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ESTIMATION OF NET BENEFIT FROM THE PROPOSED BAN LA HYDROPOWER PROJECT IN NGHE AN PROVINCE, VIET NAM

NGUYEN THI HOANG HOA

A thesis submitted

in fulfillment of the requirements for the degree of

Master of Environmental Management in Development planning

Faculty of Social Sciences

UNIVERSITI MALAYSIA SARAWAK2005

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Firstly, I would like to thank DANIDA funded WaterSPS Subcomponent 1.3 support to Capacity Building atthe Hanoi Water resources University (HWRU), Vietnam for the sponsorship of my study

<small>wish to express my appreciation and gratitude to those who had helped and supported me inthe</small>

project that leads to this dissertation

[ wish to thank my major supervisor, Assoc. Prof. Dr Gabriel Tonga Noweg, for his guidance ‘throughout my study at Unimas. From him and his guidance, Thave gained much knowledge and

<small>experiences, which I will pass on in my own future</small>

[also wish fo thank all my lecturers in Unimas for their assistance and advice, I would also lke {o thank Me Robert Malong for his help during my Master Course.

am also grateful to my co-supervisor Dr Ngo Thi Thanh Van (HWRU) for her kind and

<small>valuable assistance during my data collection in Vietnam, Lam indebted to all the officers in the</small>

DANIDA and HWRU Bourd, Power Engineering Consulting Company No 1 (PECCI), districts officials of Nghe An province, Insitute of Water resources planning (TWRP) and’ Aquatic Product Research Insitute, Do Long weir manager, Nam Dan sluice manager, Department of Agriculture and rural development of Nghe An province, National Central Meteo-Hydrology Forecast (NCMHF), and local people inthe ton districts of Nghệ An province, Thank you for

<small>‘your friendly nd warm assistance during my field tp.</small>

‘My special thanks go to my husband and my children, who love me enough t0 let me go and study abroad. Thanks for their endless support and encouragement during the coursework and ‘completion ofthis dissertation.

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11. Beonomy of Viet Nam.

12. Demand of energy in Viet Nam. 13 Power development plan 2003-2020) 14 General lood contol in Vit Nam.

<small>22. Approach in sustainability development of reservoir for multiple uses</small>

23. Cost-benefit analysis (CBA), 23.1 Introduction

232 Cost Benefit Analysis (CBA) of dams.

<small>232.1 Environmental cost-benefit.</small>

2322 Social impact mitigation cost 232.3 Flood contol eowebenefitx 232.4 Imgation costs and benefits

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3⁄3. Conceptual frameworks

33.1 Private costs and benefits

332 Public costs and benefits

34 Data collection

34.1 Primary data collection. 342 Secondary data collection, 35° Contingeat valuation

536 Flood contsol cost estimate

3.6.1 Calculation principles for flood contol cost.

3.62 Link between damage cost and return period 3.63 Cost of the energy loss 43. Public costs and benefits.

43.1. Flood control costs and benefits. 43.1.1 Flood conteal cos

43.12 Flood control benefits.

43.2 _Imvigation costs and benefits

44.16 Loss of existing fishing income

<small>44.1.7 Loss of existing hunting income</small>

44.18 Loss of revenue of existing collection of forest product 44.19 Disruption of existing River tanspertation

45 Cost benefit analysis ofthe project.

452. Economic evaluation parameters

453° Sensitivity analysis,

CHAPTER V.

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CONCLUSIONS AND RECOMMENDATIONS.

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<small>“The power generation capacities by energy sources.</small>

Benefit of flood control of Klang river basin flood mitigation project

Key dimensions and key impacts of access to good irgation water

<small>Land use in Ban La catchment and reservoir area</small>

Sell types of Ban La catchment area Potential erosion in Ban La catchment area,

Dita need and data collection method, ‘Consteuction cost of Ban La dam,

Initial investment costs, annual operation and maintenance cost in percentage and value

Basic data of Ban La hydropower project Damage cost of historical ood events

Flood damage Vs rum period ‘Flood routing by Ban La reservoir

Irrigated area anl discharge of Do Luong system from Ca river

Ifvigated area and discharge of punging stations direct from Ca river inthe NNAIS

Inrigated area and discharge of Nam Dan system from Ca

Ifvigated area and discharge of pumping stations direct from Ca river in the SNAIS.

Inrigated failure in che Future without Ban La project.

igatel Edlur in the Future ater completed Bạn La project

fective imigated area

Annual benefit fom imigaöon i the area

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LIST OF TABLES (CONTINUE)

<small>Forested area permanently flooded alter creation ban La</small>

Estimation of timber loss nthe reservoir area Esimadion of land loss by Ban La projec (current

Estimation of annual agricultural production loss Average standing volume (or stock) of the forest

Estimation of timber can be harvest inthe reservoie area Metchantable of timber in the reservoir area

“The water level along Ca river before and after construction Ban La

'Condmuetion period criteria

‘Cost disbursement for Ban La hÿđropower project

Basic data for economic assessment of Bạn La hydropower project, (PSL= 200m; P = 320 MW: 5 years construction time and 10% discount rate

Result of cost benefit analysis of Ban La hydropower project discount rate = 10.

'Resls of sensitivity analysis with changes in discount rate, output and lifespan of the project

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<small>Figure 31</small>

igure 32

Figure 4.1

LIST OF FIGURES

Location ofthe study area Total cost and total benefits Hydraulic network scheme

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<small>Asian Development Bank</small>

Aquatic Product Research Insite Benefil cost

<small>Billion Vietnamese Dong.</small>

Cost Benefit Analysis

Contingent Valuation Method

Department of Agriculture and Rural Development

<small>Environmental Impact Assessment</small>

Forest Inventory and Planning Insitute Pall Supply Level

Gross Domestic Product Gigawatt hour

Hedonic Price Method

Institute of Agricultural Planing Institute of Enersy

Institute of Geography Intemal Rate of Return

Institute of Water Resoures Planning

CCubie meter per second

Ministry of Agriculture and rural Development Million cubie meter

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LIST OF ABBREVIATIONS (CONTINUE)

Net Present Value

Operation and nuintenance Probability

<small>Power Engincering Consulting Company 1Discharge</small>

South Nghe An Inigaion System “Travel Cost Method.

