1. International Water Association Financing Water Security Rudolf Frauendorfer Asian Development Bank

2. 2 Nov 2010 2ADB Financing Water Security Introduction Why “Financing Water Security” Why “Financing Water Security” Linking Water Security to Water Safety Linking Water Security to Water Safety ADB’s water program, Water Security and Water Safety ADB’s water program, Water Security and Water Safety

3. 2 Nov 2010 3ADB Financing Water Security Overview ADB’s approach to Water Security ADB’s approach to Water Security Use Viet Nam as an example of developmental context Use Viet Nam as an example of developmental context Serves to illustrate approach to water security in Southeast Asia Serves to illustrate approach to water security in Southeast Asia As pre-requisite for water safety As pre-requisite for water safety

4. 2 Nov 2010 4ADB Financing Water Security Viet Nam in history September 1945: independence September 1945: independence 1954: Dien Bien Phu, Geneva Accords 1954: Dien Bien Phu, Geneva Accords 1975: Reunification 1975: Reunification 1986: “Doi Moi” declared: renovation 1986: “Doi Moi” declared: renovation 1993: ADB operations resumed 1993: ADB operations resumed 1994: US trade embargo lifted 1994: US trade embargo lifted 2007: Accession to World Trade Organisation 2007: Accession to World Trade Organisation

5. 2 Nov 2010 5ADB Financing Water Security 2010: Regional Indicators INOMALPHITHAVIE Population231.428.392.266.986.0 Poverty, %54.67.84511.548.4 GDP (/cap, $ PPP 4,14913,4933,5148,0562,992 % Industry13.217.28.714.421.5 % Urban43.163.76533.829.6

6. 2 Nov 2010 6ADB Financing Water Security Poverty: % population on < $ 2/day

7. 2 Nov 2010 7ADB Financing Water Security Employment in Industry

8. 2 Nov 2010 8ADB Financing Water Security Urbanisation

9. 2 Nov 2010 9ADB Financing Water Security Transformation of the economy Strong industrial growth Strong industrial growth Transition to market economy; part of global economy Transition to market economy; part of global economy De-centralisation: administrative / fiscal De-centralisation: administrative / fiscal Agriculture: still 52% of employed Agriculture: still 52% of employed Still using 80% of water Still using 80% of water

10. 2 Nov 2010 10ADB Financing Water Security Water Resources Annual Rainfall: 1,200 – 3,000 mm/year Annual Rainfall: 1,200 – 3,000 mm/year Rivers discharge: 830 billion m 3 /year Rivers discharge: 830 billion m 3 /year 57% from Mekong basin 57% from Mekong basin 16% Red – Thai basin 16% Red – Thai basin Total 60% generated outside borders Total 60% generated outside borders Water endowment: 9,800 m 3 /capita.year Water endowment: 9,800 m 3 /capita.year In some basins: < 3,000 m 3 /capita.year In some basins: < 3,000 m 3 /capita.year Critical in dry season for Dong Nai and other basins Critical in dry season for Dong Nai and other basins > 1700 m3/cap/yr “under stress

11. 2 Nov 2010 11ADB Financing Water Security Water Users 20082020Agriculture82%72% Aquaculture11%14% Industry5%9% Urban3%5% Total use 2008: 80 billion m3/year Total use 2020: 120 billion m3/year

12. 2 Nov 2010 12ADB Financing Water Security Ground Water Strategic reserve – essential for rural areas Strategic reserve – essential for rural areas Renewable potential: 63 billion m 3 /yr Renewable potential: 63 billion m 3 /yr In Northwest: 3,770 m3/cap.yr In Northwest: 3,770 m3/cap.yr In Mekong delta: 84 m3/cap.year In Mekong delta: 84 m3/cap.year Water source for 55% of population: Water source for 55% of population: 34 % of urban population 34 % of urban population 65% of rural population 65% of rural population

13. 2 Nov 2010 13ADB Financing Water Security Ground water - issues Unknown resource: insufficient data on renewable Quantity or Quality Unknown resource: insufficient data on renewable Quantity or Quality HCMC and Hanoi: groundwater table lowered by 30m+ HCMC and Hanoi: groundwater table lowered by 30m+ Need to protect strategic resource Need to protect strategic resource Storage to bridge between floods and droughts Storage to bridge between floods and droughts Potential for artificial / induced re-charge? Potential for artificial / induced re-charge?

14. 2 Nov 2010 14ADB Financing Water Security Water Safety Plans 1. System Assessment: to review supply chain 2. Operational monitoring of all control measures 3. Management Plans: documenting day-to- day operations; emergency measures a. a.Minimize contamination: protect source b. b.Reduce or remove contamination: treat c. c.Prevent further contamination: protect network

15. 2 Nov 2010 15ADB Financing Water Security Urban water supply 68 water companies, under VWSA 68 water companies, under VWSA Design capacity 5.4 million m3/day Design capacity 5.4 million m3/day Operating at 4.2 million m3/day Operating at 4.2 million m3/day Coverage: 98% “access to improved source” Coverage: 98% “access to improved source” 59% with house connection 59% with house connection 39% shared connection or standposts 39% shared connection or standposts Investment 1991 - 2008: $ 2 billion Investment 1991 - 2008: $ 2 billion Mainly treatment & transmission, Mainly treatment & transmission, 15% on distribution improvements 15% on distribution improvements

