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ADB Loan For Cambodia-Viet Nam Highway A Milestone For Greater Mekong Subregion

Traffic and trade flows between Cambodia and Viet Nam will be boosted by two concessional loans totaling US$140 million approved today by the Asian Development Bank for a project to improve the highway between Phnom Penh and Ho Chi Minh City. The first joint project between these two countries, it marks a milestone in the ADB's Greater Mekong Subregion (GMS) initiative to promote economic cooperation in a formerly conflict-torn area.

About 240 km of the road -- 160 km in Cambodia and 80 km in Viet Nam -- will be reconstructed. Loans of $40 million for Cambodia and $100 million for Viet Nam will improve facilities at the border crossing and reduce bureaucratic and procedural constraints to cross-border trade. The road improvement works in Cambodia will be low cost, reflecting relatively low traffic volumes, while the Viet Nam portion will cost more due to much heavier traffic, particularly closer to Ho Chi Minh City. The project will upgrade the road to meet traffic flows expected from 2002 to 2012.

The region used to have strong cross-border transport links, but most fell into disrepair and disuse as the political map was repeatedly redrawn. "Peace in the Greater Mekong Subregion has ushered a new era for cooperation among the six countries of Cambodia, the People's Republic of China, Lao People's Democratic Republic, Myanmar, Thailand, and Viet Nam,'' says Geert van der Linden, Director of the ADB's Programs Department (West).

The upgraded road will shorten the travel time between Phnom Penh and Ho Chi Minh City by four to six hours and reduce operating costs for trucks by 16 to 20 percent. Cross-boarder issues such as vehicle registration, insurance, drivers' licenses, and permitted routes will be addressed.

Better security as well as easier access will encourage tourists, business people, and traders to use the road instead of going by plane or boat. The highway is part of a longer corridor between Bangkok, Thailand and the southern Vietnamese port city of Vung Tau. Thus, trade between Thailand, Cambodia and Viet Nam is also expected to expand as a result.

"With the trend toward economic liberalization in most of the subregion's formerly centrally planned economies, opportunities have arisen to renew the economic ties and restore the transport infrastructure that once linked the countries' economies," notes Mr. van der Linden.

The total cost of the project is $195.5 million -- $50.7 million in Cambodia and $144.8 million in Viet Nam. The balance of the cost will be borne by the Governments. The ADB loans will come from the Bank's Asian Development Fund (ADF). They are repayable over 40 years, including a grace period of 10 years, and carry an annual service charge of one percent. Approval of the loans is subject to the condition that they shall be signed when sufficient financial resources are available for the ADF.

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