The programme stretches from 2014 to 2020 and follows a formal announcement by the EU and Viet Nam Government in October when the Vietnamese Prime Minister Nguyen Tan Dung visited the EU.

Pierre Amilhat, EU director for Asia, Central Asia, Middle East/Gulf and Pacific, said Viet Nam had come a long way in reducing poverty and raising living standards, but said many obstacles remained.

He said that the aid programme would help Viet Nam improve the energy sector, legal system and public governance in order to tackle the development obstacles.

More specifically, 85 per cent of the package would be used for clean energy and 15 per cent spent on the legal system and public governance.

He said that developing efficient, clean and renewable energy had become an urgent task for the Vietnamese Government in its efforts to fight climate change and develop the economy.

Coal remained a major material for making electricity, but 10 per cent of power was lost due to poor-quality transferring and management.

Amilhat said that the programme would help the Vietnamese Government improve its use of coal and fossil fuels to produce electricity and encourage the use of sustainable energy, including wind and solar energy.

By 2020, the programme would ensure the three per cent of the population living in remote areas and islands had access to electricity. Renewable energy would be available for 568,000 rural households..

Amilhat said the new programme would also promote democracy by allowing citizens to have stronger participation in public governance, strengthen the legal and judicial system by creating access to justice for women, poor people and vulnerable groups, and provide a friendly business environment for the private sector by improving the accountability, transparency and cost-effectiveness of public service sector.

He said that the programme would not add to Viet Nam's public debt because it was non-refundable aid, however, the Vietnamese Government must prove its transparency and efficiency in budget disbursement and management.

In addition, the EU will also provide an additional $140 million to support health sector reforms from 2015 to 2017.

The agreement is 30 per cent more than the last seven-year aid package. 

VNS/VNN