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									Technical Assistance Report

Project Number: VIE: 40080
December 2006

Socialist Republic of Viet Nam: Preparing the Hanoi
Metro Rail System Project

The views expressed herein are those of the consultant and do not necessarily represent those of ADB’s
members, Board of Directors, Management, or staff, and may be preliminary in nature.
                                     CURRENCY EQUIVALENTS
                                       (as of 31 October 2006)

                            Currency Unit        –         dong (D)
                                   D1.00         =         $0.00006222
                                   $1.00         =         D16,070.0000

                            Currency Unit        -         Euro (€)
                                   €1.00         =         $1.2773
                                   $1.00         =         €0.7829


              ADB            –       Asian Development Bank
              AFD            –       Agence Française de Développement
              HAIDEP         –       Hanoi Integrated Development and Environment Program
              HATD           –       Hanoi Authority for Tram and Public Transport Development
              JBIC           –       Japan Bank for International Cooperation
              JICA           –       Japan International Cooperation Agency
              LRT            –       light rapid transit
              MRT            –       mass rapid transit
              ODA            –       overseas development assistance
              PPTA           –       project preparatory technical assistance


Targeting Classification         –   General intervention
Sector                           –   Transport and communications
Subsector                        –   Multimodal transport and sector development
Themes                           –   Private sector development, sustainable economic growth,
                                     capacity development
Subthemes                        –   Fostering physical infrastructure development, developing urban

       (i)     The fiscal year (FY) of the Government and its agencies ends on 31 December.
       (ii)    In this report, "$" refers to US dollars.
Vice President     C. Lawrence Greenwood, Jr., Operations Group 2
Director General   R. Nag, Southeast Asia Department (SERD)
Director           J. Cooney, Infrastructure Division, SERD

Team leader        H. Jenny, Senior Urban Development Specialist, SERD
Team members       G. Atay, Principal Counsel, Office of the General Counsel
                   C. Bellinger, Senior Guarantee and Syndication Specialist, Office of
                   Cofinancing Operations
                   H. Brooke, Senior Counsel, Office of the General Counsel
                   E. Cudilla, Senior Project Assistant, SERD
                   J. Everett, Young Professional, SERD
                   Y.L. Feng, Principal Environment Specialist, SERD
                   M. Huddleston, Senior Social Development/Resettlement Specialist,
                   J. Leather, Transport Specialist, Regional and Sustainable
                   Development Department (RSDD)
                   A. Mehta, Financial Management Specialist, RSDD
                   A. Samoza, Associate Project Analyst, SERD
                   M. Sultana, Social Development Specialist, SERD
                   Le Dinh Thang, Project Implementation Officer, Viet Nam Resident
                                           I.          INTRODUCTION

1.     The Government of Viet Nam (the Government) sees public transport and inter-modal
transport as key elements of its urban transport strategy that will help restrain the use of private
vehicles and improve urban livability and the urban environment.

2.     During the 2006 Country Programming Mission, the Government requested the Asian
Development Bank (ADB) for a project preparatory technical assistance (PPTA) to identify
project financing arrangements to complement ongoing and anticipated financing provided
under French bilateral assistance for the Hanoi Metro Rail System Project. 1 The PPTA is
included in the 2007–2010 country partnership strategy for Viet Nam.

3.       ADB pre-fact-finding missions 2 visited Hanoi in May and July 2006. The missions
reviewed the feasibility study for the Hanoi light rapid transit (LRT) pilot line prepared under
French Government assistance and confirmed the rationale for a LRT system in Hanoi. A
mission was fielded in August 2006 to undertake fact-finding for the PPTA. Preliminary
environmental and social and resettlement reviews were undertaken, resulting in an initial
classification as category A for resettlement, A/B for environment, and C for indigenous people.
The latter mission held discussions with various government agencies,3 the French Economic
Mission, Agence Française de Développement (AFD), World Bank, and the Hanoi Integrated
Development and Environment Program (HAIDEP). A memorandum of understanding between
the Hanoi Authority for Tram and Public Transport Development Management (HATD) of the
Hanoi’s Peoples Committee and ADB was signed on 21 September 2006. This reflected the
latest findings of the mission and the understandings reached with the Government on the
objectives, impact, outcome, output,4 scope, cost, implementation arrangements, and terms of
reference for the PPTA.

                                                 II.      ISSUES

4.      The Project for the Development of Transport in the Capital Hanoi by 2020, approved by
the Prime Minister in 1998, states the Government’s intention to raise the share of public
transport in all transport to 30% by 2010 (of which 5–10% is to be urban rail) and 50% by 2020.
It has set the goal of implementing a first urban transit rail line by 2010. HATD is responsible for
planning and implementing the system.

