Technical Assistance Consultant’s Report Project Number: 48122-001 August 2018 Greater Mekong Subregion: Capacity Development for Economic Zones in Border Areas (Cofinanced by the People’s Republic of China Regional Cooperation and Poverty Reduction Fund) Prepared by Project Management International Limited Dublin, Ireland For the Asian Development Bank This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design. Final Report Final Scoping Study for Future Project Preparation Greater Mekong Subregion: Capacity Development for Economic Zones in Border Areas August 2018 Client Name: Asian Development Bank (ADB) Project Name: TA 8989-REG: Greater Mekong Subregion: Capacity Development for Economic Zones in Border Areas Document Number: IE131005810-06-RP-106, Issue A Client Contract Number: 129459-S52947 TA8989-REG: Greater Mekong Subregion: Capacity Development for Economic Zones in Border Areas – Final Report Document Sign Off Report Title: Final Report Client Name: Asian Development Bank (ADB) Project Name: TA-8989 REG: Greater Mekong Subregion: Capacity Development for Economic Zones in Border Areas Document Number: IE131005810-06-RP-106, Issue A Client Contract Number: 129459-S52947 File No: IE131005810-06-RP-100 CURRENT ISSUE Issue No: A Date: 30/08/2018 Reason for issue: For Client Review and Approval Sign Off Originator Checker Reviewer Approver Client Approval Jean-Pierre Print Name Jim McNelis Trevor O’Regan Eri Honda Verbiest Signature email Date 30/08/2018 PREVIOUS ISSUES Issue Date Originator Checker Reviewer Approver Client Reason for No issue A B C D E i TA8989-REG: Greater Mekong Subregion: Capacity Development for Economic Zones in Border Areas – Final Report EXECUTIVE SUMMARY 1. The original terms of reference of TA8989 identified 6 main activities, namely (i) review the governments’ policies and plans for the development of border areas including border economic zones; (ii) identify challenges and opportunities for the development of urban centers at border points and of BEZs in terms of urban planning and infrastructure development in each participating country; (iii) propose improvements in the future GMS corridor towns development approach with an increased focus on border areas; (iv) develop a pipeline for the fifth, sixth, and seventh phases of the GMS CTDP; (v) conduct regional seminars to increase awareness and capacity on urban, border area and BEZ development; and (vi) conduct pre-feasibility studies for the fifth GMS CTDP. The duration of the TA implementation was for 23 months –February 2017 to December 2018- divided in 3 phases, and 6 reports were to be delivered. 2. The TORs of TA8989 were revised in December 2017. The evaluation of the design and implementation arrangements for the on-going CTDPs was maintained as an important output while the rest of the TA would mainly focus on identifying and profiling 3 GMS economic hotspots or functional urban and economic hotspots, and develop the scope for project preparation for the next CTDP (CTDP 5). A pre-feasibility study for CTDP 5 is however not needed. The TA duration was cut to 19 months –from the original 23 months-. Progress Report II was prepared in February 2018 summarizing the changes to the TORs and identifying 3 major GMS border economic hotspots, namely the Greater Pakse Area in the south of Lao PDR, Lang Son/Dong Dang and Mong Cai on the border between Viet Nam and The People’s Republic of China (PRC). Options for a fourth economic hotspot were also presented. 3. Section II of the final report (DFR) presents a detailed review of the concept and approach to the on-going and planned GMS corridor town development projects. From the review of implementation experience of the previous, ongoing and approved GMS Corridor Towns Development Projects (CTDP), the Greater Mekong Subregion (GMS) Tourism Projects and the Viet Nam Secondary Cities Development Project (SCDP), a number of the considerations emerge with regard to the preparation of future CTDPs and GMS Tourism Projects. The review is divided into 3 interrelated parts, reflecting the process of project development, implementation and sustainability. The parts are: A – Project Scope and Coverage, which provides a critique on the process of selecting the components which are carried forward into project feasibility studies (PPTAs); B – Project Implementation which explores the procedures from PPTA endorsement, through to project implementation; and C – Project Sustainability, which is focused on the difficulties of sustainable O&M in the post project implementation period experienced in some geographies. 4. Strategic Planning and Selection of Project Components: Previous CTDP projects have focused on urban infrastructure improvements but have been somewhat piecemeal in design, leaving some towns with 50% of infrastructure needed without returning for a second project phase. While improving the quality of life of some residents, the broader impact of the project investments on stimulating economic growth, private investment and job creation has been less than anticipated. There is thus a need to take a more comprehensive, multi-sectoral approach in determining the socio-economic development needs of the future CTDP project towns. 5. A more comprehensive planning approach, through the SLEDP mechanism, is likely to lead to more inclusive project development, expanding beyond the “traditional” utilities project to include urban regeneration/urban conservation and tourism projects which have good economic development potential, social and community development potential and, importantly, create opportunities for attracting private sector investment. These could include such elements as: (i) ii TA8989-REG: Greater Mekong Subregion: Capacity Development for Economic Zones in Border Areas – Final Report markets; (ii) public transport facilities; (iii) street lighting; (iv) car parking facilities; (v) public parks and green spaces; (vi) public toilets; (vii) traffic management (if an issue), and other municipal facilities, which have previously been treated as “one off” project components, which do optimize economic and social development potential, but at the same time add to the O&M liability of local governments. 6. Project Design and Implementation: With specific reference to hard infrastructure, where sanitation and waste water treatment plants (WWTPs) are included in project designs, household connections and on-site plumbing costs should also be financed under the project, as these are crucial to the operational and financial viability of the sanitation system. Sewerage system development is expensive in part because of the high cost of land acquisition for waste water treatment plant development (WWTP), as such land is seldom identified at an early stage in the towns/cities’ development when the availability and cost of land is still low. Land needs to be reserved for WWTPs or SWM landfills as early as possible, which will help lower the cost of sewerage development or SWM. O&M has proved even more difficult. 7. Project Consultants: PPTAs are generally under-resourced and time-constrained, so that the consultant teams are unable to complete the assignments thoroughly because the teams are stretched. PPTA consultants’ recommended solutions and packaging should be reviewed and checked for appropriateness as early as possible during the PPTA stage 8. Timing of consultants’ inputs and the durations of PPTAs should be considered and planned more carefully in the PPTAs’ Terms of Reference. For example, it is common for resettlement, social and environment specialists to start close to the beginning of a project, before the subproject scope has been sufficiently defined for them to have meaningful input. Therefore, such specialists should preferably be fielded either later in the PPTA process or have their work undertaken in two phases, first at the start of the PPTA and again later after the subprojects’ scopes are more clearly defined 9. Project start-up delays also result in costs rising further. Delays in mobilizing project implementation support consultants for undertaking the detailed engineering design (DED), project management and construction supervision lead to cost escalation not only because of inflation, but at times because the project towns have expanded faster than expected since the PPTA was prepared. 10. To reduce project start-up delays, advance actions for recruitment of project implementation support consultants should be included as early as possible during the PPTA stage, as it can take the governments’ EA 12-18 months to mobilize them. Some works packages should be identified and detailed engineering design (DED) and bidding documents (including Master Bidding Documents) should be prepared for advance procurement under the PPTA stage. Procurement for these initial packages should be started in parallel with loan approval processing if possible. 11. It is best to have only a single project implementation support consultants’ package covering all aspects of the project implementation requirements (project management, DED and bidding documents, procurement, construction supervision, project performance management information system-PPMIS, etc.) for the loan/grant project in each country 12. Institutional Aspects: A multi-sector approach