Giant China, tiny Laos link up with launch of high-speed train

Laos is on track for new economic opportunities, but some worry about the cost.
2021.12.02
Share on WhatsApp
Share on WhatsApp
1-train.jpg

The Lane Xang train passes through villages and fields on Dec. 3, 2021 in Xaythani District, Vientiane, Laos. (RFA)

2-train.jpg

Officials attend the Dec. 3 handover ceremony of the high-speed rail project linking the city of Kunming, China, with Vientiane. (Reuters)

3-train.jpg

Laos' President Thongloun Sisoulith and China's President Xi Jinping attend the ceremony via video. (Reuters)

4-train.jpg

A worker in protective gear waits next to a train at the Vientiane station. (Reuters)

5-train.jpg

Vientiane train station is seen during the handover ceremony. (Reuters)

6-train.jpg

A passenger train on the China-Laos Railway arrives at Yuxi Railway Station in southwestern China's Yunnan Province on Dec. 3, 2021.(Associated Press)

7-train.jpg

Passengers line up to board a train on the China-Laos Railway at Kunming Railway Station in Yunnan Province on Dec. 3, 2021. (Associated Press)

Top leaders of China and Laos on Friday hailed the opening of a high-speed railway connecting the two Communist neighbors, with Chinese President Xi Jinping vowing to turn the $6 billion project into “money and gold.”

A centerpiece of China’s Belt and Road Initiative of state-led lending for infrastructure projects to tie countries across Asia to China, the railway offers land-locked Laos the promise of closer integration with the world’s second largest economy, but also the peril of deeper indebtedness to Beijing, analysts say.

“The opening of the Laos-China Railway is a significant milestone in history and a new era for the development of modern infrastructure in Lao PDR,” said Lao President Thongloun Sisoulith, using the Communist country’s formal name, the Lao People’s Democratic Republic.

The railway is a source of “great pride, and is making Lao people’s dream reality,” he said.

“More importantly, the railway is a historic symbol of the tie between two Parties, countries and peoples,” he said.

Speaking to the track-side ceremony in the Lao capital of Vientiane by video, Xi said, “The two sides have worked closely, efficiently and successfully to dig through the mountains, build roads and bridges” over the past five years.

“Next, the two countries must continue to protect and use the railway to develop the corridor along the railway and to turn this railway into money and gold, and bring benefit to the people of the two countries,” he said.

After blasting 75 tunnels and building 77 bridges through the mountainous jungle terrain of northern Laos, the China-Laos Railway will start plying the 414-km (260-mile) route between Vientiane and Kunming in the southwestern Chinese province of Yunnan on Saturday.

“At first, the railway will be used mainly for shipping goods. Later it will be open to passengers and tourists when the COVID-19 situation dies down,” Lao Prime Minister Phankham Viphavanh told local media at Thursday’s soft opening of the railway, timed for the 46th anniversary of the Communist revolution in Laos and the 60th anniversary of China-Laos diplomatic ties.

Laos, which has never had a significant railway system, will now be served by a train able to carry more than 700 passengers at speeds of up to 160 km (100 miles) per hour to 10 stations in the country, including Vientiane, the major tourist draw of Luang Prabang, and the Chinese border town of Boten.

Later phases of the project could take Chinese-funded high-speed railways to Thailand, Malaysia and Singapore.

The World Bank estimates that the Vientiane-Kunming section of the railway will boost tourism, freight transport, and trade in agriculture, giving Laos' pandemic-hit economy a shot in the arm.

But the project has been criticized for displacing some 4,400 farmers from their land. Many have faced long delays in getting reimbursement for their lost property, as others have been shortchanged in the payments they did receive.

Economists and business leaders meanwhile worry that heavily indebted Laos will pile up new financial liabilities that the country, with a per capita GDP of only $2,300, has little hope of repaying anytime soon.

Then there is a question about who will be able to use the new railway. The fare from Vientiane to the Chinese border — $49 for first-class tickets and $30 for second class — could be beyond the reach of many in a country where the minimum wage is around $116 a month.

“That’s too expensive for many low-income Laotians,” a Lao government worker in Vientiane told RFA’s Lao Service Wednesday.

“Fare from Luang Namtha to the capital is more than 200,000 kip ($18). It should be half that,” a resident of Luang Namtha told RFA.

According to one tour operator, the first-class fares are “almost equal to that of low-cost airlines,” one operator said.

Compensation conflicts

A total of 4,411 families have lost their land, homes and property to the railway project, a Vientiane official told RFA’s Lao Service Nov. 27.

“Most of them have been compensated, except about 100 families who are mostly residents near the railway or its stations. In Vientiane particularly, compensation rates are very high and there have been many disputes,” the official said.

The Lao government has to date paid a total of about $137 million in compensation, said Chantoula Phalanasy, director general of the Laos-China Railway Construction Project Management Committee.

This year, the Lao Ministry of Public Works and Transport is requesting an additional $43 million for payments and Lao officials have said only 10% or 20 % of displaced families remain without compensation.

Some Laotians who were made to cede land to the project remain dissatisfied.

“My shop was demolished because of this railway project. They didn’t pay me anything at all. I lost my shop for nothing,” a homeowner in Luang Namtha province, which borders China in northern Laos, told RFA.

