Yunnan proposes cross-border special zone with Laos

July 21, 2012

According to Yunnan Ribao 云南日报, Yunnan Province has proposed to Laos’ Luang Namtha Province to set up a Mohan-Boten cross-border special economic zone (SEZ) based on the “two countries, one zone; separate administrations, joint planning” 两国一区、分别管理、统筹协调 model. According to the proposal, this would require an agreement between the two national governments.

Earlier this year, the prefect of Sipsongpanna, Dao Linyin 刀林荫, announced that a Chinese-Lao cross-border nature reserve established in 2009 would be expanded to 1.5 million mu (100 thousand ha), in part to promote tourism. A previous report by Xinhua claimed that the initiative encompassed 550 thousand ha in Sipsongpanna Prefecture and Laos’ Phongsaly Province, and that talks were underway with Burma’s Shan State Special Region 4 to create a similar zone.

Currently, the Golden Boten City Special Economic Zone in Laos is the private concession of a Chinese company, which recently acquired it from its earlier, Hong Kong-registered concessonaire. While the latter had sometimes conflicted relations with the Yunnan officialdom — and was eventually forced by the Chinese government to roll up its gambling business — the new owner is said to be a high official from Sipsongpanna Prefecture in Yunnan, and may be better positioned to broker between the two governments. Although Golden Boten City has often been described by Western observers as essentially an extension of China, I argue in a recent article that its private investors used the paraphernalia of the Chinese state to enhance their own developmental clout. But if the new plan is implemented, the special zone will become more closely intertwined with Chinese bureaucracy, and questions about sovereignty may have to be asked anew.

Lao railway contract called a hoax

May 13, 2011

On the eve of a heralded groundbreaking ceremony for the Lao section of the Pan-Asia Railway (see News, 10 March 2011), scheduled for 25 April, the head of the commercial section of the Chinese embassy in Laos, Zhang Yucheng 张玉成, told Southern Weekend 南方周末 that he has “never heard of it.” Hardly believable, since major Chinese newspapers like China Youth Daily reported on the event.

According to the article, the embassy posted on its website a disclaimer that all work on the railway is done by the Chinese Ministry of Railways’ China-Lao Railway Project Coordination Group, and no contract has been awarded to any private company. A consortium made up of the Kunming Railway Bureau, China Railway Engineering (中国中铁), Sinohydro, and Southern Carriage Group (南车集团)has been organised to establish an investment company called 中铁磨万铁路有限公司 (Chinese Railways Boten-Vientiane Ltd.). A similar company is being organised on the Lao side.

Before the dismissal of China’s previous minister of railways on charges of graft, it had been widely reported that a BOT contract for the Lao section of the Pan-Asia high-speed railway had been awarded to a previously unknown Hunan-based private company called Xiaoxiang.

In a later article, 21st Century Economic Herald, Southern Weekend’s sister publication, confirmed that the Kunming police has launched a fraud investigation into Xiaoxiang’s activities. Police say that the company pretended it had gained the contract in order to defraud subcontractors of advance payments. The China-Lao Railway Coordination Group says that Xiaoxiang approached them with a proposal for a BOT contract but was rejected.

But how can a private company without a licence for foreign contracting activity claim for months that he received a government contract of this size, and have this claim reported in major national media, without being either contradicted or investigated? Why did the Ministry of Railways wait until now with announcing who was supposed to be in charge? Xiaoxiang referred to a Lao government decree — so perhaps it did receive a contract from the Lao side, without Chinese government approval. Also, according to the 21st Century Economic Herald report, two Chinese generals were present at the launching ceremony of the company.

The Southern Weekend article’s tone suggests that exporting high-speed railways remains a priority for the Chinese government. Chinese control of the terms of a future global high-speed network, this newspaper with a liberal reputation said, is like controlling the terms of the law of the sea; it would create new rules of the game for the international economy.

Gezhouba Group on overseas CSR

April 20, 2011

In an exercise that is becoming increasingly common in China, Gezhouba Group, one of the major hydropower contractors in Southeast Asia and Africa, has released its 2010 corporate social responsibility report. Chapter 6 of the report is entitled “Overseas CSR.”

