New Chinese train puts Laos on the trade map

Five years after the launch of the project, Laos inaugurates its first major railway line on Friday 3 December. Built and financed by China, it will connect in just under three hours, the capital, Vientiane, to Boten, to the Chinese border and, beyond, to the Chinese high-speed train network to Kunming, in the southwest of the country. In the colors of Laos, red, blue and white, the train travels 420 kilometers at speeds of up to 160 kilometers per hour, through ten active stations.

Since 2009, only a 3.5-kilometer track has linked Nong Khai, on the Thai side, to a small station 20 kilometers from Vientiane. The inauguration of the train, scheduled for Friday afternoon by the leaders of the small communist country of 7.2 million inhabitants, should be accompanied by a videoconference interview between the Prime Minister, Phankham Viphavanh, and the Chinese President, Xi Jinping. Covid-19 requires, only goods will be transported between the two countries.

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For China, this is the first section of the three long-planned railway corridors from Kunming to Singapore, and labeled since 2013 “new silk roads”, the flagship initiative of China’s number one, to be completed. The other two, via Burma, to the west, and Vietnam, to the east, are still in the planning stage. For Laos, it’s a revolution: “Laos has always been landlocked, and Thailand is historically its only trade route to the rest of the world. The French had tried to build routes to the east [le Vietnam], then the Soviets, but it never worked ”, Laotian economist Souknilanh Keola, researcher at the Institute for Developing Economies of the Japan External Trade Organization, said on December 2 during a round table in Bangkok. “Laos had to go through a Thai port to send containers to China or Japan, the opposite geographically. “ However, this turning point in terms of commercial outlet is taking place at a “Extremely high cost compared to the size of Laos”, he specifies.

“A unique case”

And for good reason: the “government train”, as the Laotians call it, cost 6 billion dollars (5.3 billion euros), 60% of which is financed by a loan from the Chinese Exim Bank. The remaining 40% is the responsibility of the joint venture Laos-China Railway Company, owned by Chinese state-owned enterprises, 70%, and Laos. Of the 30% of Laos, only $ 250 million comes from the state budget, the remaining 450 million being financed by another loan from Exim Bank. Debt service for Laos is estimated at $ 1.16 billion per year from 2022 to 2025, half of which goes to China according to Fitch Ratings – for a GDP of $ 20 billion. “The beneficiaries of the biggest Chinese projects are countries like Russia, Brazil, Angola … Among them, Laos is a bit of a unique case”, reported on December 2 Pon Souvannaseng, specialist in international financing at Bentley University, in the United States.

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