Category Archives: Economic development

An alternate past/future for Mekong River dams under the UN Watercourses Convention: Part 1

This article is the first in a three part series looking at dams in the Mekong. 

Damming the Mekong: Unprecedented threats to the river and its people

The lifeblood of the region, the Mekong River (known as the Lancang in China) and its many tributaries flow through six countries: China, Myanmar, Laos, Thailand, Cambodia and Vietnam. Its resources affect the lives of over 70 million people who rely on it daily for food and/or work, but these livelihoods are facing growing threats.1,2,3 Today, the mighty Mekong is at an unprecedented juncture in its ongoing survival, particularly from hydropower dam development.

Much of the focus of the Mekong is divided between the upper Mekong, which includes China and Myanmar, and the Lower Mekong, encompassing the remaining four states. Eleven dams are being planned or built on the Lower Mekong Basin’s mainstream with many more anticipated along its extensive tributaries.4,5 Most of these dams come with significant social and environmental impacts.

Source: WWF

Most dams trap fluvial sediment, creating erosion and reducing nutrients in the river, directly affecting agricultural production, so each additional dam means less rich soil downstream.11 Agricultural outputs from Vietnam’s Mekong Delta, particularly rice, have already been severely impacted via China’s Lancang dams scheme.12 The situation has become so critical that Vietnam recently went to the extent of asking China to discharge water from the Jinghong Dam on the Lancang in Yunnan Province to help alleviate conditions in the Delta and seems intent on requesting other upstream states to do similarly regarding river flows.13,14 Thailand’s need for water during the current drought has led it to set up temporary pumping stations to divert 47 million cubic metres of water from the Mekong, causing concern for other downstream countries.26 Additional Mekong dams, compounded by ongoing drought and rising sea levels due to climate change, will only exacerbate these issues.11,15

While some riverine communities may be displaced as their fishing or farming lifestyles become unsustainable, other communities, often indigenous peoples with a strong cultural connection to their ancestral land, are being relocated to make way for dam reservoirs.16,17

Thus, it is no wonder that disputes have emerged between various Mekong basin states as to the domestic, transboundary, environmental, and social impacts of certain dams. Part 1 of this three-part article examines the existing legal framework for regulating dam development in the Mekong and how its legal gaps and ambiguities have led to ongoing disputes, specifically regarding the Xayaburi Dam under construction in Laos.

1995 Mekong Agreement and MRC

Entering into force on 5 April 1995, the Agreement on the Cooperation for the Sustainable Development of the Mekong River (Mekong Agreement) for the Lower Mekong Basin states of Cambodia, Laos, Thailand, and Vietnam was the celebrated river basin treaty of its time and a major legal milestone.

Divided into six chapters, the Mekong Agreement’s provisions broadly set out the roles and responsibilities of riparian – being ‘of the river’ – states in governing the seasonal flows and major uses of the Lower Mekong Basin. It is accompanied by the Procedures for Notification, Prior Consultation and Agreement (PNPCA), which sets out key timeframes, standards, and processes for states regulating dam development. It contains separate procedures for projects on Mekong tributaries, plus intra-basin uses on the mainstream (proposing states are only required to notify fellow riparians of planned projects) versus inter-basin and other mainstream developments (proposing states must submit the project for prior consultation with MRC member states with the aim of reaching an agreement on any contested aspects). The PNPCA Guidelines elaborate further on implementing these processes. Both the PNPCA and Guidelines are not ‘international treaties’ in the strict legal sense as they are supplementary to, and thus sit outside of, the Mekong Agreement ratified by MRC member states.18,19

The Mekong river. Photo: Remy Kinna

The Mekong river. Photo: Remy Kinna

As Bearden (2010)18 aptly suggests, the Mekong Agreement and the MRC have successfully epitomised what a transboundary watercourse agreement and river basin commission should be in many respects, especially given the ever-changing geo-political and environmental contexts of the basin and its member states. However, twenty years later, the Mekong Agreement and PNPCA have collectively shown identifiable legal weaknesses.The Agreement also established the MRC as an inter-governmental institution with the aim to foster cooperation between basin states to effectively manage river usage. Having not yet decided to join, China and Myanmar hold official observer status as MRC ‘Dialogue Partners’.

