline survey was conducted in 2015, which was updated in 2017.

The Borrower shall ensure that disaggregated monitoring indicators by gender and ethnic minority are developed for monitoring of social benefits, economic opportunities, livelihood program, road safety, resettlement activities, and the programs as referred to in paragraph 14(e) above.

LA, Sche. 5 Para. 26

Complied with. During implementation, the bidding documents made provisions for the contractors to encourage employment of the poor, particularly women, and not to differentiate wages between men and women, particularly for work of equal value. Capacity building trainings on

Appendix 13 51

Covenant Reference in Loan/Project Agreements

Status of Compliance

resettlement and livelihood were conducted for women and women-headed households in all districts. The committees of income restoration program included the representatives of woman unions in the project districts. Special assistance was provided to women and women-headed households. The RP implementation was monitored by gender disaggregated indicators and progress.

The Borrower shall ensure that baseline data is collected within 6 months of the Effective Date, with a second survey to be conducted upon Project completion and a third survey to be conducted 3 years after Project completion to establish Project impact. The baseline and subsequent surveys shall draw on data collected during Project preparatory activities and data collected from traffic and travel surveys, household socioeconomic sample surveys, participatory rapid appraisals and secondary data from government sources.

LA, Sche. 5 Para. 27

Partial complied with. A baseline survey was conducted in 2015, which was updated in 2017. But no follow-up monitoring and evaluation activity was conducted after that.

ADB = Asian Development Bank, EMA = external monitoring agency, JICA = Japan International Cooperation Agency, LA = Loan Agreement, LAR = land acquisition and resettlement, SEPMU = Ben Luc–Long Thanh Expressway Project Management Unit, MOF = Ministry of Finance, MOT = Ministry of Transport, O&M = operation and maintenance, PA = Project Agreement, RP = resettlement plan, PPMS = project performance monitoring system, VEC = Vietnam Expressway Corporation. Source: ADB project completion review mission.

52 Appendix 14

ECONOMIC REEVALUATION

A. Introduction 1. The Asian Development Bank (ADB) project completion review (PCR) mission conducted an economic reevaluation of the project using similar methodology as that at appraisal with updated data. In the “without-project” case, it was assumed that the original state of the highway network in the project area was retained. In the “with-project” case, a new expressway was constructed and opened to traffic. Large number of vehicles diverted from local highways to the project expressway, which could drive at higher speeds and at shorter distances with lower operating costs and reduced travel time. The traffic forecast for the project expressway at appraisal was adjusted according to latest traffic development status in the project areas. Economic benefits were recalculated by comparing the “with-project” and “without-project” cases. Consequently, the economic internal rate of return (EIRR) for the project was calculated and its sensitivities were tested. The project expressway was constructed under two tranches. The economic reevaluation was for the first tranche only (the western section of the project expressway).

B. The Project Expressway

2. At appraisal, the east–west traffic in the south of the greater Ho Chi Minh City (HCMC) was restricted due to lack of river crossing facilities, which forced the vehicles into the center of HCMC. Constructing the Ben Luc–Long Thanh Expressway was a high priority of the government. In January 2010, the Prime Minister of Viet Nam approved a master plan for constructing 16 north–south expressways along the eastern side of Viet Nam, including the project expressway. 3. Under the project, an expressway of 57.1 kilometer (km) would be constructed between Ben Luc and Long Thanh in the south of HCMC, which is a short link of the Greater Mekong Subregion Southern Economic Corridor. The project expressway consists of a southern link to the planned HCMC Third Ring Road and an access link to the planned Bien Hoa–Vung Tau expressway. The starting point of the project expressway is an interchange with the existing HCMC-Trung Luong expressway, and the ending point is an interchange with the planned Bien Hoa–Vung Tau expressway. The project expressway is divided into a western section (19.8 km), a middle section (11.0 km), and an eastern section (26.3 km). It was planned that the western section of the project expressway would be completed in middle of 2015. The middle and eastern sections would be constructed under Tranche 2 with the completion in middle of 2016.

