nwp_rapport_021.07.2007_vietnam_meetin by xiangpeng

VIEWS: 18 PAGES: 98

									        Market scan Vietnam 2007
“Opportunities in the Vietnamese water sector”




Authors:
Joke Geschiere
Lisa Kouwenberg
Liselotte van Schie
Christiaan Schubert
Remmert Versluijs




Amsterdam, June 2007
Market scan Vietnam, 2007



           Management summary

           The water sector in Vietnam is a complex sector due to divergent interests and authority of
           stakeholders, a lack of full transparency, the strong dependence on powerful interrelationships and a
           strongly governmental regulated business climate.
                    These aspects should be considered as important factors determining whether to assimilate
           the Vietnamese water sector in your business portfolio. Gradually, yet future-oriented, Vietnam
           implements new laws and regulations to facilitate the business climate, supporting local and foreign
           investors. Direct consequences for foreign investors imply lower barriers to entry, regarding the juridical
           scope for business entities and less or no governmental say on inflows and outflows of foreign currency.
           Furthermore, foreign investors are free to select the sector(s) in which they wish to invest. The
           Investment Law1 guarantees investors' equal access to sources of capital, foreign exchange, land and
           natural resource and legal instruments.
                    Since the water sector is strongly governmental regulated, opportunities are reflected in
           projects put forward by the principal (MONRE/MARD) and MPI in cooperation with the associated
           donor. Participating in project phases requires the understanding of the tender system. An explanation
           of the tender system, its procedures and involved stakeholders is provided in Chapter 3, Tender system.

           The identified opportunities in the researched clusters within the sub-sectors Water Construction, Water
           Management and Water and Green have a knowledge intensive character. Especially technical
           expertise and integrated project management skills and capabilities are at the heart of solutions to
           various problems in the Vietnamese water sector. The final implementation of such solutions is often
           relatively straight forward and inexpensive, which is its major strength. Local parties are therefore often
           used in the implementation phase of projects and unless the implementation requires specific high-
           tech input, Dutch companies are less likely to exploit opportunities in providing high-tech products.
           Besides, if high-tech products are required, the Vietnamese water sector prefers price over quality. This
           is where less high-tech products from Asia appear to have a better position in the market due to the
           lower prices offered. A summary of all identified opportunities is provided in chapter 7.

           Organizations considering to enter the Vietnamese market should be aware of the major differences
           between the Dutch and the Vietnamese (business) culture. There are several things that a new entrant
           should keep in mind: respect the hierarchy, manage relationships, and take care of a proper track
           record. It is also important to keep in mind the so called ‘management fees’. To gain good
           understanding of all different interests and people involved in obtaining projects, it is wise to search for
           a good, reliable, Vietnamese business partner and to stay in contact with either the Royal Netherlands
           Embassy in Hanoi or the Consulate in Ho Chi Minh City. Together, these parties are able to guide you
           through the apparent chaos after having just arrived in Vietnam.




           1   Investment Law, 1 July 2006




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                                                                                                                                          Market scan Vietnam, 2007



Table of contents

Management summary...................................................................................................2
1. Introduction ..................................................................................................................5
  1.1 Cause of research................................................................................................................................... 5
  1.2 Scope of research................................................................................................................................... 6
  1.3 Method of Research ............................................................................................................................... 7
  1.4 Cluster analysis ........................................................................................................................................ 7
  1.5 Reading Manual ................................................................................................................................... 10
2. Description of subjects of research ..........................................................................11
  2.1 Macro Vietnam ..................................................................................................................................... 11
  2.2 WTO ........................................................................................................................................................ 14
  2.3 Water sector Vietnam........................................................................................................................... 16
  2.4 Economic zones .................................................................................................................................... 16
  2.5 Financial structure and decision making............................................................................................ 18
3. Tender system ............................................................................................................25
4. Water Construction ....................................................................................................29
  4.1 Barriers and flood protection ............................................................................................................... 29
  4.2 Coastal engineering and management ............................................................................................ 32
  4.3 Port management/development ....................................................................................................... 36
  4.4 Sustainable dredging............................................................................................................................ 40
5. Water Management...................................................................................................42
  5.1 Overview water resources.................................................................................................................... 42
  5.2 Integrated River Basin Management.................................................................................................. 43
  5.3 Soil issues and desalination .................................................................................................................. 48
6. Water and Green .......................................................................................................51
  6.1 Water & food production and aquaculture ...................................................................................... 52
  6.2 Water distribution and water quality................................................................................................... 55
  6.3 Delta ecology and wetlands ............................................................................................................... 60
  6.4 Alternative water sources..................................................................................................................... 63
7. Summary of opportunities .........................................................................................65
  7.1 Water Construction ............................................................................................................................... 65
  7.2 Water Management............................................................................................................................. 65
  7.3 Water and Green.................................................................................................................................. 65
8. Recommendations ...................................................................................................68
  8.1 Reminders for entering the Vietnamese market................................................................................ 68
  8.2 Recommendations for NWP................................................................................................................. 69
Appendix A: Interview list..............................................................................................71
Appendix B: Financed by state budget .......................................................................72
Appendix C: Financed by ODA ....................................................................................75
Appendix D: Financed by governmental bond investment.......................................78
Appendix E: Financed by SOEs, state credit and private investments......................79
Appendix F: Projects calling for ODA ...........................................................................81
Appendix G: Population density...................................................................................89



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Market scan Vietnam, 2007



           Appendix H: Original model of WL Delft Hydraulics....................................................90
           Appendix I: Entering the Vietnamese market .............................................................91
           Appendix J: Establishing an office in Vietnam ............................................................93
           Appendix K: Literature and internet sites .....................................................................97




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                                                                                      Market scan Vietnam, 2007



1. Introduction

The Netherlands Water Partnership (NWP) is a network organization functioning as an independent
coordination and information centre for the Dutch water sector. NWP strives to create a well organized
water network in order to strengthen the Dutch position in the international water industry.
          SVS Research Project is an international research project initiated by the Faculty of Economics
and Business Administration at VU University in Amsterdam. On behalf of NWP, SVS Research Project
conducted research in Vietnam during five weeks in April and May 2007, in order to explore the
opportunities for the Dutch water sector.
          This report is written for the members of NWP, including governmental authorities, knowledge
institutes and companies. Since basic knowledge on Vietnam as a ‘business country’ is available at the
EVD and the Dutch Ministry of Foreign Affairs, it is assumed that NWP’s members possess this basic
knowledge before reading this report. Consequently, this report will solely discuss macro economical
issues on Vietnam as a country in general. Furthermore, basic knowledge on the water sector in
general is assumed to be possessed by the readers of this report as well. The essence of this report is a
description of the present problems within the researched sub-sectors and clusters, combined with an
analysis of business opportunities that arise from those problems.

Disclaimer
Every company requires additional research within a specific cluster before entering the market.



1.1 Cause of research

NWP is committed to a proactive approach to a selected number of emerging countries. The country
priority list contains a number of countries with a great number of estimated opportunities for the Dutch
water industry. Vietnam, economically a fast growing country, is one of the selected highest priority
countries of NWP. Vietnam is considered as a high priority country by reflecting on expert judgment
from NWP concerning sector priorities, water-related priorities of the water sector gained by an online
survey and water-related priorities of the involved departments.
           From a historical point of view, Vietnam is comparable to the Netherlands in certain areas in
dealing with water issues and the struggle with rising water from the sea or rivers. Building dykes and
water management are of great importance to protect urban and rural areas from floods, water
shortages and desalination issues. Vietnam has experience in building dykes and dealing with water
issues. However, due to a lack of appropriate project management, knowledge and an integrated
overview, water issues remain and could therefore create a number of opportunities for Dutch
companies and institutions. Besides, problems such as floods caused by increased erosion due to
deforestation and dryness caused by incapable river management and the diverse interests of
stakeholders, makes the Vietnamese water sector most complicated.
           The Dutch water boards have a history of 500 to 1000 years. For this reason, the Royal
Netherlands Embassy is cooperating with the Vietnamese government to develop their water boards
by sharing information and experience in order to enable them to increase their skills and capabilities
required to effectively manage the water resources. Vietnam is aware of the expertise of the Dutch
government and water-related companies, therefore those are active in Vietnam and hope to
maintain their positions in the future. Since Vietnam is expected to become a country full of
opportunities for the Dutch water sector, specific market opportunities need to be explored.




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Market scan Vietnam, 2007



           1.2 Scope of research

           This report contains an overview of the opportunities and threats for the Dutch water sector in Vietnam.
           Since the water sector involves a broad range of sub-sectors, clusters and associated organizations, a
           selection has been made by NWP on which sub-sectors and clusters this research would focus. Hereby
           NWP used expert information from knowledge institutes and organizations from within the sector to
           determine which sub-sectors are expected to be attractive and where Dutch organizations could
           potentially gain a competitive advantage. It is assumed that this selection of sub-sectors and clusters is
           the appropriate selection to base research on. Figure 1 depicts the overall water sector.

                                                      Water sector




    Waste water                    Water                Water                    Water and               Drinking water
                                 Construction         Management                  Green



                                   Barriers and       Integrated river           Aquaculture
                                flood protection           basin
                                                       management


                                   Coastal             Soil issues and         Water and food
                               engineering and          desalination            production
                                management


                                    Port                Coastal                       Water
                                management/           development               distribution and
                                development           and land gain              water quality


                                  Sustainable         Urban water               Delta ecology
                                   dredging           management                and wetlands



                                    River                  Port                  Alternative
                                 management           management/              water resources
                                                      water pollution


                               Civil engineering
                                in the offshore


           Figure 1: Scope of research


           This research investigated the highlighted sub-sectors and accompanying clusters. The red clusters
           could not sufficiently be identified and are not included in the report. The blue clusters are discussed in
           another sub-sector, as indicated by the arrows. Since the accompanying problems and opportunities
           in Vietnam seem to show a great deal of overlap, it seemed to be more suitable to jointly discuss these
           clusters. A scaled version of this figure is presented on the top right corner of appropriate paragraph to
           indicate which cluster is described.




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                                                                                           Market scan Vietnam, 2007



1.3 Method of Research

Desk research on the Dutch and Vietnamese water sector was performed from 15th March until 1st
April 2007. From 1st April until 1st May, field research was conducted in Vietnam. The research team
visited Ho Chi Minh City region, including the Mekong River delta and Baria Vung-Tau from 1st April until
13th April, and the Hanoi region, including Hai Phong from the 17th April until the 1st May. The findings
from desk research and field research were analyzed during the analysis stage from 7th May until 27th
June 2007. Qualitative research was performed by conducting 28 in-depth interviews2 with several
Vietnamese governmental parties, Vietnamese universities, multinationals, Dutch water-related
companies and Vietnamese water-related companies.
         Due to the regulated governmental system of Vietnam, limited appropriate quantitative
research data is available. A limited number of statistical institutions are operating in Vietnam.
Moreover, these institutions use different arithmetic methods and the statistics are not being published.
Consequently, these statistics are incomparable and unavailable.
         In order to ensure an appropriate framework and foundation for research, the ‘Opportunities
and Threats Matrix’ by Kotler is used as a basis. The model has been adapted to this specific research
by elaborating on business entity issues, knowledge issues, barriers to entry, and financial issues to
determine the extent to which a market opportunity exists. How this analysis has been performed is
explained in paragraph 1.4 Cluster analysis.



1.4 Cluster analysis

Specific business aspects need to be looked at in order to gain a complete overview of the market
opportunities for every cluster. The research team adjusted the opportunities and threats matrix of
Kotler to fit in with the Vietnamese water sector. This matrix is used to identify the attractiveness of a
certain market. In order to determine this, questions are asked and ratings are given. The ratings range
from 1 to 4 stars; 1 star is ‘low’ and 4 stars ‘high’. For all clusters that will be discussed in this report a
cluster analysis is done on the following subjects.

                            Not identified

                            Low
                            Moderately low
                            Moderately high
                            High


1.2.1 Business entity
Vietnam is characterized by a very complex and to some extent dominating governmental system.
One of the things the government determines is whether or not foreign investors are allowed to start a
privately owned company in a certain branch. This depends on the strategic importance of this
branch to the Vietnamese economy. For doing business in Vietnam it is of utmost importance to be
physically present in the market, therefore the question posed for all clusters is:

        1.   To what extent is this cluster of strategic importance to Vietnam?

2   Appendix A: Interview list




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Market scan Vietnam, 2007




           In this respect, the research reflects upon the economic importance of the cluster, as this determines
           which business entity a foreign investor can start. Of course other issues can be seen ‘strategic’ as well;
           these are beyond the scope of this investigation. In this question 1 star implies that the cluster is of low
           strategic importance to the economy and 4 stars imply that the cluster is of high strategic importance.
           When translated into attractiveness this means that clusters with low strategic importance are
           attractive to foreign investors and clusters with high strategic importance are less attractive.

           1.2.2 Barriers to entry
           A successful market entrance is influenced by many factors. Kotler identified several of these factors:
           economies of scale, licenses/patents, track record, relations and high capital investments. These
           factors are identified in mature market economies. The Vietnamese economy cannot yet be
           compared to such an economy; therefore the research team adjusted these factors.
                     The first factor to be described is economies of scale. These entail whether or not current
           players within a certain market make use of economies of scale. To enter such a market will be
           difficult, as a new party will have to compete with big players. Within the Vietnamese water sector
           there are only a few really big players, mainly in the dredging cluster. Economies of scale have
           therefore not been realized and thus this factor is not included.
                     Licenses/patents is another factor that is excluded from the cluster analysis as these do not yet
           play a role in the Vietnamese market. The laws on intellectual property and patents are still in a
           developing phase; therefore the production of products is not restricted by other parties holding
           patents.
                     Maintaining a good track record and good relations is extremely important in Vietnam. Many
           deals are arranged through relatives and the Vietnamese have strong memories concerning past
           experiences with others. When a company failed to deliver in the past, this will likely harm his
           opportunities for the future as well. As this factor is so important, it is not included in the analysis of the
           clusters. For all clusters the ranking would be 4 stars (highest ranking) and the goal of the analysis is to
           identify differences between clusters, not similarities
                     Finally, the factor of high capital investment is the only barrier that is included in the analysis.
           Here differences between clusters are expected. In some clusters only the ‘import’ of knowledge will
           be attractive, whereas in other clusters companies could start production facilities. Differences in
           capital investment will thus be high and therefore interesting to include in the cluster analyses. The
           question posed for this factor is:

               1.   To what extent does this cluster require high capital investment?

           Clusters that score 1 star require low capital investment and clusters that score 4 stars, require high
           capital investment.

           1.2.3 Knowledge issues
           Opportunities for Dutch organizations in the Vietnamese water industry heavily depend on the
           availability of local knowledge of specific water issues. When local parties have insufficient knowledge
           themselves a knowledge gap needs to be filled, opportunities for Dutch organizations are likely to
           arise. However, Vietnamese companies need to be interested and actively willing to acquire
           knowledge. On the other hand, when local parties have gained specific knowledge within a cluster,
           market penetration is considered to be harder for foreign parties. The questions posed for all clusters
           are:




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                                                                                              Market scan Vietnam, 2007



        1.   To what extent is specific knowledge available?
        2.   To what extent is specific knowledge required?
        3.   To what extent are Vietnamese companies seeking to share/acquire knowledge?

For the first question, 1 star implies that no specific knowledge is available, so the Vietnamese are not
aware of their current situation and the difficulties that might arise from this in the future. In the second
question, 1 star implies that specific knowledge is not required, so the Vietnamese are completely
aware and informed about what is happening and what can be done to overcome the occurring
problems. Finally, for the third question, 1 star implies that Vietnamese companies are not seeking to
share/acquire knowledge.

1.2.4 Financial issues
Revenues for Dutch companies in the water sector are strongly related to the governmental
investments in specific water-related projects in Vietnam. By discussing financial issues, the estimated
investments, projects and opportunities for the Dutch water sector will be clarified. The questions posed
for all clusters are:

        1.   To what extent does the Vietnamese government plan to invest, financed by state budget?
        2.   To what extent does the Vietnamese government plan to invest, financed by Official
             Development Assistance (ODA)?
        3.   To what extent does the Vietnamese government plan to invest, financed by government
             bond investment?
        4.   To what extent does the Vietnamese government plan to invest, financed by state owned
             enterprises (SOEs), state credit and private investments?
        5.   To what extent does the Vietnamese government call for ODA?

These questions are answered using a list of projects provided by the Ministry of Planning and
Investment (MPI). The research team obtained this list from Mr. Tran Quoc Trung, working as expert for
the department of EPZ from the MPI 3. However, it should be kept in mind that this list might not be as
reliable as Dutch parties would expect, documents provided by the government, to be. Projects in this
list might already have been given away, or might never be executed when the financial resources
are not found. To rate these questions, the total budget for a certain cluster is calculated as being
relative to the budget for the sub-sector. The stars are given using the following method:

        •    1 star     if 0-25% of total sub-sector budget can be allocated to the cluster that is analyzed
        •    2 stars      if 25-50% of total sub-sector budget can be allocated to the cluster that is analyzed
        •    3 stars      if 50-75% of total sub-sector budget can be allocated to the cluster that is analyzed
        •    4 stars      if 75-100% of total sub-sector budget can be allocated to the cluster that is analyzed

For every cluster both the total value and the number of identified projects are given. In the
appendixes B to F the MPI lists are included.




3   See Appendix B to F for complete list




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Market scan Vietnam, 2007



           1.5 Reading Manual

           The second chapter of this report will discuss the macro-economic issues of Vietnam and the water
           sector specifically. The third chapter will elaborate on the process of the tender system in Vietnam.
           After discussing these general issues, the sub-sectors and associated clusters will be elaborated on.
           Chapter four discusses the general problems and opportunities for every cluster within the Water
           Construction sector. Furthermore, a cluster analysis will determine the extent to which the opportunities
           are present within every cluster. Chapter five and six use the same format to discuss the sub-sectors
           Water Management and Water & Green. To conclude, chapter seven will summarize the identified
           opportunities and chapter eight presents the recommendations made by the research team, starting
           with general reminders for organizations considering entering the Vietnamese market will be discussed,
           next, specific recommendations for NWP will be provided and finally a summary of opportunities arising
           in the different sub-sectors and clusters will be provided.




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                                                                                     Market scan Vietnam, 2007



2. Description of subjects of research

2.1 Macro Vietnam

2.1.1 Geography and climate
Vietnam occupies a land area of approximately 330.000 sq. km. and measures 1.650 km from its
northern border with China to its most southern tip on the Eastern Sea. Situated in the heart of
Southeast Asia, with 3.260 km of coastline. Because of the enormous length of the country, major
climate differences between different parts of the country are present. The northern part of Vietnam
has cool winters with an average temperature of 16˚C and warm summers with an average
temperature of 30˚C. Big differences are present in the south of Vietnam between the dry and wet
seasons. The wet season is from May until November, and the average temperature varies between
27˚C and 30˚C with peaks of 40˚C in the hottest months.

2.1.2 Population, religion and language

General facts
Official name                             : Socialist Republic of Vietnam
Capital city                              : Hanoi
Population                                : 84,4 million
Population growth                         : 1 million each year
GDP                                       : 60 billion US$
GDP growth                                : 8,17 % (7 % for the last five years)
GDP per capita                            : 730 US$
Inflation                                 : 6.6%
Major exports                             : rice, coffee, oil & gas, textiles and seafood
Time difference NL                        : 6 hours
Land area                                 : 330.363 sq. km. (8 times the Netherlands)
Currency                                  : Vietnamese Dong (VND)
                                           € 1: 21300 VND; $ 1: 16000 VND (May 25th, 2007)

Table 1: General facts about Vietnam4




Demographic facts
Total population                                  : 84,4 million
Population by age group
        0 – 14 years                              : 30,2 %
        15 – 64 years                             : 64,2 %
        65 years and over                         : 5,6 %
Rural population                                   :74,2 %
Population density (people per square meter)      : 244
Population growth rate (percent per annum)        : 1,5%

Table 2: Demographic facts5



4   Worldbank, 2007
5   Worldbank, 2007




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Market scan Vietnam, 2007




           In 2007, Vietnam’s population is about 84 million people, 60% is under the age of 30 and five percent
           are over the age of 65. Due to a population boom in the 1980s, Vietnam has nowadays a large and
           young working population. Many young people born in this period will start looking for jobs if not
           already employed in the near future. The average population density is around 244 people per sq. km.
           In total there are 54 ethnic groups, those of Kinh (Vietnamese) origin account for 80% of the total
           population.
                     Almost three-quarters of the Vietnamese live at the countryside; however migration to the
           cities increases6. The average growth rate of the entire population of Vietnam grows with 1, 5% each
           year. The urban population grows with 3.5% each year and it is expected that it will remain more or less
           the same in the coming years. The country population mainly lives in the two most important deltas;
           Mekong Delta in the south, and Red River Delta in the north of Vietnam. The adult literacy rate is 93%.
           Almost 57% of the population is employed in agriculture and nearly half is under the age of 25.

           The religions of Vietnam are varied and are not that explicit, Vietnamese call themselves Buddhists but
           also practice Confucian and Taoist principles, ancestral worship and superstitions as well. Furthermore,
           due to historical influences, Christianity (Roman Catholic and some Protestant) plays a small role.
           Buddhism is the most popular religion in Vietnam and has a strong influence on everyday customs and
           behaviour. The strong influences of Buddhism, Taoism and some other beliefs result in the following
           characteristics of Vietnamese people: gentleness, hospitality, non-violence and humility.

           Within Vietnam, Vietnamese is the common language. English, French, Chinese, Japanese and
           German are also spoken7.

           2.1.3 Foreign Investments in Vietnam
           With respect to foreign-invested enterprises, during the past 20 years, foreign direct investment (FDI)
           activities in Vietnam had been regulated by the Law on Foreign Investment of 29 December 1987
           together with its amendments and additions of 1990, 1992, 1996 and 2000 and other guiding
           documents mentioned therein. This law, along with the legal system and policies concerned, had
           created a favourable environment for foreign investors. Foreign investment projects had created some
           620,000 jobs directly, and several hundred thousand jobs were indirectly dependent on these projects.
                    Interest in Vietnam from foreign entrepreneurs and multinationals keeps growing. In 2005 they
           invested 5,8 billion US dollars in Vietnam, which is tantamount to 6.6% of the GDP8. Also in 2006 interests
           grew, leading to the approval of 350 investment projects by the Ministry of Planning and Investment
           during the first six months, worth a 2,84 billion US dollars. The investments mainly concerned projects
           within the sectors of industry, construction and service in the following regions: Hanoi and Ho Chi Minh
           City and in the southern provinces Bad Raving Tao, Dong Nay and Bin Duong9.

           About half of all investments is of Asian origin; Taiwan, Japan, South Korea, Hong Kong and Malaysia,
           which can be seen as the biggest traditional investors. When this is linked to the water sector and main
           activities of these countries in Vietnam, the following broad division can be given. Japan, South Korea
           and China focus on water projects (coastal engineering and management, urban water
           management, inland waterways). Japan, Malaysia, China and Hong Kong play a big role in port
           development in Vietnam (Hai Phong, Dining and Saigon Port).

           6 Appendix G: Population density
           7 Doing Business In Vietnam & EVD landenpublicatie 2007
           8 Gross Domestic Product (Bruto Binnenlands Product)

           9 Doing Business in Vietnam




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                                                                                                  Market scan Vietnam, 2007



                   Country                        Number of         Licensed           Implemented
                                                  projects          capital (billion   capital
                                                                    US$)               (billion US$)
                   1. Singapore                               334         7.98                 3.38
                   2. Taiwan                                1.259         7.26                 3.15
                   3. Japan                                   490         5.39                 4.25
                   4. South Korea                             840         4.75                 2.89
                   5. Hong Kong                               326         3.23                 1.94
                   6. Brit. Virg. Isl.                        212         2.43                 1.14
                   7. France                                  142         2.15                 1.06
                   8. Netherlands                              53         1.84                 1.97
                   9. Thailand                                116         1.38                 0.76
                   10. Malaysia                               163         1.32                 0.81
                   11. United States                          215         1.28                 0.73
                   12. United Kingdom                          62         1.22                 0.60
                   13. Switzerland                             28         0.66                 0.52
Table 3: Foreign Direct investment by country10


If we compare international interests and investments of entrepreneurs and multinationals with Dutch
interests and investments in Vietnam, the same trend is noticeable. Of all total investments the
Netherlands has maintained its top-ten position for years. Vietnamese statistics show a total amount of
1,9 billion US dollars invested by the Netherlands11. Within this list the Netherlands rank 8th, as compared
to two other European countries, France (7th) and the United Kingdom (12th), who respectively
invested 2,15 and 1,22 billion US dollars. Ho Chi Minh City and surroundings are the most important
places of business for Dutch investments and trade.

Note: Governmental authorities routinely revise or revoke investment licenses that have not been
utilized and other investment licenses contain automatic expiration clauses that take effect if a project
or certain phases of a project are not implemented by a certain date. Statistics on the number of
licensed projects and the value of licensed projects are then adjusted accordingly12.

