Vietnam: 682 million USD signed to aid reforms & pro-poor growth

May 25, 2010

Hanoi, 25/5/2010 – The State Bank of Vietnam and the World Bank today signed financing agreements worth 682 million USD for 5 projects: the First Power Sector Reform Development Policy Loan, the Second Northern Mountains Poverty Reduction Project, the Central North Region Health Support Project, Ho Chi Minh City Environmental Sanitation Project Additional Financing, and the Red River Delta Rural Water Supply and Sanitation Project.

The US$ 312 million First Power Sector Reform Development Policy Loan is to support four main policy areas essential to the reform of Vietnam’s power sector. They include development of a competitive power market by reducing the existing monopoly, power sector restructuring to offer customers more choice in services, electricity tariff reform to attract new investors and improving energy efficiency. The Government has implemented 7 prior policy actions relating to power sector reforms to get this first credit. Funding for this operation comes from both IBRD [1] (200 million USD) and IDA[2] (112 million USD) sources.

This loan is the first in a programmatic series of three. The second and third operations would continue to support the government's reform program. Based on the current path, the second operation would support putting in place detailed rules required to implement the design, restructuring and tariff actions. The third would be aimed at the startup of the Vietnam Competitive Generation Market and moving to performance based ratemaking regulation for power companies, the legal establishment and operation of the restructured entities in the power sector and the approval of implementing decrees for an energy efficiency law.

Targeted at some Vietnam’s poorest ethnic minority areas, the Second Northern Mountains Poverty Reduction Project builds on the success of its predecessor to enhance the living standards of the poor people in 2,366 villages, in 230 communes, and in 27 districts of the six provinces of Lao Cai, Yen Bai, Son La, Hoa Binh, Dien Bien, and Lai Chau.

This is done through improving and diversifying their livelihoods opportunities through better access to productive infrastructure, innovative businesses, improved agricultural productivity and local employment. It also helps to build capacity of local governments and communities to plan, manage and implement livelihood improvement programs in their localities. The total funding of this project is USD 165 million, of which USD 150 is from IDA, and the rest is from the Government of Viet Nam’s counterpart funding.

Similarly, the Central North Region Health Support Project is a continuation of two other regional projects supported by IDA - in Mekong and Northern Uplands regions. The total funding envelope of the Central Northern Region Health Support Project is 75 million USD, out of which 65 million is IDA financing and the rest is the Government’s own contribution.

The project will work to increase health insurance coverage among the near poor population; equip 30 district hospitals with basic technologies; build and equip district preventive health centers in some 30 poorest districts; train the health care personnel to fill the shortage of skills; and upgrade medical educational institutions where they cannot meet the local demand. The project also intends to pilot a number of innovative health financing policies, such as result based financing, and to generate evidence for subsequent reforms.

Meanwhile, another US$ 90 million will be invested in the Ho Chi Minh City Environmental Sanitation Project, which will help construct a 335 km drainage system for the city’s business center to control annual flooding and increase the collection of wastewater in an environmentally and financially sustainable manner. In addition to collecting wastewater, it will provide flood relief to over 240,000 households and prevent flood induced infrastructure damage – currently estimated at US$ 78 million annually- while at the same time reducing public health risks and creating an important economic stimulus to the project area. In all, over a million people will benefit from the project.

And another US$ 65 million will be spent on the Red River Delta Rural Water Supply and Sanitation Project to finance infrastructure for rural sanitation and water supply, benefitting over 800,000 people in the Red River Delta. It also supports hygiene behavior change in 120 targeted communities while helping the government build capacity for sustainable rural water supply schemes, with tariffs set at a level sufficient to cover operations, maintenance and debt service.


[1] IBRD stand for the International Bank for Reconstruction and Development, which is the World Bank Group’s lending arm for middle income countries.

[2] IDA stands for the International Development Association, the World Bank Group’s lending arm for low income countries.

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