Laos' Road to Nowhere

A two-lane asphalt road between Nan, Thailand, to Oudomxay, Laos, designed to boost regional trade and tourism, opened in mid-September with characteristic fanfare.

Four Lao hill tribe models coyly held up banners welcoming a Thai delegation to their village bordering Thailand's northern province of Nan. They posed next to a shiny pyramid-like marble tablet that bears the flags of both nations and words of gratitude to Thailand for building a rare road in this mountainous region.

The only problem with the ceremonial opening was that the road goes nowhere. Thanks to a Lao dispute with China, a key bridge for connecting the road to Lao's national highway has yet to be built.

The saga of a finished road and missing bridge may not matter much in global politics, but does reveal China’s troubles with small neighbors. The Thai government spent Bt840 million baht, just under US$27 million, 30 percent of which was given as a grant to build the 52-kilometer road in the hope of opening the depressed region to international commerce.

The new road reduced travel time from a full day to 40 minutes. Landlocked Laos, lobbying to join the World Trade Organization, was only too pleased to gain infrastructure and a trade corridor to Thailand, eventually connecting the country of 6.5 million people to China and Vietnam via this national bypass.

Except the vaunted highway version of this “orient express” to China is still incomplete.

The Chinese government agency that agreed to build a bridge across the Mekong River to link the just-completed Thai road to China’s Yunnan Province and Dien Bien Phu in Vietnam has yet to start work on their waterway sector. A group of reporters invited by the Thai government saw a tranquil river and villagers scooping sizeable catfish by the riverside. No dredging equipment has yet arrived to spoil their catches. Chagrined, a Lao official in charge of the project, Vanheung Chanthasane, would only say, “Yes, [the Mekong bridge] is a problem for us.”

The Laotians and the Chinese are said to be haggling over conditions in the Memorandum of Understanding signed last year with China Road and Bridge Corporation. According to representatives linked to these projects, the Chinese have asked to resettle large numbers of Chinese laborers involved in the Mekong bridgeworks into Laos. The influx of Chinese nationals into Laos is a source of growing tensions for Sino-Lao ties despite 50 years of relations, a milestone crossed this year. The labor issue has now come to a head over the Mekong bridge.

Vanheung explains that the missing bridge, estimated to cost $35 million, could be ready by 2015 when the Chinese disburse a soft loan. He did not discuss the so-called extraordinary Chinese demands of worker resettlement or reports of Chinese plans to build a casino and entertainment complex in the Oudamxay area for resettled Chinese residents and tourists who are increasingly fanning south for budget travel.

Other Laotian officials who asked not to be named gave contradictory information as to why the bridge plans stalled. Reasons ranged from the benign “long list of projects that [require] Chinese assistance and funding” to outright condemnation of Chinese casinos. “The Lao government has stopped issuing permits for casinos, they create so many problems in our community life,” said one official.

The bridge project is not the only snag. China's ambitious $7 billion high-speed rail network, its most high-profiled pan-Asian infrastructural investment for integration with Southeast Asian cities including Vientiane, Bangkok, Kuala Lumpur and Singapore ran into problems in the border town of Boten in northern Laos, the first train stop outside China.

Local media blamed a flood of Chinese workers and goods into Boten, leading to a series of gambling-related murders and the Lao government’s abrupt closure of the town’s casinos. The high-speed rail construction, just begun, is expected to be ready by 2020 when bullet trains will carry passengers from Yunnan to the Laotian resort cities of Luang Prabang and Vangvieng, also popular with western tourists, and then to the capital, Vientiane, in the first phase of the contract.

Laos President Choummaly Saygnasone concluded a four-day state visit to Beijing on September 21, and a “joint communiqué” issued at the end of the visit stated that both sides “will seriously implement cooperation agreements they have signed.” It added that China will support and encourage its companies to participate in Laos' infrastructural developments but on the “principle of equality and reciprocity,” a reference to Laotian fears of a Chinese takeover of their territory. In the communiqué, China also sought to reassure the small neighbor and reaffirm “its respect for Laos' independence, sovereignty and territorial integrity.”

Both sides signed another nine agreements on economic projects, largely in the resource sectors of hydropower and mining, with China surpassing other neighbors to be Laos' largest foreign investor. State figures show China invested US$2.71 billion in 397 projects in Laos last year. While the communiqué doesn’t provide information on the nine projects, Chinese investments so far are largely in resource sectors of hydropower and mining.

Laos first began transforming its economy in 1986 and lifted investment barriers over time by liberalizing its investment promotion law. Investors can use foreign laborers, own residential land in Laos and even develop the areas they reside in for their own entertainment during the contract period subject to renewal. The Lao government hopes the amended regulations will facilitate the transfer of technology and skills to its unskilled workforce. As a result, the Chinese are reported to have transplanted as many as 300,000 Chinese workers into Laos for its earlier development projects. State population data do not yet capture the latest patterns of Chinese migration or the status of Chinese workers who flock in for infrastructure projects.

A Lao official connected to the Mekong bridge project could not specify the number of workers to be resettled as requested by the Chinese or if the requests have been formally tabled, but he said the numbers ultimately depend on the equipment available to carry out the work. Better equipment will require fewer Chinese workers. Describing the bridge as a “good, important bridge,” the official added that the Lao government will agree to any Chinese requests as long as these are “reasonable.”

Attempts to reach the China Road and Bridge Corporation and the Laos-China Business Association for an assessment of the Sino-Lao disputes have proved futile. However, during last year's signing ceremony with China Bridge President Wen Gang, Lao's public works director Math Sounmala, said the Mekong bridge would help Laos to eradicate poverty nationwide by 2020. Lao villagers in the disputed area subsist on rice, ginger and some livestock.

As China’s military power grows and its economic clout rises among its southern neighbors, so, too, does the nervousness of governments that live under the shadow of the giant. An Indochinese legend has it that the dragon lives in the Mekong, and the fable exacerbates fears over hundreds of thousands of Chinese descending on Laos. The issue is serious enough for dour senior government officials in Laos to discuss anti-Chinese sentiment in news conferences, an unusual concession by the communist party. The fact that tiny Laos is resisting some Chinese demands, as evident from the missing bridge, should be a reminder to Beijing about its geopolitical weaknesses and the power of nationalism.

(Haseenah Koyakutty is a Singaporean journalist based in Bangkok. She covers Southeast Asian affairs. Reprinted with permission of the Yale Center for the Study of Globalization.)