Japanese Prime Minister Shinzo Abe announced on Sunday a $160 million soft loan for Cambodia to improve National Road 5, which connects Phnom Penh to the Thai border, strengthening trade connectivity in the Mekong region.

The loan was announced during Cambodian Prime Minister Hun Sen’s five day visit in Japan to attend a United Nations disaster risk conference, according to Kyodo News.

The announcement comes near the completion of the Japanese-funded, 2,200-metre Tsubasa Bridge in Prey Veng province’s Neak Loeung.

“By investing in such high-quality infrastructure, Japan would like to contribute to Cambodia’s efforts to significantly strengthen connectivity with neighbouring countries and achieve sustainable growth,” Abe was quoted as saying by the Japanese Foreign Ministry.

The road expansion project is expected to start at the end of 2015 and finish by 2020, according to Vasim Sorya, the director general of administration at the Ministry of Public Works and Transportation.

“National Road 5 will be expanded from its current average of 11-metres to 24-metres wide with four lanes, which will ease the transport of goods and at the same time reduce traffic accidents,” he said.

“National Road 5 has a very big economic significance not only to Cambodia, but also to the greater sub-Mekong region,” he said. “National Road 1, National Road 5 and Neak Loeung Bridge are all part of the Asian highway.”

Hiroshi Suzuki, chief economist at Business Research Institute for Cambodia, said the concessional loan comes with an interest rate of 0.01 per cent per annum and a 40- year maturity period.

He added that the expansion plans will help attract further FDI and increase Japanese investments in the Kingdom.

“The improvement of South Economic Corridor is the most important to attract FDI in the labour intensive manufacturing sector, especially Japanese automobile and electronic parts manufacturing companies,” he said.

The road and the Tsubasa Bridge are part of the Southern Economic Corridor, a transportation route linking Ho Chi Minh City to Dawei in southeastern Myanmar via Bangkok.

“National Road 5 is a very important project for Japanese companies, which have factories in Thailand and large scale companies, like Toyota and Mitsubishi,” Suzuki said.

“It is expected that the volume of trade between Cambodia and Thailand will increase with the improvements from the Japanese government’s ODA loans,” he added.