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I\u2019m writing to you from a train on the Laos-China railway as it hurtles through a tunnel in the mountains between Vientiane and the ancient town of Luang Prabang.<\/p>\n
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The Laos-China Railway\u2019s Lane Xang EMU train at Vientiane Railway Station on December 3, 2021, when the line officially became operational. <\/span>Credit: <\/span>Getty<\/cite><\/p>\n I\u2019ve been meaning to take a ride on the line \u2212 built under Beijing\u2019s Belt and Road Initiative \u2212 since it opened in late 2021.<\/p>\n At 1000 kilometres in total, including the 418-kilometre stretch from the Lao capital to the Chinese border, the line has improved connectivity between key centres within the land-locked South-east Asian nation and its superpower neighbour.<\/p>\n The journey is not rapid when compared to the high-speed trains of Europe or Japan or the 350km\/h, Chinese-backed one launched in Indonesia in October. But even with a top speed of 160km\/h, it reduces a gruelling, all-day drive between Vientiane and Luang Prabang to a touch under two hours, albeit with a 30-minute taxi ride to get to the station.<\/p>\n China-Laos Railway\u2019s Luang Prabang bridge across the Mekong River.<\/span>Credit: <\/span>Xinhua News Agency<\/cite><\/p>\n Laos is in one of the region\u2019s poorest countries, and the new travel artery has opened up fresh tourism and cross-border trade possibilities. State-owned China Railway freight trains now transport iron ore, rubber and other cargo to the northern end of the line at Kunming, in China\u2019s southern Yunnan province.<\/p>\n But the $US6 billion ($9 billion) section in Laos is also an expensive symbol of just how tightly its economic wellbeing is tethered to Beijing. Given their proximity and single-party communist political systems, it is hardly surprising the two have deep ties.<\/p>\n It\u2019s not a shock either to see that inside the shiny new Vientiane train terminal, there is a separate zone for passengers travelling all the way to China, complete with cushioned chairs. Outside that exclusive zone \u2212 no cushions.<\/p>\n And special treatment in the rail line\u2019s pre-departure area isn\u2019t all Laos owes the Chinese.<\/p>\n Laos is weighed down by about $US10.4 billion in debt to China, the equivalent of almost 55 per cent of its GDP, according to the newly published Belt and Road Reboot<\/em> report by the AidData research lab at William & Mary, a public university in the US state of Virginia.<\/p>\n China\u2019s President Xi Jinping at the opening ceremony of the Belt and Road Forum in Beijing in October. Xi said the initiative was looking towards a \u201cgolden decade\u201d.<\/span>Credit: <\/span>Bloomberg<\/cite><\/p>\n \u201cHowever, if you add in potential or \u2018hidden\u2019 sources of public debt exposure to China, this figure increases to roughly $US17 billion, which is equivalent to 88.9 per cent of Laos\u2019 GDP,\u201d said AidData executive director Bradley Parks.<\/p>\n In all, the country is burdened with a debt-to-GDP ratio estimated to have passed 110 per cent last year, the World Bank said in an economic health check in May.<\/p>\n The extent of foreign debt exposure, principally to China, has raised grim forecasts about Laos\u2019 outlook, with credit-rating agencies having assessed it as at a very high risk of defaulting.<\/p>\n I made two trips to Sri Lanka last year as it succumbed to that very fate. It wasn\u2019t pretty: there were days-long queues for fuel, crippling shortages of food and life-saving medical supplies and an uprising in which thousands stormed the presidential palace.<\/p>\n For Laos, the railway, in which Chinese state-owned companies have a 70 per cent stake, is responsible for $US3.5 billion of its debt alone.<\/p>\n There have been more than 800 other Chinese-funded projects in Laos in the past quarter of a century, according to the ISEAS-Yusof Ishak Institute, a Singapore think tank. Notably, that includes many of the 80 hydroelectric dams constructed on the Mekong River, the mighty waterway that runs from Tibet to southern Vietnam, and its tributaries.<\/p>\n The financing of those has served Laos\u2019 ambition to become the so-called battery of South-East Asia.<\/p>\n Last year, it began exporting renewable energy to Singapore via Thailand and Malaysia, the pilot project of a long-envisioned, interconnected regional power network that Australia\u2019s Sun Cable \u2212 which wants to sell solar power to Singapore \u2212 may one day plug into.<\/p>\n There are questions, however, about the sustainability of hydropower on the Mekong River system, upon which more than 50 million people are directly reliant. There has been fallout for villagers who have been relocated and NGOs have raised alarms about dams reducing fish stocks and affecting the flow of nutrients and, in turn, the production of rice.<\/p>\n While the industry is seen as a path to prosperity by leaders in Laos, its destiny is also inextricably linked to China. With the debt piling up, a state-owned Chinese electricity giant in 2021 acquired a majority share in Laos\u2019 power grid, securing a deal to manage the nation\u2019s electricity exports and domestic transmission for 25 years.<\/p>\n There is disgruntlement in Laos over the extent to which it is in thrall to China and the sentiment isn\u2019t improved by a national currency, the kip, that has careered off a cliff. It lost half its value against the US dollar in 2022 and another 16 per cent this year, contributing to soaring inflation and cost-of-living pressures.<\/p>\n China has taken \u201cextraordinary measures\u201d to keep Laos afloat and able to service at least some of its debt, said Parks, the AidData director, pointing to a $US300 million emergency loan in 2020 and deferred repayments estimated by the International Monetary Fund to have totalled $US1.28 billion over the past three years.<\/p>\n But for how long will it be afforded such relief?<\/p>\n We\u2019ll be hearing more about Laos in 2024 as it occupies the rotating stewardship of ASEAN and hosts South-East Asia\u2019s annual meeting of world leaders, including Prime Minister Anthony Albanese.<\/p>\n Chances are Albanese won\u2019t be catching the train. If he did, he\u2019d find it a comfortable, functional ride through rural scenery that, as a visitor, is a game changer for getting around in Laos. But it has not come without a cost.<\/p>\n Get a note directly from our foreign correspondents on what\u2019s making headlines around the world.<\/i><\/b> Sign up for the weekly What in the World newsletter here<\/i><\/b>.<\/i><\/b><\/p>\n<\/p>\n
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