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NEWS UPDATES Asean Affairs        2  May 2011

Lao-China railway project hits delays

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Laos' ambitious plan to build a 7-billion-dollar high-speed railway track linking its border with China to Vientiane has stalled on Chinese politics and social and environmental concerns.

A ground breaking ceremony planned on April 25 for the Laos-China Railway project didn't happen. Lao Deputy Prime Minister Somsavat Lengsavat, the minister overseeing the project, blamed the missed deadline in part on the February 25 sacking of Chinese Minister of Railways Liu Zhijun for 'severe violations of discipline.'

“Frankly speaking, the ministerial reshuffle has slowed down the project a little bit because they had to conduct an internal adjustment,'”Somsavat said.

Liu signed a memorandum of understanding on the project with the Civil and Transport Works of Laos on April 7, last year.

Over the past 10 months the two sides conducted feasibility and social/environmental impact studies on the 421-kilometre rail route, which would run from Boten, Luang Namtha province to Vientiane, the capital.

The studies proved insufficient in detail, particularly on the social impact of the route which will displace hundreds of families and run through important tourist destinations such as the ancient capital of Luang Prabang, a World Heritage Site.

'The on-site survey didn't meet our expectations,' Somsavat said. 'But the two sides have decided to pursue their (impact-study) efforts so we can launch this project within the year,' he added.

The Laos-China rail route would provide a 120-kilometres-per-hour freight and 200-kilometres-per-hour passenger train link from Kunming, the capital of China's Yunnan province to the China-Lao border and then on to Vientiane and Thailand, where another high-speed track is planned between Nong Khai, just across the border from Vientiane, and Bangkok.

Laos' current rail network consists of a 3.5-kilometre link over the Thai-Laos Friendship Bridge between Nong Khai and Vientiane. It is popular mainly among foreign tourists.

The giant railway expansion plan is not without its detractors.

'This is a landmark project for the government, but how much poverty will be reduced by a train link between China and Thailand,' asked one international aid official. 'The real benefits of the project go to China and Thailand; Laos is just a transit point.'

Laos is one of the world's poorest countries, with few export industries other than minerals and hydro-electricity, neither of which require high-speed train transport.

Another question is how Laos will pay for the project.

Under the MOU signed last year, China and Laos will set up a joint venture state enterprise in which China will hold 70 percent and Laos 30 percent.

China will provide the finance, construct the rail link with 50,000 labourers (presumably Chinese), and provide the trains, equipment and technology.

Laos' contribution, other than the land on which the track is built, remains unclear. Somsavat discounted reports that Laos would provide China with land concessions extending 10 kilometres on both sides of the rail link.

'The Lao government has decided to use one of our mineral resources to pay back the money we have borrowed from the Chinese,' Somsavat said.

That will require a lot of minerals. Laos' gross domestic product is estimated at 6.5 billion dollars, just shy of the 7 billion that the rail link would cost.

Total mineral exports, mainly copper and gold, over the past six months amounted to about 800 million dollars, all from foreign-run mines.

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