China Offers To Fund Thailand's US$12 Billion Railway With Low-Interest Loan

Belt and Road Initiative
Thailand Prime Minister Prayuth Chan-ocha and his Cambodian counterpart Hun Sen ride a train during a ceremony to re-establish a rail link between the two countries (Photo: Reuters)

Thailand previously announced that it was going to be mostly depending on domestic funding to complete work on its US$12 billion high-speed railway. However, that plan may have changed as the country could be considering accepting a low-interest loan offer from the Export-Import Bank of China (CEXIM) to complete the project.

Leaders from China, Laos, and Thailand are scheduled to meet at the end of the week at the upcoming Belt and Road Forum in Beijing. The three countries will reportedly be signing a new memorandum of cooperation at the event, which would cement their partnership in the Belt and Road Initiative's pan-Asia rail project. The event will be held from Thursday to Saturday this week and will be attended by 29 foreign leaders and representatives from more than 130 countries and 70 international organizations.

The Belt and Road Initiative's pan-Asia rail project will be stretching to various Southeast Asian nations via Kunming in China's Yunnan province. Thailand has already begun construction of the first phase of its own high-speed railway, which will be connecting its northeastern region to Kunming via Laos.

The first phase of the project will include a 252-kilometer line from Bangkok to Nakhon Ratchasima, estimated to cost around US$5.6 billion. The second phase of the project will include a 355-kilometer route that will stretch between Nakhon Ratchasima and Nong Khai, estimated to cost around US$6.6 billion.

While the country had initially planned to gain funding from domestic sources, it revealed in January that it had received an offer from CEXIM. The bank reportedly offered the country a loan with a 2.3-percent interest rate, a rate significantly better than the 2.86 percent average being offered by domestic financial institutions.

Thailand's government hasn't yet confirmed if it would be taking the offer, but reports have indicated that they are considering it and are currently looking at all the details. The reports have sparked concerns in the country, with some stating that it could very well plunge the country into a debt trap. There were also some concerns over who would be operating the land around the stations along the route of the new high-speed railway.

Critics of the project have argued that the country likely cannot handle such as a high amount of public debt from international sources. Some have also questioned the project's profitability once it becomes operational. The Thai government, however, is adamant in completing the project, stating that it will be crucial for the country's future given that it may transform Thailand into a logistics hub and the main doorway to Southeast Asia for China.

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