Only a few years ago, many legislative obstacles had to be removed by foreign investors, but
authorities are working on a more accessible investment environment. This has led to a Common
Investment Law, which came into effect 1st July of 2006, see paragraph 2.2.3 for more detail.
Moreover, the government is willing to collaborate with international parties and stimulates this among
Vietnamese organizations.

2.1.4 Investment climate
Vietnam joined the World Trade Organization (WTO) in November 2006, which has led to an increase in
foreign investments with 40% amounting to 10,2 billion US dollars in 200613.
         New regulations improve the investment climate and make it easier for foreign investors to
enter the Vietnamese market and to start companies that they own for a 100%. In the past it was only
possible to start joint ventures, now after Vietnam having joined the WTO, also other business
enterprises can be started, such as Limited and Joint Stock companies, depending on the strategic
position of the specific sector in the Vietnamese economy. However, foreign investors are still treated
differently compared to domestic investors.


10 DBIV, US Commercial Services 2004
11 MPI (Ministry of Planning and Investment)
12 Doing Business In Vietnam, US Commercial Services 2004

13 The Economist, December 2006




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Market scan Vietnam, 2007



           Positive conditions in the investment climate of Vietnam are; strategic position in Asia, political and
           macro-economic stability, extensive domestic market, the offer of young moderately qualified
           workmen/personnel and the willingness of Vietnamese government to continue privatization.
                    Nevertheless, after investigating the current economic situation of Vietnam, many foreign
           companies, multinationals and other important parties, indicate that the current investment climate
           could and should improve and that the competitiveness of the economy remains low, because of
           inadequate infrastructure, outdated technology, poor management and a shortage of skilled workers.
           Also the financial and monetary system remains weak, unemployment and underemployment are still
           high. Moreover, high costs of electricity, office rents (in Hanoi, rents are twice as high compared to
           Kuala Lumpur and Bangkok14), telephone and transport and immature internet possibilities do not
           stimulate a country’s competitiveness.

           The Vietnamese government is trying hard to change the aspects mentioned above in order to
           increase investments in the private sector. Points of interests are; a stable macro-economic policy, laws
           and regulations that are modernized to Western standards and improving the level-playing field. As a
           result differences in tariffs of electricity, gas and water between domestic and foreign investors are
           decreasing.


           2.2 WTO
                                                                                      FACT FILE
           The World Trade Organization (WTO) is the only global international
                                                                                      Location:
           organization dealing with the rules of trade between nations. At its
                                                                                      Geneva, Switzerland
           heart are the WTO agreements, negotiated and signed by the bulk
                                                                                      Established:
           of the world’s trading nations and ratified in their parliaments. The
                                                                                      1 January 1995
           goal is to help producers of goods and services, exporters, and
                                                                                      Created by: Uruguay Round
           importers conduct their business.
                                                                                      negotiations (1986-94)
                                                                                      Membership: 150 countries
           The Government of the Socialist Republic of Vietnam applied for
                                                                                      on 11 January 2007
           accession to the World Trade Organization in January 1995. Vietnam
                                                                                      Budget: 182 million Swiss
           has been carrying out economic reforms since 1986 under the ‘Doi
                                                                                      francs for 2007
           Moi’ (Renovation) policy, focusing on market oriented economic
                                                                                      Secretariat staff: 625
           management; restructuring to build a multi-sect oral economy;
                                                                                      Head: Pascal Lamy
           financial, monetary and administrative reforms; and the
                                                                                      (Director-General)
           development of external economic relations. Having joined the
           Association of Southeast Asia Nations (ASEAN), the Asia-Europe
                                                                                       Functions:
           Cooperation (ASEM) and the Asia-Pacific Economic Cooperation
                                                                                       - Administering WTO trade
           Forum (APEC), Vietnam was participating in regional institutions
                                                                                         agreements
           which were committed to WTO principles and rules, aiming at a               - Forum for trade
           successful accession to the WTO.                                              negotiations
                   Vietnam recognized the important role and significance of           - Handling trade disputes
           the WTO in the development of the global economy as well as the             - Monitoring national trade
                                                                                         policies
           economic growth of individual countries. Vietnam had decided to
                                                                                       - Technical assistance and
           apply for WTO membership with a view to expanding its economic,               training for developing
           trade and investment ties with other Members. Conscious that WTO
           membership involved both rights and obligations, Vietnam was committed to upholding the principles
           of the WTO as the basis for its trade policies. Vietnam was revising its legislation to adapt gradually to


           14   EVD landenpublicatie 2007




                                                             14
                                                                                        Market scan Vietnam, 2007



the rules and principles of the WTO. Vietnam relied on empathy and flexibility in the elaboration of the
terms and conditions for Vietnam's membership, which the Members did. After 12 years and long
negotiations, Vietnam joined the WTO in November 2006.

2.2.1 Vietnam as WTO-Member
Members of the WTO strongly welcomed Vietnam and appreciated the significant reforms already
undertaken and encouraged Vietnam to continue the policies towards market-orientation,
liberalization and transparency. As Vietnam’s first goals are of macro-economic kind, it is to early yet to
identify changes that would affect businesses in the water sector other than trade and import-export
related issues. The joining of the WTO can not be seen as a final breakthrough, but as a further step
towards liberalization. ‘It supports the thought of credibility of the Vietnamese government’, according
to Hans Peter Verhoeff. Remaining problems are lack of transparency, ‘management-fees’ and
incompatible governmental planning.

Overview of changes relevant to foreign investors:
   •   Foreign invested enterprises and foreign individuals are not considered Vietnamese enterprises
       and can transfer the profits earned from their investments in Vietnam anywhere abroad
       without having to go through the procedures applicable to Vietnamese enterprises (Decree
       No. 22/1999/ND-CP).
   •   Foreign invested enterprises and foreign parties to business cooperation contracts could open
       accounts overseas to facilitate medium and long-term overseas borrowing. (Circular
       No. 04/2000/TT-NHNN). No restriction on inflows and outflows of foreign currency (Decree
       No. 24/2000/ND-CP).
   •   Foreign invested enterprises and parties to business cooperation contracts (BCC) can
       purchase foreign currency at authorized banks to finance current, capital and other permitted
       types of transactions.

Vietnam gave the guarantee to balance foreign exchange, in case commercial banks were not able
to meet the demand had been, upon request of investors facing high risks in foreign exchange
balancing (construction projects, BOT, BTO and BT investment projects and other infrastructure
projects: electricity supply, bridge and road toll, water supply, etc). This measure aims at encouraging
private sector participation in infrastructure development as State investment in this area remains
limited. This measure existed in a number of countries and had been recommended by the World Bank
and UNCITRAL.
          With a view to further improving the business environment in accordance with international
rules, the National Assembly has adopted a new Enterprise Law in November 2005. The new Law has
entered into force on 1 July 2006. The Law regulates the establishment, management and operation of
enterprises.
          The new Investment Law entered into force on 1 July 2006. The Law regulates investment
activities, investors' rights and obligations, the allocation of incentives, State administration of
investment activities in Vietnam (encouraging, guiding and supporting investors in the implementation
of their projects and formulating strategies and policies for the development of investment), and
offshore investment from Vietnam.
          Foreign investors are free to select the sector(s) in which they wish to invest, the form of
investment, capital raising methods, the geographical location and scale of investment, investment
partners and the duration of investment in accordance with Vietnam's laws and Vietnam's
commitments under the international treaties to which Vietnam was a party. The Investment Law
guarantees investors' equal access to sources of capital, foreign exchange, land and natural




                                                   15
Market scan Vietnam, 2007



           resources, legal instruments and data on the national economy and investment opportunities, and
           ensures the investors' right to lodge claims or initiate legal proceedings.


           2.3 Water sector Vietnam

           The water sector in Vietnam is a complex sector with many stakeholders involved. Vietnam is a state
           regulated country and this is revealed in several economic sectors as well as in the water sector. The
           water sector is a governmental regulated sector which has the authority to make decisions with regard
           to land use and development, investment plans and programmes. Starting activities within the water
           sector can be difficult and almost impossible without good relations with central authorities, such as
           MONRE, MARD, and MPI and local authorities, such as PPCs, DONREs, DARDs, and DPIs. Subsequently,
           as all earlier mentioned parties have to give a ‘go’ for an investor’s investment plans, a good relation
           and mutual trust is required. In practice, for instance at negotiations, the governmental authority must
           sanction an agreement if it approves those plans. Every company or organization that is willing or
           planning to go to Vietnam and doing business should be aware of this fact.
                    In the long term if a company has started its activities in Vietnam, a company’s track record
           can function as a standard for governmental authorities to decide which company executes specific
           activities. In every economic sector and also within the water sector, the tender system fulfils an
           important role in developing investment plans and projects. Different stakeholders, such as consultants,
           contractors and knowledge institutions can be consulted at the realization of these plans and projects.
           Once again, a good relation and track record is essential if a company wants to be appointed
           regularly for consultation and execution with regard to investment plans and programmes!

           2.3.1 Legislation
           In Vietnam the water sector has no overall integrated strategy and action plan on the national or
           regional basin level. However, strategies and action plans exist for a number of the sub sectors. The
           Law on Water Resources, approved in 1998, represents a major step toward integrated water
           resources management. But only partial progress has been made in implementing the reforms
           embodied in it. Important secondary legislation necessary for implementing many of the law’s
           objectives have not yet been developed.
                    In 2000 a National Water Resource Council at the national level and in 2001 three Boards for
           River Basin Planning and Management at a local level were established to work under the government
           as advisory, coordination and planning bodies.
                    With the creation of the Ministry of Natural Resources and Environment (MONRE) in 2002, the
           state management of water resources was allocated to the Agency of Water Resources Management
           within MONRE. This important change represents a separation of state management and service
           functions for water resources.       However, for effective management the need for further
           decentralization of management authorities remains.

           Previously, both water resources management and service functions were the responsibility of the
           Agency of Water Resources and Hydraulic Works Management under MARD15.


           2.4 Economic zones

           In Vietnam there are different economic zones. In general the regions around Ho Chi Minh City in the
           south and Hanoi in the north are the places where business is concentrated. For the water sector

           15   WEPA




                                                            16
                                                                                     Market scan Vietnam, 2007



however, other zones can be identified. In figure 2, different economic zones for different clusters are
depicted. Clusters that are not depicted in this figure are less concentrated in the country. More
information about the depicted clusters is provided in the chapter concerning Water Management,
Water Construction and Water & Green.

                                                                                        Aquaculture

                                                                                        Ports

                                                                                        Salinity Intrusion


                                                                                        Dredging

                                                                                        Rocky Sediment

                                                                                        Muddy Sediment

                                                                                        Sandy Sediment




Figure 2: Economic zones in Vietnam




                                                  17
Market scan Vietnam, 2007



           2.5 Financial structure and decision making

           2.5.1 Governmental organization
           Vietnam is a single party state; the Communist Party of Vietnam has a central
           role in government, market reforms, politics and society. However, within this
           single party state economical development has the main priority. The President
           of Vietnam (currently Nguyen Minh Triet) is the head of state and Commander
           in chief of the Vietnamese military. The Prime Minister of Vietnam (currently
           Nguyen Tan Dung) is the head of the Vietnamese cabinet. He has the power to
           appoint and to fire the Parliamentary Under Secretary.
                    The National Assembly is the highest representative organ of the
           population of Vietnam; it is the highest governmental organization as well and is
           the sole organ that has constitutional and legislative rights. It has the power to
           alter the constitution and to alter and make new laws. The National Assembly also has the power to
           decide who represents the council of ministers.
                    The three main functions of the National Assembly are; (1) legislation, (2) day-to-day handling,
           and (3) the supreme supervision power over state activities. The chairman and the vice chairman of
           the National Assembly are elected by the national assembly itself. The standing committee is the
           permanent body of the National Assembly. The term of each National Assembly is five years16.

           Vietnam’s judicial bodies are the Supreme People’s Court, the local People’s Courts and the People’s
           Organs of Control. The Supreme People’s Court is the highest court and is charged with the supervision
           of the other courts in Vietnam. The Local People’s Courts, as the name implies, serves at local level. It
           consists of the Provincial Municipal Courts and the People’s District Courts. The Organs of Control guard
           the integrity of the judicial bodies.
                    Vietnam is divided in thirty-six provinces, three provinces are autonomous municipalities; Hanoi,
           Hai Phong and Ho Chi Minh. The People's Councils represent the local authority of the state and are
           the top supervisory bodies at each level. However, each administrative level has a (provincial)
           People’s Committee as well; these act as executive bodies and carry out local administrative duties17.

           Interviews with Vietnamese and other parties point out that the Provincial People’s Committee (PPC)
           has a lot of power in the provinces; the Vietnamese government is more decentralized than expected,
           as powerful tasks have been appointed to the People’s Committee. An example of these tasks is that
           the People’s Committee often identifies new projects and forwards it to the Ministry of Planning and
           Investment. Figure 318 gives a clear representation of the power and involvement of the People’s
           Committee.




           16 Doing business in Vietnam, James W. Robinson, 1995, Prima Pub
           17 The official Vietnamese government website
           18 WEPA




                                                                         18
                                                                                                         Market scan Vietnam, 2007




Figure 3: The power of the people’s committee


Twenty-six ministries can be distinguished within the Vietnamese government. However, they are not all
equally important for the water sector in Vietnam; the most important ministries are: the Ministry of
Agriculture and Rural Development (MARD), the Ministry of Natural Resources and Environment
(MONRE), and the Ministry of Planning and Investment (MPI).

Ministry of Agriculture and Rural Development
The Ministry of Agriculture and Rural Development (MARD) is a governmental agency performing state
management functions in the field of agriculture, forestry, salt production, irrigation/ water services and
rural development nation wide. The main benchmarks for 2010 of MARD are:
     •   agricultural production growth by 4% a year
     •   growth of rural economy by 8% a year
     •   forest coverage of 42%
     •   making use of technical applications in the rural sector
     •   making a balanced economic structure in the rural areas

In the water sector MARD has three responsibilities:
     •  unifying the management of construction, usage and protection of hydraulic works, water
        supply and drainage works in rural areas
     •  unifying the management of river basins and the development of rivers
     •  unifying the management of dyke construction and efforts to protect the land against
        typhoons and floods19
The local representation of MARD is the Department of Agriculture and Rural Development (DARD),
which serves on local level.

Ministry of Natural Resources and Environment
The Ministry of Natural Resources and Environment (MONRE) is a governmental agency responsible for
the management of natural resources, for example water, land and environment.




19   Vietnam Ministry of Agriculture and Rural Development; an introduction, MARD, Danko Communications Joint Stock Company




                                                              19
Market scan Vietnam, 2007



           The agency of Water Resources Management is a department under MONRE, which functions to
           provide assistance to the Minister in implementing state management on water resources including
           rain water, surface water, ground water and sea water within the territorial land and sea of Vietnam20.
           The local representation of the MONRE is called DONRE; Department of Natural Resources and
           Environment.

           Ministry of Planning and Investment
           The Ministry of Planning and Investment (MPI) is a governmental agency which is charged with the role
           of state management over the domain of planning and investment. It provides advice at country level
           on socio-economic strategies, programmes and plans, policies for specific sectors, domestic and
           foreign investments, industrial zones etc21. The prime minister of Vietnam has entrusted the MPI to
           outline the socio-economic strategy for the years 2011 to 2020.
                    All decisions about large investments are made by the MPI. The Department of Planning and
           Investment (DPI) is the local representation of MPI, deciding on smaller investments. This is because
           they have less money available than MPI.

           Interviews have pointed out that the MPI has a lot of power in Vietnamese society. Companies cannot
           act independently without approaching the MPI or a DPI, because the MPI/ DPI has to approve the
           plans of the company. The Provincial People Committee’s (PPC) have to forward project proposals to
           the MPI for approval as well. The plans sanctioned by the MPI are often in the form of feasibility studies,
           made by consultancy firms.

           Additional ministries
           Other ministries that have a connection with the water sector are the Ministry of Fisheries (MOFI), the
           Ministry of Transport (MOT) and the Ministry of Construction (MOC)22. During the field research those
           ministries only came across sporadic, therefore it is assumed that they are of lesser importance to the
           water sector and thus these ministries are not further elaborated on.

           Figure 423 depicts the described governmental structure of Vietnam.




           20 Ministry of Natural Resources and Environment, No: 600, 2003, Hanoi
           21 www.mpi.gov.vn
           22 Note: More information about these ministries can be obtained at the websites: www.mofi.gov.vn, www.moc.gov.vn, and

              www.mt.gov.vn
           23 23 Doing business in Vietnam, James W. Robinson, 1995, Prima Pub




                                                                       20
                                                                                       Market scan Vietnam, 2007




Figure 4: Governmental structure of Vietnam


2.4.2 Expenditures water sector
Expenditures on the water sector are not categorized separately in the state budget but are listed
under the various ministries such as MONRE and MARD.
          A review has been undertaken to estimate the spending of the government on activities in the
water sector. Due to the unclear division of the management and service functions in the water sector,
this review has only addressed the water resources management and the management side of the
service function. The relevant expenditures under items pertaining to water resources management
from various ministries and departments have been assessed and aggregated. Current expenditures
for water resources management consist of operating costs including salary of staff and research costs
of state institutions24.
          In addition to the small current expenditure on water resources management, the much larger
investments in the water sector were estimated in 2002 by MPI. A more recent study is not available.
The estimation is visible in table 425. It represents the expenditures on the water sector as a proportion
of the total public expenditure in million dollars.




24   Water Environment Partnership in Asia, WEPA
25   Ministry of Finance and GSO, 2002, MPI




                                                   21
Market scan Vietnam, 2007




                                                                    1996      1997      1998      1999       2000       2001
           A.         National Budget Investment                     1061,8    1217,6    1282,1      1856     1851,5     2514,7
           A1         Public Investment for Water Sector              352,3    402,06     426,8     433,6      456,5      534,9
           A2         As % of budget investment                        33,2      33,0      33,3       23,4       24,7      21,3
           B          Current National Budget Expenditure            2650,8    3079,3    3180,3    3254,8     3863,9     4472,6
           B1         Current expenditure for Water Sector           2806,2    2887,5    2818,7    3156,2       3625     3887,5
           B2         As % of current budget expenditure               0,10      0,09      0,08       0,09       0,09      0,09
           C          Total Budget Expenditure                       4408,6    4878,5    5124,6      5301     6544,6     7921,3
           C1         Total expenditure (A1 + B1)                   355118    404950    429631    436843     460187     538825
           C2         As % of total budget expenditure                  8,0       8,3       8,4        8,2        7,0       6,8
           Table 4: Investments in the water sector


           The most remarkable fact is that the public investment in the water sector has increased, but that the
           percentage of the total budget expenditure decreased over the years 1996-2001.

           Funding Institutes
           If a Dutch company within the water sector wants to invest in Vietnam, the company can apply for
           subsidy or loans from different organizations, especially when it stimulates the development of
           Vietnam. There are Dutch programmes for emerging markets, but there are foreign programmes as
           well.

           2.5.3 International Funding Institutes

           Asian Development Bank and World Bank
           Next to the subsidy of the Dutch financing programmes and loans from commercial banks the
           possibility exists to receive a loan from the Asian Development Bank (ADB) and the World Bank. Both
           banks have the aim of poverty reduction in developing countries. The ADB and the World Bank both
           provide loans that have low interest rates compared to commercial banks; other conditions are very
           favourable as well, such as special repayment programmes. Moreover, they provide policy advice
           and knowledge sharing services to developing countries.
                     Currently the ADB is involved in three segments of the water sector; urban, rural and basin
           water. At the basin water segment there is a close coordination between ADB and MONRE. The World
           Bank focuses primarily on flood recovery and prevention26.

           2.5.4 Dutch funding institutes

           PSOM
           PSOM is a Dutch programme for emerging markets (‘Programma Samenwerking Opkomende
           Markten’) that can partially cover investment costs. PSOM stimulates Dutch initiatives in emerging
           markets, under the condition that local society is socio-economically supported by means of joint-
           ventures, employment, education etc. If a company does not succeed in finding a bank to finance
           the company, it can apply for a PSOM subsidy. If the company receives a contribution of PSOM it
           borrows the money first and if the preset targets are obtained at the end of the year the money will be
           returned to the company by PSOM27.


           26   www.worldbank.org
           27   Note; more information can be found on www.evd.nl




                                                                      22
                                                                                       Market scan Vietnam, 2007



An example of the PSOM programme is the implementation of the new ultra-low cooling technology
of the Dutch company IbroMar (located in Vietnam). Since this technology has not been used in
Vietnam before and requires a high investment and local banks fail to see the added value of the new
cooling technology, the application for PSOM is valid.
        The new ultra-low cooling technology has improved the expiration date of fresh fish. As a result
IbroMar can lower their prices which enforces their competitive position. As a consequence IbroMar
could employ more people, especially women. Fishermen also have more certainty because IbroMar
assures the fishermen that they will purchase all their fish. So the added value of the cooling
technology includes positive effects for the Vietnamese society.

ORET
ORET (‘Programma OntwikkelingsRelevante ExportTransacties’) is a Dutch programme that aims at
stimulating durable economic development and the investment climate in developing countries. It is a
programme from the Dutch Ministry of Foreign Affairs.
         Developing countries can receive a gift for activities that contribute towards the development
of the country, such as infrastructure, health care, education etc. A company that wants to deliver the
capital goods or services can apply for a gift. The Dutch government passes the gift to the
government of the developing country. There is a bounded and an unbounded programme. For the
bounded programme only Dutch companies can apply. For the unbounded programme foreign
companies can also apply28.

Partners for Water
‘Partners for Water’ is a Dutch programme that stimulates the Dutch water sector in foreign countries. It
consists of enterprises, governmental organizations, NGOs and knowledge institutions. Parties in the
Dutch water sector can put forward project proposals for five different activities29; feasibility studies,
identification – and market studies, business development tracks, institutional strengthening and
demonstration and pilot projects. ‘Partners for Water’ finances eighty percent of the total sum of the
project, if the sum does not exceed a certain amount. This amount depends on the project30.

2.5.5 PPP-Programme
The majority of companies in Vietnam are public companies. This is still a remnant of the communist
regime. However, the Vietnamese government and the Dutch embassy try to stimulate PPPs (Public-
Private Partnership). PPP is a system in which a governmental service or private business venture is
funded and operated through a partnership of the government and one or more private companies.
If social enterprises are working together with the government, it is called a PSPP (Public Social Private
Partnership).
          The PPP-Programme in Vietnam is still at an early stage. According to the Public-Private
Infrastructure Advisory Faculty (PPIAF) it must be kept in mind that developing and implementing
effective approaches to seek private sector participants take time. Support is required to build
capacity in both the public and the private sectors. The commitment of time and other resources
needed to ensure success should not be underestimated.

An example of the PPP-Programme is the situation in Lym Town, a village just 25 kilometres northeast of
Hanoi, and Minh Duc Town, 15 kilometres northeast of Haiphong City. With no community water supply
system, residents do rely on untreated water. The government used a demand-based approach

28 www.evd.nl
29 www.evd.nl
30 More information can be obtained at the website




                                                     23
Market scan Vietnam, 2007



           (earlier used in the Philippines) in which each community would determine the best way to deliver
           services, one for which its residents would be willing and able to pay. Under the approach being
           piloted in Vietnam, the project owner, chosen by the local People’s Committee, in this case the
           Provincial Water Company, selects a contractor through a competitive process. The contractor would
           carry out the detailed design work on the water supply system, construct the system, and then operate
           the system. At the end, the Provincial Water Company would take over the management of the
           system. The PPIAF supports the Provincial Water Companies and local authorities with the unfamiliar
           tasks of, for example preparing such novel projects for bidding31.




           31   PPIAF, Gridlines, note no. 10, June 2006




                                                           24
                                                                                         Market scan Vietnam, 2007



3. Tender system

The tender system is used world wide. It is the procedure in which the principal announces the concept
plan(s) with the associated projects that support the master concept plan. These master concept
plans regard national interests like the improvement of infrastructure, defense, health institutions etc.
Governments often use tender systems as they have large orders and often have to justify their
expenditures.
         In Vietnam, there are two common paths towards acquiring projects. Since all related water
projects are for approximately 80% regulated by the government, as the majority of the enterprises are
state-owned enterprises, the tender system is widely applicable. If projects arise in the private sector,
the tender system could be used when project values are considered relatively large.
         Despite the fact that in April 2006 a very strict tendering law was introduced by the
government, the possible lack of transparency and the ‘management fee’ are realistic aspects that
should be kept in mind. Companies should be aware that certain projects might already be offered
directly to the client, the existence of price-rings and certain exemptions. The research team
experienced that the tender system, its procedures and the involvement of stakeholders are extremely
relevant to the water sector, for which this chapter is dedicated to the tender system.