4. Upon completion, the project would facilitate east–west traffic in the south of HCMC, thereby diverting through-traffic and reducing traffic congestion in the center of HCMC. The connectivity of cities and towns around HCMC would be also improved, which would reduce the transport costs and travel times for the movement of passengers and goods. The project area is the rice basket of Asia. The project expressway would be also used as a freight route to transport food produced in the Mekong Delta Zone to the rest of the country and overseas via land and maritime transport. Upon opening, a large amount of the traffic on the parallel local highways would divert to the project expressway. On the new expressway, the vehicles may drive at much faster speeds and with shorter distances. Due to overall implementation delays, some civil works contracts for western section is still under construction. Now, it is scheduled that the western section would complete and open to traffic in middle 2021, and the whole expressway would complete in 2023. C. Traffic Analysis

5. At appraisal, a traffic survey was conducted in the project areas. Traffic analysis and

Appendix 14 53

forecast was made for the project expressway based on socioeconomic development trends in the project areas, potential traffic diversions to the expressway, and the hard capacity of the expressway (70,000 passenger car unit (PCU) per day for a 4-lane expressway).1 The future traffic in PCU by key years (2016, 2021, 2026, 2031, and 2036) was projected with the annual average growth rates (for the western section only) of 15% in 2016–2021, 11% in 2021–2026, 8% in 2026–2031, and 2% in 2031–2036. It was assumed that the western section would start construction in 2011 and operation in 2016. 6. During the ADB’s PCR mission, the latest official traffic forecast for the project expressway was provided by the project executing agency (Vietnam Expressway Corporation), which was based on latest socioeconomic status, highway network construction, and general traffic development on similar expressways in the project areas.2 It was projected that the traffic on the project expressway would be about annual average daily traffic (AADT) of 28,722 PCU in 2022 with the future annual growth rates of 9.28% in 2022–2025, 7.04% in 2026–2030, 3.97% in 2031–2035, and 2.57% in 2036–2040. For estimating the project benefits, the traffic volume in PCU was converted into number of vehicles and disaggregated into six vehicle categories according to the actual vehicle patterns on another opened expressway in the project areas (HCMC-Long Thanh-Dau Giay expressway). The following table is the updated traffic forecast for the project expressway (for western section only).

Table 14.1: Updated Traffic Forecast (on western section, number of vehicles, AADT)

Car Mini-bus Large Bus

Small Truck

Medium Truck

Large Truck

Total

2022 5,936 6,510 2,681 1,436 881 1,704 19,148

2025 9,164 10,051 4,139 2,217 1,360 2,631 29,562

2030 12,877 14,124 5,816 3,116 1,911 3,697 41,540

2035 15,645 17,159 7,065 3,785 2,321 4,492 50,467

2040 17,761 19,480 8,021 4,297 2,636 5,099 57,294 AADT = annual average daily traffic Source: Asian Development Bank’s project completion review mission

D. Project Costs

7. The project costs comprised of investment capital cost, and operation and maintenance (O&M) costs. The actual annual investment costs for the project were used in the economic reevaluation. Comparing with the cost estimation at appraisal, the actual project cost was $383.2 million for the western section, about 39.0% lower. The project implementation period extended from original 6 years to 10 years (2012–2021). The estimation of the unit O&M cost per km was provided by VEC, that is annually $55,320 per km with 5% increase by consideration of the traffic growth and the expressway condition deterioration. Such unit O&M cost is much higher than that at appraisal ($14,258 per km). The periodic maintenance cost, mainly for pavement overlay and major rehabilitation, was assumed to occur every 6 years at 5% of the capital costs. 8. At appraisal, the project financial costs were converted into economic costs by (i) separating the financial costs into tradable and non-tradable, (ii) applying a shadow exchange rate factor (1.04) to the tradable costs, and (iii) removing the price contingency and tax. At project completion, the detailed project costs by inputs and related data were not available. Hence, the

