What a Railway in Laos Can Tell Us about China’s Belt and Road

The Chinese-financed effort to build a national railway through Laos is a quintessential project of the Belt and Road Initiative (BRI). It is hard to get a fix on BRI these days, as it is invoked in ever-expanding geographic contexts (Latin America) and fields (poetry!). But the Lao railway seems to be at the core of the economic program that has shaped the initiative—a regional infrastructure project that aims to connect Chinese markets to those of other countries and ports in Southeast Asia. And it is well underway. So if we want to know whether BRI makes sense, or even just answer “how’s it going?”, there’s a lot we can learn by taking a closer look at this project.

In a new paper, I do just that, evaluating the railway project in four dimensions:

1. Economic implications—projected benefits as well as economic risks, particularly associated with debt burdens

2. Procurement arrangements

3. Labor issues

4. Environmental and social standards

In each of these areas, the Chinese government’s approach as the financier and majority owner of the project falls short of what we would hope to see when it comes to delivering sustainable benefits to the people of Laos, who are ultimately on the hook for a significant share of this $6 billion endeavor.

The limitations on the Laos government’s ability to finance such a project appear to have resulted in a China-dominated ownership structure. As such, it may be more appropriate to think of the Lao railway as a Chinese public infrastructure project that happens to be located in another country.

The economic case for a regional rail network certainly appears to make sense for the larger markets within the six-country program, no more so than for China. But approaches to procurement, labor, and environmental issues tend to reinforce the underlying risk that the cost to Laos could well exceed the benefits that the project delivers to the country. As a regional project, the net benefits may be significant. But the distribution of those benefits could very well leave smaller countries like Laos shortchanged.

If that proves to be the case, Chinese officials are likely to encounter more of the backlash that BRI has garnered over the past year and that has threatened to stop the initiative in its tracks in key BRI countries. It is well within the power of Chinese policymakers to establish better standards and practices for BRI in ways that continues to serve China’s economic interests, but tips the scales more in favor of the partner countries and does a better job of matching official BRI rhetoric with practice.