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LUẬN văn THẠC sĩ water conflicts related to management of multi purpose reservoirs in vu gia thu bon river basin

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  • 1. Introduction (11)
    • 1.1. General topic and research background (11)
    • 1.2. Research objectives (12)
    • 1.3. Research gap and research contribution (13)
    • 1.4. Research scope (14)
    • 1.5. Research methods and framework (14)
  • 2. Conceptual framework and Literature review (16)
    • 2.1. Conceptual framework of Water conflict and Reservoir (16)
      • 2.1.1. Water conflict (16)
      • 2.1.2. Water conflict resolution (18)
      • 2.1.3. Reservoirs (19)
    • 2.2. Research on Water conflicts (20)
      • 2.2.1. Research on Water conflicts in Vietnamese river basin (20)
      • 2.2.2. Research on water allocation (to find payoff function) (23)
    • 2.3. Research on Vu Gia – Thu Bon River Basin (26)
      • 2.3.1. Research on VGTB RB related to social or environmental aspects (26)
      • 2.3.2. Research on VGTB RB about main water users in VGTB RB (27)
  • 3. Methodology (29)
    • 3.1. Theoretical approach (29)
      • 3.1.1. Game theory (29)
      • 3.1.2. Game theoretical approach can solve conflict (29)
    • 3.2. Game theory model (31)
      • 3.2.1. Game Tree (31)
      • 3.2.2. Profit functions (33)
  • 4. Current situation of water conflict (35)
    • 4.1. Context of Vu Gia – Thu Bon River Basin (35)
      • 4.1.1. Natural conditions (35)
      • 4.1.2. Social-economic conditions (36)
    • 4.2. Water resources (supply side) (36)
    • 4.3. Water consumption (demand side) (38)
      • 4.3.1. Hydropower (38)
      • 4.3.2. Irrigation (40)
      • 4.3.3. Urban water supply (41)
    • 4.4. Water balance (43)
    • 4.5. Water resource management in VGTB RB (45)
      • 4.5.1. Water resource management at basin level in Vietnam (45)
      • 4.5.2. Water resource management in VGTB RB (46)
      • 4.5.3. Management of reservoir system in VGTB RB (47)
      • 4.5.4. Procedure for operation of inter-reservoir system in VGTB RB (48)
    • 4.6. Water conflict related to multi-purpose reservoir system (50)
  • 5. Discussion and Policy Recommendation (54)
    • 5.1. Finding (54)
      • 5.1.1. Game theoretical analysis (54)
      • 5.1.2. Analysis of practical model (60)
      • 5.1.3. Analysis of modified model (72)
    • 5.2. Discussion (77)
    • 5.3. Policy recommendation (79)
    • 5.4. Limitation and Future research (80)

Nội dung

Introduction

General topic and research background

Water resources in Vietnam are relatively abundant with an annual water withdrawal per capita around 9,560 m 3 /person, but water resources are unevenly distributed across space and time Vietnam has a strong and growing economy - the GDP growth rate in 2018 is 7.08%, which is the country’s highest level of growth since 2008 and a large population scale with about 97 billion people as of 2019, ranking 14 th in the world in terms of population As a result, the demand for food, energy, and water has been on the increase

Moreover, various international reports have stated that Vietnam belongs to a group of countries most affected by climate change and sea level rise According to The Global Climate Risk Index 1 for 2016, Vietnam is the 5 th most affected country by climate change

Thus, the water availability is reduced, leading to the situation of exacerbating the food- energy-water nexus In this context, water resources are decreased in both quantity and quality, leading to a wide range of potential problems and becoming the source of water conflicts

Vu Gia – Thu Bon River Basin is one of Vietnam's biggest basins, which was not an exception from this trend of water conflict Water resources of Vu Gia - Thu Bon River Basin is quite abundant with the amount of inflow in the dry season reaching 4,280 m 3 /person/year, ranking 3 rd in Vietnam (only lower than the Mekong and Sesan RB)

This basin also has dramatic increases in economic growth and urbanization Most noticeably in this area is the coastal plain area of Da Nang City and Hoi An City, which have high population density and dynamic economic activities Therefore, water demand for development purposes is increasing especially rapidly in these downstream areas It

1 The Global Climate Risk Index (CRI), developed by Germanwatch, analyses the quantifiable impacts of should be noted that this river basin also belongs to the Central of Vietnam, one of the areas in the country that are most vulnerable to impacts of climate change every year

Therefore, it is understandable when conflict arises here

In comparison with other basins, VGTB RB has a great potential for hydropower exploitation, ranking 4 th in Vietnam for total capacity can be exploited (2030 Water Resources Group, 2017) The rapid development of hydropower since the 2000s in the upstream areas has affected water resources throughout the basin, especially by changing the natural flow of rivers Therefore, conflicts over water related to hydropower reservoirs are noticeable in many basins, including VGTB RB Currently, VGTB RB has about 60 hydropower plants in the plan with a total design capacity of 1,502 MW (L A

Tuan & Nga, 2016) Most large hydropower plants belong to the cascade hydropower systems which are constructed on Dak Mi River, Bung River, A Vuong River, Con River, and Tranh River

There have been so many studies from the social or environmental perspectives about the negative impacts of these reservoirs on the VGTB RB This study aims to achieve a similar purpose as that of these studies but is based on the economic viewpoint, with a focus on analysing the link between upstream and downstream’ use of limited water resources More particularly, this study aims to examine the strategic interactions among upstream water users (hydropower) and downstream water users (irrigation and urban water supply), thereby suggesting policy recommendations

Therefore, the topic of this study is “ Water conflicts related to management of multi- purpose reservoirs in Vu Gia - Thu Bon River Basin ”.

Research objectives

Water conflicts have been occurring on most river basins However, each region has been facing and solving the conflict in different ways with typical characteristics

Therefore, the first goal of this study is to clarify the current situation of water conflicts

After understanding the current state of conflict, based on an analysis of the scenarios, the next goal of the study is to suggest solutions to solve these water conflicts

To achieve the above objectives, this research will answer the following research questions:

✓ Which kind of water conflict is occurring in VGTB RB? Why water conflicts related to reservoirs are the highlight?

✓ How to solve the negative consequence of these conflicts in the viewpoint of economics?

Research gap and research contribution

Studies on water resources in the VGTB RB are mostly single-disciplinary studies in the fields of hydropower, irrigation (agriculture) or urban water supply , which means they do not mention the relationship with other related fields Studies on reservoirs often focus on the environmental and social impacts on the surrounding regions, such as resettlement issues for residents in mountainous areas, or the problems of declining river- bed ecosystems and degradation of the forest environment Moreover, there is rarely any research on game theory in Vietnam, except for the Mekong basin Therefore, there has been no research related to game theory in VGTB RB

Therefore, this study uses an interdisciplinary approach (studying the correlation between three sectors of water use: hydropower, irrigation, urban water supply) from an economic point of view and using game theory as water conflict resolution

First, the study brings a game theory approach to the field of water conflicts in Vietnam to understand the interactions among water users Second, this study contributes to resolving the conflicts related to hydropower reservoirs in VGTB RB Finally, the author provides practical suggestions for the operation of a river basin organisation.

Research scope

The research site is VGTB RB including Quang Nam province and Da Nang City Water resource management at river basin can be considered in dimensions of quantity-quality or dimension of surface – underground water This research focuses on the quantity of surface water in VGTB RB with three components:

✓ Water resource: big reservoirs in upstream

✓ Off-stream demand: Water supply for Da Nang City and Irrigation system in Quang Nam

Research methods and framework

This study uses qualitative methods and secondary data, which includes a variety of types: reports from international organizations in relevant sectors, legal documents of the central government of Vietnam as well as local governments in Quang Nam province and Da Nang City, scholarly articles on game theory and river basin, statistical materials from GSO, official websites of relevant companies and organization or state authorities

Legal documents are helpful to contextualize existing policies and understand the price of electricity, the price of water, the cost of agricultural production as well as standards related to usages of water Some online newspapers are used to get an initial observation of the ongoing conflict Following, this information is compared with scholarly studies to understand the current situation in VGTB RB Data to calculate payoff functions in game theory model is collected from reports, official websites and statistic organisations

The research framework shown in Figure 1.1 indicates that analysis of water demand side (part 4.3) and water supply side (part 4.2) at basin level is useful to understand water balance (part 4.4) and then water scarcity which leading directly to water conflict (4.6)

Figure 1.1: Research framework based on the demand side and supply side

The dissertation is structured in the following chapters:

✓ Part 1 is introduction including research topic and objectives as well as explain briefly about studied areas and methods used

✓ Part 2 is the conceptual framework and literature review part

✓ Part 3 is the methodology part which explains why game theory can be considered as conflict resolutions

✓ Part 4 is about the current situation of conflicts happing in VGTB RB

✓ Last part is a discussion for results of game theory model as well as recommendation for policymakers.

