Laos set to cede majority control of its national power grid to China to service Belt and Road debts
CHIANG MAI – The US$6 billion China-Laos highspeed railway is on track for completion in just over a year, with the first train scheduled to arrive in the capital Vientiane on Lao national day, December 2, 2021.
The day traditionally commemorates the communist takeover in 1975 and the economic and social progress achieved under the Lao People’s Revolutionary Party, but next year’s event will also herald a certain loss of sovereignty to its giant neighbor to the north.
Recent reports suggest Laos is the latest nation to fall victim to a Belt and Road Initiative (BRI) debt trap, whereby nations are pressed into making sovereignty-eroding concessions after defaulting on their infrastructure-related debts owed to Beijing.
Laos’ foreign exchange reserves have fallen below $1 billion, less than the country’s annual owed debt payments, putting the country on the verge of a sovereign default. News reports suggest that the Lao Finance Ministry has asked China, its biggest foreign creditor, to restructure its debts to avoid defaulting.
Last month, Moody’s rating agency downgraded Laos to junk territory, from B3 to Caa2, and changed its outlook on the country from neutral to negative due to “severe liquidity stress.”
Laos has borrowed heavily to invest in several Mekong River hydropower projects as well as the $6 billion high-speed rail project, a key link in China’s BRI design to connect its southern province of Yunnan with mainland Southeast Asia.
Around 60% of the train’s cost is financed through an Export-Import Bank of China loan. The remaining 40% comes from a joint venture company comprised of three Chinese state-owned firms, which hold 70% of the remaining stake while a Lao state-owned enterprise has the remaining 30%.
The Lao government has allocated $250 million from the national budget and taken out a further $480 million loan from the Export-Import Bank of China to finance its share of the venture.....MUCH MORE
Those financial obligations, however, have apparently become untenable for the Lao government as it moves to sell state assets to stay afloat.
On September 4, Reuters reported that Vientiane is set to cede majority control of the national electric power grid to China Southern Power Grid Company, a state-owned enterprise headquartered in Guangzhou.
The Chinese news agency Xinhua reported from Vientiane on September 2 that the agreement “marks a significant progress in enhancing win-win cooperation between Laos and China in the power industry.”....
Roger that, win-win, over.
Two years ago Asia Times was warning:
Laos on a fast track to a China debt trap
Beijing-backed US$6.7 billion high-speed railway project threatens to bust the small nation's already fragile finances...