A  man who lost land and property to the Laos-China railway project near the capital said he has yet to receive any promised money.

“Last month, they the authorities told us they’re going to pay us by December 2, 2021. We’re waiting for the payment for two years now. I’ve borrowed tons of money for our daily living expenses and am paying high interest on it, 20 percent," the landowner told RFA.

‘From landlocked to land-linked’

The China-Lao railway is the first railroad to penetrate any distance into Laos, a country whose transport infrastructure was long constrained by its poverty, mountainous terrain and sparse population.

Graphic: RFA
Graphic: RFA

Colonial power France developed a seven-kilometer (four-mile) narrow gauge railway in the far south of Laos near Cambodia in the 1890s. It transported goods and passengers where the Mekong River fans out into multiple channels and rapids and becomes less navigable. It closed around the time of World War II.

That was the only railway to have opened and operated in Laos until 2009, when a 3.5-kilometer (2.2-mile) extension of Thailand’s rail network opened across the Thai-Lao Friendship bridge, about 12 miles east of Vientiane. It carries little traffic, typically shuttling just twice a day between Nong Khai in Thailand and Thanaleng in Laos.

Observers say that the new railway will boost the Lao economy — at least in the short term.

By cutting the cost of transport through Laos by 30% to 40% compared to truck transport, it will “transform Laos from landlocked to land-linked,” Viengsavath Siphandone, Lao minister of Public Works and Transport said on Nov. 16.

“This railway will be a great benefit to Laos,” Prime Minister Viphavanh told local media in October.

“It will bring a lot of foreign tourists and will facilitate the transport of imported and exported goods,” he said.

Some people in the country share their leaders’ optimism.

“It will boost communication, transportation, tourism, and expedite shipments, and hopefully the people will benefit from it too,” a resident of the capital told RFA.

But a middle-aged man in Savannakhet province told RFA he had mixed feelings.

“Everybody wants to see more development and more prosperity,  but deep in my heart, I want the government to look after the people more, especially their living conditions and more specifically to create jobs for them.”

The new line will boost trade with China, Laos-based Chinese commentator Wang Longde told RFA’s Mandarin Service.

"The cost of transporting some minerals and agricultural products to China is really high," Wang said.

"Once the railway opens to traffic, it will be much easier to move products from Laos to China, and Chinese goods into Laos."

"If Laos is connected with Thailand [by rail] in future, and even the Pan-Asian Railway, then the line takes on even greater significance," Wang said. "China's mission will be complete if the line is extended as far as Bangkok."

Debt peril

Although many people agree that the railway will be an engine of economic growth, Laos had to borrow nearly half a billion dollars from China and some fear the project will pile up debt that erases many of the gains.

“It may help the Lao economy, but the government, the country and the people will all be under massive debt,” a citizen of the capital told RFA.

At an October meeting of the Lao National Assembly, the minister of finance warned that interest payments will sharply increase over the next five years on public debt that stood at $13 billion in 2020.

“The government will have to pay $414 million a year in interest alone, so we must tighten our belts,” Finance Minister Bounchom Oubonpaseuth said.

“Laos is heavily indebted to China,” a Lao economic and financial expert told RFA.

“I don’t know if Laos can negotiate debt repayment with China. Laos might be hoping that the railway will help its economy grow, but that’s going to take a long time, maybe even longer because of the current pandemic and the overall economic situation.”

Laos has a 30% share in the company operating the railway, while China controls 70%, said a former Lao government official who worked on the railway project.

“The Lao government is committed to contributing $730 million to the total investment of the company by borrowing $480 million from the Export-Import Bank of China with a 2.3 percent interest rate and by drawing $250 million from its national budget over the next five years,” the official told RFA.

Paying back its loans would be a daunting challenge for Laos in the current economic situation, a Lao businessman told RFA.

“Laos is in a serious financial trouble. It’s under tremendous pressure from the debt burden and payment; its economy is in crisis because of Covid-19 pandemic; the Lao currency, kip, continues to depreciate, and foreign investment will not come back soon, and trade deficit is on the rise,” he said.

China’s strategic and political goals

Some observers say China will work to translate its deepening economic dominance into greater political leverage over Laos and other Southeast Asian neighbors. That could destroy the fragile regional unity over the South China Sea maritime territorial dispute that pits China against several of Laos’ fellow members of the Association of Southeast Asian Nations.

Chinese current affairs commentator Cai Shenkun said the strategic advantage of the railway eventually connecting Laos with Bangkok indicates that Beijing is pursuing its political goals rather than economic ones.

"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]," he said.

"We will be seeking to influence Southeast Asian countries through economic means," Cai said.

"I believe these Southeast Asian countries, especially the poorer ones, will rely heavily on Chinese aid and come under its sphere of political influence."

Reported by RFA’s Lao Service and by Qiao Long for RFA’s Mandarin Service. Translated by Max Avary and Luisetta Mudie. Written in English by Eugene Whong, Luisetta Mudie and Nawar Nemeh.

POST A COMMENT

Add your comment by filling out the form below in plain text. Comments are approved by a moderator and can be edited in accordance with RFAs Terms of Use. Comments will not appear in real time. RFA is not responsible for the content of the postings. Please, be respectful of others' point of view and stick to the facts.