ADB $250 Million Road Loan to Help Lift Economy in Yunnan Province

MANILA, PHILIPPINES – The Asian Development Bank (ADB) is to finance road improvements in Yunnan in the People’s Republic of China (PRC), which will complete an expressway network for the west region of the province, and introduce community-based road maintenance practices.

ADB’s Board of Directors approved a $250 million loan for the Yunnan Integrated Road Network Development Project, which will build a new 135-kilometer long expressway, completing an east-west corridor transport route in western Yunnan. It will be the last of five ADB interventions to support the rollout of the National Expressway Network Plan in the province, and will also fund the rehabilitation and maintenance of over 1,200 kilometers of local and rural roads in poor condition.

“These improvements will cut travel time and vehicle operation costs, reduce traffic accidents and provide increased opportunities for farm and non-farm economic activities,” said Xiaohong Yang, Principal Transport Economist, in ADB’s East Asia Department.

Yunnan, a mountainous, landlocked province in the southwest, with a high rural poverty incidence, has been steadily developing its road network, but there are issues with surface quality and maintenance in many areas which increase travel time, result in a high incidence of road accidents, and undermine the province’s economic development.

A key element of the project is support for a community-based system to maintain around 650 kilometers of rural roads, which will incorporate, for the first time in an ADB project in the PRC, specific gender mainstreaming measures. This initiative will help develop women’s rural road maintenance groups for rural road routine maintenance. A technical assistance grant of $200,000 will be provided for this output of the project, which will generate local employment opportunities for the poor.

“This system, which incorporates payment for labor and training for community members, has the potential for wider replication as it will introduce a cost-effective and efficient method of maintenance for remote, rural roads,” said Ms. Yang.

Funds will also go to build up the capacity of the Yunnan Provincial Highway Bureau and other oversight agencies to carry out maintenance planning, funding and execution, including the introduction of competitive bidding. On-the-job training will be given in road safety, construction and supervision, financing, private sector participation, environment management and social safeguard planning. About 9.7 million people are expected to benefit from the project. The project is expected to cut the average travel time on project roads by 40% and reduce vehicle operating cost on them by 38% upon its completion.

The 25-year loan from ADB’s ordinary capital resources makes up just over 14% of the total project cost of $1.753 billion. It has a grace period of five years, with an annual interest rate determined in accordance with ADB’s LIBOR-based lending facility. The remaining costs will be funded by the Ministry of Transport and Yunnan provincial government, along with cofinancing from Bank of China and China Construction Bank.

The Yunnan Provincial Department of Transport is the executing agency for the project, which is due for completion in December 2015.