Smart Subsidies Help the Rural Poor Climb the Sanitation Ladder in Vietnam PER LJUNG EAST MEETS WEST / THRIVE NETWORKS MEKONG DEVELOPMENT RESEARCH INSTITUTE 1 SEPTEMBER 2016

CHOBA Vietnam - Financial Incentive Structure

Main Research Objective Examine the effectiveness of key incentives — consumer rebate and conditional cash transfers — in encouraging the installation of hygienic latrines among different income groups 2

Research Communes Hai Duong Tien Giang

Survey Coverage 2 Provinces - Hai Duong in Red River Delta, Tien Giang in the Mekong Delta Panel data: 3 surveys (same households, preferably same individual) Baseline: Mid 2012 Mid-term: End 2013 Endline: Early 2015 2,100 Households

Research Methodology Four treatment arms (31-34 communes/arm): Consumer Rebate & Conditional Cash Transfers (CCT) Consumer Rebate only Conditional Cash Transfers only Control (Government’s National Target Program and other programs) Operational constraints imperfect randomization of communes Difference in differences approach Heterogeneous impact including interactions between the treatment variables and other control variables

Regression Model 𝑌 𝑖𝑐𝑡 = 𝛽 0 + 𝛽 1 𝑅𝑒𝑏𝑎𝑡𝑒_𝐶𝑇𝑇 𝑐𝑡 + 𝛽 2 𝑅𝑒𝑏𝑎𝑡𝑒 𝑐𝑡 + 𝛽 3 𝐶𝐶𝑇 𝑐𝑡 + 𝑋 𝑖𝑐𝑡 𝛽 4 + 𝑇 𝑡 𝛽 5 + 𝑢 𝑖𝑐 + 𝑣 𝑖𝑐𝑡 𝑌 𝑖𝑐𝑡 is the dummy variable indicating of the latrine status of household i in commune c in year t 𝑅𝑒𝑏𝑎𝑡𝑒_𝐶𝑇𝑇 𝑐𝑡 etc. are dummies for the treatments 𝑋 𝑖𝑐𝑡 is a vector of household characteristics 𝑇 𝑡 are year dummies of the mid-term and endline surveys 𝑢 𝑖𝑐 and 𝑣 𝑖𝑐𝑡 are time-invariant and time-variant unobserved variables

Overall Treatments Effect Outcome: Ownership of Septic Tank Latrines Year 2015 (Endline) Unimproved Latrine (at baseline) Poverty Certificate Rebate and CTT 0.171 0.275 0.178 Only Rebate 0.101 0.192 0.114 Only CCT 0.054 0.118 0.033

Research confirmed our operational experience Program impact is significant at the 1% level Consumer rebate is more effective than the CCT The program has greatest impact on the poor Households with unimproved latrines move up the sanitation ladder

Results from CHOBA M&E – Reaching the Poor with Hygienic Latrines

Results from CHOBA M&E – Leverage in Use of Public Funds Note: CHOBA costs are for latrines built by households in the poorest 40% of the population only!

Results from CHOBA M&E – How does the consumer rebate work? Little impact on the household’s cost-benefit analysis (the traditional argument for sanitation subsidies private versus public benefits & costs) Part of a whole “package” the “hook” on which the whole incentive system hangs (OBA payments to Women’s Union, volunteers, etc.) Creates interest in village education and communications meetings Open doors for Women’s Union volunteers Without the rebate, the extensive M&E would not work Rebate is similar to a “SALE” sign (“good deal”) Time limit encourages people to get a new latrine NOW

Going to Scale Research Achievements so far: Policy Impact: 126,000 latrines in Vietnam built and used by poor households 61,000 latrines in Cambodia built and used by poor households “Spill-over” effects on richer households Policy Impact: Phase-in Phase-out program Governments in Cambodia and Vietnam have agreed to gradually finance the consumer rebates EMW (with donor support) will finance software costs (performance based) Research Laos: OBA & CLTS

Thank you!