‘ail Water Level

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‘The construction and operation of Ban La hydropower project will lead toa variety of changes in the local and wider environment, Many of the impacts will be beneficial, both atthe regional and ational eve, Project implementation will have some socioeconomic impacts an communities in two districts upstream and nine distiets downstream feom the dam. Completion of Ban La

‘project will supply water to tho inigation systems: North Nghe An Krigation System and South

[eh An, which comer sme 62.220 hao gated are in Nghe An province. The construction of the project will also reduce flood peak inthe downstream area and hence reducing flood damages for riverine residents the downstream area. This study evaluates economic and cavironmental impacts of Ban La project on local communities: upstream of the Ban La dam: food arc and iigation areas downsicam from the proposed dam, Private costs and bensits 4s wll as publi costs and benefit are estimated for the project i order to ave atthe total et social benefits, Contingent Valuation Method (CVM) is wed to estimate the costs and bensftx associated with intangible em or non-market goods. The quấy foun tha the net present vale f social benefits at 105 discount rate and 30 years project operation perio is positive (BVND 5338), Benefi-Cost ratios 3.18 and Itemal Rte of Return (IRR) i 115%, Sensitivity analysis is also performed to detect responsiveness of the investment to changes in discount ate, changes

<small>‘output of the project as wel as difererscenarios of project lifespan,</small>

Pembinaan enpangan hidro Ban La dijangka akan membawa berbagai Kesan, terwamanva

Jfaedah terus dan juga sampingan kepada pendudu setempat hasnya. Kesan sosiockonomi akan

cAbasai di dua bai daerah (Tuong Duong dan Ky Son) dibahagian hulu empangan dan juga 9

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Pembinaan enpangan hidro Ban La địmgÌa akan membawa berbagai kesan,teramansa fda ters dan juga sampingam kepada penduduk stem Khasny. Ketan ssiockonomi akan

Airasai di dua banh daerah (Tong Duong đan Kỳ Son} dibahagian hulu empangan dan juga 9 dlaerah di kawasan hilir empangan. Antara faedah yang akan dinikmat alah dalam bentuk emudahan sistem pengairan (North Nghe An Irrigation dan South Nghe An irigation) yang ‘meliput 62220 hekior tanah pertanian. Kajtan yang dijalankan ii adalah berujuan untuk Imenitai kesen pembinaan empansan Ban La dari sexi kesan sosioekonominya, Analisis pelaburan dijadikan axas penilaian ini dimana segala clomen facdas dan kos diambil kim

Facdah dan kos barangan sumber adi dan alam sektar diniat dengan Kaela penilaian Kontnjen. Hasi kajian mendapat pro mempunyai nil facdah sosial ini bejlunlah BVND 5838, Naônh faeda-kos pelauran ini adalah 3.18 dan kadar pulangan dalam adalah 11%. fi Dermaksud proj tersebit adalah baik dạn berypaya memberi sunbangan posit kepada

sosioekonom pendiduk tenpalen.

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1.1. Economy of Viet Nam

‘Viet NanŸs modem economy evolves fom the burden of mỹiary ation and political upheavals ter parition in 1954, Nonh Viet Nam and South Viet Nam each developed thet own economic sericture separately, reflecting diferent economic systems with different resources and diferent tdling patterns, The North operated under highly centralized and planned economy, whereas the South maintained a fee: market economy. With the reunification of Viet Nam in 1976, Noth ‘Viet Nam's centrally planed and controlled economy was introduced and adopted in the south of

<small>Viet Nam,</small>

Sinee 1986, the “innovative” and “opened-sdooe” policy practiced by the Vietnamese Government tas attracted foreign investors to came to do businesses and promote both the state and private seononie elements, which spur the economic development of Viet Nam It has changed tothe ‘market-oriented cconomy since then, Having a stable political regime, the Gross Domestic Product (GDP) growth rate of Viet Nam from 1991 to 2002 has reached an average igure of|

<small>1.59%. GDP per capita of Viet Nam was USD 490 in 2003. The GDP per capita and its population</small>

growth from) 1995 o 2003 i shown in the Table 1.

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‘Table 1.1 GDP growths, GDP per capita and Population of Viet Nam from 1995 to 2003.

‘Sours: General Statistics Office of Viet Nam (2008)

1.2. Demand of energy in Viet Nam

The economic growth in Viet Namis strongly indicated hy the increase in the demand for cnery,

<small>Electricity generation plans in Viet Nam at presen ate fom petroleum, natural gas, hydropower,</small>

coal and diesel However, the dependence on il or clee0i<iy generation has dckined signilicanly in recent yea, The Viet Nam govemment's pliy i to encourage the exploitation of renewable energy resoures, such as hydropower.

‘The peak electricity demand recorded in 2002 was 8,700 MW, while the total capacity of all kinds of power plant connected te the network was 8,749 MW. The electricity generation comprises ofthe following (Table L2).

