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Vientiane, Laos — Suffocating under a mountain of debt to China, communist Laos is struggling to tame rampant inflation, with food prices rising so sharply that a growing number of households are resorting to foraging.

At a market in Vientiane, traders told AFP they have never known business to be so slow, as families have seen the value of their money collapse since COVID-19.

While the pandemic and Russia’s invasion of Ukraine sent prices around the world spiraling, Laos has found itself incapable of putting the brakes on inflation.

Prices rocketed 23% in 2022 and 31% last year, while they are on course for 25% this year, according to the Asian Development Bank.

Families in particular have been hit hard as the cost of basic staples such as rice, sugar, oil and chicken doubled last year.

A growing number of households are so desperate for food that they are now having to forage to supplement their diets, according to a World Bank household survey earlier this year.

At Vientiane’s morning market, a gold trader said that where customers used to come to buy necklaces, rings and earrings for special occasions, now all anyone wants is to sell their valuables to raise cash.

“I sometimes sit all day and nobody buys my gold,” the 45-year-old told AFP last month, speaking on condition of anonymity because talking to foreign media in authoritarian, one-party Laos is risky.

“My shop used to be busy but now nobody buys gold — they all come to sell it to get money.”

After 15 years running his shop, the trader said he fears for the future of his business.

‘Unsustainable’ debt

Despite three decades of consistent economic growth, Laos remains one of the poorest countries in Asia, with limited transport infrastructure and a low-skilled workforce mostly employed in agriculture.

Life expectancy is just 69 years and the Asian Development Bank says that nearly 1 in 3 children under 5 is stunted because of malnutrition — one of the highest rates globally.

In recent years, the government has borrowed billions of dollars from neighbor China to fund a $6 billion high-speed railway and a series of major hydropower dams — aiming to become the “battery” of Southeast Asia.

The World Bank warned in a report last week that public debt — over $13 billion, or 108% of gross domestic product — was “unsustainable.”

Servicing the debt is fueling inflation by driving down the value of the kip, which lost half its value against the dollar in 2022, and nearly a fifth in the first nine months of 2024.

“Given Laos’ heavy reliance on imports, the kip’s depreciation has driven up domestic consumer prices and inflation, squeezing domestic demand and slowing economic recovery,” Poh Lynn Ng, an economist with the ASEAN+3 Macroeconomic Research Office, told AFP.

Interest payments totaling $1.7 billion are due in 2024 and an average of $1.3 billion for the next three years, further eroding Laos’ foreign exchange reserves.

AFP contacted the Laotian finance ministry for comment, but did not receive a response.

Response ‘too slow’

The Bank of Lao PDR has raised interest rates and in August, the government launched a plan aiming to bring inflation below 20% by December.

But Vivat Kittiphongkosol of the Joint Development Bank Laos said the government had been “too slow” to react as problems unfolded.

“To kill this economic problem, you cannot utilize a single transaction and expect it to solve everything. You need to do a lot of things,” he told AFP.

The World Bank says the government has brought some stability to its finances, but mainly through debt deferrals and limiting spending on health, education and welfare.

Alex Kremer, the World Bank Country Manager for Laos, warned these austerity measures would have damaging long-term consequences.

“Continued underinvestment in human capital will damage the country’s long-term productivity and its future ability to compete in regional markets,” he said.

Instead, the World Bank has urged the government to boost revenue by cutting tax breaks — and also to try to restructure its debt.

Though small, Laos is too important to Beijing to be allowed to fail, JDB’s Vivat said, both politically and as a key leg in the Belt and Road Initiative route that aims to connect southwest China ultimately to Singapore.

A Chinese foreign ministry spokesperson told AFP Beijing was doing “all it can to help Laos ease its debt burden.”