Conceptual framework and Literature review

Conceptual framework of Water conflict and Reservoir

Report of UNDP in 2008 cited a definition of Netherlands Organisation for Scientific Research that conflict is “a process that begins when an individual or group perceives differences and opposition between oneself and another individual or group about interests and resources, beliefs, values or practices that matter to them”

This view considered water conflict as social conflict is quite similar to the view considered water conflict as a disagreement of water users about water quantity at a given quality with distribution depends on space and time for a particular purpose (Esfahani, Kerachian, & Mortazavi-Naeini, 2006) The United Nations in the PCCP project (From Potential Conflict to Cooperation Potential) 2 also identifies that water conflicts arise from contradicting interests of water consumers with differential purposes, whether agricultural, industrial or domestic, in both the public and private sectors

Water conflicts can be considered as one kind of environmental conflicts related to exploit, use and manage water resources According to Libiszewski (1992), resources scarcity has four dimensions as illustrated in Figure 2.1

Three first dimensions lead to traditional conflicts related to the distribution of natural resources The last dimension leads to environmental conflicts due to overuse or pollution issues Water is one kind of natural resources, and water scarcity also has four dimensions, leading to water conflicts from both the distribution side and environment side

2 http://www.unesco.org/new/en/pccp

Figure 2.1: Four dimensions of resources scarcity

Handbook of GWP & INBO for integrated river basin management published in 2009 indicates that the river basin is a practical hydrological unit for water resource management Islam in 2011 also claims that due to water conflicts over different sectors and various regions, the basin becomes the appropriate unit to solve the challenges of water resource management

Water conflicts at a river basin involve so many linkages Research of Nepal, Flügel, &

Shrestha (2014) considers upstream-downstream linkages as unidirectional externalities because water use of the downstream mostly depends on the action of actors in upstream

For instance, if upstream actors change the usage of the land, water availability in downstream will be impacted directly

From an economic perspective, Madani (2010) gave a distinctive view of “the conflicts over water issues” that these conflicts are not only related to cost-benefit analysis, but they also stem from social and political aspects of water projects such as the issues in operation and management

To be more detail, in 2000, WCD’s report shows that conflicts over “dams” have emphasized in the past due to managers ignore the social and environmental impacts of dams Another possible reason can be a failure to fulfill commitments of environmental protection in a report of environmental impact assessment of projects, or failures to obey the rules of the legal system and internal guidelines Moreover, past existence and inequalities have not been resolved, and experience with dispute resolution is still poor can lead to current conflicts

 In this study water conflicts among users arise from opposition interests in the context of lack of water and occur in relation to the operation and management of hydropower reservoirs in upstream

According to the report of UNDP in 2008, there are some recommendations to solve water conflicts:

✓ Litigation based on the existing legal system with court participation to resolve the discord

✓ Alternative Dispute Resolution (ADR): seek consent of the parties by means of negotiation, mediation, and arbitration

✓ Preventing conflict by enticing participation of relevant stakeholders

The approach of UNDP is in term of management In addition, there are other approaches to solving water conflicts Water engineers consider water conflict due to unfair or unequal allocation of resources, so they use a hydrological model with simulation tools to find the most efficient allocation In another way, economists focus on the rational water users who pursue individual or collective interests, so they use an economic model with optimisation functions based on benefits from water exploitation These approaches can be combined

In an economic approach, Madani (2010) compares game theoretical methods and conventional optimization methods in order to solve water conflict If conventional approach solves a single-decision-maker problem, game theoretical approach can be used to solve multi-decision-maker problems In order to research multi-objective, optimization will use a function which represents for the whole system or uses weights with binding conditions The basic assumption of game theory is that each player is self- interested, so they have a trend to optimize his own objective This is opposite to optimization in which each decision makers can cooperate completely to gain the optimal benefit for the whole system

Based on optimisation methods, decision makers (water users) will optimise the benefits for the whole system despite the possible losses to themselves Based on game theoretical methods, players (water users) only pursue self-interest without regarding whether their decisions will injure other players or the whole system

According to Water Words Dictionary or definitions on the website of ICOLD (International Commission on Large Dams), the dam is built as a barrier to impound or divert the water flow, and the reservoir is a station to store water, which is created by building a dam The dam or reservoir can be used for many purposes such as irrigation, hydropower, water supply… Debate on hydropower reservoirs is controversy nowadays

Reservoirs mentioned in this research are hydropower reservoirs A typical hydropower plant includes three components: a power plant to produce electricity, a dam to control the flow of water, and a reservoir to store water The water behind the dam runs through an intake and causes a turbine to turn, then an electricity generator will be spun

According to OECD & IEA (2012), a hydropower plant (HPP) has three types: (1) Run- of-river plants generate energy based on natural river flow, depending on the variability of inflows; (2) Reservoir (or storage) plants store water in a reservoir so it can provide electricity on demand; and (3) Pumped storage plants pump water from a lower reservoir into an upper reservoir when electricity supply exceeds demand

Run-of-river plants and reservoir plants can be combined in cascade hydropower systems

A vast reservoir in the upper position can generally discharge water for several run-of- river plants in a lower position And pumped storage plants can utilise the water storage of reservoir HPPs

Research on Water conflicts

2.2.1 Research on Water conflicts in Vietnamese river basin

The Ba River Basin is one of the largest river systems in Vietnam, located in the Central Highlands The Ba River basin has very typical characteristics that are directly related to the exploitation of water resources by reservoir systems (N D Tuan, Dung, & Sy, 2015)

The main features of this system are the combination of reservoirs in main rivers and tributaries, between hydropower and irrigation, and even water transfer to another basin

In this system, there is An Khe-Ka Nak hydroelectric reservoir, which accumulates water in upstream of the Ba river for electricity generation, and then releases water to the Con river, causing the changing of flow scheme in the Ba river

Research of Tam, Hung, and Le in 2012 has applied the system analysis theory in combination with the WEAP model to assess the Ba River Basin's water resources according to 3 scenarios taking into account the operation of the hydropower system: 2 scenarios for period 2000-2010 and 1 scenario for the period 2011-2020 The results show that the water demand in the later period is so high that the current system cannot meet The authors also point out that the procedure for the inter-lake operation is more efficiency by increasing the amount of water stored in the whole reservoir system

Regarding Ankhe hydroelectricity, the study confirmed that it is impossible to satisfy both two purposes that are water demand in downstream and high-power efficiency in upstream

Giang and his co-workers 3 have published two scientific papers on the impact of the reservoir system in the Ba River Basin based on the use of 32 hydrological parameters of the Hydrologic Indicators of Alteration (IHA) The first punishment in 2016 evaluated this impact on the hydrological regime, results in that this reservoir system plays an important role in diminishing the maximum flow but has a negative effect in the hydrological regime in the dry season at Cung Son station The second pubishment in

2017 focused on the change of sediment regime, results in that reservoirs contribute to sand mud imbalance leading to consequences such as erosion, river banks in lowland delta and sedimentation, erosion in the estuary area

3 Based on “Research on a scientific foundation to determine the mechanism of sedimentation and landslide as well as solutions to stabilise the estuaries of Da Dien and Da Nong in Phu Yen province for sustainable

Nga (2017) used the hydrological-economic model to provide optimal water allocation in the Ba river basin This model examines the water balance according to the hydrological point of view and the effect of water use from an economic point of view with an optimal approach The initial conclusions of this study relate to hydropower, irrigation and urban water supply such as: (1) Total net profit from water users has a nonlinear relationship with the total volume of runoff in the basin; (2) The increase in the price of agricultural products or the cost of producing electricity only has an effect on the total net profit of each sector, without affecting the allocation of water; (3) Irrigation efficiency has a significant effect on the optimal irrigated area for each crop and does not significantly affect power production in power factories; and (4) Even in the case of high urbanization with the rapidly increasing demand for living and industry, water demand for hydropower and agriculture is not affected

The Srepok river basin is located in the west of the Truong Son mountain range, in the Central Highlands, and is one of the basins with the largest hydroelectric potential in Vietnam The whole Srepok basin has cascade hydropower systems up to 10 ladders

Only 20% of the flood season's water must be spilled is not used for electricity generation

Research of Duong (2015) has systematized a series of environmental conflicts in the exploitation of surface water resources in the Srepok river basin, many of which are related to hydropower The author states that hydropower is the most predominant sector, creating both positive and negative impacts on the basin; and the environmental conflict between hydropower and other stakeholders is the most complex The author also pointed out that the procedure of operating the reservoir approved by the state agencies on electricity but the inter-reservoir operation procedure at the basin level approved by Ministry of Natural Resources and Environment (MONRE) results in the certain conflicts during the operation of these reservoirs

Khoi (2013) used the hydrological model and climate change scenario to determine the change of flow in the Srepok river basin The results prove that under the influence of climate change scenarios, the flow in this basin will decrease sharply during the dry season, leading to the concerns about water scarcity

Le in 2017 has applied MIKE BASIN model to calculate water balance for Srepok's 10 sub-basins Although the Srepok river basin is not a lack of water basin, 8/10 sub-basins lack water with an increasing risk of drought The reasons are that the deep differentiation between the wet and dry seasons; the increasing demand for irrigation water (mainly for coffee and rice) more in the dry season; and the inefficient and insufficient irrigation systems Although the activities of reservoirs for both irrigation and hydropower are mentioned, the study shows the positive impact of large hydropower reservoirs to regulate the flow during both flood and dry seasons without considering the negative externalities

In summary, the Ba river basin and Srepok river basin in the Central Highlands have many similarities in geography and natural conditions with VGTB RB Thu Bon River's upstream branch also originates from this area Moreover, water conflicts arising in these three basins are strongly related to hydropower reservoirs and inter-reservoir operation procedures In particular, the case of diversion of Ankhe hydropower in Ba River Basin is similar to Dak Mi 4 hydropower in VGTB RB

2.2.2 Research on water allocation (to find payoff function)

There are many causes of conflict over water in which water allocation is unfair and effective To solve the water allocation problem, the researchers often use hydrological models or hydrological-economic models