Table 1.2: Power generation capacities by energy sources

<small>nergy generation Power capacity %</small>

Hydropower plant 4115 MW 47035 “Thermal powerplant (coal) 1245 MW 1423 % “Thermal power plant (i S73 MW 655%

Gas tubines (Gas) 2322 MW 2654 %

Diesel 494 MW. 5.65 [Towa 5749 MW [100%

<small>Source Tan 2004)</small>

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Power consumption

Energy demand in Viet Nam has grown ata faster rte than the growth af Gross Domestic Product (GDP). Consumption of energy increased frm 11,20) GWh in 1995 to 30.235 GWh in

<small>2008, which is equivalent to the growth ate of 15.3% per annum. The numberof ustomers is</small>

snd 4 milion. Industey consumed 41.8% of the whole power sis, residential customers consumed 47.8%, commercials and services used 4.69% and other wsers consumed 6% of the

power supply.

Economic growth and industilizaton has pushed Vit Nam's demand fr electricity up, a an svorage sal rate of 14-15% in the pst few years. This demand is projected to grow yoy at 13-15% sil 2010, Acconting to the goverment estimates, around 70-80 billion kilowatts of

power wil be need by 2010, Thereafter, the demand is expected to reach between 160 and 200

billion kilowatt in 2020 (Central Government Administration Power Repost, 20034).

1.3. Power development plan (2003-2020)

The development of energy resource in Viet Nam will have tobe in tandem withthe aceleration

<small>of thejon's industrial growth, particularly the growth emphasis onthe evelopment of energy</small>

{intensive and energy based industries,

In recent years, sustainable developmen has become the central concept of formulating strategies {or future economic progress, While raising the real per capital income remains the basie evelopment goal there is now inereasing emphasis on balancing this Boal withthe “quality of lif or “well-being” This makes the development of an cient aad economic energy sydem even more challenging because ofthe need to reconcile the ao and the environmental pliey objectives

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Based on the above forocaded demand, the development programme of power generation forthe

‘period 2003.2020, the plan fr expansion of power supply are:

(1) To meet the country’ ising energy nee.

<small>2) To devolop balanced do</small> elapment of the resources hydro, cal and gs ied shemal) in onder to explore effectively the primary energy sources and a he same time imi the adverse impact on the environment and ecology, sổ

(8) To reduce the use of fossil fuel. This s one ofthe cases of serous environmental problem today (Central Government Administration Power Report, 2002 b)

Hydropower has been proven to be sức, lalvely clean, efficent and a ronewable source of cncrgy compared to oil fired generation and natural gas: fr generation. Unlike mcoar and fossil fuels, hydroelectric is by nature less damaging to the envionment as the generation process des not esl in continuous waste production or emission of ar pollatat,Hycropower sso cone ofthe cheapest power and it reservoir have high recreational vals. They ae extensively

<small>sed for ishing, water suppl, iigation, flood control and soil erosion control</small>

14, General flood control in Viet Nam

‘Water related disasters, including floods and drought, have serious economic implication in the ‘world, both for individual households and national economies, More and more people in the ‘world are affected through homclessnss, injury, disease, loss of property and death, The vast

<small>majority of the millions of Asians affected annually by lood are the poor. Frequent flooding</small>

ives them no opportunity to break out ofthe eyele of povery. Ih addition, Hoos often cause

‘marginally betteroff people to descend into poverty asa result of flood related losses Linder, <small>2002)</small>

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Flooding is 4 major water management problem, which each year eauses a great loss of human life, property damages and loss of agriculture and other output in the Mood prone areas. Climate change and upstream watershed changes both within Viet Nam and other upstream countries have created associated problems such as flash floods with great damage (Fox, 2001),

‘VietNam sone of the most disaster prone counties inthe world because of i geographical and topographical features. The county sufces from almost all ypes of disaster, among which water disasters induced by typhoons and floods re the most fequent and severe. Every yer disasters claim hundreds of human lives and cause millions of dollar of economic Toss in the country

(Nguyen and Le, 2002), Flood contol is neoesery to increase food production and als for

cconomic development. Govemmcnt of Viet Nam hay always put disaster managemen

particularly lod and storm contcol as top priority init agenda

15. Irrigation

‘Viet Nam is one ofthe few fast growing economics inthe word since the 1990s Is GDP grew at lbout 7 per eet per annum during thí period. Rapid economic growth contributed substantially to the reduction of poverty inthe country during 1990s. The proportion of poor in the total population dectne from S8 to 29 percent between 1993 and 2002, However, accelerated growth tas also brought considerable inequalities be the eur and urban ress, and between ích and poor housholds. The poverty rte drastically declined frm 25 to 66 percent in than areas while from 66 to 37 pereent in rural ateas between 1993 and 2002. Poverty in Viet Nami largely rural problems nearly 85 pe ent ofthe country’s por live in rural areas whose primary souree of livelihood is agriculture. As poverty is widespread in the rural areas, top priority was laid

<small>down in the comprehensive poverty reduction and growth stategy to accelerate agicuure</small>

rowth and rural income, thereby improve the living condition of rural population. gation isa

lifeline for agricultural development especially for Viet Nam where about 80 percent of eropland

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is planted vi rice, which is predominantly an irigated crop. One of the best outcomes for improvement to the existing iigaton system will lead toa better availabilty of iigation water, thereby empowering rice farmers through increased in ice yields and in farm incomes (anaish, <small>2004)</small>

16. Problem statement

Dan's multiple ses ae both thoi greatest strength and th biggest weakness, It is a weakness because ofthe conflict hetween the many diferent stakeholders on how ose a reservoir system. [A classic conflict over water use is the one between those who vant {0 use the wate i the rescrvirsnctly for hydropower generation and those who want to diver some of it to supply

<small>industrial and agricultural needs as well as who want to reduce the flood in the downstream,</small>

‘There are many environmental parameters tht ar affected by hydropower developmicn! project. Environmental impacts can be given postive or negative vdluss that need to be th into account to come up withthe estimate of net cot a benefits ofthe projet. The aplication of cost-benefit analysis to envionmental impact assessment i faced with the following problems the uncertain in the valuaion of non-market goods sich as wilde and landscape. How should this be done, and how much should the society rely on the estimates that are generate? Are we acting immmoally by placing money values on such intangible items? How can the society accurately prodit the effects of changes in economic activity on complex ecosystem? How a