1 ADB. February 2010. Technical Assistance Consultant’s Report. Final Report, Volume 1: Main Report – Socialist

Republic of Viet Nam: Preparing the Ben Luc-Long Thanh Expressway Project. TA7155-VIE. 2 Decision No. 3789 / QD-BGTVT- November 23, 2016 of the Ministry of Transport

54 Appendix 14

overall conversion factor of 0.8 at appraisal was adopted to convert the financial costs into the economic costs. E. Project Benefits 9. As estimated at appraisal, the main sources of the economic benefits were the reductions in vehicle operating cost (VOC) and savings in time costs due to better road condition, shorter distance than the parallel highways, and faster traveling speeds. The unit VOC was adopted from a recent ADB study report.3 It was estimated that the average savings of the VOC per km was at least 30% compared with that on the existing parallel highways. Several cross-river bridges would be constructed under the project, which will provide much short routes for the vehicles and substantially reduce the traveling distance.

Table 14.2: Unit Vehicle Operation Cost ($ per vehicle-km)

Car Mini-bus

Large Bus

Small Truck

Medium Truck

Large Truck

On project expressway 0.13 0.22 0.29 0.19 0.29 0.40

Local highways 0.17 0.29 0.38 0.25 0.37 0.52

Saving 0.04 0.07 0.09 0.06 0.09 0.12 Source: Asian Development Bank project completion review mission.

10. In the economic reevaluation, average speeds of passenger vehicle by types were assumed to be 80 km–90 km per hour for the “with-project” case and 40–50 km per hour for the “without-project” case (on the existing national highways). Passengers’ travel time cost savings were calculated by different types of passenger vehicles (car, mini-bus, and large bus). The unit passenger time cost was derived from the average gross domestic product (GDP) per capita in the project areas (HCMC, Long An, and Dong Nai).4 Other factors considered in the calculation of the passenger travel time cost savings included average vehicle loads, percentage of work-related trips, time costs by different road users, and potential increases in the unit time cost. For the freight vehicles, average speeds were assumed to be 70 km–80 km per hour for the “with-project” case and 40 km per hour for the “without-project” case. The time costs at appraisal were adopted and adjusted to be $0.26 per ton-hour for small and medium trucks and $0.33 per ton-hour for large trucks. It was assumed that the induced traffic was 20% of the total traffic as that at appraisal. Half of the benefits were considered for the induced traffic. According to the latest project schedule, the western section would be substantially completed in 2020 and fully completed in middle 2021. Hence, partial benefits for 2020 and 2021 were included in the benefits streams. However, the benefits and costs are not actual ones, but assumption based on latest projection. The reevaluation of the benefits indicated that the VOC savings initially took around 65% of the total benefits in 2022 (first fully operation year), but the share of the passenger time cost benefits increased sharply along with fast economic development and income increase, to be 39% in 2040. F. Economic Internal Rate of Return and Sensitivity Analysis 11. Based on the assumptions and parameters above, the EIRR was recalculated for a period of 29 years (2012–2040), including 10 years for project construction and 21 years for operation (with some overlaps of construction and operation periods). 50% of the capital cost was

3 ADB. June 2018. Technical Assistance Consultant’s Final Report. Loan No. 3248-VIE (SF): Ho Chi Minh City Third

Ring Road Technical Assistance Project. 4 It was assumed that the GDP per capita would increase by 5% per year in 2021-2025 and 3% per year in 2026-2040.

Appendix 14 55

considered as the residual value of the project expressway, which was added to the last calculation year. The EIRR was recalculated at 19.4% for the western section of the project expressway. In comparing with the EIRR at appraisal (25.5%), the lower EIRR at completion was mainly due to longer construction period, lower traffic level, and higher O&M costs. The recalculated EIRR was above the ADB recommended discount rate of 12% at appraisal. Therefore, the project is still considered as economically viable. The details of the economic reevaluation are in following table.