Legal gaps and limitations for governing dams

The following critical legal gaps in the Mekong Agreement and the PNPCA have led to varying interpretations on its basic standards, timeframes, and processes for dam construction thus fostering subsequent disagreements among MRC states:

  • Lack of clear specifics for key processes under the Agreement and PNPCA’s standards, timeframes, and procedures thus leading to inconsistency in their practical application;
  • Exclusion of tributary dams from ‘prior consultation’ regulations under the PNPCA; and
  • PNPCA and Guidelines being widely perceived as not legally binding on states.2,18,19,20,21

Another significant limitation of the Mekong Agreement and the MRC is its circular mechanism for dispute resolution. As it stands, the Agreement requires states to peacefully resolve disputes or, when necessary, to refer the dispute to the MRC for further negotiation. However, the MRC refers unresolved matters back to states to use diplomatic means unless, as a last resort, they chose to invite third party involvement. Eventually, if no resolution is reached, states can essentially ‘agree to disagree’ as has occurred with the Xayaburi Dam and its PNPCA process (explored in Parts 2 and 3 of this article). Such stalemates often leave the disputing parties dissatisfied and can breed distrust for future processes.

Frustrated at the perceived inability to efficiently resolve disputes and clarify processes for dam developments, including the PNPCA, bilateral ‘Development Partners’ have considerably reduced their funding to the MRC for the 2016-2020 budget.22,23 Large-scale restructuring is scheduled and relocation of the Secretariat headquarters from Laos has even been suggested as a possibility.22,24 After years of calls for greater transparency and improved efficiency, the MRC is currently undergoing such significant changes that its ability to effectively govern the river’s resources long-term is at stake.24,25

Mekong in 2016: A basin under threat, agreement under scrutiny, institution undergoing change

As dam construction on the Mekong rapidly accelerates, states’ legal obligations under the Mekong Agreement and PNPCA, as well as the mandate of the MRC to help guide and resolve disputed procedural matters, need clarifying and strengthening to evolve and cope with these challenges.

Given the issues outlined above, Part 2 of this three-part article will next investigate the practical implementation of the Mekong Agreement and PNPCA via the Xayaburi Dam ‘prior consultation’ process, examining the specific contested procedural and legal elements. The potential benefits of the 1997 United Nations Convention on the Law of the Non-navigational Uses of International Watercourses (UNWC) – the most authoritative global treaty concerning management of international rivers – being applied to the Lower Mekong Basin are subsequently explored.

References:

