New Laos-China Rail Link Opens Up Southeast Asia For Trade And Tourism

By Kalinga Seneviratne

A new 414 kilometers high-speed rail link between China and Laos has finally opened landlocked mountainous Laos to the region and made it possible for trade and tourism to expand across Southeast Asia. This link has technically facilitated rail travel from China to Singapore, and land-based trade that could make South China Sea less important for regional trade.

This rail link built at a cost of $5.9 billion is a central plank of Chinese President Xi Jingping’s Belt and Road Initiative (BRI) while it also is part of Laos’ strategic vision to go from landlocked to “land-linked” economy and overcome the development lag that has come with being an inland, mountainous state.

Speaking to China’s Xinhua news agency in August, Lao Prime Minister Phankham Viphavanh said the BRI “is an opportunity, through economic infrastructure, trade, investment and people-to-people connectivity to deepen the mutual trust and help between China and Belt and Road Initiative countries” and the rail link is an important part of it.

The new rail line starts from the Laos capital Vientiane and goes up to Boten on the northern border with China. It is then linked to the Chinese rail system across the border at Mohan. The first two freight trains have crossed the border both ways already transporting goods worth $3 million. The border is still closed for human traffic due to the pandemic.

During the railway’s opening ceremony on December 3 where Buddhist monks chanted and sprayed holy water on the Chinese-built train engine, Lao President Thongloun Sisoulith said that it marked the day as the beginning of a new era for Laos, as the country made a significant step on its transition from a land-locked mountainous nation to a land-linked logistical hub.

On its opening day, the railway station in Vientiane was packed from early morning with middle-class Vientianers who were determined to secure a seat on what was, for many, the first ever ride on a train. More than 5,000 people have purchased ticket to ride on the train during the first week of its operations, and Laotian Times reported that more than 114,000 residents in the Chinese city of Kunming have purchased tickets to travel to Laos when the border is expected to be opened next month.

The Laos-China Railway Co. will operate the Laos’ segment of the railway, as a joint venture between China Railway group and two other Chinese government-owned companies, which collectively hold a 70 per cent stake in the rail project. A Lao state company holds the remaining 30 per cent. Laos’ debt liability in the project is believed to be $1.54 billion with the Chinese joint-venture partner owning another $2.4 billion.

This is Laos’s first rail network and Chinese had to train hundreds of Laotians in running the network—from engine drivers to linesmen and railway maintenance workers. Sida Phengphongsawanh who comes from the hilly town of Muangxay, about 100 km from the Chinese border is one of the train drivers trained by the Chinese.

Her hometown has traded with Chinese across the border for a long time. “The Laos-China railway has given me a stable job, and at the national level,” she told Xinhua, predicting that it will drive all-around development of the country, and help her hometown of Muangxay by facilitating the importation of their products to China.

With proper planning and appropriate foreign investments in development activities along the rail route, the Laos-China railway would help to improve several aspects of the Lao economy, including tourism and export-import industry that could help Laos to manage its debt liability.

“These infrastructure projects are proof that Beijing’s massive Belt and Road Initiative continues to break ground even amid a pandemic, with far-reaching implications for Southeast Asia. They will no doubt burnish Beijing’s appeal as a vital partner in promoting connectivity and spurring economic recovery in the region,” said Lucio Blanco Pitlo a research fellow at the Asia-Pacific Pathways to Progress Foundation in Manila in a commentary published this month by Hong Kong based South China Morning Post.

The new transport networks will be even more crucial after the world’s largest free trade agreement, the Regional Economic Partnership Agreement (RCEP) takes effect in 2022, bringing together all 10 countries of the Association of Southeast Asian Nations (ASEAN) and its five dialogue partners, including China, points out Pitlo.

The Laos-China Railway, which broke ground in 2015 and marks the effective extension of China’s high-speed rail system beyond its own borders, is an impressive technological undertaking by the Chinese. They had to navigate in terrain that still has unexplored bombs dropped by the US during the Vietnam war. The standard gauge single line railway cuts through rugged mountain terrain with 61 km of bridges and 198 km of tunnel. It has 21 stations within Laos with 10 for passenger traffic and others for goods traffic that indicates the dual development nature of the project.

“To which extent this benefits the country’s predominantly rural population remains open to question,” notes The Diplomat’s Sebastian Strangio. “Throughout its six years of construction, people who were displaced from their homes to make way for the railway complained they were paid too little (compensation),” he added. He also points out that one U.S.-based analyst has described the railway as “essentially a Chinese public infrastructure project that happens to exist in another country”.

This railway is not the only Chinese backed transport project in the region. In 2018, several Chinese companies signed an agreement with the Laotian government to build a 580 km highway from Vientiane to Pakse, a city in southern Laos near the Cambodian border that could link the rail corridor with a good road network across the country that will facilitate more trade between provinces and with neighbouring states, acting as a driver of economic growth.

Another project, the construction of Thanaleng Dry Port (TDP) and Vientiane Logistics Park (VLP), and linking it with Vung Ang Port, on the coast of Vietnam’s central Ha Tinh province, and the 190 km Phnom Penh-Sihanoukville expressway, in neighbouring Cambodia, is expected to open next year. Chinese companies are also busy building new airports in the Cambodian capital Phnom Penh and popular tourist city Siem Reap. The TDP and VLP projects are however, not funded by China.

While there is a flurry of construction giving shape to efforts by Asian neighbours to synergise the Master Plan for ASEAN Connectivity 2025 and China’s BRI, that was a key item in the China-ASEAN special commemorative summit in November, the alternatives to the so-called “China debt-traps” are yet to be realised notes Pitlo.

“From Japan’s Partnership for Quality Infrastructure, the United States’ Build Back Better World to Europe’s recently unveiled Global Gateway shows how Beijing’s drive is forcing rivals to compete” argues Pitlo. ”But with the exception of Japan, these new endeavours have yet to manifest in terms of projects in the pipeline. Until then, China’s belt and road will continue to find strong resonance among regional countries”.

Pitlo believes that the Vientiane-Boten line, for instance, can build momentum for similar rail linkages in Thailand, Vietnam and Myanmar. “Notwithstanding the challenges, China’s gambit is paying dividends, with growing contracts and consequent clout among countries taking part in its global connectivity programme” he argues, adding that the new railway “will be a game changer for Laos, Southeast Asia’s lone landlocked country”.