5.      A feasibility study 5 for a Hanoi LRT pilot line, prepared under French financing, was
completed in October 2005. A consultant financed under an overseas development assistance
loan from the French Government will start detailed design of the pilot line in the first quarter
2007. The line extends 12.5 kilometers (km) from Hanoi Station in the city center to Nhon Depot
west of the city. About 3 km in the city center will be underground, and the remaining 9.5 km will
be elevated. The number of stations is anticipated to be 15. The feasibility study conducted
alternatives analyses and demonstrated the rationale for such an LRT in Hanoi. Additionally, the
ongoing comprehensive urban development program, HAIDEP, which includes a section on
urban transport financed by the Government of Japan through the Japan International

    The PPTA first appeared in ADB Business Opportunities on 12 May 2006.
    Comprising Hubert Jenny, senior project engineer and mission leader; Jeanne Everett, young professional; and Le
    Ding Thang, program implementation officer.
    Including the Hanoi Authority for Tram and Public Transport Development Management, Ministry of Planning and
    Investment, and State Bank of Viet Nam.
    A project design and monitoring framework is provided in Appendix 1.
    Two feasibility studies of about 6 months each were conducted in 2004 and 2005.

Cooperation Agency (JICA), is due for completion at the end of 2006. The World Bank is
preparing the Hanoi Urban Transport Project which would primarily focus on the development of
a bus rapid transit system for the city. This initiative follows a 2004 study financed by the Public-
Private Infrastructure Advisory Facility, which examined institutional issues and opportunities for
private sector participation in the bus sector and supported the successful allocation of
operating franchises to two new bus operators in 2004. The European Union funded in large
part the Asia Trans project which took place between 2002 and 2005 aimed at improving the
public transport in Hanoi and the existing bus transit network in particular, through the
development of three pilot bus lines.

6.      Increased Mobility and Demand for Urban Transport. Viet Nam is among the world's
fastest-growing economies, registering 7.5% growth in 2004 and 8.1% in 2005. It has caught the
eye of investors with its strong economic performance, political stability, and ambitious and
industrious workforce. Investments and exports are driving growth in Viet Nam, leading to higher
incomes and rapidly improving living standards. Its capital city, Hanoi, has recorded an average
economic growth of 11% per annum in recent years, and this growth is expected to remain in
the range of 11–12% until 2020. Per capita gross domestic product (GDP) in Hanoi is expected
to continue growing well above 5% per annum up to 2025. Hanoi is a metropolis of 3 million
whose growth is spurred by rural-to-urban migration, the opening of its economy, and a growing
real estate sector, and whose population is forecast to reach 3.2–4 million by 2010, perhaps
doubling by 2020. 6 The Hanoi Peoples Committee has to balance the pressure of growing
demand for mobility with a desire to preserve the historic city center with its many monuments
and lakes. Reflecting this, the city has developed a plan to expand to new urban developments
on the outskirts of the city, all of which will require transport links to the city center, and within
and among themselves.

7.      Rising Private Vehicle Ownership in a Congested Road Network. Recent traffic
surveys 7 show that motorcycles account for 83% of vehicles in the city and bicycles, used
mainly by the poor, account for 12%. Cars account for 4.5% and buses for less than 1%.8 Car
ownership has been low historically, relative to comparable economies in the region, but will
rise.9 Expected growth in household income will make a car affordable to many more families,
particularly as prices have fallen recently following the Government’s decision to again allow the
importation of used vehicles. If current trends are not met by better transport infrastructure and
public transport systems, Hanoi faces worsened congestion, road safety deterioration, and
increasing air pollution in the coming years, which will be exacerbated in the narrow streets of
the city center. Existing examples of congestion and air pollution in such large Asian cities as
Bangkok, Beijing, Jakarta, and Manila compounds the pressure on the Government to adopt
preventive measures and prioritize investments in urban transport infrastructure.

8.      Hanoi Needs an Ambitious Urban Transport Investment Plan. To achieve its goals,
the Hanoi People’s Committee envisages (i) expanding a high-capacity road network with three
ring roads, (ii) constructing new bridges across the Red River which divides the city, (iii)
developing an urban rail network of eight lines, and (iv) implementing complementary urban and
inter-urban bus networks allowing for inter-modal transfers with the rail system. The overall
urban transport network is being examined under the JICA-funded HAIDEP study. According to

    Population figures from the Hanoi Statistics Office.
    Conducted by Intitut des Metiers de la Ville, Hanoi, in April 2004 and available at
    Share distribution in passenger terms are 74% for motorbikes, 8% for bicycles, 4% for cars, and 14% for buses.
    By mid-2005, only one in 145 people had a car, compared with one in 4–5 in Malaysia, 9–10 in Thailand, and 30–
    32 in the Philippines (Source: People's Daily, 20 March 2006).

the preliminary feasibility study for the Hanoi LRT pilot line, its estimated total investment of
$600 million will be financed in part (about 60%) through a concessional bilateral loan from the
Government of France combining tied financing of about $250 million for the rolling stock and
equipment and untied financing from AFD of about $100 million 10 for part of the line’s
infrastructure. The balance of about $250 million (about 40%) will be the responsibility of the
Hanoi Peoples Committee. The PPTA will provide a mechanism to define how innovative
financing schemes can be applied to public, and possibly public-private, investments in the
mass transport sector in Viet Nam. In the case of the LRT pilot line, it will help the Hanoi
Peoples Committee define options for financing its share of the project cost.

