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Study on Economic Partnership Projects in Developing Countries in FY2013

Study on Development of Dam Nha Mac Area in Vietnam

Final Report

February 2014

Prepared for: The Ministry of Economy, Trade and Industry

Ernst & Young ShinNihon LLC Japan External Trade Organization

Prepared by:

SE Corporation Nomura Research Institute, Ltd

NIHON SEKKEI, INC. Infrastructure Development Institute-Japan Kawasaki Geological Engineering Co., Ltd.

Reproduction Prohibited

Preface

The report summarizes outcomes of FY2013 project for revitalizing Japan by acquiring new middle-class in newly

emerging countries (feasibility study of individual infrastructure development projects for realizing action plan)

commissioned by the Ministry of Economy, Industry and Trade to SE Corp., Nomura Research Institute, Ltd., Nihon

Sekkei, Inc., Infrastructure Development Institute, and Kawasaki Geological Engineering Co., Ltd.

The survey titled Dam Nha Mac, Vietnam, Development Survey is pre-feasibility study of a Dam Nha Mac

development project in Quang Ninh Province with a total project cost of approximately 156.3 million USD (approx.

15.6 billion yen) as an effort to cope with the demand for industrial complex near the port that is expected

accompanying the opening of large Lach Huyen Port and Hanoi-Hai Phong and Hai Phong-Ha Long highways by

effectively utilizing development resources of QN Province that is part of northern economic zone of Vietnam.

We hope that the report will contribute to realization of the project and be utilized as reference by concerned parties in

Japan.

February 2014

SE Corporation

Nomura Research Institute, Ltd.

Nihon Sekkei, Inc.

Infrastructure Development Institute-Japan

Kawasaki Geological Engineering Co., Ltd.

Project Site Map

Source: Created by the Study Team based on materials provided by Quang Yen People’s Committee

Ha long-Hai Phong Highway Total length: approx. 25km

Ha Long-Hai Phong Highway

Total length: approx. 25km

Quang Yen Town Master Plan (2006-2020) with its geographical scope extending to surrounding araes, such as Hai Phong

Bach Dang Bridge and Approach Road

Length: 5.06km

200km 10km

10km

Phase 1 Development Area

Quang Ninh Province

List of Abbreviations

BOT Build, Operate, Transfer

BT Built, Transfer

CDM Clean Development Mechanism

DOC Department of Construction

DOF Department of Finance

DONRE Department of Natural Resource and Environment

DOT Department of Transportation

DPI Department of Planning and Investment

EIRR Economic Internal Rate of Return

ENPV Economic Net Present Value

EPC Engineering, Procurement and Construction

EVN Electricity of Vietnam

EZA Economic Zone Authority

FDI Foreign Direct Investment

FIRR Financial Internal Rate of Return

FNPV Financial Net Present Value

HEZA Hai Phong Economic Zone Authority

HPCPC Hai Phong city People's Committee

IPA Investment Promotion Agency

IRR Internal Rate of Return

JBIC Japan Bank For International Cooperation

JETRO Japan External Trade Organization

JICA Japan International Cooperation Agency

METI Ministry of Economy, Trade and Industry

MOF Ministry of Finance

MONRE Ministry of Natural Resource and Environment

MOT Ministry of Transportation

MPI Ministry of Planning and Investment

NEXI Nippon Export and Investment Insurance

NPV Net Present Value

O&M Operation & Maintenance

ODA Official Development Assistance

PPP Public Private Partnership

SPC Special Purpose Company

VGF Viability Gap Funding

VJEC Vietnam Japan Engineering Consultant Company

VND Vietnam Dong

WACC Weighted Average Cost of Capital

Table of Contents

Preface

Project Site Map

List of Abbreviations

Table of Contents

Executive Summary

(1) Project Background and Necessity………………………………………………………………………………….....1

(2) Project Contents Decision and Basic Policy…………………………………………………………………………...2

(3) Overview of the Project Plan…………………………………………………………………………………..............5

(4) Planned Implementation Schedule……………………………………………………………………………………10

(5) Feasibility of Project………………………………………………………………………………….........................12

(6) Technical Advantages of Japanese Companies………………………………………………………………………13

(7) Map of Project Site in Vietnam…………………………………………………………………………………........14

Chapter 1 Overview of the Host Country and Sector

1.1 Economic and Financial Situation in Vietnam............................................................................................. 1-1

1.1.1 Economic Growth of Vietnam ................................................................................................................ 1-1

1.1.2 Inflation and State Finance ...................................................................................................................... 1-2

1.2 Overview of the Project Sector .................................................................................................................... 1-2

1.3 Condition of Targeted Areas ........................................................................................................................ 1-6

Chapter 2 Study Methodology

Scope of the Study ....................................................................................................................................... 2-1 2.1

Backgrounds of the Study ....................................................................................................................... 2-1 2.1.1

Purpose of the Study ............................................................................................................................... 2-1 2.1.2

Study Methods and Organizational Structure .............................................................................................. 2-2 2.2

Scope of the Study .................................................................................................................................. 2-2 2.2.1

Structure of Member Conducting the Study ............................................................................................ 2-3 2.2.2

Survey Schedule .......................................................................................................................................... 2-5 2.3

Survey Flow and Schedule ...................................................................................................................... 2-5 2.3.1

Field Surveys ........................................................................................................................................... 2-7 2.3.2

Chapter 3 Justification, Objectives and Technical Feasibility of the Project

3.1 Project Background and Necessity .............................................................................................................. 3-1

3.1.1 Scope and Potential Users of the Project ................................................................................................. 3-1

3.1.2 Present Status Analysis and Future StatusProjection .............................................................................. 3-7

3.1.3 Effects and Impacts of the Project if Implemented ................................................................................. 3-13

3.1.4 Comparison with Other Options .............................................................................................................. 3-13

3.2 Project Studies Needed for Project Contents ............................................................................................... 3-14

3.2.1 Demand Forecast ..................................................................................................................................... 3-14

3.2.2 Identification and Analysis of Problems ................................................................................................. 3-16

3.2.3 Examination of Geo-engineering Aspects ............................................................................................... 3-18

3.3 Summary of the Project Plan ....................................................................................................................... 3-20

3.3.1 Project Contents, Decision and Basic Policy .......................................................................................... 3-20

3.3.2 Conceptual Design .................................................................................................................................. 3-36

3.3.3 Contents of Proposed Project .................................................................................................................. 3-43

3.3.4 Problems and Solutions ........................................................................................................................... 3-45

Chapter 4 Evaluation of Environmental and Social Impacts

4.1 Current Environmental and Social Condition Analysis ............................................................................... 4-1

4.1.1 Analysis of Current Conditions ............................................................................................................... 4-1

4.1.2 Future Forecast (if project is not implemented) ...................................................................................... 4-5

4.2 Environmental Improvements Due to Project Implementation .................................................................... 4-6

4.2.1 Environmental Improvements Due to Project Implementation ............................................................... 4-6

4.2.2 CDM Applicability .................................................................................................................................. 4-7

4.3 Environmental and Social Impacts Due to Project Implementation ............................................................ 4-8

4.3.1 Identification of Items of Environmental and Social Considerations Needed in Future Survey ............. 4-8

4.3.2 Results of Comparison with Other Options that Have Less Environmental and Social Impacts ............ 4-14

4.4 Overview of Vietnamese Laws and Regulations on Environmental and Social Considerations

and Measures Necessary for their Compliance ............................................................................................ 4-19

4.4.1 Overview of Vietnamese Laws and Regulations on Environmental and Social Considerations

related to Project Implmementation ........................................................................................................ 4-19

4.4.2 Vietnamese EIA and Other Measures Necessary for Project Implementation ........................................ 4-20

4.4.3 Time and Duration of EIA, Area and Contents of Survey, and Necessary Measures Predictable

in Survey Stage ....................................................................................................................................... 4-22

4.5 Matters Needed to Clarify for Projec Implementation ................................................................................. 4-23

4.5.1 Matters Needed to Clarify for Projec Implementation (Implementing and other Concerned Agencies) 4-23

Chapter 5 Financial and Economic Evaluation

5.1 Total Project Costs ....................................................................................................................................... 5-1

5.1.1 Phase 1 .................................................................................................................................................... 5-1

5.1.2 Undertakings That Should Be Desirably Implemented with Phase 1 ...................................................... 5-4

5.1.3 Phase 2 and Afterwards ........................................................................................................................... 5-6

5.2 Economic and Financial Analysis ................................................................................................................ 5-8

5.2.1 Preliminary Financial Analysis ............................................................................................................... 5-8

5.2.2 Preliminary Economic Analysis .............................................................................................................. 5-11

Chapter 6 Planned Project Schedule

Chapter 7 Implementing Organizations

7.1 Overview of the Implementing Organizations of the Partner Country ........................................................ 7-1

7.2 Partner Country’s Affairs under the Jurisdiction and Authority .................................................................. 7-1

7.2.1 Agencies Responsible for Overseas Investment Projects ........................................................................ 7-1

7.3 Organizational Structure Project Implementationin the Partner Country .................................................... 7-3

7.4 Relationship with Implementing Organizations in the Partner Country ...................................................... 7-4

Chapter 8 Technological Advantages of Japanese Company

8.1 Expected participation of Japanese companies ............................................................................................ 8-1

8.1.1 Funding scheme ...................................................................................................................................... 8-1

8.1.2 Supply of materials and equipment ......................................................................................................... 8-2

8.1.3 Facility operation and management, etc. ................................................................................................. 8-3

8.2 Advantages of Japanese companies in implementing the project (from technical, economic view) ........... 8-4

8.2.1 Technical view ........................................................................................................................................ 8-4

8.2.2 Economic view ........................................................................................................................................ 8-4

8.3 Necessary Strategy for Japanese Companies ............................................................................................... 8-5

List of Figures

Figure 1-1 Trend in Real GDP Growth Rate of Vietnam .................................................................................. 1-2

Figure 1-2 Trends in Sectoral GDP Shares in Vietnam ..................................................................................... 1-3

Figure 1-3 Division of regions in Vietnam ....................................................................................................... 1-6

Figure 2-1 Structure of the Study Team ............................................................................................................ 2-4

Figure 3-1 Location of the Target Development Area .................................................................................... 3-1

Figure 3-2 Development Area and Its Present Conditions ................................................................................ 3-2

Figure 3-3 Rich Natural Ecosystem Remaining in DMC .................................................................................. 3-3

Figure 3-4 Development Statues of Surrounding Areas .................................................................................... 3-3

Figure 3-5 Phase 1 of the Project ...................................................................................................................... 3-4

Figure 3-6 Master Plan of Hai Phong City ........................................................................................................ 3-8

Figure 3-7 Characteristics by areas ................................................................................................................... 3-19

Figure 3-8 Assumed Size of Development Area ............................................................................................... 3-21

Figure 3-9 Wide-Area Road Network as Precondition and Access Roads ........................................................ 3-22

Figure 3-10 Zoning and Road Network .............................................................................................................. 3-27

Figure 3-11 Image of Multiple-Cluster Development ......................................................................................... 3-28

Figure 3-12 Block Arrangement in the Development Area Based on Existing Demarcation ............................. 3-28

Figure 3-13 Establishment of Natural Buffer Zone ............................................................................................. 3-29

Figure 3-14 mage of Overall Development Plan ................................................................................................. 3-30

Figure 3-15 Location of Each Zone .................................................................................................................... 3-31

Figure 3-16 Images of Residential/Hotel Zone ................................................................................................... 3-32

Figure 3-17 Images of Urban/Commercial Zone ................................................................................................ 3-32

Figure 3-18 Two Possible Locations of Phase 1 Development Area .................................................................. 3-33

Figure 3-19 Images of Eco-Friendly Industrial Zone .......................................................................................... 3-35

Figure 3-20 Candidate Area of Phase 1 and Geological Survey Points .............................................................. 3-36

Figure 3-21 Schematic Drawings of Fill Work ................................................................................................... 3-39

Figure 3-22 Cross Section (image) of Internal Road ........................................................................................... 3-40

Figure 3-23 Multi-Purpose Utility Conduit Below the Road (image) ................................................................. 3-40

Figure 3-24 Image of Substation ......................................................................................................................... 3-41

Figure 3-25 Image of Sewage Treatment Plant ................................................................................................... 3-42

Figure 3-26 Image of installation of utility (left: transforming equipment; right: wastewater treatment facility) .. 3-42

Figure 3-27 Image of installation of flood control facilities (left: adjustment waterway; right: drainage station) .. 3-43

Figure 4-1 Observation Points of Various Each Iindex in Previous EIA .......................................................... 4-12

Figure 4-2 Left: Project Area; Right: Bank Protection Enclosing QY Town .................................................... 4-14

Figure 4-3 Comparison of Development Area (Road Scenario (i)) .................................................................. 4-16

Figure 4-4 Comparison of Development Area (Road Scenario (ii)) ................................................................. 4-17

Figure 4-5 Flow Chart of Request for Environmental Impact Assessment (EIA) Appraisal ............................ 4-21

Figure 4-6 Past M/P that includes DNM (2008) ............................................................................................... 4-23

Figure 4-7 Flow of DNM Development Project ................................................................................................ 4-25

Figure 5-1 Statement of the North-South Road in Sources Held by the Vietnamese Ministry of Construction ... 5-5

Figure 7-1 Organizational Structure of EZA ..................................................................................................... 7-3

Figure 8-1 Overall Picture of Project Scheme (scenarios 1 and 2) .................................................................... 8-1

Figure 8-2 Overall Picture of Project Scheme (scenario 3) ............................................................................... 8-1

Figure 8-3 Industrial Zone Development Behind Ports and Harbors ................................................................ 8-8

List of Tables

Table 1-1 FDI in Vietnam ................................................................................................................................ 1-4

Table 1-2 Japan’s FDI in Vietnam ................................................................................................................... 1-5

Table 1-3 Rate of FDI by regions in Vietnam .................................................................................................. 1-7

Table 2-1 Survey Schedule .............................................................................................................................. 2-5

Table 2-2 Flow of the Survey .......................................................................................................................... 2-6

Table 2-3 The First Field Survey Schedule ..................................................................................................... 2-7

Table 2-4 The Second Field Survey Schedule ................................................................................................. 2-8

Table 3-1 FDI in Vietnam ................................................................................................................................ 3-5

Table 3-2 Status of Industrial Zones in Hai Phong City .................................................................................. 3-9

Table 3-3 FDI in Each Province in Vietnam (2012) ........................................................................................ 3-10

Table 3-4 Outline of Geological Surveys ........................................................................................................ 3-11

Table 3-5 Contents of EIA Reports .................................................................................................................. 3-12

Table 3-6 Extracted Problems .......................................................................................................................... 3-16

Table 3-7 Characteristics of the strata .............................................................................................................. 3-18

Table 3-8 Characteristics by areas ................................................................................................................... 3-18

Table 3-9 Land Area Requirements for Different Segments ........................................................................... 3-23

Table 3-10 Area of Each Zone ........................................................................................................................... 3-32

Table 3-11 Comparison of 2 Options ................................................................................................................. 3-34

Table 3-12 Ground Model ................................................................................................................................. 3-37

Table 3-13 Project Cost Items Subject to Estimation ........................................................................................ 3-44

Table 3-14 Project Cost (to be borne by SPC) ................................................................................................... 3-44

Table 3-15 Construction Cost of South-North Road .......................................................................................... 3-44

Table 3-16 Solutions to the Problems of Each Scheme ..................................................................................... 3-45

Table 4-1 Socioeconomic Conditions in 3 Autonomous Areas around DNM (part of QY Town) .................. 4-2

Table 4-2 Overview of Industry in QY Town .................................................................................................. 4-4

Table 4-3 Environmental Factors and Elements of Sea Reclamation .............................................................. 4-5

Table 4-4 Items of Environmental and Social Considerations that Need to be Studied and their Current Status ... 4-9

Table 4-5 Impacts of Development in Different Areas on Surrounding Environment (Road Scenario (i)) ..... 4-16

Table 4-6 Impacts of Development in Different Areas on Surrounding Environment (Road Scenario (ii)) .... 4-18

Table 4-7 Contents of EIA Reports (Source: Article 20 of the Law on Environmental Protection of Vietnam) .... 4-20

Table 4-8 Responsibilities of Vietnam and Project Executor for Comprehensive DNM Development Project ...... 4-26

Table 5-1 Estimated Overall Project Cost ........................................................................................................ 5-2

Table 5-2 Project Cost (for Part Implemented by the SPC) ............................................................................. 5-3

Table 5-3 Development Cost of the North-South Road ................................................................................... 5-4

Table 5-4 Areas of Individual Zones ............................................................................................................... 5-6

Table 5-5 Infrastructure Development Cost ..................................................................................................... 5-7

Table 5-6 Construction Cost ............................................................................................................................ 5-7

Table 5-7 Sales price of industrial complex set by surrounding countries ....................................................... 5-9

Table 5-8 Revenue Plan ................................................................................................................................... 5-9

Table 5-9 Expenditure Plan ............................................................................................................................. 5-10

Table 5-10 Inflation Rate in the Previous 10 Years in Vietnam ........................................................................ 5-10

Table 5-11 Calculation for Preliminary Financial Analysis ............................................................................... 5-11

Table 5-12 Results of Preliminary Financial Analysis....................................................................................... 5-11

Table 5-13 Consumption Propensity.................................................................................................................. 5-12

Table 5-14 Consumption Expenditures as a Result of Employment Creation due to Company Establishment .... 5-12

Table 5-15 Plant Construction Cost ................................................................................................................... 5-13

Table 5-16 Calculation for Preliminary Economic Analysis ............................................................................. 5-13

Table 5-17 Results of Preliminary Economic Analysis ..................................................................................... 5-13

Table 6-1 Planned Project Schedule ................................................................................................................ 6-1

Table 8-1 Rank of projects calling for investment to QN Province ................................................................. 8-6

Executive Summary

1

(1) Project Background and Necessity

The target area of this Project is located in the southern part of Quang Yen Town, Quang Ninh Province of northern

Vietnam and includes the Dam Nha Mac (DNM) Area, which is covered mostly by mangrove wetlands. Of which

4,675ha of the entire target development area, approximately 5,000ha, excluding the area of a planned port development

project (325ha) as discussed later, 250ha of the area, the development of which is supposed to be initiated by private

operators, is the development target for Phase 1 as well as the target area of this Study. This area constitutes a part of

the coastal economic corridor of northern Vietnam along with Ha Long, a world-renowned tourist city, and Hai Phong,

a rapidly-growing industrial city, and predicted to make a significant contribution to the economic development of

Vietnam in coming decades. Industrial development is especially expected of this area as one of the priority

development projects of Quang Ninh Province.

Figure 1 Location of the Target Development Area

Source: Information Provided by Quang Yen Town with Notes Added by the Study Team

Quang Yen Town

Ha Long

Hai Phong

Target Area Approx. 5,000ha

Coastal Economic Corridor

10km

10km

2

(2) Project Contents Decision and Basic Policy

* The subsections from (1) Preconditions for Development to (3) Overall Development Plan in this section, which are

the basic policy of development including compliation of preconditions and other contents, are considred to be

components of master plan. On the other hand, the subsection (4) Dividing into Phases 1 and 2, which is the

implementation policy of development based on the master plan, is classified as urban planning.

1) Development Concept

This Project aims to contribute to the socio-economic development of Vietnam in a significant way by taking advantage

of the regional characteristics of the Area and harnessing their greatest potential. In this Study, we summarized the

development concept of this Project as shown below.

■ Features of DNM Area

<Convenient Location>

Bach Dang Bridge and Coastal Road provide direct link to the Hanoi Metropolitan Area, world heritage site, and

major ports.

→ Easy access to commercial zones, freight ports, neighboring industrial centers, tourist sites, etc.

<Rare Natural Resources>

Rich land and marine ecosystems connected by mangrove forests.

→ Blessed with world-class nature reserves and abundant marine resources.

▼

■ Visions of DNM Area Development

<Intersection of Peoples>

Attractive place for stay and exchange filled with

natural beauty and modern convenience. ＋

<Intersection of People and Goods>

Cutting-edge production/logistics center exploiting

geographical advantage and abundant natural

resources

△ △

<Futuristic Social/Economic Activities Taking Full Advantage of Regional Characteristics>

・Center for the advanced industrialization of Vietnam → Higher-education/research/training institutions, etc.

・Industrial/economic exchange center → Conference/exhibition halls, hotels, etc.

・Major resort center in Vietnam → Nature parks, hotels, resort houses, recreational shopping mall, etc.

▼

■ Development Concept of DNM Area

Next-Generation Value Creation Center for Building Partnership between Vietnam and Asia-Pacific through

advanced interactions and exchanges of peoples, goods, and information.

3

2) Overall Development Plan

■ Guidelines for Formulating an Overall Plan

Based on the aforementioned preconditions and development concept, we will propose a master plan for the entire

project area that encompasses the DNM Area and the southern part of Quang Yen Town. After sorting out basic

guidelines for each of the categories listed below, we will present the images of the overall development plan and each

zone.

・Guidelines for developing various features

・Guidelines for land use and zoning

・Guidelines for road network

・Guidelines for environmental protection and disaster

prevention

・Points to note in formulating a project plan

▼

・Image of the overall development project

・Image of each zone

■ Guidelines for Developing Various Features

Develop industrial/logistics facilities and systems that take advantage of easy access to the Ha Long-Hai Phong

Highway (HL-HP Highway) and Lach Huyen Port and other industrial infrastructure in the surrounding areas.

Develop residential/accommodation facilities by exploiting the natural beauty of the area to attract diverse people

in addition to the managers and workers of industrial/logistics companies.

Develop commercial and exchange facilities that will not only bring convenience to the residents of the area but

also serve as a socio-economic center of a wider area.

Develop large parks that incorporate the unique wetland topography, mangrove forests, and other abundant natural

resources.

■ Guidelines for Land Use and Zoning

In accordance with the development policy of the southern area, where the development of industrial parks has

been approved by the government, establish industrial/logistics zones in the southern parts of the DNM Area and

the peninsula section of Quang Yen Town, which adjoin major freight ports.

In anticipation of future increase of demand for accommodation and housing facilities for tourists and industrial

zone employees, establish eco-friendly resort-type residential/hotel zones in northern DNM while conserving the

natural environment in a grand scale.

Establish residential/commercial zones next to the industrial zone to support the lives of industrial workforce.

Establish a multi-purpose commercial zone that takes advantage of easy access and abundant nature on the east

side of the interchange in the DNM Area. Establish a village scenery conservation zone on the other side of Rut

4

River to add extra value to the urban district.

■ Guidelines for Road Network

It is assumed that the South-North Road, which will directly connect the existing central district of Quang Yen

Town to the southern industrial area and Lach Huyen Port, will be constructed.

In addition to the above, it is assumed that an arterial road (Coastal Road), which will link the HL-HP Highway

(hereinafter referred to as “HL-HP Highway”) (IC), the existing central district of Quang Yen Town, and Lach

Huyen Port, will be constructed.

The Coastal Road and the South-North Road will serve as major arteries connecting the tourist and commercial

centers of Quang Yen Town to the surrounding eco-friendly residential/hotel zones, nature reserve zone, and

industrial zone.

The HL-HP Highway will be the only road crossing Bach Dang River. However, use of a ferry service across the

river is also assumed to enhance interactions with the industrial zones in Hai Phong City.

5

(3) Overview of the Project Plan

The size of the area to be development by this Project will be 4,675ha, which was derived by subtracting 325ha, where

a port project is in progress, from the total 5,000ha development area in DNM. Of the 4,675ha, about 1,500ha will be

developed into industrial areas to form a major industrial zone linked to Lach Huyen Port in the south and Hai Phong

Port in the west. The north-south base road running through Lach Huyen Port is necessary in Phase 1 so that

develomnet area for industrial complex is considered in accordance wth the assumption.

Figure 2 Assumed Size of Development Area

Source: Quang Yen Town Master Plan with Notes Added by the Study Team

■ Wide-Area Road Network as Precondition

DNM Area is divided by Rut River into two sections, which need to be connected by building bridges or other means of

access. Based on the desires expressed by the representatives of Quang Yen Town during our interview, we plan to

build three access roads to link the island portion of DNM and Quang Yen Town on the other side of the river as part of

the regional transport infrastructure network (one on the north side and two on the south side of the HL-HP Highway).

Development Area: 4,675ha

Southern Industrial Area: approx. 1,500ha

Port Project Area:

325ha

2.5km

6

In addition, we will position the South-North Road, which will directly connect Quang Yen Town to the southern

industrial areas and Lach Huyen Port, as an important arterial road.

