Laos concerned about possible ‘debt trap’ as China escalates investment in country


With investments by China in infrastructure projects in Laos increasing, there is growing concern in the Southeast Asian country about falling into a ‘debt trap’.

A number of Chinese-backed highway projects are part of the communist nation’s Belt and Road initiative a massive economic zone linking it to Europe by land and sea, NIKKEI Asia reported.

However, the developing nation of Laos, which is recovering from the pandemic doldrums, has no other choice but to rely upon China for its developmental projects. COVID-19 pandemic, which has decimated the crucial tourism industry has left Laos with no other option but to join hands with China.

The government of Laos in early June also permitted a new expressway linking the capital Vientiane in the central part of the country with Pakse in the south.

Laos is calling the 578 km, $5.1 billion expressway as its flagship project in the country. This route had also been proposed by a Chinese consulting company known as the Henan Provincial Communications Planning and Design Institute.

Laos has also just embarked on a study for a mock-up of another proposed expressway linking Boten, which borders China, with Bokeo Province on the border with Thailand. The 180 km expressway would cost $3.8 billion and allow travel from southern China to Thailand via Laos in just 90 minutes, NIKKEI Asia reported.

Another Chinese-led expressway has already been completed. It is a 110 km highway that links Vientiane with Vang Vieng, this highway is 95 per cent Chinese-owned and now under a build-operate-transfer scheme. Control and profits of the expressway will take 50-years to return to the Laotian government.

The overall cost of construction of these three Chinese-led expressways will total USD 17.8 billion i.e; four times larger than the government’s fiscal 2020 spending and close to the country’s gross domestic product.

But these roads and expressways are not the only Chinese investment in the country, a high-speed rail service linking Vientiane to southern China is also scheduled to open in upcoming months, this railway project is the first railway project that has been primarily financed, built and operated by China, and connect another nation with China’s own railway network, NIKKEI Asia reported citing Xinhua reports.

China’s increasing support to Laos shows Beijing’s strategic aim to add Laos to ‘trap’ list

Laos’ official debts have exceeded 60 per cent of GDP, directing the nation towards its inability to repay. The Global Development also cited Laos as one of eight countries with particularly heavy debts to China and now China’s growing interest in lending capital to Laon in different forms could be devastating for the country.

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