Parliament in Laos has given the go-ahead for the construction of a U.S. $7 billion Lao-China high-speed railway line project despite China's withdrawal from the venture, according to a report.
A Chinese construction company has pulled out of the original 420 kilometer (261 mile) joint venture, but China will provide a loan to implement the project, a report in the state-run Vientiane Times said Thursday.
Approval for the project was made at an extraordinary session of the National Assembly Thursday "after concluding that it is essential for national development at a time when economic integration is viewed as the future of the region," the report said.
"The railway is now set to go ahead without any other direct stakeholders, but will be financed by a loan from China," it said.
"Laos has now decided to assume sole ownership of the project, as it considers that transforming the country from being landlocked to a land link is central to the future of the nation's development."
'Not profitable enough'
The Chinese construction company pulled out of the project "because they felt it would not be profitable enough," the Vientiane Times said.
Leaders from Laos and China are expected to perform a project ground-breaking ceremony during a summit of the Asia-Europe Meeting (ASEM) forum on November 5-6.
The rail project will connect the Lao capital Vientiane to the country's Luang Namtha province along the border with China, with the network linked further to a line from Kunming, the capital of China's Yunnan province
Lao Deputy Prime Minister Somsavat Lengsavad reported on the project to the National Assembly, saying the project would attract more foreign investment and boost economic growth.
He said the EXIM Bank of China will provide a loan to cover the cost of construction.
It is not immediately clear how Laos will service its loans for the railway project.
In a report after annual consultations with the Lao government, the Washington-based IMF said on Thursday that the country's current account deficit has widened and gross international reserves declined, covering only about two months of projected imports, the lowest level in almost a decade.
The Fund said that while Lao macroeconomic policies have remained generally sound, "low reserve coverage and rapid credit growth amid high lending rates have emerged as sources of vulnerability."
IMF Executive Board Directors stressed to Laos "the importance of replenishing international reserves, to be supported by tightening macroeconomic policies," among other steps.
In the original rail project agreement signed about two years ago, there were plans for passenger trains to run at speeds of up to 200 kilometers (124 miles) per hour, but the Lao government has decided to reduce this to 160 kilometers (99 miles) per hour for safety reasons, partly due to the route's hilly terrain, Vientiane Times reported.
Goods trains meanwhile will travel at a maximum speed of 120 kilometers (75 miles) per hour, it said.
More than 100 bridges
Considering the mountainous nature of northern Laos, the railway will require 76 tunnels and 154 bridges, including two bridges across the Mekong River, according to the report.
Under a previous agreement signed between China and Laos two years ago, the Lao government was required to compensate villagers and urban dwellers who will need to be relocated from their land to make way for the rail project.
The compensation plan had represented the Lao government’s 30 percent stake in the project.
But residents have expressed doubts about whether they will receive a fair amount of compensation from authorities.
Reported by RFA's Lao service. Written in English by Parameswaran Ponnudurai.