$600 Million Loan Approved to Help Build Roads in Sichuan, PRC

MANILA, PHILIPPINES (22 September 2005) - ADB will help develop an integrated road transport system to support the economic development of Sichuan Province in the poor southwestern region of the People's Republic of China (PRC), through a loan approved today for US$600 million.

The project will construct a 244-kilometer expressway from Ya'an to Lugu, which will complete the 900 km route connecting the growth centers of Chengdu, the capital of Sichuan, and Kunming, the capital of Yunnan Province.

It will also upgrade 678 km of local roads to improve access to poor remote areas, rehabilitate four public transport centers, and procure equipment needed for activities such as road maintenance, toll collection, and surveillance and communications.

"A road network strategy that integrates expressways with local roads will help ensure that the benefits derived from the expressway filter down to the poor," says Makoto Ojiro, an ADB Principal Project Economist.

"Better transport links are needed to improve economic efficiency, foster domestic and international trade, facilitate interregional economic integration, and promote efficient economic growth, thereby reducing poverty."

Despite considerable investment in the road sector, the PRC road network is still inadequate and does not provide efficient access to large parts of the country, particularly in the poorer inland regions, including Sichuan province.

The lack of infrastructure and inadequate road network has been identified by an ADB-assisted study as a reason for the slow economic growth and high incidence of poverty in the province. Sichuan ranks seventh lowest of all provinces in terms of gross domestic product per capita.

The project area is located in the mountainous periphery of Sichuan, where several poverty-stricken areas can be found. There are about 273,000 poor people in the project area, equivalent to 29% of the total population, living below the poverty line.

The project will improve access to jobs, markets, and social services for these rural poor residents. It will also help reduce transport time and costs, thus encouraging investment, creating jobs, and increasing incomes.

The project supports the Government's Western Region Development Strategy, which aims to reduce development disparities between the western and coastal regions.

Since 1991, ADB has provided 30 loans to the PRC, totaling nearly $5.6 billion, to finance about 4,100 km of expressways, together with 7,600 km of associated local road networks. ADB has also provided 50 technical assistance grants, totaling $26.9 million, to the road sector.

ADB's loan will cover 29% of the project's total estimated cost of $2.077 billion. The Ministry of Communications will contribute $272.4 million, the Sichuan Provincial Government $659.7 million, and the China Development Bank $544.9 million.

ADB's loan comes from its ordinary capital resources and carries a 26-year term, including a grace period of six years. Interest will be determined in accordance with ADB's LIBOR-based lending facility.

The Sichuan Provincial Communications Department is the executing agency for the project, which is due for completion around September 2011.

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