But Laotians can expect more pain in the short term, with the ADB predicting inflation will stay above 20% until the end of next year at least. 
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Before the U.S. presidential election, President Joe Biden and former President Donald Trump opposed a Japanese company’s planned $14 billion purchase of U.S. Steel, a once-iconic pillar of America’s industrial age. With the election over, there are indications that the deal may go through. VOA Chief National Correspondent Steve Herman went to Braddock, Pennsylvania, to gauge local sentiment to the acquisition. Videographer: Adam Greenbaum
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NEW DELHI — Analysts interviewed by VOA expressed skepticism over China’s recent decision to eliminate tariffs for goods from least developed countries with diplomatic relations with Bejing, including 33 in Africa, next month.

The move was announced by Chinese President Xi Jinping at the 2024 Summit of the Forum on China-Africa Cooperation in Beijing in early September.

The analysts see it as an effort to expand China’s influence in Africa without bringing much benefit to the LDCs.

“This move has not generated the excitement it should, due to well-known structural difficulties in Africa,” Emmanuel Owusu-Sekyere, director of research, policy and programs at the African Center for Economic Transformation in Accra, Ghana, told VOA.

“Cooperation between China and Africa has benefitted China much more than it has Africa,” he said, adding, “Africa has given China unbridled access to its markets, which has crippled local production capacity in several aspects of the manufacturing sector e.g., textiles.”

Xi described the zero-tariffs plan as making China the first major economy to take such a step to offer Africa a substantial opportunity to do business in the large Chinese market.

Analysts see it as Beijing’s attempt to compete with the United States. The U.S. African Growth and Opportunity Act provides duty-free access to the U.S. market for more than 1,800 products from 32 sub-Saharan African countries. It will come up for renewal next year. They say China is also trying to take advantage of resentment of some African countries barred from AGOA on such grounds as human rights or lack of democracy and free markets.

“China’s move to allow African LDCs to export tariff-free is clearly a move to project its power in an alternative world order,” said Samir Bhattacharya, associate fellow at the New Delhi-based Observer Research Foundation.

“The rigid policies of the U.S. have made some African countries averse towards it. China sees this as an opportunity to undermine the U.S.-led world order and promote its own narrow interests,” Bhattacharya said.

“China has reworked its trade basket to lure African leaders,” he added.

“This scheme would offer additional support to dictators and military leaders in African countries who are not comfortable with the U.S.,” he said. “It would not improve the economy of these countries.”

China’s viewpoint

Chinese Commerce Ministry spokesperson He Yongqian has said that the initiative would boost LDC exports. It will also promote solidarity and cooperation among the countries of the Global South and advance the goal of “inclusive and equitable economic globalization,” she said.

She said China has signed framework agreements on economic partnership for common development with 22 African countries, including Ethiopia, Burundi, Gabon and Zimbabwe.

However, Owusu-Sekyere expressed a different view.

“African countries are not strategically located in Asian production value chains like Bangladesh and Vietnam. Lack of strategic positioning and planning as well as structural bottlenecks will make it difficult for African countries to take advantage of this plan,” Owusu-Sekyere said.

Every time China’s government enters into a trade or investment agreement with another country, Chinese entrepreneurs usually rush to grab the business opportunities created by the deal. This has been the experience of several countries in Africa and Asia that have received Chinese investments.

Owusu-Sekyere said several African countries have enacted laws reserving the retail sector exclusively for locals but it has been taken over in those countries by Chinese entrepreneurs using local partners as fronts.

The bigger challenge for African countries are nontariff barriers related to such things as quality, he said.

“African economies are not diversified enough to supply at the quality and scale required to meet the sophisticated and diverse demands of a huge market as China.” according to Owusu-Sekyere. 
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Sales of personal luxury goods are set to fall 2% this year, making it one of the weakest on record, with price hikes and economic uncertainty shrinking the industry’s customer base, according to consultancy Bain & Company.

In its closely-watched report on the $386 billion global market, Bain estimated a 20-22% sales drop in China, which has turned into a drag after a years-long boom before the pandemic fueled by the wealthy and growing middle-class.

The forecasts include the effect of currency moves.

“This is the first time the personal luxury goods industry has declined since the 2008-09 crisis, with the exception of the pandemic,” Bain partner Federica Levato told Reuters.