<small>an increase in an environmental good be valued? Can we estimate it either on the people's</small>

‘maximum willingness to pay is to have this increase, or theit minimum willingness to accept ‘compensation to forgo this tem. Ifa redtion in the Same good is being valued we can ask ether

<small>‘maximum willingness to pay to prevent such a reduction oftheir minimum willingness to</small>

accept compensation to tolerate it. This allows a monetary value to be placed on an ‘environmental gain ot los, whic isan estimate of werlying utility gia of lss (Hanley, 2001),

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17 Objective

“The main im of the study is to estimate the overall costs and benefits ofthe multipurpose Bạn La

<small>hydropower project in Viet Nam</small>

Specific objectives

Specialy, the objectives ofthe dy are

ác To estimate the present valac cost of the Ban La dam constuction to the siverine

‘The hypothesis inthis study is that Ban La hydropower project constuction is efficient, and therefore socially acceptable. In testing the hypothess the overall ng socal cost and benefit

<small>from the Ban La hydropower project implementation would be determined. Ifthe net social</small>

‘benefit is higher than the net social ost, the Net Present Value (NPV) > 0, Benet Cost tio (BIC) > 1 and ternal Rate of Return (RR) > discount cate (9, then the hypothesis is accepted,

‘To achieve the above abjetives, several task involving different sets of estimations have to be undertaken. Findy, the estimation of private costs and benefits. Secondly, the public coss and

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benefits are estimated, which impact ofthe project on the local communities in the regional and national level. Where sficient information is avaiable. Finally, the net present value of social benefit was estimated aed on the above information and the BÁC; IRR were calculate.

nllieanee of study

Implementation of hydropower project have impacts to the physical environment and the socio-seoomie. Economic impact study in the hyopower projects are usally undertaken to <etermine its effect on the income, wealth ofthe residents of given geographic area as well as seononie development of regional and national economy, which is usally i monetary terms.

This study wil also provide for decision-makers with information for the feasible implementation

<small>ofthe projec.</small>

‘The results of the study will give a better picture of regional economic development through the increased in agricultural area and reduction of peak flood in the study area from the proposed

project. It will also help to identify key planning in land use issues and ptioides in the

downstream zone ofthe hydropower project.

{nthe tudy area thor is larg potential agricultural land. At present the use of he land is imited to one cropping because ofthe water shortage in the dry season. Completion ofthe project will cnsure that water wil be available for iigaion, Inthe study ara there is lược arc in the

<small>đđownsteam, whichis prone to yearly flooding. The Bạn La will reduce flood peak in this area</small>

an it will ead to reduce loot damages for downstream zone. The sudy should he estimated adequate for ieigaton and foo control benefits inthe downstream areas ofthe project.

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CHAPTER TL

LITERATURE REVIEW

2.1 Introduction

‘This chapter presents the available hteratures and the rclevant concepts as perceived by the author as being related tothe study, Theories and brief review of literature of studies carried out both internationally and locally are discussed as they relate to this study

2.2 Approach in sustainability development of reservoir for multiple uses

Reservoirs contain most of the earth's stored surface fresh water, Resets provide water for inking, imigaion, industrial processes and. power generation. They provide habitat for numerous species of fish, aquatic ức, binds, and mammals: Many ofthese aninals and plans are Jmpotan sources of protein provide and income for local inhabitants. Reservoirs also important for flood control aml retaining sediment, Dams and reservoirs are facilites. with tourism potential. large number of reservoirs are in developed counties, such as North America and ‘Western Europe, but their role may be even mere significant in the formerly centrally planed ‘economies of Eastern and central Europe, and in the developing counties of Asia, Aftica, Middle East a Latin America. In many of these regions population are growing rapidly and the needs

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{or fresh water for domestic and urban uses iigation, industrial processes and power generation, as wll a fr the protein supplied by fish and oer plant and animals ae ever increasing (Ayes tal, 1997)

In recent years sustainable development has become the ental conecpt of formulating srategies for future economic progress. Formlating a srategy for managing reservoits stats with defining 4 county's socal, economic and envionmental objectives. The stategy recognizes thả nvesemen policies and regulation in one pat ofthe watershed ofthe servo rin one sector of the economy wil fet persons and activities in oter pats ofthe watershed am in exer sectors “Thus decisions need to he made in th context of hoard strategy that takes long em view, anticipates the impacts on various users (Ayres et al. 1997).

While improving the real per capital income remains a basie development goal, there is no. increasing emphasis on balancing this goal with “quality of life” or “well-being”. This makes the development of an efficient and economic energy system even more challenging because of the ‘need to econcile energy and environmental policy objective.

‘Comprehensive strategies for managing reservoir need ta be designed forthe unique physical and

<small>biological characteristic of the watershed, ineluding the type of ecosystem, climate, topography,</small>

socioeconomic conditions, including the population, density and pressure on the resources, the conomi and environmental objectives.

