10 06 02 Policy Brief PPP irrigation Vietnam cleared by NFP by s0zwPQFl

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									                   PRO-POOR POLICY OPTIONS / VIETNAM:
     THE CASE FOR PUBLIC-PRIVATE PARTNERSHIP FOR IRRIGATION SERVICE
           DEVELOPMENT AND MANAGEMENT IN AN GIANG PROVINCE


INTRODUCTION

This policy brief suggests that agricultural cooperative and cooperation group operation of
small to medium-size irrigation services in Vietnam’s An Giang province will further
modernize the agricultural sector and increase production. The existing irrigation
infrastructure cannot meet farmer demand, which results in higher production costs and
underutilized services. Enabling cooperatives to manage small to medium-size irrigation
systems, while continuing government control of large systems, is therefore an important
strategy for optimizing irrigation system benefits and improving poor farmers’ livelihoods.

Policy analysis findings and recommendations from a study conducted under the auspices of
a “Pro-poor Policy Formulation, Dialogue and Implementation at the Country Level” project
inform this brief1. Between 2007 and 2010, the Food and Agriculture Organization–Regional
Office for Asia and the Pacific (FAO-RAP), with support from the International Fund for
Agricultural Development (IFAD), implemented this project in partnership with governmental
and non-governmental organizations in eight Asian countries. The project goal was to
enhance institutional capacity to conduct policy analysis, formulate and implement pro-poor
agricultural and rural development policies. In total, twenty-three policy studies examined
issues identified by national level dialogues in all project countries2.

CONTEXT

Viet Nam has made remarkable progress in reducing                    Figure 1. National Poverty Rates in Viet Nam
                                                                                     (1993-2004)
poverty over the past 15 years (Figure 1) (ADB,
2006). Although Viet Nam has met its Millennium                      70.00%
Development Goal (MDG) target of halving extreme
                                                                     60.00%
poverty well before the deadline, poverty reduction rates                        58.10%

have begun to slow down. Strong efforts therefore                    50.00%

remain necessary to reach the national goal of reducing
                                                                     40.00%
the proportion of Vietnamese people living below the                                      37.40%

international poverty line by 40% between 2001 and                   30.00%                         28.90%

2010 (WHO, 2009).                                                    20.00%                                  19.50%


                                                             10.00%
Ninety percent of poor Vietnamese households live in
rural, isolated areas, many with small or no                  0.00%
landholdings, that depend on agriculture as a primary                1993   1998      2002    2004

source of income (AusAID, 2002). As such,
interventions targeting rural farmers remain a relevant strategy for poverty alleviation in Viet
Nam.




1
 Mr. Vu Quang Canh (from the Department of Cooperatives and Rural Development) authored the study on
which this brief was based. The original study can be accessed by contacting: INFORMATION.
2
  Other policy issues selected for Viet Nam include Agricultural Cooperative Promotion and Land Consolidation
linked to Labor Transformation.
                                                              Figure 2. An Giang GDP sector composition:
                                                                             1996 and 2006

                                                    40%                                                          34%
                                                                                  48%
                                                                                                                       Primary
                                                                                                                       Secondary
                                                                                                                       Tertiary

An Giang province’s development
                                                                                        53%


                                                                                                           13%
strategy focuses on sustainable                                12%

agriculture, with a number of policies
supporting cooperative and irrigation
system development, as well as
sector mechanization3. Nearly 80% of province land is used for agricultural purposes and
agriculture is almost entirely mechanized. Although the primary sector’s portion of regional
GDP has decreased over the last 10 years (Figure 2), agriculture in An Giang is increasingly
productive and valuable. The province consistently has the highest rice output in the country,
contributing 9% of total paddy production in both 2007 and 2008 (GSO, 2008). Between
1996 and 2006, the value of An Giang’s agricultural, forestry and aquaculture products
increased by 50% in real terms. In addition food products accounted for 90% of total export
value, which was increasing as well.