Hydrological models often consider water demand as a determined value Water engineers will rely on the results of these models to provide technical suggestions In the hydrological-economic model, water is comprehended as a commodity and has an economic value which changes according to space, time and purpose

The hydrological model provides a static allocation scheme while water allocation according to the hydrological-economic model is dynamic The studies using hydrological-economic models all use the objective function of economic profits obtained from the exploitation of water for different purposes

In Vietnam, there are some studies on water allocation using hydrological and economic models to solve the optimal water allocation problem such as: study of Ringler & Nguyen

Research on Vu Gia – Thu Bon River Basin

2.3.1 Research on VGTB RB related to social or environmental aspects

Report of UNDP & GreenID in 2013 concentrated on costs of social-environment and dam safety risks (in part 1) to demonstrate that the statement that hydropower is cheaper than other types of energy is inconsequential because hydropower projects do not comprehensively count costs of deforestation, biodiversity loss, resettlement, and dam safety

From 2013 - 2014, CSRD supported 5 communities (including 3 communities in Quang Nam) to conduct research based on indigenous knowledge to assess the impact of hydropower on the environment and life of surrounding regions Report of CSRD in

2014 summarises the results of this research Research in 2 resettlement areas of Village

2, Phuoc Hoa commune (affected by Dak Mi 4C) and Nuoc Lang village, Phuoc Xuan commune (affected by Dak Mi 4) 4 have shown life in the new place is more difficult

Research in Dai Hong commune 5 , Dai Loc district, Quang Nam - located in midstream of Vu Gia River indicate the direct results of hydropower in upstream Vu Gia River to flow over time

Dung (2018) develops a methodology to determine MF for the river system, apply for downstream of VGTB RB With the holistic approach from the “bottom up”, this thesis considers the minimum flow consists three elements: (1) the maintenance flow to avoid the dead river; (2) the ecological flow for the aquatic ecosystem; (3) the exploitation flow to supply water for human demand

4 These 2 communes belong to Phuoc Son district, Quang Nam province

5 This research conducted in Dong Phuoc village and Duc Tich village, Dai Hong commune

2.3.2 Research on VGTB RB about main water users in VGTB RB

Firstly, about irrgation in Quang Nam, Chau et al (2015) does an assessment of the impact of the flood on agricultural production results in the damage converted into money in Quang Nam The authors assert that the benefit-cost rate is already low for farmers, and in years of extreme floods, the problem becomes more serious with a net loss for many farms Pedroso et al (2017) indicates that rice is still the main crop in this basin Despite the low net profit, water scarcity and the tendency to convert agricultural land, farmers do not diversify fruit and vegetable production because of food security and consideration of risks with new crops Viet et al (2018) investigates the technical efficiency (TE) of rice production in VGTB RB to indicate that TE affected by the scale and fragmentation in rice production as well as by the salinity intrusion The saline intrusion issue here is related to the inherent irrigation management and is proved by TE distribution unevenly in space

Secondly, about urban water supply for Da Nang City, the report “Preparatory Survey for Da Nang City Hoa Lien Water Supply Project” of JICA in 2016 in part 3.2, illustrates the current situation of water supply in Da Nang City JICA’s report along with a research of Tuan and Hung in 2016 has provided the most overview of the water supply system of this rapidly developed city

Lastly, there are so many studies in hydropower At the national level, there are some good researches provided an overview of development of hydropower in Vietnam such as Ty (2015), L A Tuan & Nga (2016), Nguyen-Tien, Elliott, & Strobl (2018) and some projects from international organisations assess the strategic environmental assessment in the hydropower sector such as a pilot assessment of ICEM (2007) on biodiversity loss’s risk and an official analysis of World Bank (2009) on master plan of hydropower development in context of electricity planning VI In case of hydropower in Quang Nam, the strategic environmental assessment (SEA) was researched by ICEM & ADB (2008) as a pilot evaluation of the fish fauna in the river and ICEM (2008) as an official report of SEA In addition, there are some studies that focus on the negative impact of hydropower in the Central of Vietnam such as CSRD (2014a) based on indigenous knowledge, My & Hanh (2018) based on gender perspectives…

Quang Nam Province has around 60 hydropower plants in the provincial plan including 4 biggest hydropower reservoirs: Song Tranh 2 in Thu Bon River; and Dak Mi 4, Song Bung

4, A Vuong in Vu Gia River There is much debate around the operation of these hydropower reservoirs UNDP and GreenID (2013) do the research on costs and risks on the operation of Song Tranh 2 reservoir, especially related to dam safety in an earthquake area CSRD has research on A Vuong hydropower plant with a new point of view from gender in 2018 mainly related to resettlement to women Environmental impact assessment report of the Song Bung 4 plant conducted by ADB in 2007 provides a positive outlook on the impact of this hydropower plant The most disreputable hydropower in VGTB RB since its inception is Dak Mi 4 hydropower plant CSRD and RLS in 2014 pointed out deviations in the implementation of environmental protection commitments in the environmental impact assessment and also assessed the negative impact of this hydropower on the flow scheme and aquatic flora and fauna of the Dak Mi and Vu Gia rivers.

Methodology

Theoretical approach

Game theorists research strategic interactions among rational players When John von Neumann made the game theory matured a unique field by the publishment of “On the theory of games of strategy” in 1928 In 1944, he and Oskar Morgenstern developed the ideal more and then published the book “Theory of games and economic behavior” which became the foundation for zero-sum games with two players Since the 1950s, game theory has been promoted extensively by many scholars The famous problem

"prisoner's dilemma" was researched in a mathematical model in 1950 Then, in 1951 John Nash developed Nash equilibrium as a criterion for a stable situation of players' strategies Cooperative game theory gives predictions of coalitions, the joint actions, and collective payoffs by using solution concepts In contrast, the non-cooperative game theory gives predictions of individual options by investigating equilibria Therefore, the terms of non-cooperative game theory can be used to interpret the cooperative game

3.1.2 Game theoretical approach can solve conflict

According to Dinar & Hogarth (2015) research on application of game theory in the water sector have increased rapidly since the 1990s because of water scarcity and necessary of efficient allocation of water or of joint costs of water projects Parrachino, Zara, & Patrone (2006), Madani (2010) and Dinar & Hogarth (2015) review a lot of research using cooperative or non-cooperative game models to give solutions for many water issues from single discipline to multi-discipline at differential levels The behaviors of relevant people in water issues can be explained by game theory because their self-interests result in non-cooperative behaviors (Madani, 2010) Jhawar et al

(2018) considers game theory as a realistic simulation of this kind of interest-based behavior, too In conclusion, this research mainly uses the game theoretical approach as a resolution for water conflict based on similarities of water conflict and game theory as in Table 3.1

Table 3.1: Similarities of water conflict and game theory

Water conflict Non-cooperative Game theory

Water users have self-optimizing behaviours

Players in the game are rational and self- interests

Water users compete to use increasingly scarce water resources

The action of one player may be detrimental to others

Each water user has a group of actions or reactions in order to maximise the amount of water

Each player has a set of strategies

Benefits of water users from exploiting water are in the form of profit functions

Payoffs show benefits of players in the game

Game theory model

Figure 3.1: Game tree with three players

Player: (1) H: hydropower plants in upstream; (2) C: urban water supply in downstream; and (3) I: irrigation system in downstream

• C1, C2, C3: cooperative strategies with C1 “to share”; C2 “to refund”; C3 “not to sue”

• D1, D2, D3: non-cooperative strategies with D1 “not to share”; D2 “not to refund”;

𝒫 = profit of each player à = punishment σ = refund σ & à are transferable from one player to another

In this game model, H has two strategies "to share water" means that H in upstream do not use water to run hydropower plants, so C and I in downstream can receive the natural flow (flow without dams' operation) or "not to share water" means that H uses all water to run hydropower plants, so others only receive the minimum flow based on the procedure of inter-reservoir operation (flow with dams' operation)

If H chooses "to share water" (sub-game 1), C and I receive flow without dams then C and I have two strategies to "to refund" or "not to refund" amount of money (σ) for H

Under the water rights of Vietnam (stipulated in the Law on Water Resources or the Decree on River Basin) the need for domestic and agricultural use in downstream is prioritized However, in reality, the entities using upstream water have great power, because their actions in upper land will impact on lower land, and even if they break the law, it is difficult to identify the type of law violation and penalty for this violation So, it can be understood that the fact that water rights in Vietnam belong to users in upstream

The strategies "to refund" and "not to refund" are possible in reality

If H chooses "not to share water" (sub-game 2), C and I receive flow with dams then C and I have two strategies "to sue" or "not to sue" This model temporarily ignores the litigation costs of both parties If C or I sue H in court, with reasonable evidence such as violations of H when compared with the Environmental Impact Assessment, reservoir operation process, the process of inter-reservoir operation This model also ignores the natural effects such as climate change on using water in this river basin Therefore, follow these conditions if C or I sue H, they will prevail, and H will suffer a penalty à

In case C or I do not sue H in court, H will not be punished too à

This study uses the following functions to determine profit functions for each player

However, within the scope of this study, players are identified as water users for agriculture (cultivation only), hydropower and city water supply (including domestic and public needs) Therefore, the payoff functions of each player will be modified from functions in part 2.2

Profit function of H (modified from equation 2.7)

𝑄 𝐸 : electricity power output (kWh per year)

