Local governments in Viet Nam’s secondary towns and cities have high implementation capacity.
Medium-sized, secondary towns and cities in Viet Nam, the project has shown, are highly capable of implementing urban infrastructure projects. Performance quality was high, and the provincial project management unit was able to successfully carry out the construction subprojects in a shorter period than envisaged at appraisal─22 instead of 35 months.
Recruitment of consulting firms by a government agency in Viet Nam is time-consuming.
The executing agency contracted the project implementation assistance (PIA) consultant 18 months later than envisaged. Significantly holding up project startup, such a delay was not specific to this project, but common in ADB-financed projects in Viet Nam. To address the problem, detailed terms of reference and request for proposals for a PIA consultant may be readied upon feasibility study approval. Preparation of these documents should be incorporated in the deliverables of the project preparatory technical assistance consultant.
Reliable cost estimates are essential to success.
This project has demonstrated how inaccurate project cost estimates could lead to implementation problems. Specifically, because the number of people that needed to be resettled and the amount of land required for construction works were underestimated at appraisal, the project scope had to be reduced, consequently pushing back implementation. Besides basing cost estimates on well-developed designs, future projects requiring land acquisition and resettlement (LAR) should factor into the estimates the rapid increase in the price of land in Viet Nam. With the actual LAR cost 4 times higher than estimated, this project’s internal rate of return was recalculated at below the appraisal estimate and required minimum.
Cofinancing could reduce flexibility.
Cooperation between ADB and the Korean Export–Import Bank (KEXIM), which cofinanced the project on behalf of the Korean government, was generally good. Besides being administratively complex, however, the cofinancing arrangement tended to reduce the project’s flexibility to respond to changes in situation. For instance, commencement of the operation of the wastewater pumping station, located on the KEXIM-financed ring road, was held back by lengthy discussions over currency issues related to the contract variations in ring road works. Delays in the completion of related activities followed along with delays in the payment liquidation of these activities. As cofinanciers typically have different disbursement and procurement guidelines, ADB can consider pursuing as a preferred mode a component−based cofinancing arrangement. While reducing administrative complexities, such an arrangement could also favor compliance to individual cofinancier requirements.
Consideration of the relationships and coordination practice among key agencies strengthens the feasibility of implementation arrangements.
During project appraisal, capacity assessment of the key project agencies should not be limited to the assessment of the individual capacity of each agency. It should also consider the relationships and coordination practice between these agencies, which could be a facilitating or hindering factor in project implementation. For example, this project’s use of multiple project implementation units failed because of lack of coordination. The revised arrangement, with one agency handling all on-grant components and another handling the on-lending component, worked well.