Laos-Vietnam highway, high-speed railway face funding issues

By RFA Laos2024.10.21

Multibillion-dollar proposals to build a railway and expressway between Laos and Vietnam have stalled due to lack of funding as Laos remains burdened by crushing debt, an official at the Ministry of Public Works and Transport told Radio Free Asia.

A 555-kilometer (345-mile) high-speed railway connecting the Vietnamese seaport of Vung Ang with Laos’ capital of Vientiane has been in the works for at least five years.

There have also been discussions about constructing a four-lane 725-kilometer expressway between Vientiane and Hanoi. That project could cost US$772 million, according to Vietnamese state media.

In 2023, Lao government officials said they hoped to begin construction on the railway that year, but the country’s economic troubles and heavy debt load have scared off investors, the official said, insisting on not being identified to speak freely.

“There is no progress. Where can we get money from?” he said. “It’s stuck now.”

Laos’ total debt in 2023 was US$14 billion, according to a report published last year by the Ministry of Finance. About 51% of the debt is owed to China, which helped Laos build the US$6 billion Lao-China High Speed Railway that was completed in 2021.

Other major Chinese investments in roads and hydropower dams have also contributed to the debt, which has risen to 112 percent of its GDP, according to officials from the World Bank and Asian Development Bank, or ADB.

In search of investors

“Of course, these two mega-projects would help develop Lao economy,” a Vientiane-based ADB employee told RFA on Friday.

But both projects would cost “a lot of money,” and the government just can’t afford it right now, he said.

The planned railway route to Vung Ang would go through southern Laos’ Khammouane province. Environmental impact assessments and other studies have been completed for the railway, which could cost as much as US$6 billion, the Ministry of Public Works and Transport official said.

The project was originally proposed as a joint venture between Petroleum Trading Lao Public Company, or PTL, and Vietnam’s Deo Ca Group Joint Stock Company. But PTL is having financial trouble and has pulled out, he said.

“We’ve been looking for another company or investor,” he said.

PTL signed agreements last year with South Korea-based Yooshin Engineering Corporation and the Korea National Railway to do a feasibility study and design for the railway.

A Khammouane provincial official confirmed to RFA that Yooshin workers have conducted the surveys.

At the ASEAN summit in Vientiane earlier this month, Lao President Thongloun Sisoulith met with South Korean President Yoon Suk Yeol to discuss South Korea’s role in providing technical assistance for the expressway and railway, the Vientiane Times reported.

The railway would connect Laos to international maritime routes while lowering logistics costs and reducing the country’s current reliance on road transport for imports and exports, according to the newspaper.

Translated by Max Avary. Edited by Matt Reed and Malcolm Foster.