Poverty Reduction in the Central Highlands Project in Dak Nong, Dak Lak, Gia Lai, Kon Tum, Quang Ngai & Quang Nam CONSOLIDATED FEASIBILITY STUDY REPORT [CENTRAL LEVEL]

Ministry of Planning and Investment World Bank Poverty Reduction in the Central Highlands Project in Dak Nong, Dak Lak, Gia Lai, Kon Tum, Quang Ngai & Quang Nam CONSOLIDATED FEASIBILITY STUDY REPORT [CENTRAL LEVEL] August, 2013 (The draft for consultation only, please not quote) The Central level Feasibility Study Report is based on the following: Legal documents: (i) Decree 131/2009/ND-CP on managing projects receiving official development assistance (and relevant circulars of MPI, MoF); (ii) Decision 48/2008/QD-TTg issued together with General Guidelines on preparing feasibility studies for projects receiving official development assistance (ODA) from the Group of Banks (Asia Development Bank – ADB, French Development Agency – AFD, Japan Bank for International Cooperation – JBIC, German Development Bank – KfW, World Bank (WB); Results from fieldwork undertaken by the consultant (the first fieldtrip in July-August, 2012; the second fieldtrip in January, 2013); consultation process was conducted with the participation of provincial PCs’ representatives, leaders of relevant sectoral agencies at provincial level, representatives of PMUs of certain projects in the Project area, leaders of Project districts, representatives of relevant sectoral agencies at district level, leaders of communes and commune-level public officials, and representatives from villages and groups of beneficiaries in the Project area; Results from consultation workshops at central and provincial levels about the content and development of the report from June, 2012 up till August 2013; meetings with WB Mission in September 2012, March 2013, and June 2013; Guidelines on Development of the Feasibility Study Report prepared by WB consultant to support the process of preparing the Feasibility Study Reports; Draft Feasibility Study Reports of the Project provinces Feasibility study reports of other projects with similar or highly-related characteristics in scale and design (such as NMPRP-2) 2|Page Table of Contents Introduction Project Overview 11 Chapter 1: Project Overview 12 I Project background 12 A National context 12 B Central Highlands context 13 II Policy framework of the Project 13 A National policy framework 13 B Policy frameworks of Project provinces 15 III Target areas and beneficiaries of the Project 16 IV Poverty reduction policies and programs in the Project are 25 Chapter 2: Project Description 28 I Overall project description 28 A Project objectives 28 B Main challenges and intervention strategy 28 C Project components 29 II Component 1: Commune and village infrastructure development 30 A Component description 30 B Implementation arrangements 31 C Implementation plan 33 III Component 2: Sustainable Livelihoods Development 34 A Overview of Component 34 B Sub-component 2.1 –Self-reliance and income diversification 38 C Sub-component 2.2 – Market Linkages Initiative 40 D Implementation Plan 44 IV Component 3: District Level Connective Infrastructure Development, Capacity Building and Communication 47 A Sub-component 3.1: District connective infrastructure development 47 B Sub-component 3.2: Capacity building 48 C.Sub-Component 3.3: Communication and knowledge sharing 51 D Implementation plan 53 V.Component 4: Project Management 53 A Component objectives 53 B.Main project management activities 53 VI Total investment funding and disbursement plan 57 A Total investment 57 3|Page B Funding Allocation 57 C.Disbursement plan 59 Chapter 3: Project Management and Operation 61 I Legal basis of the Project 61 II Project implementation and management arrangements 61 III Project implementation Plan 68 IV Financial Management 70 V Procurement Management 73 VI Transparency and Anti-corruption 76 Chapter 4: Project Monitoring and Impact Evaluation 77 I Project results framework 77 II Monitoring and evaluation system 78 III Assurance of social safeguards 81 V Assurance of environmental safeguards 86 VI Resettlement action plan 88 VII Project efficiency assessment 89 VIII Project sustainability 91 Conclusion 94 4|Page Tables Table 1.1: Total population of Project provinces and districts in 2011 18 Table 1.2: Demographic characteristics of households 21 Table 1.3: Rate of outstanding debt until 1/7/2011 (%) 24 Table 4: Programs/projects in the Project area 25 Table 2.1: Summary of commune/village level infrastructure projects in the first 18 months 34 Table 2.2: List of livelihood activities in the months in the project area 46 Table 2.3 District level connective infrastructure projects planned for the first 18 months 48 Table 2.4: Training duration in the first 18 months 50 Table 2.5: Training curriculum for the first 18 months 50 Table 2.6: Total funding allocated to provinces in the Project area 57 Table 7: Allocation of 85% of the loan by project components and provinces (USD) 58 Table 2.8: Allocation of 85% of loan and counterpart fund in the cycle of the project (Currency: USD) 59 Table 3.1: Summary of the Project Implementation Plan 69 Table 3.2: Steps on developing a Financial Plan from commune to central