                               III.     THE TECHNICAL ASSISTANCE

A.             Impact and Outcome

9.      The PPTA will advise the Hanoi People’s Committee on options available for financing
its share of the cost of the LRT pilot line which, combined with the already-committed financing
from France, will contribute to a safe, clean, and efficient urban transport system. It will reduce
reliance on private modes of travel, contributing to urban livability and accommodating
sustainable growth. A design and monitoring framework is in Appendix 1 and an initial poverty
and social assessment is in Appendix 2.

B.             Methodology and Key Activities

10.     The objective of the PPTA is to assist the Hanoi Peoples Committee with developing a
project that is suitable for financing and has a viable financing plan, covering both the committed
bilateral financing and the additional financing required to complete the LRT pilot line’s physical
infrastructure. The PPTA, for which terms of references are provided in Appendix 3, will be
implemented in two parts over a 5-month period:

         (i)         Part 1: assisting the Hanoi Peoples Committee with developing an approach for
                     financing its share of the cost of the LRT pilot line, about $250 million, using
                     various financing schemes including but not limited to ADB-financed products
                     and instruments for credit enhancements, multi-tranche financing, and local
                     currency financing on a sovereign, sub-sovereign, or non-sovereign basis,11 and
                     a benchmarking exercise with alternative products available in the market, and

        (ii)         Part 2: due diligence on technical, financial, institutional, and safeguard
                     compliance, the latter with respect to ADB’s policies and procedures for the
                     environment, resettlement, and social development.

C.             Cost and Financing

11.    The cost of the PPTA is estimated at $490,000 equivalent, of which the foreign
exchange cost is $300,000 and the local currency cost is $190,000 equivalent. ADB will finance
$400,000, comprising the entire foreign exchange cost and a portion of the local currency cost
amounting to $100,000 equivalent. The PPTA will be financed as a grant from ADB’s technical
assistance funding program. The detailed cost estimates and financing plan are in Appendix 4.

     The official figures are denominated in euros: €200 million of tied financing and €80 million from AFD.
     The products proposed will take account of recent developments in the context of ADB’s Innovation and Efficiency

12.      The Hanoi Peoples Committee will finance the remaining $90,000 equivalent of local
currency costs though in-kind contributions of office space for up to five consultants and
connections to international telephone and Internet lines (with usage paid through the PPTA
consultants’ contract); counterpart staff about 30 person-months to support the international
consultants and allow the transfer of practical experience and knowledge; vehicles for site visits;
topographic survey data to confirm resettlement impacts; and any other information that may be
identified as essential during PPTA implementation. The Government has been informed that
approval of the PPTA does not commit ADB to finance any ensuing project.

D.     Implementation Arrangements

13.    HATD will be the Executing Agency for the PPTA with overall responsibility for the Hanoi
Peoples Committee’s contribution. HATD will provide counterpart personnel to work with the
PPTA consultants as well as with other government agencies and stakeholders, and will also
provide documents, reports, etc, relevant to the project prepared by other consultants and

14.     The PPTA will have duration of 5 months, expected to commence on 1 March 2007 and
end on 31 July 2007. It will require an estimated 30 person-months of consulting services, 14 of
international consultants and 16 of national consultants. All consultants will be engaged by ADB
in accordance with Guidelines on the Use of Consultants (April 2006, as amended from time to

15.     Part 1 will be implemented by a team of three international consultants (7 person-
months) and two national consultants (4 person-months), who will be engaged as individuals:
one specialist in capital market development for 3 person-months, one specialist in guarantees
and insurance for 2 person-months, and one legal adviser for 1 person-month, supported by a
national legal counsel for 2 person-months and a project adviser for 2 person-months. One of
the three individual international consultants selected for Part 1 will be designated as team
leader for Part 1 and will be allocated an additional person-month to consolidate the reports
from the other two consultants for submission to the Hanoi Peoples Committee and to ADB. The
team leader will submit an inception report and detailed work plan for Part 1 within 1 month of
the commencement of the PPTA, a midterm report at the end of the third month, and a draft
final report in the fifth month.

16.     Part 2 of the PPTA will be carried out by individual consultants (about 7 person-months
of international and 12 national) for conducting due diligence of the project feasibility study and
safeguard compliance. The consultants will be specialized in (i) environmental assessment (1.5
person-months international and 3 national); (ii) social development and resettlement (3 person-
months international and 9 national); (iii) urban transport planning and rail civil engineering and
investment planning and operations (1.5 person-months, international); and (iv) institutional,
financial, and economic analysis (1.5 person-months, international). Each consultant for Part 2
will be responsible for his/her individual output, and will be coordinated by ADB’s task manager
for the project.

