Laos PDR is situated directly in the path of China’s much-talked about “One Belt, One Road” initiative which many see as an alternative to the cancelled Trans Pacific Partnership Agreement.
The high-speed rail project to the whole of continental Southeast Asia will commence from south China’s Kunming through the border town of Boten and on to Vientiane, the capital of Laos, and then cross the Mekong River.
For China, the railway connection to Indochina will facilitate closer relations with Southeast Asia that will benefit both sides. Trade between them is expected to rise to more than USD500 billion by 2017.
Moreover, China has signed a cooperation agreement with Laos and Thailand for the construction of a high-speed railway connecting China, Laos and Thailand, which is of great strategic significance for China. It will enable China to reach the Indian Ocean through Indochina without passing through the Straits of Malacca. This allows China to access resources in the Middle East and Africa even if the Strait was blocked by the US.
The link will propel one of the poorest countries in Asia into a higher gear in terms of economic growth. Currently, Laos has the lowest GDP in the whole of ASEAN but the gap is closing rapidly between this country and the other mid-level economic performers of the region. On top of that, Laos also has the second fastest GDP growth second only to Myanmar. The Asian Development Bank has forecast its growth to be at 7.5% per year for the next few years, which is almost double that of Malaysia’s rate at 4% per annum.