Laos’ massive train project is a fast track to debt and despair

Change is coming to sleepy Laos, as a $7.2 billion railway will run through the war-torn country. The railway will be paid for by the Lao government, with Chinese loans accounting for 86% of Laos’ $8.3 billion annual GDP. The level of debt has led some to denounce the plan as the latest example of Beijing’s ruthless expansion in Southeast Asia. Economists fear with horror that such a huge outlay could push the already impoverished country into an unbridgeable deficit. Moreover, in Laos’ shadowy police state, where even household-name dissidents “disappear” without explanation, there are serious doubts that ordinary Laotians can influence the course of a deal signed by the Communist government, no matter how bad it may be for the Lao people.

Laos, devastated by war in the 20th century (it’s the most heavily bombed country in the world, per capita, according to the United Nations), remains in a time warp and is one of the poorest countries in the world by almost every measure. Despite some progress, most people live on less than $5 a day, and agriculture (generally subsistence rice farming) dominates the economy, employing four-fifths of the population and accounting for half of GDP. “More than ever, Laos wants to increase foreign direct investment and strengthen its economic position in the region and beyond,” Gretchen A. Kunze, Laos representative for the nonprofit Asia Foundation, tells TIME.

（photo: China High Speed ​​Rail）

However, lack of infrastructure remains a huge challenge. The country has only 6.5 kilometers of old railways, and its 6 million people have to make do with a dilapidated road network with potholes and muddy roads. To solve this problem, a railway line was first proposed three years ago to connect Kunming in Yunnan Province in southwest China with the Laotian capital of Vientiane, and then south through Thailand to Singapore. As Laos is a landlocked country with rugged terrain, facilitating the flow of goods and reducing transportation costs are seen as key factors in achieving future prosperity. The railway line was originally scheduled to be completed in 2015.

However, Beijing pulled out of direct funding for the project last year after a series of feasibility studies showed the numbers simply couldn’t be calculated. The reason is no secret. The 420km track would require digging 76 tunnels and building 152 bridges – two-thirds of the route – plus two sea bridges across the mighty Mekong River. Twenty stations would open initially, with 11 more to come. It’s a massive engineering feat by any stretch of the imagination, so China decided to build a new road that would bypass the Mekong as it forms the border between Laos and Myanmar, and head further south into Thailand. This, however, would do Laos itself little good.

So, in an effort to achieve its miraculous transformation from landlocked remote region to global manufacturing hub, Laos was left to push ahead with the project alone — albeit with Chinese money. Spurred by rumors of a new Thai high-speed railway linking Nong Khai on the Lao border to Bangkok, Laos’ 11-member politburo unanimously approved negotiating a $7.2 billion loan with China’s state-owned Export-Import Bank. Chinese state media lead Laos’ energy and mines minister said in October the deal would involve importing 5 million tonnes of minerals from Laos annually by 2020, mainly potash fertilizer, as well as timber and agricultural concessions.

（more: Can damming the Mekong bring a better life to Laos?）

The state believes the deal represents the dawn of Laos’ economic transformation. “Laotians see the high-speed rail as a symbol of modernization that they see on foreign TV,” said Ekaphone Phouthonesy, deputy editor-in-chief of state-run media Vientiane. time“The business community has also welcomed the development as they believe cheap transportation will reduce production costs.” Unsurprisingly, Beijing has also been vocal in rebutting objections to the rail deal. article inside Global Timesa copy of People’s DailyChina Daily, the official mouthpiece of the Chinese Communist Party, expressed regret over Western criticism of the project and said the cost of the entire project seemed more palatable given Laos’ estimated 2011 GDP of $17.4 billion, calculated in terms of purchasing power parity.

Observers remain unconvinced. “China’s investment agreements are not going to be without strings attached,” said Jonah Blank, senior political scientist for Southeast Asia at the global policy think tank RAND. “From a political perspective, no country that owes 86% of its GDP to another country can be said to have a truly unfettered foreign policy.” Meanwhile, Laotian Finance Ministry officials Radio Free Asia quoted In December, he estimated that the Lao government would need to pay up to $3 billion in interest alone (at 2% compounded annually for 30 years). And it remains to be seen what benefits the railway will bring in the short term. “Right now, there is not much manufacturing in Laos, largely because of the low level of human resource development and the lack of skilled workers,” Kunze explained. “So the idea of ​​Laos using the railway system to export its own goods remains a distant possibility.”

Why would the Lao government rely on such a scheme? “It seems to be a gamble on rising commodity prices,” says Tim Forsyth, a lecturer in international development at the London School of Economics who specialises in Southeast Asia. The idea is that Laos’ mineral wealth will appreciate over the repayment period, allowing the debt to be repaid more quickly than it currently appears. “It also sounds like an indirect land grab, as China is exchanging its financial resources for land use rights,” he adds. Beijing’s record in this regard is hardly exemplary. Similar development projects in Myanmar, Indonesia and Sri Lanka have all used large numbers of imported labour, but have all faced fierce opposition from local populations. The Lao railway project is likely to follow a similar model, bringing in 50,000 workers over the five-year construction period.

（photo: In Laos, turning bombs into scrap has become a lucrative but dangerous business）

Besides the possibility of a heavy national debt burden from a useless project, there are other serious objections. Railway construction will require at least 50 meters of land to be cleared on both sides of the entire route, as well as a 100-meter-long tunnel and 3,000 x 250 meters of station development land. There must also be additional space for construction equipment, warehouses and workers’ dormitories. Laos is notorious for illegal land grabbing in support of local and foreign investment, and local NGOs have no doubt that the railway will seriously exacerbate the problem.

Many Laotians, even government officials, are reluctant to engage with China, and some prefer to protectively consolidate long-standing ties with Vietnam. “I know that the Laotians are divided on how far to go with China,” Ernie Ball, director of the Southeast Asia program at the Center for Strategic and International Studies, told TIME. “Vietnam has been desperately trying to win the hearts and minds of the Laotians over the past decade.”

Laotians who disagree with the project could be at serious risk. On December 15, award-winning civil society activist and land rights activist Sombath Somphone disappeared without a trace. Security camera Film Photos show him appearing to be detained by Vientiane security officials. His whereabouts remain a mystery. Even more shocking is that, unlike other activists who have disappeared, Sombath has never been seen as a particularly controversial figure and has generally worked with local officials in a conciliatory manner to negotiate the best deals for farmers and the rural poor.

Phil Robertson, deputy director of Human Rights Watch’s Asia division, told TIME that he had “no doubt” that Lao authorities were behind Sombath’s disappearance and continued detention. “They’re warning others: ‘Look what we can do — if we can take down someone as high-profile as him, what do we do with smaller land activists?'” he said. “It’s had a chilling effect on the ground, and people are very afraid to speak out.” It looks like Laos’ ambitious railway project could be costly in both human and financial terms.

more: China opens world’s longest high-speed railway