Figure 3 Wide-Area Road Network as Precondition and Access Roads

Source: Quang Ninh Province Master Plan with Notes Added by the Study Team

Central District of Quang

To Ha Long

To Hai Phong

DNM Area

IC

Bach Dang Bridge

To Lach Huyen Port

Legend HL-HP Highway as precondition for the Project Roads to be considered as part of the Project

Important link between DNM and Quang Yen Town (i)

Connects central district to southern industrial area and Lach Huyen Port

Important link between DNM and Quang Yen Town (ii)

Important link between DNM and Quang Yen Town (iii)

5km

7

■ Land Area Requirements

As described earlier, we derived the total area subject to development based on the existing master plan. The 4,675ha

area is broken down to the following segments.

Table 1 Land Area Requirements for Different Segments

Use Total

area (ha)

Ratio

(%)

Remarks

Public facilities 440 9.4 Including commercial facilities

Residential 388 8.3

Industrial 1,625 34.8

Other 196 4.2 Existing villages, crop fields, etc.

Greenery/inland waters 1,303 27.8

Roads 723 15.5 Arterial roads, inter-cluster access roads

Total 4,675 100.0

Source: Summarized by the Study Team based on Quang Yen Town Master Plan)

■ Defining the Area to be Developed

As described in Section 3-1-1, the project area will be home primarily to heavy industries, EPE, and logistics companies.

Thus, Phase 1 will center on the development of industrial facilities. Assuming that the HL-HP Highway and part of

Lach Huyen Port will open before the completion of Phase 1, an arterial road connecting the above two needs to be

constructed as part of Phase 1. Based on this assumption, we examined two possible locations for developing an

industrial zone in Phase 1.

Figure 4 Two Possible Locations of Phase 1 Development Area

Source: Study Team

Option (i) Option (ii)

250ha IZ along the north side of Coastal Road

Coastal Road

North-South Road

Industrial zone 250ha


250ha IZ along the west side of N-S Road

Residential/commercial zone


8

We roughly created two options linked to the construction of two arterial roads that will be connecting the HL-HP

Highway and Lach Huyen Port. In Option 1, as shown in Figure 3-1, the Coastal Road, which will be crossing the DNM

Area north-south, will be built before the construction of a 250ha industrial zone on the north side of the road. Option 2

will place at its core the construction of the South-North Road on the eastern part of the peninsula, and develop the

250ha land area along the road into Phase 1 industrial zone. We compared the two options from the standpoints of

infrastructure, land preparation cost, and the need for expropriation, as shown in the table below, to select one scenario,

for which a feasibility study is to be conducted.

■ Total Project Costs

The cost of the Project is to be estimated in two groups; cost of works to be carried out by SPC, the detail of which will

be discussed in Chapter 5, and the cost of infrastructure-related public works projects to be implemented by Quang

Ninh Province or through ODA, etc.

The development work to be carried out by SPC will be limited within the 250ha industrial zone area and does not

include the construction of the South-North and Coastal Roads and utility infrastructure, such as electricity and water

supply lines, up to the entrance of the area.

Table 2 Project Cost Items Subject to Estimation

Cost Phase 1 Phase 2 and beyond

(Remaining 4,425ha and

Coastal Road)

Remarks

Works to be carried out

by SPC

Public works

projects

Land

preparation

◎Earthwork

◎ Internal roads

● South-North

Road

◇ Additional earthwork,

internal roads

◇ Coastal Road

Infrastructure ◎Electricity/

telecommunications

◎ Water/sewage

◇ Transmission

line

◇ Water main

◇ Additional electricity/

telecommunication

systems

◇ Additional

water/sewage systems

Building

construction

◎Administrative

building

・Construction works to be

done by tenants are not

taken into account.

<Legend> ◎: Included in cash-flow estimation, ●: Not included in project cost, ◇: Not included in estimation

Source: Study Team

9

Table 3 Project Cost (to be borne by SPC)

Unit: millionUSD

Item Amount (million USD)

Land preparation Earthwork, internal roads 62

Infrastructure Utilities (electricity, telecommunications, water/sewage) 36

Construction Building (administrative building) 5

Other expenses 30

Total project cost 133

Source: Study Team

Table 4 Construction Cost of South-North Road

Item Quantity

Road area (on land) (m2) 353,800

Road unit cost (on land) (USD/m2) 40.0

Road area (over water) (m2) 176,900

Road unit cost (over water) (USD/m2) 79.8

Construction cost of South-North Road (million USD) 28.3

Source: Study Team

10

(4) Planned Implementation Schedule

The table below shows a project schedule planned at the momemnt. Landfil and land creation works are to be

commenced upon opening of Hanoi-Hai Phong Highway and HL-HP highway, respectively, as logistic network is

required for those works.

Table 5 Planned Project ScheduleSource: Study Team

2014 2015 2016 2017 2018 2019 2020 2021

Trends in surrounding regions

○ Zero tariff for

ASEAN region ○ Opening of Lach Huyen Port

○ Opening of Hanoi-Hai Phong Highway

○Opening of HL-HP Highway

Submission of Preliminary

Project Plan (from Japan to

Vietnam)

Grant of development

preference (from Vietnam to

Japan)

F/S conducted by Japan side

Submission of Project Plan

(from Japan to Vietnam)

Filing/examination of

investment permit application


Contract negotiation, issuance

of investment permit (from

Japan to Vietnam)

Appraisal of JICA’s overseas

investment

Financial close

Access infrastructure(*) F/S

Access infrastructure(*) DD

Access infrastructure(*) LA

Access infrastructure(*) bidding

Access infrastructure(*) civil

work

Land acquisition

Prepare/establish SPC

Start of selling negotiation for

Phase 1

11

Detail design

Methods to expedite the

consolidation of soil Phase 1

Landfill work for Phase 1

Land creation work for Phase 1

Infrastructure development for

Phase 1

Construction work for Phase 1

Commencement of Phase 1

(*) Including North-Sourth road, transmission lines, and service pipes connecting to the region.

12

(5) Feasibility of Project

■ Fund raising patterns and results of financial index analysis

JICA, Quang Ninh Province, and Japanese private investors (such as SEC, developer, utility maker) are expected to

make investments. While the location has high competitiveness, the Project presupposes to utilize JICA overseas

investments considering the fact that the development costs are required more in comparison to those of conventional

industrial zone because it contains landfill and land creation works. The following patterns are considred according to

the way of injecting JICA funds:

(i) Utilize JICA Two-Step Loan (for Pattern 1 and 2)

(ii) Utilize JICA funds (for Pattern 3)

Table 6 Patterns of Fund Raising

QN Province Japanese private investors JICA

Pattern 1 25%[E] 25% [E] 50% [D]

Pattern 2 50% [E] 25% [E] 25% [D]

Pattern 3 25% [E] 50% [E] 25% [E]

Legend: [E] Investment [D] Loan

Source: Study Team

Table 7 Results of financial index analysis by patterns

Pattern 1

(Borrowing rate: 50%)

Patten 2

((Borrowing rate: 25%)

Pattern 3

(no borrowings)

NPV(millionUSD) -90 -47 2

NPV is over 0 × × ○

IRR 6.84% 12.14% 18.15%

WACC 14.48% 15.42% 16.36%

IRR>WACC × × ○

Result Non-investment grade Non-investment grade Investment grade

Source: Study Team

■ Consideration by patterns

(i) Pattern 1

Both NPV and IRR are currently considered to be non-investment grade as they do not meet the condition.

(ii) Pattern 2

Both NPV and IRR are currently considered to be non-investment grade as they do not meet the condition. However,

the index has been largely imcreased compared to Pattern 1, and it may turn to be considered investment grade if

investment recovery achieves at an early stage due to accelerated demand for the industrial areas.

13

(iii) Pattern 3

Both NPVand IRR meet the condition and are considered to be investment grade. Thus, the most suitable way of

establishing SPC at this moment is considered to use funding scheme of JICA.

(6) Technical Advantages of Japanese Companies

As for the project scheme, DNM development and operation company (SPC) is established and such entities as QN

Province, SE Corporation, developer and utility maker, make investment. JICA overseas investment is used to raise

fund with low interest. Local banks will be major banks that extend loans for real estate development, etc. Nippon

Export and Investment Insurance’s (hereinafter referred to as “NEXI”) overseas investment insurance will be also used.

Japanese corporations are expected to participate as Engineering, Procurement and Construction (hereinafter referred to

as “EPC”) operators and Operation and Maintenance (hereinafter referred to as “O&M”) operators.

■ Technical view

○ Sophisticated utility and environmental technologies

Equipped with highly reliable power supply systems and excellent water treatment technologies, Japanese utility makers

supply materials and equipment and execute O&M. It is essential for Vietnam to develop industrial complexes with

utility of standards close to advanced countries for its advancement to the next stage of development in view of removal

of tariffs within ASEAN countries after 2015 and it will lead to bring new industries. Thus, Japanese corporations are

highly likely to be in an advantageous position for utility development of the project.

○ Experiences of large-scale development in coastal areas

Japan has abundant experiences in development of industrial complexes (e.g. Kashima coastal industrial zone and

Kitakyushu Eco-Town) and urban development (e.g. Yokohama Minato Mirai 21 and Kobe Port Island). Packaging

development know-how and introducing it to Vietnam will enable well-balanced community development. Know-how

development will put Japanese corporations in an advantageous position in the project.

○ Flood control measures

Partly because many plants of Japanese corporations were severely damaged by the flood in Thailand in 2011, much

attention is paid to flood control measures of industrial complexes. Some industrial complexes operated by Japanese

corporations have reservoirs for flood control and forced drainage facility as standard in addition to embankment as

flood control measures. Such measures will be taken for the project to differentiate it from other industrial complexes

planned in the neighboring area.

■ Economic view

Because tender is not planned for acquiring the project right, there will be little competition with Chinese or Korean

companies that have cost competitiveness. The industrial complex is planned to be also economically efficient in

principle by developing it using local business operators as needed for elements that do not require special know-how

while using technologies of Japanese corporations as much as possible when technological differentiation is needed.

14

(7) Map of Project Site in Vietnam

Project Map

Source: Created by the Study Team based on materials provided by Quang Yen People’s Committee

Ha long-Hai Phong Highway Total length: approx. 25km

Ha Long-Hai Phong Highway

Total length: approx. 25km

Quang Yen Town Master Plan (2006-2020) with its geographical scope extending to surrounding araes, such as Hai Phong

Bach Dang Bridge and Approach Road

Length: 5.06km

200km 10km

10km

Phase 1 Development Area

Quang Ninh Province

Chapter 1 Overview of the Host Country and Sector

1-1

1.1 Economic and Financial Situation in Vietnam

Vietnam is a social republic country located on the eastern Indochina Peninsula. Stretching from north to south, it is

bordered with China in the north and Laos and Cambodia in the west. It covers a total area of approximately

330,000km2 (0.88 times as large as Japan), having the total population of approximately 88.77 million (as of 2012). It is

divided into 63 administrative divisions, and its major cities include the capital of Hanoi (the population: approx. 6.5

million), Ho Chi Minh City (the population: approx. 7.1 million) and Hai Phong (the population: approx. 1.9 million).

The official language is Vietnamese, and the official currency is Vietnamese dong (hereinafter referred to as “VND”).

This chapter outlines the economic condition, industrial structure and state finance of the country.

1.1.1 Economic Growth of Vietnam

Vietnam has, firmly maintaining its status as a single-party dictatorship state governed by the Communist Party along

with China, promoted policies focusing on economic growth through marketization, the use of ODA and other forms of

financial assistance from abroad for infrastructure development, and expansion in export by attracting foreign capitals.

It has thus achieved a high GDP growth rate for a country in Asia.

In the 1990s, Vietnam continued to mark a high economic growth rate thanks to Doi Moi (renovation), an economic

reform policy adopted at the 6th Congress of the Communist Party of Vietnam held in 1986. Subsequently, the growth

rate fell to 4.8% in 1999 chiefly due to the economic crisis in Asia but hovered at high around 7-8% (7.2% on average)

in the 2000s. The growth was driven by a sharp increase in direct investment in manufacturing made by foreign capitals

that were attracted by the economic liberalization since the 1990s, continued improvements in infrastructure and the

large population including low-cost but skilled Vietnamese workers compared to other Southeast Asian countries. The

population has recently been increasing, a total of approximately 88.8 million as of 2011, making Vietnam the world’s

13th most populous country. The population growth rate has been falling since 2000 but hovered at an average of 1.1%

from 2000 to 2011: that is, the country has seen an annual increase of approximately nine million people. The expansion

in population also attracts investors wishing to hire a large number of skilled workers and those wishing to make a foray

into the Vietnamese market in future.

An issue in recent years is, however, increasing labor costs occasioned by the rapid economic growth. Moreover,

infrastructure development falls behind the rapid economic growth, so there was about to be a shortage of the electricity

supply. But still the country has perspective of the future growth in the domestic market, which has strongly attracted

investors around the world.

Because of the decline in the world economy triggered by the global financial crisis, Vietnam’s economic growth rate

fell down to the five percent level in 2008. The rate gradually turned around to 6.8% in 2010 but continued to fall again

afterwards. The IMF forecasts that it will recover again after reaching a bottom in 2012.

The IMF forecasts that the real economic growth rate of Vietnam will be around 5.5% in future, which is lower than the

rate marked in the 2000s, 7-8%. It attributes the relatively low rate to structural problems of the Vietnamese economy,

1-2

particularly delayed reforms of the financial sector and state-own companies, according to the IMF. In other words, the

country can expect a higher growth rate so long as it succeeds in facilitating the reform progress.

Figure 1-1 Trend in Real GDP Growth Rate of Vietnam

Source: IMF World Economic Outlook 2013

1.1.2 Inflation and State Finance

Inflation has recently been one of the major macroeconomic issues as the other side of the high economic growth. The

CPI growth rate in 2008 stood at 23.0% compared to the Figure marked at the end of the previous year but was

moderate in 2009, 6.9%, due to drops in international prices and other factors. The rate was high again in 2010 and

2011 because of an increase in import costs due to a lower Vietnamese dong rate, worldwide increases in resource

prices and other factors. In its economic policy in 2011, the Vietnamese government addressed inflation control,

stabilization of the macroeconomy, enhancement of the social security scheme and control of the CPI growth rate below

7% as the highest priority issues, but failed to gain satisfactory results of the economic policies in the past. Thus, the

trend in the CPI growth rate in the mid-and long-terms is uncertain.

Vietnam invested in various infrastructures as its economy grew, so it has consistently suffered from revenue shortfall

since 2001. In 2009, in particular, when the revenue seriously fell as a result of the global financial crisis, Vietnam saw

a marked excess of expenditure of VND162.355 trillion. Vietnam has taken advantage of loans granted from inside and

outside the country for investment in economic infrastructure that has been essentially needed, but the debt-to-GDP

ratio stood at as high as 55.4% (as of the end of 2011) so it has become difficult to steer the economy in the manner it

has long relied on. Therefore, it must find a new framework making use of, for example, public-private partnership

(PPP) and Build-Operate-Transfer (BOT) schemes.

1.2 Overview of the Project Sector

This Project in Dam Nha Mac (hereinafter referred to as “DNM”) is to develop an industrial park or a comprehensive

urban area to host FDI. Thus, the situations in the industrial and manufacturing sectors, as well as the trend in FDI, will

be crucial to investigation of the project sector.

0123456789

2000200120022003200420052006200720082009201020112012201320142015201620172018

(%)

Vietnam Real GDP Growth Forecast

1-3

The manufacturing sector accounts for the largest share, 26%, of the whole GDP of Vietnam. The sector’s growth rate

has also been more or less above 8% except in 2009 when the economy was somewhat stagnant. It has played a leading

role for the high GDP growth. Although the services grew conspicuously thanks to the recent economic development,

the manufacturing sector seems to remain the most dominant sector for the Vietnamese economy for the time being.

Figure 1-2 Trends in Sectoral GDP Shares in Vietnam

Source: ADB

Social and other infrastructures remain underdeveloped in Vietnam. They are not developed enough to catch up with the

speed of changes in the social structure and support the economic growth in future. An improvement in the vulnerable

infrastructures requires a vast amount of expenditures but the Government of Vietnam is in serious financial

circumstances. Accordingly, private funding cooperation, PPP and other financial sources have been growing

increasingly important, while the county has been attracting investors as an infrastructure business market and the

amount of investment in infrastructure-related businesses has been in fact increasing.

In such circumstances, Japan plays an important role in an increasing number and the variety of social infrastructure

development projects including three projects (for Hoa Lac Hi-Tech Park, North-South Expressway and North-South

Express Railway).

The following table lists a trend in FDI in Vietnam in recent years.

0

100000

200000

300000

400000

500000

600000

700000

2005 2006 2007 2008 2009 2010 2011

1 bi

llio

n V

ND

(es

tim

ated

val

ue

in 1

994)

Trends in Sectoral GDP Shares in Vietnam

その他

公共

金融

輸送通信

貿易

建設

電気ガス

製造業

鉱業

農業

Others Public sector Finance Transport and communications

Trading Construction Electricity and gas

Manufacturing Mining Agriculture

1-4

Table 1-1 FDI in Vietnam

Source: MPI

The amount of FDI in Vietnam has reached a peak in 2008 and then continued to fall partly because of the impact of the

global financial crisis. But it saw an increase in the first quarter of 2013 compared to the previous year, exhibiting a sign

of revival of investment sentiment in Vietnam as the global economy is gradually recovering from the aftermath of the

global financial crisis.

Judging from the situation prior to the financial crisis, the drop in investment was considerably attributable to a slump

in real estate projects. This was due to a series of various resort projects forced to be revised. Investment in processing

and manufacturing fell to US$ 2.2 million in 2009 but has been steadily increasing since then. This move matches the

trend in the GDP share of manufacturing.

Processing and manufacturing Real estate Retails Information and telecommunications Warehousing and transport Construction Healthcare and social support Electricity and water supply Specialized services Mining Art and leisure Hotels, food and drinking services Others Total

1-5

Despite slumping direct investment in general, investment by Japan has been steadily increasing after reaching a bottom

in 2009. The Figure for 2008 was conspicuously large because several large projects coincided in the year, but in other

years, too, foreign investment by Japan has been fairly large: in 2012, it amounted to almost US$ 4.8 billion, more than

half of all the FDI in Vietnam. Quite a few investors give great attention to Vietnam because the manufacturing sector

grew steadily and that they are more concerned about the recent “China risk”. In 2013, the amount of FDI in Vietnam is

expected to increase further partly due to the recovery of the Japanese economy.

Table 1-2 Japan’s FDI in Vietnam

Source: MPI

Japan

Total

Share of Japan

1-6

1.3 Condition of Targeted Areas

Of the entire land of Vietnam, the project targets Northern Vietnam. This area is adjacent to the region out of all the

seven regions in Vietnam; hence, it is supposed to be affected by the region. The Red River Delta is the second most

developed region next to the Southeast in which Ho Chi Minh City is located.

Figure 1-3 Division of regions in Vietnam

Source: Wikimedia

1-7

Table 1-3 Rate of FDI by regions in Vietnam

Number of

projects

Total registered

capital (Mill. USD)(*) Share (%)

TOTAL 1287 16,348 100.0%

Red River Delta 389 5,053 30.9%

Northern midlands and mountain areas 41 1,331 8.1%

North Central area and Central coastal area 78 3,049 18.6%

Central Highlands 14 91 0.6%

South East 657 6,064 37.1%

Mekong River Delta 104 604 3.7%

Oil 4 157 1.0%

(*) Including supplementary capital to licensed projects in previous years

Source: Study Team

The state of development of each region is well reflected in the amount of FDI. While the status of FDI in the entire

country was described in the previous section, the Figures above show that of 30.9% of the total registered capital flew

into the Red River Delta. Hefty investment clearly indicates the economic potentials of the region.

Major investment in this region flows into construction of factories of manufacturers and various services. Although the

capital city of Hanoi hosted the largest number of projects financed by FDI, it no longer has vacant land for industrial

use, so investment is made mainly in retails and services. The center of industrial location is now the neighboring

provinces such as Bac Ninh Province.

On the other hand, strong investment still continues in Hai Phong, the second largest city in the region. Large

infrastructure construction projects for, for example, Lach Huyen Port are on the waiting list, so expectations of the

potentials of the region will rise more. DNM, the targeted area, is also in this region with high location potentials.

As outlined above, Vietnam has continued and is expected to continue high economic growth, which has been and will

be led by the growth of the domestic market as well as hefty FDI mainly in manufacturing. The northern region

including the project area is particularly promising as one of FDI destinations.

Development of social infrastructure will be a key to keeping the economy growing. Development of economic

infrastructure such as harbors and ports and roads, requires a large sum of investment, but Vietnam has been in chronic

deficit and thus is incapable of financing the development by itself. In this sense, development of an industrial park will

become increasingly important because such a park is equipped with infrastructure to receive FDI. This Project thus

aims to solve various issues which Vietnam will face in the course of economic development in future and contribute to

development of an industrial park that can back up the economic growth.

Chapter 2 Study Methodology

2-1

Scope of the Study 2.1

Backgrounds of the Study 2.1.1

Quang Ninh Province, the implementing body of the Project, is located in the Northern Vietnam economic region

together with the neighboring cities of Hanoi and Hai Phong, and expected to see further economic growth in future.

The provincial government itself has been actively working to formulate new projects and attract foreign investors. This

Project, the Dam Nha Mac Development Project, is one of investments publicly offered by the province. The project is

included in a development plan that the Vietnamese government launched for a period until 2020 and has been

approved by the prime minister as a prioritized industrial park (according to official document No.1607/ TTg-KTN

issued in September 2009).

DNM, the targeted area of the project, is located between Hai Phong city, in which a large number of industrial parks

are currently being constructed, and Lach Huyen Port, a large port in which infrastructure has been constructed partly

with funds of Japan’s ODA. The area is expected to become more important when the constructions of the Hanoi-Hai

Phong and the Halong-Hai Phong Expressways are completed.

SE Corporation (hereinafter referred to as “SEC”), the leading managing company of the Project, has engaged in project

formulation for the construction of a bridge (Bach Dang Bridge) that will serve as a major part of the Hai Phong-Ha

long arterial road which is an extension of the Hanoi-Hai Phong Expressway under construction. The implementing

body, Quang Ninh Province, highly valued the survey and analytical capacity of SEC, and accordingly approved the

plan that the Japanese company would formulate a master plan for the Dam Nha Mac Development Project. A letter

issued in November 2012 by the Quang Ning People’s Committee officially granted SEC the rights to formulation of a

master plan, development and surveys for DNM. In the subsequent field survey conducted in October 2013, SEC

accepted the request of Quang Ninh Province to change the targeted area (to include the southern part of Quang Yen

town in addition to the existing targeted area of DNM island). The official letter was then issued in December 2013.

Purpose of the Study 2.1.2

Because the project area is large and the most part is swamp with weak foundation, ground preparation must be made

for development and the cost is likely to be enormous. Therefore, this study starts with dividing the targeted area and

decides a targeted area for the first development stage as “Phase 1”. Narrowing down to the tthe Phase 1 area, this study

is intended to assess the project feasibility specifically by means of, for example, geological analyses, consideration of

ground improvement methods, working out of a project implementation scheme and a financial plan, validation of the

project profitability, and surveys on the living environment. If the targeted area turns into a highly-advanced urban area

with expertise of Japan, it will be able to host an increasing number of Japanese enterprises that intend to make a foray

in the Vietnamese market. It will also help the local communities take advantage of the development potentials and

realize the regional economic development.

2-2

Study Methods and Organizational Structure 2.2

Scope of the Study 2.2.1

Collection and sorting of basic and relevant information

Documents of completed studies relevant to the Project, relevant materials and other information have been gathered

and sorted. These documents and materials specifically concern laws, regulations, and master plans related to the

Project; materials on studies and discussions and consideration made for related projects; and studies related to the

environment and society in the targeted area.

Geological survey and ground analysis

A geological survey and a ground analysis have been made on the targeted area. DNM is currently a huge swampy area

and its ground is not necessarily solid, so it is likely that the ground must be reinforced prior to development. Thus, a

boring survey and electric exploration have been conducted to investigate the geology and analyze the ground. More

specifically, samples of geological layers have been collected and analyzed to determine appropriate construction

methods.