Table 14.3. Economic Reevaluation (western section) ($ million)

Costs Benefits Net Net Present Value year Capital O&M Total VOC

Pssngr Time

Fright Time

Total Benefit

2012 0.5 0.5 -0.5 -1.1

2013 11.5 11.5 -11.5 -25.5

2014 24.2 24.2 -24.2 -47.7

2015 45.2 45.2 -45.2 -79.6

2016 56.8 56.8 -56.8 -89.3

2017 52.7 52.7 -52.7 -74.0

2018 50.1 50.1 -50.1 -62.9

2019 29.6 29.6 -29.6 -33.2

2020 28.7 0.5 29.2 13.4 4.9 2.3 20.6 -8.6 -8.6

2021 7.5 0.7 8.1 22.4 8.1 3.9 34.4 26.2 23.4

2022 0.9 0.9 44.8 16.2 7.8 68.7 67.8 54.1

2023 1.0 1.0 57.9 24.3 10.0 92.2 91.2 64.9

2024 1.0 1.0 63.3 27.8 11.0 102.0 101.0 64.2

2025 1.1 1.1 69.1 31.9 12.0 113.0 112.0 63.5

2026 1.1 1.1 74.0 37.0 12.8 123.8 122.6 62.1

2027 15.3 0.9 16.3 79.2 40.8 13.7 133.7 117.4 53.1

2028 1.0 1.0 84.8 44.9 14.7 144.4 143.4 57.9

2029 1.0 1.0 90.8 49.5 15.7 156.0 155.0 55.9

2030 1.1 1.1 97.1 54.6 16.8 168.6 167.5 53.9

2031 1.1 1.1 101.0 58.5 17.5 177.0 175.8 50.5

2032 1.2 1.2 105.0 62.6 18.2 185.8 184.6 47.4

2033 15.3 0.9 16.3 109.2 67.1 18.9 195.2 178.9 41.0

2034 1.0 1.0 113.5 71.8 19.7 205.0 204.0 41.7

2035 1.0 1.0 118.0 76.9 20.4 215.4 214.3 39.2

2036 1.1 1.1 121.1 81.3 21.0 223.3 222.2 36.2

2037 1.1 1.1 124.2 85.8 21.5 231.5 230.4 33.6

2038 1.2 1.2 127.4 90.7 22.1 240.1 238.9 31.1

2039 15.3 0.9 16.3 130.6 95.8 22.6 249.1 232.8 27.0

2040 -153.4 1.0 -152.4 134.0 101.2 23.2 258.4 410.8 42.6 Economic Net Present Value (ENPV): 521.4 Economic Internal Rate of Return (EIRR): 19.4% Discount Rate: 12%

Source: Asian Development Bank project completion review mission.

12. The EIRR was subjected to sensitivity analysis to test different scenarios of the O&M costs and benefits. The sensitivity analysis results indicated that the project continued to be economically viable for all tested scenarios. If a 20% maintenance cost increase would be combined with a 20% benefit reduction, the EIRR would be still 17.0%. The sensitivity analysis

56 Appendix 14

confirmed that the project had robust economic viability. The sensitivity analysis also showed that the EIRR was more sensitive to changes in economic benefits. For this reason, the expressway operator needs to keep the project expressway in good condition and facilitate the fast-growing traffic demand, especially the through traffic. The local government should pay attention to the socioeconomic development of the project area, foster local transport services, and increase incomes for the expressway users. The results of the sensitivity analysis are in the following table.

Table 14.4: Sensitivity of the EIRR (western section)

Tests EIRR (%)

ENPV@12% ($ million) Case O&M Cost Benefits

Base Case 19.4% 521.4

Changes (+/-) +10% 19.4% 519.4 +20% 19.3% 517.4 +100% 19.2% 501.3 +10% 20.4% 618.8 +20% 21.4% 716.3 -10% 18.3% 423.9 -20% 17.1% 326.5 +10% -10% 18.2% 421.9

+20% -20% 17.0% 322.5

Switching Point +2,600% 12.0%

-53% 12.0% EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance Source: Asian Development Bank project completion review mission.

