Land and water investment in Viet Nam: past trends, returns and future - Dao Trong Tu

Dao Trong Tu, Director, Department of International Cooperation

Ministry of Agriculture and Rural Development, Viet Nam

BACKGROUND

Viet Nam's main land body extends along the Eastern coast of the Indochinese peninsula facing the sea in the east and south. It shares borders with China, Laos in the north and Cambodia in the west. Viet Nam lies entirely within the northern tropical zone. Average annual rainfall varies from 800 mm to 2 000 mm. Viet Nam's total land area is 33 million ha of which nearly 20 percent or more than 7 million ha is now cultivated. Some 4.24 million ha are planted in rice. With a population of 77 865 500 (2000) and an annual growth rate of 1.51 percent (1999), arable land is becoming a scarce resource. Viet Nam remains predominantly an agricultural economy. The agricultural sector employs more than 60 percent of the labour force and accounts for 30 percent of total GDP.

While it may seem that Viet Nam has abundant water resources, the amount of water generated is low compared to other countries (4 200 m³ per capita). Water resources vary in different seasons and geographic areas. Some 70 to 75 percent of annual rainfall comes during three to four months in the rainy seasons, with up to 30 percent of annual rainfall coming in only one month, often causing serious floods. Rainfall in the three driest months normally accounts for 5 to 8 percent. Sometimes, however, it is as little as 1 to 2 percent which causes serious drought in many areas - as seen during the drought caused by El Nino in 1998 - 1999. Natural calamities such as storms, floods and droughts have traditionally threatened agricultural production and the living standards of people in many areas of Viet Nam. In addition, there are also problems in many areas with a high soil content of aluminium and salt.

The Government of Viet Nam considers the agricultural sector to be foundational to the successful implementation of industrialization and modernization of the country. Therefore it has given and continues to give high priority to agricultural development. Investment in agriculture has been increased in the past and is projected to expand in coming decades.

Investment in agriculture from the state budget during the period from 1996 to 2000 was 21 594 billion dong (15 000 dong = US$1) or US$1.44 billion or 21.75 percent of total investment in all social and economic programmes. The budget allocated for agriculture and rural infrastructure improvement was 1 432 billion dong (468 billion in external funding), while 13 008 billion dong (4 342 billion in external aid) or more than 60 percent of total investment for water resources development in the agricultural sector, 2 788 billion dong for forestry; 864 billion dong for rural water supply; and 3 503 billion dong for other activities. Investment details are presented in Table 2.

TABLE 1

Agricultural portion of gross domestic product (billion VN dong)

(US$1 = VN Dong 15 000)

TABLE 2

Total investment for agriculture and rural areas during 1996 - 2000

INVESTMENT IN THE WATER SECTOR

Existing situation

During the last decade, the government and people of Viet Nam have made significant investments in construction of many irrigation systems. Annually, about 10 percent of the state budget and labour contributed by the people is used for irrigation development. The country now has 75 large and medium scale irrigation systems, many small irrigation systems, and nearly 600 large and medium reservoirs (with more than 1 million m³ of stored water with an average dam height of more than 10 m). Viet Nam's existing water infrastructure is massive: over 3 000 small lakes and dams, about 2 000 pumping stations with a combined capacity of 200 MW in irrigation and 300 MW in drainage works, more than 1 000 drains below river and sea dykes, about 8 000 km of flood prevention dykes in the Mekong river delta and tens of thousands of kilometres of canals. Total fixed assets represented by state investment are valued 60 000 billion dong or US$4 billion (1998).

Using this infrastructure, 3 million ha of croplands are irrigated, 1.4 million ha of winter - spring crops in northern provinces are drained, 700 000 ha of land are protected against saltwater intrusion, and 1.6 million ha of acid sulphate soils in the Mekong delta are being improved. This infrastructure hasgreatly reduced the severity of floods and droughts, expanded cultivable area, improved soil, and increased food production to its present level of almost 32 million tonnes (1998).

TABLE 3

Investment from state budget for agriculture and rural in period 1996 - 2000 (billion dong)

Note: 15 000 Dong = US$1

The dyke system consists of 5 700 km of river dykes, 2 000 km of sea dykes and a network of dams, drainage canals and embankments designed to prevent flooding in the Mekong river delta, contributing both to increased production and socio-economic development. The dyke systems in the Red, Ca and Ma river systems are most important. Their success was demonstrated by the Red River dyke system preventing flooding in 1991, when water levels reached 13.6 m in Hanoi and 7 m in Pha Lai. Similarly, the sea dyke system in northern and north - central Viet Nam now prevents saltwater intrusion and can withstand storms of 8 to 9 on the Beaufort scale (unless there is a concurrent high tide) while systematic embankments in the Mekong river delta protects summer - autumn paddy and prevents early flooding in August.

