News analysis

China's dream of rail link to S-E Asia coming true

First steps taken to build 427km line connecting Lao capital to Chinese border

Long dreamed of, discussed and debated, China-backed plans to build high-speed rail networks that link countries in mainland South-east Asia and to open up a route for China to the maritime highways of the Gulf of Thailand and Bay of Bengal are seeing the first real steps taken.

 On Dec 2 last year, a ground- breaking  ceremony attended by Lao and Chinese officials was held in Vientiane in a symbolic start of construction of a 427km railway to connect the Lao capital to the Chinese border.

The US$6.04 billion (S$8.7 billion) Laos-China joint venture is expected to be completed in four to five years.

 The project could be transform-ational for landlocked Laos, though questions hang over the viability of the rail link when it is eventually commissioned.

But it also means a lot to China, which has long sought southern access to the sea.  

Some 100,000 workers will be needed for the massive project, and it is unclear how many of them will be Chinese. Laos does not have railways - and thus has no workers skilled at building them.

Students catching a train as it is about to pull out of Bangkok's Hualamphong train station. The China-Vientiane link will essentially connect China's border to Thailand, and will be the first of several railway lines China has been trying to get its southern neighbours to implement. ST FILE PHOTO

On Jan 11, the Vientiane Times reported that there would be a "sizeable Chinese workforce'' and one of the priorities was to set up infrastructure and supply chains geared to the anticipated "influx".

The newspaper quoted Deputy Prime Minister Somsavat Lengsavad as telling the National Assembly that Lao workers were being selected for training in China. Courses would include railway management.  

 On China's part, it will set up a training centre in Yunnan province, which neighbours Laos, to support the massive project.

Earlier in November, Chinese official Zhao Xiang, leader of the Lao-Sino Railway Project Joint Preparatory Team, said Chinese technicians would "accompany and mentor Lao staff'' to enable them to run the railway later, the Vientiane Times reported.  

The China-Vientiane link will essentially connect China's border to Thailand, and will be the first of several railway lines China has been trying to get its southern neighbours to implement.

In time, the network will connect Yunnan's capital city Kunming to Singapore via Bangkok.

 It took 10 years of negotiations to seal the deal with Laos - partly because its neighbour Vietnam, whose relationship with China is rocky, was wary of security implications.   

China this month succeeded also in getting Thai officials to inaugurate a 530 billion baht (S$21 billion) railway project in Thailand, despite the terms not being settled.

 A memorandum of understand-ing on building about 850km of dual track railway in Thailand, connecting the Lao border to Bangkok and then east to Thailand's Map Ta Phut industrial zone, was signed in December 2014. But construction has been delayed repeatedly as many of the terms of the project , which will cost 400 billion baht on preliminary estimates, remain to be sorted out.

One sticking point has been the 2.5 per cent interest China has wanted to charge Thailand for its loan - the size of which is yet to be confirmed.

However, that has changed. On Tuesday, Thai Transport Minister Arkhom Termpittaya-paisith said China had agreed to charge 2 per cent.

Logistics expert Ruth Banomyong, a professor at Bangkok's Thammasat University, sees the rail project in Laos as basically "a turnkey project''.

"But from the Thai perspective, Thailand wants a relatively big say on implementation," Prof Ruth told The Straits Times in an interview.

Yet, Beijing seems confident about the prospects; China's leadership sees the commence-ment of the Sino-Lao railway as a major victory in its "railway diplomacy".

Laos is turning into a showcase for China's largesse. Last November, China launched Laos' first communications satellite, LaoSat1, built and financed - at US$258 million - also by China.

Seventy per cent of the cost of the railway of more than US$6 billion will come from China.  

 In recent years, special cross-border economic zones have been coming up on the China-Laos border.

And last year, China announced an experimental economic development and industrial zone along the border with total investment pitched at US$31 billion - a sum larger than even Laos' GDP.

"It does show you that the Chinese identify Laos as a country they need to focus on,'' Ms Yun Sun, a senior associate with the East Asia Programme at the Washington-based Stimson Centre,  said in a telephone interview. 

"The logic is that when China wants to go through mainland South-east Asia, from north to south, on the east is Vietnam, and on the west Myanmar is closed either because of domestic politics or bilateral relations. Which leaves them with the central option, south through Laos and Thailand," she added.

 While the railway project may be transformational, it could also become a burden for Laos, warned Prof Ruth.

"A rail system is a facilitator for growth, but the benefits won't be felt immediately. The railway networks are a burden in the early years,'' he added.  

The Bangkok Post, Thailand's top English-language daily, headlined a recent report on China's railway plans - "Bangkok set to become China's rail hub".

Analysts noticed that the headline did not say Bangkok would be Thailand's rail hub.  

"It's a Chinese initiative, totally,'' said Prof Ruth. "And it's going the way the Chinese want it to go."

A version of this article appeared in the print edition of The Straits Times on January 21, 2016, with the headline 'China's dream of rail link to S-E Asia coming true'. Subscribe