The study released on Wednesday will likely heighten concerns among investors that the sector’s current downturn, which has knocked shares in the likes of LVMH and Kering, may be longer and deeper than anticipated.

Global sales of luxury personal goods – spanning clothing, accessories and beauty products – are expected to be flat at constant exchange rates during the holiday season, with China’s performance still negative, Levato said.

A shift by brands to position their products within a higher price band, coupled with weaker consumer confidence amid wars, China’s economic woes and elections across the globe, has led many customers, especially younger ones, to forgo purchases.

“The luxury consumer base has declined by 50 million over the last two years, from a total of approximately 400 million consumers,” Levato said.

Growth prospects for the market hinge partly on the strategies brands choose to pursue, including on pricing, she added.

In a further sign that higher prices are holding back consumers, Bain said the outlet channel was outperforming, driven by shoppers’ quest for value.  

The personal luxury goods sector is expected to grow by between 0% and 4% at constant exchange rates in 2025, supported by sales in Europe and the Americas, with China seen recovering only in the second part of 2025, Bain said.  

Levato said Donald Trump’s victory in the U.S. presidential election had removed one uncertainty, while possible interest rate and tax cuts could encourage Americans to spend more.  

In contrast to personal goods, luxury spending on experiences, such as hospitality and dining, is expected to increase this year, Bain said. 
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ABBOTS LANGLEY, England — Originally built to store crops from peasant farmers, the Tithe Barn on the edge of the English village of Abbots Langley was converted into homes that preserve its centuries of history. Now, its residents are fighting to stop a development next door that represents the future.

A proposal to build a data center on a field across the road was rejected by local authorities amid fierce opposition from villagers. But it’s getting a second chance from British Prime Minister Keir Starmer’s government, which is pursuing reforms to boost economic growth following his Labour party’s election victory in July.

Residents of Abbots Langley, 30 kilometers northwest of London, worry the facility will strain local resources and create noise and traffic that damages the character of the quiet village, which is home to more than 20,000 people. Off the main street there’s a church with a stone tower built in the 12th century and, further down the road, a picturesque circular courtyard of rustic thatched-roof cottages that used to be a farm modeled on one built for French Queen Marie Antoinette.

“It’s just hideously inappropriate,” said Stewart Lewis, 70, who lives in one of the converted houses in the 600-year-old Tithe Barn. “I think any reasonable person anywhere would say, ‘Hang on, they want a data center? This isn’t the place for it.'”

As the artificial intelligence boom fuels demand for cloud-based computing from server farms around the world, such projects are pitting business considerations, national priorities and local interests against each other.

Britain’s Deputy Prime Minister Angela Rayner has stepped in to review the appeals filed by developers of three data center projects after they were rejected by local authorities, taking the decision out of the hands of town planners. Those proposals include Abbots Langley and two projects in Buckinghamshire, which sits west of London. The first decision is expected by January.

The projects are controversial because the data centers would be built on “greenbelt” land, which has been set aside to prevent urbanization. Rayner wants to tap the greenbelt for development, saying much of it is low quality. One proposed Buckinghamshire project, for example, involves redeveloping an industrial park next to a busy highway.

“Whilst it’s officially greenbelt designated land, there isn’t anything ‘green’ about the site today,” said Stephen Beard, global head of data centers at Knight Frank, a property consultancy that’s working on the project.

“It’s actually an eyesore which is very prominent from the M25” highway, he said.

Greystoke, the company behind the Abbots Langley center and a second Buckinghamshire project to be built on a former landfill, didn’t respond to requests for comment. In an online video for Abbots Langley, a company representative says, “We have carried out a comprehensive search for sites, and this one is the very best.” It doesn’t specify which companies would possibly use the center.

The British government is making data centers a core element of its economic growth plans, deeming them “critical national infrastructure” to give businesses confidence to invest in them. Starmer has announced deals for new centers, including a 10 billion pound ($13 billion) investment from private equity firm Blackstone to build what will be Europe’s biggest AI data center in northeast England.