Large- and small-scale irrigation systems annually provide more than 4 billion m³ of water for industrial and domestic needs. Large - scale integrated irrigation and hydropower infrastructure such as the Hoa Binh, Tri An and Thac Ba dams prevent floods, provide water for downstream areas and yield large amounts of hydropower (some 10 billion kWh/yr) to the national electricity grid. They also contribute to further development in transportation, fisheries and tourism.

TABLE 4

External funds (ODA) for agriculture sector 1996 - 2000 (billion dong)

The irrigation schemes contribute to the elimination of hunger and poverty alleviation in rural areas, especially in mountainous provinces. In many localities, irrigation schemes have facilitated the creation of new economic zones, created better conditions for fixed cultivation and resettlement, and have contributed to the reduction of shifting cultivation. In many places, irrigation schemes combined with small hydropower installations provide light to remote hamlets. In the Mekong River delta, the saying is that where there is fresh water, there are people.

Many irrigation systems have contributed to improvement of the environment and tourism, for example, by creating beautiful landscapes such as Suoi Hai, the Dong Mo - Ngai Son lakes, the Dau Tieng, Nui Co and Dai Lai lakes. Irrigation systems now provide flood protection; areas which in the past were often subject to flooding now escape that problem, making peoples' lives safer, facilitating overland transport and reducing the incidence of disease.

Shortcomings and challenges

However, the system of irrigation schemes in Viet Nam still suffers from many shortcomings and challenges. For example, the initial construction cost for irrigation construction in Viet Nam has been low, at some US$1 000 - US$2 000/ha while in countries with similar conditions it reaches from US$3 000 - US$5 000 or US$10 000/ha. However, inexpensive construction has come at a loss of quality or only partial completion. Irrigation usage fees are insufficient to cover costs of management and operation (O&M), maintenance and repair of the irrigation network, leading to a process of degradation. Improper management leads to water wastage. Some irrigation works can carry only 60 percent of designed capacity - very serious in dry years when much of the crop can be lost due to the shortage of water.

Management of existing irrigation systems at the on - farm level has not been reformed during the ongoing economic transition process. Further, management of irrigation construction at local level has not yet been adapted to the market mechanism

Irrigation systems initially designed to provide water for paddy now needs to be improved to meet the present demand for multi - cropping and crop diversity. Construction of irrigation systems for fruit trees and industrial crops in mountainous areas, concrete - lined canals, and application of advanced watering techniques to reduce water consumption are now urgent requirements.

At present, one million people in the upland areas have insufficient water for domestic consumption and only 30 percent of the rural population has access to clean water.

Dyke systems and other flood prevention works should be improved and expanded to withstand even exceptional climatic conditions. There is a need now to take all necessary measures to prevent floods during the coming years. This is a serious challenge for the water management sector. Planning for water resources usage has so far been done on a sectoral basis only, without considering forests, production, the daily needs of local people and the environment. In consequence, many surface water bodies have been exhausted. Most attention has been given to supplying water, while there has been less attention to the drainage system. In addition, emphasis has been given to water for agricultural production with less attention to domestic water use and other socio-economic needs. Finally, within agricultural production, paddy production was given priority while the needs of dryland crops, subsidiary crops, cash crops and fruit trees were neglected. Although water is abundant during the rainy seasons, too little is collected and saved for the dry season. Existing reservoirs can store only 6 percent of total annually generated water resources: for water coming into Viet Nam in rivers from abroad, the storage capacity is only 2.8 percent.

Water sources are becoming polluted due to industrialization, urbanization and high growth rate of population. Over - exploitation of groundwater resource has caused supply difficulties in many areas.

Water resource management is still scattered and there is overlap between ministries, sectors and localities. Management by river basin has not been implemented; neither is there the systematic establishment of irrigation systems by river basin.