The report singles out Gezhouba’s second place in CCTV and the China-Africa Friendship Association’s China-Africa Friendship Award contest (see News, 22 December 2010) as proof of its social engagement. Going into detail — the section is about half a page long — the report first states that the construction of hydropower stations and roads contributes to the recipient countries’ economic development, and that Gezhouba “actively pays all kinds of tax” and “enthusiastically accepts the supervision of recipient countries’  tax and audit authorities.” In other words, its major CSR achievement is its core activity itself, and the fact that it conducts it lawfully.

Next, the report states that Gezhouba has provided 10,300 local jobs Not an insignificant number, but not very high either considering the number of countries and the fact that most jobs are unskilled.

Next, the report contains details of what it calls “participating in charity building” 参加公益建设. These include drilling four wells in Malabo, the capital of Equatorial Guinea and donating cash, as well as Lenovo computers and writing implements to schools and orphanages in Kashmir, Ethiopia, and Libya. The most surprising item is a donation of 10 million kip (about 850 euro) to the Lao ministry of energy and mines.

Yunnan paper praises Khmu for growing vegetables in Laos

April 8, 2011

In an article written by 赵汝碧 Zhao Rubi and 李曼曼 Li Manman, the Yunnan Daily praises the Khmu people (classified as a subgroup of the Bulang) of Nanqian, a border village in Mengla County, for the “great changes” in their “thinking and outlook” (思想观念发生了大转变) that are making them “blast a road to riches” (闯出了一条致富路) by “engaging in transnational development” (跨国搞开发).

Three years ago, Nanqian was a “backward and isolated” (封闭落后) village with yearly incomes around 1,000 yuan (under $200). In 2008, villagers started planting rubber and vegetables under a government-promoted scheme, which, according to article, “not only helped them leave poverty behind but changed their thinking and outlook, inducing them to aspire and enthusiastically plan for wealth 思富、谋富的愿望和热情”. They founded an agricultural cooperative, which first expanded farming to neighbouring villages and then organised villagers to rent 5,000 mu (330 ha) of land in Laos’ Phongsaly Province, just over ten kilometres away, and plant potatoes, beans, and gourds there to sell them to Chongqing and Shanghai. (In China, the cooperative farms on 600 mu.) In 2010, the cooperative realised sales of 2.3 million yuan, and villagers’ incomes increased to around 10 thousand yuan.

Although the article is dated 1 April, it is likely not a joke, as it fits into a trend of southwest Chinese borderland farmers crossing the border under contract arrangements for rubber (by now studied by a number of resderachers including Weiyi Shi, Antonella Diana, Janet Sturgeon, Li Yunxia, and Kevin Woods), banana (see the previous news item), and cassava. It also fits into a mode of reporting in which these “transnational farmers” — particularly if they are also members of “backward minorities” –are praised as modernisers of themselves and the other, the theme of a recent panel organised by Noel Salazar and myself at the Association for Asian Studies conference in Hawaii. As Antonella Diana reported earlier, and Janet Sturgeon in a paper at a different panel of the same conference, these  views are sometimes internalised by the farmers themselves.

Diana and Sturgeon have written cross-border farming arrangements based on ethnic kinship among Dai (Tai Lue) and Akha/Hani; this is the first time I come across a mention of the Khmu, which is notable because in Laos, the Khmu are one of the most marginalised highland groups. Their livelihoods have been greatly disrupted by the incursion of the cash economy and who, according to research by Chris Lyttleton, are overrepresented among prostitutes in northern Laos.

New studies of Chinese investment in the Mekong

February 24, 2011

As more substantial research is being done on the impact Chinese investment in northern mainland Southeast Asia (I think there are now half a dozen researchers working in northern Laos alone!), so the quality of analysis improves. I recently read several impressive pieces, including two articles by Danielle Tan, based on her dissertation research and published by IRASEC, and one by Kevin Woods on New Mandala. (Tan’s master’s thesis, on the Chinese in Cambodia, was published as a MqVU working paper.) A third new paper, by Mike Dwyer on northern Laos, emphasises the agency, and power gains, of local village elites in and from rubber planting, and criticizes views that interpret this process as erosion of sovereignty.