𝑃 𝐻 : price of electricity (VND/kWh)

𝐶 𝐻 : cost of electricity production (VND/kWh)

Profit function of I (modified from equation 2.3):

𝑃 𝑝 : price of paddy (VND/kg) 𝐶𝑎𝑝 𝑝 : yield of paddy (kg/ha)

𝐶 𝑝 : cost of paddy cultivation (VND/ha) A: planted area of paddy (ha)

𝑄 𝐴𝑡 : average water flow for planted area A in period t (m 3 /s/ha)

𝑝 𝐷𝐴𝑊𝐴𝐶𝑂 : profit of Da Nang Water Supply Company (DAWACO)

The determination of parameters in the equation (2.5) and (2.6) to calculate the economic value of water for domestic and industrial purposes is complicated and requires a lot of information Moreover, the demand for domestic and industrial water is mainly for urban areas, and in this study, it is Da Nang City whose water has been provided by DAWACO

Therefore, in this thesis, the profit of DAWACO is used to replace the above values

This model is a static model, based on extreme cases to calculate the value of payoff If

H chooses “to share”, H will share all water without generating electricity And then, C and I receives water from H with an assumption that this volume of water can meet the demand of these players

If H chooses “not to share”, H will maximise using water for electricity generation (still complying with the law, particularly the 1537 procedure), hence, H will produce the expected annual average value of electricity output And then, C and I only receive the amount of water that H discharges based on Procedure 1537, comparing this amount with the monthly guaranteed level in the dry season, if it does not meet the demand, it is necessary to consider this game model

For all three players, M-value is higher than m-value.

Current situation of water conflict

Context of Vu Gia – Thu Bon River Basin

VGTB RB stretches across 5 provinces, but most are located in Quang Nam Province and Da Nang City VGTB RB covers 65% of Da Nang City and 88.8% of Quang Nam Province and includes a few small provincial catchments with negligible areas Therefore, it is only necessary to analyze conditions for Quang Nam and Da Nang

Quang Nam stretches over an area of 10,438 km 2 and is the upstream portion of the basin, therefore, this province will decide the characteristics of natural conditions for the whole basin In contrast, Da Nang has a small area with only 1,285 km 2 and is mostly in the downstream portion of the coastal plain However, Da Nang is one of five municipalities which are the highest-ranked cities in Vietnam and is the economic development hub of the whole of Central Vietnam Hence, social-economic conditions in Da Nang are more developed than in Quang Nam

According to Decision No 1989/QD-TTg in 2010 on List of inter-provincial river basins; VGTB RB includes two rivers: (1) Vu Gia River in Kon Tum, Thua Thien Hue, Quang Nam, and Da Nang has a length of 209 km and a catchment area of 5,425 km 2 ; and (2) Thu Bon River in Quang Ngai, Quang Nam has a length of 206 km and a catchment area of 4,610 km 2 Moreover, according to Decision No 341/QD-BTNMT in

2012 on List of intra-provincial river basins, Da Nang has Cu De Catchment and Quang Nam has Tam Ky Catchment and Trau Catchment as intra-provincial basins

VGTB RB is located in a tropical monsoon area with a hot and dry west wind leading to high evaporation and risk of droughts This basin has an average temperature of 25.40C with a small thermal amplitude and average humidity of 84% with 90-170 rainy days total annual rainfall up to 4,000 mm The coastal plains have shallow rivers with flat terrain and a higher average temperature

Water resources include rainwater, surface water, and underground water This research focuses on surface water Rivers and streams in this basin are mainly steep and short, draining quickly into the basin and leading to a poor capacity to hold water in the basin as well as in the riverbed Therefore, the capability to regulate water at the basin level is low as river flow depends entirely on the rainfall (Dan, Ky, and Lan, 2012)

In 2017, Da Nang City has GRDP at current prices reaching VND 76,635 billion, and GRDP per capita reached VND 72.02 million The service sector accounted for 56.2%, followed by the industry and construction sectors accounting for 29.32% The proportion for the agricultural sector is negligible with only 1.68% The population of Da Nang City in 2017 was 1.064 million, with an urban population of 87.63% Industry in Da Nang City is more developed than Quang Nam and water demand for this city is mainly for domestic and industrial purposes

In contrast, Quang Nam is an agricultural province with the proportion of agriculture- forestry-fishery relatively high at 12% in 2018 In 2014, the population of Quang Nam was 1.471 million with 81.46% being a rural population and a half of that are laborers working in agriculture Agricultural work in Quang Nam has shifted to other sectors but slower than general economic restructuring Water demand for agricultural in general and irrigation, in particular, is very important.

Water resources (supply side)

Water resources of Vu Gia - Thu Bon River Basin is quite abundant compared to other river basins in Vietnam The amount of incoming water in this river basin in the dry season reaches 4,280 m 3 /person/year, just smaller than the Se San River Basin (8,090 m 3 ) and the Mekong river basin (6,292 m 3 ) The total area of Vu Gia - Thu Bon River

Basin is 10,350 km 2 and the total water withdrawals are about 20.22 billion m 3 per year

Due to terrain and monsoon mode, the average annual rainfall has a gradual decrease from West to East, and irregular distribution by season This distribution also affects flow regime: flood flow in rainy season and dry flow in dry season

The Vu Gia-Thu Bon system consists of two sub-systems of Vu Gia River and Thu Bon River The sub-system in Vu Gia River includes the Dak Mi, Bung, A Vuong and Con rivers Vu Gia River has an average flow of 410 m 3 /s This river has the confluence with the Tuy Loan river downstream in Da Nang The sub-system in Thu Bon River originates from Ngoc Linh mountain of more than 2,000 m Thu Bon River has an average flow of

232 m 3 /s This river has confluence with the Ly Ly river downstream in Quang Nam

This river network is narrow, steep in the mountains and shallow in the plains The alluvial content in the rivers is mostly coarse sediment with poor nutrients The network of rivers is shaped like a fan, so the concentration of heavy rain both in quantity and intensity is in a wide range

The flow regime in VGTB RB has fluctuated over the years due to weather disturbances

However, the flow fluctuation within one year is more remarkable The flow is highest in the flood season with a huge rainfall in a short time and causing flash floods In the dry season, the river faces a lack of water resulting in the river being almost depleted

Table 4.1: Water flow of dry season and flood season in VGTB RB

Season Dry season Flood season

Min in April or May with 2 – 3 % year Max in

25 – 30% year Source: Summary from (Dân et al., 2012)

In comparison with other basins, the flow of flood water in the VGTB RB appears late and occurs most severely The flood season lasts for three months from October to December and accounts for 60-75% of the total annual flow with the average flood flow module of 150-200 l/s.km 2 November is the month with the largest flow, accounting for 25-32% of the total annual flow

At the end of the flood season, the water level of rivers and streams in the basin decreases gradually to start the dry season The dry season lasts up to 9 months with an average modulus of 15-35 l/s.km 2 The driest three months have only about 9% of the annual flow, and the driest month is usually April (in the mountains) or July (on the plains) accounting for 2-3% of the annual flow In comparison to other river systems, the dry flow is relatively abundant, due to the source of rainfall from the monsoon wind

Moreover, when the southeast monsoon reaches a peak in May or June, the area also appears to have a minor flood which helps reduce the level of drought

The exchange of water flow in Vu Gia – Thu Bon River Basin is quite complicated In downstream, Quang Hue River and Vinh Dien River are two channels which make the connection between two sub-basins Quang Hue River transfers water into the Thu Bon, and Vinh Dien River delivers part of the water come back to the Vu Gia In upstream, Dak Mi 4 HPP diverts a lot of water from Dak Mi River in Vu Gia system to Ngon Thu Bon River in Thu Bon system without returning Therefore, the operation of Dak Mi 4 HPP in upstream impacts on water resources of the whole basin.

Water consumption (demand side)

Hydropower is “the generation of power by the transformation of hydraulic energy into mechanical energy to activate a turbine” (Branche, 2015) Hydropower plants in Vietnam are mainly reservoir hydropower schemes, so they can store water behind the dam in order to decouple power generation from river inflows They also use a hydropeaking scheme which exploits water at maximum level in peak hours and moderate operation or not during off-peak hours, resulting in immense fluctuations in downstream flows

According to WCD in 2000, The decision to construct a dam as a development choice is influenced by technical considerations as well as the interests of politicians, central government, etc It is similar to the current situation in Vietnam as demonstrated in research of L A Tuan & Nga (2016) that hydropower development has been seen as achievements of the political system and economic development all around Vietnam since 1954

The Vu Gia - Thu Bon River Basin is ranked fourth in Viet Nam for potential hydropower generation capacity after the Da, Dong Nai and Se San river systems

Research of 2030 Water Resources Group in 2017 shows that VGTB RB has a total power capacity of 1,059.60 MW (accounting for 6 % of Vietnam’s capacity), and reservoir capacity of 2,661.65 mn m 3 (accounting for 5 % of Vietnam’s capacity)

In the 1990s period, the electricity output produced was not enough to meet the demand, leading to the Master Plans on hydropower development for large river basins being approved By the early 2000s, the master power plan for 10 major river basins was completed through Decision No 110/2007/QD-TTg approving the National Power Development Plan for the period 2006-2015 with consideration to 2025 (stand by

Not beyond the trend of development, the planning of large hydropower development in VGTB RB is also approved

