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ADB Approves Largest-Ever Project Loan for Billion-Dollar Highway Linking Ha Noi, Kunming

MANILA, PHILIPPINES (14 December 2007) – The Asian Development Bank (ADB) is providing loans totaling US$1.1 billion to Viet Nam for the construction of a modern 244 kilometer (151 mile) highway stretching from suburban Ha Noi to Lao Cai, on Viet Nam’s border with the People’s Republic of China (PRC). It is the biggest single project financing in ADB’s history.

It currently takes two days for passenger cars and three days for trucks to travel from Kunming, PRC to Ha Noi. Once the new highway is completed in 2012, drivers will be able to make the overland trip in less than one day.

Reduced travel times will allow industries clustered around Ha Noi and Viet Nam’s major port city, Hai Phong, to expand into the country’s impoverished northwest region, increasing employment opportunities and social service access for communities along the highway corridor.

The new highway will increase Viet Nam’s ability to export agricultural and maritime products to Yunnan province, and beyond to the huge hinterland markets of southwestern PRC.

The highway will provide shippers in Kunming with a new channel for the rapid shipment of products that depend on fast access to global markets, as Viet Nam’s Hai Phong and Cai Lan ports are significantly closer to Kunming than Fangcheng port in Guangxi Province.

With World Heritage sites Ha Long Bay in Viet Nam and The Three Parallel Rivers in Yunnan, PRC, the new highway is also expected to expand cross-border tourism between the two countries.

Traffic volume on existing roads between Ha Noi and Lao Cai has been increasing at a rate of 12% per year. Over 5.5 million vehicles are expected to use the corridor in 2012, a number that will increase more than three-fold to 17 million by 2022.

“Traffic along the Ha Noi-Lao Cai corridor is already reaching saturation levels in many areas, and without this new highway, traffic costs would increase, while trade and growth would be suppressed,” said the Director of ADB’s Southeast Asia Department Infrastructure Division, John Cooney.

“Viet Nam needs modern highways to help remove the country’s transportation bottlenecks, accelerate economic growth and ultimately expand economic opportunity for Vietnamese families,” added Mr. Cooney. “This is particularly important for the northwestern provinces through which the highway will pass. These are among the poorest in Viet Nam, and their poverty is very closely linked to their present lack of access to the thriving economic centers around Ha Noi and Hai Phong.”

The new highway is designed to reduce the volume of traffic passing through cities and towns, which should decrease the number of traffic fatalities along the corridor.

The highway, designed to expressway standards, will operate as a fully access-controlled tollway. Financial analyses project that the highway project will generate sufficient revenues to recover the entire loan amount within 10 years from the time the highway opens to traffic in 2012.

The total cost of the project is estimated at US$ 1.216 billion. ADB’s US$ 1.096 billion financing for the project is comprised of two loans: a US$ 200 million low-interest loan from the Asian Development Fund (ADF), and a US$ 896 million loan from ADB’s Ordinary Capital Resources (OCR), provided under ADB’s LIBOR-based lending facility.

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