Formulation of a master plan

Preparation for formulation of a master plan has been made basically in line with the “area framework by intended

purpose” in the master plan created in 2008 for the municipal town of Quang Yen. The Project will basically cover the

development area in which Quang Ninh Province intends to construct an industrial park and begin with areas that have

good access to Lach Huyen Port currently under construction and the Halong-Hai Phong Expressway. In a long run,

rich natural environment of the targeted area, in which mangroves grow, will be made full use of so that the area will be

able to feature extended functions such as commercial facilities, resort residential homes and hotels, and higher

educational, research and development facilities.

Consideration of a project scheme

Consideration has been made to find the optimal project scheme to improve the project feasibility. Because the project

area is large and the cost is likely to be enormous, enterprises involved will be divided into several phases under the

Project. Hearings have been made to neighboring industrial parks and organizations related to Quang Ninh Province in

order to gather information and formulate a project scheme that ensures the project implementation. The first phase is

planned to construct an industrial park on land of a total of approximately 250ha initially with the focus on areas that

have good access to Lach Huyen Port currently under construction and the Halong-Hai Phong Expressway.

2-3

Economic and financial analyses

The Project will cover the entire targeted are in future, but this study has examined the financial and economic

feasibility of the first phase, industrial park construction, only. Based on information (about labor costs, preferential

taxation schemes, etc.) gained through field surveys and the findings of social and economic analyses already conducted,

preconditions for the economic and financial analyses (land creation cost and project cost) were set out; economic

indicators– Financial Internal Rate of Return (hereinafter referred to as “FIRR”) and Economic Internal Rate of Return

(hereinafter referred to as “EIRR”)–calculated; and the validity of project implementation assessed.

Environmental and social considerations

A survey has been conducted in DNM to learn matters to be taken into account to implement the land development

project. Such matters include laws and regulations, natural environment, living environment of local residents and

socio-economic situations. Documents, sources and reports have been studied to learn the existing laws and regulations

on relocation of residents, land acquisition and surrounding natural environment, and the natural environment. Hearings

have also been made to organizations related to Quang Ninh Province and stakeholders having undertakings in DNM.

The environmental impact assessment (EIA) has not yet been completed for the DNM development plan. The EIA must

be completed, while the procedures to acquire a business permit must be made to the Ministry of Natural Resources and

Environment (MONRE). Hearings have been made to the Department of Natural Resources and Environment

(DONRE) to discuss the timing and term of the EIA, and learn matters that must be surveyed and those that are

frequently surveyed in EIAs.

Structure of Member Conducting the Study 2.2.2

The Study has been conducted jointly by five entities: SEC, Nomura Research Institute, Ltd. (hereinafter called “NRI”),

Nihon Sekkei Inc. (hereinafter called “Nihon Sekkei”), Infrastructure Development Institute-Japan (hereinafter called

“IDI”) and Kawasaki Geological Engineering Co., Ltd. (hereinafter called “KGE”). SEC, the leading managing

company, is in charge of planning, coordination and management of the entire survey; NRI in charge of consideration

of the project scheme, and the economic and financial analyses; Nihon Sekkei in charge of the master plan formulation

and urban planning; ID in charge of surveys and analyses in relation to environmental and social considerations; and

KGE in charge of collection and analyses of ground information, and geological analyses. Figure 2-1 shows the

implementation structure for the survey.

2-4

Figure 2-1 Structure of the Study Team

Source: Study Team

2-5

Survey Schedule 2.3

Survey Flow and Schedule 2.3.1

The following are the survey flow and schedule. The survey is conducted between October 2, 2013 (contract date) and

February 10, 2014 (contract expiry date). During the term, domestic surveys and three sessions of field surveys are

conducted, together with the interim report meeting to confirm the progress and the final report meeting in Japan to

report the final achievements to the relevant ministries of Vietnam, corporations supporting project administration and

other parties concerned.

Table 2-1 Survey Schedule

Source: Study Team

Undertaking Date Outline of undertaking

Interim reportmeeting

Nov. 13, 2013 ･ Report on progress of the survey

Second field survey Nov. 17 – 29, 2013 ･ Survey to supplement insufficient matters and issues

Third field survey Jan. 19 – 24 (scheduled), 2014 ･ Final report meeting with the presence of persons from the

Final report meeting late-Jan., 2014 ･ Final report in Japan

Domestic survey(second session)

mid-Nov. – late-Dec., 2013

Draft report: Dec. 27, 2013Final report and other outputs: Feb. 10, 2014

Preparation

First field survey Oct. 13 – 26, 2013

Oct. 2, 2013 (contract date) – mid-Oct.

mid-Oct. – mid-Nov., 2013Domestic survey(first session)

Submission ofsurvey report, etc.

･ Creation of inception report and questionnaire sheet･ Arrangement/appointment to destinations to visit at the timeof field surveys

･ Compilation of the findings of the field survey･ Environmental and social considerations･ Sorting of insufficient matters and issues

･ Courtesy visits to relevant local organizations, ministries andorganizations of Vietnam, and briefing on the survey･ Hearings, etc. to gather information and materials･ Survey on the situations of the project area (on-site)

･ Compilation of the findings of the field survey･ Project cost estimation･ Consideration of the project scheme and master plan･ Economic and financial analyses to calculate IRR, etc.

2-6

Table 2-2 Flow of the Survey

Source: Study Team

Activity Domestic work (i) Gathering and sorting of information and existing materials about the site (ii) Consideration of project scheme, PPP and ODA

(iii) Ground information analysis and geological analysis

(iv) Consideration of master plan

(v) Urban planning

(vi) Economic and financial analyses

(vii) Environmental and social considerations and analyses

Field surveys (on-site work)

(i) First field survey (gathering of information and materials)

(ii) Second field survey (additional survey)

(iii) Third field survey (report meeting)

Report meetings and reports

(i) Interim report meeting

(ii) Creation of draft final report

(iii) Submission of draft final report

(iv) Creation of final report

(v) Final report meeting in Japan

Delivery of final report and other outputs of the survey

2013 2014

Sep. Oct. Nov. Dec. Jan. Feb.

2-7

Field Surveys 2.3.2

(1) First field survey

The first field survey was conducted for 14 days between October 13 and 16, 2013. To conduct hearing surveys and

gather information and materials, three cities were visited in which the relevant organizations to the survey and the

Project are located: Hanoi (relevant organizations in Japan and Vietnamese government organizations), Halong city (the

economic administration bureau of Quang Ninh People’s Committee, relevant organizations, Quang Yen Town

People’s Committee, and project site), Hai Phong city (the economic administrative bureau of Hai Phong City People’s

Committee). Table 2-3 shows the schedule of the first field survey.

Table 2-3 The First Field Survey Schedule

Source: Study Team

The first team: Sun., Oct. 13 – Thu., 24, 2013 The second team: Thu. Oct. 17 – Sat. 26 and Sun. 27, 2013

MM DDDay of the

weekLocation Destination (Second team) Location

17:55　Departure from Narita

21:40　Arrived at Hanoi

AM 10:00　JETRO

PM Compilation of materials

AM Compilation of materials

14:00　JICA

16:00　Japanese Embassy in Vietnam

Travelling from Hanoi to Ha Long

AM 09:00　Quang Ninh People’s Committee

13:30　DONRE of Quang Ninh People’s Committ

16:00　DOT of Quang Ninh People’s Committee

AM 09:00　DOCv of Quang Ninh People’s Committee 17:55　Departure from Narita

PM 14:00　EZA of Quang Ninh People’s Committee 21:40　Arrived at Hanoi

Travelling from Ha Long to Quang Yen Town

08:00　Quang Yen Town People's Committee

PM 14:00　Stakeholders in Dan Nha Mac area 14:00　Stakeholders in Dan Nha Mac area

19 Sat Holiday Ha Long City Ha Long City

20 Sun Holiday Travelling from Ha Long to Hai PhongHa Long City

Hai Phong CityTravelling from Ha Long to Hai Phong

Ha Long CityHai Phong City

AM 11:00　Nomura Hai Phong Industrial Zone

PM 15:00　VSIP

AM 10:30　EZA of Hai Phong City 10:00　DVIZ

PM Travelling from Hai Phong to Hanoi Compilation of materials

AM 08:30　MONRE Travelling from Hai Phong to Hanoi

14:00　MPI

23:30　Departure from Hanoi

10:00　VCCI

Compilation of materials

10:00　JICA

Compilation of matertials (23:30　Dept.from Hanoi to Japan (Mizumura))

10:00　AGS Hanoi OfficeCompilation of matertials (23:30　Dept.from Hanoi to Japan Yamaguchi))

27 Sun 6:55　Arrived at Narita

Oct

Hanoi City

Ha Long City

Ha Long City

Ha Long CityQuang Yen

Town

16

17

18

21

22

14

15

23

Tue

Wed

AM

PM

PM

Mon

Wed

Thu

Fri

Hai Phong CItyHanoi City

Destination (First team)

13 Sun

Hai Phong CityObservation in Dan Nha Mac Area

Mon

TuePM

Hanoi City

Hanoi CityHa Long City

Travelling from Ha Long to Quang Yen Tow

14:00　MPI

Hai Phong City

Hai Phong CItyHanoi City

26 Sat

Hanoi City

Ha Long City

Ha Long CityQuang Yen Town

Hanoi City

Hanoi City

24 Thu 06:55　Arrived at Narita

25 Fri

2-8

(2) Second field survey

The second field survey was conducted by two teams. The first team chiefly visited Ho Chi Minh City and Hanoi City

to make hearings to companies operating the existing industrial parks, companies in such parks, banking institutions and

other entities. The second team stayed in Hanoi, Halong and Hai Phong cities to visit organizations concerned with the

Project. The field survey was intended to conduct hearing surveys and gather information and materials to supplement

insufficient information and issues unsolved as a result of the first field survey. Table 2-4 shows the schedule of the

second field survey.

Table 2-4 The Second Field Survey Schedule

Source: Study Team

The first team: Sun. Nov. 17 – Sat. Nov. 23, 2013 The second team: Thu. Nov. 24 – Sat. 24 and Sat. 30, 2013

MM ddDay of the

weekDestination (First team) Location Purpose

11 17 Sun

Hearing surveyHearing survey

11 21 Thu Japanese industrial complexObservation and hearing survey

11 22 Fri A bank inVietnam and JICA Hearing survey11 23 Sat11 24 Sun

11 25 Mon JETRO・MPI Hanoi cityCourtesy visit, survey progress report and

hearing surveyEZA and DOT of Quang Ninh ProvinceDOC and DONRE f Quang Ninh Province

11 27 WedIPA of Quang Ninh Province and Quang Yen TownPeople’s Committee

Ha Long city and QuangYen town

Hearing survey

11 28 Thu EZA of Hai Phong city and Dinh Vu Industrial Zone Hai Phong city11 29 Fri Japanese Embassy in Vietnam Hanoi city11 30 Sat

Hearing survey, courtesy visit and surveyprogress report

HolidayHoliday

Ho Chi Minh city

Traveling

Hanoi city

11 26 Tue Ha Long city Hearing survey

Traveling

Hearing survey

11 18 Mon Hearing surveyJapanese logistic corporationJapanese water development corporationHo Chi Minh Branch of Japanese bankLocal office of Japanese construction corporationJapanese railway corporationJapanese trade corporation Vietnam officeJapanese electric power corporation Vietnam office

11 19 Tue

11 20 Wed

Chapter 3 Justification, Objectives and Technical Feasibility of the Project

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3.1 Project Background and Necessity

3.1.1 Scope and Potential Users of the Project

(1) Scope of the Project

■ Target Development Area

The target area of this development Project is located in the southern part of Quang Yen Town, Quang Ninh Province of

northern Vietnam and includes the DNM Area, which is covered mostly by man grove wetlands. The area to be covered

by this Study is 4,675ha, which is derived by subtracting the area of a planned port development project (325ha), which

will be discussed later, from the entire target development area, which is approximately 5,000ha according to

information told to us by the Quang Yen Town People’s Committee. This area constitutes a part of the coastal economic

corridor of northern Vietnam along with Ha Long, a world-renowned tourist city, and Hai Phong, a rapidly-growing

industrial city, and predicted to make a significant contribution to the economic development of Vietnam in coming

decades. Industrial development is especially expected of this area as one of the priority development projects of Quang

Ninh Province.

Figure 3-1 Location of the Target Development Area

Source: Information Provided by Quang Yen Town with Notes Added by the Study Team

クアンエン町

ハロン

ハイフォン

開発対象地約 5,000ha

ベトナム北部沿岸経済回廊Coastal Economic Corridor

清水飛鳥

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■ Present Conditions of the Target Development Area

The target area is largely divided into the island section (DNM Area) between Bach Dang River and Rut River and the

peninsula section on the east side of Rut River. The segments (i), (ii), and (vi) in the map below are mostly mangrove

forests converted to shrimp and fish farms. In the central segment, there still remains a rich eco system. Segment (iii),

which is connected to Quang Yen Town by land, is dotted with existing rural communities and crop fields.

Figure 3-2 Development Area and Its Present Conditions

Source: Aerial Photo “bản đồ ảnh về tinh của sống Bạch Đằng và Đầm Nhà Mạc” with Notes Added by the Study Team

(i)

(ii)

(iii)

(iv)Bach Dang River

Rut River

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Figure 3-3 Rich Natural Ecosystem Remaining in DMC

Source: Study Team

■ Development Status of the Surrounding Areas

The west side of the target area faces Hai Phong City, where an industrial zone project is being planned. On the south

side, Lach Huyen International Port is currently under construction with Japanese ODA aiming to start operation in

2017. Hai Phong also has Cat Bi Airport, the expansion work of which is scheduled for completion by the end of 2015.

Upon the completion of the HL-HP Highway in 2018, this area will possibly grow into a major transportation and

industrial hub in northern Vietnam.

Figure 3-4 Development Statues of Surrounding Areas

Source: Information on Lach Huyen Port Provided by Quang Yen Town with Notes Added by Study Team

■ Phased Development Approach

Considering the large 5,000ha area (for reference, Tama New Town is 3,000ha) and the complicated topographical

conditions that include wetlands, as well as the time and cost requirements, it may not be possible for a single private

(To Hai Phong)

Central District of Quang Yen Town (To Ha Long)

HL-HP Highway

Lach Huyen Port

Cat Bi Airport

Hai Phong Industrial Zone

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company to undertake the whole project. Therefore, we decided to conduct a detailed study on a smaller section of the

target area, the development of which could be led by a private business entity.

Given the fact that the timing to commence the Project is dependent on the timing of completion/opening of the HL-HP

Highway and the Lach Huyen Port, as will be discussed further in later sections, we defined Phase 1 of this Project,

which consists of the development of an industrial zone along the South-North Road, which will connect the exist

(interchange) of the highway to Lach Huyen Port.

Figure 3-5 Phase 1 of the Project

Source: Study Team

(2) Potential Users

In projecting potential users of the area, the following characteristics come to the fore

Located in Vietnam whose economy has been growing with high FDI.

Situated adjacent to Hai Phong City, one of the largest industrial/port cities in the northern Indo-China Peninsula.

Proximity to the existing Hai Phong Port and Lach Huyen Port and the completion of Bach Dang Bridge will give

the area an advantage over other Vietnamese cities, where infrastructure is generally underdeveloped.

Surrounded by abundant natural beauties, such as Ha Long Bay and Cat Ba National Park.

As described in Chapter 1, Vietnam’s high economic growth driven by FDI is expected to continue in the future. The

central players of FDI, as mentioned earlier, are the processing/manufacturing industries, and this trend will likely

continue.

Overall Master Plan

South-North Road

Industrial Zone 250ha

Phase 1

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Table 3-1 FDI in Vietnam

Source: MPI

However, lack of infrastructure to support the economic growth in Vietnam has been a large disincentive for industrial

developers. The target area has an extreme advantage in terms of location and infrastructure, as it is situated adjacent to

Hai Phong, where large factories are already concentrated, and close to ports, which are important for manufacturing

companies, including the already existing Hai Phong Port, as well as Lach Huyen Port scheduled to open in 2017. The

location is quite advantageous for attracting FDI in the manufacturing industry.

In addition, the area is surrounded by excellent natural environment, as represented by Ha Long Bay, a world natural

heritage site, and Cat Ba Nature Park. The area itself is also blessed with reserved mangrove forests and other natural

beauties despite its close proximity to large industrial cities. Potential users of the area will likely consist of high-tech

industrial companies that would enjoy these advantages while being environmentally sensitive.

In addition, personnel of the surrounding industrial zones, whom we interviewed as part of the first field survey, pointed

out the following facts.

LGE has established a significant foothold in Hai Phong, which may grow into a major industrial area.

In 2013, LG Electronics of South Korea decided to locate a large plant (40 ha) in the Trang Due Industrial Park in Hai

Phong. LGE plans to hire as many as 20,000 employees, indicating the high industrial potential of the Hai Phong area.

Possibly Advantageous for Heavy and Massive Product/Material Manufactures?

Because of lack of road infrastructure for transporting massive and heavy materials, Hai Phong is limited to certain

types of industries. The target area, on the other hand, may be able to attract plants that make relatively large products

Processing and manufacturing Real estate Retails Information and telecommunications Warehousing and transport Construction Healthcare and social support Electricity and water supply Specialized services Mining Art and leisure Hotels, food and drinking services Others Total

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and materials because of its proximity to Lack Huyen Port. However, further studies are needed to determine if the

ground of the area can support such operations.

Needs of Small and Medium Enterprisess

The ratio of small and medium enterprises (hereinafter referred to as “SMEs”) among companies making entry to the

area will gradually increase with time, which means that we need to consider securing sites for SME factories and

domestic support industries.

Concern for Lack of Labor

Though a large number of jobs are to be created by LG Electronics and other foreign investors under the current plan,

many industrial zones are concerned that there may not be an enough labor force in Hai Phong City to meet the demand.

The project area is at a disadvantage in this regard, as workers from Hai Phong City will need to cross the Bach Dang

Bridge and endure longer commute times. To compensate for lack of labor in Quang Ninh Province and Quang Ninh

City, housing and other facilities to support the lives of new population will also be needed.

In light of the above, potential users of the industrial zone will likely consist mainly of heavy industry, logistics,

food-related companies because of the area’s proximity to Lach Huyen Port. Japanese heavy industry firms such as

Idemitsu Kosan and IHI are already establishing bases in the Dinh Vu Industrial Zone on the other side of the river. By

contrast, transport equipment and electronics companies are concentrated in the Nomura Hai Phong Industrial Zone and

VSIP Hai Phong Industrial Zone, which are located slightly more inland. As it is difficult to locate factories that make

heavy and massive products in inland areas due to transportation constraints, industrial zones that can accommodate

such companies are presently limited.

Aside from the heavy industry, logistics and food-related companies are also highly promising potential users. Since

there are no full-scale warehouse centers or truck terminals in and around Hai Phong, except for small ones scattered in

various locations, the project area has a large potential to become a logistics hub, as it not only is located close to Lach

Huyen Port but also will be directly linked to the interchange of the HL-HP Highway.

Relaxation of the restrictions on foreign-owned retail firms (easing of the area requirements of the Economic Needs

Test) will likely accelerate the growth of food-related industries along with the increasing entry of Japanese retail

companies (convenience stores, etc.).

In order to differentiate from other industrial zones, the project area needs to find balance between industrial

development and preservation of a comfortable living environment. Our interview surveys in the area revealed the need

for housing and means of commute for management-class (including Japanese) and working-class employees to be

working in the industrial zone. It is possible to develop residential and commercial zones for satisfying the needs of not

only the people living/working inside the area but also those in surrounding areas. In Hai Phong City, where multiple

industrial zones already have been or are being developed, there is a shortage of service apartments, etc. for expatriates

dispatched from Japan. Therefore, by actively incorporating the development of residential and commercial properties

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in Phase 2, the project area will be able to attract Japanese corporations and other potential users that are considering

locating their bases there.

3.1.2 Present Status Analysis and Future StatusProjection

(1) Analysis/Projection of Present/Future Economic Statuses of Quang Ninh Province and Hai Phong City

DNM Area is situated on the western part of Quang Ninh Province and adjoins Hai Phong City. In analyzing the present

state of the area, it is necessary to consider the overall conditions and the status of industrial investment in Quang Ninh

Province and Hai Phong City, where similar industrial development is taking place

Overview of Quang Ninh Province and Hai Phong City

Quang Ninh Province with its capital in Ha Long City is located along the coast at the northernmost part of Vietnam

bordering China. The province had a population of 1.1 million people as of 2008 and covers a total area of 6,099km².

Quang Ninh Province is home to Ha Long Bay, Vietnam’s largest tourism asset, and is blossoming as an important

center of frontier trade along the Chinese border. Although the economy of the region is agriculture based, its

agricultural production does not constitute a large percentage nationwide. The province has rich mineral resources,

especially coal.

Under the current plan to promote economic development through massive industrial expansion, the province has

established the Industrial Promotion Agency (IPA), the likes of which is never seen in any other provinces, to attract

FDI in a focused manner.

The emphasis is placed especially on the large-scale development of the areas near the Chinese border and the central

part of the province. While the development of the former is already in progress, that of the latter remains a task for the

future.

As shown in the figure, DNM and surrounding areas form the core of the priority areas of IPA’s industrial development

scheme with DNM being the largest area, indicating its extreme importance in the development policy of Quang Ninh

Province.

The project area adjoins Hai Phong City, and the link between the two will be further strengthened upon the completion

of the Bach Dang Bridge, which will also become one of the key routes connecting Hai Phong City and Lack Huyen

Port when it opens.

Hai Phong is one of the major port cities in Vietnam and key points in Southeast Area, serving as a logistics hub not

only for northern Vietnam but also for inland China. It is Vietnam’s third largest city with a population of 1.88 million.

Although Hai Phong is a major port city and thrives with fishing industries, industrialization is gaining increasing

importance in recent years along with the growth of heavy industries in addition to food-processing and light industries.

Production of fish sauce (nouc mam), beer, tobacco, motorcycles, and steel pipes are expanding, and the software

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industry is showing remarkable growth in recent years. Ship-building and the production of steel pipes, plastic pipes,

and pharmaceuticals rose rapidly between 2000 and 2007. The city has an industrial population of 270,600 and created

112,600 industrial jobs between 2000 and 2007.

Hai Phong City plans to continue actively promoting industrial development well into the future. The city’s master plan

for the future is shown below.

Figure 3-6 Master Plan of Hai Phong City

Source: Information Provided by Hai Phong City

According to the information provided by Hai Phong City, the zones colored in purple are to be developed and used for

industrial purposes by 2025. While there is a concern for excessive competition among industrial zones, DNM has a

geographical advantage because of its location between Lach Huyen Port and the new Hai Phong city center, and its

competitive edge will likely sharpen along with the progress of various infrastructure development projects.

Industrial Investment Trends in Quang Ninh Province and Hai Phong City

In Vietnam, investments are most concentrated in Ho Chi Minh and Hai Phong, which are also commercial centers of

the country. Investments remain strong in these cities, which hosted large numbers of projects in 2012 as well. However,

these cities are running out of space especially for building large-scale industrial facilities. For this reason, the center of

large investments is shifting to less developed areas in surrounding provinces.

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Of the total FDI, Quang Ninh Province accounts for only a small percentage, and the number of projects in the province

remains small. FDI in Hai Phong City, on the other hand, grew from about 4% around 2005 to 6-7% in 2011 and 2012.

Though these percentages depend on the scales of individual projects, the figures remain at stable levels, except for the

year when the percentage grew abruptly because of a large-scale project, indicating the increasing importance of Hai

Phong City as a new FDI center.

Listed below are industrial zones located in Hai Phong City. The project area is assumed to show similar

demand/development characteristics to those of these industrial zones in Hai Phong City.

Table 3-2 Status of Industrial Zones in Hai Phong City

Source: Study Report on Industrial Zones in Vietnam in 2012 by JETRO

Dinh Vu

Do Son

Nam Cau Kien

Nomura Hai Phong

Trang Due

Tran Cat

VSIP Hai Phong

Total

Total area Develped Occupied No. of tenants Average area

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Table 3-3 FDI in Each Province in Vietnam (2012)

Source: FIA

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(2) Geological Analysis of the Target Area

According to a report of “Technical and Economic Study for Construction of Bach Dang Bridge on Ha Long-Hai Phong

Highway in Vietnam” issued in the fiscal 2012, the gound characteristics of the DNM Area consist of the thick

sedimentary of river and shore sediments from alluvial epoch spread in the entrance of a bay. The report also detailed

the following points:

■ DNM Area is located in a brackish tidal flat at the estuary of Bach Dang River, a tributary of Hong River, where

newly formed wetland is being eroded regularly.