MOIT approved the planning of the Vu Gia – Thu Bon River Basin on the development of cascade hydropower system, through Decision No 875/QÐ-KHDT in 2003 This plan was revised by Decision No 528/QĐ-NLDK in 2005, so cascading system in VGTB RB consists of 8 large projects with a capacity of upper 30 MW Moreover, Quang Nam People’s Committee approved Decision No 2056/QD-UBND in 2010 about medium and small hydropower planning, to add 38 of hydroelectric plants After that, the Provincial People’s Committee has added around 11 projects into the plan (ICEM, 2008)

Therefore, in total, Quang Nam has around 60 hydropower plants

According to IWARP in 2017, VGTB RB has a total capacity of 1,150 MW, currently, 8/10 hydropower plants have come into operation Moreover, L A Tuan et al (2014) indicates that there are 8 small hydropower plants in operation and 4 other ones in construction in VGTB RB

Huy et al (2013) explains some general characteristics of large hydropower reservoirs in VGTB RB:

✓ All large reservoirs use channels to transfer water from the reservoir to the hydropower plant

✓ Almost all reservoirs are unable to store flood volumes

✓ Most large reservoirs divert natural flows to tributaries for electricity generation

• Song Bung 4 reservoir diverts the flow from Bung River to Giang River

• A Vuong reservoir diverts the flow of A Vuong River to Bung River

• Dak Mi 4 reservoir diverts the flow of Vu Gia River to Thu Bon River

✓ Cascade hydropower system: the highest reservoir has a large capacity; the lower reservoirs are dams or dams combined with a reservoir with a small capacity

Irrigation is the way humans use water for supporting cultivation even in water shortage conditions of space-time (Branche, 2015) Most of the large dams in the World have been built for an irrigation purpose and irrigation is linked to food production and food security In developing countries like Vietnam, while agriculture still plays an important role in economics, and most labour in rural areas works in this sector, irrigation is very necessary

Agriculture - forestry - fishery sector still accounts for a large proportion of Quang Nam's economic structure In this sector, the share of agriculture is the largest (in 2014, the production value of agriculture was 10,312 billion, accounting for 63.36% of the total sector) (Lieu, 2017) In agriculture, cultivation is the central production sub-sector and focuses mainly on rice, and rice production is mainly found on the alluvial plains of the delta (Pedroso et al., 2017) Thus, of course, irrigation plays a crucial role in providing and regulating irrigation water, especially in rice production (ADB, NARBO, &

Irrigation system for VGTB RB is described in Table 4.2

Table 4.2: Irrigation system of VGTB RB

Reservoir Weir Pump station Other

Upstream of Vu Gia River 7 221 33 0

Upstream of Thu Bon River 34 414 21 5

Source: Summary from IWARP (2017) & Tuấn & Hùng (2016)

This basin has the most irrigation works located in Quang Nam: most reservoirs are in upstream of Vu Gia River, weirs are mainly located in upstream of Vu Gia River and Thu Bon River, pump stations are concentrated in downstream of VGTB RB

In order to meet the rapid increase in demand due to urbanisation and industrialisation, many reservoirs have been built to supply water for regions which are drought-prone and lack water (WCD, 2000) It is the same with the situation in Vu Gia – Thu Bon region due to most urban areas of this basin are in coastal areas, and far away from the source of water Urban water supply systems for VGTB RB includes the system for Danang and systems for urban and industrial areas of Quang Nam

According to (JICA, 2016), on average, Danang needs 205,000 m 3 per day to be supplied mainly by DAWACO with two main factories which both taking water from the Cau Do River - downstream branch of Vu Gia River Based on planning report of IWARP (2017) on average, Quang Nam's urban and industrial areas within the scope of VGTB RB need 40,000 m 3 per day In comparison to Da Nang City, the difference is significant, hence, to simplify the players, this study focuses only on the water supply system for Da Nang

Present water supply in Da Nang City has been carried out mainly by DAWACO, a one- member limited liability company owned by the people's committee of the city Although the Department of Agriculture and Rural Development of Da Nang City and other state agencies have also been providing water supply services in some parts of the city, their water supply quantity is very limited and ownership of their facilities will be transferred to DAWACO in the future (JICA, 2016)

Nowadays, DAWACO is operating 3 water treatment plants (WTPs): Cau Do WTP, San bay WTP, and Son Tra WTP

- Supplies are made by the Cau Do water plant and San Bay water plant taking water from Yen River, downstream Yen river and Tuy Loan river

- Supplies are made by the Sơn Trà provides 5,000 m 3 /day, water plant taking water from Xanh lake (not in VGTB RB)

According to ADB et al (2011), DAWACO also has other two water supply stations:

- The Hoa Khuong water supply station provides 1,770 m 3 /day, taking raw water from Yen River and the upstream An Trach Dam

- The Hoa Quy water supply station provides 730 m 3 /day and is based on groundwater

Therefore, the current water supply of DAWACO for Da Nang is mainly based on Cau

Do WTP and San Bay WTP with capacity as in Table 4.3

Table 4.3: Capacity of main water plants of DAWACO

According to ICEM (2008), for water supplies of Da Nang city, the water flow in the Vu Gia-Ai Nghia-Yen river system is essential The amount of water arriving at, and passing the An Trach weir impacts directly on the operation of Cau Do WTP, and additionally determines the extent of seawater intrusion When the water level of Cau Do River drops in the dry season, tidal waves run up to the intake point, which raises the salinity

Tuan and Thuan in 2015 cited from the research of DaCRISS 6 that Da Nang's freshwater supply will not be able to meet demand by 2020 and will only meet less than 50% of demand by 2025 This result is similar to the prediction of ADB et al (2011) These predictions do not take into account the impacts of climate change and the development of hydropower in the upstream.

Water balance

Research of 2030 Water Resources Group in 2017 assesses water resources in the dry season of large river basins throughout Vietnam through 2 indicators: water supply- demand gap and water exploitation index (WEI)

6 DaCRISS is stand for “The Study on Integrated Development Strategy for Danang City and Its Neighboring

First, the water supply-demand gap compares water availability for exploitation with water demand of irrigation, fisheries, industry - urban

Table 4.4: Water supply-demand gap index of VGTB RB

Exploitable Water Availability 4,662 4,741 +1.69 Water demand Irrigation 1,040 1,336 +28.46

Second, water exploitation index (WEI) is the average annual amount of freshwater extraction divided by available freshwater resources in the long term (only for dry season) This ratio allows for assessing water stress in each river basin

Table 4.5: Water exploitation index of VGTB RB

This study has provided an overview of water resources and stress levels In VGTB RB, from 2016 to 2030, although the water shortage rate decreases, the water stress is increasing In comparison with other basins, the situation is not too serious

However, the limitations of this study are that it does not consider the impact of upstream hydropower reservoirs, the uneven allocation of water according to space and time

Moreover, this research was conducted at the national level, hence, it brings a broad view but does not know the specific water use situation for each basin

In addition, there are other studies evaluating water balance at smaller scales such as (IWARP, 2017) research on Quang Nam (including Tam Ki and Trau catchments) and (H N Tuan and Thuan, 2015) research on Da Nang (including Cu De catchment) These studies develop hypothetical scenarios to assess the water shortage of the two provinces and give the predictions that water shortage is increasing over time.

Water resource management in VGTB RB

4.5.1 Water resource management at basin level in Vietnam

The Law on Water Resources (Law No 08/1998/QH10), the first-ever law providing a foundational framework for water resource management and legalizing the new approach of water resource management at the basin level (Article 5.1), was enacted in

1998 and took into effect in 1999 In 2000, the Government established the National Council on Water Resources to advise the Government on important decisions on water resources Besides, to implement the Article 64 of this Law, the Ministry of Agriculture and Rural Development (MARD) has also established the Basin Planning Management Boards 7 for major river basins in Viet Nam

In 2002, the Government has assigned the Ministry of Natural Resources and Environment (MONRE) 8 with the function of state management of water resources, including the river basins, throughout the country However, in 2007, the Government has transferred the functions and tasks of river basin management from MARD to MONRE After that, the MONRE advised the Government to establish river basin environmental protection committees 9 for Cau River (2007), Dong Nai River System

(2008) and Nhue-Day River (2009) The formation of the above river basin organizations has contributed to realize the National Strategy on Water Resources to 2020

7 In Vietnamese, it means “Ban quản lý quy hoạch lưu vực sông”

8 Resolution No 02/2002/QH11 and Decree No.91/2002/ND-CP

Decree No 120/2008/ND-CP on River Basin Management issued in 2008 was the most important milestone to change from the traditional approach of water resource management by administrative boundaries to the integrated approach of water resource management by river basin (Article 4.5) This Decree has also proposed to establish a new form of river basin management organization called river basin committee 10 A draft project to install six river basin committees and the Sesan-Srepok Rivers Basin Commission as a pilot Thus, there are three models of organization of river basin management in Vietnam: the basin planning management boards (managed by MARD), the river basin environmental protection committees (managed by MORNE) and the river basin committee (managed by MORNE)

4.5.2 Water resource management in VGTB RB

Hoi, Tu, and Hien (2015) affirms that the management system of water resources and related resources in the VGTB RB still follow the traditional approach - by administrative boundaries The administrative management mechanism for resources in

Da Nang City and Quang Nam Province is stereotyped the central management mechanism

Based on the Vietnamese legal framework and efforts of stakeholders, there are some river basin organisations (RBOs) established on VGTB RB as in Table 4.6:

10 In Vietnamese it means “Ủy ban lưu vực sông”

Table 4.6: River basin organizations in VGTB RB

Watershed Planning Management Board of VGTB RB 11

20/2005/QĐ-BNN Executive Board of Integrating Water

Resources Projects in Vu Gia RB 12

Committee approved Decision 2233/QĐ-UBND on 01/8/2006 The Coordination Board for Integrated

Management of the Vu Gia – Thu Bon River Basin and coastal area of Quang Nam – Da Nang 13

Nam Province and Da Nang City

PanNature in 2011 indicates that the two RBOs established in 2005 and 2006 have stopped working due to lack of mechanism and budget The Coordination Board established in 2017 based on an agreement between Quang Nam Province and Da Nang City was recorded as the RBO of the VGTB RB, while similar organisations based on Decree 120 14 have not yet been established According to JICA, TEDI, OCG, & PCKK,

(2018), this RBO has responsibility for conducting the regular conversation among stakeholders However, this coordination board cannot formulate planning and implement specific resolutions

4.5.3 Management of reservoir system in VGTB RB

The management of reservoir operation in the river basin is relatively complicated, involving the use of water by many stakeholders In addition to the RBOs mentioned in table 4.6 because VGTB RB belongs to a large basin in Vietnam, many issues will be directly managed by the Department of Water Resources Management of MONRE In

11 In Vietnamese it means “Ban quản lý quy hoạch lưu vực Vu Gia-Thu Bồn”

12 In Vietnamese it means “Ban Quản lý Điều hành Lồng ghép các Dự án về Nguồn nước Lưu vực Sông Vu Gia”

13 In Vietnamese it means “Ban điều phối về Quản lý tổng hợp lưu vực sông Vu Gia - Thu Bồn và vùng bờ Quảng Nam - Đà Nẵng”

14 According to Decree 120, state management of VGTB RB will be handed over to the River Commission of the the framework of this study, the main water users are hydropower (H), irrigation system (I) and urban water supply (C)

The management of reservoir operation in the river basin is relatively complicated, involving the use of water by many stakeholders In addition to the RBO mentioned in the Table 4.6, since VGTB RB belongs to a large basin in Vietnam, many issues will be directly managed by the Department of Water Resources Management of MONRE In the framework of this study, the main water users are hydropower (H), irrigation system (I) and urban water supply (C)

Large hydroelectric plants are operated by joint stock companies which are private In terms of state management, they are directly managed by the Electricity Regulatory Department in Ministry of Industry and Trade (MIT) through the competitive electricity market where large HPPs in VGTB RB are involved The irrigation system of Quang Nam Province is managed by Irrigation Exploitation Company which is One Member Limited Liability Company (owned by Quang Nam People's Committee); while water supply of Da Nang City is supplied by Water Supply Joint Stock Company Da Nang (DAWACO), being equitized in 2017, owned 60% by Da Nang People's Committee 15

4.5.4 Procedure for operation of inter-reservoir system in VGTB RB

Each reservoir must have its operation process Additionally, because of the direction of integrated water resource management (IWRM) at the basin level, the central government has issued the process of inter-reservoir operation for large river basins The operation of large hydropower reservoirs belong to the cascading system of VGTB RB is regulated by the decisions as described in Table 4.7

15 According to information in website of DAWACO at link: http://dawaco.com.vn

Table 4.7: Main documents for procedure for operation of inter-reservoir system in VGTB

Decision Year Inter-reservoir system Season

2010 A Vuong Lake has been completed while Dak Mi

4 and Song Tranh 2 households are under construction

2014 Ho A Vuong, Dak Mi 4, Song Tranh 2 have been completed

2015 Plus Song Bung 4 has been completed Rainy and dry season

Decision 1880/QD-TTg in 2010 was issued at the time of A Vuong reservoir was completed while Dak Mi 4 and Song Tranh 2 reservoirs were under construction This decision only focused on the flood season with simple regulations Decision 909/QD- TTg in 2014 improved its regulations for the operation of these inter-reservoirs during the flood season

In April 2014, the MONRE held a meeting to (collect opinions of) consult local government and related parties about the draft of the inter-reservoir operation procedure relating to the operation of Dak Mi 4 in the dry season of Vu Gia - Thu Bon River Basin

The proposals of relevant parties, as summarized by Department of Water Resources Management, included: (1) Da Nang City People's Committee required Dak Mi 4 lake to continuously discharge 25 m 3 /s during the dry season; (2) Ministry of Industry and Trade, IDICO Corporation proposed to reduce discharge just from 3 to 8.5 m 3 /s to ensure higher power efficiency; (3) Quang Nam Provincial People's Committee and other agencies had no specific comments

Decision No 1537/QD-TTg in 2015 is the most recent decision regulating procedures for operating inter-reservoirs in Vu Gia - Thu Bon River Basin It added Song Bung 4 reservoir into the inter-reservoir system Besides, the decision has also promulgated procedures for inter-reservoir operation mechanisms in the dry season in

Vu Gia – Thu Bon River Basin.

Water conflict related to multi-purpose reservoir system

According to report of 2030 Water Resources Group in 2017, there are some water issues which Vietnam is facing:

- The rapid development of hydropower in Viet Nam causes water-sharing conflicts related to worsening water stress in the dry season, reduce of sediment loads in rivers and dam safety

- Drought events are rising in frequency and severity impacting livelihoods and agricultural production

- Over-exploitation of groundwater resources caused land subsidence in large cities like Da Nang, water shortages in the dry season, and saline intrusion to aquifers

- Surface waters face serious pollution due to lack of municipal and industrial wastewater treated Many rivers are considered ‘dead rivers’

- Old water supply infrastructure and illegal connections reduce the availability of drinkable water

This situation is happening on most river basins in Vietnam, including VGTB RB

However, within the scope, this research focus on issues of VGTB RB related to urban water supply for Da Nang City, water demand of irrigation, development of hydropower plants… in term of quantity of water, especially in the dry season

There are some main hydropower cascade systems in Vu Gia sub-basin:

- Reservoir system in Dak Mi river [includes Dak Mi 2, 3, 4 hydropower plants]

- Reservoir system in Bung river [includes Song Bung 2, 4, 5, 6 hydropower plants]

- Reservoir system in Con river [Song Con 2 hydropower plants] and A Vuong river [A Vuong hydropower plants]

There are many studies on the impacts of hydropower reservoirs In 2014 CSRD classified the risks from the operation of hydropower with 5 catalogs: risks of operation in the flood and dry season, risks from hydropower projects (related to dam safety), risks of the degradation river environment and social problems (occurring in most river systems with hydropower) For each type of risk, the study also shows the impacts and typical cases that have occurred In relation to VGTB RB, A Vuong HPP has caused flooding in September 2009 or Dak Mi 4 HPP to divert flow causing drought for downstream since 2012

Study of Dung (2018) demonstrates that the flow frequency of 85% only meets the current demand for water use in three regions upstream, and that the remaining two areas in downstream are facing water shortage in the dry season This research based on data of four main hydrological stations are Thanh My and Ai Nghia stations on Vu Gia River, and Nong Son and Giao Thuy stations on Thu Bon River to divide the basin into 5 zones: upstream Vu Gia River; upstream Thu Bon River; midstream Vu Gia River; and downstream Thu Bon - Ly Ly River; downstream Vu Gia - Túy Loan River

Research of Trung and Lam in 2015 calculated the hydraulics in the dry season for the current situation in 2010, the future 2020 whether the lake is regulated or not (Dak Mi 4, Song Bung 3,4,5 HPPs) with the designed frequencies of 75%, 85%, and 95% This research gives the results for the scenarios taking into account the impact of hydropower on the flow of Vu Gia - Vinh Dien River and the flow of Thu Bon River According to scenario 3 for 2010, the water has been transferred to Thu Bon, the flow to the Vu Gia - Quang Hue junction decreases because of the operation of Dak Mi 4 HPP This has caused the water level in Ai Nghia to drop sharply, causing a lack of local water in An Trach pumping station According to scenario 4 for 2020, the minimum water level in

Ai Nghia station has dropped to 2.26 m and is lower than the requirement for many days

This will certainly make many irrigation works cannot work for a relatively long time

In summary, this study confirms that the activities of reservoirs (especially Dak Mi 4 HPP) in the upstream have a great impact on dry flow

Water conflict has taken place on the VGTB RB, related to the operation of multi- purpose reservoirs (but built as hydropower reservoirs) as described generally above

However, in this reservoir system, the operation of Dak Mi 4 hydropower reservoir is the most paid attention for some reasons The following studies further analyse the case of Dak Mi 4 HPP

The reservoirs are all diverted the water flow to take advantage of electricity generation because they belong to the cascade hydropower system However, only Dak Mi 4 is transferring water flow from Vu Gia sub-basin to Thu Bon sub-basin ICEM (2008) noted that Dak Mi 4 HPPs was designed for inter-river diversion in which water from the proposed reservoir will be diverted through a tunnel and penstock to the power plant, located on a tributary of the Thu Bon River called Ngon Thu Bon River 16 with flow up to 115 m 3 /s

The direct impact of Dak Mi 4 HPP on the flow of the Vu Gia River has been partly demonstrated in study of Trung and Lam (2015) Report of JICA et al (2018) analyses this impact more detail This report analyses data series from 1977 to 2015 of daily average water discharge at Nong Son and Thanh My stations The result is that at Thanh My station in Vu Gia River, annual water discharge has dramatically declined since 2012, while at Nong Son station in Thu Bon River, annual water discharge has progressed from 2012 onward The main reason is supposed to be the operation of Dak Mi 4 HPP which completed in 2012

