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ADB Road Project in Lao PDR to Develop Rural Economy

Links between Lao PDR's isolated Xieng Khouang Province and the rest of the country will be improved with all-weather access roads to be built with the help of a US$46 million concessional loan approved today by the Asian Development Bank.

The Xieng Khouang Road Improvement Project will improve about 300 kilometers of two national road sections and about 100 kilometers of feeder roads in the province. The national roads to be upgraded to bituminous standard will give Xieng Khouang Province all-year accessibility to the capital of Vientiane and other parts of the country.

The project will promote the economic development of Xieng Khouang Province which, although it has abundant natural resources, is isolated for about eight months of the year because of poor roads.

The ADB will also provide a US$700,000 technical assistance grant, financed by the Japan Special Fund, for strengthening the capacity of the Ministry of Communication, Transport, Post, and Construction (MCTPC), which will be the executing agency for the project. The technical assistance will train MCTPC staff in procurement, contract managing, project monitoring and accounting and audit practices.

About 85 percent of the Laotian population lives in rural hamlets and the country's transportation system depends heavily on its road network. The basic road network, including transit routes to neighboring countries, needs rehabilitation and improvement as well as new roads.

The project will reduce overall network transport costs and will accelerate development of the agricultural and tourism sectors in particular, increasing rural incomes and improving living standards of farmers and other low-income groups in Xieng Khouang Province. The feeder roads will connect farming communities to the national roads and market centers and by increasing employment opportunities and income generation will reduce poverty within the project area. The improved road connection to Viet Nam will also promote subregional economic activities.

The total project cost is US$64.5 million. The ADB loan is from the Bank's Special Funds, which means it is interest-free, carries a service charge of 1 percent per annum and is repayable over 40 years, including a 10-year grace period.

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