■ The geology of this area is characterized by the distribution of soft and viscous soil layer 3m to 30m thick

between Quang Ninh Province and Hai Phong City. This type of soil is usually concentrated in areas along the

river.

■ The strata are composed of soft viscous soils such as clay and silt in the surface layer, beneath which is a layer of

sandy soil supported by a mudstone bedrock.

・ Since geological survey data of this area are sparse and do not provide sufficient geotechnical engineering

information for developing the area effectively and economically, we decided to conduct the following surveys.

Table 3-4 Outline of Geological Surveys

Survey Quantity Purpose, etc.

Exploratory boring

8 points

Total length:

235m

・ Conducted a penetration test at each 1-meter interval to measure the

N-value. Used the soil samples taken as samples of physical tests.

・ Excavated the sites in order to verify the presence of a supporting

stratum having an N-value 50 or greater and a thickness 5 meters or more.

Sampling 27 samples ・Took samples for laboratory soil tests from additional boreholes.

Laboratory soil test

Mechanical test:

27 samples

Physical test:

50 samples

・Mechanical test: single-axis, consolidation

・Physical test: moisture content, grain size, specific gravity, etc.

・Assessed the geotechnical engineering properties of the soils to use as

base data for subsidence analysis and stability analysis.

Electrical survey 23 points ・To supplement exploratory boring data.

Source: Study Team

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(3) Environmental Analysis of the Target Area

Most of the DNM Area has thick sediments of soft marine or wetland deposits. In the wetland area, tidal flats are

forming convoluted microtopographies as a result of erosion by flooding of rivers and high tides in the past.

Detailed information about the natural environment of the area is provided in the Social Development Master Plan

formulated by Quang Yen Town in 2008, which, however, is currently being updated. No environmental impact

assessment (EIA) has been performed with regard to specific development projects covering the whole DNM Area. The

“Report of Environmental Impact Assessment, Ha Long – Hai Phong Expressway Project, 2011, Q.N.” provides the

most recent information on the area. (The detail of the EIA Report will be discussed in Chapter 4 “Socio-Environmental

Analysis.”)

The area has no high-rise buildings or heavy structures. Even the most populated districts are dotted with up to 3- to

4-storied buildings (public facilities and buildings). Houses, retail stores, education facilities, and other main structures

are concentrated along a few 3-to 4m-wide streets passing through the town. Utilities infrastructure, such as electricity,

water, and irrigation, is already in place (except for sewage). Less populated sections in the wetland area are dotted with

houses of farmers and fishermen.

The items to be assessed by EIA are provided under Article 20 of the Law on Environmental Protection as listed below.

In case of the following, the project owner is required to re-conduct EIA, even if EIA and licensing processes have

already been completed for the project.

Table 3-5 Contents of EIA Reports

1 Enumeration and detailed description of the project’s construction components, construction area, time and workload; operational technology for each component and the entire project.

2 Overall assessment of the environmental status at the project site and neighboring areas; the sensitivity and load capacity of the environment.

3 Detailed assessment of possible environmental impacts when the project is executed and environmental components and socio-economic elements to be impacted by the project; prediction of environmental incidents possibly caused by the project.

4 Specific measures to minimize bad environmental impacts, prevent and respond to environmental incidents.

5 Commitments to take environmental protection measures during project construction and operation.

6 Lists of project items, the program on management and supervision of environmental issues during project implementation.

7 Cost estimates for building environmental protection works within the total cost estimate of the project.

8 Opinions of the commune/ward or township People’s Committees and representatives of population communities in the place where the project is located; opinions against the project location or against environmental protection solutions must be presented in the environmental impact assessment report.

9 Citation of sources of figures and data, assessment methods.

Source: Article 20 of the Law on Environmental Protection of Vietnam

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3.1.3 Effects and Impacts of the Project if Implemented

As indicated by the above analyses, smooth implementation of this development project will have extreme significance,

as it will ensure the continuous economic development centered on FDI for the whole of Vietnam. In addition, this

project will create industrial zones linked to an excellent port development project, thus meeting the needs of potential

investors, especially Japanese firms, that would otherwise hesitate to establish bases in Vietnam due to lack of

infrastructure. In a long term, this project, which plans to develop an eco-friendly urban center in a grand scale, will

also have a large impact on the improvement of the urban environment in and around Hai Phong City.

Phase 1 of the project will focus primarily on industrial investment by developing industrial infrastructure that will link

the area to Hai Phong and Lach Huyen Port to meet the needs of Japanese investors. Development of the area will help

disperse the locations of industrial facilities in the Hai Phong area, thus promoting urban development in a balanced

manner while creating many employment opportunities for Quang Ninh Province and Quang Yen Town toward the

industrialization of the region.

Phase 2 will utilize the fruits of Phase 1 as a foothold to carry out more comprehensive urban development. This will

include securing housing and means of commute transportation for managers (including Japanese) and workers to be

working at the industrial zone. The residential and commercial zones will be developed for catering the needs of not

only the people living/working inside the project area but possibly for those in neighboring areas. Hai Phong City,

where the development of multiple large-scale industrial zones is already in progress, is facing shortages of service

apartments, etc. Therefore, Phase 2 will actively incorporate the development of residential and commercial facilities in

harmony with the natural beauties of the area toward creating an advanced city environment that will set a precedent for

urban development in Vietnam.

3.1.4 Comparison with Other Options

No other options will be considered for this Project, as its target area and the purpose (industrial zone) were directly

specified by Quang Ninh Province of Vietnam.

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3.2 Project Studies Needed for Project Contents

3.2.1 Demand Forecast

As shown ion Table 3-5, Status of Induistrial Zones in Hai Phong City, most were developed in the past three to four

years by new investment with the exception of Nomura Hai Phong, which has a longer history. Investment in the city

has risen remarkably especially in the last year or two since the economy hit the bottom as a result of the world

financial crisis.

The robust industrial demand is likely to be maintained at the level for the last several years even when the current

economic growth or macroecoonomic conditions continue. Annual demand for industrial plant establishment can be

estimated by dividing the total of new tenants equally based on the assumption that new tenants came to the existing

industrial zones for the last four to five years. Because the demand for new establishment differs case by case, it is a

mere estimate. However, it has little impact on the mid-to long-term forecast.

When calculated in the formula above, the annual demand for new industrial zones in Hai Phong is estimated to be

around 200 to 400 ha, or 300ha on average, based on the economic growth rate and FDI for the last several years. As

described above, it is based on the assumption that existing industrial zones were occupied by new tenants in the last

four to five years and they are divided equally in the time period. Because the demand for new establishment differs

case by case, it is a mere estimate.

The demand could further grow after the opening of Lach Huyen Port. FDI may also increase further if the Vietnam

succeeds in economic restructuring and if the world economy steadily recovers in coming years, in which case, the

demand for industrial sites in and around Hai Phong could increase to around 500ha/y.

Based on the above estimates, the total demand for industrial sites will be 3,000 to 5,000ha for the following 10 years,

or 6,000 to 10,000ha for the next 20 years, of which around 1,500ha will be covered by existing industrial zones and the

remaining portion could translate into the demand for the project area. This means that the project can expect a demand

of about 2,500ha in the following 10 years or about 6,500ha in 20 years. Most of the existing industrial zone

developments are also based on the demand forecast.

However, other development projects are also underway in nearby areas. Thus, how much of these demands the project

will be able to attract will largely depend on the economic trend and marketing strategies. It would be practical to split

up the project into smaller phases of a few hundred hectors each and develop and market each phase as done so by other

industrial zones.

Compared with industrial zones in other counttires, overseas-based companies are likely to emter Vietnam to establish

their plant as an alternative to China because of the labor cost and labor management issues there. The major

infrastructure development of Lach Huyen Port will also help guarantee the advantage of the DNM Area in Vietnam.

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There is need to differentiate itself from competitor industrial zones because of many industrial zones under

development in surroumding areas particularly in Hai Phong. There is concern over shortage of labor force and increase

in labor cost partly because of establishment of a new LG plant in Hai Phong. Most workers in the DNM Area are likely

to reside in QN Province in Quang Yen town and Ha Long. Thus, it is easier to secure labor force than Hai Phong and

the cost is also expected to be relatively low.

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3.2.2 Identification and Analysis of Problems

Compiled below are potential problems associated with the project that were identified as a result of our field surveys and interviews with Vietnamese stakeholders.

We created four categories (legislation, economy/finance, society/environment, technology/concept) and extracted problems that are common to all four categories, as well as those

related to “land reclamation/preparation and roads,” “electricity, water, telecommunications, and waste disposal,” and “properties development.”

Table 3-6 Extracted Problems

Common Reclamation, land preparation, roads

(bottom) Utilities (middle)

Industrial, commercial, residential

properties (top)

Legislation

1) Procedures for PPP and BOT are unclear, as PPP and BOT Laws are currently being revised.

2) Revised PPP Law will likely mandate bidding, and Japanese firms may be put at a disadvantage if their technical superiority is not duly appreciated.

1) Expropriation procedure is too complicated for private firms.

2) The project has yet to be coordinated with the port project on the east side of the area.

*No problem is found at present. 1) Strong tax incentives are offered by Dinh Vu-Cut Hai EZ, and DNM needs to introduce similar incentives.

Economy and

Finance

1) Difficult to develop a vast area without public financial.

2) Vietnamese Government is reluctant to receive ODA.

3) Project owners will have to assume currency risk, as JICA’s overseas investment loan is provided in JPY only.

1) Demand for this Project could be greatly affected the progress of the construction of Lach Huyen Port and Bach Dang Bridge.

2) QN Province needs to develop the Coastal Road as a precondition for this Project.

3) SE Corp. will have to construct the interchange on the west side of DNM Area because of the Bach Dang Bridge project.

1) QN Province needs to install electrical, water, sewage, telecommunication, and other service lines up to the entrance of DNM as a precondition of this Project.

1) Rise in reclamation cost could push up the lease fees, undermining the competitiveness of the Project.

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Environment and

Society

1) Shore protection work in DNM Area needs to be planned by taking into account its geographical relationships with HP City and Din Vuh IZ on the other side of the shore.

2) Development of Tien Phong Area may require resettlement and land expropriation.

1) Development work will take place mostly in mangrove forests and other indigenous ecosystems.

2) Development of Tien Phong Areawill requires a preliminary study on underground installations.

1) Sewage treatment plant needs to be newly constructed.

2) Existing waste disposal sites may become overburdened. 3) Existence of wetland.

1) The Project may have to compete for workers with other industrial zone projects that are mushrooming in and around Hai Phong. 2) Development of housing for workers is lagging behind, calling for the involvement and initiative of QN Province and other public bodies.

3) Eco-friendly factory designs and systems will be required. Examples: FEMS/CEMS, methane gas power generation, waste heat recovery and system, co-generation to reduce fossil fuel consumption, solar power, green roofs and walls, etc.

Technology and

Concept

1) JICA is receiving multiple requests related to industrial zone projects. This Project needs to find features that distinguish itself from other projects and are worthy of assistance. 2) The Project needs to be coordinated with other development projects (road network, etc.) of Quang Yen Town, which encompasses DNM, as well as those of and QN Province and adjoining HP City.

1) Certain sections of the Area will require soft ground reinforcement or reclamation work.

2) Consolidation of soil will take considerable time in the eastern part of the Area.

3) There is no prospect of securing sufficient amounts of earth and sand for reclamation work. The Project may have to compete with the Lach Huyen Port project for such materials.

4) It will be difficult to bring in earth and sand for earthwork via land before the completion of Bach Dang Bridge.

1) A substation needs to be constructed.

2)The water intake point is situated far away from DNM Area.

1) As ES Corp. implements PPP projects and does not possess the know-how for property development, it needs to find a qualified developer.

2) Comprehensive urban development requires the know-how not only for developing industrial zones but also for commercial and residential zones.

Source: Study Team

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3.2.3 Examination of Geo-engineering Aspects

■ The gound measures

・ Summarized below are the characteristics of the ground of the DNM Area.

Table 3-7 Characteristics of the strata

Strata Geological properties

Diluvium

Viscous

soil

Ac1 Extremely soft viscous soil (N≒1) distributed throughout the DNM Area in the

top layer.

Ac2 Highly heterogeneous viscous soil layer (N≒5).

Sandy soil As Sand layer at the bottom of diluvium widely distributed over the land area (N≒

15).

Alluvium Dc Relatively homogenous clay layer (N≒10).

Dcs Viscous soil layer irregularly mixed or interposed with sandy soil.

Basement Ms Mudstone layer recognized as a supporting stratum (N≧50).

Occurrence depth is uneven and irregular.

Source: Study Team

Table 3-8 Characteristics by areas

Area Color Characteristics

Thick clay/sand strata Blue Has thick viscous/sandy soil sediments. Supporting strata occurs at

great depth.

Sunken plateau Orange Sunken plateau with a distribution of diluvium viscous soil layers.

Shallow support strata Yellow-green Supporting strata occurs at the shallowest depth.

Thick sand strata Green Only area situated above sea level having thin viscous soil layer and

thick sandy soil layer.

Think clay strata Light blue Located in the southern part of DNM having thick viscous soil

deposits.

Source: Study Team

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Figure 3-7 Characteristics by areas

Source: Study Team

<Ground Properties> *Ground properties and stabilization approaches are outlined below.

(1) Thick sedimentation of soft viscous soil.

(2) Viscous soil has low coefficient of consolidation (Cv).

(3) Viscous soil has low shear strength (c).

(4) Priority of seismic countermeasures is low due to low probability of earthquake occurrence.

Based on the above, ground stabilization approaches can be summarized as follows.

(1) Stabilization measures, especially against subsidence, are required.

(2) As it takes time to consolidate soft soil, methods to expedite the consolidation process will need to be

employed by finding an optimum balance between the construction period and the consolidation time.

(3) If earth fill cannot be stabilized sufficiently, additional measures to increase strength or large-scale soil

improvement work may be needed.

(4) As the stratification consists mainly of viscous soil, no particular countermeasures will be needed.

■ Securing earth and sand

・ There is no prospect for securing earth and sand for land reclamation, There can be competition for reclamation of

Lach Huyen Port. As a solution, acquisition from remote areas will be examined although it will increase the cost

and the earth and sand will be transported after the opening of Bach Dang Bridge.

3-20

■ Location of basic infrastructure

・ There is no substation or water intake point in the DNM Area. The location needs to be decided in consideration of

the convenience and economic efficiency of the industrial zone so that the project implementing agency (QN

Province) will be able to launch it smoothly.

■ Environmental consideration

・ Eco-conscious plant layouts are examined in order to reduce greenhouse gas emissions. Specifically, FEMS・

CEMS/methane gas will used for power generation, exhaust heat recovery and cogeneration systems and solar

power generation systems will be established to reduce fossil fuel consumption, and rooftop and wall greening will

be introduced.

3.3 Summary of the Project Plan

3.3.1 Project Contents, Decision and Basic Policy

*The subsections from (1) Preconditions for Development to (3) Overall Development Plan in this section, which are

the basic policy of development including compliation of preconditions and other contents, are considred to be

components of master plan. On the other hand, the subsection (4) Dividing into Phases 1 and 2, which is the

implementation policy of development based on the master plan, is classified as urban planning.

(1) Preconditions for Development

■ Scale and Contents of Development

The size of the area to be development by this Project will be 4,675ha, which was derived by subtracting 325ha, where

a port project is in progress, from the total 5,000ha development area in DNM. Of the 4,675ha, about 1,500ha will be

developed into industrial areas to form a major industrial zone linked to Lach Huyen Port in the south and Hai Phong

Port in the west. Commercial and industrial facilities, which are regarded as important elements for the future

development of Quang Yen Town under its current master plan, will be constructed over the land area specified by the

master plan, to which we will make necessary revisions according to zoning and other plans proposed for this Project.

3-21

Figure 3-8 Assumed Size of Development Area

Source: Quang Yen Town Master Plan with Notes Added by the Study Team

Development Area: 4,675ha

Southern Industrial Area: approx. 1,500ha

Port Project Area:

325ha

3-22

■ Wide-Area Road Network as Precondition

Dam Nha Mac Area is divided by Rut River into two sections, which need to be connected by building bridges or other

means of access. Based on the desires expressed by the representatives of Quang Yen Town during our interview, we

plan to build three access roads to link the island portion of Dam Nha Mac and Quang Yen Town on the other side of

the river as part of the regional transport infrastructure network (one on the north side and two on the south side of the

HL-HP Highway). In addition, we will position the South-North Road, which will directly connect Quang Yen Town to

the southern industrial areas and Lach Huyen Port, as an important arterial road.

Figure 3-9 Wide-Area Road Network as Precondition and Access Roads

Source: Quang Ninh Province Master Plan with Notes Added by the Study Team

Central District of Quang

To Ha Long

To Hai Phong

DNM Area

IC

Bach Dang Bridge

To Lach Huyen Port

Legend HL-HP Highway as precondition for the Project Roads to be considered as part of the Project

Important link between DNM and Quang Yen Town (i)

Connects central district to southern industrial area and Lach Huyen Port

Important link between DNM and Quang Yen Town (ii)

Important link between DNM and Quang Yen Town (iii)

3-23

■ Land Area Requirements

As described earlier, we derived the total area subject to development based on the existing master plan. The 4,675ha

area is broken down to the following segments.

Table 3-9 Land Area Requirements for Different Segments

Use Total

area (ha)

Ratio

(%)

Remarks

Public facilities 440 9.4 Including commercial facilities

Residential 388 8.3

Industrial 1,625 34.8

Other 196 4.2 Existing villages, crop fields, etc.

Greenery/inland waters 1,303 27.8

Roads 723 15.5 Arterial roads, inter-cluster access roads

Total 4,675 100.0

Source: Summarized by the Study Team based on Quang Yen Town Master Plan

3-24

(2) Development Concept

This Project aims to contribute to the socio-economic development of Vietnam in a significant way by taking advantage

of the regional characteristics of the DNM Area and harnessing their greatest potential. In this Study, we summarized

the development concept of this Project as shown below.

■ Features of DNM Area

<Convenient Location>

Bach Dang Bridge and Coastal Road provide direct link to the Hanoi Metropolitan Area, world heritage site, and

major ports.

→ Easy access to commercial zones, freight ports, neighboring industrial centers, tourist sites, etc.

<Rare Natural Resources>

Rich land and marine ecosystems connected by mangrove forests.

→ Blessed with world-class nature reserves and abundant marine resources.

▼

■ Visions of DNM Area Development

<Intersection of Peoples>

Attractive place for stay and exchange filled with

natural beauty and modern convenience. ＋

<Intersection of People and Goods>

Cutting-edge production/logistics center exploiting

geographical advantage and abundant natural

resources.

△ △

<Futuristic Social/Economic Activities Taking Full Advantage of Regional Characteristics>

・Center for the advanced industrialization of Vietnam → Higher-education/research/training institutions, etc.

・Industrial/economic exchange center → Conference/exhibition halls, hotels, etc.

・Major resort center in Vietnam → Nature parks, hotels, resort houses, recreational shopping mall, etc.

▼

■ Development Concept of DNM Area

Next-Generation Value Creation Center for Building Partnership between Vietnam and Asia-Pacific through

advanced interactions and exchanges of peoples, goods, and information.

3-25

(3) Overall Development Plan

■ Guidelines for Formulating an Overall Plan

Based on the aforementioned preconditions and development concept, we will propose a master plan for the entire project

area that encompasses the DNM Area and the southern part of Quang Yen Town. After sorting out basic guidelines for

each of the categories listed below, we will present the images of the overall development plan and each zone.

・Guidelines for developing various features

・Guidelines for land use and zoning

・Guidelines for road network

・Guidelines for environmental protection and disaster

prevention

・Points to note in formulating a project plan

▼

・Image of the overall development project

・Image of each zone

■ Guidelines for Developing Various Features

Develop industrial/logistics facilities and systems that take advantage of easy access to the HL-HP Highway and

Lach Huyen Port and other industrial infrastructure in the surrounding areas.

Develop residential/accommodation facilities by exploiting the natural beauty of the area to attract diverse people in

addition to the managers and workers of industrial/logistics companies.

Develop commercial and exchange facilities that will not only bring convenience to the residents of the area but also

serve as a socio-economic center of a wider area.

Develop large parks that incorporate the unique wetland topography, mangrove forests, and other abundant natural

resources.

■ Guidelines for Land Use and Zoning

In accordance with the development policy of the southern area, where the development of industrial parks has been

approved by the government, establish industrial/logistics zones in the southern parts of the DNM Area and the

peninsula section of Quang Yen Town, which adjoin major freight ports.

In anticipation of future increase of demand for accommodation and housing facilities for tourists and industrial

zone employees, establish eco-friendly resort-type residential/hotel zones in northern DNM while conserving the

natural environment in a grand scale.

Establish residential/commercial zones next to the industrial zone to support the lives of industrial workforce.

Establish a multi-purpose commercial zone that takes advantage of easy access and abundant nature on the east side

of the interchange in the DNM Area. Establish a village scenery conservation zone on the other side of Rut River to

add extra value to the urban district.

3-26

■ Guidelines for Road Network

It is assumed that the South-North Road, which will directly connect the existing central district of Quang Yen

Town to the southern industrial area and Lach Huyen Port, will be constructed.

In addition to the above, it is assumed that an arterial road (Coastal Road), which will link the HL-HP Highway (IC),

the existing central district of Quang Yen Town, and Lach Huyen Port, will be constructed.

The Coastal Road and the South-North Road will serve as major arteries connecting the tourist and commercial

centers of Quang Yen Town to the surrounding eco-friendly residential/hotel zones, nature reserve zone, and

industrial zone.

The HL-HP Highway will be the only road crossing Bach Dang River. However, use of a ferry service across the

river is also assumed to enhance interactions with the industrial zones in Hai Phong City.

3-27

Figure 3-10 Zoning and Road Network

Source: Study Team

(To Ha Long)

(To Central District of QY Town)

(To Hai Phong City)

(To Lach Huyen Port)

Industrial/Logistics Zone

Residential/Hotel Zone

Nature Reserve Zone

IC + Toll Gate

IC + Toll Gate

North-South Road

Coastal Road

Village Landscape

Conservation Zone

Urban/Commercial Zone

Urban/Commercial Zone

Commercial/Residential Zone

Commercial/Residential Zone



HL-HP Highway

3-28

■ Guidelines for Environmental Protection and Disaster Prevention

Taking into account the topography and natural environment of the project area, we summarized the basic approaches to

environmental conservation and disaster prevention as follows.

Canal Network

We will divide the development area into several clusters so that each cluster will be surrounded by nature as much as

possible. Adjoining clusters will be divided by an existing or newly-excavated canal, through which water circulates

naturally to bring comfort and mitigate natural disasters such as flooding and high tides.

Figure 3-11 Image of Multiple-Cluster Development

Source: Study Team

Inter-Cluster Road Network

Clusters divided by canals will be connected by access roads. By adopting an efficient road layout, we will cluster the

development activities into compact areas.

Environmental Considerations

■ Block Arrangement:

In arranging blocks within the project area, we will utilize some of the existing boundaries demarcated by 1 to 2m high

ridges around shrimp cultivation ponds and the footpaths between rice fields. Roads will be constructed over these

footpaths as much as possible in order to minimize the reclamation work and environmental destruction. Parts of the

ponds will be subject to horizontal reclamation.

Figure 3-12 Block Arrangement in the Development Area Based on Existing Demarcation

Source: Study Team

Development Area

Natural circulation of water via canals

Nature Reserve Zone

Inter-cluster access road

Bach Dang River

Mangrove forest Pond

Bach Dang River

Mangrove forestMangrove forest + wetland

Development Area

Mangrove forest + wetland

3-29

■ Green Buffer Zone:

We will create natural buffer zones along the parameter of the island by preserving the existing forests of mangrove and

other plant, which add character and charm to this water-filled region and at the same time protect the area from high

tides, tsunami, and other disasters1. By referring to the information on coastal development2, we will establish buffer

zones extending about 100 m landward from the highest water mark of the peripheral waterways and restrict

development within the zones.

Figure 3-13 Establishment of Natural Buffer Zone

Source: Study Team

■ Points to Note in Formulating a Project Plan

We will draft and propose a development plan by envisioning an ideal local community to be constructed in phases over

a long period based on an appropriate public-private partnership model.