  1. Vidal, J. (2015, November 26). Mekong: a river rising. The Guardian. Available from:http://www.theguardian.com/environment/ng-interactive/2015/nov/26/the-mekong-river-stories-from-the-heart-of-the-climate-crisis-interactive
  2. Hirsch, P. (1999). Nature beyond the nation state symposium: beyond the nation state – natural resource conflict and “national interest” in Mekong hydropower development. Golden Gate Law Review, 29, 399
  3. Osborne, M. (2004). River at risk: The Mekong and the water politics of China and Southeast Asia. Lowy Institute for International Policy Paper 02. Longueville Media, New South Wales, Australia
  4. Goichot, M. (2016, January 14). UN convention could help solve Mekong pact’s weaknesses. Phnom Penh Post. Available from: http://www.phnompenhpost.com/analysis-and-op-ed/un-convention-could-help-solve-mekong-pacts-weaknesses
  5. International Rivers (2015, November 15). Guest Blog – Dams: Don’t Risk What You Can’t Afford To Lose. Available from: http://www.internationalrivers.org/blogs/263/guest-blog-dams-don-t-risk-what-you-can-t-afford-to-lose
  6. Than, K. (2011). New Mekong Dam a Go, and a Blow to Megafishes? National Geographic. Available from:http://news.nationalgeographic.com/news/2011/03/110324-mekong-river-endangered-megafish-xayaburi-dam/
  7. Gaworecki, M. (2016, January 12). Scientists sound alarm over hydropower’s impacts on tropical fish biodiversity.Mongabay. Available from: http://news.mongabay.com/2016/01/scientists-sound-alarm-over-hydropowers-impacts-on-tropical-fish-biodiversity/
  8. Turton, S. (2015, October 22). Mekong dams will wipe out fisheries, study says. The Phnom Penh Post. Available from: http://www.phnompenhpost.com/national/mekong-dams-will-wipe-out-fisheries-study-says
  9. WWF (2012, August 27). Mekong dams could rob millions of their primary protein source. Available from:http://cambodia.panda.org/news_cambodia/press_releases/?uNewsID=206032
  10. Henderson, S. (2013, December 3). Mekong Dams a Long-Term Risk to Food Security. Cambodia Daily. Available from: https://www.cambodiadaily.com/archives/mekong-dams-a-long-term%E2%80%88risk-to-food-security-48415/
  11. Khadka, N.S. (2015, October 20). Climate Change: Mekong Delta heads for troubled waters. BBC News. Available from: http://www.bbc.com/news/science-environment-34407061
  12. Gillet, K. (2011, August 21). Vietnam’s rice bowl threatened by rising seas. The Guardian. Available from:http://www.theguardian.com/environment/2011/aug/21/vietnam-rice-bowl-threatened-rising-seas
  13. Tiezzi, S. (2016, March 16). Facing Mekong Drought, China to Release Water From Yunnan Dam. The Diplomat. Available from: http://thediplomat.com/2016/03/facing-mekong-drought-china-to-release-water-from-yunnan-dam/
  14. Viet, D. (2016, March 16). Vietnam takes urgent action to rescue Mekong River Delta. VietNamNet Bridge. Available from: http://english.vietnamnet.vn/fms/environment/152461/vietnam-takes-urgent-action-to-rescue-mekong-river-delta.html
  15. Choonhavan, K. (2014, April 30). Vietnam screams for halt to Mekong dams as delta salts up. The Nation. Available from: http://www.nationmultimedia.com/opinion/Vietnam-screams-for-halt-to-Mekong-dams-as-delta-s-30232520.html
  16. IRIN. (2011, July 29). LAOS: Villagers brace for relocation as dam project moves forward. IRIN. Available from:http://www.irinnews.org/report/93355/laos-villagers-brace-for-relocation-as-dam-project-moves-forward
  17. Titthara, M. (2016, January 7). Trapped between two dams. Mekong Eye. Available from:http://www.mekongeye.com/2016/01/26/trapped-between-two-dams/
  18. Bearden, B.L. (2010). The legal regime of the Mekong River: a look back and some proposals for the way ahead.Water Policy. 12, 798
  19. Rieu-Clarke, A. (2015). Notification and consultation procedures under the Mekong Agreement: insights from the Xayaburi controversy. Asian Journal of International Law. 5(1), 143
  20. IUCN. (2016). A window of opportunity for the Mekong Basin: The UN Watercourses Convention as a basis for cooperation (A legal analysis of how the UN Watercourses Convention complements the Mekong Agreement): IUCN. 27pp. Available from: http://www.3sbasin.org/publication/download-documents.html?download=99:a-window-of-opportunity-for-the-mekong-basin-the-un-watercourses-convention-as-a-basis-for-cooperation
  21. Kinna, R. (2015, November 24). UN Watercourses Convention: Can it revitalise the Mekong Agreement 20 years on?. Mekong Commons. Available from: http://www.mekongcommons.org/un-watercourses-convention-can-it-revitalise-mekong-agreement-20-years-on/
  22. Cox, J. (2016, January 13). Forecast Stormy for Mekong, Commission Says. Khmer Times. Available from:http://www.khmertimeskh.com/news/19880/forecast-stormy-for-mekong–commission-says/
  23. Turton, S. (2015, June 25). Mekong body risks losing funds: donors. The Phnom Penh Post. Available from:www.phnompenhpost.com/national/mekong-body-risks-losing-funds-donors
  24. Hunt, L. (2016). Mekong River Commission Faces Radical Change. The Diplomat. (22 January, 2016). Available at: http://thediplomat.com/2016/01/mekong-river-commission-faces-radical-change/
  25. International Rivers (2008, March 27). MRC’s crisis of legitimacy and relevancy challenges new CEO: Regional Groups. Available from: https://www.internationalrivers.org/resources/mrc-s-crisis-of-legitimacy-and-relevancy-challenges-new-ceo-regional-groups-3177
  26. Lee, G. & Scurrah, N. (2009). Power and responsibility – The Mekong River Commission and Lower Mekong mainstream dams. A joint report of the Australian Mekong Resource Centre, Sydney University and Oxfam Australia. Available from: http://sydney.edu.au/mekong/documents/power_and_responsibility_fullreport_2009.pdf
  27. Cochrane, Liam. (2016, March 17) Mekong River diverted into Thailand’s waterways, worrying drought-stricken neighbours like Vietnam ABC News. Available from: http://www.abc.net.au/news/2016-03-18/mekong-river-thailand-diverts-worries-neighbours/7256678

