·The B&R Initiative and Construction of “Hard Power”·
B&R Initiative and the Infrastructure Development in Laos
Once the Cold War is over, the economic development has become the spearhead to propel the country. In so doing, developing the country's infrastructure is classified as the catalyst and the main factor conducive to the prosperity and well-being of the people. The aftermath of the Cold War provides the opportunity for countries in the region to cluster with the aim to lessen the psychological barrier. Regional cooperation happens due to the globalization process that provides unlimited opportunity for countries in the region to sustain growth. It is obvious that the 21stcentury is an era of economic globalization and multi-polarization of the world, a century of liberalization and development, and a century of peace, cooperation, openness, mutual learning and resilience.
Being a land-locked country with poor infrastructure has put a constraint to the socio-economic development of Laos. In addition to that the legacy of war still remains threatened to the daily life of the peasants who are the backbones of the country. As many developing countries consider agriculture as the basic foundation to move forward and achieve the progress and some became the tigers of Asia that I decline to mention. But in the case of Laos, agriculture development moves very slow due to some constraints. One of them is that the arable land is still covered by the unexplored ordnances. Many peasants met their destiny while working on their farm land saturated by bomb lets which become the obstacles to their routine works on the rice field.
Anyway, to get rid of this impediment, a “land-linked” strategy was introduced in parallel to regional and sub-regional infrastructure development trends, especially the frameworks of, among others, the ASEAN, Greater Mekong Sub-region, and Triangle Development Area. The strategy addresses the importance of infrastructure development, particularly the road/transport sector, as the means to achieve the 2020 vision for the country to graduate from the list of less developed countries (LDCs) and to eradicate mass poverty in the country.
Economically, Laos still lags behind the rest of ASEAN countries in terms of economic development. This step will pose the big burden not only for ASEAN integration but also for the rest of East Asian countries. This factor prevents the benefits of integration from being realized. If this large disparity can't be solved then the gap may widen and causes strong impact to the whole region, impeding the overall endeavor to achieve the regional integration as earlier agreed. As a result, the vicious circle will persist undoubtedly.
Due to the globalization era when the economic development becomes the catalyst for each country, Laos seizes this opportunity to exploit its central location in the Mekong Sub-regional to foster much needed trade and investments. Strongly committed to integration in the regional and global system, Laos has its eyes on turning itself from a land-locked country to a land-linked country through the economic corridors crossing its territory.
Infrastructure development has been identified as significant both poverty reduction and private sector development. There are two reasons behind this such as: First focusing on farm-to-market road construction with proper mechanism to link rural farmers to the growing demand within the country and in the region is significant for poverty reduction. Secondly, improvement of infrastructure, particularly factory-to-port transportation, is critical in enhancing business performance, export development and economic growth. And thirdly, widening choices for logistic transportation in the longer term of the infrastructure development strategy of the country will greatly boost growth and assist in the poverty reduction program.
The poor infrastructure system, together with the absence of the necessary logistics and the non-unification of the transport system with neighboring countries, serves as a critical problem in the development of the private sector since it raises the cost of transportation, thereupon reducing the price competitiveness of Lao export products. This directly impacts on the overall development of the country.
Under regional and sub-regional cooperation schemes, therefore, the so-called“land-linked” strategy has become the priority to develop the domestic road system enabling to link to neighboring countries in order to gradually transform the obstacle situation to an opportunity for the national development.
The infrastructure development is regarded as important particularly the road sector as a key in the country's development. The development of roads has supported the development of other sectors, including agriculture and commerce as it eased market access and improved transportation, freight and transshipment of goods in the country as well as with neighboring countries. To achieve poverty eradication through employment-generated industrialization, the infrastructure is recognized as instrumental to the success of the industrialization effort.
Infrastructure development, especially transportation and communication, has always been a priority sector of Laos as it has direct and indirect relations to many issues. The Lao Expenditure and Consumption Survey (LECS2) and participatory poverty assessments (PPA), for example, found a high correlation between lack of road access and severe poverty. The very poor (17% of the population) live in areas where infrastructure is particularly scare. On average, the very poor maybe found at least 15 km from the main road. During the rainy season, 70% among them have no road access. The rural poor have identified this as one of the main causes of their poverty.
Lack of access to all-weather roads or roads of any kind has also meant lack of access to schools, health facilities and other basic services such as electricity and potable water. Thus, poor infrastructure results in inter-generational poverty in as much as the poor people have limited opportunity and capacity to climb out of their poverty.
