The two faces of the Vientiane-Kunming train

From dreams to debt

Now to one of Thailand’s neighbours, Laos, which has experienced a real railway revolution. As recently as 2021, this small mountainous country of 7.3 million inhabitants didn’t have a proper train network. As those who have visited it will know, travelling around the country once involved very long journeys by car or bus on narrow, winding roads. Even more of an issue was the fact (as explained by Laotian economist Souknilanh Keola in December 2021) that the only real commercial route to its all-powerful neighbour China and toward Japan involved going through Thai ports. But since Laos has been involved in China’s new Silk Road initiatives, for better or worse, things have changed.

In December 2021, Laos inaugurated a line connecting Vientiane, the capital, with the city of Kunming, capital of the Chinese province of Yunnan. The 1,035-kilometre-long railway line passes over 167 bridges and through 75 tunnels especially built in this green, mountainous country. The enormous project cost $6 billion (or 5.3 billion). Given the country’s GDP is estimated by the World Bank to be $18.83 billion, that is quite the price.

Fortunately for the Laotian government (and people), the first 60 percent of this colossal sum were funded by a loan from the Exim Bank of China. The rest was paid for by a business known as the Laos-China Railway Company, which is only 30 percent run by Laos, with the rest in the hands of China. However, in the end, Laos only ended up spending around $250 million since it had acquired a second loan from Exim Bank. But those loans are enormous, because as the credit rating agency Fitch Ratings notes, those loans are costing the so-called Land of a Million Elephants around $1.16 billion per year (the country’s external debt has climbed to 66 percent of its 2021 GDP as a result).

The railway line is now up and running and is already proving a success. With its ‘semi-high-speed’ trains travelling at 160 kilometres per hour and connecting 45 stations, 20 of which offer a passenger service, it has really transformed mobility within the country. As CNN Travel has noted, this train has shortened journeys so much that it has allowed many people to see their families more often, and also helped boost the local economy in many parts of the country. According to Le Courrier du Vietnam, this Chinese-Laotian collaboration has carried more than 8.5 million people in its first year. Quite the achievement.

On the business side, the figures are also pretty interesting. Over the same period, 11.2 million tonnes of goods were also carried by the railway. According to the same source, the total figure of goods ‘imported and exported, which have passed through Kunming customs’ was 1.93 million tonnes. That adds up to around 13.29 billion yuan, or $1.88 billion. Only time will tell whether these sorts of numbers make the hefty upfront investment worth it.

Evidently, in a country where 80 percent of the population live off agriculture, the line has had quite a big impact. The Laotian Movement for Human rights estimates that 4,400 farmers and villagers had to give up all or part of their land so the project could become a reality. However, many were persuaded to do so thanks to incentives deemed ‘insufficient’, with many having to wait ages to receive their compensation.

Laos isn’t the only country to find itself in this situation. As French newspaper  Le Monde explains, two thirds of the nations that have received loans from China for similar projects have ended up overly indebted and badly hit by the strength of the dollar and the destabilising force of the war in Ukraine. China, meanwhile, has found itself in an even more favourable position, as a researcher from the AidData centre told a French newspaper: ‘We’ve gone from a position where money was going from Beijing to poor countries to a place where money is leaving those countries back to China.” Both the facts and figures show that certain aspects of the new Silk Road are very much a double-edged sword.

Midnight Trains Logo