CSRD and RLS (2014) evaluate the implementation of environmental protection commitments detailed in the Environmental Impact Assessment (EIA) report, thereby demonstrates the influence of Dak Mi 4 to changing the flow regime of both Dak Mi river and Vu Gia River According to the EIA on water resources, this hydropower will reduce 90% of the dry flow on the Dak Mi river and affect the dry flow of the Vu Gia River

16 Ngon Thu Bon in Vietnamese means start point of Thu Bon without accurate estimates However, the study of CSRD & RLS (2014) indicates that the dry flow of both Dak Mi and Vu Gia rivers is changed a lot Dak Mi river has now become a dead river, boats cannot navigate, dry flow occurs all year and aquatic species cannot live The decline in a water volume of the Vu Gia River is shown in Table 4.8

Moreover, based on the technical design report, Dak Mi 4 HPP is only electricity plant in VGTB RB operates for single-purpose – electricity generation According to the hydropower planning, for the water balance of the whole basin, Song Bung 4 HPP should be operated before Dak Mi 4 HPP However, in reality, Dak Mi 4 HPP was completed earlier results in water resources are out of balance

Table 4.8: Changes in water resources of Vu Gia River

Dry flow occurs from March to August

Dry flow occurs earlier from January

A significant decrease in water level Average depth: 2 m

Width: 140m Starting to appear sand dunes From 2011 to now

During the rainy season, dry flow maybe occurs

Average depth: 1 m Width: less than 100m Fluctuation within day

Discussion and Policy Recommendation

Finding

The VGTB game consists three players:

- H: Three large hydropower plants in upstream of Vu Gia River, including Dak

Mi 4, A Vuong, and Song Bung 4 HPPs

- C: Da Nang City located in downstream of Vu Gia River

- I: The cultivation areas directly affected by hydropower system above (H) in

Quang Nam Province, based on Figure 3.2 on Irrigation planning map, which includes (i) upstream area of Vu Gia River (Nam Giang, Phuoc Son, Tay Giang, Dong Giang, Dai Loc), (ii) upstream of Thu Bon River (Hiep Duc and a half area of Que Son), (iii) downstream area of Vu Gia – Thu Bon River Basin (Duy Xuyen, Dien Ban, Hoi An and a remaining area of Que Son)

• Nash equilibrium in sub-game

This game has two sub-games, or two branch as shown in Figure 5.1

The first branch shows the cooperation trend of H, when H chooses “share” water, due to the amount of “refund” 𝜎, C and I always prefer non-cooperative strategies The values of M-value of C and I do not decide the equilibrium Equilibrium in this sub-game always is O4(D2, D2)

Table 5.1: Matrix of Sub-game 1 in general model

To refund (C2,I) Not to refund (D2,I)

C To refund (C2,C) 𝑝 𝐶−𝑀 − 𝜎 𝐶 ′ ; 𝑝 𝐼−𝑀 − 𝜎 𝐼 ′ 𝑝 𝐶−𝑀 − 𝜎 𝐶 ; 𝑝 𝐼−𝑀 Not to refund (D2,C) 𝑝 𝐶−𝑀 ; 𝑝 𝐼−𝑀 − 𝜎 𝐼 𝒑 𝑪−𝑴 ; 𝒑 𝑰−𝑴

The second branch shows the non-cooperation trend of H, when H also chooses the non- cooperative strategy, the dominant strategy of both C and I is D3, due to the amount of

“punishment” à C and I will gain m-value that equals 0 based on the assumption that downstream does not receive water from upstream completely Therefore, equilibrium always is O8(D3, D3)

Table 5.2: Matrix of Sub-game 2 in general model

Not to sue (C3,I) To sue (D3,I)

To sue (D3,I) 𝑝 𝐶−𝑚 + à 𝐶 ; 𝑝 𝐼−𝑚 𝒑 𝑪−𝒎 + à 𝑪 ′ ; 𝒑 𝑰−𝒎 + à 𝑰 ′ Regardless of which branch occurs, the dominant strategies of water users in downstream are always non-cooperative strategies, leading to Nash equilibrium of each sub-game is non-cooperative outcomes, as shown in Table 5.1 and 5.2

Figure 5.1: Irrigation planning map of Quang Nam province

Figure 5.2: Game tree with dominant strategies and value of payoffs of general model

Equilibrium of whole game depends on the payoff of H in outcomes: O4 (𝑝 𝐻−𝑚 ) and O8

(𝑝 𝐻−𝑀 − à 𝐶𝐼 ′ ) If the amount of punishment H (à 𝐶𝐼 ′ ) give to C and I is smaller than the difference between M-value and m-value of H (∆𝑝 𝐻 = 𝑝 𝐻−𝑀 − 𝑝 𝐻−𝑚 ) then O8(D3, D3) is at Nash equilibrium In contrast, if the amount of punishment (à 𝐶𝐼 ′ ) is larger than the difference (∆𝑝 𝐻 = 𝑝 𝐻−𝑀 − 𝑝 𝐻−𝑚 ) then O4(D2, D2) is at Nash equilibrium

For example, M-values of H, I, C are respectively that 𝑝 𝐻−𝑀 = 1; 𝑝 𝐶−𝑀 = 0.5; 𝑝 𝐼−𝑀 0; and m-values of H, I, C equal 0 There are assumptions about 𝜎 𝐶𝐼 ′ that (1) 𝜎 𝐶𝐼 ′ = 𝜎 𝐶 ′ +

𝜎 𝐼 ′ = 50%𝑝 𝐻−𝑀 ; (2) 𝜎 𝐶 = 𝜎 𝐶 ′ = 1/2 × 𝜎 𝐶𝐼 ′ ; and 𝜎 𝐼 = 𝜎 𝐼 ′ = 1/2 × 𝜎 𝐶𝐼 ′ There are assumptions about à 𝐶𝐼 ′ that (1) à 𝐶𝐼 ′ = à 𝐶 ′ + à 𝐼 ′ = 50%𝑝 𝐻−𝑀 ; (2) à 𝐶 = à 𝐶 ′ = 1/2 ì à 𝐶𝐼 ′ ; and à 𝐼 = à 𝐼 ′ = 1/2 ì à 𝐶𝐼 ′ Results for outcomes are shown in Table 5.3

Table 5.3: Outcomes of VGTB game’s example model

NE in sub-game 1 is O4 NE in sub-game 2 is O8 SPNE in whole game 1 is O8

• Analysis of water right weight (γ)

The above analysis assumes that the role of three players are the same This section reassesses the role of water users in the basin through water right weight (γ) This variable shows the importance of each player according to a qualitative analysis of the geographical position and influence of these sectors in the region

Hydropower is in upstream, using water resources for power generation purpose The local government has a poor capacity to manage the operation of hydropower reservoirs

Hydropower is a key to develop economics and all huge large reservoirs are direrctly managed by central government Therefore, water right weight of H is the highest

The DAWACO is subject to the management of the Da Nang People's Committee, which is the largest shareholder Da Nang City is in downstream and depends on the flow of water obtained from upstream Additionally, in the course of the conflict, the Da Nang government has raised a strong concern about the water shortage at Cau Do river, and has put pressure on issuing inter-reservoir’s operation procedures Therefore, water right weight of C is medium

Although irrigation (I) has the highest profit among the three players, the influence of irrigation or agriucultural sector and the participation of farmers’ community in basin management are limited Therefore, water right weight of I is the lowest

Briefly, in this thesis, assumption is that γH`%; γC0%; and γI%

• Analysis based on average profit

Because H, I and C represent the collection of water users for the same purpose in VGTB

RB The profit of irrigation is larger than the profit of hydropower However, this actor has the least influence in the conflict occurring in VGTB RB For this reason, this study attempts to analyse the average profit value based on the number of water users (n) represented by each player

Firstly, H is a collection of 3 large hydropower plants, which have independent and autonomous business activities

Secondly, C means DAWACO is the unique representative of water supply organisation for domestic and industrial demand of Da Nang city The Da Nang City People's Committee hold the largest share of DAWACO - a joint stock company, therefore, profits of C from exploiting water for demand in the city are centralised

Finally, in contrast to C, while the total value of agriculture is enormous, the profit is being shared by large number of the farmers in the region, hence the profit that each

Exploitation of Hydraulic Works Co., Ltd, for providing irrigation service, but this company is often at a loss Moreover, the irrigation sector in Vietnam is also in the process of reform with some controversies on the new law of irrigation in 2017

Therefore, the company's profit was not used to calculate profit for I as in the case of C

In addition, GSO (2016) shows that currently, Quang Nam has 144,271 agricultural houses The number of farming family in the study area accounts for 70% of the total

Therefore, nH = 3; nC = 1; and nI = 100000

• Calculation of profit of M-value for 3 players

M-value means maximum profits of each player which they can gain in perfect condition

Hydropower plants can achieve M-value if they choose “not to share water”, results in sub-game 2 Irrigation system and DAWACO can achieve their own M-value if H chooses “to share water”, results in sub-game 1