The initiative raised by the Chinese Prisident Xi Jinping in October 2013. The Silk Road Economic Belt and the 21st-Century Maritime Silk Road Initiative had called for the integration of the region into a cohesive economic area through building infrastructure, increasing cultural exchanges, and widening trade. The Silk Road aims to facilitate exchanges of goods, know-how, thus promoting economic, cultural and social progress, facilitating dialogue and integration of different civilizations. This initiative is not only a vision but an action plan that will be implemented in nearly 60 countries along the Belt and Road Initiative to achieve economic policy coordination and carry out broader and more in-depth regional cooperation of higher standards.
Regional integration is an unavoidable phase toward economic globalization. The Belt and Road Initiative will contribute to greater connectivity and complementarity across the sub-regions, and help the establishment and improvement of Asia's supply chain, industrial chain, thus bringing the regional cooperation to a new level.
These initiatives foresee the infrastructure development and systematic innovation, which are conducive to an improved business environment in Laos and the region as a whole, facilitating the unimpeded flow of production factors, thus improving their distribution and lowering or removing costs and trade and investment barriers.
Regional development plans are grounded in the building of an extensive infrastructure that integrates all countries into a unique growth area. A network of transnational roads and rail routes that links transport systems, power grids and markets across and beyond the region of Southeast Asia is meant to facilitate full participation of this region and global economy by enhancing their competitiveness as an economic bloc.
At the hub of the emerging web of roadways lies Laos with the hope to exploit its central location in the sub-region to foster much needed trade and investments. Laos is strongly committed to regional integration and global trade system by turning its land-locked location through the corridors crossing its territory.
Three projects are figured out to support the facilitation of the infrastructure that link with neighboring countries. First, the North-South Corridor land route starting from South Khumming China passes through Northern Laos to Thailand via the fourth friendship bridge across the Mekong River. Besides providing GMS countries with access to a huge intra-regional market by connecting China to Southeast Asia, this North-South Corridor is expected to contribute to Laos' growth. Lao people living along the corridor can have access to markets, extension services, income and employment opportunities, thus enhancing development potential. More generally, road and other infrastructure projects revolutionize the lives of ethnic communities, enticing them to move down and abandon subsistence agriculture for market-based activities. The North-South Economic Corridor also has facilitated a boom in trade between China and the other GMS economies.
Second, the East-West Economic Corridor linking Danang of Vietnam, Savannakhet of Laos, Mukdahanh of Thailand and Myanmar is a flagship project for the Greater Mekong sub region Program. This project is highly relevant to development needs at the national and regional levels. It was appropriately designed to support economic centers and to complement poverty reduction. The project is economically efficient and can help improve access to markets, employment opportunities, and social services.
The North-South Economic Corridor and East-West Corridor will promote not only trade, investment but also tourism.
Third, the railway development project starting from Kunming of China-Laos-Thailand-Malaysia-Singapore. This ambitious project is considered as Mega project. China's B&R Initiative infrastructure megaprojects is hence welcome for it will help to fulfill the tasks of industrialization and modernization efforts. Laos considers its section of this megaproject as key to its development, and has flagged the construction project as a major priority in its nation's 8thFive Year Plan.
Once completed, these three projects can serve as the facilities connectivity, which has been the priority of Laos to transform its status. These said projects could improve the connectivity of the infrastructure construction plans and technical standard systems. They can push forward the construction of international trunk passageways and form the infrastructure network connecting the Southeast Asian region.
It is obvious that the third project has been designed in the Belt and Road Initiative linking between China and Laos and beyond is corresponding to the infrastructure development Plan of Laos. These projects will take advantage of international routes connecting the core cities along the Belt and Road Initiative by using key economic industrial parks as cooperation platforms. In other words, Laos will benefit from producing and exporting its commodities to the neighboring countries, generating incomes with the aim to eradicate poverty which has been encompassed in the National Growth and Poverty Eradication Strategy since early 2004.
The high speed railway will bridge the gap for Lao people to have access to technological capabilities, human resources development, capital, and foreign direct investment. These factors can help benefit the regional integration to be realized. In addition to that, this project can supply the material entitlements, health, and education and the like may propel the region to a high plane, accelerating the overall endeavor to achieve the regional integration as earlier agreed. As a result, the vicious circle will be terminated undoubtedly.
The construction of the friendship tunnel, a key cross-border project on China-Laos railway, was officially started in Yunnan on 22thJune, 2016 marking a practical step in the build-up of the Sino-Lao international railway, which form part of the Pan-Asia Railway Network. The cross-border tunnel has a length of 9.8 km, with 7.2 km in China and 2.6 km in Laos. The tunnel will be finished in 56 months, and it is intended to be a signature of the time-tested friendship between China and Laos. The tunnel will pass through the stratum where mud rocks and embedded with sandstones, and such rough geographical condition could make it hard to carry out works.
