HONOI: Japan will fund a second airport terminal in the capital of Vietnam, its ambassador said today, as the communist country looks to improve its poor infrastructure amid criticism from business leaders.

The Japanese loan will support a second terminal at Hanoi’s Noi Bai international airport, a new connecting road and a high-tech park, ambassador Mitsuo Sakaba told an annual meeting of World Bank and other officials.

Noi Bai is the country’s second international gateway after Tan Son Nhat in southern Ho Chi Minh City.

With the new loan, Japanese overseas development assistance (ODA) to Vietnam for this fiscal year will reach about $1.6 billion, Sakaba said in talks between Vietnam and its aid-givers, known as the Consultative Group. Japan is Vietnam’s largest aid donor.

Speaking to reporters, Sakaba could not give the exact size of the new loan but said financing will be done in stages and that “official signing will be made sometime in February next year”.

The poor state of Vietnam’s roads and other infrastructure is regarded as a key deterrent to foreign investors as the communist country battles to boost its exports, business leaders said at a forum ahead of the Consultative Group gathering.

Vietnam has already seen a precipitous drop in foreign direct investment this year. At about $19.7 billion from January to November, the total was barely a quarter of the amount registered over the same period of 2008.

After burning through its reserves, Vietnam last week devalued its currency, the dong, as it battles to contain inflation and bolster trade which has

suffered during the global economic crisis.

Japan resumed new aid loans to Vietnam in March after halting them during a corruption scandal which led to the jailing of Vietnamese officials.