Tender systems exist in different forms in Vietnam, the two most common forms are32:
   •    Open tendering; The main form of tendering, whereby the number of participating tenders is
        not limited. The conditions and time-limits for participation in the tendering must be publicly
        announced prior to issuing tender invitation documents.
   •    Limited tendering: a form of tendering whereby at least five experienced and capable
        tenders are invited to participate. ,

Tender systems exist on two levels in Vietnam; one on a local level, which is called local competitive
bidding, and one on an international level; international competitive bidding. It is often not clear how
the tender system works on the local level, in addition to the international level where the conditions
are very clear. On a local level relationships with the involved parties are very important. It is important
to build networks and to be physically in Vietnam, this will cost a lot of time and effort.
         Tenders are often announced in national and local newspapers. Companies should not
attach to much importance to these announcements, as they are often not up to date. Additionally,
companies who just started doing business in Vietnam do not make a chance of winning such a
tender as relations (networks, as mentioned earlier) are very important. There are a few organizations
which are helpful to identify projects in the water sector. An example of an organization is the Vietnam
Water Supply and Sewerage Association (VWSA). Every water company and governmental
organization (concerned with water) is a member of this association. One of the goals of the VWSA is
to share knowledge within the water sector. VWSA can be a link between a company and a potential
project (which has to be identified).
         The tender system in Vietnam in Water Management related projects consists of eight
phases33. The involvement of stakeholders differ in each phase. The picture in figure 5 displays the eight
phases and the stakeholders in question (for each phase).




32   New Tendering Law, April 2006. Phillips Fox
33   Royal Haskoning Vietnam




                                                   25
Market scan Vietnam, 2007



                                                                               MPI + Principal
                                                                                   Donor
                                                                               Consultancies




                        Donor                                                  Country
                          &                                                   Assistance                                              Principal
                     Consultancies                                             Strategy                                          (MONRE / MARD etc)




                                                                                                 Id
                                                                                                  de
                                                                                                  d
                                                                                                  d
                                                                                                                                   & Consultancies




                                                                     n




                                                                                                     nt
                                                                 t io
                                                                                    1




                                                                                                       if
                                                                                                       if
                                                                                                       ifi
                                                                                                       if
                                                                ua




                                                                                                        ca
                                                                                                        ca
                                                                                                        ca
                                                                                                        ca
                                                          al




                                                                                                            tio
                                                                                                             i
                                                                                                             i
                                                                                                             i
                                                        Ev




                                                                                                               n
                                                                                                 2
                                                                                                 2
                                                                                                 2
                                                                                                 2
                                                                         8
                                               and Completion
                                               Implementation




                                                                                                                   Preparation
                                                                                                                                            Donor
         Local Contractors & Suppliers
                                                                                                                                              &
                                                                7




       Foreign Contractors/Consultancies




                                                                                                       3
                                                                                                       3
                                                                                                       3
                                                                                                       3
                                                                                                                                         Consultancies
                                                   Im d S
                                                    m d
                                                    m d
                                                    m d
                                                     an
                                                     pl up

                                                      6
                                                      l
                                                      l
                                                      le




                                                                                                 4
                                                        m er




                                                                                                           al
                                                         e r s
                                                         en rvis
                                                         e
                                                         e r s




                                                                                                         is
                                                                                     5


                                                                                                       ra
                                                           t a s io
                                                             at on
                                                             at on
                                                             at on




                                                                                                        p
                                                              t io n




                                                                                                                                       Donor
                                                                              Negotiations           Ap
                                                                  n




             Local Contractors & Suppliers                                                                                       Financial Institutions
           Foreign Contractors/Consultancies                                   and Board                                            Consultancies
                                                                                Approval




                                                                             MPI + Principal
                                                                                   &
                                                                                 Donor


            Figure 5: Tender process


            The eight phases showed in figure 5 are:

            1.       Country assistance strategy
            The government develops a master plan for each specific sector. In this master plan the government
            describes the plans and goals for the next ten years in a specific sector. The donor prepares lending
            and advisory services, based on the master plan of the government, which in its turn is based on a
            selectivity framework and areas of comparative advantage, targeted to country poverty reduction
            efforts.
            If the project will be financed by ODA, the World Bank and the ADB are often the two biggest donors.
            However, state budget, commercial (foreign) banks etc. can finance the project as well.

            2.       Identification
            Interesting projects are identified by the government (like MONRE or MARD) which support the main
            strategies of the government’s master plan, and attributes to social, financial and economical growth.
            Consultancy firms can assist in the identification phase.

            3.       Preparation and feasibility
            In this phase the feasibility studies take place. These can be conducted by a client of the tendering
            party, such as a consultancy firm (for example a Dutch company; Royal Haskoning). But they can also




                                                                                   26
                                                                                        Market scan Vietnam, 2007



tender between consultancy companies to decide who gets the order to make the feasibility study.
This of course with an eye to the highest quality charged for the lowest price. So the competition
between consultancy firms can be very high. In this phase the bank (donor) gives advice about the
finances of the project.

4.     Appraisal phase
The bank (donor) evaluates the economic, technical, financial, environmental, political and social
aspects of the project. The bank gives a final taxation report about this; the project appraisal
document. The legal documents, which are necessary, are also prepared.

5.      Negotiations and board approval
Next the negotiations about the financing of the project and the board approval take place. First, the
negotiations between the contractor and the bank about the loan that the contractor has to borrow
from the bank take place. After they agreed about this, the project is presented to the board of the
company or the ministry (if it is within the government) for approval.

6.       Implementation
In the sixth phase the actual tendering takes place. The principal implements the project and needs
other companies to execute orders for him. After the registration is closed, companies can register for
an order with a proposition and the principal can decide who gets the order.
The final decision is taken on the basis of a checklist. Companies will be judged by a kind of score list
with different aspects. 70% is based on technical quality and 30% is based on price. If Vietnamese
contractors participate at a tender they have more chance to get the order in addition to a foreign
company. Foreign companies have more chance to get an order if it concerns specific knowledge
what the Vietnamese companies do not have.

7.     Implementation and completion
The implementation will be completed and the completion report will be prepared in order to
evaluate the performance of the bank and the borrower.

8.      Evaluation
The bank’s independent operations department prepares an audit report and evaluates and analyses
the project. This analysis will be used for future designs of other projects.

Consultancy firms can participate in all eight phases. However, in the sixth and seventh phase they do
not often play an important role. Sometimes they execute supervision in these phases.
In the sixth and seventh phase the implementation of the project takes place. If it is possible for a local
company to fulfill these tasks, but if these tasks need very specific knowledge, foreign companies are
needed to implement these projects.
          An example of this is the wave breaker at Dung Quat; this is located in the centre of Vietnam.
Several times Vietnamese companies tried to build this wave breaker (phase 6), but due to a lack of
specific knowledge on sediment and construction related issues, their attempts failed several times.
For this reason, Van Oord was contacted to solve the associated problems. As a well-known dredger
they used their experience and specific knowledge to finalize the project successfully.

As mentioned before, the master plan has been developed by the government. A project proposal
(often in the form of a feasibility study), worth more than 15 million, has to be approved by the MPI. If




                                                   27
Market scan Vietnam, 2007



           the project is worth less than 15 million, a DPI sanctions the feasibility study. However, the Ministry of
           Finance (MOF) finally allocates the budget (the cabinet gives advice about the budget allocations).
           Figure 6 displays a more complete and well-organized image of the structure. It shows the decision
           making and information transactions.




           Figure 6: Decision making and information sharing process




                                                                       28
                                                                                      Market scan Vietnam, 2007



4. Water Construction

In the first quarter of 2007, the World Bank released the report ´The Impacts of Sea
Level Rise in Developing Countries´: A Comparative Analysis, showing that oceans
would only have to rise 1m to endanger the lives of millions living in lowland or
coastal areas around the world. Whereas the Japanese believe this would destroy
50 per cent of their rice producing capacity and the Chinese are considering a
‘new Great Wall’ of dykes along its entire coastline, Vietnam is extremely
concerned about direct threats to the population. According to VNS34, Vietnam is
vulnerable to higher water levels because 10.8 per cent of its population resides in and around plains
of the Hong (Red) and Mekong Rivers or coastal regions.
          The relation with the Netherlands can be made as Dutch companies and institutions possess
knowledge in the area of flood protection, coastal engineering and management, river management,
and dredging. This can certainly create opportunities for Dutch companies and institutions to export
their knowledge and expertise to Vietnam, as will be outlined in this chapter. However, the presence of
Asian countries within Water Construction involves competition for Dutch companies in some of the
researched clusters. Especially in port management and development, it entails that Japan, Malaysia,
and China are the key players.



4.1 Barriers and flood protection

Several regions in Vietnam such as the Red River Delta and Mekong River Delta
have experience in building dykes to protect themselves from floods and can be
compared with the Netherlands and are not far behind in knowledge, in relation to
the Netherlands.
          In Vietnam the need for a coherent, long-term strategy for managing and
mitigating floods became obvious after the 2000 flood. Some measures in dealing
with emergencies have already been implemented or are under implementation. However, the fact
that not enough money is available to secure the whole southern part of Vietnam from floods by
building barriers and dykes makes it two-fold. Some other structural measures are being examined as
they require large investments and may have questionable long term impact, e.g. removing people
who live in risk areas35.
          To protect low lands and the hinterland from floods, so called ‘bypasses’ are used to lower the
water level when the water level becomes too high. Nevertheless, people live in and near those
bypasses and this gives rise to issues of how to deal with upcoming floods.
          Moreover, to manage raising water in the wet season, soil banks of max. 1-2 meter are
developed to cope with small floods in problem areas to secure their second rice crop as rice
production is highly important. These solutions are not sustainable and if floods are bigger than
expected, many people have to move as bypasses are full of water, and the 1-2 meter dykes are
devoured by the water. Furthermore, there is also great pressure from farmers in these low lands to
build fully protected areas to enable production of a third annual crop during the flooding period.
          In general, Vietnamese construction companies do not take into account the already present
construction of the dykes when they build dykes. Currently, only 20% of all dykes are consolidated with
concrete, this means that 80% of the dykes are mainly constructed out of soil and are not sustainable.


34   Vietnam News, 2007
35   Mekong River Commission




                                                  29
Market scan Vietnam, 2007



           No clear system or overview is available to see the composition of existing dykes and where they
           already are constructed. Moreover, building dykes is executed by Vietnamese companies. As 80% of
           barriers and flood protection is a governmental business, building a dike is done by several Vietnamese
           construct companies. This is totally inefficient and is the cause of bad quality of dykes as Vietnamese
           construct companies are not aware of the different techniques and working methods used.
                    Because Vietnamese companies and institutions do not have knowledge of the total project
           management of indicating problems, finding solutions, testing solutions and implementing these
           solutions, Dutch companies and institutions are involved for collaboration to require the necessary
           knowledge. The initiative comes from Vietnam, because they know Dutch companies and institutions
           have expertise of this domain and possess the required knowledge. Heading for, instead of ‘waiting
           for’ contacts in this field could be a first step of many to play a prominent role within this cluster. An
           example of sharing knowledge between two institutions is the collaboration between the TU Delft
           (CICAT) and WRU (Water Resource University Hanoi).

           4.2.1 Cluster analysis

           Business entity

               1.   To what extent is this cluster of strategic importance to Vietnam?

           Protecting inhabitants from floods in low lands and hinterlands is necessary. Besides, because rice and
           food production is of importance to the Vietnamese in two ways; own consumption and export
           products, it should be protected. The cluster is not directly strategic; 80% of barriers and flood
           protection is a governmental business and the responsible ministries decide which local contractors
           are constructing those dykes to ensure flood protection. For foreign companies it is possible to start a
           business entity with a local company, such as a joint venture or a limited one because it is not of
           strategic importance.

           Barriers to entry

               1.   To what extent does this cluster require high capital investment?

           Barriers and flood protection can be seen as a cluster that requires high capital investments for foreign
           companies. This mainly concerns the necessity of machines, but in the area of knowledge, founding
           (legislative constraints), accommodation and operation is needed. Since the construction of dykes is
           executed by Vietnamese companies, entering the Vietnamese market is difficult as it is also decided
           by the government who is going to construct the required dykes. Therefore it is more realistic to export
           knowledge as it is less capital intensive and more in demand than the executing of building dykes by
           foreign companies.

           Knowledge management

               1.   To what extent is specific knowledge available?

               2.   To what extent is specific knowledge required?

               3.   To what extent are Vietnamese companies seeking to share/acquire knowledge?




                                                              30
                                                                                     Market scan Vietnam, 2007



The availability of knowledge regarding barriers and flood protection is small, but through
collaboration between foreign and local institutions, more knowledge is gained by interested
Vietnamese parties. However, a large gap exists concerning the total project management of
indicating problems, finding solutions, testing solutions and implementing these solutions.
         From a Vietnamese point of view, more attention should be paid to overall project
management, and Dutch institutions and companies can support this with applicable knowledge. As
stated earlier, knowledge concerning the construction of dykes is not shared among Vietnamese
companies. On the other hand, the government tries hard to acquire more knowledge about barriers
and flood protection and stimulates international collaboration, both financially and institutionally,
giving universities more autonomy and capital.

Finance

    1.    To what extent does the Vietnamese government plan to invest, financed by
          state budget?

The total approved value of investments by the state concerning Water Construction is 1,50 billion US
dollars. The total amount of investments concerning barriers and flood protection is 719,31 million US
dollars divided among 8 projects, and equals 47,94% of the total approved value. The percentage is
relatively small due to a large investment in coastal development in 13 provinces, and is therefore
ranked with 2 stars. The length of projects varies from 2003 to 2010.

    2.    To what extent does the Vietnamese government plan to invest, financed by ODA?

The government does not plan to invest in projects financed by ODA.

    3.    To what extent does the Vietnamese government plan to invest, financed by
          governmental bond investment?

The government does not plan to invest in projects financed by governmental bond investments.

    4.    To what extent does the Vietnamese government plan to invest, financed by SOEs,
          state credit and private investments?

The government does not plan to invest in projects within this cluster that are financed by SOEs, state
credit and private investments.

    5.    To what extent does the Vietnamese government call for ODA?

Investments calling for ODA amount to 77 million US dollars, this is only 3,53% of total calling for ODA
because the total amount calling for ODA is 2,18 billion US dollars. 77 million is divided among 3
projects, the project length is 4 years, starting in 2006 and ending in 2010.




                                                  31
Market scan Vietnam, 2007



           4.2 Coastal engineering and management

           The Vietnamese coastline is 3,260 km and can be divided from the North to the
           South in different types of coast:
           Rocky Coast: Ha Long – Hai Phong
           Muddy Coast: Hai Phong – Than Hoa (Delta area of Red River)
           Sandy Coast: Than Hoa – Hue
           Sandy Coast: Huey – Phan Rang                   Central – South-East Coast
           Sandy Coast: Phan Rang – Vung Tau
           Muddy Coast: Vung Tau – end of coast line (Cambodian border)

           The different types of coast are causing different kinds of problems. The rocky coast in the north does
           not give problems, but from Hai Phong to the end of the coast line the structure is not that strong. Mud
           and sand are vulnerable and easily affected by the sea.

           The last 10 to 20 years more problems concerning Vietnam’s coast have occurred and the Ministry of
           Natural Resources and Environment have been paying more attention to coastal engineering and
           environment, for instance in starting a coastal engineering education at university level (Water
           Resources University, Hanoi). Besides, more attention for flood defense and tide inlets is shown as they
           together form three points of interest for the Ministry of Environment to improve the conditions of the
           coastal zones. One practical example is the launching of the Vietnam Netherlands Integrated Zone
           Management project VNICZM in 2000. However, the Ministry of Environment has only existed for three
           years, and it lacks overview and knowledge of developing coastal development plans and execution
           of projects.
                     Two layers of problems arise concerning coastal engineering and management at the
           realization and implementation of measures taken. First, at provincial level, people that are responsible
           for proper realization do not have the concept plan. The second problem is that representatives in
           Hanoi devise ideas, sometimes in combination with universities, but the implementation at province
           level fails, because of failing capacity or know-how.
                     As mentioned before, Vietnam has intensively encountered the sea in the past. The sea dykes
           however, are in bad condition due to deforestation of mangroves which leads to erosion and
           migration of people that move from inland to coastal zones causes more pressure on these areas.
           Furthermore, part of the coastline is expanding seawards as sediment is brought down from the
           mountains, and people, seeing new lands emerging, seek to colonize it. Soon, inhabitants will pressure
           for defenses against the sea, and because the land is economically productive it becomes difficult to
           deny them36.
                     Small sea dykes may then be erected but when these are overtopped, they demand higher
           and stronger ones, which is a good opportunity for Dutch companies and institutions. Especially in
           sharing knowledge and expertise on how to deal with different interest groups such as inhabitants,
           farmers, and government.

           A recent master plan (MP47) was made by the Ministry of Natural Resources and Environment
           (MONRE), to map all economic activities and natural characteristics of every province along the coast
           line. Moreover, the government is considering starting a separate Ministry, as many people live in this
           area and much economic activity is situated here. One part of the master plan MP47 is developing
           safe ports where fishing boats and large vessels find protection from the yearly passing typhoons.


           36   www.fargisinfo.com




                                                             32
                                                                                        Market scan Vietnam, 2007




Overall, the coastal engineering and management cluster is an interesting cluster that offers some
perspectives as the government notices the importance and applies funds to generate more
understanding. Dutch companies and institutions could assist with their knowledge and experience to
improve aligning master plans and coastal development plans between the different governmental
levels involved. Besides, the knowledge on executing and supervising large projects is still lacking and
needs to be improved.
          A first step that is made to overcome above mentioned problems, was the start of a project
named VNICZM (Vietnam Netherlands Integrated Zone Management), in 2000. The first phase of the
VNICZM Project (2000-2003) aimed at establishing a long-term Vietnamese Integrated Coastal Zone
Management Programme by focusing on advising in the planning and development of the
Vietnamese coastal zone, its communities and its resources in a sustainable way. Emphasis was on
strengthening MONRE-VEPA in Hanoi and the DONREs of Nam Dinh, Thua Thien - Hue and Ba Ria - Vung
Tau. Tools and methodologies were developed and training in Integrated Coastal Zone Management
(ICZM) was given in Vietnam, Manila and the Netherlands. Guidelines for Strategy and Action Planning
for ICZM, including databases and GIS tools, facilitate the launch and sustainability for such long-term
Vietnam ICZM Programmes in its 30 coastal provinces. Following the first phase, the VNICZM Project
finds itself in a ‘bridging phase’ between 2003-2005, which among other things will strengthen
institutional ICZM frameworks at provincial level, will introduce ICZM at coastal district level and set up
the first national ICZM strategy document for approval by the national steering committee. The long
term objective of the Vietnam Netherlands Integrated Coastal Zone Management Project is raising
awareness of the needs and benefits of an integrated coastal zone management approach as a tool
to reach sustainable development in the coastal zone of Vietnam. A training schedule is being offered
to give Vietnamese managers and other stakeholders acting in the coastal zone the opportunity to
learn about ICZM. Some of them are trained as future 'ICZM trainers' themselves37. The VNICZM project
recently ended and showed remarkable results concerning Integrated Coastal Zone Management.

4.3.1 Cluster analysis

Business entity

       1.   To what extent is this cluster of strategic importance to Vietnam?

It is not specifically a strategic cluster that is of economic importance to Vietnam, however protecting
economic activities in agriculture and industrial zones is important. Mainly through a rising awareness of
the government of the importance of economic activities in several coastal regions and its protection,
accompanying measures are encouraged. Starting a business entity is possible but not interesting,
because it is encouraged by the government to cooperate with different knowledge institutions,
ministries and consultants on the area of barriers and flood protection. Therefore only one star is given.

Barriers to entry

       1.   To what extent does this cluster require high capital investment?

The management of water resources is a highly intensive knowledge cluster, attractive to consultancy
firms and knowledge institutes. For this reason no high capital investment are required other than costs


37   www.nea.gov.vn




                                                      33
Market scan Vietnam, 2007



           of founding (legislative), accommodation and operation that are generally low in Vietnam, compared
           to Western countries. If a foreign company is active in the execution of a certain project where
           technical expertise (machines and equipment) is required, high capital investment is needed. Foreign
           companies are only approached if Vietnamese companies are not able to execute these projects.

           Knowledge management

               1.    To what extent is specific knowledge available?

               2.    To what extent is specific knowledge required?

               3.    To what extent are Vietnamese companies seeking to share/acquire knowledge?

           The availability of knowledge regarding coastal management and engineering is small, but through
           collaboration between foreign and local institutions, more knowledge is gained by Vietnamese
           interested parties. Consultancy firms also bring in specific knowledge and contribute to the already
           available knowledge. However, a gap exists in overall coastal engineering and management,
           because ministries of different provinces are involved with coastal development and transferred
           responsibilities and redivision to and from local ministries, are still vague. From a Vietnamese point of
           view, more attention is paid to coastal engineering and management. This is supported with capital by
           the Dutch government to stimulate Dutch institutions; companies and other interested parties because
           they are able to contribute with applicable knowledge, among others confirmed by the VNICZM
           project. The research team is convinced that ongoing knowledge from Dutch institutions is necessary
           and useful to enforce solutions and long term perspectives.

           Finance

               1.    To what extent does the Vietnamese government plan to invest, financed by
                     state budget?

           The total approved value of investments by the state concerning Water Construction is 1,50 billion US
           dollars. The total amount of investments concerning coastal engineering and development is 781
           million US dollars divided among 2 projects, and equals 52,06% of the total approved value. The
           percentage is relatively large due to a large investment concerning coastal development in 13
           provinces, and is therefore ranked with 3 stars. The length of projects varies, projects start from 2006 up
           to 2010.

               2.    To what extent does the Vietnamese government plan to invest, financed by ODA?

           The government does not plan to invest in projects financed by ODA.

               3.    To what extent does the Vietnamese government plan to invest, financed by
                     government bond investment?

           The government does not plan to invest in projects financed by governmental bond investments.

               4.    To what extent does the Vietnamese government plan to invest, financed by
                     SOEs, state credit & private investments?




                                                              34
                                                                                        Market scan Vietnam, 2007




The government does not plan to invest in projects within this cluster that are financed by SOEs, state
credit and private investments.

    5.   To what extent does the Vietnamese government call for ODA?

There are 7 indicated projects that deal with coastal engineering and development in various ways.
The accumulated sector value of projects financed by ODA state budget is 891 million US dollars, and
accounts for 40,82% of the total value 2.18 billion US dollars. The length of the projects varies from 2006
up to 2010.




                                                   35
Market scan Vietnam, 2007



           4.3 Port management/development

           International and national (cargo) transport overseas and by inland waterways is
           becoming more important, resulting among others in developing ports. Currently,
           three main ports in Vietnam can be distinguished; Saigon Port in the south, Danang
           Port in the centre and Hai Phong Port in the north of Vietnam. Moreover, Qui Nhon
           and Quang Ninh in Central-Vietnam and Can Tho Port in the Mekong Delta can be
           considered as the smaller important ports.
                     Comparing Vietnamese ports with ports in Japan, China, Malaysia, and
           Hong Kong, they show remarkable differences in size and modernities. Investments in ports are mainly
           financed by Official Development Assistance (ODA) 38.

           The government has implemented developments in the cluster of port management and
           development since 1999 and has set the following main goals until 2010:
              •   enlarging and innovating Hai Phong Port, with a capacity of 10,000,000 tons a year in 2010
              •   enlarging and innovating the group of Danang – Lien Chieu – Chan May Ports, to become the
                  most important port in Central-Vietnam, with a capacity of 15,000,000 tons a year
              •   building and developing Dung Quat (Quang Ngai province) to serve the ‘petrol industry’, it
                  should have a capacity of 15,000,000 tons a year39
              •   rebuilding and relocating ports in and around Ho Chi Minh City in Vung Tau (Thi Vai River) to
                  support and lighten economic zone Ho Chi Minh – Bien Hoa – Vung Tau
              •   building of general ports within the Cai Mep region to transfer 27,000,000 tons a year
              •   rebuilding Nha Thrang Port to serve as passenger port, next to cargo port

           In the past years, many investments were made concerning expanding and innovating existing ports
           to make them accessible for larger vessels. Ports and accompanying industrial zones often consist of a
           number of ports that represent economic developments of a certain region or economic zone. The
           ports in total transfer 14,000,000 tons cargo, excluding oil; this is three times the amount of 1993. The
           Ministry of Transport and Communication conducted a Sea Port Development Master Plan, which
           provides 199 Sea Ports with a total cargo of 190,000,000 tons put through in 201040 and 41. Yet, no reliable
           statistics are available to check these port developments if the goals mentioned above will be
           achieved in 2010. From interviews the research team gathered, the main players involved in supporting
           port management and development within Vietnam are; Japan, China, Malaysia and Hong Kong.