16. 2 Nov 2010 16ADB Financing Water Security Urban water: data needs 1. Reliable: independent verification 2. Relevant: performance indicators, Financial performance Financial performance Asset inventory and valuation Asset inventory and valuation 3. Comprehensive: data on small town systems (~ 400 towns) Minimum requirements to attract private sector interest in management, operation, investment

17. 2 Nov 2010 17ADB Financing Water Security Urban water: non revenue water NRW Range: 15 – 70% Range: 15 – 70% Average: 30% ( 2009 ) down from 39% ( 2000 ) Average: 30% ( 2009 ) down from 39% ( 2000 ) Government target: 15% by 2025 Government target: 15% by 2025 $ 500 million government program, to be supported by ADB $ 500 million government program, to be supported by ADB Importance of reducing NRW as indicator of improved all-round efficiency Importance of reducing NRW as indicator of improved all-round efficiency VWSA: some doubt on data means of measurement lacking

18. 2 Nov 2010 18ADB Financing Water Security Urban water: Business principles Legislation: enables tariff increases to full cost recovery Legislation: enables tariff increases to full cost recovery Some hesitation to apply but promising progress Some hesitation to apply but promising progress Affordability not an issue < 1% hh income Affordability not an issue < 1% hh income Ownership of assets still unclear: prevents progress with full privatisation Ownership of assets still unclear: prevents progress with full privatisation

19. 2 Nov 2010 19ADB Financing Water Security Rural water: the issues Coverage: 90% (2009) from 43% (1990) Coverage: 90% (2009) from 43% (1990) Sector in transition: Sector in transition: supply driven developments supply driven developments no funding for operation & maintenance no funding for operation & maintenance unsustainable systems unsustainable systems Provincial water companies: combining urban + rural responsibility. Provincial water companies: combining urban + rural responsibility. ADB project in Hue: pilot with sustainable rural schemes to become part of urban company. ADB project in Hue: pilot with sustainable rural schemes to become part of urban company.

20. 2 Nov 2010 20ADB Financing Water Security Urban wastewater: the issues Coverage: waste from <10% of urban households is treated Coverage: waste from <10% of urban households is treated Government target: 70% coverage by 2025 Government target: 70% coverage by 2025 Investment implication: $ 15 – 25 billion Investment implication: $ 15 – 25 billion Decentralised: local government’s responsibility Decentralised: local government’s responsibility Financing: tariff can be raised, but not widely implemented. Financing: tariff can be raised, but not widely implemented.

21. 2 Nov 2010 21ADB Financing Water Security Summary of Issues A.Efficient water supply companies: define assets, then define assets, then manage to improve efficiency and safety manage to improve efficiency and safety B.Protect the sources: Reduce waste discharges, to secure sources for the future Reduce waste discharges, to secure sources for the future WSP step 1 WSP step 2

22. 2 Nov 2010 22ADB Financing Water Security ADB’s strategies Water supply: support to water supply companies – including NRW reduction – to enable access to investment by private sector: Improving Efficiency Water supply: support to water supply companies – including NRW reduction – to enable access to investment by private sector: Improving Efficiency Wastewater – assist local government to meet government’s targets in waste treatment: Protect the sources Wastewater – assist local government to meet government’s targets in waste treatment: Protect the sources Province-wide programs combining urban & rural water & sanitation Province-wide programs combining urban & rural water & sanitation

23. 2 Nov 2010 23ADB Financing Water Security Water supply Line of credit $ 1 billion, 2011 – 2020 Line of credit $ 1 billion, 2011 – 2020 Four large cities initially, specified Four large cities initially, specified Smaller cities to submit applications Smaller cities to submit applications Institutional Support to water companies Institutional Support to water companies NRW reduction program NRW reduction program Asset inventory & management Asset inventory & management Run on business principles, maintain service charter Run on business principles, maintain service charter Prepare for privatisation Prepare for privatisation Gain access to capital markets Gain access to capital markets

24. 2 Nov 2010 24ADB Financing Water Security Wastewater Starting point Starting point Skills gap / Awareness gap / Funding gap Skills gap / Awareness gap / Funding gap Long term programme Long term programme City sanitation strategies + capacity building City sanitation strategies + capacity building Loan preparation ==> line-of-credit 2013 - 2022 Loan preparation ==> line-of-credit 2013 - 2022 New approaches: New approaches: Explore decentralisation Explore decentralisation Fit-for-use treatment Fit-for-use treatment Local re-use Local re-use

25. 2 Nov 2010 25ADB Financing Water Security Conclusion Promote Water Safety Plans Promote Water Safety Plans By better understanding on essential operating data, to improve efficiencies, By better understanding on essential operating data, to improve efficiencies, to achieve financial sustainability, to achieve financial sustainability, critical for maintaining safety of supplies critical for maintaining safety of supplies Protect the sources Protect the sources Urgent and large scale Urgent and large scale Creative approaches & flexibility required Creative approaches & flexibility required