Stakeholders i reservoir resources may include fishermen, farmers, eleteal power generators, corte public asa whole, Involving stakeholders lcs @ wide variety of vows an in addition, it foxcrs commitment to the final option selected. When persons who are affcted by project, ate involved in discussing the options and understanding the risks an benefits: costs, they are far ‘more likely to accept theultimate decisions and to behave in accordance with the decision makers. The decision makers are alsa farmers and they ae likely to participate in implementing

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and managing them, I enhances creativity. Stakeholders can often provide a range of measutes t6 reduce a project's environmental impact, avoid conficts, minimize confrontation, and generate altemative (Ayres eta, 1997)

23. Cost-benefi malysis (CBA)

2.3.1 Introduction

Cost - Benefit Analysis (CBA) isa widely practiced technique of project appraisal (Perman <small>ai1999), Cost ~ Benefit Analysis is a resource management tool used to test the economic</small>

feasibility of projects The application of CBA in a wide range of Fields including natural resources development, criminal justice, foreign aid, and welfare analysis, CBA. determines

<small>feasibility by subtracting the total cost incured aver the life of the projet frm projected total</small>

revenue earned from the projet. CBA is wel in comparing alternative development projet (Lawrence, 1901) In many cases, CBAs used a tol to provide publi, officials and managers ‘ith information to asst them in exercising their own judgment on the feasibility of public

projet (Smith, 1995).

Cost-Benefit Analysis approach to evaluate environmental policics fae dilicies on two levels. Fis CBA relies on cost estimates that represent qualities đạt are not validly measurable. This

oblem is exacerated when incommensurable covs and benefits ate weighed on the sime

monetary sale, which makes final decision on whether or not to proces! with paticlar polices seems deceptively simple. The second problem with CBA isis reliance on co-modfication of ‘oth human and elements of these "4BjecŸ in economic tems such 3s their non- economic values cam be undermined. As we learn to think of ether people an the environment in economic

<small>{erms, we may lose our ability of appreciate them fr ther other characterises (Spevak, 1997)</small>

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23.2. Cost Renefit Analysis (CBA) of dams

CCost- Benefit analysis of water resources development as well as of other development project involves several stages (Hanley & Spash, 1993):

<small>Definition of project: This definition will include the reallocation of resources being</small>

proposed and the population of gainers and losers tobe considered

‘entifeation of projet impacts: Once the project is defined the next step io identify all those impacts resulting from it implemcotation, which ince « listing of all resources used in implementing the projet. In this stage, the net impacts ofthe project are identied

Which Impacts is Beonomically Eelevan: Since the question “what to count s bound upin neo-classical welfare economics, in particule i the social welfie function which society is interested in maximizing. The sim of CBA isto select projet, which al 10 the total of social tity, by increasing the value of consumable and nie views by more than any associated depletion inthe Level of other utility. gonenting good. CBA can in fact select the best, (os efficient) projets fom a ist (porfolio) of aleratves. Thus, What are counted positive impacts, which fom no on wil be refed o as benefits What recounted as cost that is negative impacts, Environmental impacts of project will

<small>be count so long a they either (cause at leas ne person inthe relevant population to</small>

kecome more or less happy: and (i) change the level or quality of outpat of some positively valued comoty

Physical quantification of lvant impacts: These involve the determination of the

physical amounts of cost and benefit that lows fora project, and identifying when they

wal occ.

Monctary valuation of relevant effect: The common unit in CBA is money. Matksts generate the relative values of all traded goods and services as eative prices the remaining tasks forthe CBA analyst are then to: @) predict prices for valve flows ‘extending into the future; i) correct mavket prices where necessary and caleulate prices

2

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(lative values in common unit) where it doesnot exis. Bringing environmental values

inca business and political calculations as an everyday input to decision-making is a ‘major goal of environmental CBA.

46) Discounting of cos and benefit flows: Ones all elevant cost and benefit flows that ean

be expressed in monetary amounts have heen so expressed iis necessary to convert them all into present value (PV) tems. This necessity arises out ofthe me value of money; oF time preference. This ste even if inflation ác) in every time period, so long as the time preference at iscount rat) s postive

(2) Apphing the net present value ts: The main purpose of CBA isto help selet projets

and policies, which are efficient in term of ther use of resour “The Net Present Value (NPV) ofa project is

x Bí C: ANS Eee

Bisbee yart Chis cou yeart

<small>ris discount rate</small>

‘Tis ie of project (Randall, 1987)

The critvion for projeet acceptance is NPV>0, Any project passing the NPV est is

and the Benefit- Cost ratio (B/C). The decisions rule becomes: proceed if the Benefit ~ Cost ratio exceeds unity. The Benefit - Cost rato is another way of presenting the NPV ‘of a project The IRR is a measure frequently empfoyed in financial investment appraisal

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isthe rate of interest which, if wse asthe discount ate for a projet, would vief a NPV cof zero, tis interpreted asthe rate oF ret onthe resoures used up in the project, tobe compared with the opportunity est of ivestment funds, hich might he the market rate of inerest. However, the IRR is imperfect as a measure of resource allocation fortwo

‘principal reasons: Fist, many project can generate multiple IRRS from the same data set,

so the analyst doesnot know which to select as the decision making cdledon, Second, the IRR is unrcliable when comparing performance across many projects in a polio. (8) Sensvity analysis: The NPV test described above tel us about the elative ficiency of

4 given project, given the data input othe calculations If this data changes, thenclenly the results ofthe NPV test will change too, This

‘means recalculating NPV when the values of cexsin key parameters are changed. These

paramtets wil nade

<small>The discount ate</small>

<small>«Physical quantities and qualities of inputsShadow prices of these inputs</small>

<small>Physical quantities and qualities of outputs</small>

<small>= Shadow prices of these ouput, ad</small>

<small>Project lifespan</small>

For multipurpose dam project, (dentfy all the cots and benefits of projst and compare with th case ofthe dam not being built. Coss and benefts fo inclu are direct and indired vale, cots and benefits if all within our traditional understanding of market good is cll direct cons and direct benefits, For example, ost and benefit ofthe dam, the dct costs nce construction oss, lost of farmland, operation and maintenance, There would also be opportunity costs for submerge and (lost farmland, dislocated fais, ost ural tesources and natal areas and ‘0 on) On the benefits side would be the mount of electricity produced beyond that which would

