Status: 12.12.2021 9:20 a.m.
China opens the first section of its “New Silk Road” through Southeast Asia. The project is intended to bring the economically underdeveloped Laos forward economically – and will increase its dependence on Beijing.
After five years of construction, Laos and China have inaugurated a train line that connects the Laotian capital Vientiane with China. The small country to the south of its large neighbor is the only landlocked country in Southeast Asia and has so far not had a railway network.
The route built by China cuts 400 kilometers with 242 tunnels and bridges through mountainous terrain and ends directly at the border with Thailand. What used to be an arduous day trip now only takes a quarter of the time.
At high speed towards Laos: The train from Kunming to Vientiane crosses the Yuanjiang River in China.
Image: AP
The train connection is one of hundreds of development projects that Beijing has summarized under the heading “New Silk Road”. The highly ambitious, trillion euro initiative aims to expand strategic infrastructure in more than 60 countries in Asia, Europe and Africa. The high-speed train through Laos is also just the beginning of a route that will eventually lead through Thailand, Malaysia and as far as Singapore.
Displeasure with high fares
International trade should be promoted in this way for the benefit of all countries involved, said Beijing. In fact, economically very underdeveloped Laos urgently needs better infrastructure. The rail link could help reduce transport costs, strengthen industry, trade and tourism and diversify the economy, proponents of the project in Laos also explain. The previously disadvantageous geographical location – wedged between the economically strong neighbors Thailand, Vietnam and China – could become a strategically favorable trade cross.
But there is a long way to go for Laos to get there. Most of the seven million people in the one-party state, under nominally communist leadership, live in poor rural areas and cannot afford to drive. The displeasure about prices that were too high was already airing on social media.
Dancers in traditional clothing entertained the passengers on the first ride of the express train.
Image: AP
In Laos, a Buddhist monk then blessed the procession inside and out.
Image: REUTERS
4,400 people also had to leave their country to build the route, others were cut off the water supply. Many of them have not received adequate compensation so far, reports the organization “Lao Movement for Human Rights”. Environmentalists complain that the construction has destroyed ecologically sensitive habitats and is putting endangered species under further pressure.
And it is doubtful how much the Laotian private sector will be able to benefit. The small number of stops suggests that the route is hardly planned for use by Laotians. According to experts, the train connection is primarily designed to promote the export of Chinese goods and to quickly connect China with ports in third countries. Especially the economically weak south and west of China compared to the boom regions on the east coast would be strengthened by the new export route – a central project of the government in Beijing.
It remains to be seen how many people will get on the express train to Thailand and China at the Vientiane station – for many Laos the tickets are far too expensive for the time being.
Image: REUTERS
Risk of the debt trap
However, observers are particularly concerned about the dependence on China, which Laos is potentially entering with the project. The railway in Laos is operated by a joint venture between Chinese and Laotian state-owned companies, in which the Chinese parties hold 70 percent of the shares. In order to be able to finance the costs of 5.3 billion euros for the route built by China, Laos also took out a large loan from China.
Even before that, the country owed its largest creditor, China, a sum equal to two-thirds of its annual economic output. If rail operations are not profitable and the company becomes insolvent, Laos could find itself forced to assume all of the company’s debts in order to continue operating the route. These debts alone would then represent a good fifth of Laos’ annual economic output.
China’s rival in Laos: Thailand
Alternatively, Laos could have to hand over all rail operations to China. Something similar happened at the end of last year, when Laos transferred the majority stake in its electricity grid to a Chinese state-owned company for precisely this reason. Many observers fear that Laos will be more and more in the hands of China as a result of this debt trap – and that China could use this to expose the country to strategic political pressure.
While Laos is often referred to as the vassal of China, Vientiane has long been practicing balance diplomacy with its larger neighbors. Traditionally, Vietnam has been Laos’ political senior partner, again a rival of China. Thailand is Laos’ largest trading partner, an important source of investment and culturally closely related to Laos. Japan and South Korea have long been important development aid partners. And in the US, some strategists are calling for greater engagement in Laos to counter its dependence on China. But until further notice, it seems, China will be able to expand its influence in Laos.