The European Union lent Vietnam 150 million euros (200 million dollars) on Monday to help build a metro line in the traffic-choked southern business capital of Ho Chi Minh City.
The project will help to reduce congestion and the effects of climate change, said the European Investment Bank's vice president Magdalena Alvarez Arza, who signed the contract with the finance ministry in Hanoi.
Construction of the 11.3-kilometer (seven-mile) line is scheduled to begin early next year with operation by 2016, according to officials.
By 2022, HCMC will have seven metro lines as well as three monorails and tramways running a total length of more than 100 kilometers, said Nguyen Do Luong, head of the city's urban rail management board.
"Investment for the whole system may reach 20 billion dollars," he told AFP.
In December last year Spain announced it would provide up to 500 million euros (670 million dollars) in credits to help finance Ho Chi Minh City's metro.
Streets in the city of about eight million people are often jammed with traffic, mostly motorbikes, which are packed handlebar-to-handlebar in rush hour.
Foreign businessmen have repeatedly pointed out that Vietnam must improve its transportation and other infrastructure in order to secure future growth and investment.
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