           Japan, Malaysia, China and Hong Kong play a big role in the development of ports in Vietnam. In
           order to create and maintain a stable position and to obtain shares in key distributional/logistic future
           main ports, these countries are active in port management and development. It is remarkable that for
           special projects in which Japan is involved, the construction is contracted to Japanese executors. The
           Netherlands are not able to compete in this market as Dutch companies are not large enough, on the
           area capital, to compete with the above mentioned Asian key players. Furthermore, construction is
           done by local constructors e.g. dredging, as it is much cheaper. There is no spin-off for Dutch
           companies.
                   The government sees the importance of ports and transshipment companies. Specifications for
           composing ports are free and not state regulated, though, for everything that is constructed

           38 EVD
           39 www.hydrocarbon.com
           40 EVD, may 2007
           41 www.vpa.org.vn




                                                              36
                                                                                          Market scan Vietnam, 2007



permission and official stamps are needed. No matter how good a company’s relations with local
parties are, if you do not possess an ‘official stamp’ that gives permission to start your activities, nothing
is certain.
          According to current legislation, it is not possible to possess a majority of shares in companies
or organizations which are crucial to the economy of Vietnam and can be considered as strategically
important. On the other hand, due to the joining of the WTO, it is possible to start a Limited or Joint
Stock Company. However, in the port sector which is mainly state owned, it is only possible to own a
maximum of 49% of the shares of a port.

Opportunities for Dutch companies could lie in delivering technical expertise concerning the logistical
process, cranes, and transport rails. The technology is of better quality compared to Asian produced
cranes, and can already be found in different ports or transshipment companies. Hai Phong Port has
closed many contracts with suppliers of these products, but licenses have not yet been issued,
opportunities could present themselves on short term.
         For foreign investors it is too late to join expanding projects or to establish it in new developing
ports, most licenses have already been issued. However, this can change any moment if the
government or local authorities decide to cancel a license when an organization does not take action
in developing their branch offices or annexes.
         An overall warning has to be made to question the actual developments of ports as no
reliable statistics are available. Furthermore, the hinterland has still not been well developed and
causes many problems, leading to rising transportation costs. As a foreign investor one should be
reactive as licenses can be changed any moment.

4.4.1 Cluster analysis

Business entity

    1.   To what extent is this cluster of strategic importance to Vietnam?

Ports are of strategic importance to Vietnam and their GDP. Therefore, foreign investors are not
allowed to possess more than 49% of all stocks. They contribute to the trade between Vietnam and
Asia and the rest of the world. Furthermore, ports stimulate inland transport over waterways to Thailand,
Cambodia and Laos.

Barriers to entry

    1.   To what extent does this cluster require high capital investment?

Developing ports requires high capital investment, for this reason The Netherlands is too small and
players like Japan, China, Malaysia, and Hong Kong fulfill a more prominent role. These large players
invest a lot of capital and sign contracts for 30 to 40 years to have a 49% share in this strategic
distributional position to enforce their returns on investments. Delivering cranes do not require large
investments; only transportation costs will be higher but balance the better quality of these cranes.

Knowledge management

    1.   To what extent is specific knowledge available?




                                                    37
Market scan Vietnam, 2007



               2.    To what extent is specific knowledge required?

               3.    To what extent are Vietnamese companies seeking to share/acquire knowledge?

           The availability of knowledge regarding port management and development is small. Through
           collaboration between foreign investors (Japan, China, Malaysia, and Hong Kong) and Vietnam,
           generally more knowledge is gained by Vietnamese state-owned ports.
                    The state and ministries (Ministry of Transport) involved take all opportunities to rebuild and
           innovate ports using knowledge provided by other countries, in order to stimulate economic growth
           and employment. Vietnam is aware of the key position it can take in the area of cargo transport and
           transshipment to other countries and is willing to share and acquire knowledge.

           Finance

               1.    To what extent does the Vietnamese government plan to invest, financed by
                     state budget?

           The government does not plan to invest in projects financed by state budget, concerning port
           management and development.

               2.    To what extent does the Vietnamese government plan to invest, financed by ODA?

           The total accumulated value is 60 million US dollars, and accounts for 100% of the total sector value.
           However, only one project is mentioned concerning port management and development within the
           sub-sector Water Construction. The project started in 1998 and will continue to the end of 2007.

               3.    To what extent does the Vietnamese government plan to invest, financed by
                     governmental bond investment?

           The government does not plan to invest in projects financed by governmental bond investments.

               4.    To what extent does the Vietnamese government plan to invest, financed by
                     SOEs, state credit & private investments?

           There are 6 indicated projects that deal with port management and development in various ways. The
           project lengths vary from the beginning of 2006 to the end of 2012. The accumulated sector value of
           projects financed by SOEs, state credit and private investments is 787,5 million US dollars and accounts
           for 100% of the total sector value. However, no other projects concerning other clusters within the
           sector Water Construction are planned in the future. From the total amount of 787,5 million US dollars,
           431,25 million US dollars originates from SOEs and accounts for 54,76% of the total investments made.
           Furthermore, 43,75 million US dollars is directly financed by the state and accounts for 5,55% of the total
           amount of capital invested.

               5.    To what extent does the Vietnamese government call for ODA?

           There are 14 indicated projects that deal with port management and development in various ways.
           The project lengths vary, projects start from 2006 up to 2012. The accumulated sector value of projects




                                                              38
                                                                                   Market scan Vietnam, 2007



calling for ODA is 1,13 billion US dollars that deals directly with port management and development.
1,13 billion US dollars accounts for 50,91% of the total sector value (2,18 billion) calling for ODA.




                                                39
Market scan Vietnam, 2007



           4.4 Sustainable dredging

           Dredging or sustainable dredging in Vietnam is mainly executed by Vietnamese
           companies. Opportunities in sustainable dredging are constant; dredging tide
           inlets along the coastline must be done continuously , as in dry seasons not much
           rain falls and river mouths are closed by the carried silt. Resulting in problems for
           fishing boats as they cannot reach the ports that are behind these naturally
           formed obstacles and open sea. This can be prevented by sustainable dredging
           by using a small dredging machine at every tide inlet. Presently, these kinds of problems only occur at
           country level, but this could change within years and is therefore more interesting as a potential
           market, because more attention will be paid to this issue. Furthermore, the government pays much
           attention to: coastal engineering and management and coastal development and land gain. This
           brings more opportunities concerning sustainable dredging, such as keeping tide inlets and river
           mouths accessible for fishing boats and preserving the drainage of rivers.
                     Currently, four big players are active in Asia and Vietnam concerning dredging: Van Oord,
           BAM, Boskalis and Jan de Nul. They are mainly self-supporting in their activities and to intervene in this
           market, a lot of capital is needed to be self-reliant. Besides, a prominent track record can be seen as
           necessary. An example of a Dutch company active in Vietnam is Van Oord. Van Oord was awarded
           the contract to lay foundations for a breakwater in Dung Quat to provide shelter to berths for receiving
           oil tankers.
                     As mentioned earlier, there are opportunities for Dutch dredgers, but for companies that are
           not active in the Asian market it is difficult to enter this market and to maintain a position between the
           biggest players. For smaller Dutch players in this market, it could be advisable to choose an entry
           strategy by establishing a joint venture with a Vietnamese company so as to be active in the
           Vietnamese market. All the more so because dredging activities can take place at developing ports,
           dredging of rivers and other ‘small’ activities, and are executed by Vietnamese dredging companies.
           Subsequently, dredging activities are allocated by Vinamarine, a state owned enterprise and will
           allocate it to Vietnamese enterprises. This work can be done by local companies as the required
           technologies do not need to be highly skilled. Besides, local contractors are less expensive. Choosing
           this strategy could lead to a favourable market position in Vietnam in a few years.



           4.1.1 Cluster analysis

           Business entity

               1.   To what extent is the cluster of strategic importance to Vietnam?

           The cluster sustainable dredging is not of strategic importance. However, sustainable dredging
           contributes to the accessibility of for example hinterland, as rivers, and tide inlets are dredged. Larger
           and more vessels can reach the hinterland and the coast in an easier way and do contribute to
           economic development. Consequently, foreign investors are allowed to start a privately owned
           business.

           Barriers to entry

               1.   To what extent does this cluster require high capital investment?




                                                             40
                                                                                      Market scan Vietnam, 2007



Sustainable dredging requires high capital investments (machinery). The aforementioned four big
players are already active in South East Asia and the capital investments for them are less capital
intensive. Companies such as Boskalis and Van Oord have already established their branch offices
and positioned their necessary machinery around this region (Singapore and China) for dredging
activities. Though, for a small player using an entry strategy by starting up a joint venture will reduce
costs. However, there will be administrative costs, as well as accommodation and operation costs.

Knowledge management

    1.    To what extent is specific knowledge available?

    2.    To what extent is specific knowledge required?

    3.    To what extent are Vietnamese companies seeking to share/acquire knowledge?

The extent to which knowledge is available within the cluster sustainable dredging, is two sided.
Vietnamese dredging companies possess knowledge and execute regular dredging activities.
Nevertheless, there is no long term vision, nor is sustainable dredging their specialty. Knowledge of
sustainable dredging is not available, though it should be required and used. Here lie opportunities for
Dutch dredging companies, for example making Vietnamese partners aware of the need of
sustainable dredging via joint ventures. Dutch companies can fulfill a prominent role by using their
knowledge on the area of sustainable solutions, such as keeping river mouths and tide inlets
connected with the sea. Besides, the greatest part of Vietnamese dredgers is not aware of the
possibilities of dredging with eliminating the pollution from the silt. Moreover, no good overview is
present of dredging companies sharing knowledge among each other or with foreign institutions or
companies.

Finance

The MPI-list of projects planned by the Vietnamese government does not show any specific investment
plans for dredging or sustainable dredging, therefore the questions are not posed. However, as
dredging is an activity that lay foundations for several planned projects such as coastal engineering,
land gain and flood management, financial input from the government, ODA, and other donors are
available.




                                                  41
Market scan Vietnam, 2007




           5. Water Management


           5.1 Overview water resources

           Vietnam has a dense river network of 2360 rivers with a length of more than 10
           km. Eight out of these are large basins with a catchment-area of 10,000 km² or
           more. This river network includes many international rivers that originate in
           catchments in other countries. About two thirds of Vietnam’s water resources
           originate outside the country, making Vietnam susceptible to water resources
           decisions made in upstream countries.
                    Although all the rivers traversing Vietnam provide an abundant supply of water (255 bill. m³
           annually), inadequate physical infrastructure and financial capacity result in a low utilization of only 53
           billion m³ per year. In addition, the uneven distribution across Vietnam of the average annual rainfall
           (1,960 mm) and the prolonged dry season result in serious shortages of fresh water in many areas.
                    Groundwater resources are abundant as well, with the total potential exploitable reserves of
           the country's aquifers estimated at nearly 60 billion m³ per year. However, despite the abundance of
           groundwater reserves, less than 5% of the total reserves are exploited for the country as a whole. In
           some areas, over-exploitation has resulted in falling water tables which contributes to further land
           subsidence and salinity intrusion, especially in the Mekong River Delta.
                    In Vietnam, irrigation places the largest burden on water resources. Total irrigation demand in
           2000 was 76.6 billion m³, representing 84% of the total demand. Since 1998, the total irrigated area has
           increased annually by 3.4% on average, but the irrigation systems can serve only 7.4 mill. ha (or 80% of
           total cropped land). The government expects irrigation demand to increase to 88.8 billion m³ by 2010
           (representing an irrigated area of 12 million ha)42.

           5.1.1 Vulnerability
           Heavily populated areas such as the Delta Regions of the Red River and the Mekong River along with
           the Central Coastal Regions are especially vulnerable to natural disasters. Natural disasters in Vietnam
           occur on a more frequent and severe basis and are directly linked to rising temperatures and
           atmospheric changes. Since these factors are beyond the direct control of the Vietnamese
           population, they are faced with unpredictability of the monsoon season in terms of its strength, timing
           and movement and are forced to deal with the consequences of mudslides, floods and typhoons.
                    It is inevitable that Vietnam invests in disaster forecasting abilities and integrated sustainable
           water management solutions.




           42   Water Environment Partnership Asia (WEPA)




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                                                                                                                Market scan Vietnam, 2007



5.2 Integrated River Basin Management

Integrated river basin management entails areas of water resources development,
river and floodplain management. River basin management deals with technical,
socio-economic and ecological aspects and calls for an integrated approach. Why
is such an approach crucial?
         A key issue in sustainable river and flood plain management is the matching
of divergent uses and functions with the natural capacity of the river system. Besides
the primary function of discharging water and sediment, the most important roles
involve the supply of water for drinking and for use in agriculture, aquaculture, industry and
hydropower generation43. Moreover, since increasing number of villages are settled around plains of
the Hong (Red) and Mekong Rivers, floods and accompanied mudslides become direct threats to
society.
         The current situation continues creating snowball effects with serious consequences. In the
rainy season flooding in the deltas is more intense and erodes the river banks causing devastating
landslides damaging property and public infrastructure. The landslides leave dunes and alluvial
grounds that block water flowing downstream and the sea from flowing inland44. Since villagers try to
protect their crops from the floods, they build platforms and temporarily ‘assist’ in blocking the water
flow. When the water level rises due to increasing rainfall, the natural evolved and created dunes
break, causing the plains to flood. Although building these platforms is essential for survival - food
production - the groundwater levels decline and hinder the supply of fresh water in the dry season45.
The local population is in need for sustainable solutions through an integrated approach.
         Next to the shortage of fresh water in the dry season, streams and rivers become stagnant
waters (or dry up) and form a source of pollution since they no longer mouth the sea. The current
situation is worst along Nhuê, Dáy, Châu Giang Rivers and for populations living southwest of Hanoi, Hà
Tây, Hà Nam, Nam Dinh and Ninh Bình Provinces46.
         Another example of the need for an integrated approach is the relation between reservoir
management and river management. Most dams and reservoirs in Vietnam were constructed for
multiple purposes, including flood control, irrigation, hydropower, water supply and other flow
management. Most are more than 20 to 30 years old. There are about 3600 reservoirs of various sizes, of
which less than 15 percent is large or medium (capacity of over 1 million m³ or a height of more than
10 meters)47. The major reservoirs are listed in table 548.




43 WL Delft Hydraulics
44 See Chapter Water Construction - Dredging
45 In the 6-7 month dry season the runoff is only 15 to 30% of the 835 billion m3 annual runoff. Source: WEPA

46 VNA/VNS

47 Dinh Trong, Workshop on integrated water management for reservoirs, Hanoi Oct 1994

48 National Water Sector Profile, 2002




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Market scan Vietnam, 2007




                               Reservoir          Catchment             Volume             Irrigated       Hydropower
                                                  (km²)                 (bill. m³)         Area            (MW)
                                                                                           (ha)
                               Hoa Binh                    51,700                  9,450                         1,920
                               Thac Ba                      6,100                  2,940                           108
                               Tri An                      14,600                  2,760                           420
                               Dau Tieng                    2,700                  1,580          72,000
                               Thac Mo                      2,200                  1,370                           150
                               Yaly                         7,455                    414          23,000           720
                               Phu Ninh                       235                    357
                               Song Hinh                      772                    345                            66
                               Ke Go                          223                                 17,000
           Table 5: Major reservoirs in Vietnam


           It became clear by interviewing different parties49 that different governmental institutions are
           responsible for water resources that are inherently related. Regarding reservoir management of
           hydropower generation and river management, the following situation occurs: during the rainy season
           the reservoir’s level rises quickly and for reasons of hydropower generation the reservoir remains closed
           to reach maximum capacity. The water level in the river rises as well, reaching maximum capacity. At
           the point of overflow in the reservoir, the reservoir is fully opened to generate maximum hydropower.
           The river is unable to deal with the enormous extra flow of water, causing the river to flood. As the
           reservoir is emptied to the minimum, there is no ‘backup’ to maintain consistent water levels in the dry
           season. Furthermore, due to siltation the reservoir capacity declines – some with only 30% of the
           original capacity remaining. The associated problems due to a lack of fresh water in the dry season
           are life threatening. An integrated approach is crucial.




           Figure 7: An integrated approach50


           Figure 7 identifies the problems that currently occur at the point where stakeholders interact.




           49   WRU, Royal Haskoning
           50   See appendix H for original model WL Delft Hydraulics




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                                                                                     Market scan Vietnam, 2007



The local villagers are not aware that their temporary platforms result in falling water tables, nor are
there any (local) regulations in water exploitation and use.
         Corporate and governmental institutions have divergent interests regarding the management
of water resources and lack social responsibility. Research has reported on exceeded water quality
standards near outlets from industries. Example: the Cau river that runs through the Thai Nguyen
industrial zone is heavily polluted with concentrations of NO2, NH4 and BOD5 that exceed the
standards by 10, 2 and 5 times respectively. TSS and H2S exceed the standards by ten to hundred
times51!

5.2.2 Cluster analysis

Business entity

        1.   To what extent is this cluster of strategic importance to Vietnam?

Obviously, the water resources are of great strategic importance to Vietnam, with irrigation demand
being the primary need for food production (84% of total water resources demand). Consequently,
foreign investors other than consultancy firms, cannot start their businesses without the influence of a
Vietnamese stakeholder (joint-ventures & PPPs).

Barriers to entry

        1.   To what extent does this cluster require high capital investment?

The management of water resources (integrated river basin management is one aspect) is a highly
knowledge intensive cluster, attractive for consultancy firms and knowledge institutes. For this reason
no high capital investment is required other than costs of founding (legislative), accommodation and
operation, which are generally low in Vietnam.

Knowledge management

        1.   To what extent is specific knowledge available?

        2.   To what extent is specific knowledge required?

        3.   To what extent are Vietnamese companies seeking to share/acquire knowledge?

The availability of knowledge regarding water resources and related aspects (integrated river basin
management) is extensive. The Mekong River Commission (MRC) is a knowledge-based river basin
organization using the principles of Integrated Water Resources Management (IWRM) and functions as
an institutional framework to promote regional cooperation. The Mekong Programme works in close
relationships with the ADB, the Association of South East Asian Nations (ASEAN), United Nations
Economic and Social Commission for Asia and the Pacific (UNESCAP), the World Bank, the World
Conservation Union (IUCN), the World Wide Fund for Nature (WWF) as well as civil society and
academic institutions. Since current problems will not be solved in the near future and continue in
putting pressure on the Vietnamese government, the research team is convinced of the ongoing need


51   WEPA: NEA (1997-2002), HIO (1999)




                                                       45
Market scan Vietnam, 2007



           for specific knowledge. The enforced relationships with academic institutions are initiated to support
           this need. For example, the research team became aware of close relationships of the Water
           Resources University (Hanoi, Ho Chi Minh) with the TU Delft (CICAT projects), the institutes involved
           being UNESCO-IHE Delft and WL Delft Hydraulics.

           Finance

               1.    To what extent does the Vietnamese government plan to invest, financed
                     by state budget?

           There are 7 indicated projects that deal with Water Management in various ways. The project lengths
           vary, projects start from 2006 up to 2011. The accumulated sector value of projects financed by state
           budget is 153,56 million US dollars. There are 3 indicated projects that deal directly with (integrated)
           river basin management. The accumulated value is 38,06 million US dollars and accounts for 24,8 % of
           the total sector value.

               2.    To what extent does the Vietnamese government plan to invest, financed by ODA?

           There is 1 indicated project that concerns natural disaster risk management. The project length is from
           2006 up to 2009 and values 86 million US dollars. The project value accounts for 66 % of the total sector
           value of 129,00 million US dollars, financed by ODA.

               3.    To what extent does the Vietnamese government plan to invest, financed by
                     governmental bond investment?

           There are no indicated projects in this cluster that are financed by government bond investments.

               4.    To what extent does the Vietnamese government plan to invest, financed by SOEs,
                      state credit & private investments?

           There are no indicated projects in this cluster that are financed by any of the mentioned resources.

               5.    To what extent does the Vietnamese government call for ODA?

           There are 16 indicated projects in the sub-sector Water Management, from which 10 projects are
           directly related to (integrated) river basin management. The project lengths vary. Projects start from
           2006 up to 2010. The accumulated sector value of projects that calls for ODA is 1232,60 million US
           dollars. The accumulated value of the 10 projects is 626,60 US dollars and accounts for 50,8 % of the
           total sector value.

           Findings from a review to estimate Vietnamese governmental spending on the water sector activities
           show that although its proportion in the total national budget expenditure has declined, the public
           expenditure on the water sector has increased at an annual average of 8.9% during the period from
           1996 to 2001. Although spending on water resource management is far too little compared to
           investment (less than 1%) and accounts for less than 10% of the current budget expenditure, the public
           investment in water sector constitutes a considerable proportion of the national budget investment
           from 1996 to 1998 (about 33%), but this has declined since 1999 due to the national budget’s shift in




                                                             46
                                                                                         Market scan Vietnam, 2007



focus toward banking systems and SOEs improvement. The main investments are made in irrigation,
water supply and drainage52.

5.2.3 Opportunities
Vietnam is about to embark on a major river basin planning/management activity and there is much
to learn. The key tasks, as supported by the advice of Project TA352853 and summarized below are
benchmarked by worldwide river basin planning and management guidelines that are rated as
‘good’:

        1.   A stable institutional framework that overcomes fragmentation and overlap of responsibilities
             and is supported by a strong, comprehensive yet flexible legislative base.
        2.   River basin organizations that have a foundation and mandate in legislation, which clearly
             identifies their functions, structure, financial base and decision processes.
        3.   Good information and knowledge based on a good data network and systems.
        4.   Integration across all aspects of the hydrological cycle – the need to look at whole systems,
             including the needs of different sections of society and types of economic activity, within the
             hydrological system that links upstream and downstream resources and ecosystems.
        5.   A strong programme for community awareness and participation. People have to understand
             the issues and the need for new ways before they will make any commitment to change.

The challenge for Vietnam is to put in place measures and processes that can achieve these 5
outcomes. To achieve these outcomes, a number of specific tasks for MONRE remain, but especially
Dutch consultancy firms can offer their specialist knowledge and services to assist in #3 and #4.
Furthermore, the research team would highly recommend NWP to pursue closer relationships wit the
Mekong River Commission since the MRC counts as an important input for governments in the South
East Asian region responsible for river management projects. Regarding the aim to increase
competitiveness, EU-countries (Germany, Belgium, Denmark, Sweden, Finland, France) are important
donors within this cluster.




52   WEPA
53   International Water Resource Management Specialist, Australia




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Market scan Vietnam, 2007



           5.3 Soil issues and desalination

           A pressing issue is the salinity intrusion taking place both in the Red River Delta, the
           Central Coastal Regions and in the Mekong River Delta. Salinity intrusion is a natural
           phenomenon in coastal areas. However, due to increased groundwater exploitation
           and blocked river estuaries, salinity intrusion increases and poses a threat to safe
           water supply e.g. in the Red River and Mekong River Deltas.
                    In the Red River Delta, salinities over 3% stretch more than 60 km inland to Hai
           Duong in the north and Nam Dinh in the south of the delta. In the Mekong River
           Delta, salt water is registered in half of the delta area.
                    The availability of fresh water is expected to deteriorate in the next 15 to 20 years as increases
           in economic growth will imply higher fresh water demands to supply industry, agriculture and the
           community as a whole. The current fresh water supply system for urban areas is solely based on the
           provision of groundwater, since there is no appropriate water supply system that supplies fresh water
           from the river to urban areas. Such a system would be very costly, particularly when the community
           pays only a very small fee or none at all. Temporarily applied solutions are installations that pump at a
           deeper (450m) level; however, the question for how long this ‘solution’ will be applicable remains, as it
           is an important reason for soil decrease.
                    Soil loss or decrease is one of the most pressing and difficult environmental problems facing
           the developing countries of Southeast Asia. At the national level, soil erosion produces sediment and
           silt that can clog up irrigation channels and lower the water storage capacity of dams, thus
           decreasing water supply and hydroelectric power productivity. Today, almost all of the country’s rivers
           are highly charged with silt: the Red River alone transports 0.6 billion m3 of silt a year, the Mekong 1.5
           billion m3 54.

           At the regional level, soil decrease pressurizes the local farmers to continuously adapt their cultivation
           practices. Through these practices, that lack soil management in terms of conservation technologies,
           the vulnerability of the soil increases even further55.

           5.3.2 Cluster analysis

           Business entity

                   1.   To what extent is this cluster of strategic importance to Vietnam?

           Desalination and soil issues can be viewed as important aspects that are related to water supply and
           Water and Green. Both technology and knowledge can be provided by foreign companies without
           direct influence of Vietnamese stakeholders.

           Barriers to entry

                   1.   To what extent does this cluster require high capital investment?

           As the project team did not learn about the practical specifics of this cluster in Vietnam, this question
           cannot be rated.


