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Loan Signed to Boost Rail Links Between Viet Nam and China

HANOI, VIET NAM (16 January 2007) - ADB and the Government of Viet Nam today signed a loan agreement for US$60 million to help upgrade and modernize the rail link between the Vietnamese capital of Hanoi and Lao Cai on the border with the People’s Republic of China (PRC).

The project will promote sustainable growth and greater trade between the two countries by increasing rail traffic through a portion of national rail line that provides a vital subregional link.

Signing the agreement was H.E. Le Duc Thuy, Governor of the State Bank of Vietnam for the Government of Viet Nam, while Mr. Ayumi Konishi, Country Director for ADB's Viet Nam Resident Mission signed on behalf of ADB. Also present at the signing ceremony was Ambassador of France in Viet Nam, Mr. Pham The Minh, Vice Minister of Transport, and Mr. Pham Huu Bang, General Director of Vietnam Railways.

The line - stretching 285 km between Yen Vien, outside Hanoi, and the border at Lao Cai - carries substantial domestic traffic as well as and rapidly growing regional traffic between Viet Nam's Hai Phong port and the PRC's Yunnan Province. The track was built around 1910 and needs upgrade and rehabilitation to meet the growing demand for railway transport.

The project will rehabilitate the line to ensure safe and efficient operation and boost the capacity of its stations and main terminal points to permit more and bigger trains to use the line.

Worn track will be replaced, new bridges constructed or strengthened and stations extended. Safety features will be introduced to secure road crossings and protect people living along the line.

The project will also undertake institutional reforms to modernize Viet Nam Railway Corporation's financial governance and upgrade cross-border procedures at Lao Cai.

"The improvements are required to cope with rapidly increasing trade between Viet Nam and the PRC, and to enable international trade from the PRC to be shipped via the container port at Hai Phong," says Peter Broch, ADB team leader for the project. "The line forms an important part of the Greater Mekong Subregion transport network and is also an integral part of the Singapore-Kunming link, which could be completed by about 2015 with the construction of a final link between Phnom Penh and Ho Chi Minh City."

Some 200,000 local people along the line should benefit. Consultations with them have indicated strong support for the project, which is expected to lower transport costs and traveling time, and generate additional economic activity and new jobs.

Besides expanding trade, the project will open up important tourist destinations in Viet Nam, including the World Heritage Site at Halong Bay and the Sa Pa mountain resort.

ADB's loan, from its concessional Asian Development Fund, covers almost 38% of the project cost of $160 million. The loan has a 32-year term, including a grace period of eight years. Interest is charged at 1% per annum during the grace period and 1.5% per year for the rest of the term.

Agence Francaise de Developpement will provide a loan of Euro32 million (to be administered by ADB) and the French Ministry of Finance will provide a credit of Euro30 million. The Viet Nam Government will cover the remaining cost of $22.5 million.

Vietnam Railways is the executing agency for the project, which is due for completion in 2012.

The Asian Development Bank is dedicated to reducing poverty in the Asia and Pacific region through pro-poor sustainable economic growth, social development, and good governance. Established in 1966, it is owned by 66 members - 47 from the region. In 2005, it approved loans and grants for projects totaling $6.95 billion, and technical assistance amounting to $198.8 million.

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