Belt and Road

The Vientiane Express

Who benefits most from China’s just opened $6 billion train line in Laos?


Full speed ahead? The newly opened Chinese built railway in Laos

Buddhist monks, a lucky gong and a video call with Chinese leader Xi Jinping were all part of the celebrations as Laos formally launched its $6 billion rail link with China last week.

Timed to coincide with the 46th anniversary of the Lao Communist revolution on Thursday of last week, the opening of the 400km line is controversial because of its high costs and questionable benefit to the local population.

That the new railway – which runs from the Lao border with Thailand in the south to the frontier with China in the north – is an incredible feat of engineering is in no doubt.

The standard gauge single-track line incorporates 61 kilometres of bridges and 198 kilometres of tunnels, all built in just six years. But the railway line – which continues through to the city of Kunming on the other side of the Chinese border – is too expensive for the majority of Lao people to use. Furthermore the line has just 21 stops (only 10 of which are for passengers) – which is probably too few to boost connectivity within Laos.

Critics say the railway would have better served the rural economy in Laos if there were more stations to connect farmers to markets. Instead, the real beneficiary is China, which wants to extend the line down through Thailand and Malaysia to Singapore, as part of the Belt and Road Initiative. “This is essentially a Chinese public infrastructure project that happens to exist in another country,” the Associated Press quoted Scott Morris of the Center for Global Development in Washington as saying.

Laos has long dreamed of turning its geographical challenges to its advantage. Sandwiched between China, Vietnam, Cambodia, Myanmar and Thailand, it is the only country in Southeast Asia without direct access to the sea. That has created development challenges, although the railway hopes to make a virtue of the situation under the ‘landlocked to land-linked’ slogan.

Yet the country – one of the poorest in the region – has little in the way of connective infrastructure. Until the construction of the line to China, Laos boasted just four kilometres of railway track.

That now changes with the new railway, which Chinese President Xi Jinping championed as a “golden route for the benefit of both peoples” at the launch ceremony.

Chinese railway companies own 70% of the project and a Lao state-owned enterprise holds the remainder. Laos borrowed more than $1.5 billion from Chinese banks to fund its share of the construction costs, topping up it debts to its northern neighbour.

Laos, with annual GDP of $19 billion, already owes about $13 billion in foreign debt, about half of which has been borrowed from the Chinese. In September, a looming debt default saw the government cede majority control of its national power provider to China Southern Power Grid. Soon afterwards Lao finance minister Bounchon Oubonpaseuth told the country’s one-party parliament that the government had to find $1.8 billion by the year’s end to meet internal and external obligations. “We must tighten our belts,” he was quoted as saying.

The opening of the railway comes as the United States and European Union both try to offer their own alternatives to China’s Belt and Road Initiative. In July, the Americans announced their Build Back Better World partnership with other G7 countries to fund infrastructure needs in low and middle income countries. And at the start of this month the European Union announced its €300 billion Global Gateway scheme for investment in transport, energy, education and health too.

In comparison to China’s trillion-dollar-plus BRI, both of these schemes link their offers of funding to democratic values – meaning that countries such as Laos or Pakistan (anmajor big BRI participant) are unlikely to benefit.

Parts of the seven million population of Laos have become concerned at China’s growing influence in their country, however. Ahead of the anniversary of the Communist revolution last year, authorities in the capital Vientiane allowed a Chinese supplier to put up celebratory decorations so they would not have to find the money from the municipal budget. The company opted for traditional Chinese decorations such as red lanterns and urbanites soon took to social media to complain about the ‘Sinification’ of their capital. The decorations were taken down.

This September citizens protested again when a Shanghai-based real estate company announced plans for a 100-metre tall Buddha close to the Pha That Luang Buddhist stupa – a Lao national symbol. Critics said the Chinese project would overshadow the Lao stupa and that its Mahayana Buddhist design was out of keeping with the Theravada tradition followed by local Buddhists.

Some 300,000 Chinese are now thought to live in Laos – a population that is likely to expand when Covid-19 restrictions are lifted and people start to use the new rail link to cross the border in larger numbers. But as of now only freight trains are running the full length of the line to Kunming. Trains on the Lao side of the border can reach maximum speeds of 160 kilometres an hour, cutting travel times between Vientiane and the Chinese border from a 15-hour road trip to just four hours.

However, the cost of tickets for travel on the line – $49 for first class and $30 for second class – is high for a country where the average month salary is around $350.

In addition, many of the 4,400 farmers moved from their land to make way for the project say their compensation has been slow to arrive or that that they have been short-changed in the amounts on offer.

The long-term success of the line is also greatly depends on Laos’ neighbours, notably Thailand, which thus far has been slow to agree to an extension of the track southwards through its territory. Without the onward connectivity that this line will provide to Bangkok (and then south to Malaysia) it is not clear that there will be enough traffic to cover the costs of construction and operation.

“If you look at the railway as an investment, there is no way China can make a return, so it must be political considerations [that made them do this],” Radio Free Asia cited one analyst as saying.

“These Southeast Asian countries, especially the poorer ones, will rely heavily on Chinese aid and come under its sphere of political influence,” he added.

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