Laos, a small, poor country in Southeast Asia, lost majority control of its electricity network when it ceded to a company regulated by the Chinese Communist Party (CCP) trying to avoid defaulting on its debt.
The agreement signed between the state-owned Electricite du Lao (EdL) and China Southern Power Grid Co. fuels criticism of the CCP for using “debt-trap diplomacy” to gain advantages over countries struggling to repay loans contracted under leader Xi Jinping’s Belt and Road Initiative (BRI) according to Reuters.
“Laos has become the latest victim of China’s debt trap, as after strategically de-watering the country and burying it under unsustainable loans, China [the CCP] has occupied the country’s national electricity grid after Laos fought to avoid defaulting on the debt,” reported TFI Post journalist Jash Yoshi on Sept. 6.
For Laos, the CCP is its largest lender, and the deal makes this landlocked mountainous country of 7 million people risk-averse to its dependence on the CCP.
Laos got into debt with companies depending on the CCP to help it become “The Battery of Southeast Asia” and investing in a new high-speed railroad.
“Giving China a major stake in the Southeast Asian Battery Plan puts Laos on the path to becoming a pseudo-province of China,” said Brian Eyler, director of the Southeast Asian program at the Stimson think tank in Washington, Reuters quoted.
According to a report by the Australian-based Lowy Institute, Laos’ debt to China is equivalent to 45 percent of GDP.
This strong economic dependence on the CCP means that Laos also supports its actions in the South China Sea.
Following its aggressive actions in the South China Sea, the CCP is accused of infringing on the territorial sovereignty of countries with rights over this region.
The International Policy Council of the Gatestone Institute warns about the so-called debt traps with which the CCP grants loans to poor countries and then permanently traps them.
“A few of these bilateral packages appear to have been designed to imprison already impoverished states into realms of permanent economic vassalage to China,” the Gatestone Institute said on Aug. 28.
“The economic benefits, however, of some of these agreements between China and poor Third World countries in Africa and Latin America are questionable,” the Gatestone Institute added.