Railroad to nowhere? China draws a line across landlocked Laos

For years, China has promoted a cross-border railroad system that would link its southwest provinces to mainland Southeast Asia. So far, progress has been halting and prone to political risk. 

Sally Mairs
A cement plaque that Chinese surveyors installed near Ban Pasak village in Luang Namtha to mark the route of a railroad that will cut through landlocked Laos. Chinese and Lao officials held a ceremony on Dec. 2, 2015, to revive the long-delayed project.

Chang Son first heard about the train that will be routed through his mountainous village five years ago. But today, the only sign of progress is a dusty cement plaque that Chinese developers installed to mark the proposed route.

“We are sure the train will come, but we don’t know when,” says Mr. Chang, who lives next to a hillside in Ban Pasak village through which the line would pass, one of 72 planned tunnels. His village of ethnic Hmong is to be relocated to make room for the line, though no one knows where they will be forced to go.

The Beijing-backed railroad is designed to cut through Laos’s jungle interior to connect southwest Yunnan Province to the Lao capital, Vientiane, and on to neighboring Thailand. The ultimate goal is 2,400 miles of seamless rail transport from China to Singapore. And Lao and Chinese government officials insist the railroad is just around the corner.

This week, for instance, senior ministers from both countries gathered in Vientiane to stick shovels into neat piles of sand as part of a symbolic groundbreaking ceremony. The event coincided with National Day in this Communist-ruled country. 

But the railway has been mired in delays ever since construction was first scheduled to start in 2010. And despite this week’s fanfare, there’s still disagreement over how to finance the $6 billion venture – a price tag that’s more than half of Laos’s GDP.

For China, the stalling appears to be part of a broader diplomatic balancing act, as the country waits for assurance that other governments in the region will commit to building their own stretches of track. Although the railroad would transform the physical and economic landscape of poor and landlocked Laos, it’s only one piece of a much larger puzzle for Beijing.

China strengthens foothold

China has already inked an agreement with Thailand to connect the Lao line with a “medium-speed” train that will run down to Malaysia. Chinese companies are expected to bid for contracts to build a high-speed link between Kuala Lumpur and Singapore, completing the overland route.

But similar to Laos, Thailand has yet to agree to Beijing’s proposed interest rate for loans that will be used to finance the construction. There is fear that onerous loan terms will make these smaller countries indebted to Beijing for years to come – especially Laos, whose mineral resources could be used as collateral.

The envisioned pan-Asia train line has clear economic benefits for China: It will accelerate the country’s ability to funnel resources back to the mainland, and to export more Chinese-made goods. More broadly, it would increase the economic prospects of its landlocked southwest provinces and boost cross-border investments.

But geopolitical reasons are driving the mega-project as well. China is keen to strengthen friendships and secure a physical foothold in Southeast Asia, especially as tensions rise with the US and its military allies over territorial disputes in the South China Sea.

To that end, the Yunnan-Singapore rail line is one means by which China could have direct access to the Strait of Malacca, a narrow channel near Singapore through which approximately 80 percent of China’s oil imports pass. China also recently finished construction on gas and oil pipelines through Myanmar that will bypass the Strait, where the US Navy maintains a sizeable presence.

“China is covering all of its bases,” says Benjamin Zawacki, an American analyst writing a book on US-Sino relations in Thailand. In his view, the railroad is “part of a larger geopolitical scheme whereby China is trying to ensure that in the event of an armed conflict with the US, or a proxy conflict with a US ally, that their resources are protected.”

Trains run aground

China’s appetite for infrastructure deals in Asia was affirmed this October when the country edged out Japan to secure rights to build Indonesia’s first high-speed rail from Jakarta to Bandung. But the painfully slow progress in Laos suggests Beijing’s “railway diplomacy” doesn’t always deliver.

According to the American Enterprise Institute, nearly a quarter of China’s overseas investments and engineering contracts since 2005 have been marred by lengthy delays, budget overruns, and cancellations.

The source of these troubled transactions varies, but in Southeast Asia, a common reason is political instability. In Myanmar, for example, the semi-civilian government that replaced a pro-Beijing junta in 2011 suspended plans for a Chinese rail project in response to a groundswell of protests. Last year’s military coup in Thailand also delayed China’s rail plans; a previously agreed deal was put on ice, though it has since been revived by the junta. 

This risk of postponement and cancellation is especially acute for economies in the recipient countries, says Tomoo Kikuchi, an infrastructure expert and senior research fellow at the National University of Singapore. “In the end, the project is going to be their asset or their liability.”

Mr. Kikuchi notes that Southeast Asian leaders often initiate infrastructure projects in an effort to shore up domestic political support. Such projects, whether viable or not, are appealing to politicians because they can be touted as concrete achievements, and show up quickly in GDP figures, he said. And China is eager to feed this desire for mega-projects.

“Southeast Asian governments do not necessarily have long-term master plans, or bureaucracies that are efficient enough to plan and manage these infrastructure projects,” he says. “That would be my biggest worry.”

The wait continues

British and French colonialists in the early 1900s were the first to fail in their effort to build a railway connecting mainland Southeast Asia. Whether China will join the club remains to be seen. And as long as Laos’s train project remains up in the air, so do the lives of those who live along its path.

Though the railroad will not run roughshod over Tin Tok village, an ethnic Khmu community some 30 miles from the Chinese border in Laos, it is slated to pass through rubber farms that belong to the villagers nearby.   

Thong Boonhuang, one of the village’s chiefs, said the community is unsure of what changes the rail may bring.

“Local people here really don’t know,” he says quietly from inside his thatch-roofed home. “We have never heard or seen a train.”

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