China-invested Cement Plant inaugurated in Laos to serve China-Laos Rail Construction

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China starts work on Laos Railway, eyeing farther horizons

China and Laos signs an intergovernmental railway cooperation agreement in Beijing on Friday night

Vientiane/Beijing: The first Southeast Asian rail project to grow out of China’s transcontinental vision for new economic links got underway Wednesday.

The president of Laos, Choummaly Sayasone, dug into a tidy pyramid of white sand at the groundbreaking ceremony in Vientiane for a roughly $6 billion segment of railroad that could eventually extend from the southern Chinese city of Kunming all the way to Singapore.

China is helping to finance and build it. Project contractor China Railway wants to put its reputation for reliability at home to work in Laos, General Manager Sheng Guangzu told the audience.

Roughly 430km of track will cut southward through Laos, from Boten, a town on the border with China, to the capital, which nestles against Thailand. It will go down as one of the biggest undertakings in infrastructure ever in Laos.

Both freight and passenger trains will use the line. China Railway aims to begin high-speed service, with trains traveling at up to 200kph, in 2020.

China offered to foot about $4.2 billion, or 70%, of the cost and lend the remaining amount – terms so good that they piqued Laos’ interest in a neglected 2010 bilateral railroad-building agreement.

China is hurrying to turn its “One Belt, One Road” vision of economic routes to the Middle East and Europe into a reality on the ground.

Beijing fears the Trans-Pacific Partnership, a U.S.-led effort to build a zone of free trade and common rules for investment, as an attempt to economically isolate China.

Reinforcing ties with neighboring countries with roads, rails and other infrastructure is its way of countering the perceived threat.

China wants to lay further lengths of rail from Vientiane to Thailand, Malaysia and Singapore. It reached a basic agreement with Thailand late last year on building an 874km stretch through that country.

But the groundbreaking, originally anticipated for this year, is expected to be delayed until around next May because of disagreement over the cost.

The Chinese side raised its estimate a full 25% to roughly 500 billion baht ($13.9 billion). China insists on starting construction this year, but Thai Transport Minister Arkhom Termpittayapaisith says the Chinese should present a detailed cost breakdown before a final agreement is signed.

As for the Laotian segment, some question the wisdom of such a massive railroad investment in a nation of just under 7 million people with a gross economic product per capita of less than $2,000. Maintenance of the line may prove burdensome for the country, some warn.

Xu Shaoshi, head of National Development and Reform Commission, China’s top economic regulator, signed the document with Somsavat Lengsavad, deputy prime minister of Laos, at a ceremony at the Diaoyutai State Guesthouse.

The two countries have agreed to use Chinese technology and equipment to build a 418-km line that will connect Kunming, capital of southwestern China’s Yunnan province, with the Lao capital city of Vientiane, according to the agreement.

The line will start in Kunming and travel southward to Jinghong and Mohan until entering Laos through the Lao border city of Boten. It will then travel past Luang Prabang and Vang Vieng before arriving in Vientiane. It will transport passengers as well as cargo.

The railway’s average speed is set at 160 kph and 60 percent of the line will be bridges and tunnels. China will be responsible for 70 percent of the 40-billion-yuan ($6.27 billion) investment, while Laos will be responsible for the remainder.

Once it is operational, this line will become Laos’ longest and fastest railway. Currently, the Southeast Asian nation has only one railway, which was opened in 2009 and links Vientiane with Thailand’s Nong Khai.

“The project will significantly boost the socioeconomic development of Laos, improve the nation’s transportation and generate a lot of jobs for local people. Of course, it will also inject new momentum into the economy of China’s southwestern regions,” Wang Xiaotao, deputy head of National Development and Reform Commission, told reporters at the signing ceremony.

He did not disclose when the line’s construction will begin, only saying that construction of the Chinese section between Yuxi and Mohan began in January.

Earlier reports said the Lao government had decided to start construction of its section of the line around the end of this year.

The two nations began to discuss the cross-border line in 2010, but the project had not made any substantial development since then due to investment issues. The turning point took place in April 2014 when Lao Prime Minister Thongsing Thammavong visited China and talked with President Xi Jinping and Premier Li Keqiang on the railway. After that, railway authorities from both sides have speeded up their work.

Bilateral trade between China and Laos reached $3.6 billion last year, according to Somsavat Lengsavad.