Positioned for new opportunities

Laos can reap huge economic gains from new rail link with China, experts say

Phouphet Kyophilavong said he is delighted that the China-Laos Railway is now in full operation after being opened on Dec 3 despite the difficulties that the pandemic threw in the way.

Apart from linking two countries, the first railway in landlocked Laos ushers in a new era and will benefit the country economically, including by helping to alleviate poverty, said Kyophilavong, dean of the Faculty of Economics and Business Management at the National University of Laos in Vientiane.

On Dec 4, the first international freight train from Vientiane, the country’s capital, loaded with Lao exports arrived in China in the afternoon. By the evening, the first crossborder freight train from Kunming, in Yunnan province, arrived at Vientiane South Station after traveling 1,035 kilometers.

“The China-Laos Railway runs similar to the domestic railways, and the railway conditions are even better,” Zhou Yukui, 31, driver of the freight train from Kunming, fully loaded with dicalcium phosphate, was quoted by Xinhua as saying.

Kyophilavong said he expects the railway to create more opportunities for Lao businesses, though more policy support is needed for trade facilitation in terms of addressing both tariff and non-tariff barriers. The Southeast Asian country should open up more to welcome investors from China and other countries to set up joint ventures, which will create jobs for locals, he said.

Tee Chee Seng, general manager of the joint venture Savan Park, said the railway will provide a new and convenient logistics route for trade and turn the Southeast Asian country into a regional connector.

Savan Park links Laos and the Malaysian company Pacific Streams Development to create a commercial and logistics hub for Laos by building the country’s first special economic zone. About 70 companies from countries including China, Australia, Japan, Thailand and the United States have invested in the zone.

Tee’s company used to depend on sea freight, which could take days to reach its destination. The railway has shortened the transit time to just 10 hours.

The railway link could reduce transport costs between Kunming and Vientiane by 40-50 percent, a reduction of about $30 per metric ton, a report issued by the World Bank last year said. Domestic transport costs within Laos are tipped to fall by 20-40 percent.

The railway “will not only benefit investors in the park, but will also benefit manufacturing companies in Bangladesh, Cambodia, Malaysia and Singapore”, Tee said.

Countries in the region have long desired to connect to each other as well as to China, which now has the capital, technology and expertise to work with its neighbors to realize this vision, said David Lampton, senior fellow at the Foreign Policy Institute of Johns Hopkins School of Advanced International Studies and former president of the National Committee of US-China Relations in New York.

The Bangkok Post reported on Dec 1 that the Thai government is being advised to accelerate efforts to link its rail system with the ChinaLaos Railway, citing comments by Danucha Pichayanan, secretary-general of Thailand’s National Economic and Social Development Council.

Lampton said he expects subsequent links involving Thailand, Malaysia and perhaps Singapore to emerge over time.

“Opening the high-speed rail line in Laos is a key step in realizing this vision because it runs down the spine of Southeast Asia,” said Lampton, a co-author of the book Rivers of Iron: Railroads and Chinese Power in Southeast Asia.