Mekong Utility Watch

US $ 270 million loan to be granted to Laos from ADB

Vientiane Times
February 18, 1997

The Asian Development Bank (ADB) will provide Laos of US $90 million in each of the next three years, an ADB representative said in an interview in Vientiane last week. “We sent Mr. Rajendran and some other programmers to Laos to programme assistance for Laos for the next three years, and we can now say that we will grant about US $90 million to Laos each year for the years 1998, 1999 and 2000W said Mr.Rajat Nag, programme manager of the ADB’s Programmes Department.

On top of the US $90 million concessional loan, the ADB will also provide about US $5 million in the form of a technical assistance grant.

“We call it a concessional loan because 80 per cent of our loans are grants with Zero per cent interest, ” Mr. Nag said. “It is also a long -term loan of about 30-40 years”.

The concessional loan, also called soft loan, will be used for various projects while the technically assistance grant will be used for a field study.

The loan from the ADB carries zero per cent interest, however Laos is required to pay a service charge of between 0.75-1 per cent of the principal. The service charge won’t take effect until ten years after the loan is first released.

Most of the funds granted by the ADB are allocated towards infrastructure construction, especially in hydropower works, roads and rural development projects.

“We are of the opinion that Laos’ continued economic development hinges on the increased support given to its overall infrastructure, ” said Mr. Nag.

“Laos has very significant hydropower resources with a low demand for electricity. Therefore it could be a great benefit for Laos to sell electricity to neighboring countries which strongly demand it.

“Because Laos has a major advantage in hydropower, the export of hydropower to earn foreign currency is a critical element for Laos’ economic growth,” Mr. Nag reiterated.

He also said that though the ADB was not involved in the Namtheun 2 hydropower project he privately agreed with the project.

According to ADB representatives, the bank also helps Laos in the fields of education, health and agriculture.

One are in which the ADB is particularly interested in helping Laos is in the integration of Laos to join Asean and to become involved in Mekong sub-region cooperation.

“We are very pleased to be involved in the transport corridor which links Laos, Thai;and and vietnam, “Mr. Nag said.

Asked about ADB’s decision not to support road construction projects in Vientiane, Mr Nag defended his bank’s position by saying that it could not be involved in every thing and that it must choose only those projects deemed most important.

He said that apart from the ADB, Laos is also able to draw on the assistance of other international organisations.

So far the ADB has not become directly involved in the tourism industry in Laos. However it has supported the development of tourism systems encompassing the entire Mekong sub-region and has noted that Laos has greatpotential for tourism because of its untouched habitat and rich culture.

“we do not have any particular tourism project in Laos, but Laos is a very important country in the Mekong sub-region.”

When asked whether Laos would be able to pay the ADB back in the next 40 years, Mr. Nag said that due to the long length of the terms of repayment, the actual annual amount will be negligible for Laos. So, in this regard, Mr. Nag fully agrees with the policy of the Lao government.

“Your economic growth now is in the right direction,” he said.

Laos has been granted the same amount of monetary support as Cambodia; a country which, as Mr. Nag explained, has double the population of the Lao PDR.

“We do not compare the level of funding that each country receives, rather we stress the need to forecast how each country will actually utilize the funds provided.”

“Laos has been utilizing our fund very well,” he said in praise of Laos.

It has been almost 30 years since Laos first began to build its solid relationship with began to build its solid relationship with the ADB and up to now the ADB has granted about US $ 700 million to Laos for its development needs.

Categories: Mekong Utility Watch

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