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ADB’s Project Signed to Address Forest Loss and Rural Poverty in Viet Nam

HANOI, VIETNAM (7 December 2006) - The Government of Viet Nam and ADB today signed a US$45 million loan for the project that will help address the problems of forest loss and degradation as well as rural poverty in Viet Nam's Central Highlands.

The loan agreement was signed in Hanoi today by Ayumi Konishi, Country Director for ADB's Resident Mission in Viet Nam, and Le Duc Thuy, the Governor of the State Bank of Viet Nam. Also present during the loan signing was representatives from concerned agencies.

The Central Highlands contribute more than 60% of the country's annual hardwood consumption. Its ecological conditions and terrain are suitable for sustainable forestry, as population densities are still low compared with the rest of the country. However, the region, home to at least five million people, is also the second poorest in the country.

Despite the existence of good laws and policies, there is little capacity to develop the country's forestry sector. As such, even in the Central Highlands, the sector is in serious decline due to unsustainable resource use and exploitation. A key factor is uncertainty over forest ownership, management, and user rights and roles.

"The Highlands communities have forestry-relevant skills and knowledge, thus engaging them in forestry should lead to both improved forests and forestry, and livelihoods," says Ayumi Konishi, Country Director for Viet Nam.

The project will establish sustainable forest management over one third of the country's natural forest estate, whose timber stocks are valued at about $4.4 billion. It will do so by improving forest sector governance, management, and incentive regimes in the provinces of Dak Lak, Dak Nong, Gia Lai, Kon Tum, Lam Dong, and Phu Yen, covering more than 3 million hectares of forestland.

The project will also increase forestry-based livelihood opportunities to reduce poverty in 60 communes by involving over 80,000 of the country's poorest households in sustainable forestry. Commune development funds will be established for small-scale and other livelihood-related infrastructure.

The development of small businesses will also be supported to improve the use of forest resources, strengthen supply and market chains, and add value to forest-based goods and services. Environmentally sustainable practices, such as those promoting clean development mechanisms, will likewise be supported.

The cost of the project is estimated at $91 million. ADB's loan comes from its concessional Asian Development Fund and carries a 32-year term, including a grace period of 8 years. Interest is 1% a year during the grace period and 1.5% a year afterwards.

The Governments of Finland, The Netherlands, Sweden, and Switzerland will provide grant assistance of about $16 million, while the Government of Viet Nam and the beneficiaries will shoulder the balance. The Ministry of Agriculture and Rural Development is the executing agency for the project, which is due for completion by the end of 2014.

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