Laos plans two mega railway lines
The Lao government plans to build a massive 420km high-speed railway from the Chinese border to Vientiane, and a 220km high-speed railway linking Lao Bao on the Vietnamese border with Savannakhet on the Thai border.
Details of the projects are sketchy. For the north-south line linking Kunming with Vientiane, Laos’ Politburo – the country is a one-party Communist state – in the first week of April ordered the government to pursue a US$7.2 billion loan from China’s Exim Bank.
By some calculations, this sum is more than 80 per cent of Laos’ entire gross domestic product (GDP). Thousands of Chinese workers are expected to be transported to Laos to work on the railway. The line requires 76 tunnels, 154 bridges and 31 stations.
The east-west line will end at Savannakhet, where it connects with the Lao-Thai Friendship Bridge over the Mekong. It will offer access to Thailand’s developed highway system and nearby airports. A $5 billion Fund Syndication Agreement, signed in Vientiane on April 10, has put the project in motion.
The Lao news agency KPL last week reported that a company, identified as Malaysian, called Giant Consolidated Limited received $5 billion of funding from a company called Rich Banco Berhad for the construction of the 220km route.
The links will connect three vibrant economies – China in the north, Vietnam in the east and Thailand in the west – through relatively impoverished Laos. The Lao government sees the railway projects – a quantum leap for the country’s almost non-existent railway infrastructure – as economic engines and a symbol of the modernisation of the country.
In effect, the deal is also about access to Laos’ mineral resources – by both the Lao government and resource-hungry China.
Critics point to the financial liabilities and environmental damage, among other factors, to emphasise that the deal is lopsided.
They argue that it will benefit China more than Laos, which they say is mortgaging its natural resources to China.
The size of the loan, too, has raised eyebrows. An anonymous Lao government official was quoted by Radio Free Asia in January as saying the country may have to pay up to $3 billion in interest.
The Asian Development Bank, normally keen on pushing for Asean “connectivity” infrastructure, has nothing to do with the railway deal with China.
The bank’s Thailand director Craig Steffensen was quoted last week as saying: “For the Asian Development Bank and many others, the cost is unaffordable for Laos to take on, even at very concessional rates.”