levels 71 Table 3.3: Procurement thresholds for consulting services, purchasing of goods, and construction 75 Table 4.1: Project results framework 77 Table 4.2: Periodic reports and authorities/agencies in charge 79 Table 4.3: Environmental management policies for each type of environmental risk of the Project 88 Table 4.4: Financial efficiency of livelihood models 89 Table 4.5: Investment efficiency of transportation construction (Unit: VND and %) 90 5|Page Figures Figure 1.1: Project area by type of land and province 17 Figure 1.2: Ethnic group distribution in the Project area 18 Figure 1.3: Income per capita in 2010 at current prices (thousand VND/person/month) 19 Figure 1.4: Poverty rate in the Project area (%) 19 Figure 1.5: Rural poverty rate of the provinces and of the Project area (%) 20 Figure 1.6: Poverty rate by ethnic group and gender of household head 20 Figure 1.7: Ownership of motorbikes, TV and mobile phones (%) 22 Figure 1.8: Annual crop land distribution (m2) 22 Figure 1.9: Perennial crop land distribution (m2) 23 Figure 1.10: Forest land distribution (m2) 23 Figure 1.11: Access to national power grid, clean water sources and hygienic latrines (%) 24 Figure 2.1: Inter-relation and supplement among Project components 30 Figure 2.2: Commune classification by livelihood potential 35 Figure 2.3: Supports from stakeholders for market linkages LEGs 41 Figure 2.4: Estimated financial ratios and production cycles 45 Figure 3.1: Project management structure from Central to local levels 62 Figure 3.2: Central Project Coordination Board organisational structure 63 Figure 3.3: Provincial PMU chart 64 Figure 3.4: District PMU chart 65 Figure 3.5: CDB chart 66 Figure 4.1: M&E Framework 78 Figure 4.2: The highly vulnerable beneficiaries in the Project area 82 6|Page Abbreviation ADB Agribank AusAID CPO CDB CEMA CH CHPov EM FA FLITCH FS Asia Development Bank Vietnam Bank for Agriculture and Rural Development The Australian Agency for International Development Central Project Office Community Development Board Committee on Ethnic Minority Affairs The Central Highlands Central Highlands Poverty Reduction Project/ the Project Ethnic Minority Finance Agreement Forests for Livelihood Improvement in The Central Highlands Feasibility Study GoV GSO H IFAD IRR ISP L M&E MARD/DARD MIS MOC MOF/DOF MOLISA/DOLISA MOST MOT MPI/DPI NGOs NPV NTFP NTM NTP NTPPR NNP ODA OP P135 P30a PDO PIM PMU PPC PPU QCBS SEDP Government of Vietnam General Statistics Office Height The International Fund for Agricultural Development Internal rate of return Supporting program for Program 135-II in Quang Ngai Length Monitoring and Evaluation Ministry/Deaprtment of Agriculture and Rural Development Management Information System Ministry of Construction Ministry/Department of Finance Ministry of /Department of Labour, Invalids and Social Affairs Ministry of Science and Technology Ministry of Transport Ministry/Department of Planning and Investment Non-governmental organizations Net present value Non-timber forest products National targeted program on building new countryside The National Target Program The National Target Program to Poverty Reduction The National Nutrition Program Official Development Assistance Operation Policy The Program 135 The Program 30a Project Development Objective Project Implementation Manual Project Management Unit Province People’s Committee Project Preparation Unit Quality and Cost Based Selection Socio-economic Developing Plan 7|Page TAB TNSP ToRs RAP RPF UN UNDP USD VBSP VHLSS 2010 VND WB WB3 8|Page Technical Assistance Board (TAB) Tam Nong Support Project Term of references Resettlment Action Plan Resettlement Policy Framework United Nations United Nations Development Program United States Dollar Vietnam’s Bank for Social Policy Viet Nam Household Living Standards Survey 2010 Vietnam Dong World Bank Forest Sector Development Project Introduction Vietnam has achieved remarkable progress in poverty reduction and economic growth, which has also received international recognition over the past two decades Rapid and stable economic growth is an important prerequisite for poverty reduction and improvement in living standards This is, however, only a necessary condition More important is the strong commitment of the Vietnamese Government to socio-economic development and allocation of growth outcomes to ensure equality of opportunity for people from all social classes to truly benefit from economic growth Since the Reform or “Doi Moi”, Vietnam’s poverty rate has decreased from nearly 58% in 1992 to 11% in 2010 Along with the increase in income, people’s access to health care and education services has been improved greatly; spiritual and cultural lives have been enriched even in rural and remote areas Critical achievements in socio-economic development have lifted Vietnam from the group of least developed countries to a middle-income country group since 2010 However, Vietnam’s socio-economic development has also been encountering considerable challenges The poverty rate remains relatively high in difficult areas, especially in rural and mountainous localities Poverty reduction is slowing down and the gap between rich and poor families is