For many years, Laos lagged behind its South East Asian neighbours in terms of building essential infrastructure and expanding its regional and global trade.
Poor road and rail connections stymied any significant investment by manufacturers in the country as the cost of moving goods to market were prohibitively high.
Now, the country is accelerating its ambitious plans to become land-linked rather than landlocked.
Without any seaports, the small Southeast Asian nation, which, until recently, remained significantly underdeveloped, is heavily reliant on overland transport connections with neighbours China, Thailand, Cambodia and Vietnam.
Change is underway, however, primarily via the under-construction China-Laos railway, one of China’s most visible and influential Belt & Road Initiative (BRI) projects to date.
Laos was the first ASEAN country to sign up to the BRI back in 2015 and is expected to benefit greatly from the US$6 billion high-speed rail project, which is 70% funded by China.
The project represents a key section of the Pan-Asia Railway, a 3900km network of new and upgraded rail routes which will eventually connect the southwestern Chinese city of Kunming with Singapore. A new section will connect the capital Vientiane to the border with the People’s Republic of China (PRC); the link will also provide high-speed rail access for Thailand to the PRC.
The Laos railway is almost 50% complete, and operations are expected to begin by the end of 2021, with transit time reduced to three hours compared to the 18-hour road trip from Vientiane to northern Laos.
According to the World Bank, the massive project that includes building 167 bridges and 75 tunnels will help support GDP growth, which has been running at between 6-7% during the last few years.
Work is also underway on a new dry port to be built in Vientiane to handle rail and road transhipment volumes.
Laos is busy upgrading its road network, too. Road freight accounts for some 86% of trade to and from Laos, according to the Asian Development Bank (ADB). In 2020, the country will open a four-lane, 113.5km highway, costing US$1.3b, connecting Vientiane with tourist town Vang Vieng, and extending to the Chinese border. Laos will also be linked to Southeast Asia’s emerging East-West Economic Corridor, which spans the Greater Mekong Subregion from Myanmar to the port city of Da Nang, Vietnam.
The Thai government plans to invest in improved logistics infrastructure with Laos to take advantage of its growing economic zones and their lower duties for exports to the EU, rather than build new ones in Thailand.