■ Overall Image

Based on the above, we propose the following overall development plan.

1 Tetsuo Nakaya, et al, “Investigation of Tsunami Prevention Technology by Coastal Forest” 2006, etc. 2 Dr. Gillian Cambers, “PLANING FOR COASTLINE CHANGE – COASTAL DEVELOPMENT SETBACK

GUIDELINES IN NEVIS” 1998

0m 40m 100m

Development Zone(with foundation work)

Small plants w/o foundation work

All types of construction prohibited

Green Buffer Zone 100m-wide green buffer zones along

coastlines

3-30

Figure 3-14 Image of Overall Development Plan

Source: Study Team

■ Use and Image of Each Zone

Shown below is an overall zoning map. We will briefly describe the scale and land use of each zone along with

imaginary pictures. Please note that the area size of each zone was determined by referring to the existing Master Plan

of Quang Yen Town.

3-31

Figure 3-15 Location of Each Zone

Source: Study Team

(i) Residential/Hotel Zone (yellow)

This approximately 300ha zone will consist of a combination of 30ha and 75ha clusters to encompass housing,

commercial and educational facilities, and parks (plus roads covering about 75ha). Housing will mainly consist of

low-rise resort homes and partially of resort-type condominiums 4 or so stories high. We aim to create an environment

surrounded by waterways, mangrove forests, and other natural beauties, where the residents can enjoy a slow life away

from the noise of cities.

(ii) Urban/Commercial Zone (Orange)

This approximately 530ha zone will include service apartments and housing for construction workers of the industrial

zone, as well as a multi-purpose commercial complex to house offices and tourist attractions, plazas, and parks (plus

roads covering about 132ha). This zone will be the activity center for visitors and tourists with resort hotels and a

complex containing international exhibition halls and educational facilities. It is also home to mid-to-high-rise

apartment buildings for the workers of the industrial zone, as well as a shopping mall and large parks to provide

convenience and comfort for the residents.

(iii) Industrial Zone (Purple)

The size of the zone will be 1,625ha, of which 10% will be covered by roads, 10% by parks and peripheral green zones

with mangrove or other trees, and the remaining 1,300ha will be developed into industrial parks. We aim to create an

eco-friendly, clean industrial zone with lots of green and water features.

(i) Residential/hotel zone

Legend

(ii) Urban/commercial zone

(iii) Industrial zone

3-32

Table 3-10 Area of Each Zone

Zone Total area (ha)

Ratio (%) Land Use

(i) Residential/Hotel 375.5 8.0 Housing, commercial/educational facilities, parks, roads

(ii) Urban/Commercial Commercial/Residential

662.5 14.2

Housing, commercial complex including offices and hotels, a complex including international exhibition halls and educational/exhibition facilities, educational institutions, parks, plazas, roads

(iii) Industrial/Logistics 1,625.0 34.8 Industrial parks, greenery, parks, roads Other 196.0 4.2 Existing rural communities, crop fields, etc. Greenery/Waterways 1,303.0 27.8 Roads 513.0 11.0 Arterial roads, inter-cluster access roads Total 4,675.0 100.0

Source: Study Team

Figure 3-16 Images of Residential/Hotel Zone

Source: Study Team

Figure 3-17 Images of Urban/Commercial Zone

Source: Study Team

3-33

(4) Dividing into Phases 1 and 2

■ Defining the Area to be Developed

As described in Section 3-1-1, the project area will be home primarily to heavy industries, export processing enterprises

(EPEs), and logistics companies. Thus, Phase 1 will center on the development of industrial facilities. Assuming that the

HL-HP Highway and part of Lach Huyen Port will open before the completion of Phase 1, an arterial road connecting

the above two needs to be constructed as part of Phase 1. Based on this assumption, we examined two possible locations

for developing an industrial zone in Phase 1.

Figure 3-18 Two Possible Locations of Phase 1 Development Area

Source: Study Team

We roughly created two options linked to the construction of two arterial roads that will be connecting the HL-HP

Highway and Lach Huyen Port. In Option 1, as shown in Figure 3-1, the Coastal Road, which will be crossing the DNM

Area north-south, will be built before the construction of a 250ha industrial zone on the north side of the road. Option 2

will place at its core the construction of the South-North Road on the eastern part of the peninsula, and develop the

250ha land area along the road into Phase 1 industrial zone. We compared the two options from the standpoints of

infrastructure, land preparation cost, and the need for expropriation, as shown in the table below, to select one scenario,

for which a feasibility study is to be conducted.

Option (i) Option (ii)

250ha IZ along the north side of Coastal Road

Coastal Road

North-South Road



250ha IZ along the west side of N-S Road



3-34

Table 3-11 Comparison of 2 Options

Criteria Option 1 Option 2

Infrastructure

Access △

Easy access to Lach Huyen Port.

Has difficulty accessing Hai Phong

Industrial Area, as it faces landward.

△

Easy access to Lach Huyen Port.

Has difficulty accessing Hai Phong

Industrial Area, as it is located on the

inland side.

Power

supply △

Can receive power (110kV) from

existing grid on the eastern part of the

peninsula.

○

Can directly receive power (11okV)

from existing grid along the

South-North Road.

Water

supply ×

A long distance away from the water

supply (intake) point on the northern

part of the eastern peninsula.

△

Relatively close to the water supply

(intake) point on the northern part of

the eastern peninsula.

Arterial

road ×

As it will be built on wetland, land

improvement and reclamation cost

will be high and the design will be

complicated.

Total distance from IC (9,630m)is

slightly greater than Option 2.

○

As it will be built mostly on land, the

civil work cost will be relatively low

and the design will be relatively

simple.

Total distance from IC (8,845m) is

slightly shorter than Option 1.

Land preparation cost ×

Earthwork will be costly, as

structures will be built on soft ground,

including wetland.

○Relatively low, as structures will be

built mostly on land.

Resettlement and land

expropriation ○

Resettlement will not be necessary, as

there are no permanent residents in

the area.

△

Development of areas near

densely-populated districts will

require resettlement and

expropriation.

Source: Study Team

The comparison in Table 3-1 indicates that Option 2 is a more practical option from the perspective of financial

feasibility, which this type of privately-led development project must achieve by taking into account various cost factros

based on the results of geological surveys described in Section 3-1-2. Therefore, we decided to select Option 2 for

Phase 1 to conduct further study.

In determining the size of the industrial zone, we referred to the development area of VSIP Hai Phong Industrial Zone,

which is similar to this Project, as the maximum area size (500ha) and eventually chose 250ha as a result of feasibility

analysis. Phase 1 will also develop multi-purpose zone for building a shopping mall and other facilities to meet the

needs of employees of the industrial zone and people in peripheral areas, as well as a residential zone to construct

service apartments and public housing for local workers. We will study the detail of the industrial zone, which will be

managed by SPC, but not the commercial and residential zones, the development of which will be led by Quang Yen

Town or Quang Ninh Province. Feasibility studies of these zones will need to be conducted at some point in the future.

3-35

■ Development Image of Phase 1

The major goal is to create a landscape that depicts “an eco-friendly industrial zone with lots of green and water

features.” To achieve this, we plan to construct a canal network, through which water circulates throughout the zone, as

well as low-rise factory buildings with green roofs and walls to increase the green coverage ratio.

Of the 250 ha area, 25% (10ha) each will be allocated for roads and greenery, and the remaining 80% (200ha) will be

developed into sites for building industrial facilities to ensure profitability.

Figure 3-19 Images of Eco-Friendly Industrial Zone

Sources: Left: Eco-industrial park http://www.upp.ca/eco-park

Right: http://www.japanfs.org/ja/pages/028540.html

3-36

3.3.2 Conceptual Design

(1) Ground Foundation Design

■ Ground Model

We will create ground models for Phase 1 based on the results of geological surveys.

Figure 3-20 Candidate Area of Phase 1 and Geological Survey Points

Source: Study Team

Residential/Commercial

250ha industrial zone on the west side of SN Road

Industrial Zone 250ha

Industrial zone

SN-1 3,474m

SN-2 2,001m

SN-3 3,370m

3-37

Phase 1 will center on the South-North Road on the eastern side of the peninsula, along which a 250ha land area will be

developed into an industrial zone.

Table 3-12 Ground Model

Road

Industrial

Area

Source: Study Team

■ Analysis Items

・Consolidation Subsidence

Subsidence at the time of building the planned fill height, required fill height, settlement time, final settlement

・Fill Stability

At the time of constructing the required fill height (current and additional strengths are taken into account)

Design Parameters

(i) Current Ground Height

・Land area: H=1.0(m) (SN-3 is H=1.0(m))

・Shrimp pond: H=-0.5(m)

(ii) Fill

・Wet density: ρt=17.0(kN/m3)

・Adhesion: c=10(kN/m2), Internal friction angle: φ=25(°)

・Slope inclination: 1 : 1.5 (at the completion of fill work)

Ground model Section

Total length (km)

Ratio of land above water

Length (km)

Condition of land above

water

Section Ground model

Condition of land above

water

Ratio of land above water

Area Area (ha)

Land

Shrimp pond

Land

Shrimp pond

Land

Shrimp pond

Land

Shrimp pond

3-38

(iii) Fill Rate

・10cm/d

(iv) Required Safety Factor for Fill Stability (Fs)

・Fs = 1.1

(v) Preload

・Wheel vehicle weight ≒10(kN/m2) → Converted into fill thickness ≒0.6(m)

(vi) Planned Ground Height

・H = 3.5(m)

Note: This height was chosen to be a bove the 1 in 100 year probability flood line (3.4m) as confirmed by the

Study on the Bach Dang Bridge Project in the fiscal 2012.

(vii) Ground Water Level

・Ground level: GL±0.0(m)

(viii) Allowable Settlement by Consolidation

・Road area: 30(cm) or less after 180 days

・Industrial zone: 30(cm) or less after 270 days

(IX) Strengthening

・Strength increase rate: m=0.3

・Degree of consolidation: U=50(%)

(X) Soil Parameters

・To be determined based on the results of this survey

(XI) Required Fill Thickness

・Minimum thickness that satisfies the following formula (see the figure below):

Fill thickness – Final settlement – Preload ≥ Design thickness

3-39

Figure 3-21 Schematic Drawings of Fill Work

Source: Study Team

○ Design Fill + Preload

○ Design Fill + Preload + Extra Fill for Settlement

Design Height

H=3.50 (m)

Design Height

H=3.50 (m)

Current ground level

Current ground level

At completion of work

Design fill

Preload

Preload

Preload

Preload

End of settlement

Settlement Design fill Design fill

Design fill Design fill

Design fill Settlement

End of settlementAt completion of work

After removal of preload

After removal of preload

Extra fill Extra fill

Extra fill

Shortage

3-40

(2) Basic Infrastructure Design

A. Internal Roads

Shown below is an image of a cross section of a 25m-wide road. Multi-purpose utility conduit will be constructed

beneath the sidewalk for installing electric/telecommunication cables, water/sewage pipes, etc.

Figure 3-22 Cross Section (image) of Internal Road

Source: Standard cross section of Yono-Oomiya Road, Kanto Regional Development Bureau, Ministry of Land,

Transport and Infrastructure (left)

http://www.ktr.mlit.go.jp/oomiya/02sigoto/17/yono02.htm

Thang Long Industrial Park II (right)

http://tlip2.com/?page_id=21&lang=ja#Modern_Advance_Infrastructures

Figure 3-23 Multi-Purpose Utility Conduit Below the Road (image)

Source: Standard cross section of underground utility conduit in southern Hiroshima, Chugoku Regional Development

Bureau, Ministry of Land, Transport and Infrastructure

http://www.cgr.mlit.go.jp/chiki/doyroj/gaiyou/3-1%20kyoudoukou%20Top.htm

Sidewalk Greenery Roadway Radway Greenery Sidewalk

Gas

Telephone

Electricity

Water

Sewage

About 0.7m

3-41

B. Electrical Infrastructure

Using several Japanese industrial zone projects in northern Vietnam as reference, we plan to install 110/22kV substation

equipped with two 63MVA transformers, which will supply power to users via the utility conduit beneath the roads.

Additional substations and distribution cables will be installed on an as-needed basis according to the increase in

demand for electricity in the industrial zone. It will be relatively easy to connect the zone to the 110kV transmission line,

as it has already been extended close to the zone. In addition, preparatory work has already begun for the construction

of 220kV transmission line towers between the planned industrial zone site and Lach Huyen Port, indicating the high

probability that the power grid network will be further expanded by EVN in the future.

Figure 3-24 Image of Substation

・

Source: Phu My-Ho Chi Minh City 500kV Transmission Line Project, Project by Country, Ministry of Foreign Affairs

http://www.mofa.go.jp/mofaj/gaiko/oda/data/gaiyou/odaproject/asia/vietnam/contents_02.html

C. Water Infrastructure

Prior to Phase 1, Quang Ninh Province will extend the water main up to the entrance of the industrial zone. In Phase 1,

service water will be stored temporarily in a tank within the industrial zone and then sent to each user through the

underground utility conduit. Wastewater will be sent via the underground conduit to a sewage treatment plant, which

discharges into river treated water that meets the Vietnamese effluent standards. It will likely be a standard-type

activated sludge plant with a capacity of around 3,000m3/d as those of other Japanese industrial projects in northern

Vietnam.

3-42

Figure 3-25 Image of Sewage Treatment Plant

Source: Motoarakawa Water Recycling Center, Saitama Sewage Systems Agency

http://www.saitama-swg.or.jp/hokubu%20hp/gesui_yakuwari/gesui_shikumi_002.html

Figure 3-26 Image of installation of utility (left: transforming equipment; right: wastewater treatment facility)

Source: Nomura-Haiphong Industrial Zone

http://www.hpnomura.com/jp/services.html

D. Others

Flood control is also required in Northern Vietnam; thus, it is necessary to consider improvement of adjustment

waterways and drainage station as well. Although its project cost is not allocated for Phase 1, the possibility of their

installation is to be considered based on the needs, etc. of tenants.

3-43

Figure 3-27 Image of installation of flood control facilities (left: adjustment waterway; right: drainage station)

Source: Thang Long Industrial Park II

http://tlip2.com/?page_id=21&lang=ja#Modern_Advance_Infrastructures

3.3.3 Contents of Proposed Project

The cost of the Project is to be estimated in two groups; cost of works to be carried out by SPC, the detail of which will

be discussed in Chapter 5, and the cost of infrastructure-related public works projects to be implemented by Quang

Ninh Province or through ODA, etc.

The development work to be carried out by SPC will be limited within the 250ha industrial zone area and does not

include the construction of the South-North and Coastal Roads and utility infrastructure, such as electricity and water

supply lines, up to the entrance of the area.

3-44

Table 3-13 Project Cost Items Subject to Estimation

Phase 1 Phase 2 and beyond


Coastal Road)

Remarks

Works to be carried out

by SPC

Public works

projects

Land

preparation

◎Earthwork

◎Internal roads

◇South-North

Road

●Additional earthwork,

internal roads

●Coastal Road


telecommunications

◎Water/sewage

●Transmission

line

●Water main

●Additional electricity/

telecommunication

systems

●Additional water/sewage

systems

Building

construction

◎Administrative

building

Construction works to

be done by tenants are

not taken into account.

<Legend> ◎: Included in cash-flow estimation, ●: Not included in project cost, ◇: Not included in estimation

Source: Study Team

Table 3-14 Project Cost (to be borne by SPC)

Unit: millionUSD

Item Amount (million USD)

Land preparation Earthwork, internal roads 62

Infrastructure Utilities (electricity, telecommunications, water/sewage) 36

Construction Building (administrative building) 5

Other expenses 25


Source: Study Team

Table 3-15 Construction Cost of South-North Road

Unit: millionUSD

Item Quantity

Road area (on land) (m2) 353,800

Road unit cost (on land) (USD/m2) 40.0

Road area (over water) (m2) 176,900

Road unit cost (over water) (USD/m2) 79.8

Construction cost of South-North Road (million USD) 28.3

Source: Study Team

3-45

3.3.4 Problems and Solutions

Solutions to the problems identified in the previous section are summarized in the table below.

Table 3-16 Solutions to the Problems of Each Scheme

Common Reclamation, land preparation, roads Utilities Industrial, commercial, residential properties

Legislation

1) Persuade the Vietnamese Government and MPI to formulate detailed regulations in conduction with the revision of related laws, while providing Japanese legislative know-how.

2) Gather forces of all Japanese parties concerned and work as a team to persuade the Vietnamese Government and MPT to accept no-bid contracts proposed by private entities.

1) Select the most appropriate approach by referring to the precedent cases in the southern region, where little trouble was experienced related to land expropriation.

2) Find the developer of the port project to have discussions so that the Port and DNM Area will be developed in a coordinated and harmonious manner.

No problem is foreseen at present.

1) Request the Vietnamese Government and MPT to provide similar incentives to those of the economic zone.

Economy and Finance

1) Divide the project into phases and determine the most appropriate scale for each phase to minimize the need for public funding.

2) Formulate a financial plan based on the use of JICA’s overseas investment loans instead of ODA.

3) Thoroughly investigate potential Vietnamese banks for 2-step loan to avoid

1) Divide the development work into phases, and contain each phase within a scale, in which project risk is manageable, while making modifications to the project plan as needed according to the progress of the infrastructure projects in the surrounding areas.

2) Request QN Province to develop infrastructure facilities in and around the DNM Area and obtain commitment in writing.

3) Notify QN Province that tolls will be collected if an IC is built in the section of HL-HP Highway to be constructed by a

1) Request QN Province to develop infrastructure in and around the DNM Area and obtain commitment in writing.

1) Sites of Phase 1 were chosen to minimize the need for reclamation work. However, if additional expenses are to incur, minimize its impact by changing the construction method and/or land use.

3-46

banks plagued with bad debts.

4) Request the Japanese Government to provide trade insurance or other measures to hedge the currency risk of the project owner.

Taiwanese firm.

Environment and Society

1) Damage by high tides, spring tides, torrential rains, etc. is expected especially when they are combined during monsoon season. Conduct hydraulic/flood analyses at 1 in 30-and 50-year probabilities to examine the need for shore protection works.

2) Proceed with resettlement/expropriation procedures in accordance with the rules of Vietnam, and conduct public consultation at an appropriate timing.

1) Discuss with Vietnamese counterparts regarding environmental protection measures. For instance, if trees are to be cut down in an area, secure an equivalent size area nearby to plant trees.

2) Obtain information from the administrators of the planned underground facilities, and conduct exploratory drilling if necessary.

1) It is essential to build a sewage treatment plant to discharge treated water into the river and bay mouth in compliance with the applicable effluent standard in an appropriate location relative to similar facilities in surrounding areas.

2) It may be necessary to consider constructing intermediate/final disposal sites separately depending on the plans of other areas in Quang Yen Town.

3) Select appropriate sites and construction methods to reduce impact.

1) It may be necessary to consider obtaining laborers from other regions or countries.

2) Japanese side needs to show QN Province model cases, etc. of public housing projects for workers.

3) Actively introduce to the Vietnamese agencies Japanese environmental technologies with proven track records for reducing greenhouse gas emissions.

3-47

Technology and Concept

1) This Project may be able to distinguish itself, as no other Japanese firms are developing an industrial zone in the coastal area.

2) Obtain authorization and approval for the key concepts of the Project by keeping in line with the master plans of upper-level jurisdictions and maintaining close contact with the relevant agencies of Town, Province, and City.

1) Determine appropriate land improvement and construction methods for building structures on land based on the results of geological analysis.

2) Method to expedite the consolidation of soil may need to be employed to find balance between project period and consolidation time.

3) Earth and soil may need to be procured from a faraway place albeit extra cost.

4) Begin the earthwork upon the opening of Bach Dang Bridge.

1) Detailed geological survey is needed to select sites with more stable ground.

2) Determine the most economical water intake point by referring to he intake points of HP City and Quang Yen Town.

1) Request the participation of Japanese firms in the Project through METI, etc.

2) Same as 1).

Source: Study Team

Chapter 4 Evaluation of Environmental and Social Impacts

4-1

4.1 Current Environmental and Social Condition Analysis

4.1.1 Analysis of Current Conditions

(1) Natural environment

DNM (approx. 50km2) is in QY Town situated at the western end of QN Province. It is adjacent to HP City across the

Bach Dang River. Most of the area is in the intertidal zone (brackish waters) south of QY Town and it is partially

divided by the Rut River.

Most part of DNM is covered with thick (20m to 30m) soft coastal and marshy sediment and tidal land of complicated

microrelief caused by erosion due to river flooding and high tide are formed in the wetland.

Although the social development plan M/P compiled by QY Town in 2008 is available as detailed information on the

natural environment of DNM, it is currently being renewed. No environmental impact assessment based on specific

development plan of entire DNM has been conducted. And the most recent information on the area is the EIA report

titled Report of Environmental Impact Assessment, HL-HP Highway Project, 2011, Q.N. that was conducted for the

expressway development project.

The ecological system around DNM is summarized below based on the EIA report.

(i) Fauna and flora

As for fauna, approx. 10 varieties of mammal mainly the rodent and bat are confirmed and such birds as hawks, cranes

and snipes are reported. None of them inhabits the area in group and the population is not understood accurately.

As for flora, no species listed in the Vietnamese Red Data Book is observed.

(ii) Ecosystem in the coastal and river mouth area

Indigenous mangrove forests distribute widely in the intertidal zone in the coastal area. According to QY Town, its total

is approx. two-thirds of DNM. Mangrove forests serve as valuable natural resources as habitats of fish, shellfish and

crustacea. Mangrove was logged and embankment was built also in DNM to build prawn ponds. However, mangrove

forests still remain extensively there. Mangrove forests play a key role of maintaining the ecological system in the entire

region where coastal sediment is found and maintaining regional natural environment by helping control the soil erosion

to be caused by high tides and promoting precipitation of suspended matters for stabilization of the sediment.

4-2

(2) Socioeconomic conditions

DNM is situated in QY Town south to southeast of its center. DNM consists of wetland (natural condition) and land

area that was partially reclaimed and there is a residential area. Because information on socioeconomic conditions only

of DNM is not available without such M/P of socioeconomic and urban development plans, socioeconomic conditions

around DNM are summarized in Table 4-1 based on information from the EIA report (2011) that was conducted for

HL-HP Highway Project.

Table 4-1 Socioeconomic Conditions in 3 Autonomous Areas around DNM (part of QY Town) Autonomous

Area Area (ha) Population Infrastructure Living Environment

Phong Hai Com. (Yen Hung District)

606 8,100 persons 2,078 households

Transportation1.8km-long road (asphalt). 8 bridges (conditions have deteriorated and do not meet DOC standards)

Permanent and semi-permanent housing excluding temporary or run-down housing accounts for 75 %. Main industries are rice production and fisheries.

Irrigation 6.6km-long canal, 20km in length including drainpipe.

Electricity Although electric system is developed, network does not satisfy electricity requirements.

Educational facility

1 kindergarten, 1 primary school and 1 junior high school

Cultural facility

No cultural or sports facility in the area

Market No market

Phong Coc Com. (Yen Hung District)

1,333 7,221 persons 1,561 households

Transportation 11.7km-long local road All of the 1,561 households have tile housing and 1,200 of them meet standards. The majority is made solid with such materials as bricks, cement, mortar and sand. Because of 962.6ha-wide water surface of lakes and Mac gia dong, it is advantageous for aquaculture development. Agriculture and fisheries account for 59.5% of the total production value. Other industries include industry, handicrafts and trade.

Irrigation 26.3km-long ditch as irrigation system

Electricity Although there are 3 substations, new substations need to be built.

Educational facility 3 schools

Cultural facility

No cultural or sports facility in the area. Small cultural facility was built in 6 village.

Market Dinh Quoc Market

Lien Hoa Com. (Yen Hung District)

3,019 8,507 persons 2,069 households

Transportation 3.9km-long main road (asphalt), 4 bridges (concrete but bumpy)

56.7% of housing meets DOC standards. There is one temporary run-down housing building. Because the commune is on coastal plain and convenient for inland navigation, it is advantageous for economic development in agriculture, fisheries and service sector. Economic structure: agriculture, forestry and fisheries account for 64.7%, trade and service account for 27.5%, and industry, handicrafts and construction account for 7.8%.

Irrigation 6.26km-long canal, 20km in total length when collecting and drain pipes are included

Electricity Although electric system is developed, network is not updated and thus does not satisfy electricity requirements.