                             IV.     THE PRESIDENT'S DECISION

17.     The President, acting under the authority delegated by the Board, has approved the
provision of technical assistance not exceeding the equivalent of $400,000 on a grant basis to
the Government of Viet Nam for Preparing the Hanoi Metro Rail System Project and hereby
reports this action to the Board.
                                                                                             Appendix 1     5

                              DESIGN AND MONITORING FRAMEWORK

Design                        Performance                          Data                      Assumptions
Summary                     Targets/Indicators               Sources/Reporting                and Risks
Impact                                                                                Assumptions
Safe, clean, and      Reduced travel time in project         Government and           • Ongoing government and
efficient urban       corridor                               transport sector            private sector commitment
transport system in                                          statistics                  and resources to operate
Hanoi, including      Reduced traffic congestion,                                        and maintain the system
light rapid transit   accidents, and environmental           Traffic surveys,         • User adoption is in line
(LTR),                pollution                              accident and hospital       with forecasts.
accommodates                                                 records, and             • Detailed design,
sustainable growth    Increased share of travel by           environmental records       construction, and
and improves          public transport modes                                             operation occur as
urban livability                                             Public opinion and          planned and in line with
                      Service perceived by consumers         customer surveys            ADB due diligence
                      to be affordable, high quality, and                                recommendations.
                      largely free of fraud                  Official reports and
                                                             feedback from Hanoi      Risks
                      Achieved ridership meets or            People’s Committee       • Complementary and inter-
                      exceeds level expected under           and Ministry of             modal urban transport
                      conservative scenarios                 Transport                   services to be integrated
                                                                                         with the line are not
                                                             Asian Development           implemented efficiently or
                                                             Bank (ADB) country          effectively or compete with
                                                             monitoring of baseline      the service.
                                                             Indicators               • Public transport service
                                                                                         operations and financial
                                                             Operator records            structure are not
                                                                                         sustainable in the long
Outcome               Enduring institutional and             Consultant’s working     Assumptions
Government of Viet    implementation arrangements for        papers and reports       • Overseas development
Nam able to           mass transit development and                                       assistance financing
manage                operation                              Project preparatory         arrangements and
competitive and                                              technical assistance        supporting conditions for
                      Optimal and affordable
sustainable                                                  (PPTA) completion           the line are appropriate,
                      counterpart financial
financing and                                                report                      economic, competitive,
                      arrangements for LRT pilot line, in
institutional                                                                            secure, and timely
                      the short and long term, relative
arrangements for
                      to comparable projects in the
                                                             Official reports and     • Cooperation and
urban LRT project                                            feedback from Hanoi         commitment of concerned
in Hanoi in                                                  People’s Committee          government agencies and
agreement with key    Risks are allocated to parties         and Ministry of             participating sponsors,
partners and ADB      most able to manage them, priced       Transport                   financiers, and guarantors
                      fairly, and met with effective                                     to coordinate and
                      mitigation strategies                  Industry and financial      implement
                                                             sector data including       recommendations
                      Project design satisfies scrutiny of   that from similar
                      ADB due diligence

                                                             Long-term financial
                                                             and passenger
                                                             records of LRT
   6      Appendix 1

Design                         Performance                         Data                      Assumptions
Summary                      Targets/Indicators              Sources/Reporting                and Risks
Outputs                By month 3:                                                    Assumptions
1. Optimized and                                             Consultant working       • Government commitment
                       Matrix of financing alternatives
finalized 40%                                                papers, key outputs,        to the project and
                       prepared that articulates available
counterpart funding                                          and reports                 willingness to take on a
                       financing options and identifies a
of the project                                                                           share of the risk and
                       preferred option.
reflects fair risk,                                          Output and minutes of       provide a degree of
return, and            By month 5:                           PPTA dissemination          comfort regarding political
responsibility and                                           workshop                    risk, etc., to financial
serves as a model      Project risk management strategy
                       and institutional and financial
for innovative                                               Financial                • Cohesion and good
financing of           arrangements prepared                 documentation               cooperation among
municipality           An outline of financial contracts     prepared for the            relevant government
investment in          and documentation required for        project                     agencies and ministries
infrastructure.        the project is drafted and                                     • Project attracts significant
                       undergoes initial reviews.            Industry and financial      interest from potential
2. All standard                                              sector data including       financiers
                       Elements of draft ADB Board
                       document for ensuing investment
                                                             that from similar        • Absence of conflicting or
required as part of                                          projects                    contradictory assistance
ADB due diligence      loan or other financial product by
                       ADB (if ADB product is relevant)                                  from stakeholders
prepared and                                                                             independent of PPTA
compliance and         Letters of interest with terms and
feasibility of the     conditions from financial sources                              Risks
proposed line          for counterpart funding                                        • Government
confirmed, with any                                                                      understanding is lacking
necessary              Standard ADB due diligence,
                       financial and economic analysis,                                  on the needs of major
supporting                                                                               infrastructure project
recommendations        and safeguard documentation
                       submitted                                                         development and
                       Application for Clean                                          • Ability to forge consensus
                       Development Mechanism funding                                     among vested interests of
                       submitted                                                         numerous stakeholders
                                                                                       Appendix 1    7

