Viet Nam's Water and Irrigation Systems Get ADB Assistance

News Release | 21 April 2010

MANILA, PHILIPPINES - The Asian Development Bank's (ADB) Board of Directors approved a $100 million concessional loan to rehabilitate one of Viet Nam's oldest and largest irrigation and drainage systems located in the heart of the Red-Thai Binh river basin.

The loan will also help build a campus for Water Resources University (WRU) which is the only university in Viet Nam with a full program of subjects necessary to educate water engineers.

"The loan-funded project is designed to address two binding constraints that contribute to the core sector problem of poor quality and delivery of water-related services - insufficient human resource capacity and inadequate public infrastructure," said Dennis Ellingson, Senior Natural Resources Management Specialist of ADB's Southeast Asia Department.

Irrigated agriculture is by far the largest user of water in Viet Nam. Paddy rice is the dominant crop, accounting for more than 80% of the irrigated area. In recent years, however, Viet Nam has diversified to aquaculture and other crops. Also, economic growth sectors other than agriculture are placing greater demand on water resources and causing its reallocation.

The Red River delta is one of the key economic hubs of Viet Nam. Around 560,000 people living in the surrounding area of the 50-year old Bac Hung Hai (BHH) irrigation and drainage system are expected to benefit from increased household incomes from improved irrigation. A total of 1.9 million people in BHH area will benefit from improved drainage and reduced risk of flooding.

The loan will fund education facilities to train engineers in water-related fields that are needed to meet the heightened demand of a rapidly growing economy. A total of 13,400 future students and 800 faculty members will benefit from improved quality of education and improved learning and accommodation facilities at the new WRU campus.

ADB will provide the loan from its Special Funds resources. The loan will have a maturity of 32 years with a grace period of 8 years and an interest rate of 1% every year during the grace period and 1.5% thereafter.

Agence Française de Développement will cofinance the project with a loan of EUR20 million. The government of Viet Nam will provide counterpart financing of $51 million for the project.