Thailand
Laos opens scenic railway built on a mountain of debt
BANGKOK (AFP) – Laos opened a new USD6-billion rail link with China to much fanfare this month, but analysts warn the party could be short-lived as the government grapples with a potential debt crisis.
The line will connect the capital Vientiane with the southern Chinese city of Kunming, and there are grand plans for a high-speed rail network running to Singapore through Thailand and Malaysia.
Laos President Thongloun Sisoulith at the opening heralded a “new era of modern infrastructure development” for the impoverished country, adding that “the dreams of Lao people have come true”.
The government is hopeful the railway will turn a profit by 2027, but analysts are concerned about the unsustainable Chinese loans to pay for this and other projects.
With a tiny domestic market, there is “limited commercial logic for an expensive railway” to connect the country of seven million to Kunming, said Jonathan Andrew Lane in an Asian Development Bank Institute report. His analysis found that potential benefits to Laos do not appear to outweigh the risks.
“That debt service will put further strain on the limited tax-raising abilities of the government,” Lane wrote. Laos faces having to stump up vast sums of cash to pay for the rail line, which was set up as a Laos-China joint venture under Beijing’s vast, trillion-dollar Belt and Road infrastructure initiative (BRI).
As the reclusive Southeast Asian country’s overall debt climbs to a dizzying USD13.3 billion – making up almost three-quarters of gross domestic product – experts fear Laos could be at risk of default.
Laos Prime Minister Phankham Viphavanh – installed in March – hopes to reduce debt from 72 per cent to 64.5 per cent of GDP by the end of 2023.
But in the meantime, Laos owes USD1.16 billion per year between 2022 and 2025, Fitch Ratings said.
Its public debt is higher than most regional counterparts – including Cambodia, Vietnam and the Philippines – which also have Chinese-financed infrastructure projects, according to the International Monetary Fund (IMF).
Source: https://borneobulletin.com.bn/laos-opens-scenic-railway-built-on-a-mountain-of-debt/