This article was first published here on the website of the Global Water Forum. It is reprinted with permission of the author and Global Water Forum. 

Rémy Kinna is an Australian international water law, policy and governance specialist and Principal Consultant with Transboundary Water Law (TWL) Global Consulting (www.transboundarywaterlaw.com) currently based in Phnom Penh, Cambodia. He is an Honorary Research Associate with the Institute of Marine and Environmental Law at the University of Cape Town, South Africa, and an Expert – International Water Law and Policy with the London Centre of International Law Practice’s Centre for International Water Law and Security. Rémy can be contacted via email (remy@transboundarywaterlaw) or found on TwitterAll views and errors remain those of the author and do not represent those of the states, organisations and individuals mentioned in this piece.

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Thailand bets on China-led AIIB to finance massive infrastructure needs

Will China's AIIB-backed 'railway diplomacy' be enough to jumpstart Thailand's lagging economy?

Will China’s AIIB-backed ‘railway diplomacy’ be enough to jumpstart Thailand’s lagging economy?

On January 26, Thailand’s cabinet approved a budget of 52.82 billion baht (US$1.47 billion) to join the China-led Asian Infrastructure Investment Bank (AIIB).

Thailand will hold around a 1.43 percent share of the bank with payments beginning in five installments of 2.112 billion baht (US$58.90 million) due by the end of 2019.

“As the country [has] aggressive plans to improve its much needed infrastructures, the AIIB would offer great opportunities in terms of more loan availability” explains Nithi Kaveevivitchai, a research economist at the Bank of Ayudhya.

Thailand’s junta is attempting to revive the country’s flailing economy with an ambitious spending program of over US$100 billion that would include large-scale infrastructure upgrades for the country’s railways and roads, as well as air and seaports. Being one of the fifty-seven founding members of the AIIB, Thailand could potentially receive cheaper loan rates and more flexible lending conditions from the Beijing-based bank, compared against the US-led World Bank or the Japan-led Asian Development Bank.

The Thai government foresees it will benefit from intensified diplomatic rivalries between China and Japan. During a speech in April 2015, Thailand’s energy minister Narongchai Akrasanee, cannily asserted that “one thing we have learned is that if we welcome the Chinese, the Japanese will come running.”

Support for the AIIB in Thailand has not been unanimous, however. Kasit Piromya, a former foreign minister and current advisor to the Democratic Party of Thailand, criticized the creation of the AIIB as “part of China’s global strategy to dominate” and argued at the Asian Financial Forum that “China will be dictating terms and that will further weaken the Asean community.”

