MANILA, PHILIPPINES - The Asian Development Bank (ADB) will double its investment in the rehabilitation of Cambodia's dilapidated railway, a move that will position the country at the center of a growing trade network in the Greater Mekong Subregion (GMS).
The ADB Board of Directors have approved another $42 million in financing, bringing ADB's total investment to $84 million - approximately 60% of the $141 million rail project.
With this additional financing, freight trains will begin operating between Kampot, near the border with Viet Nam, and the capital Phnom Penh in 2011. The entire railway system will be operational in 2013.
Cambodia's rail network is in tatters following decades of neglect, with the last 48 kilometers of track extending from the Thai border destroyed during wartime.
In addition to rehabilitating and reconstructing 600 kilometers of rail network, including rebuilding the destroyed link to Thailand that will reestablish railway traffic between the two countries, the infusion of new funding will enable the development of a modern freight and rolling stock maintenance facility on the outskirts of Phnom Penh.
"This upgraded rail network will position Cambodia as a true sub-regional transport hub, creating new jobs and business opportunities in the manufacturing and logistic services sectors," said Peter Broch, Senior Transport Economist in ADB's Southeast Asia Department.
The new railway will directly connect to Cambodia's national highway network, and to a major river port in Phnom Penh, fusing the rail network with road and inland water transport systems connecting Northeast Cambodia and Viet Nam's Mekong Delta.
"Cambodia's modern railway will be the backbone of a regional transport system interlinking Cambodia with major industrial and logistics centers in Bangkok and Ho Chi Minh City," said Mr. Broch.
There is an urgent need for an upgrade of the current rail system, with Cambodia's railway traffic continuing to decline due to the poor condition of the track and equipment.
"Without this project the railway would cease to function," said Mr. Broch.
In addition to creating new jobs and spurring economic growth, the revitalized railway will also enhance international trade, reduce the costs of imports, ease road traffic and diminish road hazards.
ADB's loan, from its concessional Asian Development Fund, has a 32-year term, including a grace period of eight years. Interest is charged at 1% per annum during the grace period and 1.5% per year for the rest of the term.