From Potholed Roads to Modern Rails: Laos's Railway Dilemma

In December 2021, Laos unveiled the Boten-Vientiane railway: a 414-kilometre, $6 billion high-speed track connecting the capital, Vientiane, to the border town of Boten. While backed by substantial Chinese investments, the project has thrust Laos into a delicate financial and geopolitical position.

Leaving Luang Prabang, a 30-minute drive on an unpaved, pothole-filled road paints a picture of the country's existing infrastructure. But then, unexpectedly, a massive, ultra-modern train station emerges, reminiscent of an airport terminal in more developed nations. The disparity is stark.

This journey, mirroring the seamless efficiency of Japan's Shinkansen, stands in strong contrast to a nation where 23% of the population lives under the poverty line. The railway, a USD 6 billion project, is the flagship of  China’s Belt and Road Initiative in Laos. However, it comes with concerns. The AidData research lab at William & Mary places Laos’ debt to China at a staggering USD 12.2 billion — nearly 65% of its GDP. To mitigate this, concessions to Laos' political autonomy and sovereignty have been made. Beijing's security forces and police are reported to operate nationwide, extending China’s influence and its repression beyond its borders. Additionally, control of Laos's electrical grid now rests with China due to financial constraints, as Laos couldn’t afford to run its power grid

In 2023, Laos's external debt was approximately 90% of its GDP. Being landlocked in Southeast Asia and grappling with a faltering economy, Laos didn't have investors flocking. The Chinese proposal was a lifeline but came with strings attached. Relations between Laos and China’s geopolitical rival, the USA, are multifaceted, stemming from the extensive and brutal bombing of Laos territory during the Vietnam War. This has left the nation agriculturally defunct, pushing imports and straining the economy. Critics say the USA's $335 million aid to clear unexploded ordnances is minimal in the face of China’s growing influence.

For Laos, the railway promises a transformation from being landlocked to land-linked, envisioning a boost in trade and tourism, especially given its current connection to mainland China and the future project of connecting the railway to Thailand and Malaysia. Though it's been just over a year since the railway's inauguration, roaming the streets of Vientiane and Vang Vieng it is impossible to ignore the great number of Chinese tourists, a notable influx in a country that Western tourists often overlook.

Beyond Laos, the railway has broader implications for China’s Southeast Asia geopolitical goals: it paves the way for augmented regional connectivity, potentially extending to other Southern Asian countries. For China, this project showcases a major victory in its Belt-Road Initiative and greatly strengthens its ties with another country in its region. With the World Bank estimating a 21% increase in long-term aggregate income, only time will tell if the price Laos paid can overturn its failing development progress and yield genuine developmental progress.

References

Bhatt, A. (2023, April 23). Laos Is Not in a Chinese “Debt Trap” – But It Is in Trouble. Thediplomat.com. https://thediplomat.com/2023/04/laos-is-not-in-a-chinese-debt-trap-but-it-is-in-trouble/

Mahtani, S., & Huiying, O. (2023, October 12). China’s promise of prosperity brought Laos debt — and distress. Washington Post. https://www.washingtonpost.com/world/interactive/2023/laos-debt-china-belt-road/

Medina, A. F. (2021, December 21). The Completed China-Laos Railway: Bringing Opportunities for ASEAN and the Asia Pacific. ASEAN Briefing. https://www.aseanbriefing.com/news/the-completed-china-laos-railway/

TAKAHASHI, T. (2023, January 14). Ambition and concern drive the Laos-China high-speed rail project. Nikkei Asia. https://asia.nikkei.com/Spotlight/Belt-and-Road/Ambition-concern-drive-Lao-China-high-speed-rail-project