High-speed train in one of Asia’s poorest countries may benefit Beijing more than locals

Near Bom Or, a village of dirt streets and shacks in northern Laos, Chinese construction crews have cut a tunnel through a mountainside to carry high-speed trains on a 400km rail line across the country, a section of a planned route from Kunming in south-west China to Singapore.

The tunnel is part of a $6.7bn project through the rugged countryside around Luang Prabang, the ancient capital of Laos, one of the highest profile being built under China’s Belt & Road Initiative.

Beijing has used the programme to build roads, ports and power stations in some of the world’s poorest countries. But critics have raised concerns about the social & environmental impact of the projects, saying that many of them are white elephants that have left states heavily indebted to Beijing.

The project in Laos, one of Asia’s poorest countries that has no independent media and limited civil society groups, has been carried out with little public consultation.

A villager in Bom Or said that 30 households had been visited three times in September by the Laos government and Chinese company officials, who asked them to move to make way for the train. They refused because they had not been offered financial compensation or alternative housing.

“We will not leave,” said one man, who asked not to be identified for fear of repercussions. “We want to see a place where we can live.”

Laos’s Communist government sees the rail line as central to its strategy of making the landlocked country “land-linked”, a term officials use in their quest to refashion it as a regional transport hub.

“This project is very good for Laos,” Lattanamany Khounnyvong, Vice Minister of Public Works & Transportation, said at the Asia Infrastructure Forum 2019, a conference of which the Financial Times was a partner.

The railway, set to open in 2021, will facilitate Laos’s ability to transport goods around the region faster and “about three times cheaper” than today, he added.

The Laos-China Railway Company, which is building and will operate the link, is 30 per cent owned by Laos’s state railway company and 70 per cent by Chinese state-owned companies.

These include the investment company of Yunnan, the province of which Kunming is capital; an affiliate of the sovereign wealth fund China Investment Corporation; and civil engineering affiliates of the state-owned rail, power and water companies.

Chinese companies have won tenders to build six sections of the railway in Laos. The opening to the new tunnel sits under a sign for PowerChina, a subsidiary of which is building this section of the line.

Laos’s government has taken on $480m of loans from China’s Eximbank, on concessional terms. The amount is equivalent to about 2 per cent of Laos’s gross domestic product. However, the IMF classifies Laos as a country with an “elevated” risk of debt distress because of its high existing debt, which amounts to nearly 65 per cent of GDP.

The project’s backers have not made the business plan public, so little is known about its assumptions of how many passengers will use the train.

“The main problem is that the high-speed train is driven by a political economy agenda that serves the promoting nation much more than the recipient country,” said Ruth Banomyong, a professor of supply chain logistics management at Thammasat Business School in Bangkok.

“Apart from the debt incurred by Laos, it will also be very difficult for the Lao private sector to gain benefit from this new infrastructure, as they are less competitive than the Chinese-related business ecosystem.”

One likely source of business will be Chinese tourists visiting Laos, whose numbers have roughly doubled from 400,000 in 2014 to 800,000 last year.

“It is Chinese tourists and products in, and raw materials out,” said Nadège Rolland, an expert on BRI with the National Bureau of Asian Research, a US think-tank. “But eventually the BRI is about much more than infrastructure; it is policy co-ordination that will align the claimed needs of the region with those of Beijing.”

Ms Rolland added that, like its neighbour Cambodia, Laos with its small economic base, history of Chinese immigration and shared Communist party rule was fertile ground for Beijing to build influence.

While Laos has moved quickly on its section of the proposed Kunming-to-Singapore link, other parts of the proposed rail line remain un-built. The Thai part is only set to be completed by 2025.

“This is a demonstration of China’s ability to overcome all natural obstacles in pursuit of economic development and broader strategic goals,” said Sebastian Strangio, author of a forthcoming book on China’s impact in south-east Asia. “What’s in it for Laos is a little bit more contentious.”