Activities with Milestones                                                      Inputs
1. Optimize the project financing plan for the local counterpart funding.       • ADB to provide 14
1.1. Present and examine various forms of financing options for the counterpart     persons-months of
     funding portion of the project.                                                international consultancy
1.2. Analyze credit enhancement and guarantee solutions for each option.            and 16 person-months of
1.3. Examine laws and regulations to accommodate financing scenarios.               national consultancy
1.4. Organize dissemination and capacity building workshop, plan and initiate • Government in-kind
     implementation of financing, and draft board documents of any ensuing ADB      contributions to include
     financial product, if relevant.                                                office space, local
                                                                                    transportation, and
2. Perform due diligence and prepare necessary documentation for relevant           counterpart staff.
     aspects of the project.                                                    • PPTA budget of $490,000,
2.1. Review environmental information available for the project, prepare any        consisting of $400,000
     complementary documentation (including an initial environmental evaluation     financed by ADB and an
     and an environmental management plan) needed to meet ADB                       in-kind contribution of
     requirements, and prepare a project idea note on urban transport in Hanoi      $90,000 from the
     for the Clean Development Mechanism.                                           Government
2.2. Prepare a full resettlement plan and poverty and social impact assessment. Milestones
2.3. Review and comment on traffic and demand forecast, capital cost estimates, • Month 1 Part 1 Inception
     and design and engineering plans.                                              Report
2.4. Comment on the institutional framework and implementation arrangements     • Month 3 Part 1 Interim
and carry out economic and financial analyses.                                      Report
                                                                                • Month 5 Part 1 Draft Final
                                                                                    Report, and Part 2
                                                                                    individual due diligence
8        Appendix 2

                               INITIAL POVERTY AND SOCIAL ANALYSIS

A.     Linkages to the Country Poverty Analysis

Is the sector identified as a national              Yes         Is the sector identified as a national             Yes
priority in country poverty analysis?                           priority in country poverty partnership
                                                     No         agreement?                                         No

Contribution of the sector or subsector to reducing poverty in Viet Nam:
The Country Strategy Program 2006–2009 stresses the importance of maintaining sustainable, equitable economic
growth to achieve further reductions in poverty. Viet Nam’s success in bringing down the poverty rate from 70% in
1990 to 27% in 2005 is based on the rapid and equitable economic growth recorded during this period. The
Government’s strategy for Hanoi is to actively develop public transport and road infrastructure to alleviate congestion
and open up new areas for urbanization. Linkage between public transport and new urban areas will provide better
access to services and employment opportunities. The proposed project is expected to support the development of a
pilot light rapid transit (LRT) line in Hanoi to provide convenient, comfortable, safe, affordable, and clean urban travel.
Introducing LRT lines will provide cheaper transportation than by motorbike and car. The new metropolitan railway will
bring time savings to people now using motorcycles, cars, buses, etc. The saved travel time will be available for more
productive activities. An urban public transport system will help address growing pressures on roads and the
environment that result from rapid growth in high-density areas such as Hanoi that would otherwise damage the
project area’s quality of life, working environment, and ability to attract investment. Investment and better access to
services will reduce poverty. The Government’s poverty reduction strategy will be reviewed to identify the role and
impact of large-scale infrastructure projects such as the proposed project in overall poverty reduction in Viet Nam.

B. Poverty Analysis                                              Targeting Classification: General Intervention

What type of poverty analysis is needed?
Following the Enhanced Poverty Reduction Strategy (December 2004) of the Asian Development Bank (ADB),
projects classified as general intervention no longer require project-wide poverty assessments. However, social
assessments will be prepared for resettlement, HIV/AIDS, and the personal safety and security of passengers and
staff as they represent risks in implementing the project. The resettlement plan will have mitigation measures to
address impoverishment from displacement and land acquisition. The terms of reference for social development and
resettlement specialists are included in the consulting services.

C. Participation Process

Is there a stakeholder analysis?                Yes                 No
Project preparatory technical assistance (PPTA) consultants will conduct the stakeholder analysis as part of due

Is there a participation strategy?                 Yes                No
PPTA consultants will prepare a participation strategy for the duration of the PPTA, as well as a participation strategy
for project implementation, as part of due diligence.

D. Gender Development

Strategy to maximize impacts on women:
The consultants will conduct a brief gender assessment of the households affected by resettlement. In addition, an
assessment will be done on the impact of rapid transit lines on male and female user groups for private and public
transportation in terms of safety, time savings, and transport costs, etc. Required services and facilities in stations for
men and women will be also identified. A gender plan for addressing gender concerns in the project related to
resettlement, HIV/AIDS, safety measures, facilities in stations, and capacity building in the Executing Agency and
relevant stakeholders will be prepared for the proposed project.

Has an output been prepared?                        Yes               No
                                                                                               Appendix 2       9

E. Social Safeguards and Other Social Risks

Item                Significant/                                                                      Plan Required
                  Not Significant/                  Strategy to Address Issues

                   Significant       Relocation will be required in the core urban center to            Full
Resettlement                         allow access to metro stations. A resettlement plan will be
                   Not significant   prepared during PPTA in compliance with ADB’s                      Short
                                     Involuntary Resettlement Policy (1995). It will address
                   None              resettlement impacts during construction and operations,           None
                                     including but not limited to the LRT pilot line, stations, and

                   Significant       The LRT operations plan will include a public service              Yes
Affordability                        obligation approach.
                   Not significant                                                                       No


                   Significant       People affected by the project will be given opportunities         Yes
Labor                                for project-related construction work. Standard clauses
                   Not significant   with respect to international labor standards and national          No
                                     labor legislation will be included in the Loan Agreement.