IRRIGATION SYSTEMS DEVELOPMENT/WATER MANAGEMENT OBJECTIVES

Water resources in Viet Nam are relatively abundant in the rainy season and can be exploited for different purposes: domestic use, food production, industry, energy development, transportation, tourism and environment, and socio-economic development. In the major river valleys, the water level can be maintained over the entire year, except in Binh Thuan province, where there is a need to transfer water from Dong Nai. There are also technical difficulties in arranging irrigation in the Mekong River delta. Building water retention structures in upstream countries may create additional water shortages during the dry season downstream.

• Industrialization and modernization are accompanied by urbanization, leading to increased water demand for domestic and industrial use, which leads to increased demand for construction of more water storage and distribution works - which in turn leads to the need for drainage and wastewater treatment facilities.
• The more highly developed the economy, the more sophisticated systems for protecting society from natural calamities must be. Both the dyke system and flood regulation structures at residential and important economic production areas should be strengthened to ensure safety, limit losses, and enable sustainable development.
• The average agriculture land area per capita is very low. At present, there are about 7 million ha of agriculture land, giving an area per capita of less than 0.1 ha. Even if the area of agriculture land could be increased to 10 or 11 million ha over the next few decades, the expected population growth (to 140 million by 2040) would make the average remain below 0.1 ha per capita. Therefore, increased agricultural production cannot only be achieved through expansion in the land area cultivated but must be accomplished mainly through the intensification of cultivation. Increasing areas of agricultural land should be made able to carry two or three crops per year. Further, protective measures should be taken that ensure continued productivity of the land despite natural calamities in both dry and rainy seasons.

The irrigation network is extensive and there has been no major breach of the dykes in the last 20 years. The high food production level reached in 1998 demonstrates the robustness of the agricultural production system. However, much of the irrigation and dyke system consists of low - cost construction which might not be able to fill their function in extreme situations or flood or drought.

Structural quality will also deteriorate without regular maintenance and upgrading, The irrigation system should also be gradually modernized to support the transition in the cropping structure, irrigating more vegetables, subsidiary crops, cash crops and fruit trees. Water and soil should also be used sparingly to protect the environment.

At present, Viet Nam faces many difficulties, such as the changes in global climate and ecological changes due to local deforestation; increased frequency of natural calamities; increased production of waste which pollutes water sources due to industrial development and growth of urban areas. In this situation, it is necessary to develop irrigation within the framework of comprehensive water resource management and exploitation to obtain multiple benefits for industry, agriculture, and livelihood of the people. Integrated management and utilization of water resource should be implemented according to the Law on Water Resources. New organizations for water resource management should be established, such as a National Water Resource Council and management boards for planning of river basins. The quantity and quality of water resources should be monitored to facilitate water management according to the new law.

By the year 2010, the irrigation schemes must be able to meet the demands originating in Viet Nam's industrialization and modernization:

• For agricultural production, 11 million ha of land should be fully utilized, of which annual crop production areas would be 9.7 million ha for production of 36 to 38 million tonnes. Clean water must be ensured for domestic use and for supply to industrial zones. Water demand in 2000 is estimated at 72 billion m³, of which 61 billion is for agriculture and 11 billion is for domestic use and industry. Water demand is expected to increase to 90 billion m³ by 2010, with agriculture needing 74 billion m³ and industry and household use at 16 billion m3. Demand is expected to increase particularly rapidly in the Mekong river delta, the southeast, the mountains and in the central highlands. Drainage should be ensured in flood - prone areas.
• For flood prevention and limitation of damage by natural calamities, the dyke system must be improved. The Red River dyke system should be strengthened and improved in quality to control water flow even if water levels reach historically high levels. More reservoirs should be created to reduce fluctuations in water flow. The sea dyke system must be strengthened to withstand storms of 11 and 12 on the Beaufort scale. In the Mekong river delta, an area safe from severe flooding in areas of shallow water levels should be created, where people from areas of deeper inundation can find safety. In large river valleys, integrated construction in which flood prevention is combined with irrigation and electricity generation must be created.

  The planned Son La hydropower plant at Ta Bu and the Dai Thi plant on the Lo river are highest priority, followed by Cua Dat on the Chu, Ban Mai on the Ca, and Ngan Truoi on the La rivers, respectively, along with plants on the Huong, Bo (Thua Thien Hue) and the Dinh Binh plant on the Con river. The plant on the Phuoc Hoa river must be constructed as early as possible to overcome serious water shortage in the Ho Chi Minh City - Dong Nai - Vung Tau triangle. The 'stair' on the Dong Nai river will be formed after the Han Than - Da Mi plant is finished. The Dai Ninh plant should be started to generate electricity and provide water for the Luy river region (Binh Thuan). These are strategic plants; apart from building such large plants throughout the country, small - and medium - scale plants in the mountains and central highlands have important roles to play in socio-economic development, hunger elimination and poverty alleviation, and as a basis for establishing agricultural and industrial production zones.

