MANILA, PHILIPPINES - ADB will help improve irrigation infrastructure and management in the central region of Viet Nam through a US$74.3 million loan.

The project covers one irrigation subproject each in Binh Dinh, Quang Binh, Quang Ngai, Quang Tri, Thanh Hoa, and Thua Thien Hue, central region provinces that have persistently high rural poverty and suffer disproportionately from natural disasters.

In each subproject, the project will improve badly deteriorated and incomplete irrigation and drainage infrastructure, and reduce their vulnerability to natural disasters. More than 57,000 hectares of agricultural land will benefit from the project.

It will also establish a service-oriented approach to irrigation water management where provincial agencies and the water users will be empowered to jointly manage irrigation schemes. Irrigation service providers will be strengthened to become financially autonomous entities, water user groups will be formed, and a project performance management system will be put in place.

"Continued deep and lasting poverty reduction in the central coastal region depends on improving returns from agriculture, a sector whose performance is held back by physical and institutional constraints," says Ian Fox, an ADB Principal Project Specialist.

"The improved performance of the region's irrigation schemes depends on introducing service-oriented management systems that are cost-efficient, effective, autonomous and accountable. The participation of water user groups is not only indispensable for sustainable operation, it is also a cost-efficient means of helping service providers meet their goals."

Viet Nam's financing needs to upgrade and expand the country's water sector infrastructure are estimated to be more than $3 billion, and water supply and irrigation are identified as priority sectors for development assistance. Currently, about 40% of the country's agricultural areas, equivalent to 2.25 million hectares, are not served by irrigation schemes.

More than 400,000 people in the project areas, 38% of whom live below the poverty line of $0.33 per person per day, will benefit from increased agricultural income and more jobs as a result of the project. Many of them will also benefit from improved water supply for domestic use and reduced vulnerability to natural disasters.

ADB's loan comes from its concessional Asian Development Fund. It carries a 32-year term, including a grace period of 8 years, with an interest charge of 1% per annum during the grace period, and 1.5% per annum thereafter.

The Government will finance about $24.7 million of the project's total estimated cost of $99 million. The Ministry of Agriculture and Rural Development is the executing agency for the project, which is due for completion in December 2011.