The infamous Chinese debt-trap diplomacy is spreading its deadly tentacles and is fast-tracking China’s aggressive expansionist policy as it seeks to occupy the assets of foreign countries. Laos has become the latest victim of the Chinese debt trap as after strategically dehydrating the country and burying it under unsustainable Chinese loans, China has occupied the country’s national power grid after Laos is struggling to avoid defaulting on Chinese debt.
In a worrying development, Laos will cede majority control of its electric grid to a Chinese company as the country struggles to avoid a default on Chinese debt.
For the uninitiated, the modus operandi of China is to influx smaller, less resource-rich countries with truckloads of Chinese money under the garb of Belt and Road Initiative with punishing repayment terms would allow China to occupy strategic assets of the defaulting country.
It is unsurprising to know that China is Laos’ biggest creditor which paved the way for power grid shareholding deal between state-owned Electricite du Laos (EDL) and China Southern Power Grid Co.
Bangkok Post reports that China Southern Power Grid Co would now gain majority control of the new Electricite du Laos Transmission Company Limited.
Armed with Chinese money, Laos has spent heavily on hydroelectric schemes and a new Chinese high-speed railway, with the projects being at the centre of a debt crunch.
According to the rating agency, Moody’s, the country’s debt service obligations this year is estimated to be around $1.2 billion with foreign reserves plummeting to just $864 million in June.
Toshiro Nishizawa, a Japanese professor who has advised the Laos government on fiscal stability, said, “Economically Laos is going to depend more on China and this is inevitable.”
Despite Laos emerging as Xi Jinping’s all-weather ally as it was the first country to endorse Xi’s political message of “building of community of common destiny”, China has attempted to dehydrate Laos.
Laos is a landlocked country of 7 million people and heavily depends on the Mekong River to quench the thirst of its population. Laos along with Vietnam, Cambodia and Thailand fall in the Lower Mekong Basin which recently suffered a severe drought as the water levels in the river receded to a 50-year low.
According to a US-based research company, the damaging droughts can be largely attributed to the Chinese dams that have been holding backwaters.
Alan Basist, a meteorologist and President of Eyes on Earth said, “If the Chinese are stating that they were not contributing to the drought, the data does not support that position.”
China claims that there was low rainfall last year on its portion of the 4,350-km (2,700-mile) river which is known as Lancang upstream. The upstream region of the River, viz. the Yunnan province of China received more than average rainfall according to satellite measures of “surface wetness” and snowmelt was slightly above-average during the May to October wet season. Yet the Lower Mekong Basin (LMB) countries in Southeast Asia witnessed the worst drought in the past five decades.
The water levels measured downstream along the Thai-Laos Border dropped, at times, by 3 metres (10 metres) than the average levels wreaking havoc for the agriculture-based LMB economies.
Coming into the limelight are the eleven dams that China has built on the mighty Mekong River which have a combined water capacity of more than 47 billion cubic metres, but the Communist regime of China, known for its hallmark opacity, does not release any data about the amount of water that it is holding back to fill the reservoirs.
80 per cent of the 12 million households in these agrarian economies are directly dependent upon the Mekong River for their survival. Livelihoods are at risk with the Chinese dams holding backwaters from the Mekong River in the Yunnan province.
All four LMB countries could face economic devastation as the Mekong recedes in the downstream areas. Fisheries which contribute about 3 per cent of the region’s combined Gross Domestic Product (GDP) is at risk of getting seriously annihilated. Worst hit will be Cambodia and Laos, where fisheries contribute 18 per cent and 12.6 per cent of the economy respectively.
China now controls Laos’ two most important lifelines: power and water. Going by China’s recent history, if Laos were to ever take a stance or an action which irks the wrath of China, it will not be farfetched to say that Xi Jinping will order his lackeys to punish Laos by cutting off power and water supply.
Laos is now on the fast track of becoming a pseudo-province of China, a recent study putting Laos’ debt to China at a whopping 45% of GDP with Chinese investment in the country is already totalling over $10 billion.