Laos gets rail boost from China

NEWS flow on the construction of the China-Laos railway is giving confidence that the mega infrastructure will be on track for completion in December next year, and Laos will reap vast economic benefits from the project.

Last month, the Laos-China Railway Company announced that the boring of the final tunnel of the 414km rail project had been completed. This signalled one of the most difficult civil works was overcome.

The Xiang Ngeun No. 3 Tunnel – about 210km north of capital city Vientiane, is the last of the 75 tunnels passing through some uninhabited mountainous terrains and scenic forests.

Before this, there were also announcements on the completion of the boring of the 9.3km Ban Nakok tunnel after over two years of drilling; and the successful boring of a 15.2km tunnel in China’s Yunnan Province.

In Laos, the planned high-speed train project with speed of 160km per hour will link Boten on the China/Laos border with Vientiane via 198km of tunnels and 62km of bridges.

From Boten, the rail line will continue to run into China to end at Kunming, the capital of Yunnan Province that has rail link with Vietnam and road link with Myanmar, Laos and Thailand.

When the project was mooted over 10 years ago, it was met with scepticism mainly due to the weak financial situation of Laos.

The former French colony, now under a one-party socialist rule, has one of the highest poverty rates in South-East Asia, according to the World Bank.

The economy relies on exports of copper, gold and timber.

But the Laotian government was determined to go ahead with this controversial project after learning that investors would only come if there was good transportation.

In an interview with Nikkei in 2015, the then deputy prime minister Somsavat Lengsavad explained that the landlocked country could only rely on roads.

“In our policy of turning Laos from a landlocked to a land-linked country, the railroad will help us reach our economic objective.

“Many investors are now looking for a production base here but they say if the country had a railway, it would help them reduce transportation costs, ” he was quoted as saying.The Laotian government hopes the railway will lower the cost of exports and goods, promote economic development and improve the living standard of its seven million people in this land with poor roads and other transport systems.

Hence after some failed early attempts to build the railway and subsequent negotiations with Beijing to lower loan interest rates, the China-Laos railway was launched in December 2016 as a project under Chinese President Xi Jinping’s key Belt and Road Initiative (BRI).Projections released by the Laotian government then predicted that 14 million people would use the rail line annually – four million Laotians and 10 million tourists from China and South-East Asia.

In terms of trade, the rail line will serve as a means to connect the country with China and its more affluent South-East Asian neighbours.

Unlike some Belt and Road projects in other Asean countries, it did not seem to encounter any major hiccup after 2016. Construction went uninterrupted even during Covid-19 pandemic.

Laotian government’s political will to create a vibrant local economy and China’s determination to finance and build the project for mutual benefit are factors that see the railway project galloping non-stop.For China, the undertaking will be part of a planned web of railroads linking all South-East Asian capitals, with Kunming acting as a transportation and logistics hub connecting the entire region.

Hence, despite criticisms that the costly project could become a “white elephant”, and warnings of “debt trap” and “debt diplomacy” from anti-China commentators, the project developer has kept sending out positive progress reports on construction – some even ahead of schedule.

The project has also come under the scrutiny of conservationists, who believe the increase in noise and activity brought by the trains will harm wildlife and forests already ravaged by logging.

However, the World Bank Group holds a more positive view on the project.

In a June report, the World Bank said by linking with the vast China-backed BRI network, the China-Laos railway could potentially raise aggregate income in Laos by up to 21% over the long term.

It added the railway could provide Laos with a land link to global supply chains, thus making the country more attractive to investors.“The transit trade through Laos along the railway corridor could reach an estimated 3.9 million tonnes per year by 2030, which would include a shift of an estimated 1.5 million tonnes of trade from maritime transport to the railway, ” said the report.

“If Laos implements logistics and trade facilitation reforms, the railway could attract traffic currently using maritime and air routes. It could reduce land transport prices by 40%-50% between Vientiane and Kunming, and by 32% between Kunming and the Port of Laem Chabang in Thailand, ” added the report.

The 1,022km rail journey from Kunming to Vientiane is expected to be 10 hours, much shorter from current 30 hours of bus journey. Hence, Laos tourism industry could benefit greatly from an expected increase in demand for passenger rail traffic.

“The Laotian government should focus on simplifying border clearance procedures to minimise delays, providing public transport facilities, and improving tourist attractions, ” the World Bank said in its June report.

But even before completion, the rail project has created thousands of jobs and generated more economic activities in Laos, according to local media reports.

Supported by this and other infrastructure projects backed by China, tourism and business have taken foothold in Laos. China is now the biggest investor in the country.

According to a September Xinhua report, the five-year construction scheme has a total investment of some 40 billion yuan – 70% of which from Chinese investment and 30% from Laos.

The electrified passenger and cargo railway is built with the full application of Chinese management and technical standards, according to Xinhua.

What is left to be done is the laying of the final stretches of railway track and installation of signalling mechanisms.

Without a doubt, the China-Laos train is galloping its way forward.

Its value can only be appreciated more when positive economic impact is shown not only on Laos, but also mainland China and other Asean neighbours.

Source: https://www.thestar.com.my/business/business-news/2020/10/10/laos-gets-rail-boost-from-china