Tan and Woods agree with Dwyer that Chinese investment does not bring about a territoiral expansion of Chinese state sovereignty, but unlike him, they argue that it in fact reinforces the expansion of lowland (Lao/Burmese) state control. The thrust of the two papers is similar, but Tan elaborates the argument in much more detail. Chinese businessmen, she argues, have very nearly regained the status of tax farmers that they possessed under colonial rule. They provide farmers with seedlings (mostly of rubber palm, but also other cash crops), fertilizer, and access to markets they collect produce and take care of its passage through the Lao-Chinese border, including negotiating payment with customs officials. “By producing rent and new opportunities of redistribution among influential personalities, they contribute to the viability of the state. This alliance of networks thus constitutes a strategy [or the Lao state] to impede the emergence of a counter-elite” in the form of a native moneyed class (p. 16), the same function “middlemen minorities” played under colonialism or Chinese in Indonesia under Soeharto. Thus, Chinese investment and migration helps to render the highlands “legible,” governable and profitable for the lowland state while minimising the risk of new regional centres of power emerging.

Eximbank official critical of Chinese companies’ communications abroad

February 24, 2011

Li Fusheng, Deputy General Manager of the Department of Assessments and Approvals (评估审查部), who is also a professor at the graduate school of the Chinese Academy of Social Sciences, published an article in the widely read Chinese-language edition of Global Times, often distinguished by its nationalist tone. This article draws conclusions from Li’s “inspection trip” to Laos and Cambodia, organised by a Western NGO.

Li writes that Chinese companies tend to respond to local criticisms (which he describes as “not the mainstreamvoices”) by saying that their practices are not the best, but also not the worst. This, he writes, is true, but not a convincing communication strategy. Li stresses the importance of conducting proper environmental impact assessments, but devotes most of his space to urging companies to communicate better and respond to critical voices.

This is not a particularly new or unusual opinion in today’s China, but considering that other commentators continue to view NGOs as nothing but a disturbance, it attests to the usefulness of the approach taken by those Western NGOs who are focusing on bringing Chinese scholars and officials into contact with overseas critics.

China’s railways minister under investigation

February 15, 2011

On 12 February, Xinhua reported that China’s minister of railways, Liu Zhijun, has been placed under investigation. It is presumed that he will be charged with corruption and replaced.

Although there have not been any indications that the case relates to contracts overseas, it is likely that the recent scandal surrounding the Mecca Light Railway, which made a huge loss and was one of the high-profile cases seemingly leading the State Assets Administration to issue a new directive on state enterprises’ overseas investments, has played a role. Compared to that, the award of the Lao railway construction contract to the mysterious Xiaoxiang Company is small fry, but it again signals that the ministry and its affiliated parastatals are likely involved in murky and possibly unprofitable transactions abroad. (In an article published three days after Liu’s fall, Xiaoxiang’s chairman, Li Zhanqun, commented that it was much easier for a private company to get the contract because state companies’ offers needed to be approved by the Development and Reform Commission.)

Liu’s innovations included the involvement of provincial governments as shareholders in the construction of railways in exchange for land provided by them. This made provinces eager to compete for high-speed railways. This is the model that seems to be applied now to Laos.

Private contractor gets China-Lao railway contract

January 12, 2011

 21st Century Economic Herald reports that a private company called Yunnan Xiaoxiang Pan-Asia Investment Co. got a BOT contract for constructing the Lao section of the much-talked-about China-Singapore “Pan-Asia” railway. The company, whose name suggests a connection to Hunan Province, was registered in 2010, and its chairman, Li Zhanqun, is unknown but claims to have spent many years in Southeast Asia. The company’s registered capital is $1 million, and the shareholders are three private individuals. There are currently many Hunanese migrants in Laos, but they tend to be very small businessmen.

The total investment in the Lao part of the railway is estimated at 40 bn yuan. According to Li, some of this will come from the $3 million provided to the Lao government by UNDP, about 15% will come from Chinese government aid, and the rest, about $2 bn, will be raised overseas. This clearly raises questions: first, China has not previously provided direct grants-in-aid of anywhere near this scale. Second, how and why would an unknown person able to and entrusted with raising two billion dollars overseas? It is almost certain that someone who does not want to reveal their identity is behind Li, but it is not clear why. Perhaps because the Chinese subcontractors who will carry out the construction and will certainly benefit from state loans would rather deal with a Chinese contractor? Or perhaps because the real investors are connected to high officials and do not want this revealed?

