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US$90 Million Loan Signed to Help Alleviate Water Shortages in Southern Viet Nam

HANOI, VIET NAM (8 APRIL 2004) - The signing ceremony for a US$90 million loan to develop water infrastructure in southern Viet Nam took place today between the Asian Development Bank (ADB) and the State Bank of Viet Nam (SBV).

Governor Le Duc Thuy represented the State Bank of Viet Nam at the signing, while Bradford Philips, Country Director at ADB's Resident Mission in Viet Nam signed for ADB.

The Phuoc Hoa Water Resources Project will provide additional water in the Saigon and Vam Co Dong river basins for salinity control and domestic, municipal, and industrial use in Ho Chi Minh City. It will also help develop irrigated agriculture in the surrounding provinces.

The total cost of the project is estimated at $164.6 million, of which the Government is financing $35.6 million equivalent and Agence Francaise de Developpement (AFD) is cofinancing about $34 million through two loans. The beneficiaries will contribute a further $5 million. The Ministry of Agriculture and Rural Development is the executing agency for the project, due for completion in September 2010.

Water shortages in the Saigon and Vam Co Dong river basins are causing saline advance during the dry season. Users in the lower reaches frequently suffer from deteriorating water quality. Without the basin transfer, shortages of fresh water are forecast to increase significantly within the next four to five years in the face of rapidly increasing demands, constraining new development and impinging on existing activity.

The project will divert surplus water from the Be River to the Dau Tieng reservoir located to the west in the neighboring Saigon river basin. It will achieve this through the construction of the Phuoc Hoa barrage on the Be River and a 38-km transfer canal. From there, the water will be diverted through the existing Dau Tieng irrigation system to an area of 48,130 ha for which a new irrigation system will be constructed. The project will also undertake overall management and coordination of activities and provide support to develop capacity within government institutions, irrigation management companies, and water users groups.

"The additional water resources for the Saigon and Vam Co Dong river basins will benefit directly almost 170,000 people in the three new irrigation areas, creating jobs and raising incomes," said Mr. Philips. In addition, large number of households will benefit from improved supplies of water for domestic and industrial use and from improved salinity control in the downstream reaches of the rivers.

Almost 40% of the project's beneficiaries live below Viet Nam's national poverty line of $0.33 per person per day. It is estimated that improved agricultural production will increase average incomes of beneficiaries by about 40%, halving the number living below the poverty line.

ADB 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 63 members - 45 from the region. In 2003, it approved loans and technical assistance worth US$6.1 billion and US$177 million, respectively, of which $179 million in loans and $8.6 million in technical assistance were for Viet Nam.

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