PROJECT INFORMATION DOCUMENT (PID)

CONCEPT STAGE

Report No.: AB5405

Project Name / Medium and Small Cities Development
Region / EAST ASIA AND PACIFIC
Sector / General water, sanitation and flood protection sector (40%);General transportation sector (40%);Sub-national government administration (20%)
Project ID / P116398
Borrower(s) / SOCIALIST REPUBLIC OF VIETNAM
Implementing Agency / Vinh PMU, Phu Ly PMU and Lao Cai PMU
Environment Category / [X] A [ ] B [ ] C [ ] FI [ ] TBD (to be determined)
Date PID Prepared / February 1, 2010
Estimated Date of Appraisal Authorization / December 6, 2010
Estimated Date of Board Approval / June 23, 2011
  1. Key development issues and rationale for Bank involvement

Vietnam’s population and economy are rapidly urbanizing. Vietnam is one of the fastest urbanizing countries in the EAP region. The urbanization level is estimated to rise from around 28 percent at present, to 38 percent by 2015 and 50 percent by 2025. It is estimated that 1 to 1.3 million people will be added to the urban population every year, and as a result, the urban population between now and 2025 will double to 52 million. With urban areas accounting for about 70% of the country’s economic output in 2005 and the increased flow of FDI toward cities – the complementary shift in the Vietnamese economy is clear. Economic opportunities in urban areas are propelling rapid growth in urban population with significant rural-urban migration. Urbanization is in turn fuelling further economic growth.

Vietnam is taking a strategic stance on urbanization. The Central Government’s framing policy for urbanization, the “Framework Master Plan for Urban Development in Vietnam to 2020,” has recently been updated through the “Adjustment of the Master Plan for Urban Development in Vietnam to 2025 and Vision to 2050.” This sets out a strong and renewed emphasis on Vietnam’s urban transition – with a well-built understanding of the role Vietnam’s cities are playing in integrating its economy into the international economic system, while also propelling growth at more focused regional scales within the country. The objective of the national plan is to strengthen and develop a ‘national urban system’ comprised of urban centers of various scales/types distributed across the country’s 6 geographic regions for balanced and strategic growth. One of the plan’s specific objectives is that “due attention and priorities are given to the development of medium and small urban areas to serve as development hubs within general urbanized areas and provinces, in order to secure an adequate distribution of urban areas among different geographical and rural-urban regions.” In addition, the plan emphasizes the speed of urbanization, stressing how local capacity of urban planning and management is unable to meet the increased needs – and it outlines ‘holistic’ capacity building as an important objective.

There is an increasing global focus on medium cities. Global statistics show that about 50% of urban population increase is taking place in medium and small cities with populations less than 500,000. These cities play a critical role in supporting regional economic growth networks, and also fight poverty by absorbing a large portion of in-migrating labor into the manufacturing sector. While they contribute significantly to poverty reduction and economic growth, these cities are often neglected because larger and more iconic cities carry more political and economic clout. Ironically it is the medium and smaller cities which face tougher technical, administrative and financial capacity constraints – and stand to benefit significantly from strategic investment, policy focus and capacity building. Vietnam’s medium sized cities are growing and present many opportunities. Cities in Vietnam are categorized into 5 types based on population, with Hanoi and HCMC designated as Special Cities, and Danang joining the list in 2025. There are currently 55 ‘Medium Cities’ (Type II and Type III) in Vietnam, and it is projected that there will be 46 more within the next 15 years.

Some of these cities are taking advantage of their location on or close to Vietnam’s coast with large ports or with access to large inland waterways. Location advantage with facilities for large ports in these cities attracts foreign direct investments and production facilities for export goods. Comparative advantage in relatively cheaper labor and land in the medium-sized cities also attracts FDI for a host of industries including garment, textiles, standardized manufacturing products and food processing. In addition, some cities continue to maintain traditional state-owned enterprises which often rely on heavy industry and natural resources. Some cities, especially those located near Hanoi and HCMC, increasingly serve as satellite cities, absorbing some of the population pressure and providing supporting service and amenities. Finally, tourism is also contributing to the growth of some medium-sized cities.

Rationale for Bank Involvement. The Bank has a large urban portfolio in Vietnam, and has typically been involved in urban sector investments in some of the larger cities. The Bank has ongoing as well as new investments planned in urban upgrading, urban transport, as well as water, sanitation and drainage projects. The GoV has requested a Bank focus on medium cities. Medium cities are typically at a geographic, demographic and economic scale where a well coordinated package of Bank investments and capacity building can make a significant and lasting impact. They provide an opportunity to engage at an early stage of growth, enabling efficient and well-planned development that can lock-in benefits for future generations.