A Chinese manager at the Golden Triangle Special Economic Zone in Laos suggested that the investors might be gambling barons, like the owner of Malaysia’s Genting resort. He thought that, among the legal industries, only gambling tycoons have the cash to pay $2 bn, and it would be in their interests to get more Chinese gamblers via the railway.

But from my perspective the more interesting aspect of the deal is this: Li says that Xiaoxiang  will operate the railway and get all the income for it (he doesn’t mention the time period), and that in return for the investment it will also receive logging, mining and industrial concessions. He also says that the project will need 40-50 thousand Chinese workers. In other words, he pictures a massive concession along the lines of the China Eastern Railroad, constructed by Russia at the beginning of the 20th century, which remained under Russian control and whose employees enjoyed extraterritorial rights until the Japanese occupation in 1937. These Russians built and ran the city of Harbin, even though technically they had no concession rights, unlike, say, foreign powers in Shanghai.

So if the construction of the Golden Triangle SEZ, with a 99-year lease and Chinese management, recalls Hong Kong, the railway would hark back to another form of extraterritoriality.

The question is how much of this is true, and whether Peking likes it. The construction may well be embarrassing and unwelcome for the national government. Conflicts between Yunnan Province and Peking about how to deal with neighbouring countries are routine, with the former looking more at profit and the latter more at the long-term strategic fallout.

Hydropower company reports on impact assessment experience

December 31, 2010

China International Water & Electric Corp., an operator of BOOT hydroelectric projects abroad, posted an account of what it calls its “Nam Lik model” of corporate social responsibility, developed at the Nam Lik hydropower plant in north central Laos. The report describes CSR as not only including contributing to solving “local labour and resource issues,” i.e. creating jobs and economic growth, but also “charitable behaviour such as helping people in backward areas develop education, social welfare and health care, … gradually develop social activities, and to gain a publicity effect through charitable activities, improving the corporate image and consumers’ approval rating.”  

The specific activities undertaken under the CSR label are nonetheless probably not quite what Western critics have in mind. In the case of Nam Lik 2, they included setting up an environmental protection office, making a donation towards the ASEAN Games held inVientiane in 2009, building a primary school and giving villagers cash handouts.

The description of the environmental impact assessment (EIA) process suggests a model focused on government approval rather than independent evaluation.

First we conducted a census of the population, property, and housing in the village and took photographs. The first draft report was sent to the Lao environmental protection authorities; then the provincial government dispatched county officials for an inspection; after revising the EIA, it was returned to the provincial authorities for discussion … after approval by a special conference at the provincial level, it was sent to the central environmental office. … The main objective of the above was to prepare for offering villagers resettlement compensation and house reconstruction funds.

It is unlikely that provincial, let alone county officials would have enough power to object to the results of an EIA, even if they wanted to. In any case, the only issue at stake was the amount of compensation for villagers. This is perhaps a step forward compared to the reputation of Chinese companies for ignoring EIA and social impact assessment altogether, but perhaps not quite “corporate citizenship” yet.

Aid race in Laos continues

July 28, 2010

A look at today’s official Vientiane Times (all foreign news are from Xinhua!) headlines suggests that the aid race in Laos is still on — or at least that the government wants to cleverly present it in this way, lest some parties feel like withdrawing from it after the recent Chinese announcement of 18 new infrastructure projects in Laos, including a railway from Vientiane to Mengla in Yunnan.

A piece called “Roads built for SEA Games not up to standard” (pp. 1, 3) cites an official as stating that parts of a road built by a South Korean contractor using a South Korean low-interest loan for the Southeast Asian Games last year have already developed potholes, as have some Chinese-built roads. Another article (Somxay Sengdara, “Korean volunteers deliver much needed technical training,” p. 2) highlights another aspect of Korea’s aid, which in most respects is similar to China’s. This is not a new discovery, but it still has not attracted any attention as far as I know. (We also know very little about Chinese volunteers, an interesting issue as it  links state projects with China’s emerging middle-class do-gooderism.) 

A report on the uses of Japanese aid and an article on the World Bank’s environmental activities completes the first three pages.