MANILA, PHILIPPINES - The Asian Development Bank (ADB) is providing a $25.5 million supplementary financing to an existing emergency assistance loan to Viet Nam for the rehabilitation of rural infrastructure severely damaged by typhoons and storms in 2005.

The project was initially approved in 2006 by ADB with a loan of $50.97 million. However, high inflation has increased the cost of civil works, materials, and labor. Additional damage to rural infrastructure caused by typhoons in 2006 and 2007 has contributed to significant cost overruns. The government initially tried to address the situation by reducing the number of subprojects and increasing the project funding, but its efforts were hampered by the extent of price escalation.

The supplementary ADB funding will ensure completion of the project. It will also provide an opportunity to further address institutional development objectives of the project through an attached grant. Viet Nam will provide $4.5 million on top of the $8.9 million it contributed when the project was first approved.

"Without the additional funding, the investments made so far under the project would be at risk - as partially completed structures could be lost or unable to provide their expected protective function," said Dennis Ellingson, Senior Natural Resources Management Specialist of ADB's Southeast Asia Department. As of October 2008, more than 40% of the project activities have been completed.

Flooding is the most prevalent and serious natural disaster in Viet Nam. In 2005, tropical storms and typhoons affected large parts of the country, causing loss of life and extensive damage estimated at $365 million. Many types of infrastructure critical to the livelihoods of poor rural households were destroyed.

The project is targeting 10 of the most affected provinces - Ha Giang, Ha Tinh, Nam Dinh, Nghe An, Phu Tho, Phu Yen, Quang Binh, Quang Tri, Thanh Hoa, and Yen Bai. The target provinces have poverty rates higher than the national average of 24.1%.

Some 450,000 people are expected to benefit from the project through the restoration of essential infrastructure, including roads, flood protection, irrigation systems, and social infrastructure such as schools and water supply.

Viet Nam will also receive a $500,000 grant from the Republic of Korea e-Asia and Knowledge Partnership Fund to improve disaster preparedness by training staff of the Ministry of Agriculture and Rural Development's Disaster Management Center and the Water Resources University on the use of advanced technology.

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