News Room - Business/Economics

Posted on 18 Dec 2007

Viet Nam to build $1.2bn expressway to China

The Viet Nam Government is to build a 244km grade-separated highway from the suburbs of Hanoi to the Chinese border at Lao Cai to complete a direct road connection with Kunming, capital of the westerly province of Yunnan.

The project, officially known as the Kunming-Haiphong Corridor, will give China’s industry and agriculture much easier access to Vietnam’s expanding sea port on the Gulf of Tonking.

The highway, including the section now under construction in China, will provide shippers in Kunming with a new route for rapid movement of products that depend upon fast access to global markets.

The road will benefit Viet Nam by raising its ability to export agricultural and maritime products to Yunnan province and the growing hinterland markets of the China’s south western region. There are also prospects of a large increase in cross-border tourism between the two countries.

When the new highway is completed, truck drivers and passenger cars should be able to make the overland trip in less than one day. This compares with the current three days journey for trucks and two for cars.

Traffic volumes on existing roads between Hanoi and the Chinese border are said to be increasing at the rate of 12 per cent per year. The Bank says that Viet Nam will need to invest a large share of its annual domestic product to overcome the infrastructure bottlenecks now becoming apparent.

These, it says, will need to be addressed quickly if growth and consequent poverty reduction targets are to be met. But the Bank commends Viet Nam’s policies for economic growth as soundly based, bringing about a dramatic reduction in the country’s poverty rate in recent years.

Present cost estimates for the new road stand at around US$1.2 billion, of which the Asian Development Bank is to contribute $896 million from its ordinary capital resources and $200 million from the low interest Asian Development Fund.

The Bank says this is the biggest single-project financing it has undertaken in its history.

Designed to expressway standards, the new highway will operate as an access-controlled toll road. Financial analyses indicate that the project will generate sufficient revenues to recover the entire loan amount within ten years from the time it is due to open in 2012.

Over 5.5 million vehicles are expected to use the Kunming-Haiphong corridor when it opens, rising threefold to 17 million by 2022.