Construction has resumed on the new US$6 billion China-Laos railway, a key piece of Beijing’s Belt and Road Initiative, despite the deep impacts of COVID-19 across the region. But as the pandemic brings new questions about sustainable growth and resilience, it’s changing the calculus for the governments and local communities that host China’s new development projects.
While many across Southeast Asia have seen their jobs disappear and economies are on hold, work has resumed on the new China-Laos railway after stopping for just 23 days. Construction of the US$6 billion railway, a key piece of Beijing’s transnational Belt and Road Initiative (BRI), was put on hold on April 1 when the Lao government closed its borders in response to COVID-19.
Nearly half of the workers and engineers—Chinese as well as local—are still unable to return to work but according to Chinese state-run news outlet Xinhua, progress is now continuing ahead of schedule. Chinese workers on the 411-kilometer railway are now allowed to enter Laos if they go through quarantine. According to Chinese state-owned rail companies, the project is now 90% complete and will still open as planned in December 2021.
The railway offers one example of how Beijing is pushing ahead with BRI projects during the global pandemic and what this means for the people whose land and resources are impacted by Beijing’s network of roads, dams and railways. As China’s economy begins to restart but host countries remain largely shut down, Chinese developers are setting the agenda for these multi-billion dollar projects and shaping the future of local residents and national economies.
In Laos, this means local residents will see even fewer benefits from the railway project while the country takes on more debt despite an uncertain economic future. The pandemic has illustrated just how crucial it is for countries to pursue sustainable, resilient growth, but the China-Laos railway never sought the consent, much less the input, of impacted communities. Moving ahead on the railway, without waiting to assess the new ‘normal’ of global and local economies, pushes Laos further away from the sort of sustainable growth that could benefit its people.
Rail link from China to Singapore promises growth but brings mostly questions for Laos
The new railway will connect the Lao capital of Vientiane with the Chinese border and sits in the middle of a plan to build high-speed rail links between China, Laos, Thailand, Malaysia and Singapore. Trains on the line will reportedly be able to travel up to 160 kilometers per hour.
The rail line itself is a massive undertaking, with 167 bridges and 72 tunnels through the mountains of Laos making up nearly two-thirds of the route. In late April, workers completed a nine-kilometer tunnel at Ban Konlouang, near the Chinese border.
So far, local communities have received minimal compensation for land the government has seized for the railway or for pollution that has damaged their water sources. The Lao government has promised compensation, as mandated under domestic law, to over 4,000 families who have been pushed off their land to make room for the railway. According to the latest media reports, only a few hundred families have received any compensation.
Construction resumes while locals see few jobs, some go without pay
As work resumes on the railway, Chinese managers say they’re taking precautions to protect themselves and workers from COVID-19. Laos has confirmed only 19 cases of the disease, likely due to very low rates of testing but also to the country’s low population density. It has a population of just over 7 million and Vientiane, the country’s largest city, has only a million people.
But while construction on the project has resumed, few Lao workers appear to be benefiting. The majority of the workers on the China-Lao railway are Chinese—around 19,000—though both governments made promises that the railway would bring a wave of good jobs for local residents.
Of the Lao workers who are still employed on the railway, many may be going without pay. Soon after construction resumed on the railway, 30 Lao workers came forward and said they had not been paid in three to four months, according to Radio Free Asia. The workers said they no longer have money to pay for food or support their families. They said they would quit their jobs with the railway developers but they don’t have any other options for work.
The allegations are especially significant as the workers face major risks in speaking with the media, given the repressive policies of both the Lao and Chinese governments towards dissent, and the problem may be much more widespread.
The lack of jobs for locals also raises doubts about Laos and China’s plans for 40 special economic zones across the country. One, the 700-hectare Boten economic zone on the Chinese border, has seen the Lao government invest US$1 billion in the hope of creating 300,000 jobs and attracting up to US$10 billion in Chinese investment. As the pandemic causes industries on either side of the border to stall, the jobs and growth touted for both projects may not materialize.
Pandemic adds risk to Laos’ debt from railway
The pandemic has also thrown the future of financing for BRI projects into question. Construction on the railway began in 2016, with China financing 70% of the project and Laos financing 30%. Before the pandemic, Laos was planning to pay US$720 million over the next five years, with the help of a loan from the Export Import Bank of China.
It’s unclear how Laos was planning to finance its remaining US$1.1 billion contribution to the project, but with Southeast Asia’s economies slated to see record-low growth in 2020, a large portion of this will likely become public debt.
Laos already faces major pressures from debt. A Financial Times study in 2018 showed the country’s external debt was equal to 93% of its gross national income and suggested that paying for the China-Laos railway could cost nearly 40% of its GDP. Debt already accounts for at least 65% of Laos’ GDP.
With the impacts of the COVID-19 pandemic still evolving, the risk posed by this ballooning debt is only increasing. There has been no news from either government on renegotiating the financing for the project.
China is pursuing a similar strategy on BRI projects elsewhere in Southeast Asia. In Myanmar, Chinese Ambassador Chen Hai is working to tie Beijing’s key projects to the country’s COVID-19 Economic Relief Plan, in the hopes of completing the China-Myanmar Economic Corridor. The initiatives—New Yangon City, the China-Myanmar Border Economic Cooperation Zone and the Kyaukphyu Special Economic Zone and Deep Sea Port—will give China access to the Bay of Bengal and the Indian Ocean for both shipping and importing oil and gas.
Given the global economic slowdown, China may struggle to offer the same extensive loans to BRI host countries that it did before the pandemic. In Myanmar, the government is turning towards international financial institutions—the World Bank, Asia Development Bank and International Monetary Fund—to help foot the bill on recovery and keep development projects on track.
Regardless of financing and debt issues, Beijing appears to be pushing ahead with its original BRI model: large-scale development projects that may bring local benefits but carry a hefty price tag. The impacts of the pandemic, however, are making governments even more wary of economic risks, whether from debt or over-reliance on Beijing.
As the pandemic throws issues of sustainable growth and resilience into sharp relief, COVID-19 is changing the calculus for the people and governments who host BRI projects.