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The project will rehabilitate and upgrade deteriorated but critical rural infrastructure in 15 mountainous provinces of northern Viet Nam. These provinces have a combined population of 12.2 million people and are among the poorest in the country. Overall poverty rates average about 27%, but are considerably higher in more isolated areas, where poverty levels may be 50%-60%. One of the main reasons for these high levels of poverty is limited access to productive assets and infrastructure (such as irrigation water systems), and physical isolation. The project will focus on improving small- to medium-scale irrigation and/or

drainage systems, rural roads, and district and commune markets. The project will include 40-45 subprojects. Rehabilitation and upgrading of rural infrastructure is expected to have a positive impact on the lives and livelihoods of the population in the project area, providing easier access to inputs (including irrigation water), markets, health services, higher levels of education, and employment opportunities, while reducing production and marketing costs.

The majority (84%) of the population of the northern mountain provinces live in sparsely populated villages, dispersed where land is suitable for agriculture. The incidence of poverty remains consistently higher than in other parts of Viet Nam. While poverty has been reduced nationwide, from 28.9% in 2002 to 16.0% in 2006, and 11.0% in 2008, equivalent figures in the northern mountain provinces were 47.9% in 2002, 32.3% in 2006, and 27.0% in 2008. These

figures reflect the more difficult environment and terrain, and the lack of commercial opportunities, arable land, and water resources. Poverty rates among some ethnic minorities in the project area are 70%-80% due to lower levels of access to rural infrastructure, limited opportunities for commercial activity, relatively lower education and skill levels, and low population densities.

The 15 northern provinces are comparatively underdeveloped in national terms; this is reflected in the physical infrastructure. While the government and international development partners have invested in rural infrastructure since 1995, a huge backlog of unimproved infrastructure remains. Much of the existing infrastructure is in poor condition due to age, inadequate design and construction, and insufficient maintenance. Nationwide, only two- thirds of the 3 million ha provided with irrigation facilities is currently being irrigated. In the project area, irrigation schemes supporting over 200,000 ha are in need of rehabilitation. Within these schemes, of the 50,000 kilometers (km) of primary and secondary irrigation canals, only 16,270 km or 32% are lined, leaving the majority in need of lining to reduce water loss. Improving irrigation water management is critical to food security in the face of increased food demands and the effects of climate change.

In the case of rural roads, only 11.0% in the Northeast and 6.6% in the Northwest are either concrete-surfaced or sealed. This compares with 44.5% in the more developed region of the Red River Delta and 28.0% in the South Central Coastal region. The north has predominantly earth and gravel roads, which are particularly unsustainable in hilly and mountainous terrains, where intense rainfall accelerates their deterioration leading to unaffordably high maintenance and repair costs. Furthermore, the distances faced by northern communities to the nearest all-weather road are much higher than elsewhere, averaging 4.4 km

in comparison to 1.7 km in the Red River Delta. Distances are a key obstacle to accessing a range of services, including health services. For example only 23% of communities in the Northwest have access to a doctor compared with a national average of 60%. The quality of transport infrastructure is crucial to reaching medical attention, an especially important consideration for the welfare of women and children.

In this environment, rural infrastructure is not only a necessary prerequisite to stimulate private investment but it provides a foundation for rural development. Irrigation development enhances agricultural productivity and provides options for farmers to diversify production into higher-value goods, thereby enhancing household incomes. However, investments in agriculture leading to surpluses will not be made if the produce cannot be cost-effectively moved. Rural roads enhance access to markets, commercial opportunities, and input supplies for agricultural production, while also providing access to education and health services. Furthermore, many members of northern farming households are seeking off-farm employment to offset the cyclical costs and unpredictable returns of farming. Access to off-farm employment opportunities also requires good transport facilities.

The government's draft socioeconomic development plan 2011-2016 indicates the intent to prioritize upgrading rural infrastructure to serve the dual objective of social and economic development. This includes upgrading irrigation for water supplies, aquaculture, double cropping in paddy areas, and the expansion of irrigated areas for cash crops. It also includes developing rural transport to move agricultural surpluses and improve social conditions. The project design is therefore based on (i) an identified demand to rehabilitate and upgrade priority rural infrastructure to reduce the high and persistent poverty levels in the northern mountain provinces, thereby improving access to productive resources, services and socioeconomic opportunities, (ii) the government and Asian Development Bank (ADB) strategies of providing rural infrastructure as a means to achieve poverty reduction as described in the government's

national socioeconomic development plan and other related documents, as well as ADB's country strategy and program, and (iii) the successful design, implementation experience, and relevant lessons from earlier ADB-funded rural infrastructure projects. Lessons were incorporated from six successfully completed ADB projects implemented by the Ministry of Agriculture and Rural Development (MARD), particularly the Rural Infrastructure Sector Project, which had similar objectives and outputs to the proposed project.