Since seizing power, Thailand’s military generals have instead sought to deepen political and economic ties to China, which is now the country’s largest trading partner. “It has been analyzed that any related projects that could benefit the supply chain network and trading routes between the ASEAN region and China would receive great attention from the AIIB,” assesses Nithi Kaveevivitchai.

The Sino-Thai railway link, which aims to transform Bangkok into the hub of China’s ambitious Pan-Asia Railway Network, appears to be a particularly likely candidate for an AIIB infrastructure loan. After months of bumpy negotiations – during which Beijing insisted on downgrading the railway from high-speed to medium-speed – the project saw a breakthrough in January 2016 when China agreed to Thailand’s demand that it slash its interest rate from 2.5% to 2%.

The Chinese government had long insisted on a 2.5% rate, arguing that Thailand was now an upper-middle income country, notes Mr. Nithi.

“Whether [the] AIIB will be used to fund this project is still too early to say… it could be seen as a good alternative for funding, especially if the development bank can offer a more competitive lending rate,” he adds.

The railway is currently facing further uncertainties due to its estimated budget of 500 billion baht (US$13.08 billion) and the Thai government is asking China to take more financial responsibility for the project.

Thai Deputy Prime Minister Somkid Jatusripitak told the Nation (Thailand) on February 5 that “Thailand was requesting that China be responsible for civil construction and related work for the 800km-plus railway track instead of just providing trains, rolling stock and related equipment, as the scheme is mutually beneficial so profits should not be the only factor for consideration.

In addition to issues of cost, critics in Thailand have asked whether the project is actually beneficial to the country, which has no mass goods in need of rail transit.

In parallel to the Sino-Thai railway link, Thai and Japanese authorities recently announced they have launched on a trial basis a train-delivery service using 12-foot long containers at Nong Pla Duk Junction in Ratchaburi province.The aim would be to eventually connect the junction to the Dawei deep-sea port in Myanmar, where Thailand has been developing a special economic zone (SEZ) with Naypyidaw since 2012. The long-delayed project was recently joined by Japan in 2015 and has the ambitious aim to become the gateway for the Mekong region to the Indian Ocean. China, however, has also expressed interest in creating a Dawei rail link, intimating a likely point of competition in the future. 

While it remains too early to be seen whether Minister Narongchai will be proven right, using the AIIB to expedite rail infrastructure loans could significantly help China  secure its fragile ascendancy over Japan in terms of ‘railway diplomacy’, as the two countries continue to compete for contracts across Southeast Asia.

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China’s Key Cities: From Local Places to Global Players

China projects a huge and continually growing profile and impact on the world stage. Much of this Chinese influence globally is often anchored to and channeled out by its key cities. Shanghai towers over all these cities in what it stands and functions for China, as the country’s financial and trade centre, largest port (also the world’s top container port), and gateway to China’s huge domestic market. As such, Shanghai gets a lot of attention from the global business community, especially when its stock market tumbled recently and sent shock waves around the world.

Besides Shanghai, a variety of other cities have become more important for China, and the world economy, for that matter. A number of these cities are well known for their significant historic and contemporary economic and cultural roles such as Guangzhou and Xi’an. Other cities have risen from unknown origins to prominent economic centres like Shenzhen. There are also some much less known cities that have grown into new regional hubs with strong global connections. You most likely have not heard about them, names like Ruili and Yiwu.

In this article I take a new look at China’s key cities by focusing on two of their salient features. These cities are drivers of China’s local and regional economic growth. They also serve as bridges to link China’s varied local economies to regional and global markets. I examine both roles in how they play out in similar ways across four very different cities in scale and other dimensions: Shanghai, Chongqing, Yiwu, and Ruili (see their locations on Map 1).


Map1

Map 1: The Location of Four Key Cities in China: Shanghai, Chongqing, Yiwu and Ruili

Shanghai: Leading Nationally and Bridging Globally and Regionally

Shanghai’s transformation has been heavily studied over the past two decades. Yet here is another interesting way to look at how Shanghai itself has changed in leading China’s economic growth and global integration. Compared to all major cities in China, Shanghai has undergone the most striking and sustained shift from manufacturing to services (see Figure 1).