           54   EEPSEA Research Report 2001-RR13
           55   Vezina, Bonn, Cu Pham Van (2006): Landscape ecology; vol. 21, no8, pp. 1311-1325




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                                                                                      Market scan Vietnam, 2007




Knowledge management

    1.    To what extent is specific knowledge available?

    2.    To what extent is specific knowledge required?

    3.    To what extent are Vietnamese companies seeking to share/acquire knowledge?

Although the problems of salinity intrusion are fully recognized and measurements are executed by
NGOs or knowledge institutes, sustainable solutions to deal with desalination on the one hand lie in the
field of integrated water resources management. This includes the aim for consistent (urban) water
supply throughout the seasons, in order to relieve the pressure on groundwater exploitation. On the
other hand, there are neither financial resources to design or acquire existing desalting technologies,
nor possibilities to support research in developing low cost desalting technologies. The Vietnamese
government realizes the pressing needs to deal with desalination and soil issues. Universities enroll in
exchange programmes with foreign countries (e.g. USA, the Netherlands, Germany) in order to
acquire specific knowledge. Since 2004, universities have been allowed to collaborate with foreign
companies, and in turn sell their acquired knowledge by taking the role as consultant.

Finance

    1.    To what extent does the Vietnamese government plan to invest, financed by ODA?

The other indicated project concerns the protection and development of the salt-marsh area in
coastal South Vietnam. The project length is from 2006 to 2008 and values 43 million US dollars. The
project value accounts for 33.3 % of the total sector value of 129,00 million US dollars, financed by
ODA.

    2.    To what extent does the Vietnamese government call for ODA?

There is one indicated project concerning salt water prevention works in the district of Luong Tam,
Long MY, (12,800 ha). The project length is from 2006 to 2010 and values 17 million US dollars. The
project accounts for 1,4 % of the total accumulated sector value of 1232,60 million US dollars, calling
for ODA.

    3.    To what extent does the Vietnamese government plan to invest, financed by
          governmental bond investment?

There are no indicated projects in this cluster that are financed by government bond investments.

    4.    To what extent does the Vietnamese government plan to invest, financed by SOEs,
          state credit & private investments?

There are no indicated projects in this cluster that are financed by any of the mentioned resources.

    5.    To what extent does the Vietnamese government call for ODA?




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Market scan Vietnam, 2007



           There are no indicated projects in this cluster for which the government is calling for ODA.

           5.3.2 Opportunities
           Although desalination and soil issues have serious consequences for fresh water supply and agricultural
           practices, there are few or no governmental initiatives to deal with the issues individually. It could be
           that these issues are incorporated in water supply or agricultural projects, but this is beyond the
           provided information. The research team expects that Vietnam will not spend resources on the use of
           expensive existing desalting technologies and will wait for low cost desalting technologies56 to be
           developed elsewhere. There are opportunities for knowledge institutes and consultancy firms in
           designing, assisting or modeling components of IWRM and in providing soil conservation techniques.
           Where in the area of IWRM numerous projects are applicable, providing soil conservation techniques
           will be dependable on ODA-projects. For this reason, the research team expects NGOs and universities
           to deal with soil conservation and recommends companies to incorporate desalination in their IWRM-
           approach.




           56   Wageningen-UR, Nummer: 0544_2: ‘Zeewater zoet maken kan goedkoop’




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                                                                                                         Market scan Vietnam, 2007



6. Water and Green

A major part of the Vietnamese diet constitutes of rice and aquatic products,
therefore the sub-sector of Water and Green is very important for the people of
Vietnam. The production of rice and fish is located in three regions: (1) Mekong
River delta, (2) Red River delta and (3) Nha Trang. Of these regions, the Mekong
river delta is the most important area for the sub-sector Water and Green. This
region extents over an area of 39.000 km2 and is the most important agricultural
region in Vietnam. It covers only 12% of Vietnam’s total land area, but it supplies
half of the national rice output57.

Currently, around 17 million people live in the Mekong River delta, and the number is expected to
increase up to 21 million by the year 2010. Such a population growth implies an increasing demand for
food that needs to be produced. In the delta, approximately 400.000 ha are suitable for the
production of rice and fish, and today only 10% of the area is used for this purpose. So the area has
enough potential to satisfy the increasing demand in the coming years. In addition, some important
steps of progression in the production efficiency and sustainability need to be taken to ensure the
productivity of the area in the future. The major problems are:
    •   continuous use of antibiotics and pesticides for the production of rice and fish
    •   dependence on countries upstream the Mekong river for availability of fresh water and salinity
        intrusion in the river delta and less water for irrigation
    •   expected shortage of fresh water in the future

These problems will be discussed in more detail and opportunities will be identified for the different
clusters within the sub sector Water and Green. Water & food production and aquaculture will be
jointly discussed as the problems and associated opportunities for Dutch parties are closely related.




57Berg, H. Rice monoculture and integrated rice-fish farming in the Mekong Delta, Vietnam – economic and ecological
considerations, Ecological Economics, 2002, vol 41, pp 95-107




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           6.1 Water & food production and aquaculture

           For the production of fish and rice, Vietnamese farmers intensively use antibiotics
           and pesticides to increase their yield. This stems from the Vietnamese focus on short
           term profits and their current reluctance to invest in sustainability of the
           environment. However, the ecosystem is at great risk if the farmers continue to
           misuse the natural resources.
                     In the case of fish production, the situation is a little more nuanced as for
           the export of fish strict rules are applicable. The fisheries that export their products to
           the EU are well aware of these regulations and strictly check both their raw materials and their end
           products on antibiotics. Additionally, these companies have trained their suppliers not to use
           antibiotics. This training process can be rather difficult as farmers need to stop doing what they have
           done for many years, and which always resulted in better returns. However, fisheries that produce for
           local markets are not effectively restricted in their use of antibiotics. Vietnamese farmers and fisheries
           are checked on product quality, but they are often warned in advantage (by relatives) about
           impending check-ups. Then the farmers have enough time to clean everything up so they appear to
           be producing following quality regulations. In reality however, they return to using antibiotics as soon as
           the quality controllers have left. The main reason for this is that many farmers are unaware of the
           potential health risk for people eating a great quantity fish that is produced by using antibiotics.
           With the Vietnamese joining the WTO convention, quality regulations will be stricter, resulting in a
           restriction of antibiotics for local use too58. These regulations however, have not yet been affected.
           Other regulations that are supposed to be controlled on a more serious basis concern (waste) water
           quality. NAFIQAVED, which is part of the Ministry of Fisheries and was established in 2004, is responsible
           for controlling these quality standards. They are supposed to check end products on antibiotics and
           waste water quality of production facilities. However, from interviews with foreign companies, their
           control system is said to be not so strict, at least not at the present.
                     Within these two clusters, the production of rice, besides that of fish is important. A field
           research has been conducted on practices of rice production. This study has shown that farmers who
           adopt Integrated Pest Management (IPM) and produce both rice and fish have the highest net
           income. IPM is a way to protect the natural growth of rice/fish without the use of polluting chemicals.
           This results in lower production costs and higher yields. However, only 10% of all farmers is currently using
           IPM59.
                     Additionally, when the Vietnamese shrimp production is compared to the Thai production
           figures, the Vietnamese are falling far behind. Where Vietnamese farmers are able to produce 25 to 35
           shrimps per m2, the Thai produce 80 to100 shrimps per m2. This results from better production
           procedures, better filtration and better aeration of the water.

           6.1.1 Cluster analysis

           Business entity

                  1.    To what extent is this cluster of strategic importance to Vietnam?




           58   Berg, H. Rice monocultura and integrated rice-fish farming in the Mekong Delta, Vietnam – economic and ecological
           considerations, Ecological Economics, 2002, vol 41, pp 95-107!
           59   Berg, H. Rice monocultura and integrated rice-fish farming in the Mekong Delta, Vietnam – economic and ecological
           considerations, Ecological Economics, 2002, vol 41, pp 95-107




                                                                            52
                                                                                         Market scan Vietnam, 2007



Water & food production and aquaculture have not been indicated as of strategic importance to the
economy of Vietnam. Therefore these clusters score low in this area. Consequently, foreign investors
are allowed to start a privately owned business.

Barriers to entry

    1.    To what extent does this cluster require high capital investment?

Generally speaking this cluster does not call for high capital investments, considering different activities
that could be employed within the clusters. The technologies used are not extremely sophisticated.

Knowledge management

    1.    To what extent is specific knowledge available?

    2.    To what extent is specific knowledge required?

    3.    To what extent are Vietnamese companies seeking to share/acquire knowledge?

As stated before, many farmers are unaware of the health and environmental risks that are a
consequence of the use of antibiotics and pesticides, as there is low availability of specific knowledge.
Additionally, many farmers do not know that there are other ways to protect the cultivation of rice and
the production of fish that are less expensive and lead to higher yields. For the farmers who use
antibiotics and pesticides, arguments concerning lower costs and higher profits would stimulating them
to change their habits. Moreover, prolonged misuse of pesticides will further harm the ecosystem and
eventually destroy it. Therefore specific knowledge is urgently required. The drawback is that the
Vietnamese have not yet shown much interest in sustainable solutions, as it will always take some time
before results can be seen. Furthermore, the Vietnamese market is not demanding shrimps that are
produced without antibiotics, so from a farmer’s perspective; why change?

Finance

    1.    To what extent does the Vietnamese government plan to invest, financed by
          state budget?

There are 10 indicated projects that deal with Water and Green in various ways.
The project lengths vary. Projects start from 2006 up to 2011. The accumulated sector value of projects
financed by state budget is 2,76 billion US dollars. There are 2 indicated projects that deal directly with
aquaculture and water & food production. The accumulated value is 262,5 million US dollars and
accounts for 9,5% of the total sector value.

    2.    To what extent does the Vietnamese government plan to invest, financed by ODA?

There are 7 indicated projects that deal with Water and Green in various ways. The project lengths
vary, projects start from 2006 up to 2010. The accumulated sector value of projects financed ODA is
389 million US dollars. There are no projects that deal directly with aquaculture and water & food
production.




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Market scan Vietnam, 2007



               3.   To what extent does the Vietnamese government plan to invest, financed by
                    government bond investment?

           The government is not planning to invest in the sub-sector of Water and Green through government
           bonds.

               4.   To what extent does the Vietnamese government plan to invest, financed by
                    SOEs, state credit and private investments?

           There are 3 indicated projects that deal with Water and Green in various ways. The project lengths
           vary, projects start from 2006 up to 2010. The accumulated sector value of projects financed by SOEs,
           state credit and private investments is 93,75 million US dollars. There is 1 indicated project that deals
           directly with aquaculture and water & food production. The value is 31,25 million US dollars and
           accounts for 33% of the total sector value

               5.   To what extent does the Vietnamese government call for ODA?

           There are 22 indicated projects that deal with Water and Green in various ways. The project lengths
           vary, projects start from 2006 up to 2010. The accumulated sector value of projects calling for ODA is
           1,25 billion US dollars. There are 9 indicated projects that deal directly with aquaculture and water &
           food production. The accumulated value is 641 million US dollars and accounts for 51% of the total
           sector value.

           6.1.2 Opportunities
           The clusters water & food production and aquaculture present several opportunities. First of all in the
           area of knowledge sharing; farmers need to be educated about the risks they run when they continue
           to use pesticides and antibiotics for the production practices. Additionally, they should be educated
           about the advantages of IPM management. If the awareness increases, farmers will need to change
           their production procedures, here again, assistance will be needed.
                    Another opportunity would be to start a new fishery. As this cluster is not seen as of strategic
           importance to Vietnam, it is possible for foreign investors to start up a privately owned company. Since
           in general labour costs are low and the worldwide demand for fish is still higher than the supply, this
           would be economically feasible. However, one should think carefully about how to get raw materials.
           Relationships are very important here. Newcomers are warned for the fact that local farmers who
           produce for instance cultivated shrimps, are producing at their maximum and are very loyal to the
           factories they currently supply. Therefore it might be hard to get cultivated shrimps that are needed to
           produce full-grown shrimps. A good way to overcome this problem is to take on the complete
           production process and thus be independent of Vietnamese ‘raw material’ suppliers.
                    Finally Dutch companies could supply pumps that can filter the water. Cleaner water will result
           in higher survival rates of fish and higher returns accordingly. Besides, it contributes to a cleaner
           environment and sustainable development. However, Dutch organizations will have to carefully
           explain these benefits. Referring to the Thai example might help here.




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                                                                                                 Market scan Vietnam, 2007



6.2 Water distribution and water quality

This cluster consists of two parts, water distribution on the one hand and water
quality issues on the other. Firstly, water distribution will be elaborated on, secondly
water quality issues are discussed.

6.2.1 Water distribution
Many Vietnamese who live in rural areas still depend on natural sources for their
water supply. The Mekong River and the Red River are such resources, but as
Vietnam is the lower riparian country in the Mekong River, and the Red River, water levels are
susceptible to water resource decisions made in upstream countries. This susceptibility intensifies the
highly variable seasonal (droughts in the dry season and flooding in the monsoons) and geographical
distribution of water. Despite the total abundance of water resources, the dependency on upstream
countries and the uneven distribution contributes to the low ranking of Vietnam in Southeast Asia’s
water availability per capita (4170 m³/person compared to average 4900 m³/person in Southeast Asia
and 3300 m³/person in Asia)60. Additionally, this dependency causes different problems in Vietnam. First
of all it causes a lack of fresh water. Secondly, due to low fresh water levels, salty water from the sea
runs into the river basin causing damage to vegetation and animals living there. These latter problems
will be elaborated on in paragraph 5.3 concerning soil issues and desalination.

Table 661 depicts a water resources scorecard. It attempts to evaluate the water resources availability
in Vietnam for eight regions and highlights issues requiring attention. A high score (+++++) means water
is abundant, a low score (+) means that water is scarce.

Region                  Surface water          Ground water        Issues
Northwest                                                          Flashfloods, floods, seasonal drought, reservoir
                              +++++                   +++
                                                                   siltation and construction
Northeast                      ++++                   +++          Flashfloods, floods, seasonal drought
Red River Delta                                                    Floods, cross-sectoral water allocation and
                              +++++                   +++++        use, intensive agriculture, groundwater over-
                                                                   exploitation
North Central                                                      Flashfloods, floods, seasonal droughts, low river
Coast                           +++                   +++          flow during prolonged dry season in South of
                                                                   region
South Central                                                      Flashfloods, floods, severe seasonal droughts,
Coast                            ++                   +++          low river flow during prolonged dry season
                                                                   entire region
Central                                                            Flashfloods, seasonal droughts, groundwater
Highlands                      ++++                   ++++         over-exploitation for irrigation, reservoir
                                                                   construction
Northeast of                                                       Floods, seasonal drought, sector wise water
Mekong                         ++++                   +++++        allocation and use, groundwater over-
                                                                   exploitation (HCMC)
Mekong river                                                       Flood, cross-sectoral water allocation and use,
delta                         +++++                   +++++        intensive agriculture/aquaculture,
                                                                   groundwater over-exploitation
Table 6: Water Resource Availability




60   WEPA
61   VEPA website, Environmental Water Report, 2003




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Market scan Vietnam, 2007



           6.2.2 Water quality
           There is increasing evidence of pollution of Vietnam’s surface, ground water and coastal waters.
           Although the quality of upstream river waters is generally good, downstream sections of major rivers
           reveal poor water quality and most of the lakes and canals in urban areas are fast becoming sewage
           sinks. Groundwater shows pockets of contamination and some salinity intrusion. Rapid urbanization
           and industrialization in coastal areas, port and marine transport development, expansion in tourism,
           and an increase in the number of oil spills contribute to the deterioration of coastal water quality62.

           Next, first surface water quality issues are discussed, followed by groundwater quality issues.

           Surface water
           In Vietnam, data on surface water quality is poor. However, limited testing reveals rising pollution levels
           in downstream sections of the major rivers. Tests indicate that the levels of two primary pollution
           indicators, Ammonia-nitrogen (NH4-N) and Biochemical Oxygen Demand (BOD) often exceed
           national water quality standards by several fold. The problems are worst during the dry season, when
           the flows in the rivers are reduced.

           Industrial waste and pollution from other sources add to human waste. The 70 industrial zones and
           1,000 hospitals alone produce a million cubic meters of untreated wastewater a day! Only 15% of the
           industrial zones have waste water treatment facilities, so rivers in Vietnam's urban areas, especially
           major cities, are seriously polluted by untreated industrial wastewater. According to environmentalists,
           the investments of 1247 million USD are needed before 2010 to deal with the environmental pollution63.

           Ground water
           The groundwater resources in Vietnam are abundant; the total potential exploitable reserves of the
           country's aquifers is estimated at nearly 60 billion m³ per year. The availability varies from abundant
           resources in the Mekong River delta to somewhat limited resources in the North Central Region.
                    However, despite the abundance of groundwater reserves, only less than 5% of the total
           reserves are exploited for the country as a whole. The abstraction of groundwater also varies. For
           example, groundwater exploitation is difficult in the Northeast because the reserves are scattered and
           diverse. In the Central Highlands, on the other hand, groundwater is exploited heavily for irrigation of
           crops resulting in shortages of water in parts of this region. In the Red River and Mekong River deltas
           groundwater is exploited beyond the recharge capacity around Hanoi and Ho Chi Minh City. This
           over-exploitation is resulting in falling water tables – further causing land subsidence and salinity
           intrusion, especially in the Mekong River delta64.
                    While the quality of ground water remains good, there are some pockets of contamination.
           There is evidence of pollution from poorly maintained septic tanks, garbage dumping, and industrial
           effluents and overexploitation in parts of Hanoi, HCMC and the Mekong river delta. New investigations
           have shown potential problems related to the presence of pollutants in alluvial deposits in the Red
           River region and in tube wells pumping water from lower aquifer. This requires further study and careful
           assessment. In addition nitrogen and iron levels above the admissible standards are found both in the
           Red River and Mekong river deltas65.




           62 WEPA
           63 WEPA
           64 WEPA

           65 WEPA




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                                                                                          Market scan Vietnam, 2007



Table 766 provides an overview of the ground and coastal water quality in different areas and
highlights issues requiring attention. A high score (+++++) means good water quality, a low score (+)
means low water quality.

Region                Rivers                        Ground    Coastal      Issues
                      Upstream        Downstream    water     water
Northwest                +++++               ++++    +++++         -       -
region
Northeast                +++++                ++     ++++        +++       Urban pollution, saline
region                                                                     intrusion, marine transport
                                                                           pollution risks
Red River                ++++                 ++      +++        +++       Urban and industrial
delta                                                                      pollution, saline intrusion,
                                                                           agrochemical pollution,
                                                                           transport pollution risks
North central            ++++                +++     ++++        ++++      Urban pollution, saline
coast                                                                      intrusion
South central            +++++                ++     ++++        ++++      Urban pollution, saline
coast                                                                      intrusion
Central                  +++++               ++++    +++++         -       -
highlands
Northeast of             ++++                 +       +++         ++       Urban and industrial
Mekong                                                                     pollution, saline intrusion,
Mekong                   ++++                 ++      +++        +++       Saline intrusion, low pH in
River delta                                                                rivers (acid soils),
                                                                           agrochemical pollution,
                                                                           transport pollution risks
Table 7: Water quality


6.2.3 Cluster analysis

All information provided above resulted from the desk research phase the research team executed in
the Netherlands. From the interviews held in Vietnam, the project team did not come across examples
of Vietnamese public or private initiatives that are currently executed in this area.

Business entity

       1.   To what extent is the cluster of strategic importance to Vietnam?

Water distribution and water quality are very important issues when looked at from a human and
environmental health perspective. However, in this question the importance to the Vietnamese
economy is referred to. In that respect, the cluster is of less importance and therefore foreign investors
are allowed to start a privately owned company.

Barriers to entry

       1.   To what extent does this cluster require high capital investment?




66   VEPA website, Environment Report 2003




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           As the research team did not learn about the practical specifics of this cluster in Vietnam, this question
           cannot be rated.

           Knowledge management

               1.    To what extent is specific knowledge available?

               2.    To what extent is specific knowledge required?

               3.    To what extent are Vietnamese companies seeking to share/acquire knowledge?

           As far as the research team based on the desk research can conclude, the Vietnamese are aware of
           their current problems concerning water distribution and water quality. In order to discuss issues related
           to the usage of water by other countries through which Vietnam’s major rivers run, Vietnam joined the
           Mekong River Commission (MRC) and the Red River Commission. However, many of the identified
           problems are caused by the Vietnamese themselves. They seem to be aware of the problems, but
           they also seem to lack the knowledge, and/or the money to resolve them. Nevertheless, specific
           knowledge to protect the environment and the people is extremely important. The research team did
           not come across any examples of companies, or governmental agencies seeking to share knowledge
           concerning these issues.

           Finance

           For this part of the cluster analysis the research team will look to projects in the sectors of water supply
           and waste water treatment. In the other analyses these are not included as they are not included in
           the sub-sectors the research project investigates. The issues in this sector however, call for these type of
           projects.

               1.    To what extent does the Vietnamese government plan to invest, financed by
                     state budget?

           There are 6 indicated projects that deal with water supply and waste water treatment in various ways.
           The project lengths vary, projects start from 2004 up to 2010. The accumulated sector value of projects
           financed by state budget is 1,06 billion US dollars. There are 4 indicated projects that deal directly with
           water distribution and water quality. The accumulated value is 407,06 million US dollars and accounts
           for 38,3 % of the total sector value.

               2.    To what extent does the Vietnamese government plan to invest, financed by ODA?

           There are 8 indicated projects that deal with water supply and waste water treatment in various ways.
           The project lengths vary, projects start from 2001 up to 2010. The accumulated sector value of projects
           financed ODA is 389 million US dollars. There are 6 indicated projects that deal directly with water
           distribution and water quality. The accumulated value is 151 million US dollars and accounts for 21,4 %
           of the total sector value.

               3.    To what extent does the Vietnamese government plan to invest, financed by
                     governmental bond investment?




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The government is not planning to invest in the sub-sector of Water and Green through government
bonds.

    4.   To what extent does the Vietnamese government plan to invest, financed by
         SOEs, state credit & private investments?

There are 9 indicated projects that deal with water supply and waste water treatment in various ways.
The project lengths vary, projects start from 2004 up to 2012. The accumulated sector value of projects
financed by SOEs, state credit and private investments is 1,14 billion US dollars. There are 8 indicated
projects that deal directly with water distribution and water quality. The accumulated value is 577,8
million US dollars and accounts for 50,7% of the total sector value.

    5.   To what extent does the Vietnamese government call for ODA?

There are 79 indicated projects that deal with water supply and waste water treatment in various
ways. The project lengths vary, projects start from 2006 up to 2010. The accumulated sector value of
projects calling for ODA is 3,40 billion US dollars. There are 34 indicated projects that deal directly with
water distribution and water quality. The accumulated value is 1 billion US dollars and accounts for
29,4% of the total sector value.

Based on the MPI project list, the government has several plans to invest in their water quality by
means of waste water treatment projects. The research team is not acquainted with the specifics of
this type of projects as waste water treatment was outside the scope of the research.

6.2.4 Opportunities
Providing clean water and sanitation to all people worldwide by 2020 is one of the Millennium
Development Goals. In that respect, the cluster of ‘water distribution and water quality’ is supposed to
be of great importance, as water distribution and quality are directly linked to this goal. However,
drinking water and waste water treatment are out of the scope of this research. However, from what
the research team has seen in Vietnam and from the MPI list, it is expected that many construction
opportunities will arise in the future. Further research is needed to identify real opportunities.

In addition, Vietnam needs knowledge about the possibilities they have to overcome their current
problems. Then again, for this to be interesting for foreign investors, Vietnam should also be seeking this
knowledge. So far, that ‘knowledge search’ has not really been identified, but as the problems will
become bigger, it is expected that opportunities for importing knowledge will arise.




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           6.3 Delta ecology and wetlands

           Vietnam’s freshwater and marine biodiversity is relatively high but threatened by
           domestic and industrial water pollution, dam and road construction, dredging,
           over-fishing and destructive fishing techniques, as well as intensive aquaculture.
           Below, delta ecology and wetlands will be discussed separately67.

           6.3.1 Delta ecology in Vietnam
           The freshwaters of Vietnam have a great biodiversity in flora and fauna biodiversity
           including fish (544 species), shrimp, crab (52 species), 782 species of invertebrates (snails, mussels,
           amphibians, insects) and plants (20 species of weeds, 1402 species of algae). Vietnam’s marine waters
           are home to more than 2000 fish species, of which about 130 species are economically important.
           Additionally, there are more than 1,600 species of crustaceans and 2,500 species of mollusks.
                    Only scarce quantitative data are available for inland aquatic ecosystems, and the extent of
           the deterioration of freshwater biodiversity is still poorly known. However, there are indicators showing
           that many species are in danger of extinction or becoming rare. Listed in the Red Book 200268 are 6
           wetland waterfowl birds, 24 reptiles, 14 amphibian, 37 fish, 19 mollusk and 1 insect freshwater species69.

