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The Ho Chi Minh City municipal government has approved the construction of Vietnam's first subway system at a cost of $1.1 billion, with 83 per cent of the money to be provided by Japanese aid.

The Japan Bank for International Cooperation would provide $904.7 million and the municipal government $186.6 million, the Ho Chi Minh City People's Committee said in a statement.

Construction of the 19.7 km (12 mile) track linking Vietnam's largest city and the nearby province of Binh Duong was expected to start late this year or early in 2008 and be completed in 2013, city transport officials said.

The statement did not say which companies would build the subway and supply trains and equipment. The system will start at a station in front of Ben Thanh market, a popular tourist spot in the centre of the city of 8 million people, run underground near the Opera House and then cross the Saigon River on an elevated track.

Japan is the single biggest country donor to Vietnam. It has pledged $890 million in aid this year, 6.5 percent higher than the $835.6 million it promised in 2006.

Japan is also expected to finance up to 70 per cent of a $33 billion high-speed north-south railway in Vietnam.