widening, so is between rural and urban areas The poverty rate is also particularly high among ethnic minorities (EMs) While the national poverty rate in 2010 is 11%, the average poverty rate of the EMs is almost 48% (and that of the Kinh ethnic group is only 7.5%) Although agriculture is not the key pillar of economic growth, it plays a very important role in rural economic development and it is the livelihood of almost all poor households However, excluding a number of important agricultural exports, most of the agricultural exports are still in forms of raw products with unstable supply sources, low quality and value added, making them hardly sustainable to escape from poverty However, unless Vietnam moves on from its current export strategy focusing on raw, low quality and cheap agricultural products, it would be difficult ensure sustainable poverty reduction The Central Highlands (CH) is a politically and geographically special area of Vietnam with an excellent potential for development of high-value perennial crops As a “destination” of the developing-new-economy program of the 1980s, the CH has welcomed an influx of Kinh and EM migrants from the Northern mountainous area There are now about 74% of CH ethnic minorities living below the poverty line Along with the North-Western region, the CH is one of the poorest areas of Vietnam and the poverty rate is especially high for the EMs The CH has the most alarming proportion of children suffering from malnutrition in height for age and weight for age in the country The area also has the lowest rate of primary school enrolment, and less than half of the children at lower-secondary school age enrolling in lower secondary schools This happens in the context of the CH experiencing a growth rate that is double the national average (nearly 12%) over the last 10 years, resulting in the CH having the greatest income disparity in comparison with other regions across the country Therefore, improving living standards of CH minorities over the coming years is one of the top priorities in socioeconomic development of the CH Improving lives of the poor and promoting socio-economic development for CH minorities have been the priorities of Vietnam’s government and international donors for many years Given its high poverty rate and concentration of EMs, the CH is a critical target area of P135-II, national target programs (on poverty reduction, water and sanitation, education, etc.), Program 30A, and, most recently, the national target program on Building New Countryside The CH has also received a lot of support from international donors such as ADB (in poverty reduction for a number of provinces and forestry development), WB (rural transportation, rural finance, and rural energy), and many other international organizations In spite of that, the region has only been receiving around 4% of total ODA over the past two decades High and persistent poverty rate, especially among indigenous EMs, continues to be a challenge for socio-economic development of the CH In this context, the continuity of large-scale policies, projects/programs promoting CH’s propoor socio-economic development, especially for EMs, is critical Accordingly, since 2010, MPI has held technical discussions with WB on the possibility of a large-scale poverty reduction program to help to improve lives of CH ethnic people, to awaken and realize effectively the potential of the region This proposal has gained support from WB given that it aligns with WB’s commitments and strategies On this basis, following the recommendation of MPI, the Prime Minister has approved the Project th priority list according to the Decree 1440/TTg-HTQT dated September 18 2012 9|Page This Feasibility Study Report is developed in the above-mentioned context It proposes a fundamental design of the Project and proves its feasibility This report has main parts Chapter analyses the general background of the Project and the expected Project area to highlight its urgency as well as to identify the general context to design project activities in a manner that is suitable for the conditions of the Project area Chapter provides a detailed description of components, mutual relations among components/sub-components and funding allocation Issues related to the design of implementation arangements and project management are presented in Chapter Chapter provides mainly an assessment of social and environmental impacts of the Project, based on which an environmental and social safegards are proposed In parallel, Chapter also provides an analysis on financial and economic efficiency of planned Project activities 10 | P a g e ... household level between the rural and urban areas as well as between different economic areas of the country Although the average national poverty rate is 14.2%, the disparity between urban and... mountainous localities Poverty reduction is slowing down and the gap between rich and poor families is widening, so is between rural and urban areas The poverty rate is also particularly high... Infrastructure Development, Capacity Building and Communication 47 A Sub-component 3.1: District connective infrastructure development 47 B Sub-component 3.2: Capacity building