Educational facility

1 kindergarten, 1 primary school and 1 junior high school

Cultural facility

N cultural or sports facility in the area. There is small cultural facility in one community.

Market Although there are 2 markets, one is temporary.

Source: an excerpt from Report of Environmental Impact Assessment, HL-HP Highway Project, EMAC 2011

4-3

There is no high-rise building or heavy construction in DNM and three-to four-story buildings (public facilities and

buildings) at highest scatter even in densely populated areas. There are several three-to four-m-wide roads in the town

and housing, retail stores and educational facilities concentrate along them. Such infrastructure as electricity, water and

irrigation is developed (there is no sewerage system). Housing of households engaged in agriculture and fisheries scatter

in the wetland away from the densely populated area.

Photo 4-1 Housing scattering in Tien Phong

Source: Study Team

(3) Overview of industry in QY Town

The population of QY Town is several tens of thousand and the primary industry (agriculture and fisheries

(aquaculture)) is the main industry in which more than 90% of working population is engaged. Table 4-2 shows an

overview of industry in QY Town.

4-4

Table 4-2 Overview of Industry in QY Town

Agriculture Overview Working population is 42,600 (2010) and rice accounts for 98% of

production volume. Those engaged in agriculture are required to obtain

business permit.

Main

products

Rice, vegetable, fruit, etc.

Yield 50,960 t/y (rice), 1,040 t/y (other than rice) (2010)

Average

income

16-18mil.VND/y

Fisheries Overview Mainly bay fisheries (mainly aquaculture) and coastal fisheries. Working

population is approx. 11,800 (approx. 6,300 households) and approx. 3,200

(1,900 household) of them are engaged in aquaculture. Private business

operators and corporations are required to file business registration with

finance and planning section and DPI, respectively.

Main

products

Prawn, crab, fish and shellfish (coastal and brackish water zone), etc.

Yield 19,486 t/y (2010)

Average

income

Approx. 36 mil.VND/y

Construction Overview Construction companies and consulting firms, etc., in civil

engineering/construction work, transportation-related infrastructure

development, cultural event businesses. Working population is approx.

1,300.

Business

sector

Investment, transportation, power distribution, water supply,

telecommunications, drainage system, etc.

Annual

order intake

value

1,325,000 mil.VND

Average

income


Shipbuilding Overview Construction and repair of passenger vessel (mid-to small size) and small

freighter. Working population is approx. 500.

Average

income


Water

transportation

Overview Main routes are QY Town-Ha Long and QY Town-Hai Phong.

Source: partial addition of updated information to FY2012 METI survey, Project Survey Report on Bach Dang

Bridge Development over HL-HP Highway in Vietnam

As for the income of working population in QY Town, the minimum wage is 1,400,000VND per month according to

materials compiled by QN Province investment assistance and promotion committee (2011). As shown in Table 4-2, the

annual income (approx. 16-18 mil. VND) of those engaged in agriculture which accounts for the majority of the area is

similar to that of the minimum wage of laborers in Vietnam (Decree No.70/2011/ND-CP, August 22, 2011). The

average income of those engaged in fisheries and construction is about twice as much as that of farmers.

4-5

4.1.2 Future Forecast (if project is not implemented)

DNM is an area where natural coastal environment remains excluding the reclaimed land that was developed for

housing and aquaculture pond. The planned project is development of DNM mainly as an industrial zone. It is expected

to contribute greatly to socioeconomic development of local communities and neighboring HP special city and further

to that of northern Vietnam. However, there is need to find ways to minimize the impact on the current natural

environment and realize sustainable development. Development of DNM requires land reclamation and improvement of

soft ground in the wetland and the foundation construction that includes land reclamation and basic infrastructure

development of the entire area which will require several to over 10 years.

Table 4-3 Environmental Factors and Elements of Sea Reclamation

Environmental Factor

Environmental Element

Work Implementation Existence of Land or Workpiece

Embankment and bank protection

work

Land reclamation

Existence of

reclaimed land

Environmental elements to be studied, predicted and assessed in order to maintain natural environmental components in the environment in good condition

air pollution air dust, etc. ●

noize noise ● vibration vibration ●

water environment

water quality

water pollution turbid water caused

by soil ●

Soil and other

environment

Geography and

geology important geography

and geology

●

Environmental elements to be studied, predicted and assessed in order to secure biodiversity and systematically preserve natural environment

fauna important species and

association and notable habitats

● ●

flora important species and association ● ●

ecosystem Ecological system

that characterizes the area

● ●

Environmental elements to be studied, predicted and assessed in order to secure abundant contact between humans and nature

landscape main outlook and

landscape resources an main view

landscape of prospect

●

contact place of activities of humans and nature

main contact place of activities of humans

and nature ● ●

Environmental elements to be predicted and assessed based on the amount of environmental load

waste, etc. byproduct of construction work ●

Source: Basics of Science of Environmental Assessment edited by Japan Society for Impact Assessment

(Kouseisha-Kouseikaku Corp.)

Table 4-3 is a list of items to be monitored environmentally and socially in development of sea reclamation projects. If

the DNM development project is not implemented, there will be no impact listed in the table on natural environment.

Development project planning requires study of monitoring and measures to minimize the impact.

4-6

4.2 Environmental Improvements Due to Project Implementation

4.2.1 Environmental Improvements Due to Project Implementation

The Project is to develop approx. 50km2 land and around 90% of the target land is an untapped area (baseline). QN

Province aims to develop 1,500ha (15km2) of the land as an industrial zone and develop ports and harbors (warehouses,

including customs facility in some case), commercial and residential areas and public service facilities in other areas

and it plans to formulate a detailed M/P.

Thus, the project that is to develop untapped land in natural conditions that absorbs greenhouse gases is not a project

that is expected to reduce pollutants or greenhouse gas emissions when compared with the baseline. Therefore, there is

need to plan introduction of environmental technologies that are currently in use in Japan as plant construction plans

with environmentally-friendly production, drainage and heat exhaust functions in the detailed planning stage from a

viewpoint of controlling pollutant and greenhouse gas emissions so that the Project can be promoted as one that helps

reduce environmental load in the area by realizing pollutant and greenhouse gas emissions. The

environmentally-friendly plants and functions include the followings:

Plant with co-generation function that enables reduction of fossil fuel consumption

Installation of sealed anaerobic treatment facility in the wastewater treatment process to use it for

decomposition, generation of methane gas and collection of exhaust heat

Introduction of multilayered fluidized incinerators to reduce greenhouse gases emitted in sludge

combustion

Introduction of IT and other various technologies that include rooftop and wall gardening, solar-power

generation and passive design combination to build production facility that helps CO2 reduction and

rational and high-quality energy-saving capacities.

4-7

4.2.2 CDM Applicability

The Clean Development Mechanism (CDM ) allows developed countries (UNFCCC Annex I parties) to implement a

greenhouse gas (GHG) emission reduction project that also contributes to sustainable development in developing

countries (non Annex I parties) through financial and technical assistance and the amount of GHG emission reduction

and sinks to be realized by the project is issued as emission reduction (CER) credits and the countries that implement

the project can earn the credits in whole or in part toward meeting the reduction target of the country. It is stipulated in

Kyoto Protocol (December 1997). Vietnam is a non Annex I party and applicable to CDM projects (ratified in Kyoto

Protocol in December 1998).

The DNM development project will be planned primarily to develop the extensive wetland into an industrial zone. To

be brief, it is to develop an area of abundant vegetation equipped with GHG absorption capacity and it will reduce the

absorption amount. However, the CDM can be applied depending on the use of reclaimed land.

Although it is too early to assume specific CDM project scheme as the land use plan is yet to be formulated, a CDM

project will become more realistic if the technical introduction in the areas below is planned.

There has not been any CDM project in QN Province.

【Technical Areas of Survey Target】

The following is a list of areas in which the Ministry of Environment has conducted F/S:

Source: Global Environmental Center Foundation website

(i) Waste management:

･ Collection and energy use of landfill gas

･ Aerobic treatment of organic waste (composting)

･ Collection and energy use of methane gas by organic wastewater treatment at starch plants, etc.

(ii) Use of biomass:

･ Biomass power generation using such biogenic organic matters as agricultural waste (rice husk, etc.),

thinnings and wood scrap and livestock excreta

･ Production and use of biofuel using plant oil extracted from oil-plants

(iii) Generation of renewable energy:

･ Development and use of renewable energy using wind power, hydraulic power, solar power and other

natural energies

(iv) Energy saving:

･ Conversion into energy-efficient equipment

･ Effective use of waste energy (included in waste gas and exhaust heat) that is not collected

(v) Sinks:

･ Forestation, reforestation, etc.

4-8

4.3 Environmental and Social Impacts Due to Project Implementation

4.3.1 Identification of Items of Environmental and Social Considerations Needed in Future Survey

No environmental impact assessment has been conducted for the DNM development plan and it needs to be carried out

and project permit procedures need to be completed with MONRE (Ministry of Natural Resource and Environment) in

line with the Vietnamese Law on Environmental Protection (2005) for the development. Hearing sessions for the local

residents on the development plan and project contents need to be held along with the procedures.

The table below shows items of environmental and social considerations needed in EIA survey for the DNA

development project with the checklist of JICA Guidelines for Environmental and Social Considerations used as

reference.

EIA has been conducted in DNM for the HL-HP Highway development project. With the assessment results as

reference, the table below is a list of items that need to be surveyed and current status.

4-9

Table 4-4 Items of Environmental and Social Considerations that Need to be Studied and their Current Status

* “Previous EIA” in the table refers to EIA that was carried out (confirmation required) in 2011 for HL-HP Highway development.

Item Items Need

to be Studied

Current Status Possible Countermeasures

1. Pollution

(1) air

○

Although observation results near the

Bach Dan River and Rut River (See

Figure 4-1 for observation points.) in

the previous EIA show the air pollution

is below the Vietnamese environmental

standard level (24-hour observation), it

needs to be measured due to changes in

the surrounding environment (traffic

volume increase and plant construction,

etc.).

Baseline data is insufficient. There is

need to obtain such data as air and

water quality, noise and vibration,

etc., in the next stage, compare it

with monitoring results and examine

measures separately.

(2) water

○

The above applies to water quality.

There is concern over water

contamination due to bridge

construction and it needs to be

measured also to compare it before and

after the construction.

Same as above.

(3) soil

○

There is plan of land reclamation and

ground improvement in DNM and soil

needs to be surveyed to monitor the

impact on surrounding areas.

Pick up possible sites of soil

contamination based on the

development plan and examine

specific measures for each site after

identifying the harmful substances.

(4) waste

○

It needs to be studied for treatment and

disposal of surplus soil, soil and earth,

wood scrap and effluent generated by

civil engineering work (bridge

construction, land development, etc.)

Identify the type and destination of

waste by site based on the

development plan and take such

measures as use of sheet to block

seepage of harmful substances.

(5) noise/vibration

○

They need to be measured to compare

before/during/after reclamation and

development work.

Same as (1).

(6) subsidence

○

There is plan of land reclamation and

ground improvement in DNM and

subsidence measurement monitoring

is needed.

Monitor subsidence from the soft

ground improvement work stage.

Examine possible application of

multiple improvement methods in

accordance with the degree of

subsidence.

(7) foul odor

△

It needs to be surveyed depending on

the DNM development plan.

Pick up sites where foul odor may be

generated in the planning stage and

examine measures for each site from

the preliminary stage.

(8) bottom sediment

○

It is civil engineering work plan (land

reclamation, ground improvement, land

development, etc.) in coastal areas and

before/during/after construction needs

to be monitored.

Monitor the situation to take

necessary measures before

occurrences of irreversible impacts.

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2. Natural environment

(1) nature reserve

△

Although DNM is not designated as

part of national park or reserve

according to information we obtained,

it needs to be studied if the act of

development may affect the reserve

near HP area.

Study how the development affects

nature reserve in and near Hai Phong

specifically and examine

countermeasures in the next stage.

(2) Ecosystem

○

There are mangrove forests and the

ecosystem in the area needs to be

studied. The biosphere around DNM

also needs to be studied.

Examine impacts on mangrove

forests in DNM Area.

(3) Hydrological

phenomena ○

Hydrological phenomena including

past floods and high tides in and

around DNM need to be studied.

Monitor the situation to take

necessary measures before


(4) geography/geology

○

Because the project requires

reclamation and development of

extensive (50km2) wetland, geography,

geology and soil condition need to be

checked.

Currently, information is limited to

10 boring and physical exploration

for the 50cm2. There is need to

improve the geographical and ground

survey density in accordance with

the project plan stage.

(5) vacated lot

management

○

The management body and target

depend on the DNM development

project scheme, management for (soft)

ground monitoring, waste management

and leaching of harmful substances

caused by reclamation need to be

planned.

Monitor the situation to study and

take necessary measures before


3. Social environment

(1) Resettlement of

local residents

△

There is no permanent residents in DNM

and there is no need for resettlement of

such people. However, local residents

who are engaged in aquaculture settle

there seasonally and the project

implementation will require

compensation depending on the yield. .

Study new aquaculture site

development and introduction of

new jobs when the compensation

plan for those engaged in the

business is examined specifically

after the next survey.

(2) Living and

livelihood ○

There is need to monitor the impact of

DNM development on living and

livelihood of local residents in QY

Town.

Business operators and QN

Province continue monitoring and

deal with each individual case.

(3) cultural heritage

△

There is no relic with historical or

cultural values according to information

we obtained. However, there is need to

study them if information is updated and

there are such relics.

If such sites are newly discovered,

necessary procedures will be

performed to properly handle them

based on the Vietnamese law.

(4) landscape

○

It depends on the DNM development

plan (categories of housing/industrial/

commercial, construction regulations,

etc.). Survey and analysis are needed

from the viewpoint of harmony with

surrounding environment.

Formulate development plan that

matches the surrounding landscape

from the land development

planning stage.

4-11

(5) minority and

indigenous people －

There is no minority or indigenous

people there according to information we

obtained.

-

(6) working

environment

(including labor safety) △

It needs to be studied from the viewpoint

of working conditions (safety and health

management, etc.) in the stages of

ground reclamation and improvement

and civil engineering and construction.

If Japanese companies are involved

in civil engineering work, the site

work will be carried out based on

local health and safety management

regulations.

4. Others

(1) impact during work

○

Hearing in advance and monitoring

during construction are needed on the

impact of surrounding natural

environment, laborers involved on the

development project, local residents and

local industry (various businesses

adjacent to DNM, which include

shipbuilding, water transportation, etc.)

on the operation and other impacts from

various viewpoints.

There is need to interview

stakeholders on the indirect

impacts continuingly in addition to

the air and water monitoring.

(2) measures to

prevent accidents

○

Measures to prevent accidents by work

category need to be taken in civil

engineering and construction stages.

Hold safety meetings daily, weekly

and/or monthly including the KY

activity and conduct promotion

campaigns when the work is being

carried out to raise workers’

awareness of prevention of

accidents.

(3) monitoring

○

Various monitoring (air, water,

noise/vibration, subsidence caused by

ground consolidation, leeching of

harmful substances from reclamation

materials) needs to be conducted before,

during and after development work.

Conduct monitoring at certain

places regularly. Study the possible

increase of monitoring locations

and frequency as needed.

Note) ○: survey, monitoring, etc., needs to be conducted, △: Needed depending on development conditions and project

contents

Source: Study Team

4-12

Figure 4-1 Observation Points of Various Each Iindex in Previous EIA

■: Observation points of air, noise and vibration ▲: Sampling points of surface water survey ●: Sampling points of ground water survey ＋: Sampling points of soil component analysis

(Source: compiled based on Report of EIA for HL-HP Highway Project)

Source: Study Team

【Mangrove forest protection measures】

The Project may require extensive logging of mangrove depending on the development area. However, the study is to

examine the layout plan of industrial zones in DNM and specific impacts (logging area, etc.) of the project

implementation on mangrove forests and aquaculture ponds are yet to be assessed.

We discovered in the interview on past development projects involving indigenous mangrove forests with QN Province

that they have no concerted view on the matter. Some said that they planted in the area same as the logged area in past

infrastructure development projects implemented by the province. Some also commented that logging can’t be helped

as it is needed for development projects for the economic growth of the province. It is so true that mangrove forests are

valuable area for biodiversity and there is need to formulate a development plan while respecting their values in

implementing an international cooperation project. In the survey, it is not clear how much of indigenous mangrove

forest area becomes the target project development site. In the following stage, there is need to understand the level of

impact on the forests concretely based on identification of the target area and study concrete measures including

transplantation to different areas.

As for compensation for aquaculture that is directly affected by the development, there is a rule that QY Town supports

those engaged in aquaculture in ponds in the target area finding new business opportunities. The interview result show

that most of local residents approve DNM development and land will be acquired in accordance with the rules.

Although the compensation talks depend on the development plan in the area, it will require about six months. The

compensation is one-time compensation and it is calculated based on the remaining time period of the fishing right at

4-13

the time of land acquisition if the right based on tendering is up to five years. Alternative sites will be prepared when

the land is acquired and occupational training will be provided for those who cannot find the same job in accordance

with a government ordinance.

4-14

4.3.2 Results of Comparison with Other Options that Have Less Environmental and Social Impacts

The DNM development plan will be studied base on the idea that area with bigger economic development impacts will

be selected and development will be conducted gradually. This section introduces comparison results of how selection

of development areas will affect existing surrounding environment based on the current natural and social environments

of DNA.

(1) Current status of project target area

Figure. 4-2 is an excerpt of Yen Hung development plan report provided by QY Town. The red line on the right-side

map shows the embankment built to protect the center of QY Town and its surrounding residential areas and farmland,

etc., from high tides and flooding of rivers. Discharge channels are built along the embankment and culverts and weirs

are built at intervals. They function not only to protect the land from flood and high tides described above but to prevent

entry of salt water (seawater) from outside the embankment to enable cultivation of land inside.

Figure 4-2 Left: Project Area; Right: Bank Protection Enclosing QY Town

Source: partial addition to Figures from General Urban Construction Development Planning of Yen Hung District to

2010, orientation to 2020, Yen Hung District

4-15

The land inside the embankment (red line) is shown in Photo 4-1 (4-3p). The natural environment outside the

embankment differs significantly from inside as mangrove (Photo 4-2) and natural trees and grasses grow in the area.

Photo 4-2 Embankment (left) and Mangrove Forest outside the Embankment (right)

Source: Study Team

(2) Impact on surrounding natural and social environments caused by development area

Comparison results of how the DNM development project will affect existing natural and social environments

depending on the development plan are shown below. Because the development area is likely to differ by road (arterial

road) network to be constructed in the target area, assumable two road network scenarios (road scenarios (i) and (ii)) are

compared.

*The specific development area with main focus on industrial zone development depends on future detailed study and it

is not necessarily either of the scenarios below.

4-16

【Road Scenario (i)】

Road network of HL-HP Highway (under planning) and the new road that runs north-south

(north-northwest-south-southeast) across QY Town crossing at Phong Hai point:

Figure 4-3 Comparison of Development Area (Road Scenario (i))

Left: (i)-A Center: (i)-B Right (i)-C

Source: Study Team

Table 4-6 shows impacts of the development in different areas on the surrounding environment. There is more impact

on the natural environment as the development area outside the existing embankment (in red line) becomes wider.

Table 4-5 Impacts of Development in Different Areas on Surrounding Environment (Road Scenario (i))

*The comparison is limited to that of impacts on the surrounding environment.

Development Area (i)-A (i)-B (i)-C

Area size (relative

comparison) small large medium

Impact on natural

environment

Development inside the embankment will cause almost no impact on indigenous mangrove forests, etc.

The entire development area is outside the existing embankment and thus it will have great impact on indigenous mangrove forests.

Indigenous mangrove forests grow outside the southern embankment and thus it causes great impact on the natural environment.

Impact on residential

area

Development near densely populated areas requires resettlement of residents and land acquisition. Environmental measures and monitoring based on detailed survey on impacts on residential area may be required depending on development contents.

There is no permanent settler in any of the area and thus the development will not require resettlement of residents.

Development near densely populated areas may require resettlement of residents and land acquisition. There is no permanent residents in the wetland in the southern part.

Legend

HL-HP Highway Project site

New route (assumption) Densely populated area

Interchange Development area

4-17

Impact on agriculture

It will significantly affect agriculture as it is mostly developed as farmland.

Aquaculture ponds cover an extensive area of the southern part of QY Town and thus the development will have little impact on agriculture.

Farming activities are carried inside the embankment in the densely populated southern part and the development will affect them.

Impact on fisheries

(aquaculture)

Although some aquaculture is performed inside the embankment, it is not likely to have any major impact.

Aquaculture is active particularly western and southern DNM and it will significantly affect it.

Aquaculture is active in the southern edge of the area and the development will affect it.

Source: Study Team

【Road Scenario (ii)】

Development is planned along a new road that is connected at the interchange of HL-HP Highway (under planning) and

DNM wetland (at approximately 5km from the end of Hai Phong side):

Figure 4-4 Comparison of Development Area (Road Scenario (ii))

Left: (ii)-A Center: (ii)-B Right: (ii)-C

Source: Study Team

Because the development is away from densely populated areas in the scenario, it will have no major impact of

resettlement of residents, etc. However, the development will involve vast untouched natural environment.

Legend

HL-HP Highway Project site

New route (assumption) Densely populated area

Interchange Development area

4-18

Table 4-6 Impacts of Development in Different Areas on Surrounding Environment (Road Scenario (ii))

*The comparison is limited to that of impacts on the surrounding environment.

Development Area (ii)-A (ii)-B (ii)-C

Area size (relative

comparison) small large medium

Impact on natural environment

The development is mostly inside the existing embankment. Although it will not affect indigenous mangrove forests, etc., inside it, it will have some impact outside it.

Most of the development is outside the existing embankment and thus it will have great impact on indigenous mangrove forests.

Indigenous mangrove forests grow in the area and thus it causes great impact.

Impact on residential area

There is residential area inside part of the embankment and it will involve resettlement and land acquisition although the number of applicable households is small.

There are permanent residents in part of southern Phong Hai inside the embankment. There is no other permanent residents in other areas.

Although there are permanent residents in part of inside the embankment, the number of households is small. There is no permanent resident in most areas.

Impact on agriculture

Farming activities (mainly rice paddies) are carried out inside the embankment and there will be some impact, although it is not significant.

Aquaculture ponds cover an extensive area of the southern part of QY Town and the affected farming area will be small although there is little impact on agriculture

Most areas are outside the embankment and thus the development will have little impact on agriculture.

Impact on fisheries

(aquaculture)

Although some aquaculture is performed inside the embankment, it is not likely to have any major impact.

Aquaculture is active particularly western and southern DNM and it will significantly affect it.

Aquaculture is active in the southern edge of the area and the development will affect it.

Source: Study Team

4-19

4.4 Overview of Vietnamese Laws and Regulations on Environmental and

Social Considerations and Measures Necessary for their Compliance

4.4.1 Overview of Vietnamese Laws and Regulations on Environmental and Social Considerations related to Project

Implmementation

(1) Vietnamese legal system

The legal system in Vietnam comprises the levels of regulations below with the constitution formulated by the

Parliament as the supreme regulations. (Reference: Betonamu Kankyo Hogoho wo Yomu)

(i) Constitution (Hiến pháp) formulated by the Parliament

(ii) Law (Luật) (same as above)

(iii) Decree (Nghị định) equivalent to government decree in Japan)

(iv) Prime minister’s decision (Quyết định) decided by Prime Minister

1. Brevity code example) Decision No.64/2003/QD-TTg

2. Decision No. 64 in 2003. QD means “decision” and TTg means “Prime Minister.”

(v) National technical standards (QCVN)

(vi) Resolution (Nghị quyết) issued by standing committee of the Parliament

(vii) Circular (Thông tư) issued by ministers

(2) Law on Environmental Protection

Vietnamese Law on Environmental Protection (hereinafter referred to as “LEP”) was enacted in 1993 as a law

comprising 55 articles and enforced in 1994. It was revised for the first time in 2003 and the number of articles added

significantly from 55 to 136 in the revision in November 2005 (52/2005/QH11) and the revised law that was enforced in

2006 is currently in effect. Although there was move to revise it again in 2013, it has not been revised yet as of

November 2013.

In 2006, Decree No. 80/2006/ND-CP and Decree No. 81/2006/ND-CP were put into effect as the enforcement

regulation of the law and penalty, respectively. The Decree No. 80/2006/ND-CP was partially revised in Decree No.

21/2008 and it revised some articles of revisions of enforcement regulation of LEP (2005).