In order to calculate M-value of H, this section estimates the profits of all three hydropower plants based on Equation 3.1: 𝒫 𝐻 = 𝑄 𝐸 × (𝑃 𝐻 − 𝐶 𝐻 ) The value of annual electricity power output of each plant is the annual average energy potential from some reports Annual average energy potential (GWh) can be found in research of Firoz, Nauditt, Fink, & Ribbe in 2018, which provides similar values as in UNFCCC (2006a) for Dak Mi 4 HPP and UNFCCC (2006b) for Song Bung 4 HPP

The calculation of electricity price is very complicated because this price is changed depending on the purpose of use, the amount of electricity used, the time of using electricity, etc The Article 2 of Decision No 4495/QD-BCT in 2017 (as shown in Table 5.3) pointed out that "The average electricity retail price is VND 1,720.65/kWh (excluding value added tax)"

The calculation of electricity cost is as complicated as the calculation of electricity price because electricity production cost is changed depending on the size of the power plant as well as the technology used and other costs Research of OECD & IEA in 2012 has applied the calculation of levelised cost “the total cost of building and operating a generating plant over its economic life, converted to equal annual payments” to gain the value of USD 67/MWh on average equals to 1,562,429.31 (VND/MWh) 17 so 𝐶 𝐻 1,562.43 (VND/kWh)

M-value of H is the total of profit of 3 HPPs

Table 5.4: The basis to calculate M-value of H (hydropower plants)

Decision No 4495/QD-BCT in 2017 Price of electricity 𝑃 𝐻 Report of OECD & IEA in 2012 Levelised cost of electricity

Research of Firoz, Nauditt, Fink, &

Ribbe in 2018 UNFCCC (2006a) for Dak Mi 4 HPP and UNFCCC (2006b) for Song Bung

Table 5.5: Profit of hydropower plants in VGTB game’s practical model

GWh per year VND/kWh VND/kWh billion VND

In order to calculate M-value of I, this section estimates the profits of irrigation sector based on Equation 3.2: 𝒫 𝐼 = [(𝑃 𝑝 × 𝐶𝑎𝑝 𝑝 ) − 𝐶 𝑝 ] × 𝐴 − 𝑃 𝑊 × ∑ 12 𝑡=1 (𝑄 𝐴𝑡 × 𝐴 × ∆𝑡)

The price of paddy sold at the field is estimated at 70% of the price of rice in the market

According to Viet (2011), the average price of rice in Vietnam is VND 7000 per kilogram

Discussion

• The nature of water conflict

This study analyses the interaction among three main water users in VGTB RB: hydropower in mountainous areas, irrigation in plain areas, and water supply in the coastal area All three water users have non-cooperate trends to maximize their own profits Hydropower wants to maximize the amount of water used for electricity generation without considering downstream requirements Water supply companies and irrigation systems also want to have the maximum amount of water to satisfy their demand without considering the efficient water use The results of the models also indicate that hydropower player tends to avoid the outcome O4 because the payoff they achieved in this case is minimum The highest payoff which they can gain is in the outcome O5 However, water users in downstream never choose strategies which lead to the outcome O5 because their payoffs in this case are minimum Therefore, competition in water unavoidably occurs

• The ability to promote cooperation in the basin

However, it is not impossible to promote cooperation among these users With the variables of refund and punishment, the government can contribute to regulating the behaviour of water users

Based on the general model in Part 5.1.1, in order to encourage H to cooperate, the government should give an amount of punishment large enough to be deterrent It means that punishment should be greater than the difference between the profit (the average annual based on the capacity of the hydropower reservoir) with the minimum profit H receives when sharing water à 𝐶𝐼 ′ > ∆𝑝 𝐻 = 𝑝 𝐻−𝑀 − 𝑝 𝐻−𝑚

Based on the practical model in Part 5.1.2, the conditions for cooperation can be:

Without reasonable penalties or refund, it is challenging to create incentives for cooperation However, the model suggested that the amount of fine for H should be greater than the profit of H to encourage cooperation, that is contradictory in practice

Nowadays, Vietnam has a direction to create a competitive electricity market, although electricity is a typical commodity If the electricity retail market is prosperous, electric enterprises need to consider the intangible value of the brand

The relative values between the amount of refund or punishment in comparison to the profit of hydropower sector are more meaningful If these two rates are greater than 100 percentage of the payoff value of hydropower plants, they tend to cooperate with downstream users In addition, the difference between these two rates also reflects the policy bias If the ratio of the refund on hydropower’s profit is smaller than the ratio of the punishment on hydropower’s profit, urban water supply for Da Nang City and irrigation sector of Quang Nam Province will gain more benefits than hydropower sector

In contrast, if the amount of money, which hydropower plants receive by refund scheme, is larger than the amount of money, which hydropower plants give for downstream user by punishment scheme, hydropower sector will benefit more

In the absence of state intervention with the refund scheme or punishment scheme, policymaker issues policy based on the viewpoint that brings the greatest social benefits

However, the method to calculate the benefits of the players also reflects the opinion of the policymaker If the government is concerned about a large number of people affected by water shortage in the downstream area, the policy will benefit irrigation sectors and city If the government cares about economic development indicators and the most profitable industries, the policy will benefit the hydroelectricity sector.

Policy recommendation

This thesis proposes three recommendations for public policy Firstly, government should create a suitable refund and punishment scheme in order to give directions for action of water users in a river basin Institutionalization of economic instruments is necessary to regulate the behavior of water users in river basin Although it is difficult to measure economic losses for the downstream area and bring these losses into the game theoretical model in term of mathematics, it is actually proven that cooperation is needed for management of this common resources

Secondly, government should consider the importance of two factors: scale of economy and number of people affected, in the process of issuing policies on integrated management of river basin In the reality of economic development in Vietnam as well as in Central region, hydropower companies are mainly private companies with more efficient operation and irrigation management agencies are mainly state-own companies with less revenue Hydropower sector provides electricity, which is extremely necessary for development of whole Vietnam, and brings high value in term of money Irrigation is an important part support for agriculture sector, which is still inexpensive with lower value in comparison with electricity in term of money Urban water supply sector is also momentous for the economic development Citizen requires a lot of water, electricity and agricultural products Therefore, it is necessary to consider the water demand of hydropower and irrigation as well as urban demand If government enacts some policies at national level which support hydropower companies, a huge number of farmers and urban people will be affected However, if government enacts other policies at national level which support public services on irrigation and urban water supply, the overall economic benefits can be hurt

Finally, the government should issue policies based on policy scenarios In Vietnam, pressing issues have often taken place for a long time in reality before the government issued some legal documents to solve these issues The policy following the practice can be seen quite clearly in the field of water resources management, especially the integrated management of river basins The water conflict is not exclusion in this context, especially conflicts related to the rapid development of hydropower in the upstream of large rivers Water conflict is more complicated because several sectors involve, and each sector has own state management mechanism This study proposes a policy formulation method based on the development of interaction scenarios among some major water users When these scenarios are more specific, it is possible to assess the behavior of water use in more detail with economic profits.

Limitation and Future research

In the scope of this master's thesis, this study focuses on analysing the interaction among water users in the river basin in relation to the operation of upstream reservoirs, leading to the following limitations

The study has not addressed the issue of water quality, groundwater issues and the correlation between land use and water use although they are essential aspects for integrated water resources management (IWRM) The study has only considered three biggest users including hydropower, irrigation, and urban water supply, not including aquaculture and environmental demand

The function used to calculate the benefits of domestic and industrial water demand is too complicated, so this study used DAWACO's profits instead The price and cost data in this study are average values or values specified in the law

The study just uses the economic model, and the hydrological data based on secondary research, leading to a lack of data for running the expected model

With the above limitations, initial analysis is relatively simple However, there are some directions to develop more in the future for this topic Hence, the author proposes a research framework for the future as follows:

✓ Agricultural demand: Cultivation, Livestock, Aquaculture

✓ Underground water Impact of climate change on water resources

Water balance for the whole basin Water balance for both Hydropower and Irrigation reservoirs

Optimisation of benefits from the exploitation of water in the whole basin

 Analyse based on social welfare view Optimisation of benefits for each water user

 Analyse based on a game theoretical model Analyse water conflict based on some scenarios:

This research is about the operation of an inter-reservoir system in Vu Gia - Thu Bon River Basin, in relation to three water use purpose: hydropower, irrigation and urban water supply Water conflict occurs due to the competition of using scarcity water resources in demand side

VGTB RB has abundant water resources but complicated flow regime with uneven distribution in space and time This basin also has high potential hydropower capacity to develop a cascade system Impacts of hydropower reservoirs on downstream are obvious

Irrigation system in VGTB RB mostly provides water for paddy cultivation of Quang Nam Urban water supply in VGTB RB mostly provides water for domestic and industrial demands of Da Nang City Water demand in downstream is rapidly increasing and water balance just satisfies in a short time Water resources management in VGTB

RB is not so strong due to the lack of river basin organization The procedure for operation of the inter-reservoir system was issued in 2015 partially solved the water problem but the conflict has been continued

The game theoretical approach is used as a water conflict resolution A general model includes three players: H stands for hydropower; I stand for irrigation and C stands for urban water supply Each player has cooperative and non-cooperative strategies and a profit function Practical model’s results indicate that all players have trend to non- cooperate and government concerns more about benefits for users in downstream due to the greater social benefits However, modified model which considers water rights and number of people in each group, indicates that non-cooperative strategies are still dominant, and the view of government is closer to benefit of hydropower

To conclude, the government should promote cooperation by adjusting the behaviour of water users with economic-policy instruments such as penalties and reimbursement rates

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