These agricultural results are largely made possible thanks to Viet Nam’s irrigation
infrastructure which is comprised of three levels of canals, as well as sluices at provincial and
district levels, and dikes. Public and private sector investment in An Giang’s irrigation
infrastructure has yielded appreciable results. The system supplies water, provides drainage,
and controls floods. Canal planning, technical and budget management are decentralized;
national entities [MARD] manage Level One canals, whereas provinces are responsible for
Level Two canals.

PROBLEM STATEMENT

Inefficient use of An Giang’s irrigation infrastructure remains an obstacle to complete
modernization of the province’s agricultural sector. Currently only 21% of total agricultural
areas are irrigated, 22% are drained and only 10% of electric pumps are utilized collectively.
Oil pumps continue to serve 80% of production areas, although producers using them pay
10-20% more in oil pump costs than for comparable electric pump use.

Key challenges where pumping stations have been developed without planning include:

       lack of organization to invest in and manage pumps and canal systems,
       lack of pumping system synergy with drainage systems, and
       incorrect installation and insufficient capacity.

Pumping stations are therefore not used to full capacity, nor are they able to meet producer
demand. An existing project for electric pumping station development seeks to reduce
producer costs, save water and control floods by ensuring that 80% of fields are served by
electric pumps by 2012. These efforts are already bolstered by special loans, subsidized
interest rates, as well as tax and land policies favourable to cooperatives, cooperation groups
and enterprises.

As such, An Giang province should prioritize irrigation investment and expand opportunities
for participatory planning and management of small and medium-scale irrigation systems in
order to improve the system’s efficiency and sustainability in a manner which benefits the
poor.




3
 Policies supporting mechanization include interest-free credit for machinery investment, as well as price
subsidies to farmers. In addition, the widespread “3-decrease, 3-increase” rice production program has increased
efficiency and reduced production costs, leading to increased profits for farmers.


                                                          2
EXISTING IRRIGATION MANAGEMENT STRUCTURES

The four main irrigation service management models currently controlling An Giang’s over
550 irrigation works include:

   1. Agricultural cooperatives independently and directly operate and safeguard
      irrigation units. Cooperatives manage
      nearly 50% of provincial pumping                         0%

      stations (Figure 3), and render full or                 1%

      partial    services    to   cooperative  34%
                                                                            47%
      members as well as non-members.
      More than half of cooperatives offer
      only one type of service, while 8% offer
      four or more services. Almost 97% of         4%
                                                          14%

      cooperatives provide pumped water
      services.
                                                              Cooperatives                   Cooperation Groups
                                                              Communal People's Committees   Private Sector

       Cooperatives improve the economic                  Irrigation Management Company Management Board


       efficiency of production and reduce
       farmers’ input expenditure since        Figure 3. Management of An Giang pumping stations,
       cooperative service charges are                              by group, 2009 (n=259)
       lower than those of private
       providers. For the most part, An Giang’s cooperatives are dynamic- increasing
       membership numbers, as well as capital contributions from service delivery.
       Cooperative profits and operation quality are also improving, thanks to increasingly
       professional financial management.

   2. Cooperation group quality is significantly less consistent than that of cooperatives.
      Nearly 60% of cooperation groups disbanded in 2007, bringing total numbers to 750.
      However, while many cooperation groups may have existed only on paper as a
      means to access loans, a number of cooperation groups are deemed effective.

   3. Private businesses rendering services comprised of both individuals and
      companies currently manage about one-third of An Giang’s pumping stations.
      Competition is intense; cooperatives are dominant in areas where improved irrigation
      systems exist. On the other hand, the private sector dominates the market in areas
      where no infrastructure exists, due to lack of government investment.

   4. State-owned irrigation enterprises which manage, operate and maintain a small
      percentage of irrigation systems.

POLICY OPTIONS

The proposed policy options correspond to a broader legal framework which prioritizes
irrigation system development, investment and management as key components of
provincial development and economic integration.

Centrally, the recommendations propose strengthening the decentralization of small and
medium size irrigation management by 1) providing long-term investments, 2) involving
farmers’ groups in system planning and implementation, 3) further empowering cooperatives
and cooperation groups to manage systems, and 4) developing new policies to guide the
process.




