Debt reliance will undermine Laos's development

Significance

Alongside loans, the sale will support energy infrastructure development, part of Vientiane's national development and economic growth plans; Laos has also started preparatory work for a high-speed rail link with China and Thailand. However, there are fears that the rail scheme might bankrupt the country (the Asian Development Bank (ADB) in 2012 described it as "unaffordable") while the IMF warned in January that Laos could face wider financial stress, including debt defaults, after years of rapid credit growth and mounting public liabilities.

Impacts

• Ceding the rail project's management to China increases the risk of Laos losing control over its financial affairs.
• The railway is unlikely to spur significant development of Laos's mining, agriculture and manufacturing sectors.
• Pledging future mining revenues as payment for loans will erode Laos's government income and public services.