China in Laos: Counting the cost of progress

Asia Times Online, 19 Sep 2009

BEIJING - At Kunming's long-distance bus station, a sleeper bus
crammed with Chinese laborers edges toward the exit, en-route to the
Laotian capital of Vientiane. Despite the prospect of an uncomfortable
40-hour journey ahead, this group of wiry, chain-smoking men is buoyed
by the expectation of a reasonable salary and a chance to take China's
economic miracle southward. "Laos is poor and dirty," says one. "But
we have many friends there already. We can make money and help make
Laos more like China."

The resource-rich Golden Triangle area of northern Laos, Thailand and
Myanmar is no stranger to Chinese influence. Just as the Chin Haw -
Han and Hui Chinese from Yunnan province - first arrived in Laos in
the 19th century looking to get fat off the land, so a new wave of
migrants from Yunnan and further afield is now making a beeline for
the same region, looking to take advantage of opportunities thrown up
by modern China's long and powerful economic arm.

China's role in the development of northern Laos has become
increasingly marked in recent years. A cooperation agreement signed in
1997 signaled a break from the hostility of the 1980s, when Laos
allied with China's then adversary Vietnam. By 2007, China was
responsible for nearly 40% of investment projects in Laos, and,
according to the Laotian government, Chinese direct investment totaled
over US$1.1 billion by the end of August that year.

Indeed, through official aid, state investment and a growing number of
private ventures, China now dominates a large part of the Laotian
economy. From mining and hydropower to rubber, retail and hospitality,
the Chinese generally have a controlling interest in almost every
economic sector. Trade between Laos and China was valued at about $250
million in 2007, and is expected to reach $1 billion over the next few
years.

Last year, the government of Yunnan completed a blueprint - widely
known as the "Northern Plan" - to develop the industrial sectors of
northern Laos from now until 2020. This was handed over to the Laotian
government in January, and is expected to be ratified at the Laotian
9th Party Congress in 2010. Setting specific targets for the "backbone
industries" of power, agriculture and forestry, tourism and mining,
the Northern Plan "intends to develop a highly focused and executable
roadmap for industrialization".

While growing Chinese influence undoubtedly benefits some, as
evidenced by the row of luxury SUVs sitting at the China-Laos border,
many Laotians, expats and international observers are deeply concerned
about its social and environmental impact. Many of these concerns
center on the newly completed Kunming-Bangkok Route 3 highway, part of
which runs through northern Laos (built with Chinese and Thai money),
and the rash of new towns, settlements and business ventures this road
is now spawning.

Sitting on the Chinese border next to Route 3, the Laotian town of
Boten was designated a special economic zone in 2002. Renamed "Boten
Golden City", the 21 square kilometers on which the town sits is now
effectively part of China, having been leased for 30 years by a
Chinese company, with an option to extend this lease by another 60
years. Vaunted as the "most internationally modernized city in Laos",
plans for Boten include a golf course, a convention center,
residential real-estate projects and even an international airport.

Dominating the landscape of Boten is the incongruous and unsightly 271-
room Royal Jinlun hotel and casino complex, which rears above a
sprawling concrete plaza of Chinese restaurants, cell-phone outlets,
duty free shops and stalls selling cheap Chinese products. The casino
is a collection of gaming operators that rent rooms in the back of the
hotel and cater to a growing number of international visitors - it's
illegal for Laotians to gamble, but Chinese can simply walk across the
border without a visa.

While Boten has created some jobs for local people, these are largely
menial. The town works on Beijing time, accepts only Chinese currency
and speaks only Mandarin Chinese. Electricity and telephone lines run
from China, and electric sockets adhere to Chinese standards. The
growing numbers of prostitutes that patrol the streets are all
Chinese, as are the beer and the cigarettes.

Apart from the less-than-desirable appearance of Boten Golden City -
most foreign visitors traveling into Laos from China describe the
place as an eyesore (or worse) - it has also generated a host of
grievances from local people. To make way for the special economic
zone, inhabitants of the old town of Boten had to be relocated 20
kilometers down the road, where many have complained of a lack of
services and poorer-quality land. Others have objected to land grabs
adjacent to the new highway by well-connected traders and businessmen.

An increase in Chinese-owned Lao-based concessions (another Chinese-
financed casino is going up in Huay Xai), the growing influx of
Chinese immigrants and the developing regional road network have also
combined to drive up the trade in Laotian biodiversity, much of which
is now endangered.