  Dykes preventing saltwater intrusion and regulating water flow in the Mekong river delta, particularly increasing water retention capacity in the dry season, should be completed. Groundwater resources should be protected and exploited safely for domestic use in the Mekong watershed, the central highlands, the central coast and in the southeast. The problem of insufficient water for domestic use by one million people in upland areas should be solved. Water resources must also be provided as needed for development of industrial zones.

• Irrigation systems and related infrastructure such as pumping stations, mechanical facilities and electricity transmission lines should gradually bemodernized. Channel systems should be consolidated. Existing irrigation works should be utilized to their full design capacity. Small irrigation systems in mountainous area must be strengthened. The area watered and drained for cash crops and fruit trees should be expanded and soil and water conservation must be practised on sloping land.
• Viet Nam's capacity for scientific research, water resource management, planning, design, construction and application of new materials for irrigation construction should be increased integrating new technologies.
• Appropriate policies and procedures should be formulated to support the introduction and use of the coming Law on Water Resources.
• These tasks show that irrigation is very important for Viet Nam's socio-economic development, for the sustainability of production and for protection of the environment. There is need for US$5 - 7 billion of state funds in this field.

PRIORITIES FOR INTERNATIONAL ASSISTANCE SUPPORT

Irrigation schemes

Because of the central importance of irrigation to Viet Nam's national economy and social needs the following priorities have been established for international assistance:

Construction of multipurpose irrigation systems. Regulating water levels to create water resources for both national economic sectors and environmental improvement. Build works which regulate floods and reduce losses caused by natural calamities, works to prevent saltwater intrusion; plants to treat wastewater and protect water quality; works to drain low - lying areas to improve living standards.

Improve existing irrigation systems to take full advantage of their capacity for multiple cropping and crop diversification. Modernize works and apply advanced water technology combined with traditional techniques to save water and maintain humidity for longer time. Strengthen the canal system.

Invest in irrigation control systems: communications for flood prevention; strengthen reservoir management; establish wastewater quality standards and programmes for clean water and rural environmental hygiene; strengthen management capacity in water resources and irrigation; formulate national water resources strategies; and prepare integrated plans for river basin and irrigation development.

By-law preparation: preparing by-laws including decrees for implementing the Law on Water Resources, on administrative punishments in the water resource sector and on water pricing. Revisions of laws on the exploitation and protection of irrigation constructions, on dykes, and on flood and storm prevention, so that they become compatible with the Law on Water Resources. Prepare inter - ministerial circulars and regulations on water resource management and on prevention of losses caused by water.

Establish water resource management agencies in accordance with the new Law, such as a Water Resource Management Council and management and planning agencies for river basins and investigation of water resources.

Investigate the extent of water resources (including surface water and groundwater), establish data banks and related resources.

Training human resources for development of irrigation and water resource management.

Licensing exploitation and utilization of water as well as for wastewater emission.

INVESTMENT IN THE LAND SECTOR

From 1996 to 2000, the state budget of Viet Nam allocated 1 432 billion dong for agriculture, of which 468 billion is external funding. Investment in land development is 6.61 percent of total funding for all sectors of agriculture. Investment for agriculture, however, is mainly for rural infrastructure with only a small amount for land (improvement of agriculture production on land). Investment in land concentrates to sustainability of food production to ensure national food security; improvement of management of natural resources (including ecological systems and environmental protection); and poverty reduction, or increasing living standards for rural areas and improvement of rural infrastructure

ASSESSMENT OF INVESTMENT IN AGRICULTURE

Thanks to the high level of attention by the government in the past, agricultural production has achieved encouraging results:

TABLE 5

Land - related investment (1999) (billion dong)

The growing rate of agricultural sector has been increased continuously with average rate 4.3 percent in the period 1989 - 1999. From a rice - importing country, Viet Nam has become the second largest rice exporting country worldwide. Agriculture has change from self - sufficiency to a diversified, commercialized and export - oriented agriculture.

