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Laos opens scenic railway built on a mountain of Chinese debt
Laos opened a new $6 billion rail link with China to much fanfare this month, but the party could be short-lived as the government grapples with a potential debt crisis.
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This file frame grab from Lao National TV video footage taken on October 16, 2021 via AFPTV shows Laos' Minister of Public Works and Transport Viengsavath Siphandone (R) and China's Ambassador to Laos Jiang Zaidong unveiling a sign for the Lane Xang bullet train in Vientiane. (AFP/STR/LAO NATIONAL TV)
L
aos opened a new $6 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.
