Colonial power trapping the Laotian government and exploiting its workforce

Photo: Christian Haugen/CC BY 2.0

China has a colonial agenda with Laos. It provides aid and investment, but both come at the cost of Laotian sovereignty.

By Oliver Ward

Big changes are taking place in Laos. In the north-western village of Ton Pheung, visitors can clearly see those changes. Its residents speak Mandarin. Local transactions take place in Yuan and clocks display Beijing time.

The changes are not unique to Ton Pheung. Villages across northern Laos are displaying similar characteristics. Chinese investment has poured into Laos. With it has come a Chinese way of life and increasing Chinese influence. But Laos is making some heavy sacrifices for its Chinese investment.

China has increased investment into Laos in recent years

In 2014, China overtook Vietnam to became the most prominent investor in Laos. The total value of Chinese investment into Laos was more than US$5 billion.

Sources: Radio Free Asia, J&C

The decision to invest heavily in Laos benefits Beijing in two ways. Firstly, Laos is a pillar of the One Belt One Road strategy. Construction on the Kunming-Singapore railway began in 2016. The railway will connect China to Southeast Asia and beyond. The railway runs through Laos and depends on the nation for its success.

Secondly, by increasing its influence in Laos, Beijing can offset Vietnamese influence. Vietnam was the largest investor in Laos before 2014. It has traditionally enjoyed strong ties with the Laotian military. Undermining the Laos-Vietnamese special relationship will help further isolate Vietnam. Vietnam is a rival claimant in the South China Sea dispute. Beijing will welcome any erosion of Vietnamese military ties.

But the Chinese money comes at a price

There is no doubt that Chinese money has been instrumental in Laotian development. Chinese companies have put US$7 billion into dams, mines and rubber plantations. Beijing is providing 70% of the US$5.6 billion for the Laos section of the Kunming-Singapore railway. It will be the country’s largest ever infrastructure undertaking.

However, Beijing’s funding terms are a cause for concern. The Centre for Global Development warned that the terms of China’s funding make Laos vulnerable to debt distress. The Laotian government is liable for 30% of the cost of the railway. This will amount to some US$700 million. Laos will use the state budget to pay around US$220 million of the figure. The rest will come from a loan from the Export-Import Bank of China.

China’s intention is not just to increase its influence in Laos. It wants to make the country dependant on Chinese credit. China uses aid packages and investment to sweeten the deal. Then it engages in predatory loan practices. With one hand it lures its prey in and with the other hand, it robs it of self-sustaining growth.

This was apparent this month when China unveiled its new aid agency. The agency will manage China’s foreign aid program to control its global influence. We are already seeing this strategy in action in Laos.

Beijing could use this debt to seize Laotian assets

In the past, Beijing has used debt as leverage to seize assets. In 2011, it used debt relief as a strategy to settle its territorial dispute with Tajikistan. Tajikistan had to hand over 386 square miles of land to China to settle its debts.

China did a similar thing in Sri Lanka. It took control of Sri Lanka’s Hambantota Port after the Sri Lankan government could not repay its debts.

It is a form of neo-colonialism

What is taking place in Ton Pheung is directly linked to Beijing’s foreign aid and loan programs. China is embarking on a form of neo-colonialism. It is exporting its culture and currency through direct investment. It promises development. Then traps nations into debt to increases its global influence as a creditor. If they cannot pay, it seizes assets and robs countries of their growth.

China’s treatment of the local Laotian population mirrors the days of colonialism. Villagers displaced from the construction of the Kunming-Singapore railway have not received compensation.

Chinese business owners are also exploiting the Laotian workforce. Chinese investors have bought up rice paddies in northern Laos. They converted them into banana plantations. Chinese owners use local workers to spray pesticides on the banana trees. They receive no safety equipment. Many become sick from the fumes. These chemicals then run off into the streams and damage the local river systems.

Laos has no other choice

There are no other nations willing to offer investment and aid on the same scale as China does. Laos has limited options. It has a poor international credit rating. It would, therefore, be unable to secure loans from western banks.

It could follow Pakistan and Nepal’s lead and pull out of One Belt One Road projects. But it would lose out on its stream of investment, aid and credit.

For now, Laos must concede to its wealthy neighbour. It needs the financial and economic assistance China can provide. However, make no mistake, China is taking more from Laos than it is putting in. It is exploiting its workforce and binding its government to astronomical debt. It is engaging in modern-day colonialism. Imposing its culture, currency, debt and influence on its smaller neighbour.