: Head 22:40 22/03/19

Chinas US$7 billion railway link to Laos is almost half done, on schedule to begin service in 2021

Laos is dependent on China to bankroll the US$7 billion project, raising concerns of being caught in a debt trap
The Kunming-Vientiane link would eventually connect with a railway line to Bangkok, and southward along the Malay peninsula through to Singapore

Published: 11:00am, 21 Mar, 2019

Chinas railway line to Laos, a 414km (257 miles) link between the Yunnans provincial capital of Kunming and the Laotian capital Vientiane, is almost half
complete, putting it on schedule to begin service in December 2021, said the chief of Lao Railways.
Trains on the line can travel at up to 160 km/h (100mph), cutting the travelling time between the two cities to three hours from three days, said Lao Railways
director general Somsana Ratsaphong. Tickets will start from US$20 a trip.
The US$7 billion project is a showcase of Chinese President Xi Jinpings Belt and Road Initiative for rebuilding infrastructure along the ancient Silk Road from
China to Africa and Europe, which has garnered an estimated US$460 billion in investments [1] since its inception in 2013. The Kunming-Vientiane link would
eventually connect with a railway line to Bangkok, and southward along the Malay peninsula through to Singapore.
The Chinese government, a major promoter of the Belt and Road, will bankroll 70 per cent of the cost of the railway, while Laos where subsistence agriculture
makes up half of the economic output pays for the remaining 30 per cent with loans from Chinese financial institutions. China was the biggest foreign investor
in Laos as of 2016, having invested US$5.4 billion since 1989.
For an economy like ours, with a population of only 6.8 million people, it is good for us to make use of the manpower and finance from China, said Ratsaphong,
during the Asia-Pacific Rail conference in Hong Kong.
Part of the loans tenure will be interest-free, with a 2 per cent annual rate charged over 30 years, according to Ratsaphong. The financing terms have raised
concerns among developing nations of being pushed into a debt trap, as debtors may find themselves saddled with large borrowings that would take a long time to
repay.
Malaysian Prime Minister Mahathir Mohamad has been the most vocal critic, instructing his government to scrap a US$20 billion rail link on the countrys east
coast after balking at its construction cost and the terms of its loans from Chinese banks.
Sri Lanka handed over management of the Hambantota Port to China [4] in a 99-year lease in 2017, after failing to repay loans on the US$1.5 billion project.
The debt trap is created not because of the money from China, [but] mainly because some countries did not do a good assessment on the financial terms and
repayment requirements, said Andrea Giuricin, a professor at University Milan Bicocca, who is also a visiting professor to the China Academy of Railway Sciences.
Chinas state-run construction companies have mastered some of the worlds most impressive engineering and building technology, but are still lacking in project
management expertise, Giuricin said.
China lacks a good track record in management, he said. Most of the high-speed railways in China are losing money, and the data is not transparent. For some
places, you simply dont need to build the fastest railway.
For Ratsaphong, the new rail link promises closer connectivity, which will spur greater economic development in his nation, one of the poorest among the 10
economies among the Association of Southeast Asian Nations, or Asean.
The railway will bring new developments including industrial parks, hotels and tourism business that generates income way bigger than ticketing, said
Ratsaphong, noting journey costs would be cut by 40 per cent, compared to using roads on the same route.

Source URL: https://scmp.com/business/banking-finance/article/3002518/chinas-us7-billion-railway-link-laos-almost-half-done


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