Figure 1: Shares of Agriculture, Industry and Service in Shanghai’s GDP

Figure 1: Shares of Agriculture, Industry and Service in Shanghai’s GDP

During the first half of the 1984-2014 period, Shanghai was more of a manufacturing centre as it was built up to be during the centrally planned era from 1949 to the early 1980s. The second half from the late 1990s saw Shanghai move steadily towards a service economy. This trend not only puts Shanghai’s economic transition ahead of all other manufacturing-oriented cities in China but also places Shanghai on a similar pathway like other global cities as important service hubs.

Shanghai is indeed on track to resemble the economic profile of global cities like New York and London (see Figure 2). As Shanghai’s service sector as a share of GDP has surpassed manufacturing, its high-end or producer services like finance, insurance and real estate (FIRE) have grown faster than low-end services like retails. This shift reflects the faster and greater concentration of international banks in Shanghai, mostly in the Pudong financial district. More than half of the foreign-owned banks and their branches operating in China are registered in Shanghai. The assets of foreign banks in Shanghai accounts for 47.3% of the foreign banks’ total assets in China. Shanghai’s banking dominance today brings back its heyday in the early 1930s when it ranked the world’s third banking centre, only behind New York and London and ahead of Hong Kong and Tokyo.

Figure 2: Shares of Low vs. High-end Services in Shanghai

Figure 2: Shares of Low vs. High-end Services in Shanghai

As Shanghai marches (back) to its historic global city status, it has also been leading and driving the China’s major manufacturing cities in developing stronger services. At the same time, Shanghai plays a growing part in bridging the global economy with the Yangtze River Delta (YRD) region of which it has been the unquestionable hub (Figure 31). With the shedding of manufacturing functions to second-tier YRD cities like Suzhou, with subcontracting ties to even smaller cities, Shanghai has strengthened its position as the regional core by adding more critical and high-value-added functions such as corporate headquarters and R&D centres. By October 2014, Shanghai secured 484 regional headquarters of multinational corporations, of which 24 were Asia-Pacific headquarters, 295 investment companies, and 379 R&D centres.2

Besides being China’s premier international city, Shanghai continues to lead China’s major cities in transitioning towards a service-oriented and advanced local economy. This has also paralleled Shanghai’s stronger role in connecting and integrating the YRD region with the global economy, driving forward one of the world’s largest and most powerful regional economies.

Chongqing: Shanghai of the West

About 2,400 kilometers up the Yangtze River from Shanghai in western China is the city of Chongqing (Map 1). With over 30 million people in its sprawling administrative boundary, Chongqing may be “the largest city in the world that few people know about.” Chongqing drew some global attention in 2012 when Bo Xilai, the then Party secretary of Chongqing Municipality, was sacked and then imprisoned for what the central government labeled as corruption and other criminal activities.

If we take a much longer historical perspective, Chongqing has always loomed large among China’s major cities, even relative to Shanghai. Chongqing had a small concession zone as an inland treaty port after 1891, with a little similarity to Shanghai’s dominant treaty port status after the first Opium War in 1842. But Chongqing was hindered by its position as a mountain city close to the headwaters of Yangtze and languished as a distant backwater.

Chongqing was never cosmopolitan until the outbreak of the war of resisting Japan in 1937 and when the Nationalist government moved its capital to Chongqing in 1938. Being China’s political centre then in the first half of the 1940s propelled Chongqing to the largest financial, aviation and even cultural/fashion centre in interior China, second only to Shanghai.