           6.3.2 Wetlands and mangroves
           Vietnam has many freshwater and marine wetlands. These are mainly distributed in the Red River and
           the Mekong River deltas and along the 3,260 km coastline. The Directory of Asian Wetlands lists over 25
           wetland sites in Vietnam that meet the criteria of ‘Wetlands of International Importance’.
                     Over the last 50 years of development, Vietnam has lost more than 80% of mangrove forests.
           The surge in shrimp farming emerges as one of the leading causes of mangrove forest destruction. The
           loss of mangrove forest area is largest in the Mekong River Delta, Quang Ninh and Hai Phong
           provinces. Other causes for mangrove losses include conversion to agricultural and construction lands,
           war destruction and fuel wood collection.
                     From 1960 to 1995, Quang Ninh and Hai Phong lost close to forty thousands hectares of
           mangrove forest. Only 15,700 hectares remain in the two provinces. It was estimated that the annual
           loss in terms of forgone benefits of mangrove functions (e.g., fishery, forestry, and erosion) could be in
           the range of 10 to 32 million USD per year70. Estimated data compiled from various sources for 1999
           and 2001 indicates some increase in mangrove areas (Figure 8)71.




           67 WEPA
           68 Note: The International Union for the Conservation of Nature and Natural Resources (IUCN) created a Red List of Threatened
           Species (also known as the IUCN Red List or Red Book), created in 1963, is the world's most comprehensive inventory of the global
           conservation status of plant and animal species
           69 WEPA

           70 Note: World Bank, (1999), ‰ The Quang Ninh and Hai Phong Coastal Region:

           Options for Comprehensive Development, Seminar on Options for Comprehensive
           Development in the Quang Ninh and Hai Phong Coastal Region
           71 1987-1995: Vietnam Forest Resources Inventory and Monitoring Program, FIPI 2001, 1999 and 2001: Estimated data from various

           sources




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                                                                                              Market scan Vietnam, 2007



                                 300000



                                 250000



                                 200000

                                                                    Estimated
                      hectares




                                 150000



                                 100000



                                 50000



                                     0
                                          1987   1990        1995               1999   2001


Figure 8: Mangrove loss in Vietnam


The risks of mangrove loss are three-fold. Firstly; increase of erosion. Secondly, more mud slides will
occur during the wet season. Finally, as the soil holds less water, salt water will advance and push back
the fresh water.

Business entity

     1.   To what extent is this cluster of strategic importance to Vietnam?

Water distribution and water quality are very important issues when looked at from a natural health
perspective. However, with this question the importance to the Vietnamese economy is meant. In this
respect the cluster is of less importance and therefore foreign investors are allowed to start a privately
owned company.

Barriers to entry

     1.   To what extent does this cluster require high capital investment?

As for the water distribution and water quality cluster, the research team has not seen examples of
activities within this area in Vietnam. Therefore barriers to entry cannot be identified and rated.

Knowledge management

     1.   To what extent is specific knowledge available?

     2.   To what extent is specific knowledge required?

     3.   To what extent are Vietnamese companies seeking to share/acquire knowledge?

The desk research phase for this cluster only revealed a description of the current situation in Vietnam.
Based on this information, the research team is not able to identify whether or not specific knowledge




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           is available, whether it is required and whether Vietnamese organizations are interested in sharing
           knowledge

           Finance

           Vietnam is not investing money in this cluster. At least not when the MPI list is taken as a
           reliable source.

           6.3.3 Opportunities
           The project team is unable to identify opportunities for Dutch organizations within this cluster. Too little
           information is available at the moment. However, it is expected that the damage caused by the
           disappearance of mangrove forests will lead to required knowledge in the future.




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6.4 Alternative water sources

As Vietnam is running out of fresh water they are in urgent search of alternative water sources. Or at
least they should be. Currently they are drilling to reach low-lying groundwater pools and they use
basins with limestone to turn salt water into fresh water. A major problem in this cluster is a lack of
money to fund more sophisticated techniques. Additionally, the lack of fresh water is not yet occurring
on a large scale and is therefore not yet an important issue on the Vietnamese agenda.

6.4.1 Cluster analysis

Business entity

    1.    To what extent is the cluster of strategic importance to Vietnam?

Providing the population with a sufficient amount of fresh water should of course have a high priority.
Nevertheless, this cluster is not of strategic importance to the Vietnamese economy and therefore this
dimension scores low.

Barriers to entry

    1.    To what extent does this cluster require high capital investment?

This is a difficult question. On the one hand better techniques are not yet used as they are too
expensive, so introducing them will be difficult. Following this line of reasoning it can be said that the
only thing that could be helpful is knowledge about alternative water sources, which does not call for
high capital investment. On the other hand one could think about starting to actually provide Vietnam
with alternative fresh water by importing all machinery or equipment needed to make fresh water out
of salty water and then sell the fresh water. As everything needs to be imported from abroad, this
option will require high capital investment. However, we consider this a rather unfeasible option as the
Vietnamese are currently not able to pay an economical justifiable price for this alternative water.

Knowledge management

    1.    To what extent is specific knowledge available?

    2.    To what extent is specific knowledge required?

    3.    To what extent are Vietnamese companies seeking to share/acquire knowledge?

For this cluster the same reasoning as for the clusters of water & food production and aquaculture
holds. On the one hand some knowledge about using alternative water sources is available, but not to
the extend that it is actually needed to overcome the upcoming fresh water shortage. However, as
the problem is not obvious yet, the general interest in alternative water sources is still rather low.

Finance

Vietnam is not investing money in this cluster. At least not when the MPI list is taken as a reliable source.




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           6.4.3 Opportunities
           As already identified within the analysis for this cluster, sharing knowledge is the only aspect that could
           be interesting and feasible for Vietnam.




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                                                                                         Market scan Vietnam, 2007



7. Summary of opportunities

This chapter will summarize the identified opportunities within the different sub-sectors and clusters.


7.1 Water Construction

In the sub-sector Water Construction opportunities are identified in the following areas:

Barriers and flood protection;
     •   Sharing knowledge about total project management with Vietnamese ministries and
         institutions to develop a long-term strategy for managing and mitigating floods.
     •   Sharing knowledge to create a central overview and about the construction and composition
         of dykes throughout Vietnam.

Coastal engineering and management;
   •    Sharing knowledge and experience to improve aligning master plans and coastal
        development plans between the different governmental levels involved.
   •    Sharing knowledge on executing and supervising large projects.
   •    Port management and development;
   •    Delivering technical expertise concerning the logistical process, cranes, and transport rails.

Sustainable dredging;
    •   Dredging tide inlets along the coastline must be done continuously to keep those tide inlets
        and river mouths accessible for fishing boats and preserving the drainage of rivers.


7.2 Water Management

In the sub-sector Water Management opportunities are identified in the following areas;

Integrated river basin management;
    •   Dutch consultancy firms can offer their specialist knowledge and services to assist and support
        the creation of an integrated river basin approach by a reliable data network, simulation
        models, data analysis & interpretation.
    •   Dutch consultancy firms can sell their managerial skills and capabilities to support integration
        across all aspects of the hydrological cycle.
    •   Knowledge institutes and consultancy firms can design, assist or model components of IWRM.

Soil issues and desalination;
      •   NGOs and universities can assist in offering/sharing soil conservation techniques and upgraded
          agricultural techniques (like IPM).


7.3 Water and Green

In the sub-sector Water and Green opportunities are identified in the following areas;

    •   Sharing knowledge and/or selling equipment for sustainable production of fish and cultivation
        of rice.




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               •   Starting up a fishery.
               •   Sharing knowledge and/or selling equipment of the Vietnamese waste water treatment
                   sector.




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                                                                                                                                              Market scan Vietnam, 2007


                         Water Construction                                         Water Management             Water and Green
                         Barriers and   Coastal       Port       Sustainable        Integrated    Soil issues    Aquaculture   Water            Delta         Alternative
                         flood          engineering   manage-    dredging           river basin   and            + Water &     distribution     ecology and   water
                         protection     and man-      ment/                         manage-       desalination   Food          and water        wetlands      resources
                                        agement       develop-                      ment                         production    quality
                                                      ment
Business entity
1. *is the cluster of
strategic importance
to Vietnam?
Barriers to entry
1. * does this cluster
require high capital
investment?
Knowledge
management
1.   *   is   specific
knowledge
available?
2.   *   is   specific
knowledge required?
3. *are Vietnamese
companies seeking
to     share/acquire
knowledge?
Finance
1. **state budget?

2. ** ODA?

3. ** government
bond investment?
4. ** SOEs, state
credit and private
investments?
5.    *   does     the
Vietnamese
government call for
ODA?
Overall attractiveness

*        To what extend
**       To what extend does the Vietnamese government plan to invest, financed by




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Market scan Vietnam, 2007




  8. Recommendations

  In this chapter different kinds of recommendations will be given. First of all, the focus will be on general
  reminders for organizations which consider entering the Vietnamese market. Then specific
  recommendations for NWP will be given. Finally, a summary of opportunities arising in the different sub-
  sectors and clusters will be made.



  8.1 Reminders for entering the Vietnamese market

  Organizations considering to enter the Vietnamese market should be aware of the major differences
  between the Dutch and the Vietnamese (business) culture. There are several things that a new entrant
  should keep in mind. Firstly, respect for the hierarchy. In this respect, it is important to first approach high
  positioned people and then work out the details of a deal with lower positioned people. Losing face
  and, directly related to this being anxious to please, are other important issues to keep in mind.
  Vietnamese people always want to make others feel comfortable, which results in telling others what
  they want to hear, promising things they cannot execute in order not to have to turn the other party
  down etc.. Vietnamese feel like losing face if they need to say ‘no’ to a request or if they have to admit
  that they do not know the answer to a certain question. To solve this, Vietnamese are inclined to accept
  requests even when they are not able to follow up on them. Additionally, they rather give you incorrect
  information than admitting that they do not know the answer to a certain question. Associated with this is
  the Vietnamese reluctance to admit mistakes as that would mean ‘losing face’ too.
           Managing relationships is another important issue. In Vietnam, business success can depend on
  the people you know, as many things are arranged underhand. In dealing with Vietnamese people it is
  important to always be patient, friendly, open and fair. Building these relations can cost a considerable
  amount of time and therefore money. Foreign investors should be aware of this and include this
  time/money expenditure in their budget.
           An important party in doing business within the water sector is the government. In order to
  maintain good relationships with them, it is recommended to hire Vietnamese people. Vietnamese
  employees will enable foreign investors to overcome language and culture barriers with other parties
  and thereby enlarge business opportunities. However, it is also important to bring in people from abroad
  to check what the Vietnamese are doing for the company. In Vietnam quality awareness is not as high
  as in the Western world. Therefore, they easily settle for lower quality as long as ‘it looks good’. Employees
  from the ‘home’ country should train and educate their Vietnamese colleagues in the quality standards
  of the company. Another reason why companies should employ both foreign and local staff is that, in
  general, the Vietnamese show a favourable attitude towards Western people, which might be helpful in
  establishing relations.
           Associated with maintaining your relations, is taking care of a proper track record. The
  Vietnamese people tend to have a very good memory, and highly value trustworthiness. If parties failed
  in the past, this will effect future opportunities as well.
           It is also important to keep in mind the so called ‘management fees’. In Vietnam, information
  costs money, this money is called ‘management fee’, but it$ is rather similar as to what the Dutch
  consider as corruption. Foreign investors should be aware of the Vietnamese habit of expecting money
  for every ‘favour’ done to you. The Royal Netherlands Embassy and the Dutch Consulate have a clear
  opinion of how to deal with these fees; it is the ‘western’ point of view that one should never get involved
  in paying these fees. Once a party has paid, it will be difficult not to pay the next time. Therefore it is very




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                                                                                         Market scan Vietnam, 2007



important to clearly state how far you want to go and probably to clearly communicate your vision on
paying management fees to the employees.
To take one example: Stories were told about a company that invested € 2 mill. in building a factory.
When they could start exporting goods, customs asked 300 US dollars for each container to be shipped. If
this company would decide not to pay, their complete investment was wasted. On the other hand, if
they would pay, would it ever stop? A difficult decision.
          Another issue foreign investors should keep in mind when entering the Vietnamese market is that
this economy is by far no open market economy as Western economies are. Everything needs to be
arranged with government approval and foreigners should not think they can just come in and start
selling. To gain good understanding of all different interests and people involved, it is wise to search for a
good, reliable, Vietnamese business partner and to stay in contact with either the Royal Netherlands
Embassy in Hanoi or the Consulate in Ho Chi Minh City. Together, these parties are able to guide you
through the apparent chaos after having just arrived in Vietnam.
          In addition, the research team has come across a document containing different strategies for
entering the Vietnamese market. It describes which legal entities are possible, and how foreign
companies should start their entrance on the Vietnamese market. This document is included in appendix
I.



8.2 Recommendations for NWP

Taking together all the information and data the research team collected, both during the desk research
and during the field research in Vietnam, one idea kept coming back. We think NWP should seriously
consider to follow the example of the HME with its Holland Marine House and start a NWP house in
Vietnam. This would provide the members of NWP the opportunity to enter the Vietnamese market but
with seriously lower risks than when they would enter the market by themselves. The idea comprises
starting up of an office in Vietnam, preferably in Hanoi as the government is located their. Several NWP
employees should be employed there and will be responsible for building an extensive network with
Vietnamese people. This network should at least consist of highly positioned people within the ministries
of MARD, MONRE, and MPI as they are most important for the water sector. Additionally, the network
should contain people from quality control organizations such as NAVIQAVED and from major
consultancy and construction companies. In addition to the network, NWP employees should also be
appointed to create a database containing different kinds of knowledge. The reason for this is that
information provided by Vietnamese cannot be considered to be reliable. However, when Dutch people
are present in the country, they will be able to gather data and information independently and thereby
create a more reliable database. Information and data collected should contain current and future
projects, market development figures, governmental zoning plans, etc..
         NWP members considering to enter the Vietnamese market could then come to the NWP House
and investigate the market from within. The network that is established by the NWP employees will be
open to NWP members so that the companies will be better able to assess their opportunities within the
Vietnamese market. Besides attaining a better insight in business opportunities, a NWP House would
enable members to get this insight a lot quicker than when they would come to Vietnam on their own.
The main reason for the latter is the extreme importance of relationships for doing business in Vietnam.
Many of the parties the research team spoke to emphasized this as absolutely crucial for business
success.
         Introducing an NWP House would be in line with several of NWP’s goals. It would be an excellent
representation of the Dutch water sector abroad, it would stimulate Dutch business activities and, taking
these two together, NWP would contribute to achieving the Millennium Development Goals. Finally, an




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  NWP House would result in synergy advantages for both the NWP members and NWP itself, as they will
  learn from each other and share costs and thereby risks.
           The specifics of the NWP House should be designed in close cooperation with the Royal
  Netherlands Embassy and with the Dutch Consulate as they both give high priority to stimulating the
  Vietnamese water sector.
           In addition to the document about entering the Vietnamese market and different options
  foreign investors have, the research team has received a document which could be of special interest
  to NWP as it describes the possibilities for establishing an office in Vietnam. This can be found in appendix
  J. Furthermore, the research team would highly recommend NWP to pursue closer relationships wit the
  Mekong River Commission since the MRC counts as an important input for governments in the South East
  Asian region responsible for river management projects. Regarding the aim to increase competitiveness,
  EU-countries (Germany, Belgium, Denmark, Sweden, Finland, France) are important donors within this
  cluster.




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                                                                                   Market scan Vietnam, 2007



        Appendix A: Interview list

Date                  Company                       Interviewee                     Function
25-3-2007     WL Delft Hydrolics Nederland          Peter Kerssens                 Consultant
26-3-2007           DHV Nederland                  Rick Langereis            Manager Contracting
29-3-2007           Alterra Nederland               Henk Ritzema          Researcher / Drainage Expert
 3-4-2007      Baria Serece, Phu My Port         Jean-Louise Nicaise           General Manager
 3-4-2007      Baria Serece, Phu My Port          Pham Van Truong            Commercial Manager
 3-4-2007     Consulaat Ho Chi Minh City          Ton van Zeeland       Consul-generaal der Nederlanden
 4-4-2007     Consulaat Ho Chi Minh City             Dhr. Le Son         Economic / Commercial Officer
 4-4-2007          Unilever Vietnam              Marijn van Tiggelen               Chairman
 5-4-2007           Royal Haskoning                Harrie Laboyrie              Director General
 5-4-2007           Royal Haskoning              Merieke Nieuwaal              Manager Vietnam
 6-4-2007                 AVK                     Nguyen Anh Vinh          Manager Products & Sales
 6-4-2007               Ibro Mar                  Thuy Bich Nguyen                  Manager
10-4-2007             Akzo Nobel                     Mr. Cheung                General Manager
11-4-2007               DONRE                    Nguyen Trung Viet      Head of Solid Waste Management
11-4-2007             Kim Anh Co                   Lam Huu Nhon               Trading Department
11-4-2007           Maersk Logistics              Paul Hoogwaerts                     CEO
12-4-2007      Urban Drainage Company                 Thai Hoa                    Vice Director
12-4-2007               Nutriway                   Johan Rietberg              General Manager
12-4-2007               Nutriway                       Mrs. Thu                  Aqua Manager
17-4-2007      Mekong River Commission               Nico Bakker             Chief Technical Advisor
17-4-2007      Water Resources University           Vu Minh Cat                Associate Professor
18-4-2007      Water Resources University        Gerrit Jan Schiereck    Delft Partners Resident Engineer
18-4-2007      Barwil Unitor Ships Services       Tran Quoc Huong                Boarding Agent
18-4-2007            Hai Phong Port                  Nam Than                       Director
18-4-2007            Hai Phong Port              Nguyen Tuong Anh                 Vice Director
18-4-2007            Hai Phong Port                Pham Van Tuan        Chief Operations & Business Devel
19-4-2007             Ambassade                     Armand Evers        First Secretary Water Management
19-4-2007             Ambassade                   Ton van Zeeland       Consul-generaal der Nederlanden
20-4-2007      Water Resources University              Mrs. Thu                     Professor
24-4-2007      DHV Representative Office         Doan Manh Thang         Senior Manager Project Develop
24-4-2007          Ned-Deck Marine                Arnout IJzermans             General Manager
25-4-2007      Asian Development Bank              Do Nhat Hoang         Project Implementation Officer
25-4-2007        Vision Attorneys at Law          Hoang The Thang                   Associate
25-4-2007        Vision Attorneys at Law        Nguyen Nguyet Dzung           Manager IP Practice
26-4-2007   Ministry of Planning and Planning     Tran Quoc Trung         Expert of Department of EPZ




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         Appendix B: Financed by state budget

         LIST OF STATE BUDGET INVESTED GROUP-A PROJECTS/PROGRAMS OF 2006-2010
         (Excluding ODA projects/Programs)
                                                                                                                                              Unit: Billion VND
                                                                                       Designed           Project        Approved
          Seq.   Projects/Programs                                  Location                                                          Notes
                                                                                       capacity           length         value
                 TOTAL

          I      WATER & GREEN
                 Program for animal, crop plant and forestry
          6                                                         Provinces                             2006-2010           3,500
                 varieties
          7      National Project of 5 million ha afforestation     Provinces                             1998-2010          32,000
          8      Program for aquatic production (infrastructure)    Provinces                             2006-2010           3,500
          9      Program for fishery varieties                      Provinces                             2006-2010             700
          14     Lower U Minh Forest protection and production      Ca Mau             36,960 ha          2003-2010              86
          16     Hi-tech agricultural park in Ha Noi                Ha Noi             300 ha             2006-2012           1,000
          18     Thac Muoi Lake project                             Nghe An            8,000 ha, 40 KW    2006-2012           1,400
          20     Van Phong watering system                          Binh Dinh          28,000 ha          2007-2010             400
          132    Agriculture University I project (phase 2)         Ha Noi             10,000 students    2007-.......        1,000
          138    Kien Giang Fisheries University project            Kien Giang         5,000 students     2008-.......          500

          II     WATER CONSTRUCTION
          51     Dyke and ring road of Long Xuyen city              An Giang           16 km              2006-2010           1,484
          72     Cai River dyke and riverside roads                 Khanh Hoa                             2006-2010           1,696
          82     Focal laboratory: Ship model test tanks            Ha Noi             In-depth invest.   2003-2006             144
                 Research     Ships   for   sea    sources    and
          94                                                        Hai Phong                             2008-2010            135
                 environment
          17     Red River dyke, plan and residential allocation    Ha noi             12 km              2006-2015           3,000
          10     Program for storm-hiding of fishing boats          Provinces          1,000 boats        2006-2010           2,500
                 Residential reallocation and settlement of TB1
          11                                                        Bac Giang          2,300 households   2003-2009            585
                 project
                                                                                                                                      Phu Tho, Vinh Phuc,
          12     Program for flood prevention and derivation        6 provinces                           2005-2010           3,500   Ha Tay, Hoa Binh, Ha
                                                                                                                                      Nam, Ninh Binh
          15     Cua Dat Lake Channel                               Thanh Hoa                             2007-2010            700
                                                                    Dong Thap,         Flood prevention
          21     Tien River - Hau River connecting channel                                                2007-2010            400
                                                                    Vinh Long          and watering



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                                                                           Designed           Project     Approved
Seq.   Projects/Programs                                   Location                                                    Notes
                                                                           capacity           length      value
       Seadyke updrade project Quang Ninh to
22                                                         13 provinces                       2006-2010       10,000
       Quang Nam
23     Program for residential reallocation                Provinces                          2006-2010
17     Red River dyke, plan and residential allocation     Ha noi          12 km              2006-2015        3,000
51     Dyke and ring road of Long Xuyen city               An Giang        16 km              2006-2010        1,484
       Improvement and expansion of Quy Nhon Port,
53                                                         Binh Dinh       2 mil. ton/year    2008-2010         953
       phase 2
72     Cai River dyke and riverside roads                  Khanh Hoa                          2006-2010        1,696
82     Focal laboratory: Ship model test tanks             Ha Noi          In-depth invest.   2003-2006          144
       Research     Ships   for   sea     sources   and
94                                                         Hai Phong                          2008-2010         135
       environment

III    WATER MANAGEMENT
       Mekong River Delta flood control and warning
100                                                        Mk. Delta       Facilities         2008-2011         139
       system
       Natural environment forecast and warning
101                                                        Ha Noi                             2007-2010         100
       network (Earth quakes, Tsunami,...)
110    Capacity building for sea mapping                                                      2006-2010         200
       Projects of Decision 64/2004/QD-TTg on strictly     Whole
104                                                                                           2006-2010         660
       improve seriously polluted production units         country
       Establish 3 centers for coping with oil
105    overflowing problems in the North, Center and                                          2001-2010         700
       South
       Purchasing    ships     for  general     surveys,
106    researches, sea mapping and international                                              2006-2008         160
       cooperation
       Purchasing ships for geographical, mineral, sea
107    geographical,     environmental,     and     sea                                       2006-2011         128
       meteorological and hydrographical surveys.
       Modernization      of     meteorological     and
109                                                                                           2007-2010         370
       hydrographical station network

IV     WATER SUPPLY                                                                                           15,113
78     Program for clean water and rural sanitation        Provinces                          2006-2010        9,000   water supply only
                                                                                                                       State investment for
                                                           Hoa Binh, Ha
79     Da River water supply System, phase 1                               300,000 m3         2004-2007        1,393   roads      to   pump
                                                           Tay, Ha Noi
                                                                                                                       stations only



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                                                                                          Designed   Project     Approved
          Seq.   Projects/Programs                                    Location                                               Notes
                                                                                          capacity   length      value
                                                                      27 provinces
          80     Vietnam’s water supply development Project                                          2006-2010       2,160
                                                                      and 4 cities
                 Red River Delta water supply and             rural
          81                                                          12 provinces                   2006-2010       2,560
                 sanitation
          19     Ngan Truoi,- Cam Truong Irrigation system            Ha Tinh                        2007-2010       1,500

          V      WASTE WATER                                                                                           400
          108    Living waste-water treatment Plants in key cities                                   2007-2010         400




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                                                                                                                                    Market scan Vietnam, 2007




Appendix C: Financed by ODA

LIST OF ODA PROJECTS/PROGRAMS OF 2006-2010
                                                                                                                                       Unit: Million USD
                                                                                       Project     ODA
 Seq.   Projects/Programs                                   Location                                              Notes
                                                                                       length      capital
        TOTAL