The land for the Abbots Langley data center is currently used to graze horses. It’s bordered on two other sides by a cluster of affordable housing and a highway.

Greystoke’s plans to construct two large buildings totaling 84,000 square meters and standing up to 20 meters tall have alarmed Lewis and other villagers, who worry that it will dwarf everything else nearby.

They also doubt Greystoke’s promise that it will create up to 260 jobs.

“Everything will be automated, so they wouldn’t need people,” said tech consultant Jennifer Stirrup, 51, who lives in the area.

Not everyone in the village is opposed.

Retiree Bryan Power says he would welcome the data center, believing it would benefit the area in a similar way as another big project on the other side of the village, the Warner Bros.’ Studio Tour featuring a Harry Potter exhibition.

“It’ll bring some jobs, whatever. It’ll be good. Yeah. No problem. Because if it doesn’t come, it’ll go somewhere else,” said Power, 56.

One of the biggest concerns about data centers is their environmental impact, especially the huge amounts of electricity they need. Greystoke says the facility will draw 96 megawatts of “IT load.” But James Felstead, director of a renewable energy company and Lewis’ neighbor, said the area’s power grid wouldn’t be able to handle so much extra demand.

It’s a problem reflected across Europe, where data center power demand is expected to triple by the end of the decade, according to consulting firm McKinsey. While the AI-fueled data boom has prompted Google, Amazon and Microsoft to look to nuclear power as a source of clean energy, worries about their ecological footprint have already sparked tensions over data centers elsewhere.

Google was forced to halt plans in September for a $200 million data center in Chile’s capital, Santiago, after community complaints about its potential water and energy usage.

In Ireland, where many Silicon Valley companies have European headquarters, the grid operator has temporarily halted new data centers around Dublin until 2028 over worries they’re guzzling too much electricity.

A massive data center project in northern Virginia narrowly won county approval last year, amid heavy opposition from residents concerned about its environmental impact. Other places like Frankfurt, Amsterdam and Singapore have imposed various restrictions on data centers.

Public knowledge about the industry is still low but “people are realizing more that these data centers are quite problematic,” said Sebastian Lehuede, a lecturer in ethics, AI and society at King’s College London who studied the Google case in Chile.

As awareness grows about their environmental impact, Lehuede said, “I’m sure we will have more opposition from different communities.”
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Berlin — German Chancellor Olaf Scholz will hold meetings with his top two ministers to try to find common ground after they put forward contradictory plans to fix the nation’s ailing economy, a government source told Reuters on Sunday.  

A document leaked by Christian Lindner’s finance ministry raised eyebrows in Berlin last week, with its push for tax cuts and fiscal discipline widely interpreted as a challenge to the multibillion-euro investment plan put forward by Economy Minister Robert Habeck just days earlier.  

The stand-off is the latest escalation in a row over economic and industrial policy between the FDP, the Greens and Scholz’s Social Democrats that has fueled speculation of the coalition’s potential collapse, less than a year before elections are due.  

But a government source told Reuters that Scholz and the ministers would hold several meetings in the coming days, saying that “now that everyone has submitted their paper, we have to see how they fit with each other.”  

A worsening business outlook in Europe’s largest economy has widened divisions in Scholz’s ideologically disparate coalition over policy measures to drive growth, protect industrial jobs, and reinforce Germany’s position as a global industrial hub.  

While Habeck wants the creation of a fund to stimulate investment and to get around Germany’s strict fiscal spending rules, Lindner advocates tax cuts to spur the economy and an immediate halt on all new regulation.  

SPD leader Lars Klingbeil signaled openness to discussing Lindner’s proposals in a local newspaper interview, but said that some of them were untenable for his party, which released its own economic plan earlier in October.  

“Giving more to the rich, letting employees work longer and sending them into retirement later – it will come as no surprise to anyone that we think this is the wrong approach,” Klingbeil told the Augsburger Allgemeine newspaper. 
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