Appendix 15 57

FINANCIAL REEVALUATION 1. It is currently scheduled that the western section of the project expressway would fully complete and open to traffic in middle 2021. For the operation and maintenance (O&M) of the project expressway, the project executing agency (Vietnam Expressway Corporation–VEC) intends to procure an operating entity by competitive bidding in accordance with the Vietnamese regulation. The operating entity will be equipped with vehicles and facilities for emergency rescue, regular patrolling, and routine maintenance for the expressways operated. The toll plazas would operate 24 hours a day and use large number of toll collectors, more than 400 with 60% for female. To control overloaded trucks, the expressway installs weighing equipment at all entries. 2. The financial internal rate of return (FIRR) of the project (western section) was recalculated based on actual project capital costs, latest estimations of the O&M costs, and tentative toll revenues of the expressway operation. The major assumptions used in the FIRR recalculation are as follows:

(i) The capital costs included all capital expenditures related to the civil works, land acquisition and resettlement activities, and consulting services, but excluded the financial charges for the ADB loan.

(ii) The latest official traffic forecast for the project expressway was used, about annual average daily traffic (AADT) of 28,722 PCU in 2022 with the future annual growth rates of 9.28% in 2021–2025, 7.04% in 2026–2030, 3.97% in 2031–2035, and 2.57% in 2036–2040.

(iii) Latest estimations of the O&M cost per km was provided by VEC and used as the basis in the analysis. The O&M costs were kept at constant prices with a 5% annual increase to account for traffic increases and expressway condition deterioration.

(iv) Base toll rate of VND2,000 per vehicle-km for a passenger car was applied to estimate the toll revenue.1 The amount of toll revenue would increase along with the traffic increase.

(v) 1%–3% of the toll revenue was added as the non-toll revenue, like the revenues from service areas, advertisement space and spare facility leasing, emergency service, etc., which would start in 2025.

(vi) The value-added tax (VAT) rate of 10% was applied in the analysis. 3. Based on the above assumptions and estimations, the FIRR was recalculated at 6.12% before tax and 5.41% after tax. The recalculated FIRR is higher than the weighted average cost of capital of 2.22% recalculated at project completion. Therefore, the project is still considered financially viable. In comparing with that at appraisal (2.7%), the FIRR at completion is a much higher, which was mainly due to much lower capital costs and higher base toll rate applied. Table 15.2 presents the cash flows of the FIRR recalculations. Additionally, the FIRR was subject to sensitivity tests. Combining a 20% increase in O&M costs and a 20% decrease in revenue, the FIRR was at 4.51% before tax and 3.85% after tax. The test results indicated that the FIRR was very sensitive to the revenue changes (Table 15.1). Therefore, the VEC and the expressway operator should improve their management and service of toll collection, explore more revenue sources to ensure sufficient revenue, and adjust the toll level to keep financially viable of the project expressway.

1 The basic toll rate of VND2,000 per km for a passenger car is now applied for a nearby Ho Chi Minh City–Long

Thanh–Dau Giay Expressway.

58 Appendix 15

Table 15.1: Sensitivity Tests

Scenarios

FIRR before tax

FIRR after tax

Base Case 6.12% 5.41%

Sensitivity Tests

1 O&M cost 10% higher 6.06% 5.35%

2 O&M cost 20% higher 5.99% 5.28%

3 Revenue 10% higher 6.79% 6.06%

4 Revenue 20% higher 7.41% 6.66%

5 Revenue 10% lower 5.42% 4.73%

6 Revenue 20% lower 4.67% 3.99%

7 O&M cost 10% higher & revenue 10% lower 5.35% 4.66%

8 O&M cost 20% higher & revenue 20% lower 4.51% 3.85% FIRR = financial internal rate of return, O&M = operation and maintenance. Source: Asian Development Bank project completion review mission.