The LEP stipulates specific obligations of report compilation of environmental impact assessment and environmental

obligations including water, air, waste and other environmental media as well as waste management imposed on each

entities including organizations (business operators, etc.), families, and individuals. The law stipulates rules on a wide

range of general environment-related areas and it can be said that it is a combination of separate laws including the

Environmental Basic Act, Air Pollution Control Act, Water Quality Pollution Control Act, Wastes Disposal and Public

Cleansing Act, and Noise Regulation Act in Japan. It also provides regulations of each sector and defines air pollution,

noise and vibration regulations as part of waste management.

4-20

4.4.2 Vietnamese EIA and Other Measures Necessary for Project Implementation

The contents of environmental impact assessment (EIA) are provided as below in the Law on Environmental Protection

Article 20. The EIA is required to be performed again when the situation falls into the following cases even if the

request for project permit is completed:

a) when the project site changes,

b) when the project is not commenced within 36 months after construction permit after EIA is issued,

c) when changes of the project scale and operational technology are determined to increase environmental load.

Table 4-7 Contents of EIA Reports (Source: Article 20 of the Law on Environmental Protection of Vietnam)

1 Enumeration and detailed description of the project’s construction components, construction area, time and workload; operational technology for each component and the entire project.

2 Overall assessment of the environmental status at the project site and neighboring areas; the sensitivity and load capacity of the environment.

3 Detailed assessment of possible environmental impacts when the project is implemented and environmental components and socio-economic elements to be impacted by the project; prediction of environmental incidents possibly caused by the project

4 Specific measures to minimize bad environmental impacts, prevent and respond to environmental incidents.

5 Commitments to take environmental protection measures during project construction and operation.

6 Lists of project items, the program on management and supervision of environmental issues during project implementation.

7 Cost estimates for building environmental protection works within the total cost estimate of the project.

8 Opinions of the commune/ward or township People’s Committees and representatives of population communities in the place where the project is located; opinions against the project location or against environmental protection solutions must be presented in the environmental impact assessment report.

9 Citation of sources of figures and data, assessment methods.

Source: Study Team

4-21

Figure 4-5 Flow Chart of Request for Environmental Impact Assessment (EIA) Appraisal

Source: Study Team based on No.29/2011/ND-CP

Preparation of EIA report

Dossier of request for EIA appraisal ①EIA appraisal, written request for appraisal ②EIA report ③Investment plan (F/S report)

EIA report appraisal -Projects to be approved by MONRE Ordinary: 45 days Complicated projects: 60 days - Projects to be approved not by MONRE Ordinary: 30 days Complicated projects: 45 days

Reproduction of EIA report and re-request

EIA report completion, request for approval

If not approved

If approved

Notice of appraisal results from MONRE, etc.

Notice of appraisal results from MONRE, etc.

Approval of EIA report by MONRE, etc. (within 15 days)

Completion of supplementary EIA report

Request for approval of supplementary EIA Preparation for EIA report appraisal by MONRE, etc.

(30 days)

*if supplementary EIA is required

4-22

4.4.3 Time and Duration of EIA, Area and Contents of Survey, and Necessary Measures Predictable in Survey Stage

Land development projects in Vietnam require strategic environmental assessment (hereinafter referred to as “SEA”)

and environmental impact assessment (hereinafter referred to as “EIA”) in the survey stage. Whether the environmental

assessment is carried out or not depends on the scale and contents of the project and its impact on the socioeconomic

development of the neighboring area or Vietnam. We received a view that the project does not require SEA from

MONRE and DONRE. Because the entire DNA is located in QN Province, the development does not make nationwide

contribution although it has great contribution to the local economy, and the area is not designated as a special

economic zone, EIA is sufficient enough as environment impact assessment.

We confirmed in the interview with DONRE that the EIA survey is mostly conducted in terms of its time and duration

and area and contents as summarized below.

【EIA survey】

Time: In Pre F/S stage or before or after it (after project plan approval) See 4-21P Figure. 4-7.

Duration: approx. 4 to 6 months (Note 1)

Area: All areas of project site (50km2) (Note 2)

Contents: Table 4-15 Items of Environmental Impact Assessment (See 4-16P.)

Note 1: it is estimated from the target area based on the response that EIA survey of Ha Long-Hai Phong Expressway

required approx. three months.

Note 2: Although a plan of step-by-step area development is being studied currently, EIA of the entire project area is

carried out first and detailed assessment survey is later conduced for the area where the project is

implemented in an early stage based on the project plan in some cases according to DONRE. Thus, it covers

the entire project area.

We did not receive any notable comment on specific measures that can be needed in the survey stage in interview with

DONRE and QY Town. However, DNA development includes areas where resettlement of residents and land

acquisition are needed. Partly because we received a comment that there are national standards and provincial and city

regulations on the process and resettlement of residents and land acquisition are carried out through public-private

collaboration at this point when a new PPP law is yet to be formulated, the project operator needs to collect and sort out

such standards, etc.

As untouched natural environment remains extensively in the project site of DNM, it is necessary to begin confirming

survey items and methods in detail in order to prevent missing of items in EIA.

4-23

4.5 Matters Needed to Clarify for Projec Implementation

4.5.1 Matters Needed to Clarify for Projec Implementation (Implementing and other Concerned Agencies)

DNM is wetland covering an area of approx. 50 km2 with thick sediment situated in the brackish waters at the mouth of

the Bach Dang River. Most of the area is untouched with no significant development with some prawn aquaculture

development in the southern part of the wetland.

Figure 4-6 Past M/P that includes DNM (2008)

Source: PT material: General urban construction planning of Yen Hung District to 2010, orientation to 2020. Quang

Ninh Province

The survey on Bach Dang bridge development over Ha Long-Hai Phong Expressway in Vietnam as FY2012

infrastructure system and import promotion survey project (survey on infrastructure project formation based on yen loan

and private-sector vitality) provides a report on natural and ecological status of DNM that no precious flora and fauna

that requires protection under Vietnamese laws or international treaties has been observed. On the other hand, such

attention needs to be paid as formulation of development plans based on full understanding of the current status of

surrounding natural environment as there are indigenous mangrove forests are located there. There is no permanent

resident in DNM according to the interview with QY Town. Of households that are members of any of five labor unions

that manage and operate aquaculture, local residents who obtained the right to operate the business in tender are

engaged in prawn aquaculture. They have their permanent residence at a separate place in QY Town and they operate

aquaculture only in the period they operate aquaculture activities in DNM.

M/P survey for the development plan of Yen Hung (administrative zone 1 in QN Province) including DNM was carried

out in 2008. However, no development of DNM is launched in accordance with the plan and priority should be given to

the updating of the M/P. (See Figure. 4-6.)

4-24

(1) Updating of master plan (M/P)

DNM is wetland situated in Yen Hung District in QN Province, adjacent to HP City across the Bach Dang River. DNM

development plan will contribute to socioeconomic development of the district when it is consistent with the emergence

of new local traffic network as a result of opening of Bach Dang Bridge and future development plan of QY Town in

the northeast. Thus, the existing M/P needs to be updated soon.

(2) Strategic environmental assessment (SEA) and environmental impact assessment (EIA)

The environmental impact assessment below is required to be carried out in Vietnam to implement large-scale projects.

(i) Strategic Environmental Assessment (SEA)

It is to analyze and estimate the impact of development before the approval of the development plan.

【Projects that require SEA】

a) Strategies and plans on national socioeconomic development

b) National development strategies and plans

c) Socioeconomic strategies and plans of provinces and centrally-run cities

d) Land use, forest protection and development and exploitation and use of other natural resources on

inter-provincial or-regional scale

e) Development plans of key economic zones

f) Inter-provincial river basin plans

(ii) Environmental impact assessment (EIA)

It is to analyze and estimate environmental impact caused when the project is implemented.

【Projects that require EIA】

a) Nationally important projects

b) Projects using land of nature reserves, national parks, historical/cultural relics, natural heritages and scenic places

or projects that cause adverse impacts

c) Projects that may have adverse impact on river basins, coastal areas and protected ecosystem

d) Projects to build infrastructure in economic zones, industrial complexes, hi-tech parks, export-processing zones

and traditional craft villages

e) Projects to build new urban centers and dense residential areas

f) Projects that use a large amount of natural resources or ground water

g) Other projects that may adversely affect the environment

Request for project approval needs to be submitted to the Ministry of Natural Resources & Environment (MONRE)

after SEA and EIA to obtain approval on the development.

4-25

(3) Project plan approval and F/S, etc.

As shown in Figure.4-7, the DNM development plan will proceed as follows: (i) M/P formulation (updating of

existing development plan, described above, (ii) formulation of project plan, (iii) project plan approval by DPI

(Department of Planning and Investment), (iv) F/S, (v) arrangement for land lease, (vi) land purchase, and (vii) land

development. BT (Build-Transfer) is the likely scheme of the development project and Figure. 4-7 shows

responsibilities of Vietnam (A) and project executor (B) in each process.

Figure 4-7 Flow of DNM Development Project

Source: Created by the Study Team based on confirmation of Quang Yen City

As shown below, main responsibilities of Vietnam for the project realization are (iii) approval of DNM development

project plan formulated by the project executor and F/S (feasibility survey) in addition to (1) and (2) described above.

Table 4-8 shows what Vietnam and project executor should do related to environmental and social considerations for

project realization not only before the project launch but also during the construction and operation stages in terms of

environmental and social considerations.

Table 4-9 in the following page is a list of possible responsibilities of QN Province and project executor for the

promotion of the project that is designed in PPP scheme with interview in the field study as reference although QN

Province is currently preparing for the enactment of the PPP law and the responsibilities of the two parties are not

defined clearly. We did not confirm the responsibility sharing with QN Province in the study.

Mas

ter

Pla

n P

rep

arat

ion

Pre

par

atio

n o

f P

roje

ct P

lan

A

pp

rova

l of

Pro

ject

Pla

n

Con

du

ct F

/S

A

rran

gem

ent

of

lan

d le

ase

L

and

pu

rcha

se

L

and

d

evel

opm

ent

Vietnam

Business Operators

(i) (ii) (iii) (iv) (v) (vi) (vii)

4-26

Table 4-8 Responsibilities of Vietnam and Project Executor for Comprehensive DNM Development Project

Item Vietnamese obligations

Obligations of project operator

Planning stage

Formulation of master plan (M/P) ○

Formulation of project plan ○

Environmental impact assessment (EIA) ○

Project approval procedures ○

Feasibility study (F/S) ○ △

Explain to local communities and residents ○ △

Before project launch

Survey, geological survey ○ Plan of land reclamation, development, and improvement of soft ground ○

Lad acquisition, arrangement for land lease ○ Arrangement for resettlement of residents(including compensation) ○

Additional cost in case of delay of resettlement of residents, etc. ○

Explaining of construction overview to local communities △ ○

Respond to residents’ request and lawsuits ○ △ Additional cost due to extension of construction period due to force majeure (unexploded bomb, flood, etc.)

○

Formulation of measures against air pollution, noise and vibration, and coastal and river pollution

○

Designation of proper sites to acquire embankment material ○

Formulation of waste treatment plan (construction waste) △ ○

Transfer of buried matters ○

Construction stage

Land reclamation, development, and improvement of soft ground ○

Environmental monitoring during construction ○ Subsidence measurement (anti-subsidence measures) ○

Traffic control around construction site ○

Site safety/quality control ○ Implementation of measures against air pollution, noise and vibration, and coastal and river pollution

○

Waste treatment (construction waste) △ ○

Environmental improvement around soil pit ○ Measures against traffic accidents involving construction work vehicles ○

Study and implementation of measures to minimize impacts on tourism resources ○

Operation stage

Monitoring and renovation of basic infrastructure ※dependence on DNM management plan

○

Response to impacts on surrounding area caused by land reclamation, development, and improvement of soft ground

○

Monitoring of surrounding environment ○

Source: Study Team

Chapter 5 Financial and Economic Evaluation

5-1

5.1 Total Project Costs

5.1.1 Phase 1

This Project consists of the project to develop an industrial park undertaken by the SPC described later and a public

work for improvements of the surrounding areas undertaken by Quang Ninh Province or financed by an ODA or other

budget.

The project undertaken by the SPC will cover the area of 250ha for the industrial park only, excluding the cost of

electricity, water supply and other utility infrastructure for the north-south road, coastal road and access roads to the

entrance to the town block.

The project cost is calculated in principle by multiplying basic units by area or according to the demand.

The basic units will be set out in four categories: land creation, roads, utility (electricity, telecommunications and water

supply and sewerage) and building (administrative building). Because a municipality-affiliated corporation engaging in

urban environment is commonly in charge, the cost of waste treatment will be excluded from the coverage of the project

for the industrial park.

The basic units for land creation and roads account for a large part of the total project cost and thus will be set out in

accordance with the results of field boring surveys and other factors. Those for utilities will be set out in accordance

with hearings to companies operating industrial parks in Vietnam, and business operators and other parties involved in

construction of industrial parks. The basic unit for constriction will be set out according to information in the public

domain.

5-2

Table 5-1 Estimated Overall Project Cost

Cost Phase 1 Phase 2 and beyond


Coastal Road)

Remarks

Works to be carried

out by SPC

Public works

projects

Land

preparation

◎Earthwork

◎ Internal roads

● South-North

Road

◇ Additional earthwork,

internal roads

◇ Coastal Road


telecommunications

◎ Water/sewage

◇ Transmission

line

◇ Water main

◇ Additional electricity/

telecommunication

systems

◇ Additional

water/sewage systems

Building

construction

◎Administrative

building

・Construction works to be

done by tenants are not

taken into account.

Legend: ◎: Undertakings subject to cost calculation up to the cash flow;

●: undertakings subject to cost calculation; and ◇ undertakings outside the coverage

Source: Study Team

(1) The scope of the project implemented by the SPC

A. Land creation

The basic unit for land creation in Phase 1 has been set at 23.3USD/m2 in light of the ground subsidence level,

necessary amount of earth for filing, etc. obtained from field boring survey data and other sources.

B. Roads (on the premises)

The basic unit for roads in Phase 1 has been set at 40.0USD/m2 in light of the ground subsidence level, necessary

amount of earth for filing, etc. obtained from field boring survey data and other sources.

The land preparation cost has been made the sum of land creation and road, and calculated by:

Basic unit for land creation x (total area of industrial park - road area) + basic unit for roads x road area.

C. Utility (electricity, telecommunications, and water supply and sewerage)

The basic unit for electricity and telecommunications has been set at 12.5USD/m2 according to hearings to utility

makers, and other parties.

The basic unit for use of water supply and sewerage plants has been set at 29USD/m2 according to the specifications of

a number of industrial parks in Northern Vietnam, and that for construction of such plants has been set at 700USD/m2

according to hearings to utility makers and other parties.

5-3

The cost of infrastructure work has been calculated by:

Basic unit for electricity x total area of industrial park +

basic unit for water supply and sewerage x basic unit for use x total area of industrial park.

D. Building (administrative building)

The building subject to the SPC project is basically for the administrative office of the company operating the industrial

park and small offices for rent. The total floor area has been set at 5,000m2. “Vietnam Quarterly Construction Cost

Review Q2/2013: August 2013” (LangdonSeah) sets the unit construction cost for office buildings on the project site on

a publicly announce base at 775USD/m2. But taking into account the fact that the ground of the project site is weak

foundation, the basic unit for construction here has been calculated by multiplying the above unit cost by a premium

coefficient (x1.2); that is, 930USD/m2.

Hence, the construction cost is calculated by:

Basic unit for construction x floor area x premium coefficient.

E. Other expenses

For other expenses, five items-land cost, interest incurred prior to business commencement, business commencement

expenses, expenses of survey, designing and planning, and value-added tax-are taken into account.

As for land cost, the unit cost has been set at 7.5USD/m2 by referring to the cost in the project for Bach Dang Bridge,

and it is assumed, in light of the presense of swamp, etc., that the cost will be incurred for 50% of the area covered by

the project. The interest incurred prior to business commencement is determined in accordance with the ratio of

borrowing to the total cost at the interest rate of 14%. The business commencement expenses have been set at 3% of the

infrastructure and construction cost; the expenses of survey, designing and planning at 10% of the infrastructure and

construction cost; and the value-added tax at 10% of the sum of the infrastructure and construction cost and the

expenses of survey, designing and planning.

Table 5-2 Project Cost (for Part Implemented by the SPC)

Unit: millionUSD

Item Amunt

Land preparation cost Land creation and roads (on the premises) 62

Infrastructure

construction cost Utilities (electricity, telecommunications, and water supply and sewerage) 36

Construction cost Building (administrative building) 5

Other expenses 30


Source: Study Team

5-4

5.1.2 Undertakings That Should Be Desirably Implemented with Phase 1

The cost of developing the north-south road necessary to secure access to the industrial park is shown below.

A. Development cost of the north-south road

This section outlines the development cost of the north-south road of approximately 8.8km to secure easy access from

the HL-HP Highway to the project site.

The road will begin at the intersection with the HL-HP Highway and end at the opposite side of the Lach Huyen Port.

This planned road length includes aquaculture ponds and other water surfaces (swamp) that require additional land

creation costs. But the precise area is uncertain, so the ratio of water surface has been set at a half of dry land. The

government of Quang Ninh Province clearly states that it will develop this north-south road on its own, so that it is

assumed that the development of the road will not be included in the SPC project but will be undertaken by Quang Ninh

Provinc.

The method of connecting the north-south road to the Lach Huyen Port will be determined under mutual consultation

between the city of Hai Phong and Quang Ninh Province, and the province apparently takes into account the

construction of underground tunnels crossing the watercourses.

Table 5-3 Development Cost of the North-South Road

Item Amount

Road area (dry land) (m2) 353,800

Basic unit for roads (dry land) (USD/m2) 40.0

of which, civil engineering work (USD/m2) 22.0

Processing of weak ground (USD/m2) 18.0

Road area (water surface) (m2) 176,900

Basic unit for roads (water surface) (USD/m2) 79.8

of which, civil engineering work (USD/m2) 33.7

Processing of weak ground (USD/m2) 46.1

Development cost of the north-south road (million USD) 28.3

Source: Study Team

5-5

Figure 5-1 Statement of the North-South Road in Sources Held by the Vietnamese Ministry of Construction

Source: General urban construction development planning of Yen Hung District to 2010, orientation to 2020.

YEN HUNG District, QUANG NINH Province p.163 (Vietnam Institute of Architecture and Planning–Ministry of

Construction, 2008)

B. Power transmission line and water supply pipes

Power transmission line will cost almost nothing because of the presence of the 110kV-transmission line near the

construction site of the industrial park. Water supply pipes, on the other hand, will be outside the scope of the project

cost calculation because the Survey this time was unable to obtain information about water intake points.

60.0m15.0 10.5 4.0 3.0 5.0 10.5 4.0 3.0 5.0

Central median 3-lane road Bicycle lane

Sidewalk

3-lane road Bicycle lane

Sidewalk

5-6

5.1.3 Phase 2 and Afterwards

The total project cost has been estimated for the area of 3.221ha which is to be developed by Quang Ninh Province and

EZA: that is the total development area of 4,675ha presented in Chapter 3 except the northern part of Dam Nha Mac. It

has been estimated by adjusting the Figure calculated in the FY2012 “Study on the development of Bach Dang bridge

on HL-HP Highway in the Socialist Republic of Vietnam”0F3 to meet the area covered by the project in this fiscal year

as shown in Table 5-1. The cost will be made more accurate by examining various conditions when the conditions of

Phase 2 and afterwards are examined in more detail. At the moment, however, it is assumed that the infrastructure

development cost is 1,306 million USD and the construction cost is 5,954 million USD: the total project cost is assumed

to be 7,260 million USD.

For the land preparation cost (land creation and roads), the unit cost of land creation has been set at 28.0 USD/m2 and

that of road construction at 48.0 USD/m2, which has been calculated by multiplying the unit cost set out in Section 5.1.1

by a premium coefficient (x1.2) to take into account the fact that most of the development area in Phase 2 and

afterwards is weak ground. Meanwhile, the “Vietnam Quarterly Construction Cost Review Q2/2013: August 2013”

(LangdonSeah) has been used to estimate the construction cost.

Table 5-4 Areas of Individual Zones

Zone Total area (ha)

Intended purpose

Urban and commercial zonesCommercial and residential zones

662.5

Commercial complex including, residences, offices, and hotels; complex facilities including international exhibition halls, and educational and exhibition facilities; educational facilities; parks; open spaces; and roads

Industrial and logistics zones

1,625.0 Industrial parks, green space and parks, and roads

Others 196.0 Existing settlements, dry and wet fields, etc.

Green space and water surface

404.0

Roads 334.0 Main arterial roads and inter-cluster access roads

Total

3,221.5

Source: Study Team

3 “Technical and Economic Study for Construction of Bach Dang Bridge on HL-HP Highway in Vietnam”, Study on

Economic Partnership Projects in Developing Countries in FY2012, pp.3-108、February 2013

0

5-7

Table 5-5 Infrastructure Development Cost

Unit: million USD

Item Amount

Land preparation cost (land creation and roads) 800

Infrastructure development cost (utilities) 330

Others 176

Total project cost 1,306

Source: Study Team

Table 5-6 Construction Cost

Unit: million USD

Item Amount

Residences (including housing complexes and vacation

condominiums)

1,821

Commercial facilities (including hotels and offices) 4,016

Educational facilities (including primary and secondary schools,

research institutes and cultural facilities)

85

Industrial park 32

Total project cost 5,954

Source: Study Team

5-8

5.2 Economic and Financial Analysis

5.2.1 Preliminary Financial Analysis

This section calculates FIRR and FNPV based on the amount of investment in the project and the balance of payments

during the project term, rather than on the fund-raising scheme.

(1) Revenue plan

The income source contributing to the project the most is sales of land lots for plant construction. The unit price has

been set at 90USD/m2 in light of the market rates applied to the surrounding industrial parks and in order to attract

heavy industries which are not yet common in Vietnam. According to the findings of surveys conducted by JETRO and

hearings conducted by the Study Team, the unit price of industrial parks near Haiphong is normally 50-60USD/m2 in

cases where local companies were responsible for development and operation, and 70-100USD/m2 in cases where

Japanese or other foreing affiliated companies were responsible.

Many of them, however, are located inland, so the availability of sites that are reasonably close to urban cities and

usable for factories of heavy industries is limited. In fact, there are few industrial parks close to harbors and ports in the

northern Vietnam except for Dinh Vu Industrial Zone in Haiphong city. Thus, care must be taken when comparing the

sales prices of lots in the industrial park to be built with those in industrial parks for processing and assembling plants

located inland. Moreover, there are quite a few industrial parks in neighboring countries, where the unit price of land

lots is above 100USD/m2, so the price set here, 90USD/m2, is considered to be reasonable enough to secure

competitiveness in Asia. Meanwhile, because the current legal system does not allow the private sector to own land,

“sales of land lots” actually means the sales of the right to use land for 50 years.

It has been planned that 10% of land lots for sale will be sold each year from the first fiscal year and the sales will be

completed in the tenth year. The assumption is a somewhat conservative setting based on actual performance of sale of

land lots. In the case of a recent Japanese-capital industrial park in the northern Vietnam, for example, almost all the

land lots for sale were sold in six years or so.

Companies moving into the industrial park will pay the electricity charges directly to the EVN and also be charged the

connection fees to the electricity infrastructure within the industrial park.

They will also be charged for water supply and sewerage, as well as the administration fees necessary for the

management and operation of the industrial park.

5-9

Table 5-7 Sales price of industrial complex set by surrounding countries

Country City Industrial complex (land)

purchase price (USD/m2) Remarks

China Beijing 72～87 Beijing Economic Technical Development

Zone

China Shanghai 143～167 Shanghai Jiading Industrial Zone

Malaysia Kuala Lumpur 67 Westport/Pulau Indah (70km from KL)

Indonesia Jakarta 180 Greenland International Industrial Center

Thailand Bangkok 144 Amata Nakorn Industrial Estate

Philippine Manila 122 Laguna Technopark (45km from Manila)

India New Delhi 91 Bawal Industrial Estate (90km from Delhi)

India Chennai 157 Mahindra World City Industrial Park

Source: Comparison of investment-related costs in major cities and regions of Asia and Pacific regions in 2013

Table 5-8 Revenue Plan

Unit: million USD for items with specific unit given

Item Amount

Sales of land lots (plants) 180

Unit price (USD/m2, 50 years) 90

Area of land to be sold (m2) 2,000,000

Revenue from electricity (annual) 0.001

Connection fee (USD/kWh, year) 0.015

Electricity consumption rate (kWh/ m2) 0.042

Revenue from water supply (annual) 1.7

Water charge (USD/m3) 0.71

Water consumption rate (m3/ha, day) 40

Revenue from sewerage treatment (annual) 1.4

Sewerage charge (USD/m3) 0.73

Sewerage treatment rate (m3/m2, year) 32

Administration fee (annual) 1.7

Administration fee rate (USD/m2) 0.85

Total current revenue (electricity + water supply + sewerage + administration fee) 4.8

Source: Study Team

5-10

(2) Expenditure plan

The land rental fee has been set nil since it is provided free of charge by Quang Ninh Province. It has also been assumed

that the cost of land expropriation is nil since the province in principle bears it.

