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ADB Supporting Viet Nam's Poverty Reduction Program

HANOI, VIET NAM (7 December 2006) - ADB and the Government of Viet Nam signed an agreement today for a US$15 million loan to support a multi donor program to reduce poverty in Viet Nam.

On behalf of the Government of Viet Nam, Mr. Le Duc Thuy, Governor, State Bank of Viet Nam signed the agreement. Signing on behalf of the Asian Development Bank was Mr. Ayumi Konishi, ADB's Country Director for Viet Nam. Other senior officials from concerned agencies also witnessed the signing.

In spite of adverse shocks experienced in recent years, such as the avian influenza and rising oil prices, Viet Nam's gross domestic product has grown at an average annual rate of 7.5% over the past decade, with a high of 8.1% in 2005. This makes Viet Nam one of the fastest growing economies in Asia.

Despite these successes, important structural issues and social challenges remain, and the new loan addresses these through the multi-donor supported Poverty Reduction Support Credit framework. It helps Viet Nam in the transition to a market economy by removing structural weaknesses and improving the business environment. It will also make development socially inclusive and environment friendly, and will modernize governance capabilities and the public administration system.

"This framework is hinged on the strong commitment of the donor community to supporting Viet Nam's reform agenda and galvanizing interest for the reform program," says Ayumi Konishi, Country Director for ADB's Resident Mission in Viet Nam.

The loan provides this year's ADB support to the framework, which donors are using to provide financial support to the Government's Comprehensive Poverty Reduction and Growth Strategy for 2002-2006. This year, the framework will provide $210 million to the Government.

" This loan is an excellent example of the operational links among Viet Nam's Socio Economic Development Plan 2006-2010, and the harmonized and coordinated efforts of the development partners in support of the plan," adds Mr. Konishi. " The country is making good progress in reducing poverty supported by strong growth ."

Aside from ADB, the framework is supported by concessional loans from the World Bank (US$100 million), Japan Bank for International Cooperation, and Germany (€6 million).

Grants will also be provided by Spain (€3 million), Australia (A$10 million), Canada (Can$4 million), Denmark (DKr61 million), European Commission (€10 million), Ireland (€3 million), Netherlands (€9 million-14 million), and the United Kingdom (£20 million).

ADB's loan comes from its concessional Asian Development Fund and carries a 24-year term, including a grace period of 8 years. Interest is set at 1% per annum during the grace period, and 1.5% per annum thereafter.

The State Bank of Viet Nam is the executing agency for the program loan, which will be utilized until December 2007.

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