According to the construction plan of the high speed rail line 154 bridges, 76 tunnels and 31 train stations will be built. The project costs US 7 billion which is very costly but this debt burden is regarded as a short term sacrifice that will benefit the country in the long run.
It is estimated that this speed railway can carry about 3.98 million passengers per year for domestic trip and 9.65 million passengers for domestic plus cross border trips. Besides that it is estimated that more than 2.59 tons of cargo will be shifted per year. The 427-km-railway will link Vientiane, the capital city with the Chinese border and will pass through the urban areas in several provinces.
In general the Belt and the Road Initiative is an important base for it will deepen cooperation between China and ASEAN while the ASEAN Economic Community is on the way. This project has no doubt to solve differences in economic development, mitigating diversity in terms of growth, facilitating cross-border trade cooperation, making Southeast Asia a perfect market for China and vice versa and facilitating both sides to work together in the financial field. ASEAN is an important base for the China-proposed Belt and Road Initiative, having it as a starting point, and the upcoming establishment of the ASEAN Community will benefit both the bloc and its partners including China. The Belt and Road Initiative has huge potential for ASEAN and China to cooperate in infrastructure construction and cross-border trade cooperation.
To support the Belt and Road Initiative, China has set the Asian Infrastructure Investment Bank in October 2013 with the aim to lend the loans for the project of infrastructure. The AIIB, first proposed by China in October 2013, is a development bank dedicated to lending for projects regarding infrastructure. As of 2015, China announced that over one trillion Yuan (USD 160 billion) of infrastructure projects were in planning or construction.
To witness the construction of the high speed railway, Laos and China had broken ground in Vientiane to start the construction of a high speed rail mega project to connect between China and Laos. This rail line will link China's Kunming all the way down to Singapore, passing through Laos, Thailand, Malaysia and Singapore as final destination of about 3,000 Km.
Laos fully supports the building of a railway in a bid to free itself from the constraints of being land-locked, hoping to create a land link and become a transit hub with the region. The railway will lower transport costs and is expected to benefit the economy by attracting more foreign investment and providing much improved logistics services, boosting the socio-economic development of Laos, improving the nation's transportation and generating a lot of jobs for local people. Of course, it will also inject new momentum into the economy of China's southwestern regions. The national strategy will be upgraded to change its geographical disadvantages due to the megaproject initiatives.
The rail line shall enable interconnectivity once it is operational. It will give a significant boost to socio-economic development of Laos given that the current time-consuming high cost road transport is among the core issues that discourages foreign investors in operating business in Laos. Once completed, the farm goods from Laos will reach China within 2-3 hours.
Three projects earlier mentioned above would be of use in terms of contribution to the connectivity and eventual East Asian Community building regardless of the financial burden, which will be left for the generation to come. The development of the infrastructure becomes the vital factor for the East Asian Community building for it can help sustain growth, easing the free flow of capital, people and investment. ASEAN, the sole and viable organization in Southeast Asia has been engaged in the cooperation with China, its giant neighbor, with the hope to bring the Belt and Road Initiative into a high plane. 20 years had elapsed, ASEAN-China dialogue relations have been developed constantly and effectively. China has shown its support for ASEAN's role as the driving force in regional process. Clearly, ASEAN and China have been engaged in series of agreements for them to commit obligations to bolster bilateral interaction.
Laos and China are good neighboring countries, sharing the border of 550 Km, closely linked by common mountains and rivers and have been keeping a profound traditional friendship since ancient time. Satisfied with the achievement in trade and economic cooperation, Laos and China attach great importance to and deepen Laos-China economic and trade cooperation.
With the target to set the goal of developing bilateral ties of all-round cooperation characterized by long term stability, good-neighborliness, friendship and mutual trust, Laos and China signed many agreements and MOU including trade, investment protection and tourism. The committee on bilateral economic, trade and technological cooperation was set up. This, in turn, will contribute to the services of railway link between Kunming and Singapore in the future and facilitate the economic North-South Corridors (China-Laos-Thailand) by having Laos as land-link country. In this particular project, China shared half the cost of the construction of the bridge across the Mekong River.
China ranks first investor amounting over US$ 5 billion invested in Laos in 165 projects. According to the statistics from the Lao Ministry of Commerce and Industry unveiled that the Chinese investment concentrates on agriculture, fishery, food processing, construction, mining and exploration. It is worth noticing that the trade relations between Laos and China have achieved a great deal of progress. This is poised to increase with the involvement of the construction of the high-speed rail.
As neighbors, the economic and trade cooperation between 8 Northern provinces of Laos and Yunnan province is very encouraging. The cooperation in the field of communication is one of many important factors to promote economic and trade interaction. The two sides attach great importance to the improvement of the navigation along the Mekong River with which the exchanges of goods will be increased in numbers.