China's ambitious 'One Belt, One Road' plan for new Silk Road is facing many obstacles
Published 06/06/2016 | 02:30
For the southwestern city of Kunming, China's plan to extend a high-speed rail link 3,000km south to Singapore is already a boon: pristine expressways, a gleaming station and something of a real estate boom, as young buyers crowd property showrooms.
In Laos, work has yet to start on what should be the first overseas leg of a rail line stretching throughout Southeast Asia. The country, one of the region's poorest, could struggle to finance even part of the $7bn cost and has yet to agree financial terms with China.
From Laos, the railway would enter Thailand. But Beijing's negotiations have soured there as well, highlighting the sort of problems Beijing may face as it develops its economic highways beyond Southeast Asia and across Asia under its "One Belt, One Road" project.
The plan to build land, sea and air routes reaching across the continent and beyond was announced by President Xi Jinping in 2013. As China's economic growth slows, Beijing is encouraging its companies to win new markets overseas.
But across the Southeast Asia border, neighbours protest what they say are excessive Chinese demands and unfavourable financing conditions.
They have resisted Chinese demands for the rights to develop the land either side of the railway. Beijing says turning a profit on land development would make the rest of the project more commercially viable and allow it to make a greater upfront financial commitment. Myanmar, in addition, had environmental concerns and cancelled its part of the project in 2014.
For China, Southeast Asia's concerns are "going to be the first significant hurdle as they implement One Belt, One Road," said Peter Cai, a research fellow at Lowy Institute for International Policy in Sydney.
In 2013, all signs pointed to fast completion of the Laos leg. China offered to loan most of the project funds. In November, construction on the line's terminus in Kunming began.
The high-speed rail station in Kunming is now months from opening. Yet, there is no action in Vientiane despite an elaborate groundbreaking ceremony in December.
Without significant help from China, Laos lacks the finance for the project, diplomats said.
It is unclear why China, which has been vying with Vietnam for influence in Laos, could not offer terms acceptable to Vientiane.
The Laos government did not respond to a request for comment for this story. Diplomats though say the inaction reflected an internal Communist Party rift over how the negotiations with China were handled.
They said a shock decision in January by the politburo to exclude Deputy Prime Minister Somsavat Lengsavad from the top decision-making body in part indicated concern at senior levels that the deal's terms were too favourable for China.
Somsavat had led negotiations on China-related projects and had faced internal criticism for being too pro-Chinese.
"The terms were good for Laos," Somsavat told Reuters. Construction was delayed because Laos was still "researching some details" and because of local opposition of land issues.
Holding the ground-breaking ceremony on December 2 also raised eyebrows in the leadership because the date clashed with celebrations marking the 40th anniversary of the founding of the Laos People's Democratic Republic, diplomats said.
With Somsavat out of the government, "moves internally by the Laos government have been to renegotiate the terms of this rail agreement," a diplomat said.
Zhao Jian, transportation professor at the Beijing Jiaotong University, said China offers concessionary loans of between 2pc and 7pc, so any country pushing for cheaper loans was being "unrealistic".
Thai Prime Minister Prayuth Chan-ocha told Chinese Premier Li Keqiang at a meeting in Hainan in March that Thailand would go it alone on financing and for now build only part of the project. The Thai line would stop well short of the Laos border, however. (© Reuters)