A U.S. $5 billion dollar loan for construction of a rail link across southern Laos between Thailand and Vietnam has reportedly been approved. The loan is worth more than half of Laos’ total Gross Domestic Product.
New Zealand group Rich Banco Berhad has apparently approved the loan to Malaysian-based Giant Consolidated, which will build the 220-kilometer track linking the two borders. However, details surrounding the deal, the bank and its relationship with the Malaysian group are sketchy at best.
The project, along with other massive infrastructure projects planned by Vientiane, has raised eyebrowsamong economists who doubt the country’s ability to repay its potentially enormous debts.
According to the World Bank, Laos GDP was just U.S. $8.3 billion in 2011. Laos has sole ownership of the project and will be responsible to repay the debt after a Chinese group withdrew amid concerns over its profitability.
However, Chinese companies remain active elsewhere in the country and are prominent on big ticket infrastructure projects, including the U.S. $7.2 billion high-speed train running north to south and linking the Chinese border with Vientiane.
The Asian Development Bank has described that project as “unaffordable.” Yet, the EXIM Bank of China intends to fund the project, which the Lao transport minister says is almost ready to go ahead once the final details are thrashed out. READ MORE