The facility operating costs have been assumed to consist of labor cost of regular workers, operating cost (annual

revenue x 4%), maintenance cost (annual revenue x 5%), non-life insurance premium (project cost x 0.1%), advertising

expenses (annual revenue x 1.5%) and miscellaneous expenses (annual revenue x 3.0%). The labor cost of regular

workers is based on workforce of 13 workers at the managerial level and 27 workers at the engineering level, while

there wages are assumed to be 1,100 USD/month for the former and 315 USD/month for the latter according to the

“Status Survey on Activities of Japanese Companies Operating in Asia and Oceania” reported by JETRO.

The large-scale repair cost will be recorded in the 15th year as 50% of the cost of infrastructure work.

Table 5-9 Expenditure Plan

Unit: million USD

Item Amount

Land rental fee 0.0

Facility operating cost 1.0

Labor cost of regular workers 0.3

Operating cost 0.2

Maintenance cost 0.2

Non-life insurance premium 0.1

Advertising expenses 0.1

Miscellaneous expenses 0.1

Total current expenditure 1.0

Large-scale repair cost 18.2

Source: Study Team

(3) Inflation rate

The National Center for Socio-Economic Information and Forecast estimates the inflation rate in 2013 at 7%. The

average inflation rate in the previous 10 years exceeds 10%, but the rate has been below 10% throughout 2013, so the

rate has been set at 7%.

Table 5-10 Inflation Rate in the Previous 10 Years in Vietnam

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

8.90% 3.20% 7.70% 8.30% 7.50% 8.30% 23.0% 6.90% 9.20% 18.60% 9.20%

Source: Study Team

5-11

(4) Calculation of FIIR and FNPV

FIRR calculated by using the project cost and pre-tax current net income only is 9.22%, which exceeds the long-term

interest rate in the previous 10 years, 7-15%, while FNPV is above zero. Thus, the project is considered to be worth

investment at least at the time of the preliminary study.

Calculation of FNPV, on the other hand, requires the setting of a discount rate, which has been calculated by the

formula: risk-free rate +β x market risk premium. The risk-free rate has been set at 10.07% according to the Japan Bank

for International Cooperation, and β-value and the market risk premium at 1.257 and 5.0%, respectively, according to

the real estate market in Japan. The discount rate is 16.36%, and, accordingly, FNPV amounts to -135.4 million USD.

Table 5-11 Calculation for Preliminary Financial Analysis

Table 5-12 Results of Preliminary Financial Analysis

Results of analysis

FIRR 17.05

The lowest long-term interest rate in the previous 10 years in Vetnam (Jan. 2014) 7.00%

The highest long-term interest rate in the previous 10 years in Vetnam (Jan. 2014) 15.00%

FNPV(millionUSD) 4.3

Source: Study Team

5.2.2 Preliminary Economic Analysis

This section quantitatively analyzes the impact of the project implementation on the economy and society. More

specifically, the section estimates employment generated as a result of establishment of plants and the subsequent

increase in consumption, before computing EIRR and ENPV.

Operating income

Operating expense

Operating profit Ordinary profit Net income before provision for income taxes

Labor cost of regular workers

Operating cost

Maintenance cost Non-life insurance premium

Advertising expenses

Miscellaneous expenses

1st year 2nd year 3rd year 4th Year 5th Year 6th Year 7th Year 8th Year 9th Year 10th Year 11th Year 12th Year 13th Year 14th Year 15th Year

1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year 11th year 12th year 13th year 14th year 15th year

Construction period

Sales

Industry Electricity, water supply and sewerage

Administration t

Facility operating cost

Large-scale repair cost

Preliminary CF Preliminary FIRR Preliminary FNPV Long-term interest rate (Jan. 2014) The highest long-term interest rate in the previous 10 years (Nov. 2011)

Construction period

5-12

(1) Calculation of consumption propensity

Calculation of consumption expenditures from wages requires consumption propensity, which has been calculated as

follows according to personal consumption expenditure and gross domestic product of Vietnam.

Table 5-13 Consumption Propensity

Unit: billion VND

Personal consumption expenditure (2011) 1,630,143

Gross domestic product (2011) 2,535,008

Consumption propensity (β) 64%

1/ (1-β) 280%

Source: Study Team according to data from the General Statistics Office of Vietnam

(2) Consumption expenditure as a result of employment creation due to company establishment

It is believed that most workers in the industrial park will be the working class. The compound wage per worker has

been calculated by setting the ratio of the working class to the engineer class at 9:1. The wages are based on the “Status

Survey on Activities of Japanese Companies Operating in Asia and Oceania” reported by JETRO. In addition, the

number of workers in the industrial park is assumed to be 55,000 in reference to those in the neighboring industrial

parks so as to calculate the total annual wage and consumption expenditure. These figures are based on the assumption

that the occupation rate is 100%. For actual calculation, however, it has been assume that the occumation rate increases

10% each year and reaches 100% in the 10th year. (The figures are calculated by multiplying the figures below by 0.6

in, for example, the 6th year.)

Table 5-14 Consumption Expenditures as a Result of Employment Creation due to Company Establishment

No. of workers Annual wage (USD/worker)

Engineer 0.1 5,441

Worker 0.9 2,602

Compound wage (USD/worker) 2,886

Employment to be created in the industrial park (workers) 55,000

Total annual wage (million USD) 159

Consumption expenditure (million USD) 444

Source: Study Team

5-13

(3) Amount of investment in plant construction

This survey has calculated the impact of the project including the effect of corporate establishment after infrastructure

development in the industrial park. Thus, EIRR has been calculated by incorporating not just the development cost of the

industrial park but also the amount of investment in plant construction by companies moving into the industrial park.

The following table shows the total plant construction cost at the time when all the land lots are sold in Phase 1. The

unit price of plant construction has been calculated by multiplying the value set out in the “Vietnam Quarterly

Construction Cost Review Q2/2013: August 2013” (LangdonSeah)”, 430USD/M2, by the premium coefficient (x1.2)

for the weak ground. The construction area has been set at 85% of the entire floor upon the assumption that 15% of the

area of all the land lots to be sold is exterior of buildings.

Thus, the total investment will be calculated by adding 877 million USD to 128 million USD, that is, 1,005 million USD.

Table 5-15 Plant Construction Cost

Unit price of plant construction (USD/m2) 516

Construction area (m2) 1,700,000

Plant construction cost (million USD) 877

Source: Study Team

(4) EIRR and ENPV

EIRR and ENPV have been calculated by replacing revenue with consumption expenditure. The discount rate is set at

16.36% as in the case of calculation of FIRR. EIRR exceeds the discount rate, indicating that the project

implementation has a significant impact on the economy.

Table 5-16 Calculation for Preliminary Economic Analysis

Table 5-17 Results of Preliminary Economic Analysis

Results of analysis

EIRR 20.51%

ENPV(millionUSD) 303

Source: Study Team

1st year 2nd year 3rd year 4th Year 5th Year 6th Year 7th Year 8th Year 9th Year 10th Year 11th Year 12th Year 13th YConstruction

period

Consumption expenditures as a result of employment creation due to company establishment

Total

Project cost + construction cost

Chapter 6 Planned Project Schedule

6-1

The table below shows a project schedule planned at the moment. Landfil and land creation works are to be commenced

upon opening of Hanoi-Hai Phong Highway and HL-HP highway, respectively, as logistic network is required for those

works.

Table 6-1 Planned Project Schedule

2014 2015 2016 2017 2018 2019 2020 2021

Trends in surrounding regions

○ Zero tariff for

ASEAN region ○ Opening of Lach Huyen Port

○ Opening of Hanoi-Hai Phong Highway

○Opening of HL-HP Highway

Submission of Preliminary

Project Plan (from Japan to

Vietnam)

Grant of development

preference (from Vietnam to

Japan)

F/S conducted by Japan side

Submission of Project Plan


Filing/examination of

investment permit application


Contract negotiation, issuance

of investment permit (from

Japan to Vietnam)

Appraisal of JICA’s overseas

investment

Financial close

Access infrastructure(*) F/S

Access infrastructure(*) DD

Access infrastructure(*) LA

Access infrastructure(*) bidding

Access infrastructure(*) civil

work

Land acquisition

Prepare/establish SPC

Start of selling negotiation for

Phase 1

Detail design

6-2

Methods to expedite the

consolidation of soil Phase 1

Landfill work for Phase 1

Land creation work for Phase 1

Infrastructure development for

Phase 1

Construction work for Phase 1

Commencement of Phase 1

(*) Including North-Sourth road, transmission lines, and service pipes connecting to the region.

Source: Study Team

Chapter 7 Implementing Organizations

7-1

7.1 Overview of the Implementing Organizations of the Partner Country

As described earlier, the project is an investment project designed and implemented independently by QN Province and

it is responsible for the entire process from preliminary survey to project implementation and management. Currently,

QN Province is actively promoting investment from overseas and taking a variety of such measures to bring overseas

investors as provision of tax advantages for overseas investors in addition to designing of attractive investment projects.

A particularly notable feature is that it has established an independent organization of its own specializing in investment

project managements as an effort to smooth project implementation and reduce procedural burdens on investors.

Regarding infrastructure projects, North-South road, transmission lines, and service pipes are in charge of DOT, EVN,

and DONRE, respectively.

7.2 Partner Country’s Affairs under the Jurisdiction and Authority

EZA and IPA are responsible for such overseas investment projects as this project in QN Province, and the two

agencies are both commissioned by the QN Province People’s Committee to manage investment projects in the

province.

7.2.1 Agencies Responsible for Overseas Investment Projects

【IPA】

IPA is an agency independently established by QN Province for promoting investment from overseas and it is currently

the only province that has established such an agency. It was established in February 2012 directly under the

jurisdiction of QN Province people’s Committee and manages all overseas investment projects in the province. It has

three major responsibilities in addition to the autonomy to issue investment permit on behalf of the people’s committee.

(i) Investment promotion

It conducts various PR activities to attract investment from overseas. Examples include production of materials for

overseas project investors and holding similar sessions to attract investment.

(ii) Improvement of investment environment

Designing investment projects and conducting research on investment environment.

(iii) Assistance for investment procedures and project management

It provides consulting service for investors and issues investment permit. It assists various procedures related to project

implementation as contact point for investors.

7-2

【EZA】

Although it manages overseas investment projects, same as IPA, it is specialized in management of investment projects

of industrial complexes and special economic zones. It does not design investment projects or conduct PR activities for

investors but only handles projects relevant to industrial complex and special economic zone among those IPA managed

up to decision of investors. They are then put under the jurisdiction of EZA. EZA serves as the contact point of

industrial complex and special economic zone projects and provides support for the series of processes from

preliminary survey to investment procedures and management after project implementation. It has the autonomy to

issue investment permit on behalf of People’s Committee.

Because it is an industrial complex development project of which QN Province invited investors to invest, the

preliminary survey is conducted and it is implemented under the jurisdiction of EZA. It will be also requested to

provide cooperation in the management after the completion of the industrial complex, promotion of brining companies

as tenants, and management of workers there.

Land in QN Province is originally under the jurisdiction of DOC which is responsible for land development projects

and master plan management. Before the establishment of EZA or IPA, DOC served as the contact point of land

development projects including this particular one and investors had to carry out projects while contacting concerned

agencies as necessary.

However, QN Province that aims at development as an industrial center established special agencies for smooth investor

decision and project promotion and the People’s Committee has transferred all the power related to project promotion to

them. Integration of power on one project and speedier coordination, negotiations and decision-making is important for

the smooth promotion of such projects.

7-3

7.3 Organizational Structure Project Implementationin the Partner Country

The project is implemented with EZA serving as the contact point commissioned by QN Province People’s Committee.

EZA performs all the procedures of project implementation and assist management and operation of project

implementation and information gathering in preliminary survey. The EZA organization is shown below.

Figure 7-1 Organizational Structure of EZA

Source: Study Team

Management Committee Chair

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Vice Chair of Management Committee

Vice Chair of Management Committee

②Vice Chair of Management Committee

7-4

7.4 Relationship with Implementing Organizations in the Partner Country

QN Province and SEC have good relationship and we arranged appointments with organizations we visited and

gathered information related to the project in the field survey all via the province. Arrangement of appointments with

HP City and national agencies in addition to QN provincial agencies and information gathering are all carried out

smoothly. This makes us feel much expectations of the realization of DNM development project and the attitude of the

province toward the project is very cooperative.

Chapter 8 Technological Advantages of Japanese Company

8-1

8.1 Expected participation of Japanese companies

8.1.1 Funding scheme

(1) Overall picture of project scheme

DNM development and operation company (SPC) is established and such entities as QN Province, SEC, developer and

utility maker, make investment. JICA overseas investment is used to raise fund with low interest. Local banks will be

major banks that extend loans for real estate development, etc. Nippon Export and Investment Insurance’s (hereinafter

referred to as “NEXI”) overseas investment insurance will be also used. Japanese corporations are particularly expected

to participate as Engineering, Procurement and Construction (hereinafter referred to as “EPC”) operators and Operation

and Maintenance (hereinafter referred to as “O&M”) operators since those operators are required to carry out earthwork

and landfill work with environment and disaster prevention taken into consideration.

Figure 8-1 Overall Picture of Project Scheme (scenarios 1 and 2)

Source: Study Team

Figure 8-2 Overall Picture of Project Scheme (scenario 3)

Source: Study Team

EPC operator

Order placement

Operation and maintenance

O&M operator

Payment of rent

Order placement

Service provision

Tenants

DNM development

and operation

company (SPC)

Insurance NEXI

JICA

Financing Financing

Local bank

Utility maker

Developer

SE

QN Province

Investment

Design and construction

EPC operator

Order placement

Operation and maintenance

O&M operator

Payment of rent

Order placement

Service provision

Tenants

DNM development

and operation

company (SPC)

Insurance NEXI

JICA

Utility maker

Developer

SE

QN Province

Investment

Design and construction

8-2

(2) Roles of SPC investors

- Utility maker

Among basic infrastructures required for industrial complex and urban development, plant makers relevant to

electilicity and water and sewerage are assumed to participate. They take part of planning and coordination,

improvement, operation and maintenance of electric and water and sewerage infrastructure.

- Developer

Japanese corporation with its overseas experience in industrial complex and urban development or which is considering

future development is expected. In addition, cooperation with government-owned corporations and financial combines

as a partner developer within ASEAN regions is considered. They take part of comprehensive planning and

coordination, improvement, operation and managemzzzzzent of industrial complex and urban development.

- SEC

Of which basic infrastructures required for industrial complex and urban development, SE is in charge of planning and

cordiantion, improvement, management, etc. of the road-related sector.

- QN Province

Large-scale landfill work and earthwork are implemented in the project area and those works account for a large portion

of project costs. In order to reduce their cost burden, QN Province as a sponsor invests in the works. It also takes part of

improvement of various infrastructure (North-South Road, Coarstal Road, water main, etc.) connecting inside and

outside the project area as well as requesting EVN for leading-in of transmission lines.

(3) Packaging of projects

SEC’s implementation of construction, operation and management of Bach Dang Bridge that connects to DNM Area as

well as its participation in industrial complex and urban development project at the same time will bring various

opportunities of infrastrucre business, such as road, electricity, water and sewerage, waste, and urban development. It is

deemed to provide a model case of regional development for Japanese corporations driven by a road project.

8.1.2 Supply of materials and equipment

(1) Road and land creation

The project is likely to require construction for soft ground improvement by Japanese corporations. Steel pipe piles, etc.,

will be purchased from Japanese steel makers in Vietnam (southern area), if such materials are needed. However,

construction work that does not require civil engineering or other special techniques will be performed by local contractors.

(2) Utility

Because main tenants are expected to be Japanese corporations, etc., and thus high specifications are likely to be

required, work for facility for receiving, transformation and distribution of electricity and water and sewage plants are

more likely to be performed by Japanese corporations.

(3) Buildings

Electric installations for building work are likely to be procured from Japan and others will be locally procured.

8-3

8.1.3 Facility operation and management, etc.

Japanese corporations have already developed industrial complex projects in Vietnam and corporations with no

experience around HP City are likely to participate in operation and management. As shown in the example of new

entry of Daiwa House Industry Co., Ltd. in an industrial complex project in the southern area, participation of Japanese

real estate developers that are studying opportunities to enter the Asian market may newly participate in the project.

Partnership with Japanese local governments is also possible in various aspects ranging from infrastructure to assistance

for entry of Japanese corporations. Kitakyushu City is supporting water works project in HP City and QN Province has

friendly ties with Shizuoka Prefecture.

8-4

8.2 Advantages of Japanese companies in implementing the project (from

technical, economic view)

8.2.1 Technical view

○ Sophisticated utility and environmental technologies

Equipped with highly reliable power supply systems and excellent water treatment technologies, Japanese utility makers

supply materials and equipment and execute O&M. It is essential for Vietnam to develop industrial complexes with

utility of standards close to advanced countries for its advancement to the next stage of development in view of removal

of tariffs within ASEAN countries after 2015 and it will lead to bring new industries. Thus, Japanese corporations are

highly likely to be in an advantageous position for utility development of the project.

○ Experiences of large-scale development in coastal areas

Japan has abundant experiences in development of industrial complexes (e.g.Kashima coastal industrial zone and

Kitakyushu Eco-Town) and urban development (e.g.Yokohama Minato Mirai 21 and Kobe Port Island). Packaging

development know-how and introducing it to Vietnam will enable well-balanced community development. Know-how

development will put Japanese corporations in an advantageous position in the project.

○ Flood control measures

Partly because many plants of Japanese corporations were severely damaged by the flood in Thailand in 2011, much

attention is paid to flood control measures of industrial complexes. Some industrial complexes operated by Japanese

corporations have reservoirs for flood control and forced drainage facility as standard in addition to embankment as

flood control measures. Such measures will be taken for the project to differentiate it from other industrial complexes

planned in the neighboring area.

8.2.2 Economic view

Because tender is not planned for acquiring the project right, there will be little competition with Chinese or Korean

companies that have cost competitiveness. The industrial complex is planned to be also economically efficient in

principle by developing it using local business operators as needed for elements that do not require special know-how

while using technologies of Japanese corporations as much as possible when technological differentiation is needed.

8-5

8.3 Necessary Strategy for Japanese Companies

○ Collaboration with HL-HP Highway project

SEC implements the bridge construction of HL-HP Highway very near the project site as a PPP project and it is

conducting this Study mainly because of its contribution of the bridge project. The highway and bridge construction

projects need to progress steadily for Japanese corporations to acquire the project rite.

○ Rasing priority of the project in QN Province towards improvement of access infrastructure

Due to its location 9km distance from the existing city area (QN town), the targeted area is not directly connected to

arterial roads and service pipes, thus, it is necessary to improve access infrastructure. DMN Area Development is

ranked the tenth in the project list of the Province, falling behind the Van Don Economic Zone. Therefore, in order to

realize immediate improvement of the access infrastructure, it is necessary to appeal to the Province and raise priority of

the project.

8-6

Table 8-1 Rank of projects calling for investment to QN Province

Source: QN Province

In the meeting held between QN Province and the Study Team in January 2014, the Vice Chairman of QN Province

gave comments as follows. Although the priority compared to the existing project was not mentioned, it can be read that

an intent of improving access infrastructure by the Province’s initiative in the right time when project conditions are

arranged and regional development is sufficiently planned.

Comments of Vice Chairman, QN Province)

- In formulating DNM M/P in future, it is required to reflect the results of arrangement of project conditions to the

M/P.

- In order to formulate M/P, it is necessary to carefully examine the alignment with overall goals set by the

Vietnamese government and the Province.

8-7

- It is required to consider a development plan in borader area, not limited in the area of 250ha as described in this

report.

- As the develompent of South-North Roads are initiated by the QN Province side, location of starting and ending

points as well as additional road functions are required to be considered.

- The Province is responsible for the improvement of basic infrastructure before the boundary of the area where SPC

is in charge of its development.

○ Establishment and acquisition of development priority right

A project plan is to be submitted to QN Province after the completion of the F/S. The project is more likely to be

launched as planned if HL-HP Highway and Lach Huyen Port development go smooth. However, early launch is not

necessarily good depending on the progress of infrastructure development in the neighboring area. It is desired that the

province establish a long-term development priority right of 30 to 50 years and Japan hold the right prior to official

designation as an investor and acquisition of project right.

If Vietnamese PPP law applies to the project itself, tender is required. In such a case, advance arrangements become

necessary for Japanese corporations to hold an advantageous position in terms of specifications.

Regarding the state of relevant projects, SEC has been appointed as an official investor for HL-HP Highway (Bach

Dang Bridge project) as of January 2014 and the FS is currently on-going. As for Lach Huyen Port, on the other hand,

the construction work has been being executing towards its open around 2017 to 2018, according to a hearing survey in

the field and other resource.

○ Hedging exchange risks of O&M project

Dollar-based loans of JICA overseas investment is yet to be realized as of the time when the report is written. A

Japanese corporation in Vietnam expressed its view that there is need to enable JICA to take the exchange risks

proactively or arrange NEXI trade insurance that covers the risks of O&M projects.

○ Further improvement of potential as backland of ports and harbors

The target area is situated behind the Lach Huyen Port. However, because it is not administered by HP City in which

the port is located, industrial complex development on the city side is preceding. Although the land on the QN Province

side is locationally more advantageous, it is left behind port development.

Japanese examples can be used as reference. For example, many manufacturers are situated behind the Kashima Port

and regional development combined with ports and harbors is realized across several administrative districts. There are

many other such examples of port and harbor development across several administrative districts in Japan, in addition to

the example of the Kashima Port.

8-8

It is written that Japanese corporations need to be able to serve as an overall coordinator of developing an industrial

zone behind ports and harbors to participate in such projects in document of the Ports and Harbors Bureau of the

Ministry of Land, Infrastructure, Transport and Tourism. As for DNM behind the Lach Huyen Port, it will be necessary

to establish an agent capable of coordinating both HP City and QN Province and for Japanese entities involved in ports

and harbors and industrial complexes to provide know-how.

Figure 8-3 Industrial Zone Development Behind Ports and Harbors

Source: Document for 4th Overseas Port Logistics Project Council, Ports and Harbors Bureau of the Ministry of Land,

Infrastructure, Transport and Tourism

Upstream

Middlestream

Downstream

Master Plan Formulation Collaborative Survey

Survey and design Phase

Construction and Development Phase

Operation and Management Phase

Consultant Construction companies Loading machinery manufacturers, etc.

Consultant, Construction companies Manufacturers, tradeing companies, etc.

Terminal operator (shipping, harbor transportation, and trading companies) Harbor procesures system vendor, etc.

Promoting participation

More opportunities of order

Promoting participation

Industrial location in seaside area

Com

pre

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ad

just

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The Nikkei, (morning edition) front page on infrastructure export srpport … “We wish to improve an environment for Japanese companies to involve and participate from Planning Phase,” according to a companies.

Exp

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Exp

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Con

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Location of Kashima Port

Kashima Port

Tokyo

Unified regional development of surrounding infrastructures and production base adjusted to the national comprehensive development plan set by the government

More than 70% of the total project costs, 140 billion yen, are allocated in public investment

Inte

rnat

iona

l and

dom

esti

c fr

eigh

ts

Kashima Port before development (1963) Commencement of ground work of Central route of Kashima Port (1965)

Current port with many manufacturers located

Industrial product Grain and food products Energy

○ Many steel, energy, food products, petroleum chemical companies are located (ove r160 companies)

○ Shipment for manufactured goods: approx. 2.2 trillion yen (2010)

Industrial location at the backyard of the port Harbor

Use of Japan’s successful experence

Japan’s successful case: Kashima Port