Chongqing after 1949 was down and up. The uptick phase began during the Cultural Revolution. Concerned about a potential Soviet attack, the central government designated Chongqing as the core of the “Third Front” for hosting the relocated heavy industries from the coast. This turned Chongqing into a “Little Shanghai” that would lead the nation in developing defense-related machinery and ship-building industries. Chongqing ended up receiving 122 enterprises in these industries from Shanghai with a large pool of human talent in engineering and technical professions. In spite or because of this external transfer of resources, Chongqing neglected local advantages as the natural and potentially autonomous hub for the upper Yangtze region in achieving a more balanced development of housing, infrastructure and amenities of city life.

Chongqing got a big boost in 1997 when it was elevated to the fourth central government municipality besides Beijing, Shanghai and Tianjin. It would now cover 82,403 square kilometers and encompass a population of over 30 million. This designation brought about a great deal more autonomy by making it function as a province, and one of the most important ones at that, and thus setting it onto the most remarkable phase of growth and change in its long history.

Starting in 1997, the central government would give Chongqing $240 million as low-interest loans per year for the Three Gorges Dam-affected region, $80 million for building new housing for displaced residents, and refund $85 million from import taxes to Chongqing for Dam-related projects. In addition, Chongqing was allowed to lower enterprise tax for new foreign investment projects from 33% to 24%, or even to 15% if these projects were located in its economic and technological development zones.

The launch of China’s “Go West Campaign” in 2000 moved Chongqing up another notch to finally become the undisputed economic hub for the upper Yangtze region, or the “dragon’s tail” relative to Shanghai as the “dragon’s head” for the YRD. To live up to this ambitious goal, Chongqing unveiled the “One Circle and Two Wings” (see Map 2) master plan in 2007. It would accelerate the pace and spread of urbanisation and economic development from the enlarging urban core into the two largely rural subregions. It called for converting about 10 million rural residents of Chongqing Municipality to urban dwellers by around 20203, through the building up of several secondary cities like Wanzhou.

Map 2: Chongqing’s “One Circle and Two Wings” Development Plan Source: Chongqing Municipal Planning Bureau.

Map 2: Chongqing’s “One Circle and Two Wings” Development Plan
Source: Chongqing Municipal Planning Bureau.

By building up the municipal and transport infrastructure in and around these secondary cities, the municipal government can scale them up and out so they are capable of accommodating more rural people and also pushing some development impulses deeper into the distant and poorer areas of Chongqing’s sprawling regional hinterland. If successful, this strategy will replicate a similar regional bridging role as Shanghai.

Like Shanghai’s global connective functions but from a less advantaged interior position, Chongqing launched the 11,179-kilometer Trans-Eurasia Railway from southwestern China to Duisburg, Germany, through Kazakhstan, Russia, Belarus and Poland in 2011. In 2005, Chongqing also opened seven new international flights to Paris, Vancouver, Los Angeles, Sidney, Melbourne, New Delhi and Mumbai, even though they all connect through Shanghai. As labour and land costs in coastal cities like Shanghai have gone up, Chongqing has benefited by attracting more foreign investors and domestic producers to move inland. Having set up Asia’s largest laptop factory in Chongqing, US computer giant Hewlett Packard has already shipped more than four million notebook computers to Europe by the Chongqing-Duisburg railroad. This was part of the $2.5 billion worth of goods China has shipped on this route since 2011.4

 Yiwu: Relatively Small Yet Very Global

As the megacities of Shanghai and Chongqing continue to garner global attention, little remains known about China’s much smaller cities, although more of them have begun to play similar roles in driving local and regional growth and in fostering beneficial global connections. I start with the story of Yiwu. Few people outside of China have heard about Yiwu and how it has become one of the most globalised cities in China today.

A small rural town of Zhejiang province in the late 1970s and located from 300 kilometers from Shanghai, Yiwu was an early beneficiary of China’s initial wave of decentralisation and economic reform. With a lot of local autonomy, the local government steered local market and global economic forces in jump-starting rapid urban growth through careful planning and flexible policies. Instead of building many factories in spatially distinctive industrial districts like Shenzhen and other coastal cities, Yiwu chose a commercial route and charted a new path to globalise its own local economy.

