The China-Laos Train: Debt and Collateral

On the ground in the northern province of Oudomxay (Laos), most jeeps roaming the deforested valley bear Chinese and Vietnamese number plates…Investment is flowing into agriculture, typically rubber plantations, market gardening and other cash crops, much of it destined for the huge Chinese population to the north. The side-effects include a loss of forests and biodiversity, serious soil erosion and growing numbers of people in this multi-ethnic province being pushed off their land.

Chinese firms have secured rubber concessions in the province covering 30,000 hectares (74,000 acres). The idea is that tens of thousands of Chinese workers will eventually be needed to tap the rubber. In the past decade the government has granted land concessions across the country for up to 100 years, often at knock-down prices, to Chinese, Vietnamese and, to a lesser extent, Thai operators. More land is now in the hands of foreigners than is used to grow rice. The fear of one expert in Laos is the emergence of a landless poor.

Not all Chinese influence is welcomed by the government. Recently a deputy prime minister, Somsavat Lengsavad, announced the closure of a Chinese-run casino near the border that had attracted drugs and prostitutes along with gamblers. Yet Mr Lengsavad, ethnically Chinese himself, has his own patronage network built on granting concessions for Chinese-run special economic zones. And he is the point man for one of Asia’s most ambitious projects: a proposed 262-mile (421-km) passenger and freight railway connecting Kunming, in the south-western Chinese province of Yunnan, with Vientiane, the Laotian capital. The $7.2 billion price tag (including interest) is nearly as big as Laos’s entire formal economy. It will take 50,000 workers five years just to lay the tracks. Two-thirds of the route will run through 76 planned tunnels or over bridges.

The collateral for such a huge project lies in the mines of Laos. In other words, the extraction of natural resources in this undeveloped country is about to accelerate. Economic rents already accrue to an oligarchy, for which the railway, one way or another, will prove a bonanza… The capital of Laos is on the mighty Mekong river, which forms the border with Thailand. Though it still has a torpid air, Vientiane is growing fast in the hands of a Communist kleptocracy whose members queue up on Saturdays in their big cars to cross the Mekong for a dose of shopping across the border. For many of the remaining 6.6m Laotians, unease and sometimes fear are the predominant emotions.

Last December a well-known democratic activist and advocate of sustainable development, Sombath Somphone, disappeared. At the same time, the government clamped down on foreign NGOs, especially those advocating land rights. Two months ago the American embassy hung a banner from its water tower calling for the return of Mr Somphone. In September the head of the American-based Asia Foundation in Laos was told to pack her bags….The trauma of its long civil war and of American carpet-bombing during the Vietnam war is never far away. One-third of the country is still contaminated by unexploded American ordnance. Hundreds of people lose limbs every year to cluster bombs.In few countries do development agencies have to operate in thinner air than in Laos. In e-mails, foreign residents drop syllables from the names of Politburo members in attempts to outsmart new Chinese surveillance technology. The regime is constantly on guard against foreigners who might be seeking to “change our country through peaceful means”.

The future of Laos: A bleak landscape, Economist, Oct. 26, 2013, at 50

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