Appendix 15 59

Table 15.2: Financial Reevaluation for the Project Expressway (Western Section)

($ million)

Costs Revenue Profit Tax

Net Profit year Capital O&M Total Toll Other Total

2012 0.53 0.53 -0.53 -0.53

2013 14.39 14.39 -14.39 -14.39

2014 29.59 29.59 -29.59 -29.59

2015 55.19 55.19 -55.19 -55.19

2016 68.55 68.55 -68.55 -68.55

2017 62.27 62.27 -62.27 -62.27

2018 60.35 60.35 -60.35 -60.35

2019 35.78 35.78 -35.78 -35.78

2020 35.90 0.58 36.49 6.03 6.03 -30.46 -30.46

2021 9.36 0.82 10.17 10.05 10.05 -0.13 -0.13

2022 1.17 1.17 20.10 20.10 18.93 1.89 17.03

2023 1.23 1.23 25.98 25.98 24.75 2.48 22.28

2024 1.29 1.29 28.39 28.39 27.10 2.71 24.39

2025 1.35 1.35 31.03 0.31 31.34 29.98 3.00 26.98

2026 1.42 1.42 33.21 0.33 33.54 32.12 3.21 28.91

2027 19.16 1.17 20.33 35.55 0.36 35.90 15.57 1.56 14.02

2028 1.23 1.23 38.05 0.38 38.43 37.20 3.72 33.48

2029 1.29 1.29 40.73 0.41 41.14 39.85 3.98 35.86

2030 1.35 1.35 43.60 0.87 44.47 43.11 4.31 38.80

2031 1.42 1.42 45.33 0.91 46.23 44.81 4.48 40.33

2032 1.49 1.49 47.13 0.94 48.07 46.58 4.66 41.92

2033 19.16 1.17 20.33 49.00 0.98 49.98 29.65 2.96 26.68

2034 1.23 1.23 50.94 1.02 51.96 50.73 5.07 45.66

2035 1.29 1.29 52.97 1.59 54.55 53.27 5.33 47.94

2036 1.35 1.35 54.33 1.63 55.96 54.60 5.46 49.14

2037 1.42 1.42 55.72 1.67 57.39 55.97 5.60 50.38

2038 1.49 1.49 57.15 1.71 58.87 57.38 5.74 51.64

2039 19.16 1.17 20.33 58.62 1.76 60.38 40.05 4.01 36.05

2040 -185.96 1.23 -184.73 60.13 1.80 61.93 246.67 24.67 222.00

(before tax) (after tax) Financial Net Present Value (FNPV): 318.43 248.15 Financial Internal Rate of Return (FIRR): : 6.12% 5.41% Weighted Average Cost of Capital (WACC): 2.22% 2.22%

O&M = operation and maintenance Source: Asian Development Bank project completion review mission.

60 Appendix 16

CONTRIBUTION TO ADB RESULTS FRAMEWORK

No. Level 2 Result Framework

Indicator Target

Revised Target

Aggregate Output

Methods/Comments

Transport

1 Use of roads built or upgraded (average daily vehicle-kilometers in the first full year of operation)

0.20 million vehicle-km in 2017

0.40 million vehicle-km in 2022

At appraisal, the traffic for the first fully operation year (2017) was forecast to be 15,016 PCU (about 10,011 vehicles) per day. At completion, the traffic forecast was updated to be 28,722 PCU (about 19,148 vehicles) per day in 2022 (actual first fully operation year).

2 Roads built or upgraded - Expressways and national highways (kilometers)

Western section of 19.8 km under Tranche 1

Western section of 21.1 km under Tranche 1

Upon completion of Tranche 1, the western section of the project expressway with 21.1 km and 4 lanes were constructed and opened to traffic.

AADT = annual average daily traffic Source: Asian Development Bank project completion review mission.