Lao officials have told Samkhan Koomsanyalat that she and her family will have to leave their home in Phu Din Daeng village, nestled in a bucolic valley amid limestone cliffs, to make way for the Laos-China railway.
“The government has told us we have to leave, but they haven’t told us how much they will pay us,” said Samkhan, who currently lives about eight kilometers outside of Vang Vieng town. “We will not move unless we are paid.” Now her once peaceful home is next to a giant construction site, near the planned Vang Vieng Railway Station.
Phu Din Daeng, a village of 200 people, is situated directly in the route of the 414-kilometer Laos-China railway, a medium-speed train system (160 kilometers per hour for passenger trains and 120 kilometers/hour for freight). Upon its scheduled completion, Laos will be transformed from land-locked to “land-linked”, in the parlance of the ruling Communist Party.
The project’s scheduled launch, set for December 2, 2021, will symbolically mark the 46th anniversary of the creation of the Lao People’s Democratic Republic, the one-party communist system that has governed the country since 1975.
Construction of the Laos-China railway began in December 2016, and is now more than 20% complete, according to government media reports. Some 53 tunnels have been bored through mountains at a combined length of 37,314 meters, while 47 of the 167 bridges to be built for the line are under construction, according to the Vientiane Times.
Tunnels and bridges will comprise 62% of the track’s length, from Boten on the northern Laos-China border, to Vientiane, the capital. It will pass through scenic mountainous terrain while stopping at the country’s major tourist destinations such as Luang Prabang, the ancient royal capital, and Vang Vieng, a hipster hangout on the Nam Song River.
More than 4,000 Lao families will be “impacted,” and 3,832 hectares of Lao land will be handed over to the project, according to state media reports.
Under a China-Laos agreement signed in 2016, the two sides have set up a joint venture – the Laos China Railway Company – where the Lao sides holds 30% and China 70%. The joint company is responsible for the estimated US$6 billion mega-project, the largest investment in Laos to date worth about 35% of Laos’ meager gross domestic product (GDP) of US$17 billion in 2017.
Although the railway project is now considered part of China’s Belt Road Initiative (BRI), it was actually conceived long before the grand US$1 trillion Chinese infrastructure scheme was hatched.
Vientiane and Beijing had discussed a train link as early as 2001, culminating in the signing of a memorandum of understanding in 2010. The two communist neighbors came close to launching the scheme in 2011, but it was derailed by a corruption scandal at China’s Railways Ministry.
The project was dusted off again in 2015, when both sides resumed discussing financial terms. Under the terms of the latest deal, both sides must commit over 40% of the investment (or US$2.4 billion) in cash to cover initial construction costs, to be split 30/70 with China paying the lion’s share.
That means that Laos’ cash commitment is US$720 million, of which US$250 million will come from the national budget over the next five years and the remaining US$470 million borrowed from the Export Import Bank of China at a 2.3% interest with a 35-year maturity after a five-year grace period.
Laos’ public debt is projected to reach 65% of GDP this year, up from 61% in 2017 due to increased borrowing from Chinese banks and the issuance of sovereign bonds on the Thai market. The figure already has the International Monetary Fund (IMF) concerned, judging by its most recent assessment of the country’s fiscal situation.
While US$50 million a year might seem a manageable budgetary burden, it is a fiscal challenge for little Laos, which faces declining revenues from its mining sector (big silver and copper mines are expected to be depleted in two to three years) and a low tax base of about 12% of GDP.
An estimated US$250 million is to be spent on compensation for those displaced by the rail project. Leakage in such payments is to be expected in Laos, where corruption is the norm. However, there are worries that the cash payments will detract from the government’s already inadequate budgets for health and education.
It is still unclear how Laos will pay for its remaining US$1.1 billion commitment to the project. Development bank officials in Vientiane say the remaining portion will likely be paid in kind via land contributions to the scheme, though it’s unclear how such land concessions will work.
Visits by paid by this reporter to the potential rail station sites in Luang Prabang (about 13 kilometers north of the city) and Vang Vieng (eight kilometers north) revealed huge plots of land being cleared for what looks like more than just cargo and parking space.
The Vang Vieng station site covers 143.8 hectares, presumably enough land to set up train facilities as well as commercial complexes and hotels.
“We heard that Laos has pledged some concessions, on bauxite or other things, in order to basically back the guarantee for the JV component,” said one international organization head who requested anonymity.
“If that is the case then I presume that there is no further government guarantee, but I don’t know, because the deal was not wholly transparent or discussed in an open way when it was negotiated.”
The lack of transparency and independent local media coverage has spawned rampant rumors, including murmurs that the government has agreed to allow 8,000 Chinese families to settle in Laos as a type of down payment on the train project.
What is clear so far is that there has been little trickle down into the local economy from the US$6 billion project. Workers on the track, estimated at over 30,000, are predominantly Chinese, so the project has created few new local jobs.
Chinese work camps, meanwhile, are situated far from city centers, and food and supplies are provided mostly by Chinese contractors rather than local vendors.
One form of local employment, however, is on the rise: prostitution. Lao locals say brothels, specializing in provincial Lao girls with little education or job prospects, are being established to cater to the Chinese workers. There is little interaction with locals beyond the commercial variety, they say.
“They leave villagers alone. The Chinese workers are like prisoners. They stay in their barracks mostly although some will come out at night, but they don’t have much money to spend,” said Phanh Bounthium, a Luang Prabang-based van driver.
“In the short term, we thought there would be some impact, but we haven’t seen it,” said Bounmy Sengphachan, deputy chief executive officer of Banque Franco-Lao (BFL), a joint French-Lao bank “But in the long term, once the railway is finished it’s going to bring a lot of people in and we will see a lot of tourism infrastructure being built that will have an impact on job creation and everything.”
