ADB announces more to support Vietnam’s finance, roads

The Asian Development Bank (ADB) announced Nov. 29 more financing of more than 100 million US dollars for Vietnam to support the country’s financial sector and upgrade a key road network.
 
The Philippines-based bank said it is extending US$60 million equivalent to Vietnam to expand financial sector reforms that have been at the heart of the country’s strong, sustained growth and poverty reduction achievements for over a decade.

An ADB statement said the bank approved a loan for the second phase of the Third Financial Sector Program on Monday.

The funds are targeted at the development of the non-bank financial sector, including the securities and bond markets, as well as strengthening rules and regulations to enhance transparency and provide investor and consumer protection, and overall financial stability.

“The results will be a more diversified and resilient sector with an increased share of capital market financing of domestic investments to support economic growth,” Hasnah Omar, senior financial sector specialist in ADB’s Southeast Asia Department, said in the statement.

The new assistance will help the capital markets increase their share of financing domestic investments, and reduce the funding mismatches that can occur with business bank loans, the statement wrote.

It also seeks to bring the regulatory environment for capital markets up to international standards, with improved information disclosure, and a stronger framework for issuing securities, according to ADB.

“These measures will strengthen market transparency, corporate governance and risk management capacity of institutions, as well as aiding government efforts to limit the scope of unregulated markets for unlisted securities,” said Ms. Omar added in the statement.

The 24-year loan has a grace period of 8 years, with an annual interest rate of 1% during the grace period, rising to 1.5% for the balance of the term. The State Bank of Vietnam is the executing agency for the program.

As for the second assistance, ADB said it will extend $95 million to help Vietnam and Laos upgrade roads in the northeastern transport corridor that offers trade and poverty reduction benefits to both countries, as well as the wider Mekong region.

Another announcement issued the same day said ADB 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 Vietnam, through Laos, to Bangkok, Thailand.

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, according to the bank.

ADB said 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. Jeffrey Miller, principal transport specialist in ADB’s Southeast Asia Department, said in the announcement.

ADB will provide a loan of US$75 million equivalent from its concessional Asian Development Fund for the Vietnamese component of the project, and a grant of US$20 million from the same source for the Lao 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 Laos 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 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, said ADB.

By Tuong Thuy

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