Britain's Deputy Prime Minister John Prescott has signed an agreement in Hanoi with Vietnamese officials for a grant of $11m to help alleviate poverty in the north of the country.

Mr Prescott is the most senior British government official ever to visit Vietnam.

He is meeting the prime minister, Phan Van Khai, and the head of the Communist Party, Nong Duc Manh, on Monday.

His visit is the last leg of a two-week tour which also took him to the United States, New Zealand, Australia and Malaysia.

Correspondents say that Britain has overtaken the former colonial power, France, as the largest European investor in Vietnam.

The British Petroleum corporation heads a $1.5bn consortium exploiting off-shore gas in the South China Sea.