                   Significant                                                                          Yes
Peoples            Not significant                                                                       No


                   Significant       To be determined                                                   Yes
Other Risks
and/or             Not significant                                                                       No
10            Appendix 3

                                          TERMS OF REFERENCE1
A.            Objective

1.      The project preparatory technical assistance (PPTA) will help the Hanoi Authority for
Tram and Public Transport Development Management (HATD) to optimize the plan for
counterpart funding to finance the implementation of the Hanoi light rapid transit (LRT) pilot line.
Due diligence will also be undertaken as part of this work.

B.            Detailed Tasks

2.      The PPTA will have a duration of about 5 months, commencing in March 2007 and
requiring an estimated 14 person-months of international consultancy supported by 16 person-
months of national consultancy. The objective of the PPTA is to optimize Viet Nam counterpart
financing (estimated to about $220 million) through bonds issues, local currency financing, and
loans supported by various Asian Development Bank (ADB) financing instruments and credit-
enhancement products for the Hanoi Metro Project. The project is cofinanced by bilateral
overseas development assistance loans of €280 million, €200 million of which is tied and €80
million untied. A feasibility study has been completed, and a bilateral consultant financed under
the bilateral loans will start the detailed design in first quarter 2007. The PPTA will be articulated
in two parts:

        (i)           optimizing the counterpart financing plan using various financing schemes
                      including but not limited to various ADB financing products and instruments for
                      credit enhancements, multi-tranche financing, and local currency financing on
                      sovereign, sub-sovereign or non-sovereign basis, and a benchmarking exercise
                      with alternative products available in the market, and
       (ii)           due diligence on technical, financial, institutional, and safeguard compliance with
                      ADB procedures regarding the environment, resettlement, and social

              1.     Part 1: Alternative Financing for Local Counterpart Funding

3.      Part 1 will be implemented by a team of three international consultants (7 person-
months) and two national consultants (4 person-months), who will be engaged as individual
consultants: One specialist in capital market development (3 person-months), one specialist in
guarantees and insurance (2 person-months), and one legal adviser (1 person-month),
supported by a national legal counsel (2 person-months) and a project adviser (2 person-
months) to disseminate the results and outcomes of the PPTA to stakeholders. One of the three
international consultants selected for Part 1 will be designated as team leader of Part 1 and will
be allocated an additional person-month to consolidate the report from the other two consultants
for submission to the Hanoi People's Committee and ADB. The consultant will have expertise in
project finance and structured trade finance; a proven track record in financing infrastructure
projects in the region, specifically in the transportation sector (with Viet Nam experience
preferred); and demonstrated knowledge of ADB financing instruments and credit-enhancement
products including but not limited to local currency financing, guarantees to support lending, and
bond issues in local or foreign currency. Experience in dealing with export credit agencies,
multilateral development banks, investment banks, public-private guarantee instruments, local
currency funding, public finance, and capital markets will be key selection factors.

    More detailed individual terms of reference generated through the ADB individual consultant recruitment system
    will be provided when individual consultants are contracted.
                                                                          Appendix 3     11

(i)     Project finance (capital market). The consultant will look at the options to raise
        counterpart financing, in particular through the capital market, and define
        strategies for capital market enhancements, including using ADB financing
        instruments. He or she will examine issues associated with local currency
        financing versus foreign exchange financing, including commercial and
        concessional lending and bonds in local or foreign currencies with and without
        central or local government guarantees. The consultant will liaise with the other
        consultants to review the use of various financial products in the current legal
        framework. The output will be a matrix presenting the different financing schemes
        that provide for limited recourse financing in respect of the maximum amount of
        the capital cost of the project, with terms and conditions and comments from the

(ii)    Project finance (guarantee). The consultant will look at the different financial
        and credit-enhancement products available on the market for Viet Nam including
        but not limited to ADB financing instruments and guarantees with and without
        central or local government guarantees and counter-indemnity, supplier
        financing, export credit agency financing and guarantees, and private sector
        guarantees (commercial and political risk insurance). He or she will liaise with the
        other consultants to optimize the counterpart financing plan in the current legal
        framework. The output will be a matrix showing the implications of the several
        financing schemes evaluated as suitable for Viet Nam, with comments from the

(iii)   Legal advisor. The consultant will define for the other consultants the legal
        framework for project financing in Viet Nam. The consultant will liaise with Part 2
        consultants to look into the institutional framework and will recommend ways to
        optimize the legal structure of the operating entity. He or she will review with
        each of the consultants their proposed financing options and comment on and
        confirm their possible implementation in the current legal context of Viet Nam.
        The consultant will be supported by a national consultant. The output will be a
        report comprising comments on the matrices for project financing proposed by
        the other consultants and a matrix with comments on a possible structure for the
        operating entity.

