For China, the railway connection to Indochina will facilitate closer relations with Southeast Asia that will benefit both sides. Trade between them amounts to $370 billion, and is expected to rise to $500 billion by 2015.
Moreover, China signed a cooperation agreement with Laos and Thailand for the construction of a high-speed railway connecting China, Laos and Thailand, which is of great strategic significance for China. It will enable China to go to the Indian Ocean through Indochina without passing through the Strait of Malacca so that China can have access to resources in Middle East and Africa even if the Strait was blocked by the US.
Out of jealousy at China’s rise, the western media fiercely opposed China’s loan to the project of the railway linking Laos with China’s Kunming, alleging that the railway is detrimental to the environment due to the construction rubbish along the railway, and that the cost of borrowing is too huge.
In fact, China lends the loan at a low interest rate for a long term of 30 years and Laos is to repay the loan by its mineral and agricultural products.
The New York Times quotes an anonymous expert and advisor to UNDP as saying that the terms of the loan are too harsh, and will threaten Lao’s macroeconomic stability. It moreover quotes an anonymous Asian diplomat as alleging that both the Asian Development Bank and World Bank have expressed their worries over the project, and that the IMF has warned Laos that it must be prudent.
Well-known rating agency Moody, however, gives a positive comment, saying that it will be a win-win project.
For Laos, the railway is certainly a very important route to the sea as it has no coastline. Laos expects it will receive $95 million from railway transport in the first year while the net profit from the railway transport will amount to $16.39 billion in 50 years.
High officials in Laos government are mostly former members of Pathet Lao who fought against the US along with North Vietnam in the past. They all do not like the US. However, in order to restrain China, US Secretary of State Hilary Clinton visited Laos last July in an attempt to draw Laos to its side.
In fact, the Sino-Laos high-speed railway project has encountered impedance now. When Chinese Premier Wen Jiabao attended the Asian-European summit last November, he was unable to attend the ground-breaking ceremony for the railway scheduled then due to the delay caused by the impedance.
In contrast, the project of the high-speed railway linking Laos with Vietnam, that Malaysia’s Giant Consolidated invested $5 billion in, met little Western opposition. An agreement on it was entered into during the summit.Source: Hong Kong’s Ming Pao
- Laos Faces Rail Loan Squeeze (eurasiareview.com)
- Connecting Asia: India Talks, China Builds (carnegieendowment.org)
- China will finance Laos rail link (chinadailymail.com)