The development of an efficient railway system is essential to boost investment and spur socio-economic development of landlocked Laos, the Deputy Prime Minister told the National Assembly (NA) on Friday.
Mr Somsavat Lengsavad addresses the National Assembly session on Friday.
Mr Somsavat Lengsavad made the comment when speaking about the railway that will link Vientiane to the Chinese border following a groundbreaking ceremony earlier this month for the 38.7 billion yuan (US$6.04 billion) project.
Mr Somsavat, who is in charge of production and goods circulation, said investors have been asking him if Laos plans to build a railway network as companies want to cut costs by using cheaper rail transportation.
“The cost of transporting goods by road is high, making it difficult [for businesses] to compete with their [rivals] in other countries in the region,” he told lawmakers as he explained why the government had decided to go ahead with the costly project.
Studies showed the railway could yield economic benefit of more than 30 percent, Mr Somsavat said, adding that if a project was able to yield economic benefit of 15 to 16 percent it would be profitable and worth investing in.
On December 2, the day that Laos celebrated the 40th anniversary of the founding of the Lao PDR, Lao and Chinese officials broke ground in Vientiane for the start of construction of the 427.2 km railway.
China will be responsible for 70 percent of the total investment, while Laos will be responsible for the remainder. The two governments are required to contribute 40 percent each of the total amount needed to form a joint venture company to operate the project. Laos will need to secure a loan of about US$480 million from China to pay its share of the investment.
China has now agreed to reduce the annual interest rate on the loan from the 3 percent offered previously to 2.3 percent.
Mr Somsavat said Laos' five potash mines should provide sufficient revenue to enable Laos to repay the loan and interest within five years.
Construction of the single-track railway will take about five years to complete. The railway will have 21 sidings to enable trains to pass, as well as 11 passenger stations and one container station.
Mr Somsavat said construction of the railway would be costly because of the many tunnels and bridges that would have to be built to traverse the mountainous terrain in the north of the country.
The railway will have 170 bridges of 69 kilometres in length, equating to 16 percent of the total length. There will be 72 tunnels over a distance of 183 kilometres, comprising 43 percent of the total length.
The electricity-powered passenger train is set to travel at 160 km per hour, while the freight train will run at 120 km per hour. However, the passenger train can travel at up to 200 kilometres per hour on flat terrain between Vangvieng and Vientiane.
Fifty metres of land along each side of the railway will be kept clear to ensure safety.
Responding to questions raised by NA members, Mr Somsavat said appropriate compensation would be paid to people displaced by the railway, within a reasonable time.
He assured lawmakers that officials had been assigned to deal with unexploded ordnance if devices were uncovered during construction of the railway.
The track will form part of the regional rail link known as the Kunming-Singapore rail network over a distance of more than 3,000km.
The railway will link China's Kunming all the way down to Singapore, passing through Laos, Thailand and Malaysia.