A railway connecting the Lao capital Vientiane with the port of Vung Ang on Vietnam’s coast may have trouble finding lenders to finance the project, plans for which were announced at the end of February by Lao and Vietnamese leaders, experts say.
The proposed 555-km (330-mile) rail line is expected to cost U.S. $5 billion, with each side “pledging to seek financing for the stretch of railway on its soil,” according to a Feb. 25 report by the Vientiane Times.
Money for the project, announced during a Feb. 24-25 visit to Laos by Vietnamese president Nguyen Phu Trong, may be hard to find though, Murray Hiebert—senior associate for the Southeast Asia program at the Washington, D.C.-based Center for Strategic and International Studies—told RFA’s Lao Service in an interview.
“I don’t see any funders out there that are going to want to put up $5 billion right now,” Hiebert said, adding that international lending institutions are now concerned at the level of Laos’s debt, projected to rise this year to as much as 60 percent of the landlocked, impoverished Southeast Asian country’s GDP.
“I talked to them at some length last year, some months ago, and there was really not much interest in adding to Laos’s debt burden,” Hiebert said.
“Laos really doesn’t have a lot of room to keep borrowing money for these big infrastructure projects,” Hiebert said, noting that Laos has borrowed heavily to build dams on the Mekong River and has already spent over $500 million on a still unfinished high-speed railroad connecting China with the Lao capital Vientiane.
The rail link now planned to run to Vietnam’s coast may be more a diplomatic project than an economic one, Hiebert said.
“What Laos is trying to do is find a way to show Vietnam that it still wants to be friends with them, too,” he said.
“[But] I think that Laos has pretty much stretched its capability to borrow money,” Hiebert said.
Too little transparency
Also speaking to RFA, Keith Barney—senior lecturer at the Crawford School of Public Policy at Australian National University—said that the proposed rail link joining Laos with Vietnam would be better supported economically by also connecting with Thailand.
"I am doubtful whether it would be wise for Laos to proceed with another expensive railway project that has no existing Thai connection,” Barney said.
And though a feasibility study for the project has already been completed by the Korean International Cooperation Agency (KICA), the results of that study have not been made public.
“Without a publicly accessible feasibility study, the Lao public is still being kept in the dark regarding the potential costs and benefits of railway infrastructure,” Barney said, adding, “There is so little transparency behind all of these projects.”
If Laos is left facing a major financial crisis in the future, Lao citizens may start to ask “very difficult questions” about how these projects have been organized and managed, Barney said.
“[And] so there are political risks [involved] in this rapid rush to ‘land-linked’ status.”
Thousands of Lao families ordered from their land and homes to make way for a high-speed railway linking the country with China are meanwhile still waiting for compensation promised by their government though construction has surged ahead, sources in the country say.
Plans now call for work on the railway to end in 2021, with Chinese companies promising completion by that date despite the challenges of boring tunnels in mountainous areas of the country’s north.
Landlocked Laos expects the railroad to lower the cost of exports and consumer goods while boosting socioeconomic development in the impoverished nation of nearly 7 million people.
Reported and translated by Ounkeo Souksavanh for RFA’s Lao Service. Written in English by Richard Finney.