(iv)    Team leader. The team leader, who will be one of the three international
        consultants on the team, will consolidate the output of the whole team for Part 1
        of the PPTA and finalize one matrix to be presented to the Hanoi Authority for
        Tram and Public Transport Development Management (HATD, the Executing
        Agency), ADB project officers, and other stakeholders. To support the study, the
        team leader, assisted by the project team, will outline financial structures that
        have been recently used in similar projects, subject to confidentiality concerns.
        He or she will outline as case studies the financing schemes used for the
        Channel Tunnel, Kuala Lumpur Mass Rapid Transit, Bangkok Transit System
        Corporation, Bangkok Mass Rapid Transit Authority, Manila Mass Rail Transit,
        and the High Speed Rail System in Taipei. This will serve as background to the
        Hanoi People’s Committee and help it evaluate the likely advantages and
        disadvantages of the proposed options. The consultant should also identify the
        extent to which its proposed financing will rely on conditions in the concession
        contract that is awarded to the developer and evaluate leasing arrangements as
        a means of raising funds. The team leader, assisted by the project team, will
12     Appendix 3

               assess the Government’s and financial sector’s capacity to implement the
               proposed financing schemes and propose and initiate capacity-building
               interventions. He or she will draft a training program to build capacity in the local
               government to implement financial arrangements and will organize a
               dissemination workshop in Hanoi with relevant stakeholders with support from
               the national project advisor. During the workshop, the various stakeholders and
               counterparts will discuss the presented options and select one or several
               preferred options that may or may not involve ADB financial products. The team
               leader will manage a provisional lump sum of $5,000 to organize the
               dissemination workshop. Afterwards, the consultant will finalize a time-bound
               action plan to implement the selected option for counterpart financing and, if an
               ADB financial product is seen most suitable, prepare a draft Board document
               including a design and monitoring framework for the ensuing project.

4.       The proposed financing options are expected to apply specifically to the Hanoi Metro
Rail System project but also be generally adaptable to structure financing of larger infrastructure
projects by the Government of Viet Nam. This effort will be in the context of ADB's recent
undertaking for more liberalized credit-enhancement products. ADB will play the role of
facilitator for these agreements and, by providing its endorsement, provide the necessary quality
guaranty to attract the interested of appropriate financial partners.

       2.      Part 2: Due Diligence

5.       Part 2 will be awarded to individual consultants (about 7 person-months of international
consultancy and 12 of national) for conducting due diligence on the project feasibility study and
safeguard compliance. The consultants will be specialized in (i) environmental assessment (1.5
person-months international and 3 national); (ii) social development and resettlement (3
person-months international and 9 national), (iii) urban transport planning and rail civil
engineering and investment planning and operations (1.5 person-months international); and (iv)
institutional, financial, and economic analysis (1.5 person-months international). Individual
consultants will review the preparatory work done for the project and perform the necessary due
diligence to ensure that the project is being prepared to standards that meet ADB’s compliance
requirements. Each consultant for Part 2 will be responsible for his/her individual output, and will
be coordinated by ADB’s task manager for the project. Specifically, the consultant’s will be
required to review the following aspects of the project in cooperation with the consultants
conducting the detailed design and HATD:

       (i)     Environment. The project has been classified category A. The consultant will
               review environmental assessment documents that are readily available, including
               work undertaken for the project feasibility study and the detailed design study
               and requirements under Viet Nam regulations. Based on this information, the
               consultant will confirm the categorization or recommend a change of category.
               He or she will provide as output an initial environmental examination and a
               summary of it according to ADB's Environment Policy (2002) and Operations
               Manual F1/BP and F1/OP (2003) to confirm any significant environmental
               impacts. This will also be the initial step towards preparing an environment
               impact examination, which will be required for the project but prepared outside of
               the scope of this PPTA, only after ADB participation in project financing is
               confirmed. The consultant will specify the gaps between past and ongoing
               studies conducted by national and international consultants and ADB
               requirements. He or she will also prepare an environmental management plan, in
                                                                                 Appendix 3     13