4

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have been produced under the next cheapest altemative, Other benefits include Mlood contol, ‘water supply and recreation from the newly ~ created reservoir. For those goods not trade in market, sch as cultural, i is called the indirect. Cost - benefit Analysis practitioners rely ơn several techniques fo assign monetary values (Spevak, 1997)

2.3.2.1 Environmental cost-benefit

‘Method used to value the environment includes Contingent Valuation Method (CVM), Travel (Cost Model (TCM) and Hedonic Price Method (HPM) environmental

as factor input method, replacement cost approach. All these methods rely on data obtained fom the general public. Forexample, the Contingent Valuation Method employs questionnaire suey {in asessing peoples ates towards the eaviroment. The TCM values recreational aspect of the envionment by stdying the tourist's travel distance (and tel cost) fom thủ residence to

<small>he recreational site, The HPM valuates environmental quality, sich as air quality or noise</small>

pollution by comparing them with other variation in property price

<small>Contingent Valaaion Method (CVM) is direst method in th it involves asking sample ofthe</small>

relevant population questions about their Walling To Pay (WTP) or Willing To Accept compensation (WTA) Is sometime refered to as a stated preference method. This approach can reveal both use and non-use values. More complicated valuations can be calculated using conjoint analysis, With this method, fishermen might be asked to compate the relative values fo them of two hypothetical fishing rps The tip may be described woul identify how many ish are caught

Its man use i to provide input to analyses of change in the level of provision of public good or bad, and especially of environmental ‘commodities’ which have the characteristic of

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non-saelulabiiy and non-divisbility. On the eter han, (hệ CVM has (wo advantages over inet ‘methods Fest it can deal with both use and sơn se values, Second in principle, CVM answers to WTP or WTA question go ditect to theoretically comect monetary measures of uty changes “The stops involved in applying the CVM can be sated a follows

(1) Creating a survey istument forthe elicitation of individuals WTPAVTA, This ean be

broken down into thee distinct, but related, components: {@) Designing the hypothetialsenaro,

(©) Dosing whether io ask bout WTPAVTA

(6) Creating scenario about the mean of payment or compensation (2) Using the survey instrument with a sample of the population of interest

(3) Analyzing the responses tothe sn. This can b sen ác having two componcntc

(4) Using the sample data on WTPAWTA to estimate average WTPIWTA for the

(b) Assessing the survey results so ast judge the accuracy ofthis estimate

<small>(8) Computing total WTPAWTA forthe population of interest for use in an economic cost</small>

benefit analysis (Perman eLal, 2003).

<small>However CVM has some disadvantages following: Firstly, the results vary with how the</small>

«questions are asked. Relatively sublediferences in wording, i the order ofthe questions being

asked or in the supporting evidence given, can substantially affect the answers of respondents Secondly, some results are not consistent with basis tenets of economic theory. Economists expect thatthe value of a certain quantity of goods will increase a that quantity increases Respondents in CVM studies have not always behaved as economist expert. Thinlly, dadies sometime appear to produce unreasonable answers. Paniclarly when sich responses are Đypotheiel, as they are in CVM, respondents may not meaningfully consider what expenses they wil forego to pay foe such contibution. Fourth, respondents may give “sates” answers to survey questions that are intended to influence public agencies. Finally, respondents may not

16

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fully understand or trust the information provided by survey. The responses requested on CVM. survey are unlike typical choices made by consumers (Office of Technology Assessment US congress, 1994)

23.22. Social impact mitigation cost

Any development project tht intraduces significant changes inthe pattems of use of land, water, cor he nail resources muy entail some adverse impacts on people who are cen using sich resources and associated economic, social cults an religious Facies. large vadety of projects ivolve acquisition or redirection of use of lands that are owed oe tized by individuals and communitis, Examples of such projocts are 6) constuction of dams for ảmgaHon and hydrococtic power gensration; (i) constriction of highways, railways, and ‘nigation canal networks (i) constuction of amsmision lines and ther faites requiring rights-of-way; (iy) construction of airports and soon.

‘Many of these projects may be of crucial importance for local, regional, and_national development. However, they may also give rise to conflicts between long-term national development goals and intrets of communities snd individuals who ate immediately and

<small>aiverely affected, I is important to weigh the benefits agains the costs of adverse impacts by</small>

examining development options that ental eterno resettlement or iim sil and economic dắnlocaion, and to find the means to reconcile the conflicting interests. Where resetlment is unavoidable, concrete measures must he taken to i) protect the lives and welfare of those Aisplaced by the projects i reduce and redress the loss of economic potential incurred by the alfected poople, ad the local and regional economies: and Gi) assist in developing the conomic, social, and cultural potential o the people and the conmiities so affected (Asian Development Bank, 1998)

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Many development projets that require involuntary displacement of people generally have averse economic, social, and environmental impacts on the displaced poople, Homes are shundoned, production systems ae dismantled, and pradtive assets and income sources are lost. Displaced people may be relocated to environments whore their skills may be Tess applicable, the competition for resources may be greater and host populations may be boxile or culturally incompatible, WelLevablsbed community tuctres, social networks, and kinship es may be broken oF weakened. Cultal identity, traditional authority, andthe potential for mutual help may be diminished, For survival, displaced people may be foreed lo overexpliL ecologically fragile areas, exacerbating en onmeatal degradation, The averse inpac on host

populations may also be significant. The abscace of appropiate development measures for

compensation, reseitlemnt, and rehabilitation ofthe dspacsl people may ) cause severe long-term hardship, impoverishment, an even decimation ofthe affected communities: (6) adversely affect the host populations; and (i) lead te severe environmental damage.

