ADB Approves $95 Million to Help Lao PDR, Viet Nam Upgrade Key Road Network

MANILA, PHILIPPINES - The Asian Development Bank (ADB) will extend $95 million to help the Lao People's Democratic Republic (PDR) and Viet Nam upgrade roads in the northeastern transport corridor that offers trade and poverty reduction benefits to both countries, as well as the wider Mekong region.

ADB's Board of Directors has approved funding for the Second Northern Greater Mekong Subregion Transport Network Improvement Project. The project will improve 340 kilometers of roads, which form part of a corridor stretching from Thanh Hoa in northern Viet Nam, through Lao PDR, to Bangkok, Thailand.

"The section of the corridor running from Thanh Hoa through Houaphanh province in northeastern Lao PDR needs to be improved if the northeastern corridor is to reach its full potential, including giving Lao PDR year-round access to the fast developing port at Thanh Hoa on the South China Sea," said Jeffrey Miller, Principal Transport Specialist in ADB's Southeast Asia Department.

Cross-border transport corridors are a central element of the Greater Mekong Subregion's economic cooperation program, opening up trade, tourism, and investment opportunities among the six member countries. ADB has been a longstanding partner of the program, and the new project continues its support.

Along with physical improvements, the project will address maintenance and vehicle overloading problems which undermine road sector sustainability in the two countries. This will include the use of performance-based maintenance contracts, the purchase of vehicle weighing scales, and programs to control overloaded vehicles. The project will address road safety as well, though physical improvements to the roads and through public awareness campaigns. Support will also be given for an HIV/AIDS awareness and human trafficking prevention program, as well as the clearance of unexploded ordnance along the project route.

"The project area encompasses areas of high poverty in both countries, and the road improvements will provide new economic opportunities and better access to health, education, and other social services for households which will be able to move goods to market more quickly and cost-effectively as a result of faster travel times and lower transportation costs," Mr. Miller said.

ADB will provide a loan of $75 million equivalent from its concessional Asian Development Fund for the Vietnamese component of the project, and a grant of $20 million from the same source for the Lao PDR component. The loan has a 32-year term with an 8-year grace period carrying an annual interest charge of 1.0%, which rises to 1.5% for the balance of the term.

The two governments will provide combined finance of $32.7 million. The OPEC Fund for International Development (OFID) is expected to consider a loan of $12 million to Lao PDR in March 2011. If approved, ADB will administer the OFID funds, and the total investment cost will be $139.7 million.

The executing agencies for the Vietnamese and Lao PDR components are the Ministry of Transport and Ministry of Public Works and Transport, respectively, with an expected completion date of June 2016 for both components.