Passing through Boten, many travelers will spot cramped cages
containing monkeys, black bears and other rare species blatantly
displayed beside the road, ready for purchase and cross-border
transport into China. "This is surely not the image that the Laotian
government wants foreigners to see first when they cross the border,"
said one shocked American tourist.

With its booming economy, China is now the world's largest and fastest-
growing market for wildlife. Rising incomes in China are stimulating
demand for a wide range of Laotian species, both for consumption and
use in traditional Chinese medicine.

This has pushed prices to the level where many animals have become
"too expensive to eat" for local villagers; instead, dead and living
wildlife is hawked to traders for eventual resale on the Chinese
market. In China, the remains of a rare Laotian tiger may sell for
more than $70,000.

"The escalating illegal wildlife trade in Southeast Asia is driven by
increasing affluence, and therefore especially by demand from China,"
said Dr Richard Thomas of Traffic, a wildlife trade monitoring
network. "Boten in particular may be a hotspot for smuggled wildlife
as it is the main trade crossing between Laos and China, and
endangered species have frequently been observed there."

Beyond Boten, the defaunation of Laos is particularly bad along Route
3, with the new highway driving widespread deforestation and wildlife
poaching. Vast tracts of forest along the road have been logged for
timber and converted for teak or rubber plantations, while hillsides
have been burned for sticky rice cultivation. Most of the money for
these activities comes from Chinese business owners who not only
provide finance, but also sell snares and traps and place orders for
fresh wildlife, guaranteeing a market for local hunters and smugglers.

Although the first rubber plantations in northern Laos were planted as
recently as 1994, Chinese investment has accelerated coverage
dramatically. China is projected to consume 30% of the world's rubber
production by 2020, and is relying on plantations outside its borders
to make up the shortfall from domestic production, which could be over
7 million tons.

In northern Laos, Chinese companies generally establish large-scale
plantations through massive investments. These companies sign
contracts directly with the Laotian government first, arranging the on-
the-ground set up with local villagers later on, and then employing
them on subsistence-level salaries.

This process for allocating land for rubber plantations remains open
to serious abuse. Reports from some government staff and Laotian
villagers show that Chinese companies are in effect allowed to
allocate themselves land by putting local government officials on the
company payroll. Stories of manipulation, exaggeration of benefits and
forced coercion of villages to give up land are rife. Although the
Laotian government announced a ban on granting land concessions in
2007, this has generally proved ineffective, as it is either ignored
by local officials or bypassed via gaping loopholes.

A recent report in the journal Science has warned of the "devastating
effect" that increasing the coverage of rubber plantations in Laos and
other Southeast Asian countries could have, citing significant
reductions in carbon biomass, desiccation of water sources, increased
risk of erosion and landslides, and consequent loss and degradation of
habitat. As the Yunnan government's Northern Plan calls for an
increase in Laotian rubber plantation coverage to 150,000 hectares by
2020, not to mention more than 100,000 hectares for biofuel
plantations and a step up in mining projects, the prospects for the
area's rapidly dwindling biodiversity look poor at best.

A voracious appetite for Laotian natural resources, coupled with the
availability of cheap Chinese products and the willingness of the
Chinese government to provide aid without asking questions, will
undoubtedly see China play an even greater role in Laos over the
coming decades. With Chinese companies continuing to step up
investment and an increasing flow of southward-bound Chinese migrants,
the need for a comprehensive and watertight system of regulation is
both clear and crucial.

The Laotian government is already taking some steps to prevent Laotian
people from being exploited and to protect biodiversity. "The highest
level of government does take illegal wildlife trade seriously,"
explains Bouphanh Phanhthavong of the Ministry of Agriculture and
Forestry. "The national poverty reduction plan clearly states that
environment protection is one of three pillars to reducing poverty.
The other two are economic growth and socio-cultural development. If
the natural resource base is depleted or destroyed, local people's
livelihoods will also suffer and ultimately cause more poverty."

Despite the apparent desire of the Laotian government to promote
sustainable development, however, it's obvious that some Chinese
companies and individuals are going to require a large measure of
control from Beijing.

The Chinese government's "Guidelines for Environmental Conduct
Overseas" are expected to be issued soon by the Ministry of
Environmental Protection and other offices responsible for the
management of overseas investment, aid and loans. These should help to
improve the environmental impact of China's financial policies and
regulate Chinese companies' environmental conduct overseas.