Beware of BRI debt trap

Beware of BRI debt trap

Amid concerns about China's Belt and Road Initiative (BRI) leaving more developing countries in a debt trap, Thailand cannot be complacent about the Thai-Sino high-speed rail project in its negotiations with China.

At the BRI forum in Beijing on Thursday, the Thai government demonstrated its eagerness to cement the project by signing a new deal with China and Laos to develop a rail link between Nong Khai and Vientiane connecting the area with China's BRI.

Since Chinese President Xi Jinping initiated the BRI in 2013, there have been worries and complaints that most of the benefits flow to China while developing countries have to bear the burden of high costs.

Many Belt and Road projects are built by Chinese state-owned companies and are paid for with loans from government banks, which has pushed some countries into a debt trap.

Compared with projects in some countries which have fallen into debt, the Thai-Sino project has not flashed such red lights. The Thai government has also insisted that 80% of the 166 billion baht set to be borrowed to fund the first phase of the project, from Bangkok to Nakhon Ratchasima, will come from domestic sources.

But about 85% of the financing for the 211-billion-baht development of the second phase, from Nakhon Ratchasima to Nong Khai, will come from international loans and China stands to be the key lender.

Earlier, the government said that loans from the Export-Import Bank of China (Cexim) were lower than those offered by domestic financial institutions. But it has not revealed any details about its negotiations with Cexim.

The public, which has been largely kept in the dark over loan deals with China, has the right to worry that the devil could lie in the details of the making of these deals.

More importantly, it has to look for the possibility that the costs of the project will balloon multiple times above the originally planned budgets. This is a common occurrence during the development of major infrastructure projects.

Even though the high-speed rail project will bring about other indirect social and economic benefits to people in addition to direct revenue from passengers, it will likely end up loss-ridden when it commences operations given the modest passenger forecasts and its limited benefits.

This is partly the result of the government's development of the double-track rail system that will cover the same route. Unlike the high-speed project, the double-track system will provide both passenger and freight services. The government's approval of a motorway nearby will also likely lower the number of high-speed train commuters.

Given all this uncertainty, the government must take more cautious steps and come up with plans to deal with potential losses and debt repayment for possibly skyrocketing project costs.

It must disclose as many details about its financial negotiations with Beijing to the public, especially the exact terms of the loans. At the same time, overseas loans must also be diversified. This must be done to ensure that Thailand will not end up becoming another debt-ridden mark in China's global BRI project.


Bangkok Post editorial column

These editorials represent Bangkok Post thoughts about current issues and situations.

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