“The contents and level of detail of resettlement plans, which will vary with circumstances,

<small>specially the magnitude of resettlement, should normally include a statement of objectives,</small>

policies, nd strategy, and should cover the following essential coments: 6) organizational

responsibilities; (ji) community. participation and intgration with host populations; i)

<small>socioeconomic survey i) legal framework including mechanisms fr resolusion of confit and</small>

appeals procedures, (9) identification of atemative Stes and selection; (i) valuation of and compensation for ost asst; (i) land ovmersip, tne, sequisiton and transfer (si) acess

<small>to tsining, employment, and credit; (ix) shelter, snfasinictre, and. social services; (x)</small>

environmental protection and management; and 0) implementation schedule, monitoring, and evaluation,

Involuntary resettlement should be an important consideration in project identification The three Important elements of involuntary resettlement ate ) compensation for lost assets and oss of

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livelibood and income, (i) asidanee for relocadon including provision of relocation sites with appropiate facilities and services, and Gi) asidanee for rehabilitation to achieve at Teast the same level of well-being with the project a8 without it. Some or all ofthese elements may be present in projects involving involuntary resetement, For any project that requires relocating

‘people, resettlement should bean integral part of projet design and shouldbe dealt with from the

caries stages ofthe project cycle, taking into account the following basi principles:

i. Involuntary resettlement should be aided where posible

Ji, Whore population displacement is unavoidable, exploring all viable project options to

fii, individuals or a commnity must lose thst lad, mans of livelihood, social sopport

systems, or say of life in onde tht project might proceed they should he compensated and ssided so that their economic and social future will gonenlly be at least sẽ favorable with the project as without it, Appropriate land, housing, infrastructure, and ther compensition, comparable to the without project sition, shoal he provided to the adversely affected population, including indigenous groups, ethnic minorities, and

pastoralists who may have usutruct or cudomany rights to the land or thor resources

taken forthe project.

<small>jv, Any involuntary resttemsent should, as far as possible, he conceived and executed a a</small>

part ofa development project or program and resetlement plans should be prepared with

appropriate time bound actions and budgets. Restlers should he provided siiient

<small>resources and opportunites to reestablish their homes and ivlihoods as soon a8</small>

The alfeted people should be fly informed anl closely consulted onreetlemenl and compensation options, Where adversly affect people are parienlaly vulnerable, resetement and compensation decisions should be precedsl by a social preparation

‘hase to build up the capacity ofthe vulnerable people to deal with the issues.

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Appropriate pater of social organization should be promoted, and existing social and

cultural institutions of nosodlers and thr hosts should be supported and used to the

greatest extent posible, Resetlers should be integrated economically and socially into

‘host communities so that adverse impacts on host communities are minimized. One of the effective ways of achieving this integration may be by extending development benefits to host communities

‘The absence of formal legal tile to land by some affected groups should not be a barrier (0 compensation, Affected persons entiled to compensation and rehabilitation should be ‘identified and recorded as cany as posible, preferably atthe project identification stage, in order to prevent an influx of illegal eneroachers, squatters, and her nonresidents who ‘wish to take advantage of such benefits, Particl tention should Be pid tothe neolx of the poorest affected persons including those without legal tide to ase, female-beaded households and other vulnerable groups, such as indigenous peoples, and appropriate assistance provided to elp them improve thee status

<small>‘The fll costs of resettlement and compensation, including the cost of socal preparation</small>

‘and livelihood programs as well asthe incremental benefits over the “without project” situation, should be included inthe presentation of Project costs and benefits

<small>To beter asc timely availabilty of required resources and to ensure compliance with</small>

involuntary resettlement procedures during implementation, eligible costs of resettlement and compensation may be considered fo inclusion in Bank loan financing forthe project if requested (Asian Development Bank, 1998).

Cost estimates should be prepared for these activities. They should be budgeted, and Implementation of the activities should be scheduled with time-bound actions in coordination ‘with the civil works for the main investment project. The resettlement plan should have an

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‘The implementation of hydropower projet would change the character of the whole upper catchment. The population of the area above wil he relocated. This would rel in đisupion of their exiting social, economic anl ctu relation. I ation, they have to adapt to. new way

<small>of fife in the now settlement area,</small>

AL hydropower projets involve more or less significant disuptions to existing paterns of livelihoods, such as use of land and other natural resoures, income generation and living conditions, Most hydropower projects also involv the resetlemeat of people. In this eotext & fundamental principle for iỏeniBing socio-economic mitigation and enhancement measures has been the concept of “change for development”, This implies that affected people and ‘communities in the short term should atleast aot have their Situation negatively affected and, in the medium to long term, should have their opportunities for improved living. standards enhanced. Particular attention is given to improve the situation of poor and vulnerable people in ‘the concemed communities. (Phan, 2001)

23.23 Flood control coss-benefits

Benefits are measured primarily a the reduction of flood damages expected after completion of 4

proposed dam or flood contol structure. In the USA benefits ae estimated, consistent ith

Corps of Enginecnng Man andar estimted with heal of the Corps HEC mode. The model

<small>simulates flood damage through dc based on geographic and economic data describing</small>

servtues within a floodplain and hydrologic data relative to the probabilities of different food ‘event (U.S Environmental Protection Ageney, 2002).

