[ET] China’s Belt and Road Initiative has resulted in debt traps for a number of countries. Laos may have just joined the list with the opening of the China-Laos railway on Dec. 3.Countries such as Kenya and Ethiopia are already struggling to repay China’s Belt and Road loans, while Laos, a landlocked country, still has great expectations for the Beijing-initiated railway project, hoping that it will energize its agriculture-based economy.
The debt incurred by Laos, $3.54 billion, is close to one fifth of Laos’ 2020 GDP, which was $19.14 billion. If Laos fails to repay its debts, it will have to use its natural resources, such as bauxite and potassium mines, to repay the debt.
Laos’ outstanding debt, most of which is owed to China, is equal to approximately two-thirds of its annual economic output, according to a Dec. 2 report by the Associated Press (AP).
The AP report quoted Greg Raymond, a Southeast Asian expert at Australian National University, as saying,"Laos has put itself in a position where if the railway doesn’t make a profit, then it’s got real debt issues."
Raymond told BBC that China will have a double benefit from the railway project. First, the line helps to connect China and Southeast Asian countries in its backyard by rail, greatly facilitating China’s access to those countries. Second, China can use the new special economic zone in Laos as a node to control production, supply chain, and consumption.
The newly opened line goes to China in the north, Thailand in the east, Myanmar in the west, Malaysia and Singapore in the south. It is a great help for the CCP to realize its ambition to expand its influence in Southeast Asian countries.