Loan Approval Puts Thailand-Laos-Vietnam Rail On Track

2013-04-17
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The planned Thailand-Laos-Vietnam line runs across southern Laos from Savannakhet to Lao Bao, while a second planned line links the capital Vientiane with China.
RFA

A U.S. $5 billion loan for Laos’s planned rail link to Vietnam and Thailand has been approved and studies on the project are underway in preparation for construction to begin this year, according to a Lao official.

New Zealand financial institution Rich Banco Berhad agreed last week to provide a loan to Malaysian builder Giant Consolidated Limited to fund the construction of the 220-kilometer (140-mile) rail running across southern Laos from the Thai to the Vietnamese borders.

Giant is now conducting studies on the project but has “not yet” completed the mandatory environmental impact assessment needed for construction to begin, a railways official told RFA’s Lao Service.

“According to new laws of Laos, any development project must have a detailed environmental impact study before construction begins,” the official said, speaking on condition of anonymity.

“Now [Giant] is still conducting the feasibility study, and there will be a project design study which the company expects to complete by August.”

Construction of the railway, which runs from Savannakhet city in the east to the border town of Lao Bao in the west with an onward link to Vietnam’s Danang port city, is expected to take four years.

Laos-China rail link 'a must'

Giant was awarded a contract to construct and operate the railway in November of last year, a month after Laos decided to go it alone on a second planned rail line, an ambitious 420 kilometer (260-mile) project linking Vientiane to southwestern China.

Laos assumed sole ownership of the project after a Chinese construction company pulled out of a joint partnership because it decided the project would not be profitable enough.

Laos plans to borrow U.S. $7.2 billion from China to build the line, despite concerns from legislators and the Asian Development Bank that the project is “unaffordable” and could sink the country into debt.

Vientiane and Beijing are still in the process of negotiating a deal to fund the project, another railways official told RFA, saying that the railway was crucial to landlocked Laos’s future.

“It is a must. If we don’t do it, we will be crushed by the wheels of history,” he said, speaking on condition of anonymity.

“We must find a way to become a land-linked country.”

Laos has no coastline or seaports, and the rail links are expected to lower the cost of exports and consumer goods and help drive the impoverished country’s socio-economic development.

The country’s current rail system consists of a 3.5-kilometer (2-mile) link over the Mekong River between the capital Vientiane and Thailand’s Nongkhai.

Last week, the Vientiane Times reported the government will start Phase II of the line in the coming months, including constructing a container yard, upgrading railway signals, and improving the telecommunications system at Thanalaeng station in Vientiane.

Reported by RFA’s Lao Service. Written in English by Rachel Vandenbrink.