ADB, France to help Viet Nam complete key southern water project

The Asian Development Bank (ADB) and the Government of France’s development agency are extending additional funds to complete an irrigation and water management project that will boost growth in rural, urban and industrial areas of Ho Chi Minh City and surrounding provinces in southern Viet Nam.

The ADB Board of Directors recently approved a supplementary loan of $60 million for the Phuoc Hoa Water Resources Project, with Agence Française de Développement (AFD) providing a further $25 million in cofinancing. ADB and AFD had initially pledged a combined $124 million for the initiative which will ultimately build irrigation systems and supply water for domestic, municipal and industrial uses, and to develop management skills in government oversight agencies and community water user groups.

“The goal of the project is to provide additional water in the Saigon and Vam Co Dong river basins for developing irrigated agriculture and to supplement existing supplies in Ho Chi Minh City and neighboring provinces,” said Dennis Ellingson, ADB’s Senior Natural Resources Specialist.

The original project was prepared in 2003, but delays in implementation and high inflation caused cost over-runs and a financing gap of over $131 million. At the request of the government, which has earmarked the project as a key development priority, and following a review in 2008 with subsequent improvement in implementation, it was agreed to extend additional funds.

The new ADB loan will supplement the original loan which financed the construction of the Phuoc Hoa transfer canal to divert water from the Be River to a reservoir on the Saigon River. With supplementary financing, it will be possible to complete the original scope of the project including the construction of two new irrigation systems for agricultural development and intensification. It will also cover costs related to project management services and environmental measures linked to the protection of natural habitats, along with a portion of the land acquisition and resettlement costs for households affected by construction activities.

The supplementary loan from ADB’s concessional Asian Development Fund has a 32-year term, including an eight-year grace period, with an interest rate of 1% per annum for the grace period and 1.5% for the balance. Along with the AFD loan, the Government of Viet Nam will supply an additional $42.9 million, with farmer beneficiaries contributing $3.7 million in kind. The Ministry of Agriculture and Rural Development is the executing agency for the project which is expected to be completed by the end of March 2014 at a total cost of $329.5 million.

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