That may or may not come to pass. Many of the smaller hotels and restaurants in Luang Prabang and Vang Vieng are already being rented out by their Lao owners to Chinese, Vietnamese and Korean entrepreneurs. Lao jobs at the tourism-geared businesses are largely confined to cleaners and bus boys.
Once completed, the railway is expected to facilitate even greater imports of the cheap Chinese goods which already inundate Lao markets and discourage local industries. It will also detract from locally owned bus and plane services between Luang Prabang and Vientiane, economists note.
“The railway serves a political purpose and an economic purpose,” said one Lao economist, who asked to remain anonymous. “It’s not only about Laos. We have agreed to serve as an international connection, and the government committed to it. But looking at the economic returns…not much.”
Laos is a landlocked country. It’s main connection to the outside world are the river Mekong, roads and rail, and air. Looking attractive is the hugh Chinese market in the north. There is thus a need for a modern transport system.High speed rail will be providing fast and easy accessibility to the Chinese market. Needless to say the cost of this rail is very expensive as 67% comprise of bridges and tunnels. But it will bring hugh economic developments with investments from China. The initial investments in infrastructure projects are high. It’s the down payment for developing the country and to attract foreign investments. The Chinese needs and investments will ensure the viability of the project in the long term. This the writer has not taken that into consideration. He’s just focusing on Laos been too poor to pay.
Terrible innit, the Chinese? Best to just let the Americans drop bombs on Laos again. Two million tonnes and 580,000 bombing missions. Those were hallowed and enlightened times!
Articles written by Western so-called analysts on Belt and Road Initiative projects are becoming boring and hilarious. Invariably, they focus on the poverty of the recipient countries, the inability of the recipient countries to repay the loans, the displacement of a few families, and lack of opportunities for the local people. It is as if the format is provided to them by their western pay master. However, the World knows better. Most people just laugh at these articles and ignore them, not even deigning to refute the silly arguments.
"The figure already has the International Monetary Fund (IMF) concerned"
Probably because neither the IMF or any other western lending agency would not agree to a 35 year loan with a 5 year grace period at 2.3%. And of course, there is no requirement for austerity. When railroads arrive, all kinds of commercial and industrial activity become possible.
They want to come back to provide "stability" and "democracy".
Hey, 2.3% money over 35 years is nothing to sniff at.
Yes, the US dropping bombs will bring freedom and prosperity to Laos and the BRI will not. What do you expect from western commentators.
I agree. The formula is so uniform and predictable it is almost as boring as reading a real estate contract.
You have to wonder if some of these Western journalists are actually on the payroll of the CIA. Their job is to help the US ‘Pivot to Asia’ or ‘Stop the Chinese Project’.
As expected, westerners wish and therefore only see bad things in whatever China can do to integrate and build up Asia to a powerful region. They hope the region remain poor so that there is no short supply of young boys to them.
Michael Chan,
These westerners think their "Freedom" is the best product and it could substitute foods.
Unfortunately, reality has shown that not only it’s faked Freedom, but it always comes with blood and death.
Actually, Laos already got its share of bombs from America during the Vietnam war.
You bet. So the wise thing for China to do is to be transparent enough to the locals to fend off all these Westerners’ badmouthing and rumours.
‘attraction of the chinese market’, exactly what high value stuff with Laos export compared to inward Chinese loans (aka take-over)
Galen Linder Just like in Tibet & E Turkmenistan !
Galen Linder Yes just ask Sri Lanka, or…. Tibet
While the Puny Little Army (PLA) have murdered millions of Chinese, Tibetans and Uighurs…… bringing communism
Yashad Rizvi, When the Westerners were in control of Tibet and Xinjiang, there was only slavery, desperate poverty and misery beyond imagination in Tibet and Xinjiang. The 14th Dalai Lama and Taliban were part of their compradors. The peace, stability, equality, and law and order in Tibet and Xinjiang provided by CCP make Westerner’s democracy hollow and hypocritical that only morally defunct people can spew out without looking in the mirror what they have done while they were there.
As history has shown, democracy is chaos, violence and lies; it has nothing to do with stability, peace, liberty, equality and prosperity. Democracy peached by the West is not humanity friendly, it is comprador for the demon and Satan.
Yashad Rizvi, the Westerners never addressed their crimes against humanity, crimes against peace and war crimes they committed since Columbus time; they only fabricate fake crimes thru the thin air about others so that hundreds of millions of people all over the world who were robbed and murdered, those who become victims of the very madness of colonialism, of the crusaded and slave trade, the horrid foundations of bones and bloods, and amalgamated by tears of the inseparable part of ‘Western existance and culture’ would get never addressed, let alone critized.
Yashad Rizvi, Galen Linder needs to ask the Westerners why haven’t the West not done what Chinese is doing for the Laos, sri Lank, or … Tibet, so that there will be no chance for the Chinese to make the West appeared ugly, greedy, selfish, narrow minded, … and the West is the dark side of the humanity.
Yashad Rizvi, even if Chinese takes over Chinese gives money first, unlike the White they took over the Americas (North, Central and South), Australia, NZ and islands in Pacific and Atlantic oceans with organized crimes, Kangaroo Court, genocides, lies, diseases, … and all possible evil and sin deeds and no decent human beings can image.
Another unneeded and unnecessary rail naysayer article! How about mentioning that the railway will provide safe, non-polluting, fast, comfortable, efficient, inexpensive travel, transport and trade! Further, multiplied thousands of new jobs will open in the tourist and rail industries.
ao people dont want this project.leave them alone!
ao people dont want this project.leave them alone!
You are absolutely correct!
You are absolutely correct!
Joe Wong True!
Joe Wong True!