ADB approves US$600 million loan for road project in southwest China

The Asian Development Bank (ADB) has decided to provide 600 million US dollars in a loan to help develop an integrated road transport system to support the economic growth of Sichuan Province in the poor southwestern region of China.

The loan will be used to build a 244-kilometer expressway from Ya'an to Lugu, which will complete the 900 km route connecting Chengdu, the capital of Sichuan, and Kunming, the capital of Yunnan Province, the bank said in a statement.

It will also be used to upgrade 678 km of local roads to improve access to poor remote areas, rehabilitate four public transport centers, and procure equipment needed for activities such as road maintenance, toll collection, and surveillance and communications.

ADB's loan will cover 29 percent of the project's total estimated cost of 2.077 billion US dollars. The Ministry of Communications will contribute 272.4 million US dollars, the Sichuan Provincial Government 659.7 million US dollars, and the China Development Bank 544.9 million US dollars.

Makoto Ojiro, an ADB principal project economist, said a road network strategy that integrates expressways with local roads will help ensure that the benefits derived from the expressway filter down to the poor.

"Better transport links are needed to improve economic efficiency, foster domestic and international trade, facilitate interregional economic integration, and promote efficient economic growth, thereby reducing poverty."

The lack of infrastructure and inadequate road network has been identified by an ADB-assisted study as a reason for the slow economic growth and high incidence of poverty in the province.

Sichuan ranks the seventh lowest of all provinces in terms of gross domestic product per capita.

The project area is located in the mountainous periphery of Sichuan, where several poverty-stricken areas can be found. There are about 273,000 poor people in the project area, equivalent to 29 percent of the total population, living below the poverty line.

Since 1991, ADB has provided 30 loans to China, totaling nearly 5.6 billion US dollars, to finance about 4,100 km of expressways, together with 7,600 km of associated local road networks. ADB has also provided 50 technical assistance grants, totaling 26.9 million US dollars, to the road sector.

ADB's loan comes from its ordinary capital resources and carries a 26-year term, including a grace period of six years. Interest will be determined in accordance with ADB's London Interbank Offered Rate-based lending facility, said the bank.

The Sichuan Provincial Communications Department is the executing agency for the project, which is due for completion around September 2011.

Source: Xinhua