Laos Seeks Second Loan From China to Build Northern Road

laos-pakmong-road-upgrade-june8-2015.jpg Construction work commences on Pakmong Road between Luang Prabang and Oudomsay province in northern Laos, June 8, 2015.

Laos is planning to ask China for a second multimillion-dollar loan to build a 90-kilometer (56-mile) road in the northern part of the country, after using previously borrowed funds for the same project to host a summit for Asian and European leaders, according to an official with knowledge of the loan request.

China’s Export-Import Bank (EximBank) issued Laos the first loan three years ago for U.S. $80 million at two percent interest for 20 years to build Pakmong Road from Nambark district in the Pakmong area of Luang Prabang to Oudomsay province.

But officials used those funds to pay for organizing and hosting the ninth Asia-Europe Meeting (ASEM) in November 2012, according to Sommad Pholsena, the former minister of public works and transport.

Now the government is seeking a U.S. $100 million loan from EximBank to build the road.

“The government as well as the Ministry of Public Works and Transport has to make sure the loan must go to the development of projects that are in the public’s highest interests,” the official, who declined to be named, told RFA’s Laos Service.

“But, in fact, the government has not given any details to the public,” he said. “So my concern is that the loan will be used in such a way to create a conflict of interest.”

The loan would be divided into two payments with 70 percent of the money spent road construction and the remainder spent on related administrative expenses, he said.

RFA could not reach Thongvanh Boutthanavon, the official in of charge of the road project, for comment.

Laos made the initial request for the second loan in March when Somsavat Lengsavad , deputy prime minister and chairman of the Lao-China Cooperation Commission, submitted a letter to the Chinese ambassador to borrow funds to build the road.

But according to information from the Lao-China Cooperation Commission, EximBank stopped issuing loans to Laos last year for nine road construction and improvement projects throughout the country, including the road from Luang Prabang to Oudomsay province.

The bank, which had disapproved of Laos using the $80 million loan for the ASEM summit, said that loans for road construction in Laos were not as financially worthwhile and profitable as investments in mining projects.

Lacking transparency

Many road construction projects in Laos lack transparency and high-ranking officials are known to use state funding to build roads to their own homes. In addition, some of their family members have gotten involved in road construction projects, driving up the cost of the projects so they themselves can profit.

In April, a road construction expert speaking on condition of anonymity told RFA that the cost of a road upgrade scheme in the capital Vientiane led by the son of Lao Prime Minister Thongsing Thammavong was greatly over-estimated.

A Chinese firm, which reportedly has connections to Lao national leaders, estimated that the cost of upgrading the road from Laos National University's Dongdok campus to Route 13 North would be U.S. $80 million or slightly less than U.S. $9 million per kilometer (0.6 mile).

But the road construction expert said the work should cost no more than U.S. $2.2 million per kilometer, including administrative expenses.

The misuse of funds, including the first loan from China for the Luang Prabang-Oudomsay province road, has outraged citizens who say such funds are needed to repair main thoroughfares used by the public.

“The government used the loan for the road construction to organize the ASEM conference, believing that it would bring pride and a positive image to our country,” said a resident of Savannakhet province in southern Laos. “But the people who use the road daily are not proud of this thing [ASEM] because they have been affected by terrible road conditions.”

Reported by RFA’s Laos Service. Translated by Ounkeo  Souksavanh. Written in English by Roseanne Gerin.

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