Food production from 1989 to 1999 doubled; every year food production rose by 1.3 million tonnes, coffee - growing areas expanded 20 times, the production of rubber, tea and cashew nuts increased by five times, four times and four times respectively. Rice, coffee, tea, rubber have become main products for export. Income from export increased 13 percent annually and occupied 30 percent of production exported by all national economic sectors.

Technology succeeded progress. Advanced and modern technologies/methods in agricultural sector have been developed or applied which contribute to the improvement of yield and quality of plants and animals.

Agricultural structures have changed positively, moving toward an efficient and diversified agricultural sector. Many concentrated production areas have been created. Rural infrastructure has been significantly improved. The income of most farmers is rising and living conditions of people in rural, mountainous areas have improved. Rehabilitation of forests and reforestation has progressed: after 10 years Viet Nam has 1 464 million ha of forest; deforestation declined from 100 000 ha/year in 1980 to only a few thousand ha/yr today. Forest cover rate in 1999 reached 33 percent (11 million ha).

CHALLENGES IN LAND DEVELOPMENT

Viet Nam has 10 million ha of barren land (hills, mountains) of which some area can be cultivated. the income from 8.1 million ha cultivated land is low with US$1 000 ha/yr. Rural labour potential and local people's capital resources are now still not yet mobilized effectively for production

Viet Nam's agriculture is still underdeveloped, with low productivity and efficiency, and low competitive capability. As of 1994 more than 70 percent of farmers household owned farmlands of less than 0.5 ha. Investment in land is low. Agricultural services, including marketing for agricultural production, is weak. Due to various constraints, government investment in agriculture is not at sufficient levels.

CONCLUSIONS

Improvement of efficiency of planning activities: investment efficiency in the rural infrastructure (including irrigation, rural roads and household living areas) and concentration of investment for targeted national and sector programmes such as: resettlement and new economic zones, drinking water, sanitation and rural environment, seeds and animal, and 5 million ha of forest addition; improvement of land use planning to mobilize all potential of areas to increase income of farming; changing investment structures: government should increase investment in agriculture and rural development (including water resources and land). Enhancement of managing institution and strengthening state administrative mechanism in order to mobilize and efficiently utilized external assistance for development of

Viet Nam's strategy for irrigation development and water resources management to 2010

Challenges

• Low initial investment (US$1 000 - 2 000/ha)
• Degraded constructions: some only reach 60 percent of designed capacity
• Lack of water, dam safety for hydraulic works
• Management of local level irrigation construction not consistent with market mechanisms
• One million people in uplands lack clean water supply: only 30 percent of rural people have clean water
• Planning for protection and utilization of water resources is not comprehensive
• Exhausted water resources in many places
• Scattered and overlapping management of water resources between Ministries, sectors and local level; management by river basin not yet implemented

Targets for the year 2010

• ensure clean water supply of 72 billion m³: agriculture: 61 billion m³; industrial and domestic use: 11 billion m³ and 90 billion m³ by year 2010 (agriculture: 74 billion m³; industry and domestic use: 16 billion m³⁾;
• ensure drainage for flooded areas;
• improve environment and ecology;
• implement a Red River dyke system to ensure the stable flow of water and prevent flooding at highest water levels;
• install a sea dyke system to withstand storms of 11 to 12 on the Beaufort scale and prevent coastal saltwater intrusion;
• ensure flood security for the Mekong river delta;
• establish integrated water infrastructure in large river basins
• overcome water shortages in Ho Chi Minh City - Sang Nai - Vòng Tau triangle;
• develop small - and medium - scale water infrastructure in mountains and Central Highlands;
• complete construction to prevent saltwater intrusion and regulate water level in Mekong delta;
• provide basic water supply to 1 million people in upland areas;
• strengthen scientific research, water resource management, capacities for planning, design of irrigation construction and applications of new construction materials; and
• complete the legal documentation system under the Law on Water Resources

Priorities for investment in irrigation development

• multi-purpose irrigation schemes;
• flood regulation and reduction of losses by natural calamities;
• infrastructure to prevent saltwater intrusion;
• construction for wastewater treatment;
• construction for drainage channels for flooded areas
• improve existing irrigation works;
• consolidate dykes and canals system improve irrigation control system;
• improve weather forecasting system and natural calamity prevention/reaction information;
• strengthen reservoir management capacity;
• establish management networks for wastewater treatment; and
• provide clean water and hygiene in rural areas.