        ON GOING PROJECTS OF 2001-2005
 I      WATER & GREEN
                                                                                                                  Fruit trees at 7 provinces: Bac
                                                                                                                  Giang, Thanh Hoa, Hoa Binh, Binh
                                                                                                                  Dinh, Khanh Hoa, Tien Giang, Ben
 1      Tea plant and fruit trees development project       Provinces                  2001-2006             40
                                                                                                                  Tre. Tea plant at 6 provinces; Thai
                                                                                                                  Nguyen, Phu Tho, Yen Bai, Lam
                                                                                                                  Dong, Tuyen Quang, Ha Giang
                                                            Quang Binh, Quang                                     funded by loan from ADB of USD
 2      Central Region Livelihood Improvement Project       Tri, Thua Thien Hue,       2002-2007             60   43.09 million and grant from DFID
                                                            Kontum                                                USD 16.45 million
                                                                                                                  Loan for agricultural development
                                                                                                                  policy reforms - implemented by
                                                                                                                  MARD - USD 60 million; Loan for
 3      Agricultural sector development program                                        2003-2006             90
                                                                                                                  credits for SMEs in agricultural
                                                                                                                  sector - implemented by MARD:
                                                                                                                  USD 30 million
                                                            8 coastal Central
                                                            provinces, 3 Central
        Agricultural diversification, rubber tree, pepper                                                         WB co-finances AFD France: USD
 4                                                          Highland       provinces   1998-2006             83
        plant, cashew development                                                                                 15.6 million
                                                            and 6 mountainous
                                                            Northern provinces
                                                            Thanh Hoa, Quang                                      ADB: USD 33 million, Nederland:
 14     Forestry sector                                                                1998-2006             40
                                                            Tri, Gia Lai, Phu Yen                                 USD 7 million
                                                            Dong Nai, Lam Dong,
                                                                                                                  WB: USD 21.514 million, Nederland
 15     Forest protection and rural development             Binh Phuoc, Kon Tum,       1997-2006             26
                                                                                                                  ODA: USD 4.76 million
                                                            Dac Lac
 16     Forestry development                                                           2005-2010             50

 II     WATER SUPPLY
 5      Irrigation schemes for Red River basin (Stage 2:    25 provinces               2002-2007         100      The     Project   compose      of   2



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                                                                                           Project       ODA
          Seq.   Projects/Programs                                   Location                                           Notes
                                                                                           length        capital
                 ADB3, France, Nederland)                                                                               components: (i) water resource
                                                                                                                        integrate      management        and
                                                                                                                        institutional strengthening and (ii)
                                                                                                                        Irrigation             infrastructure
                                                                                                                        improvement           and        rural
                                                                                                                        development
                                                                                                                        Total value of project: USD 164.6
                                                                                                                        million (ADB: 90 million, AFD: 34
          6      Phuoc Hoa irrigation project                        Binh Duong            2004-2009           124      million, responsive fund: 35.6
                                                                                                                        million, provincial contribution: 5
                                                                                                                        million)
          7      Mekong Delta basin irrigation development           Provinces             1999-2006           102
          9      Vietnam irrigation support                                                2004-2011           158
                 Develop irrigation system infrastructure Ninh
          12                                                         Ninh Thuan            2005-......             14
                 Thuan
                                                                                                                        (Co-financed by AFD and Norad);
          64     Nhon Trach Water supply system, stage 1             Dong Nai              2004-2008               75   ADB: USD 60 million, AFD: 11.24
                                                                                                                        million, NORAD: 1.15 million
          65     Vietnam urban water supply development                                    2005-2011           112      In calling list for WB fiscal 2004-2006
          66     Bac Lieu water supply system                        Bac Lieu              2002-2008            14      in Japanese fiscal ODA 2003
                 Expansion of Thu Duc water supply system, stage
          67                                                         HCM city              2006-2010               75
                 2
                 Expansion of Nhon Trach water supply infra, stage
          68                                                         Dong Nai              2009-2012               35
                 2
                 Water supply and sanitation for Red river delta
          122                                                                              2006-......             46
                 area
          123    Phan Ri - Phan Thiet Irrigation project                                   2006-......             42
          124    Hanoi water drainage system, stage 2                Hanoi                 2006-2010               31
          125    Son La irrigation system development project        Son La                2006-......             16
          126    Bac Giang water drainage and sanitation             Bac Giang             2006-2010               19   Funded by Denmark ODA

          III    WATER CONSTRUCTION
          62     Tien Sa Port (Hai Van - Tuy Loan wave prevention)   Da Nang               1998-2007               60

          IV     WATER MANAGEMENT
                 Protect and develop salt-marsh area in coastal      Ca Mau, Bac Lieu,                                  WB: USD 31.8 million, Danish ODA:
          8                                                                                2000-2008               43
                 South Vietnam                                       Soc Trang, Tra Vinh                                USD 11.2 million



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                                                                                                                          Market scan Vietnam, 2007




                                                                                Project     ODA
Seq.   Projects/Programs                                  Location                                         Notes
                                                                                length      capital
119    Natural disaster risk management project           17 provinces          2006-2009             86   Japan and Nederland co-finance

V      WASTE WATER
       Ho Chi Minh city Sanitation project (Nhieu Loc -
69                                                        HCM city              2001-2007         424
       Thi Nghe basin)
       Ho Chi Minh city Water drainage and Waste                                                           in annual ODA, Yen 46,057 billion -
70                                                        HCM city              2002-2006             71
       Water treatment system                                                                              1 st time credit
       Upgrade project for waste water drainage                                                            in Japanese fiscal ODA 2002- 2nd
71                                                        HCM city              2006-2010         129
       system of Ho Chi Minh city                                                                          time credit
72     Hai Phong Waste water and disposals treatment      Hai Phong             2005-2013             14

       Renovation of waste water drainage system in
73                                                        Bac Ninh, Hai Duong   2003-2008             20
       Bac Ninh and Hai Duong towns
       Waste water drainage and disposal treatment
74                                                        Nghe An               2003-2008             14
       program of Vinh city
       Upgrade project for waste water drainage
75                                                        Can Tho, Soc Trang    2003-2007             15
       system of Can Tho and Soc Trang provinces
       Waste water collection, drainage and treatment
76                                                        Ba Ria - Vung Tau     1999-2006             17
       of Vung Tau city




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         Appendix D: Financed by governmental bond investment

         LIST OF GOVERNMENT BOND INVESTED GROUP-A PROJECTS/PROGRAMS OF 2006-2010
                                                                                                                                Unit: Billion VND
                                                                           Designed            Project     Approved
          Seq.   Projects/Programs                        Location                                                      Notes
                                                                           capacity            length      value
                 TOTAL

          I      WATER SUPPLY                                                                                  25,500
          1      Hat Mon - Dap Day irrigation complex     Ha Tay           Ha Noi protection   2003-2007          550
          2      Cua Dat Lake                             Thanh Hoa        cover 86,862 ha     2004-2008        3,300
          3      Nuoc Trong Lake                          Quang Ngai       cover 20,000 ha     2006-2010        1,500
          4      Dinh Binh Lake                           Binh Dinh        cover 15,000 ha     2003-2008          850
          5      Irrigation works in mountainous areas    Provinces                            2006-2010        7,300
          6      Ia-Mo Irrigation Project                 Gia Lai          cover 12,500 ha     2006-2012        1,400
          7      Krong Buk Lower Reservoir                Dak Lak          cover 11,400 ha     2006-2010        1,090
          8      Ray River Irrigation System              BR-VT            cover 9,150 ha      2006-2009        1,910
          9      Ta Trach Lake                            TT-Hue           cover 34,782 ha     2005-2009        2,000
          10     Mong Village Lake                        Nghe An          cover 30,600 ha     2006-2013        3,000
          11     Krong Pach Upper Reservoir               Dak Lak          cover 14,000 ha     2008-2012        1,400
                                                          Binh Thuan,                                                   this is a multiple
          12     Ta Pao Lake                                               cover 32,000 ha     2006-2012        1,200
                                                          Dong Nai                                                      objective project




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                                                                                                                                   Market scan Vietnam, 2007




      Appendix E: Financed by SOEs, state credit and private investments

      LIST OF SOES, STATE CREDIT AND PRIVATE INVESTED PROJECTS/PROGRAMS IN 2006-2010
                                                                                                                                      Unit: Billion VND
                                                                                                     Demand of 2006-2010
                                                           Designed        Project     Total
Seq.      Projects/Programs                  Location                                                SOEs     State    Private       Notes
                                                           capacity        length      investment
                                                                                                     capital  credit   capital
          TOTAL
          WATER & GREEN
127       Fish cage raising onshore          Nghe An       400 ha          2006-2010           750                750
          Local    people's    aquaculture
128                                          Phu Yen                       2006-2010           500                          500
          projects
          Go Gang sea food processing
129                                          BR-VT         250 ha          2006-2010           250                150
          zone

          WATER CONSTRUCTION
145       Sai Gon - Thi Vai Port project     Vung Tau      2 wharfs        2008-2012           400       200
                                                           3.5-4    mil.
146       Hiep Phuoc Port project            HCM city                      2006-2010         1,600      1,600
                                                           ton
          Cai Mep Upper Container port
147                                          BR-VT         550,000 TEUs    2006-2011         3,000      2,000
          project
          Cai Mep Lower Container port
148                                          BR-VT         550,000 TEUs    2006-2011         2,400      2,000
          project
                                                           2.2      mil.
149       Thi Vai complex Port               BR-VT                         2007-2012         4,000      1,100
                                                           ton/year
150       Chan May port project, stage 2     TT Hue                        2006-2012         1,200                700
151       Phu Huu 1 port project

          WATER SUPPLY                                                                      18,245       825    6,489      2,700
                                                                                                                                     Loan from support
                                             Hoa   Binh,                                                                             fund     650 billion
          Da River water supply system,
157                                          Ha     Tay,   300,000         2004-2007         1,393       274      896                dongs,        Bank
          stage I
                                             Hanoi                                                                                   investment of 246
                                                                                                                                     billion dong
          Thu Duc water supply factory
158                                          HCM city      300,000         2005-2008         1,487       500      987
          (BOO)
          Nhon Trach water supply system,
159                                          Dong Nai      100,000         2004-2008         1,424                191                15% loan
          stage I
160       Kenh Dong water supply system      HCM city      240,000         2005-2007         1,240                235                Enterprise      fund



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                                                                                                   Demand of 2006-2010
                                                              Designed   Project     Total
      Seq.   Projects/Programs                  Location                                           SOEs     State    Private     Notes
                                                              capacity   length      investment
                                                                                                   capital  credit   capital
                                                                                                                                 including
                                                                                                                                 commercial loan
                                                Hoa   Binh,
             Da River water supply system,
      161                                       Ha     Tay,   300,000    2009-2010         1,151        51     1,100
             stage II
                                                Hanoi
             Da Den water supply system,
      162                                       Vung Tau      50,000     2009-2012           400                400
             stage II
             Thu Duc water supply system,
      163                                       HCM city      300,000    2006-2010         1,500                300              20% support fund
             stage II
             Expansion of Nhon Trach water
      164                                       Dong Nai      100,000    2009-2012           650                130              20% support fund
             supply system, stage II
             Rural clean water and sanitation
      165                                       Provinces                2006-2010         9,000               2,250     2,700   Only water supply
             program




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                                                                                                                       Market scan Vietnam, 2007




Appendix F: Projects calling for ODA

LIST OF PROJECTS/PROGRAMS CALLING FOR ODA OF 2006-2010
                                                                                                                             Unit: Million USD
                                                           Location or management       Project      ODA
 Seq.   Projects/Programs                                                                                            Notes
                                                           organizations                length       capital
        TOTAL

 I      WATER CONSTRUCTION
        Inland Waterways
                                                                                                                     Long    list of
        Waterway transportation development of Red
 77                                                        Ministry of Transportation   2006-2007              250   Japanese ODA
        River in Hanoi
                                                                                                                     2005-2007
        Improvement for waterway transportation Lach
 78                                                        Ministry of Transportation   2006-2010               50
        Giang – Hanoi
        Study to improve waterway transportation of Thao
 79                                                        Ministry of Transportation   2008-2010               50
        River

        Seaways
 80     Lach Huyen Port                                    Ministry of Transportation   2006-2010              250
 81     Study to modify ships passage by Dinh An Estuary   Ministry of Transportation   2006-2010              250
 82     Lien Chieu Port                                    Ministry of Transportation   2006-2010              150
 83     Upgrade project for Da Nang Port, stage 2          Ministry of Transportation   2006-2011              110
        Development of EDI system at some national
 84                                                        Ministry of Transportation   2008 -2012              50
        major ports
 85     Expansion for Cai Lan Port, stage 2                Ministry of Transportation   2008 -2012              40
 86     Can Giuoc Port, Long An Port                       Long An PPC                  2006-2010               31
        Study to develop ships passage through Soai Rap
 87                                                        Ministry of Transportation   2007-2009               30
        Estuary
 88     Expansion for Chan May Port                        Thua Thien Hue PPC           2007-2009               30
        3 salvage, rescue ships fundef by ORET
 89                                                        Ministry of Transportation   2007-2008               17
        Netherlands
        Development of VTS system in-flow of ports Hai
 90                                                        Ministry of Transportation   2006-2010               25
        Phong, Quang Ninh, in the Central Region
 91     Upgrade project for Cua Viet Port                  Quang Tri PPC                2006-2008               20
                                                                                                                     For ship of over
 92     Vung Ro Deep-water Port                            Phu Yen PPC                  2006-2009               16
                                                                                                                     20.000 tones
        Van      Phong      International   intermediate
 93                                                        Khanh Hoa PPC                2006-2010               94
        transportation port



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                                                                              Location or management   Project     ODA
          Seq.    Projects/Programs                                                                                                Notes
                                                                              organizations            length      capital
                  Development of anchorage shelter in storms for
          132                                                                 Ministry of Fisheries    2006-2010             150
                  fishing ships
                  Upgrade and modernization project for sea dyke
          187                                                                 MARD                     2006-2010             300
                  system from Quang Ninh to Quang Nam
                  Restoration, enhancement, and upgrade project
          188     for sea dyke and wall of North Central provinces            MARD                     2006-2008             100
                  (Thanh Hoa, Nghe An, Ha Tinh)
                  Upgrade project for sea dyke in Thanh Phu and Ba
          191                                                                 Ben Tre PPC              2006-2008              31
                  Tri, Tien river dyke, Binh Dai district, Tam Hiep hillock
          192     Dyke building and dyke surface reinforcement                Phu Tho PPC              2006-2010              30
          193     Chan May wave prevention sea dyke                           Thua Thien Hue PPC       2006-2008              30
                  Landslide prevention wall along rivers and sea
          194                                                                 Ha Tinh PPC              2006-2010              29
                  coast
          195     Can Tho River walls                                         Can Tho PPC              2006-2008              18
          237     Upgrade project Hue water plant, stage II                   Thua Thien Hue PPC       2006-2010              18
                                                                                                                                   30,000 m3/day
          245     Tan Hiep Water Plant                                        Binh Duong PPC           2006-2010              14
                                                                                                                                   and night

                  WATER & GREEN
          118     Agricultural diversification project 2                      MARD                     2006-2010              60
          119     Vietnam Global forestry Program, stage 2                    MARD                     2006-2010             226
          120     Forestry Development Project                                MARD                     2006-2010              80
                  Forest development to improve livelihood in
          121                                                                 MARD                     2006-2012              50
                  Central Highland
          122     Afforstation to minimize Carbon Dioxide (CO2)               MARD                     2006-2010              40
          123     Vu Quang National Park and buffer zones project             Ha Tinh PPC              2006-2010              24
          124     Conservation of North Truong Son Forest                     MARD                     2006-2010              22
                  Conservation and development of Ba Be National
          125                                                                 Bac Kan PPC              2006-2010              20
                  Park
                  Protection forest plantation in Song Ma, Song Da
          126                                                                 Son La PPC               2006-2010              20   20.000 ha
                  watershed
                  Support forest plantation in Xuyen Moc, Con Dao
          127                                                                 Ba Ria Vung Tau PPC      2006-2010              20
                  districts
                                                                                                                                   Plantation 15000
                  Development of eco-forests in line with poverty                                                                  ha,       natural
          128                                                                 Lai Chau PPC             2006-2010              17
                  reduction                                                                                                        regeneration
                                                                                                                                   100.000ha



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                                                                  Location or management   Project     ODA
Seq.   Projects/Programs                                                                                               Notes
                                                                  organizations            length      capital
       Forestry development to improve livelihood of
129                                                               Kon Tum PPC              2006-2010              15
       ethnic minority people in Central Highland
       Conservation and development of Xuan Son
130                                                               Phu Tho PPC              2006-2010              12   15.000 ha
       National Park
       Aquaculture
       Aquaculture for poverty reduction, food security,
131    environment protection and aqua-resource                   Ministry of Fisheries    2006-2010             300
       protection
133    Aquaculture Development                                    Ministry of Fisheries    2006-2009              61
134    Mechanical development in aquaculture                      Ministry of Fisheries    2006-2010              24
       Development of shrimp crops along Kim Son, Ninh
135                                                               Ministry of Fisheries    2006-2010              20
       Binh Coast
       Reparation workshops for hydro motors and fishing
136                                                               Ministry of Fisheries    2006-2010              12
       ships
       Infrastructure development for fisheries and
137                                                               Thua Thien Hue PPC       2006-2008              12
       reservoir, lagoon
138    Infrastructure development for aquaculture                 Dong Thap PPC            2006-2010              12
251    Agriculture sector development program                     MARD                     2007-2010              60
       Upgrade project for off-shore fishing and fishery
320                                                               Ministry of Fisheries    2006-2010             140
       management

       WATER SUPPLY
139    Irrigation support program                                 MARD                     2006-2010             207
                                                                                                                       Long    list of
140    Ta Pao irrigation system project                           MARD                     2006-2010              80   Japanese ODA
                                                                                                                       2005-2007
141    Irrigation development in Central Region (ADB4)            6 provinces              2006-2010              99
142    Van Lang - Dong Hy water Reservoir                         Thai Nguyen PPC          2006-2010              67
143    Nam Po irrigation system project                           Dien Bien PPC            2006-2008              45
       Improvement for Cai Ca and Ca Loc canals, Ben
144                                                               Ben Tre PPC              2006-2009              42
       Tre town
145    Nam Cai San, Thot Not - O Mon Irrigation system            Can Tho PPC              2006-2008              42
       Watering system in South Quang Ngai - Tra Cau
146    River Basin, Tra Bong river basin, Tra Khuc and Ve         Quang Ngai PPC           2006-2010              35
       riverheads
       Irrigation system of sub region IV, VI, XVII, IX - South
145                                                               Ca Mau PPC               2006-2010              34
       Ca Mau



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                                                                           Location or management   Project     ODA
          Seq.    Projects/Programs                                                                                            Notes
                                                                           organizations            length      capital
                  Improvement of irrigation system of Rac River, Ky
          146     Anh district and irrigation system of Ke Go Lake,        Ha Tinh PPC              2006-2010             32
                  Cam Xuyen district
          147     Ke Sach flood drainage for rice and fruit crops          Soc Trang PPC            2006-2010             27
                  Upgrade project for irrigation system in South Moi
          148     River, Sang Hong - Kien Thuy, Dap Han - Vinh Bao,        Hai Phong PPC            2006-2010             27
                  Nam An Kim Hai, Hon Ngoc canal, North Moi River
                  Improvement of crop-fields and safe irrigation for
          149                                                              Quang Nam PPC            2007-2008             25
                  agricultural development in Quang Nam
          150     Can River Lake project                                   Khanh Hoa PPC            2006-2009             25
          151     Bien and Than River Water Reservoirs                     Ninh Thuan PPC           2006-2010             25
                  Development of 3 flood prevention and irrigation
          152     regions in Hau Giang (Nang Mau - Lai Hieu, Lai           Hau Giang PPC            2006-2010             23
                  Hieu - Xeo Chit, Xa No - Nang Mau)
                  Small irrigation system for sub-regions in Soc Trang -
                  canal 30/4, sub-regions in Ho Phong -Tac Van, sub-
          153                                                              Bac Lieu PPC             2006-2010             23
                  region 30/4 - Chua Phat, sub-region Ke district -
                  Ganh Hao
                  Irrigation infrastructure in Rao Tro, Ky Anh district,
          154     Khe Giao Lake water reservoir, Thach Ha district,        Ha Tinh PPC              2006-2010             22
                  irrigation infrastructure in Huong Khe district
                  Upgrade project for irrigation system in Nam Yen
          155                                                              Bac Giang PPC            2006-2010             22
                  Dung, Cau Son
                  Upgrade project for 132 main canals of Cau River
          156                                                              Bac Giang PPC            2006-2010             19
                  irrigation
          158     Bong Lai Lake, Khe Van Lake, and Bang Lake               Quang Binh PPC           2006-2010             16
          159     Irrigation system for slope-land and hilly area          Phu Tho PPC              2006-2010             15   19,712 ha
                  Improvement project for irrigation system in Hung
          160                                                              Thai Binh PPC            2006-2009             15
                  Ha district
                  Upgrade project for irrigation system in the South
          161     West of Viet Tri city, Le Tinh, Lam Thao and Thuong      Phu Tho PPC              2006-2010             13
                  Nong
                  Level-2 Canal of My Van - Rum Soc interior field
          162                                                              Tra Vinh PPC             2006-2008             13
                  irrigation system
          163     South Thach Han Irrigation system                        Quang Tri PPC            2006-2008             13
          164     Thuan Phong, Da Mai Lake water reservoir                 Binh Dinh PPC            2006-2010             13
          165     Irrigation system of La Tinh River barin                 Binh Dinh PPC            2006-2010             12



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                                                              Location or management         Project     ODA
Seq.   Projects/Programs                                                                                                 Notes
                                                              organizations                  length      capital

       Pumping water from Luy River to Le Hong Phong
166                                                           Binh Thuan PPC                 2006-2008              12
       area to improve fallow, impoverish area
       WATER MANAGEMENT
       Landslide prevention and stabilization in 2 banks of
189                                                           Dong Nai PPC                   2006-2010              37
       Dong Nai River
190    Natural Disaster Relief system                         MARD                           2006-2010             180
       Landslide prevention along rivers and flood-tide
196                                                           Tra Vinh PPC                   2006-2010              15
       prevention along sea coast
       Environment protection of Nhieu Loc - Thi Nghe
202                                                           HCM city PPC                   2007-2010             150
       canal basin, Stage 2
214    Restoration of water towers water reservoirs           HCM city PPC                   2006-2010              40
                                                                                                                         Stage 2 of Urban
                                                                                                                         water     supply
       Region division, separate network to reduce water
                                                                                                                         project funded
215    loss and improve water management network in           HCMC PPC                       2006-2010              39
                                                                                                                         by WB, Feasible
       Ho Chi Minh city
                                                                                                                         study report is
                                                                                                                         being prepared
       Improvement project for water environment,
218    waste water management, and rain water                 Dong Thap PPC                  2006-2008              31
       drainage
       Salt water prevention works in Luong Tam, Long My
157                                                           Hau Giang PPC                  2006-2010              17   12,800ha
       district
       Poverty reduction and environment management
256                                                           Kon Tum PPC                    2006-2010              22
       of Se San River basin
       Environment protection from pollution in area of
259                                                           Ba Ria Vung Tau PPC            2006-2010              12
       rivers: Dinh, Thi Vai, Cai Mep, Ray
       Priority harmonization for the poor and natural
260                                                           Ha Tinh PPC                    2006-2010              12
       resources conservation in North Truong Son
       Natural resource and environment monitoring            Ministry of Natural Resource
261                                                                                          2005-2009              24
       system for Vietnam (ODA from France)                   and Environment (MONRE)
262    Modernization for land administration systems          Provinces                      2006-2010             494
       Sustainable development program in Cau River
263                                                           Provinces                      2007-2010              70
       basin
       Enhancement             capacity    project    for
264    hydrometeorology forecasting for natural disaster      MONRE                          2007-2010             9,6
       prevention




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                                                                      Location or management     Project     ODA
          Seq.    Projects/Programs                                                                                          Notes
                                                                      organizations              length      capital
                  Assessment and institutional strengthening for
          321     coastal   regional   management,       livelihood   Ministry of Fisheries      2006-2010              80
                  improvement for Central Region Coastal areas

                  WATER SUPPLY
                                                                                                                             Feasible   study
                                                                                                                             prepared     and
                  Water drainage and pollution solution on Canal
          197                                                         HCM city PPC               2006-2010             390   registered with
                  Tham Luong - Ben Cat - Rach Nuoc Len
                                                                                                                             Japanese
                                                                                                                             government
                                                                                                                             Feasible   study
                  Water environment improvement in Ho Chi Minh
          198                                                         HCM city PPC               2006-2010             365   prepared     and
                  city, stage II
                                                                                                                             agreed by JBIC
                  Water drainage and environment protection for 3
          200                                                         Ministry of Construction   2006-2008             150
                  cities Dong Hoi, Quy Nhon, Nha Trang
                  Water supply plant using Red River surface water                                                           Capacity
          203                                                         Ha Noi PPC                 2006-2010             120
                  source                                                                                                     300,000m3/day
                  Dien Bien water supply plant, Dien Bien Dong,
          205                                                         Dien Bien PPC              2006-2008              80
                  Muong Nhe, Muong Lay water supply plants
                                                                                                                             300,000m3/day
          206     Expansion for Thu Duc water supply plant            HCM city PPC               2006-2010              74
                                                                                                                             and night
                  Water drainage and environment protection                                                                  TA    is  being
          207                                                         Binh Dinh PPC              2006-2010              52
                  system                                                                                                     prepared
                  Water supply system using water source from Cu
          210                                                         Da Nang PPC                2006-2010              43
                  De River
                  Domestic water supply system and environment
          217                                                         Quang Ngai PPC             2006-2010              34
                  protection
                                                                                                                             Capacity
          219     Water supply system in Cua Can, Phu Quoc            Kien Giang PPC             2006-2010              30
                                                                                                                             30,000m3/day
          221     Water drainage system of Tay Ninh, Go Dau town      Tay Ninh PPC               2006-2010              27
                  Upgrade project for waste water drainage and
          222     treatment in My Tho city, Go Cong town, Cai Lay     Tien Giang PPC             2006-2010              27
                  town
                  Safe water supply for 4 districts of Go Cong                                                               Capacity
          223                                                         Tien Giang PPC             2006-2010              27
                  Coastal area                                                                                               30,000m3/day
                  Safe water supply for Tien Giang province (urban
          225                                                         Tien Giang PPC             2006-2010              26
                  and rural)




