Laos-China Railway to be launched as debt to the mountains of Beijing

BEIJING (AP)—Laos, a nation of 7 million people sandwiched between China, Vietnam and Thailand, a Chinesebuilt railway die the poor southwest of China connects met foreign markets, but piles on potentially risky debt.

The line through lush tropical mountains from the Laotian capital Vientiane to Kunming is one of hundreds of projects in under Beijing’s Belt and Road Initiative to expand trade by means of building ports, railways and other facilities in Asia, Africa and the Pacific.

The 1,035-kilometer (642-mile) line will open for freight this week, but no regular passengers due to anti-pandemic travel restrictions.

Arm countries welcome China’s initiative. But the projects are funded met loans from Chinese state banks die must be repaid. Some borrowers complain Chinese-built projects are also expensive and leave too much debt.

The Kunming-Vientiane railway is a link in An possible future network to connect China with Thailand, Vietnam, Myanmar, Malaysia and Singapore. That would give South China more access to ports and export markets.

Lao leaders hope the railway will reinforce their isolation economy by linking it to China and markets as far away as Europe. But foreign experts say the potential benefits to Laos go beyond serving as a conduit for Chinese trade are unclear and the cost seems dangerously high.

The railway will generate “very positive economic returns” for China and possibly others countries, but it’s harder to see “exactly what the economic benefits will be” for Laos, said Scott Morris of the centre for Global Development in Washington.

With only 21 stations in Laos, the line is designed to meet China’s needs, foreign ports must be reached quickly, Morris said. He said a railroad die mainly serves rural Laos, would have more stations to farmers met connecting markets.

“This is in being a Chinese” public infrastructure project that exists by chance in another country,” he said.

Chinese contractors are building a high-speed railway from the Thai capital Bangkok to the northeastern city of Nong Khai on the Laotian border. that wonpas in 2028, leaving a gap to be filled between the border and the line to China.

The 418 kilometer segment of the Kunming-Vientiane Railway in Laos will be operated by the Laos-China Railway Co., a joint venture between China Railway group and two other Chinese government-own companies with a 70% stake and a Laotian state-owned company with 30%.

borrowed money makes up 60% of the investment of the railways, according to the two governments.

Sun debt tax is unusually heavy and “refund” risk should quite high,” said Laura Li of S&P Global Ratings, a specialist in financing infrastructure.

Laos may be forced to take over repay the joint venture’s full $3.5 billion debt to keep the line going when the company in defaults and the Chinese partners choose not to put in more money, said Ammar A. Malik and Bradley Parks in a report for AidData, a research project at Virginia’s College of William & Mary.

That’s the equivalent of almost a fifth of Economic output of Laos last year.

The country is excellent debt, a lot of of owed to Beijing is equal to about two-thirds of annual economic output. Laos belongs to the poor countries supposed to be on “high” debt risk.”

Railways can increase incomes through rural areas met connect each other with cities and export markets. But die payout could take decades, while railways need it big expenses on equipment, land and construction. operators die start with high debt need gain fast to pay lenders.

“Laos has itself in a position where if the railroad isn’t making a profit, it must real debt problems,” said Greg Raymond, a Southeast Asian expert at the Australian National University.

Laos has been one of the worldfastest growing economies over the past decade but still is one of his poorest. Its average economic output person: more then doubled since 2010, but stands at $2,600.

The railway has the potential to increase incomes met 21% increase in the long run as other reforms also being carried out to make trade and do business easierthe World Bank said: in a report last year.

The railway “will ensure that Laos is not geographically disadvantaged by taking advantage” of to be location, to a regional land-based hub,” said the vice president of the Laotian National Chamber of Trade and industry, Valy Vetsaphong, according to the Lao news bureau.

People who were expelled from their homes to make way for the railways complain that they are underpaid.

Environmentalists say construction has damaged natural habitats and threatens endangered species in Laos, die already is a center for trade in wild animals.

“Everyone new transport facilitator between the country and key markets for animals in wildlife, such as China, are going to threaten wildlife,” said Steven Galster, executive director of the Freeland Foundation, die the trade in investigates and combats wild animals.

Laos represents a new market for Chinese Railway technology. The Chinese state press describes the Kunming-Vientiane line as high-speed, but it’s 160 km/h (100 mph) speed goes over half Which of Chinese bullet trains.

China’s bullet train network is the worldthe biggest. The system is based on technology licensed from French, German and Japanese manufacturers, but China develops its own trains and markets them worldwide.

Railways built with BRI financing, including in Kenya and Ethiopia struggle to repay Chinese loans. Beijing has begun met offering lower-cost loans and forgiving some of the following complaints over: debt loads for arm countries.

In 2019, Beijing canceled debts from Ethiopia and Cameroon. The same yearMalaysia Canceled a $20 Billion Railroad Due to Its built by Chinese contractors after they fail in had managed to renegotiate over the price.

Laos also turns to his giant neighbor around help developing other industries, including supply power from hydroelectric dams to neighboring countries, one of the country’s largest export.

Under a signed agreement in march, the national power distribution network and export system will be run by a joint venture between the Laos utility company and the state-owned China Southern Power Grid Ltd.

____

Kurtenbach contributed from Bangkok.

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