‘Universally, the rationale fr flood control project is based on economic considerations linked to avoidance of both direct and indirect losses (including such intangibles as injury, illness, ‘mulnutsition, interference with income-caring activites and other opportunities foregone). The

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projects have sound economic rationales supported by strong arguments linked to protecting peoples’ lives and wellbeing. However, litle account ha ben taken ofthe bsneficial impact of|

‘oo, including the rejuvenation of wetlands as breeding grounds for auatic plants, fish and animal (vital sources of income and food forthe poor) enrichment of soil by riverborne sediments and nuưdews benefical to agriculture, and replenishment of resevois and

around ater table as reserves against dry season water shortages (Fox, 2003),

In the cost-benefit analysis of the Klang river basin flood mitigation project in Malaysia it was sown that the economic benefits of the project consist of directly quantifiable benefits indirect, benefits indiect use values), and nonuse values (DID, Malaysia, 2003), The major benefits are inthe Table 2.1

Another aspect of cost in hydropower dam project i related to the delicate balance between flood ‘control and power generation, Flood contol conflicts with power generation, Generally speaking, the higher the evel of water in reservoir, the more power can be generated. To implementation of ‘ood contro function, this could be done delaying emptying ofthe reservoir, which has to be done prior to the Mood season (Nguyen eta, 203)

Table 2.1 Benefit of ood contol of Klang river basin Mod mitigation project,

Benelit ‘Onsite benefit Offsite benet

Tntograted river basin

+ Soil erosion « 1290kni assuming | ¢ Clean water (water

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Improve river quality Tributary ver conidor Reduced cost of, collecting rubbish from

+ Avoided - damages incremental and Clean water and disruption value

+ Recreational values ‘Acathetie values

Reduction siverbank Recreation values

Flood forecasting and

‘Flood retardation Carbon Flood retardation Đ 03

â Carbon sequestration sequestration rllione

+ Tourism assuming 1 thác Carbon sequestration

: efor 1.800 haat §

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Soil erosion demonstration Tnereased fish production

River and wetland Offshore

Improved human welfare

“Land value improvement

<small>‘Source Feral Depart of Tigation and Dranage (DID) Malaysia 205)</small>

23.24 Irrigation costs and benefits

(Cost- Benefit Analysis asin the system of economic analysis, anything that reduces national incom isa cost and anything tha increased national incom is a benefit, Projet analysis tiesto ‘identify ad value the cost and benefit that will aise with the proposed project and to compare ‘them with the situation as it would be without the project. change in output without the project can take place im two kinds of situation. The most common is when production inthe area is already on-going, even if oaly slowly, and will probably continue to grow đường the life of

project. The objective ofthe project is (o increase growth by intensifying produetion. A change in

‘output can also occur without the project if production would actually fal inthe absence of new

<small>”</small>

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Ôn osmteh, OF course, if nọ change in output is expected in the projet ae out the project, then the distinction between the “before and after” comparison and the “with and without” comparison is less eri. In some projects the prospects for increasing production without new

<small>inosment are minimal In che Kemuby ization projet in Norheader Malaysia, «pump</small>

inlgwion scheme was built that permite Famer to produce second sce crop dung the dey season. Without the project, most ofthe area was used for giới with the hp of residual ‘moisture or small pumps some was used produce tobacco and othe cash crops, Production was ot likely to increase because of the limited amount of water avaiable, With the project now is operation, sce i grown in the dry season, OF course the value ofthe secon ie ep could not be taken asthe total henefit rom the projet. From tis valu the value forgone fom the grazing and the production of cash crop mist be deducted. Only the incremental value could be ttbuted {o the new investment in this project (Gittinge, 1982),

“The case study in Sri Lanka's Uda Walawe left bank imigation system was demonstrated how imigado water was assessed by all household located within the imigation system. The study ‘identified the key dimensions and their key impacts of gaining access to good itrigation water

(Table 22).

Table22. Key dimensions and key impacts of acess to good irrigation water Key dimensions Rey impacts

Increased crop areas

<small>+ Increased crop intensity</small>

“© Increased crop diversification

+ Opportunity for year-round cropping

Treonersonaunpnon “Increased income from erop production

<small>‘+ Increased family consumption of food</small>

{Stabilization of farm family income ‘+ Relueed food prices

<small>© Offiam</small>

+ Stabilization of employment

<small>opportunities</small>

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Thereised rural wage ates Vulnerabiliy? Food security ‘Enhanced food availablity

<small>‘+ Increased opportunities to produced</small>

And retain food for home consumption ‘+ Reduced level consumption shortfall

<small>4+ Reduced isk of op faire‘+ Reduced seasonality eects of</small>

<small>+ _ Improved overall resource hase</small>

<small>‘Soure- Hussain ea. 2002),</small>

CHAPTER IL

<small>MATERIALS AND METHODS,</small>

3.1 Introduetion,

‘This chapter presents the conceptual framework and analytical approach used in the study. It

<small>details the steps and procedures involved in data collection and analysis. The primary data</small>

collection involved household surveys, community interviews, key information's in-depth interviews and participant observations. Secondary information are also used and derived from ‘various elated goverment and companie sources, Data from household survey are processed ‘withthe SPSS sofware. Cost and benefit estimates are caeulted based on information obtained from fold survey, and secondary information, For stangible benefits and costs, however, the values used are derived from the most common technique of non-market valus0on; the ccntingent valuation method. The final phase ofthe study isthe estimation ofthe social costs and benefits of the hydropower projet.

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32 Study area

321. Location

Ban La hydropower project is located on Ca river some 15 km upstream of the confluence with Nam Mo river at E 104° 18" 30 and N 19° 16 30% The catchment area of the Ban La

hydropower project is 8,700 khẺ, being 325% ofthe total catchment area of Ca river at the Cua,

‘Hoi outlet into the South China sea, The project area is located inthe mountainous area just 1o the North of Truong Son range and the mountains inthe area are of medium height, bat with ‘several mountain peaks i the range of 1,300 o 1,600 m in eight. The project area including the reservoir lies within the Kim Da, Kim tien, Huw Dong, Huu Khuong and Luan Mai communes of "Nghệ An Province

“The Ban La Hydroelectric project was constructed with the objectives to generate power, for ood control and to inerease inigation water dovmsizeam areas during the dry season. The Jocation of the project sas shown in the Figure 3.1

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‘Map of Viet Nam

Ban La hydroelectric

Figure 3.1 Location ofthe study area

</div>