Belt and Road: Vientiane-Kunming railway, an opportunity and debt risk for Laotians

New high-speed rail connection between the two countries inaugurated. Experts: for Beijing it has a strategic, more than economic significance. Doubts shroud Laotian capacity to repay Chinese loan. The US and EU response to China's infrastructure programs is underway.

Beijing (AsiaNews) – A high-speed railway connecting Laos and China was inaugurated today in Vientiane. The 5.3-billion-euro project is part of the Belt and Road Initiative, launched in 2013 by Xi Jinping to strengthen infrastructure links between the Chinese giant and the rest of the world: a way to increase Beijing's commercial centrality.

Laos is one of the poorest countries in Asia. Laotians hope the project will bring new economic opportunities, but there are serious concerns about its cost.

The new railway runs about 1,000 km from Vientiane to the Chinese city of Kunming (Yunnan). The Chinese would like to link it with Singapore, via Thailand and Malaysia. Beijing has 70 percent of the joint venture that operates the new rail route.

Analysts point out that the Chinese do not expect profits from the initiative; it would have more of a strategic-geopolitical significance, allowing Beijing to expand its sphere of influence in Southeast Asia.

Laotian authorities, on the other hand, see the project as a leap into modernity. For the communist government in Vientiane, the railway means greater economic integration with China, a major factor for a small landlocked country. For the time being, it will carry only freight; it will be opened to tourists and other passengers when the Covid-19 emergency subsides.

The realization of the infrastructure has had an enormous social and economic cost for part of the Laotian population. Authorities in Vientiane have forced some 4,400 farmers to give up their land. Many of those expropriated did not receive the promised reimbursement, while others got less than what was agreed upon.

According to several economists, the launch of the new railway line could then complicate Laos' efforts to repay its foreign debt, of which China has a large share. For Belt and Road partners, there has long been talk of a "debt trap": the risk of having to sell off their assets to Beijing, especially infrastructure such as ports, in the event of non-repayment of loans and related interest.

According to AidData, 40 of the 50 largest loans allocated by Chinese state creditors have received "collateral" from client governments.

The United States and the European Union recently launched their own alternatives to the Belt and Road: Build Back Better World under the auspices of Washington and the EU's Global Gateway Initiative.

They are supposed to be "sustainable" plans financially, environmentally and in terms of workers' rights. The absence of these standards is at the root of Western criticism of the new Silk Roads.

However, many developing countries favour Chinese loans and projects because Beijing does not impose fiscal and financial conditions, environmental and humanitarian constraints or complex management controls and transparency on them.