The proposed project will benefit by being able to leverage ongoing and planned AAA work in this regard. For instance a comprehensive urban transportation study for 13 medium sized cities in Vietnam will be delivered early in 2010. This will feed in nicely to the proposed project, for which a significant portion of the planned investment is related to urban transport. Also, as part of the urban cluster AAA, the Bank will be carrying out an Urbanization Review of Vietnam’s ‘system of cities.’ This will provide a framework to help determine at which urban locations (and scales) public investments are likely to yield higher returns, narrow development gaps, and complement each other in a regional context. The Cities Alliance may provide further support to enhance capacity building in urban planning and management. At the same time, the Bank is increasingly moving toward a more multi-sector approach at the city level in order to better coordinate its various sectoral investments and realize synergies on cross-cutting themes like disaster risk management and climate change. The Bank’s new Urban Strategy, and approaches like the Bank’s Eco2 City initiative (both launched this year) are also presenting new perspectives, experiences and methods for city development and management.

In this context, the 3 cities participating in this project will benefit from both – the rich ongoing country specific experience of the Bank, as well as the global experiences and best practices brought by the Bank. The current project offers a great opportunity to pilot a mulit-sector approach for medium cities which can later be scaled up and replicated.

Contribution to Country Partnership Strategy. The project will support two of the four pillars of the CPS themes/pillars: 1) Improve business environment and 2) Strengthen social inclusion. It also more specifically builds into two of the CPS outcomes in the CPS results matrix: 1) More efficient and reliable provision of infrastructure services and 2) Improved policies and infrastructure to address the needs of urban poor and migrants. It will also contribute to the national urban policy as set out in the “Framework Master Plan for Urban Development in Vietnam to 2020,” and updated through the “Adjustment of the Master Plan for Urban Development in Vietnam to 2025 and Vision to 2050.”

  1. Proposed objective(s)

The proposed project development objective is to promote sustainable urban development in medium and small sized cities in Vietnam.

  1. Preliminary description

Proposed Project Investments. The project is comprised of priority infrastructure investments in 3 cities: Lao Cai, Vinh, and Phu Ly. The total project cost is USD 265.51 million, of which USD 200 million will take the form of a World Bank loan. Counterpart funding constitutes over 25% of total project costs. The allocation of WB funding for Lao Cai and Phu Ly will be USD 55 million each, with USD 90 million for Vinh. A bulk of the investments will be related to roads and urban transport, upgrading of low income areas, and provision of water, wastewater and drainage infrastructure. The cities have indicated an environmental interest as well, and some investments planned include an ecological lake, a green park and street lighting with street greenery. It is important that these investments in infrastructure take place in the context of strong urban planning and management for which the capacity building components will also be very important. Civic engagement in certain components of the project will strengthen ownership and can leverage contribution from communities.

The overall project will have the following 4 components. While the specific investments in each city will vary according to demand and priority need, the four components to be included in each of the three cities will be the following:

Component 1: Tertiary Infrastructure Upgrading and Service Improvements. This component will focus on improving the infrastructure and service conditions in existing urban neighborhoods, primarily through investments in basic infrastructure (water supply and sanitation, drainage, lighting, street paving and widening, etc.). In addition, the component will also include the financing of infrastructure and service provision in new urban areas and resettlement areas which are required for accommodating new urban population growth in accordance with approved master plans.

Component 2: Urban Water Supply and Environmental Sanitation. Drainage and sanitation are among the highest investment needs in Vietnamese cities. Water supply is also critical for expanded urban areas. This component will include financing of investment in primary and secondary infrastructure in drainage, wastewater collection and treatment and in limited cases, water supply. These investments will be aimed at urban environmental improvement and completing the network infrastructure necessary for wastewater collection and flood control.

Component 3: Urban Roads and Bridges. This component will finance investments aimed at upgrading existing roads and in some cases financing the construction of new roads in accordance with the Master Plan. In the latter case, these roads would be constructed on phased basis considering current and future demand as well as the potential for the future inclusion of BRT rights of way within this network.

Component 4: Technical Assistance and Capacity Building: Significant resources will be allocated to each city for capacity building and technical assistance. This component will focus on targeted assistance in the areas of urban planning, urban management and specific technical assistance related to the investment program and the specific urban management needs of each city.

  1. Safeguard policies that might apply

Based on the available information:

·  The following Bank safeguard policies will apply: Environmental Assessment (OP/BP 4.01) and Involuntary Resettlement (OP/BP 4.12). Relevant safeguards documents (such as Environmental Management Framework and Resettlement Policy Framework) will be prepared to assess safeguard issues and to mitigate them in line with Bank policies.

·  During preparation, the applicability of the following policies will be determined. If they apply, remedial measures will be taken in line with Bank policies: Natural Habitats (OP/BP 4.04), Physical Cultural Resources (OP/BP 4.11), Indigenous People (OP/BP 4.10) and Projects on International Waterways (OP/BP 7.50).

  1. Tentative financing

Source: / ($m.)
BORROWER/RECIPIENT / 100
International Development Association (IDA) / 200
Total / 300
  1. Contact point

Contact: Dean A. Cira

Title: Lead Urban Specialist

Tel: 5777+362 / 84-4-3934-6600

Fax:

Email:

Location: Hanoi, Vietnam (IBRD)