              close coordination with the bilateral consultant and the project management
              office, and a draft registration to the ADB Carbon Market Initiative for urban
              transport in Hanoi based on the HAIDEP financed by JICA, which is to be
              completed in December 2006.
      (ii)    Resettlement and social development. The project has been classified category
              A, which the consultant will confirm. In consultation with affected people, host
              communities, and other key stakeholders, the consultant will (a) write a full
              resettlement plan and its summary and/or framework based on the field survey
              done by the national consultants and the information provided by the bilateral
              consultant, in line with ADB standard guidelines; (b) finalize the social poverty
              assessment, based on information from the initial social poverty assessment and
              the bilateral consultant; and (c) write a summary poverty reduction and social
              strategy in line with ADB Board documentation guidelines. The full resettlement
              plan and the social poverty assessment will follow ADB latest guidelines such as
              ADB's policy on Involuntary Resettlement (1995), provisions in its Operations
              Manual (section F2/BP), Handbook for Resettlement, Handbook on Poverty and
              Social Analysis, Policy on Involuntary Resettlement, Gender and development
              (1998), and Public Communications Policy (2005). The consultant will receive a
              provisional lump sum of $15,000 for field surveys on inventory losses and census
              and a socioeconomic survey that will serve as the baseline assessment and
              reference for impact surveys done upon completion and after several years of
      (iii)   Urban transport planning. The consultant will review the feasibility study and the
              HAIDEP and liaise with the bilateral consultant, municipality of Hanoi, and co-
              financiers to summarize the urban transport sector review and roadmap for Hanoi,
              as well as to define the project rationale. He or she will confirm the technical
              proposal and the accuracy and appropriateness of investment cost estimates and
              confirm alignment with industry trends. The output will be a report no longer than
              20 pages summarizing the conclusions of the due diligence and sector review.
              The consultant will assist the Part 1 consultant with the dissemination workshop
              and provide guidance to HATD and the larger project team to address planning
              and implementation issues.
      (iv)    Institutional, finance, and economic analysis. The consultant will review the
              proposed institutional framework for urban transport in Hanoi and liaise with the
              Hanoi municipality, bilateral consultant, and co-financiers. He or she will finalize a
              financial analysis and an economic analysis based on the data from the feasibility
              study according to ADB’s latest Guidelines for the Economic Analysis of Projects
              (1997) and Guidelines for the Financial Management and Analysis of Projects
              (2005). The output will be a report of no more than 50 pages that will include a (a)
              summary of the recommendation for the institutional framework for urban
              transport in Hanoi, (b) financial analysis and economic analysis for the project,
              and (c) summary financial and economic analysis as standard appendixes to an
              ADB Board document. The consultant will assist the Part 1 consultant with the
              dissemination workshop and provide guidance to HATD and the larger project
              team to address institutional and implementation issues.
      3.      Reporting
6.       Reports will be prepared in English, with summaries translated into Vietnamese to
facilitate government understanding and decision making. Reports will be submitted in both
14     Appendix 3

electronic and paper form. All data and analyses will be consolidated and provided to the
government in electronic form.

7.        Concerning Part 1 of the PPTA, an inception report and detailed work plan will be
submitted within 1 month of the commencement of the PPTA. An interim report will be prepared,
initially in draft form, and submitted before the end of the third month. It should focus on the
findings of the study and actions needed to implement the financing plan. Five copies of the
draft interim report and ten copies of the final version shall be provided. The reports will present
the consolidated outputs of the three international consultants as described in section B.1 above.
The final report will be submitted in draft form in the first half of the fifth month in the same
number of copies as the interim report.

8.      For Part 2 of the PPTA, each consultant will have independent output as described in
paragraph 5 above. In addition, the consultant will draft, using standard ADB Board document
formats and guidelines, the following: (i) ADB safeguard documents (resettlement, social, and
environment) and (ii) relevant summaries formatted in such a way as to be directly incorporated
into drafts of the report and recommendation from the President to the Board of Directors.

9.     Finally, with the assistance of the whole project team, parts 1 and 2, the team leader will
organize a dissemination workshop in Hanoi with the Hanoi People's Committee, Ministry of
Planning and Investment, Ministry of Finance, State Bank of Viet Nam, and other stakeholders 1
month before the completion of the PPTA, to present and discuss the study findings and
implement initial capacity-building activities for the Government.

C.     Study Schedule

10.     The PPTA will have duration of 5 months, commencing on 1 March 2007 and ending on
31 July 2007. Parts 1 and 2 of the PPTA will be implemented simultaneously. The consultants
will operate in an office provided by the project management office and located at HATD, of the
Hanoi People's Committee.

D.     Consultancy requirements

11.     Individual consultants will provide an estimated 30 person-months distributed as 14
person-months of international consultancy, supported by 16 person-months of national
consultancy. The study will require seven international experts with expertise in (i) capital
markets, (ii) guaranties, (iii) legal issues, (iv) environmental assessment, (v) social development
and resettlement, (vi) urban transport planning, and (vii) institutional financial and economic
analysis. Five national consultants will be recruited with expertise in (i) legal issues, (ii) the
environment, (iii) general project advisory, (iv) social development, and (v) resettlement. Part 1
will have a team leader chosen from among the three international consultants recruited for it,
and he or she will be responsible for efficiently and effectively undertaking the study. Part 2 will
be implemented by individual consultants coordinated directly by ADB’s task manager for the
project. The consultants will be engaged by ADB in accordance with Guidelines on the Use of
Consultants (2006).
                                                                     Appendix 4   15


Item                                                        Cost
A. Asian Development Bank (ADB) Financinga
    1. Consultants
       a. Remuneration and Per Diem
           i. International Consultants                     300.0
           ii. National Consultants                          40.0
       b. International and Local Travel                     20.0
       c. Reports and Communications                          0.0
    2. Equipment                                              0.0
    3. Training, Seminars, and Conferences
       a. Training and Dissemination Workshop                 5.0
    4. Surveys                                               15.0
    5. Miscellaneous Administration and                       0.0
       Support Costs
    6. Contingencies                                         20.0
           Subtotal (A)                                     400.0

B. Government Financing
   1. Office Accommodation and Transport                     12.0
   2. Remuneration and Per Diem                              30.00
      of Counterpart Staff
   3. Survey                                                 48.0
          Subtotal (B)                                       90.0
              Total                                         490.0
  Financed by ADB’s technical assistance funding program.
Source: ADB estimates.

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