                                                 3
In particular, recommendations suggest that An Giang province:

1. Prioritize sustainability:
    Create mechanisms for long-term investment which prioritize not only initial capital
      investments, but also repair and maintenance costs. Irrigation fee remission can fund
      these activities, according to government guidelines.
    Strive to invest 10% of the annual value of provincial agricultural production back into
      the sector4.
    Allow Commune/Ward People’s Committee to contract with construction
      organizations, cooperatives, and cooperation groups operating pumping stations for
      15 to 20 years, a 10 year increase over current policy.

2. Formulate programs to encourage farmer participation in irrigation planning,
   design, investment and management:
    Further strengthen and empower cooperatives by developing and implementing
      technical and management trainings for cooperative management officers, officers
      and members. Rural cooperative investment in training and expanding production,
      services, and cooperative asset accumulation can be funded through income tax
      earnings.
    Provide technical assistance on operation and financial management and
      maintenance.
    Increase cooperative awareness and involvement in processes through participatory
      evaluation and program adjustment.

3. Progressively hand-over management and financial responsibility to cooperatives
   & cooperation groups:
    Following capacity building, cooperatives can manage small and medium-scale canal
      infrastructure5. Gradually, cooperatives can be entrusted with management of entire
      small and medium scale irrigation systems. The government will continue to focus on
      large sized works, with complicated technology, main canals, and linking works.
    Mobilize community and private sector financial contributions for irrigation
      infrastructure in complement to government budget contributions.

4. Develop related policies:
    Locate additional funding sources for building additional electric pumping stations.
    Create policies to support operation hand-over. In addition to operational guidance,
      An Giang should prioritize measures to gradually reduce government subsidies on
      operations and maintenance, in order to ensure works can serve effectively and
      sustainably.
    Create an investment mechanism to assist with the transition from an electric network
      to a low voltage container for agricultural, aquacultural and other occupational use.

CONCLUSIONS

While Viet Nam has made impressive progress on reducing poverty in recent years,
persistent pockets remain, especially among rural farmers.




4
  Since the reference studies were written, new national policy now stipulates that government investment in
agriculture should double every five years.
5
  In the absence of a community cooperative, cooperation groups may be capacitated and utilized.



                                                       4
An Giang’s irrigation infrastructure promises to further modernize the province’s strong
agricultural sector, yet the lack of organization for electric pumping station investment and
management handicap efforts to maximize the existing system. Presently, a combination of
agricultural cooperatives, cooperation groups, government enterprises and private business
entities are involved in irrigation system management. This brief has proposed entrusting
small to medium-scale irrigation system management to cooperatives and cooperation
groups, while continuing with government control of the large systems.

Expanding irrigation investment and opportunities for participatory planning and management
can improve system efficiency and sustainability, productivity and living standards for the
poor. Key policy recommendations therefore involve 1) prioritizing sustainability (especially
increasing investment and providing funds for maintenance and repair), 2) formulating
programs to encourage farmer participation in irrigation planning, design, investment and
management, 3) progressively handing-over management and financial responsibility to
cooperatives and cooperation groups, and 4) developing corollary policies that diversify
funding sources and create mechanisms to support the management hand-over.



                                      REFERENCES:

Asian Development Bank, 2006. Vietnam Poverty Assessment. Accessed on:
       http://www.adb.org/Documents/Reports/Poverty-Assessment/poverty-assessment-
       vie.pdf

Centre for International Economics, 2002. Vietnam poverty analysis. (Prepared for the
       Australian Agency for International Development). Accessed on:
       http://www.ausaid.gov.au/publications/pdf/vietnam_poverty_analysis.pdf

General Statistics Office of Viet Nam, 2008. Data- “Production of Paddy by Province.”
      Accessed on:
      http://www.gso.gov.vn/default_en.aspx?tabid=469&idmid=3&ItemID=8878

World Health Organization- Western Pacific Region, 2008. Vietnam Millennium Development
       Goals. Accessed on: http://www.wpro.who.int/vietnam/mdg.htm




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