Thursday, July 2, 2015

China's Strong Investments in Laos Bringing a Transformation

Reported by:  Suwatchai Songwanich (Bangkok Bank) for  The Nation (Thailand), June 8 2015

Until recently, most of China's investments were in energy and raw materials, such as hydroelectric dams, mining and forestry, but now it is diversifying into areas such as real estate and transport.

The biggest planned investment is a rail link between Kunming in China and Vientiane and Thailand. This has been stalled for some years but received a boost last year when Thailand signed an agreement with China to build the Thai section from the Eastern Seaboard to Nong Kai.

The idea is to connect Thailand's major industrial region and ports with China, with part of the route running through Laos. However, how can Laos afford it?

The anticipated cost of the railroad is $7 billion, which is more than 60 per cent of Laos' GDP, and $5 billion of the funds would come from a loan that would be secured by untapped minerals.

Servicing the loan would require about 20 per cent of Laos' annual government spending, a huge burden for a tiny economy.

Clearly, there are still many questions that need to be answered before the Laos part of the railway goes ahead.

Aside from the railway, probably the most high profile project being undertaken by Chinese investors in Laos is the That Luang Marsh Special Economic Zone (SEZ), which is being built near the capital of Vientiane.

This development, with a budget of $1.6 billion, is taking place on 365 hectares that will host a large residential area, public parks and green spaces, a commercial centre, hotels, shopping centres and entertainment venues.

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