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                                                              Location or management   Project     ODA
Seq.   Projects/Programs                                                                                           Notes
                                                              organizations            length      capital
                                                                                                                   Capacity
226    Thuong Cat water plant using underground water         Ha Noi PPC               2006-2010              25
                                                                                                                   600,000m3/day
       Water supply in Cam My district center, Thong
229    Nhat, Trang Bom town, Dinh Quan, Long Thanh,           Dong Nai PPC             2006-2010              22
       Nhon Trac, Tan Phu and wards of Bien Hoa city
                                                                                                                   1,000-
230    Water supply system in towns and rural area            Phu Tho PPC              2006-2010              20
                                                                                                                   1,500m3/day
231    North Cam River water supply system                    Hai Phong PPC            2006-2010              20
       Improvement       project      for  water     supply
235                                                           Dong Thap PPC            2006-2010              20
       infrastructure and rural sanitation
                                                                                                                   12,000m3/day
       Urban domestic water supply system (6 districts                                                             each;
241                                                           Son La PPC               2006-2010              15
       and towns)                                                                                                  Requesting
                                                                                                                   Belgium
       Expansion of water supply plant in Tra Vinh town
248                                                           Tra Vinh PPC             2006-2010              13
       (stage 2)
       Clean water supply plant for Dak R'lap, Dak Song,
249    Dak Mam, Duc Minh, Duc Manh, Nhan Co, Dak              Dak Nong PPC             2006-2010              12
       Buk So, Nam Da towns
       Domestic water supply plants (Tam Duong, Lai                                                                12,000m3/day
250                                                           Lai Chau PPC             2006-2010              12
       Chau town, Phong Tho, Sin Ho, Than Uyen)                                                                    each
238    Water drainage system in Rach Gia Town                 Kien Giang PPC           2006-2010              18
                                                                                                                   15,000 m3/day
                                                                                                                   and        night;
252    Water drainage system in Phan Rang town                Ninh Thuan PPC           2006-2010              12
                                                                                                                   requesting
                                                                                                                   Finland
253    Water supply system in towns, and central districts    Dak Lak PPC              2006-2010              12


       WASTE WATER
       Waste water treatment plant of Tan Hoa - Lo Gom
199                                                           HCM city PPC             2006-2010             199   Agreed with WB
       canal
                                                                                                                   Request WB to
201    Waste water treatment system in Hue city               Thua Thien Hue PPC       2006-2012             150   implement
                                                                                                                   Stage 2
       Waste water drainage and treatment system in
204                                                           Dong Nai PPC             2006-2010              82
       Bien Hoa city




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                                                                        Location or management   Project     ODA
          Seq.    Projects/Programs                                                                                         Notes
                                                                        organizations            length      capital
                  Urban waste water drainage system (for 10                                                                 Total length 100
          208                                                           Son La PPC               2006-2010             50
                  districts)                                                                                                km
          209     Waste treatment system                                Dien Bien PPC            2006-2007             45
                  Waste water drainage and treatment urban area,
          211                                                           Ha Tay PPC               2006-2010             41
                  Ha Dong and Son Tay town
                                                                                                                             19,700m3/day
          216     Waste water drainage system in Viet Tri city          Phu Tho PPC              2006-2010             35   and    night in
                                                                                                                            scale
                  Waste water drainage and solid waste disposal
          220                                                           Quang Binh PPC           2006-2010             28
                  treatment system in districts
          227     Waste water treatment system in Thai Binh city        Thai Binh PPC            2006-2008             25
                  Upgrade project for waster water drainage in
          228                                                           Binh Thuan PPC           2006-2008             25   35,000 km
                  Phan Thiet city
                  Waste water treatment system in Nhon Hoi urban
          234                                                           Binh Dinh PPC            2006-2010             20
                  area
                  Waste water drainage and treatment in Ca Mau
          236                                                           Ca Mau PPC               2006-2010             19   Suggesting Italia
                  city
                  Waste water treatment system for districts and
          243                                                           Ha Tinh PPC              2006-2010             15
                  towns
                  Waste water drainage and treatment system in                                                              48,000m3/day
          244                                                           Vinh Long PPC            2006-2008             14
                  Vinh Long town                                                                                            and night
                  Waste water treatment system in Khanh An                                                                  212,000m3/day
          246                                                           Ca Mau PPC               2006-2009             13
                  industrial zone                                                                                           and night
                  Upgrade project for current clean water supply                                                             12.4 km, D =
          247                                                           HCM city PPC             2006-2010             13
                  pipelines                                                                                                 2,000 mm
          254     Waste water, solid disposal and sanitation in towns   Dak Lak PPC              2006-2010             12
                                                                                                                            Capacity       25
          255     Waste water treatment plant in Chau Phu district      An Giang PPC             2006-2010             12
                                                                                                                            tones/hours




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                                      Market scan Vietnam, 2007



Appendix G: Population density




Source: Agroviet.gov.vn, 2004




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           Appendix H: Original model of WL Delft Hydraulics




           Source: WL Delft Hydraulics, 2007




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                                                                                         Market scan Vietnam, 2007



Appendix I: Entering the Vietnamese market

Market Entry Strategy
Return to top Western companies interested in doing business in Vietnam may do so indirectly through
the appointment of an agent or distributor in Vietnam. (Note: U.S. companies new to Vietnam should
conduct sufficient due diligence on potential local agents/distributors to ensure that specific permits,
facilities, manpower, and capital are available.) U.S. firms seeking a direct presence in Vietnam can
establish a commercial operation utilizing the following options:
     •     a representative office license;
     •     a branch license;
     •     a foreign investment project license under Vietnam's revised Foreign Investment Law
in addition, U.S. companies interested in doing business in Vietnam should contact the U.S. & Foreign
Commercial Service or Foreign Agriculture Service in Hanoi and Ho Chi Minh City. Contact information
is located in Ch.11 U.S. and Vietnam Contacts. American business executives should be aware that
Vietnam’s legal and regulatory environment is undergoing profound change.

On-going efforts to implement BTA commitments and to lay the legal and regulatory foundation for
WTO accession will bring about significant changes in Vietnamese law affecting an array of
commercial issues. In 2005, Vietnam’s National Assembly is expected to finalize a number of important
legislative initiatives. Among the laws and ordinances expected to be passed in May 2005 are a full
revision of the Commercial Law, intended to provide a modern and simplified legal framework for
commercial transactions, as well as a broad legal framework for liberalizing distribution services in
Vietnam. A new Civil Code, addressing contract enforcement, secured transactions and property
rights is also slated for passage in the spring of 2005. Amendments to the Customs Law of 2000 are also
anticipated, including provisions intended to modernize customs procedures and implement greater
use of technology in the customs clearance process.

A second series of legal changes is likely to follow in late 2005 or 2006. These should include a new
Intellectual Property Rights Law which will be intended to bring Vietnam into compliance with BTA
obligations and the WTO agreement on Trade Related Intellectual Property; a new Law on Electronic
Transactions to form the legal basis for how digital information is used in commercial transactions;
amendments to the Law on Import and Export Duties addressing procedures for collecting import
tariffs and taxes; revisions of the Enterprise Law intended to unify and streamline regulations for
registration and corporate governance of private, state-owned and foreign-owned companies; and
a new Law on Technology Transfer intended to modernize an outdated legal and policy framework
for technology transfer. The above are only a partial list of the legislative initiatives currently underway
that should transform key elements of Vietnam’s commercial environment. Still, effective
implementation and issuance of follow-on implementing regulations will be important to determine the
impact of these legislative initiatives.


Using an Agent or Distributor
Unless a foreign company has an investment license permitting it to distribute its own goods in
Vietnam, a company must appoint an authorized agent or distributor.
    •   Agents: A Vietnamese agent imports and sells a foreign supplier’s goods in Vietnam for a
        commission. The risk of non-payment rests with the foreign supplier, and the after sales
        service/support is typically performed by the foreign supplier, as the agent is only selling the
        goods on behalf of the foreign firm. Vietnam's Commercial Code recognizes the right of




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                     foreign companies to appoint agents, provided that the Vietnamese agent’s authorized
                     scope of business includes such activity and the agent obtains an import/export code from
                     the customs authorities.
                •    Distributors: Under a distributorship arrangement, the question of legal protection and recourse
                     is clearer. The Vietnamese distributor buys the goods from the foreign supplier for resale in
                     Vietnam and thus is liable for the full amount of the goods purchased. Unlike some agents,
                     distributors normally provide after sales service/support. A distributorship arrangement is
                     considered a ‘foreign trade contract’ and must be structured in compliance with Vietnam’s
                     regulations on foreign trade contracts. In principle, it is legally binding upon signing.


           Legal and Practical Considerations
           Companies should conduct sufficient due diligence on potential local agents or distributors to ensure
           that they have the specific permits, facilities, manpower, capital, and other requirements necessary to
           meet their responsibilities. Commercial agreements should clearly document the rights and obligations
           of each party, and stipulate dispute resolution procedures. In most cases, payment by irrevocably
           confirmed letter of credit is recommended, although it should be noted that letters of credit issued by
           local banks may not be enforceable.         Going to court is generally not a recommended strategy to
           enforce agreements or seek redress for commercial problems in Vietnam. Foreign firms that have dealt
           with the court system in Vietnam report it to be slow and non-transparent. Similarly, although a
           framework for commercial arbitration exists in Vietnam, the process is not usually considered a viable
           option for foreign entities. When the need to consider such strategies arises, the advice of an
           international law firm operating in Vietnam should be sought.

                •    Foreign-Invested Trading Companies in Vietnam: When seeking prospective agents or
                     representatives in Vietnam, U.S. exporters may wish to consider not only Vietnamese firms, but
                     the representative offices of foreign trading companies operating in Vietnam, as well. The
                     latter, which include U.S. trading companies, often have distinct advantages in
                     communication, experience in importing, expertise in product and package modification,
                     and marketing capability.
                •    Finding a Local Partner: While 100 percent foreign invested enterprises are becoming more
                     numerous, the majority of foreign companies operating in Vietnam have chosen to partner
                     with local firms. One way to locate Vietnamese partners is to contact local chambers of
                     commerce and industry associations. The major chamber of commerce for Vietnamese
                     enterprises is the Vietnam Chamber of Commerce and Industry (VCCI), headquartered in
                     Hanoi with branches throughout Vietnam. VCCI members include state-owned enterprises
                     (SOEs), joint-stock companies, and private firms of all sizes in many sectors. In Ho Chi Minh City,
                     the Investment & Trade Promotion Center (ITPC) can also make introductions to prospective
                     partners. Another channel for finding a local partner is through local industry associations,
                     since most key industries in Vietnam have formed associations. A number of private consultant
                     companies have also developed matching services. Additionally, an effective means for
                     finding a local partner is to utilize the Gold Key Matching Service and/or International Partner
                     Search of the offices of the U.S. Commercial Service in Hanoi and Ho Chi Minh City.

           Source: ‘Doing business in Vietnam, US commercial service’




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Appendix J: Establishing an office in Vietnam

Establishing an Office: In order to establish a commercial presence in Vietnam, a foreign firm must
obtain one of the following two types of license:
    1. Representative Office License
    2. Branch License


Representative Office License
A representative office is generally easy to establish, but is the most restricted form of official presence
in Vietnam. The license is issued by the Ministry of Trade (MOT) and allows for a narrow scope of
activities, as stipulated in the ‘Regulations on Establishment and Operation of Representative Offices of
Foreign Economic Organizations in Vietnam.’

A representative office may rent office space/residential accommodations, employ local staff and a
limited number of expatriate staff, and conduct a limited range of business operations. Permitted
activities include market research and monitoring of the marketing and sales programs carried out by
its overseas head office, as well as pursuing long-term investment activities. As the representative office
is regarded as a commercial liaison office and not an operating entity, it is strictly prohibited from
engaging in any revenue-generating activities, such as trading, rendering professional services,
revenue collection, or subleasing of its office space.

The representative office license permits the foreign company to open only one office at one site.
Should the firm wish to open a second office in the same city or, more commonly, in a different city,
another license is required. A ‘branch representative office’ license is no longer allowed. Experts
advise that a foreign company should decide at the time of application whether it wants more than
one representative office in Vietnam. Experience suggests that it is easier to obtain licenses for several
rep offices when all are applied for simultaneously. If an additional license application is made at a
later date, the Ministry of Trade may require documentation on the performance of the first
representative office.

Tax Considerations
A representative office is exempt from corporate tax auditing requirements. Income tax for
Vietnamese and expatriate staff must be paid in accordance with relevant regulations.

Other Considerations
From time to time, representative offices have come under scrutiny by the local People’s Committees
(municipal governments), police, and tax and labor authorities, especially with respect to Foreign
Service providers who claim they are not rendering services on-the-ground, but are merely facilitating
services actually provided by their head office.

Application Procedures
The procedure to establish a representative office is relatively straightforward. An application with
stipulated supporting documentation must be submitted to the MOT. The application and profile must
be prepared in English and Vietnamese, and both sets of documents must be duly executed.
Applicants have 90 days to register with the local People’s Committee once the license has been
issued.    The fee for a representative office license is VND 1,000,000 (about US $65). The license is
usually valid for three years and may be extended for additional three-year periods.




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           Branch License
           The term ‘branch office’ under the laws of Vietnam refers to a 100 percent foreign-owned business
           that operates in certain designated service sectors. These sectors, which are restricted and closely
           monitored by the Vietnamese government, include banking, law and insurance. Many foreign branch
           offices first entered Vietnam as representative offices and later applied for a branch license. Branch
           status authorizes a foreign business to operate officially in Vietnam, including billing onshore and the
           execution of local contracts.

           Tax considerations
           Branches are fully liable for Vietnamese taxes on their assets and activities.
           Application Procedures: Applications for a branch license are generally submitted to the ministry or
           other competent authority for the industry in question (e.g., the State Bank of Vietnam for banking
           licenses, or the Ministry of Justice for law offices).

           Foreign Investment Licenses (FIL)
           Foreign investment in Vietnam is regulated by the Ministry of Planning and Investment (MPI) through
           FILs and related implementing regulations, decrees, and circulars. Compared to previous legislation
           the FIL delegates more authority over investment licensing to provinces, municipalities, and investment
           zones, although several provinces and large cities have been urging the Vietnamese government to
           expand their autonomy in this area. The Prime Minister's office retains authority over larger and
           ‘sensitive’ projects. MPI remains the principal government agency dealing with foreign investors.

           There are four primary forms of investment for foreigners in Vietnam:

               •   Joint venture (JV) a foreign joint venture is a Vietnamese entity, at least one of whose partners
                   is a foreign company. Vietnam’s Foreign Investment Law permits the establishment of 100
                   percent foreign-invested enterprises (‘100 percent FIEs’) in many but not all sectors. Recent
                   reforms have made this an increasingly popular option, although some foreign investors still opt
                   to form joint ventures with a Vietnamese partner. Joint ventures offer both plusses and minuses.
                   On the positive side, the Vietnamese partner, which is often a state-owned enterprise (SOE),
                   may contribute crucial relationships with government officials and clients, local market know-
                   how, staff, and land-use rights. On the negative side, local partners rarely can contribute
                   operating capital or other current assets. Their management technology is often limited and
                   organizational culture may be cumbersome and bureaucratic. They also may not share the
                   fundamental outlook and objectives of their foreign capitalist partner. Because their resources
                   typically are limited, the local partner may balk at major strategic moves such as
                   recapitalization or changes to the business plan. JV licenses are normally granted for fifty
                   years. At the conclusion of the term, the JV may be renewed by mutual consent of the
                   parties, or dissolved. At present there are approximately 3,300 SOEs out of over 100,000
                   registered domestic enterprises. Under the State’s restructuring plan, many SOEs are destined
                   for equalization, sale, lease, transfer, closure or bankruptcy. The private sector (generally
                   taken to mean sole proprietorships and limited liability companies) makes up most of the rest.
                   There are also a large number of household enterprises, which, although unregistered,
                   comprise a significant share of non-agricultural output and employment. However, the
                   average capitalization of the SOEs is many times that of the other forms, allowing them to
                   dominate manufacturing and trade activities. Therefore, many foreign investors partner with
                   SOEs, including firms controlled by central government ministries and by municipal and
                   provincial authorities. Local private firms routinely lack the financial resources and know-how




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        to facilitate contacts with potential foreign investors, while government ministries and
        provincial authorities usually promote enterprises related to their own organizations. Private
        firms must contend with greater government-imposed controls than their state-run
        counterparts, specifically with respect to access to land, trading licenses, and entry barriers in
        some sectors. The state-owned sector also has preferential access to financing and foreign
        exchange. Technology can be transferred by outright sale, licensing, or contribution as
        capital. Foreign JVs often contain technology transfer provisions. The Ministry of Science and
        Technology has primary authority to approve technology transfer contracts. The implementing
        regulations of the law governing technology transfer have made such deals very difficult. The
        key areas to note are strict requirements for precise details on the timetable for the delivery of
        technology; provisions requiring extensive warranties; the limited duration of contracts; and
        restrictions on royalty rates. The Commercial Code does provide protection for transferred
        technology, but some of its provisions remain to be implemented. Licensing: Licensing
        arrangements are beset by many of the same problems as franchising: stringent regulations,
        long approval times, and restrictions on payments, limited contract duration, weak legal
        frameworks and intellectual property rights (IPR) problems. Nevertheless, there is considerable
        licensing of trademarks, technology, and after-sales service activities from overseas
        companies to affiliated joint ventures in Vietnam.
    •   A business cooperation contract (BCC) allows a foreign firm to pursue business interests in
        cooperation with a Vietnamese firm without conferring the right of establishment or ownership.
        In many respects it is the most flexible arrangement Vietnam offers to foreign investors,
        although the BCC license carries no tax holidays or concessions such as those given to other
        types of foreign investments. BCCs have predominated in the telecommunications and
        petroleum sectors, where the government limits foreign involvement in operations and
        management.
    •   100-percent foreign-invested enterprises (‘FIEs’) have become more popular recently, as
        investors have learned to navigate the local system on their own and as problems with JV
        partners have become more apparent. Amendments to the Foreign Investment Law
        adopted by the National Assembly in May, 2000 regularized procedures for conversion of joint
        ventures to 100 percent FIEs. The new law made a number of other improvements upon its
        1996 predecessor which enhanced the attractiveness of investing in Vietnam. It has reduced
        the number of issues requiring unanimous approval by the boards of joint ventures, thereby
        strengthening the management control of the majority investor (which is typically the foreign
        partner). It simplified licensing procedures, lowered remittance tax rates, and gave foreign-
        invested enterprises relief from excessive government inspections. Disadvantages of FIEs over
        other forms of investment include more difficult access to land-use rights (except in industrial
        zones and export processing zones) and a more limited duration of license.
    •   Build-operate-transfer (BOT) investment agreements are authorized under the FIL, but the
        legal, regulatory, and financial framework is still incomplete. The FIL also recognizes build-
        operate-own (BOO), build-transfer-operate (BTO), and build-transfer (BT) forms of investment
        projects.    Many international observers believe that BOT and other private financing
        mechanisms hold the key to Vietnam’s future infrastructure development.                 Vietnam's
        enormous needs have largely been financed by multilateral and bilateral ODA up until now,
        but the Government’s project wish list threatens to overwhelm donors.

Under a BOT agreement the investor builds an infrastructure project, operates it for an agreed period
of time to recover the investment and earn a profit, and then returns it to the government without
further compensation. In principle, BOT projects are subject to approval by the Prime Minister's Office.




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           BOT projects may be joint ventures or 100 percent foreign-owned. They are exempt from land tax and
           from payment of duties on goods imported to implement the contracts. They enjoy a lower profits tax
           rate (10 percent), a 5 percent withholding tax rate (the lowest normal rate), an eight-year tax holiday
           starting from the first profitable year, and a government guarantee for conversion of revenue from
           local to foreign currency. The term of a BOT can extend to fifty years, after which project ownership
           reverts to the government.

           In 2003, the Vietnamese Government expanded the options for foreign investment in Vietnam in an
           effort to attract more foreign investment capital into the country and to enhance the efficiency of
           existing FIEs. Effective as of May 7, 2003, the recently amended Law on Foreign Investment in VN
           permits the following:

                •    Existing FIEs may co-operate with other foreign investors to perform a BCC.
                •    Joint Venture Enterprises (JVEs) may be established between an existing 100 percent Foreign
                     Owned Enterprise (FOE) and a Vietnamese enterprise or between an existing 100 percent FOE
                     and an existing JVE.
                •    An existing 100 percent (FOE) may co-operate with another existing 100 percent FOE and/or
                     foreign investor(s) to establish a new 100 percent FOE.

           Source: ‘Doing business in Vietnam, US commercial service’




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Appendix K: Literature and internet sites

   -   1987-1995: Vietnam Forest Resources Inventory and Monitoring Program, FIPI 2001, 1999 and
       2001: Estimated data from various sources.
   -   Berg, H. Rice monoculture and integrated rice-fish farming in the Mekong Delta, Vietnam –
       economic and ecological considerations, Ecological Economics, vol. 41, pp 95-107, 2002
   -   Chain Partners in Water B.V., Marktscan Turkije, mogelijkheden voor de Nederlandse
       watersector, 2006.
   -   DBIV, US Commercial Services 2004.
   -   Dinh Trong, Workshop on integrated water management for reservoirs, Hanoi Oct 1994.
   -   Doing business in Vietnam, James W. Robinson, 1995, Prima Pub/ Doing Business In Vietnam, US
       Commercial Services, 2004.
   -   Dutch Water Sector, 2007-2008.
   -   Dutch Water Sector, 2005-2006.
   -   Een wereld om water, NWP & CUR 2005.
   -   EEPSEA Research Report 2001-RR13.
   -   EVD, landenpublicatie 2007.
   -   EVD, programma’s: projectmatige en financiële ondersteuning.
   -   Gibcus, P., Verhoeven, W., De Watersector Exportindex (WEX), 2005.
   -   ICZM Action Plan, Ba Ria Vung Tau, Provincial People’s Committee, 2005.
   -   International Water Resource Management Specialist, Australia.
   -   Interviews (see appendix A).
   -   Mekong River Commission, Annual Report 2005.
   -   Ministry of Natural Resources and Environment, No: 600, 2003, Hanoi.
   -   Ministry of Finance and GSO, 2002.
   -   Ministry of Planning and Investment (MPI).
   -   National Water Sector Profile, 2002.
   -   New Tendering Law, Phillips Fox, April 2006.
   -   NWP jaaroverzicht, Facts & Figures, 2006.
   -   PPIAF, Gridlines, noten no. 10, June 2006.
   -   Ronald J. Cima, ed. Vietnam: A Country Study. Washington: GPO for the Library of Congress,
       1987.
   -   The Economist, December 2006.
   -   VEPA website, Environmental Water Report, 2003.
   -   Vezina, Bonn, Cu Pham Van (2006): Landscape ecology; vol. 21, no8, pp. 1311-1325.
   -   Vietnam News Agency (VNA), 2007.
   -   Vietnam News (VNS), 2007.
   -   Vietnam Ministry of Agriculture and Rural Development; an introduction, MARD, Danko
       Communications Joint Stock Company.
   -   Wageningen-UR, Nummer: 0544_2: ”Zeewater zoet maken kan goedkoop”.
   -   Water Environment Partnership in Asia (WEPA), NEA (1997-2002), HIO (1999).
   -   Worldbank, 2007



Internet sites:
www.adb.com
www.alkyon.nl
www.ballastnedam.com




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           www.citg.tudelft.nl
           www.dhv.nl
           www.evd.nl
           www.fargisinfo.com
           www.google.com
           www.mpi.gov.vn
           www.mrcmekong.org
           www.nea.gov.vn
           www.nwp.nl
           www.royalhaskoning.com
           www.vanoord.com
           www.vietnam.gov.vn
           www.vpa.org.vn
           www.waterland.net
           www.wepa-db.net
           www.wldelft.com
           www.worldbank.com
           www.wto.org




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