From the very outset, the local government focused on promoting spatially centralised and specialised markets and vending booths for small merchandise such as handicraft items and hand tools. These commodities found home at thousands of booths amassed in the International Trade Mart (Yiwu Market) located in a huge mall-like structure of 4.7 million square meters built by the local government (see Figure 4). In 1982 there were only 705 booths in this trade centre. Fast forward to 2004 the number of booths shot up to 42,000, which are estimated to reach roughly 65,000 in 2014.

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Figure 4: Yiwu’s market has an area of 2.6 million square meters, accommodates 58,000 booths, selling over 400,000 plus goods. Source: http://101.69.178.21/purchaserservice/detail/43511.html

These booths display and sell 300,000 different kinds of merchandise goods in specialised markets for glass gifts, wooden gifts, pencils, office supplies, jewelry, toys, radios, earphones, socks, clothes, etc. Some refer to Yiwu as “The Socks City” because it supplies an enormous amount of socks to the world. In addition, 600 factories around Yiwu make about 60% of the world’s Christmas decorations.6

As small commodity booths grew in numbers and density, they attracted hundreds of thousands Chinese and international buyers and traders. The increase in commercial transactions spurred the expansion of small factories around the region surrounding Yiwu. These factories process and assemble more small merchandise to be sold at and exported from the city’s central mart. This trade-manufacturing relationship, on a much smaller scale, bears some resemblance to the dominant trading and marketing specialisation of Shanghai with backward manufacturing ties to the YRD regional economy (see Figure 3).

The regional integration of Yiwu as a globally connected small merchandise hub has fueled the ten-fold growth of the city’s population from 1990 to around one million today. Among the long-term local residents are approximately 10,000 foreign businessmen from 85 countries working for over 3,000 foreign trading companies. This has earned Yiwu the moniker as “the largest commodity wholesale market in the world” with a market index that is widely regarded as a barometer of prices and performance.

The recent installment of the Yiwu-Madrid Railroad further highlights Yiwu’s extensive global economic reach. Covering 13,500 kilometers, this railroad goes through eight different countries as the world’s longest. It begins from Yiwu through central China, joins the Trans-Eurasia Railway at Kazakhstan, continues on from Germany to France, and finally reaches Madrid. The train takes just three weeks to complete a journey that would take up to six weeks by sea. It is also more environmentally friendly than road transport, which would produce 114 tonnes of CO2 to shift the same volume of cargo, compared with only 44 tonnes produced by the train – a 62% reduction.7 This new rail line expands Yiwu’s global trade in small merchandise by making it easy to export its goods all over Asia and Europe.

Ruili: From a Small Border Town to a Major Gateway to Southeast Asia

The last city takes us back from the coastal region to the southwest, but all the way to the border city of Ruili in Yunnan province (Map 1). A sleepy town on the border with Myanmar through the 1980s, Ruili has since grown into a key city for driving lagged economic development in its border region and bridging the latter with the neighbouring Southeast Asian economies. In this process Ruili has acted a little like Shanghai, albeit on a much smaller scale, and in similar ways as Yiwu but with a smaller scope of local marketing.

The collapse of the Burmese Communist Party at the end of the 1980s was key to opening up border trade between China and Myanmar. The city of Ruili created the Jiagao Border Economic Development Zone in 1991 to facilitate trade with Muse on the Myanmar side. At Ruili’s border trade market, hundreds of petty traders and dealers from Myanmar, Bangladesh, India, Nepal, Pakistan and Thailand selling cotton, jade, bracelets, ivory items and aquatic products. The market however is dominated by Chinese and Myanmar jade traders who converge from local and other places in their respective countries to make jade the central focus of Ruili’s lively border trade.

Ruili’s importance rose much beyond a border market in June 2010 when the city became more regionally linked to China’s strategic plan to develop its vast western region. During 2012-2013, the central and local governments began to execute the “Implementation Scheme of Ruili Experimental Zone” and the “Master Plan of Ruili Experimental Zone” in order to build Ruili up to a regional hub. The Master Plan included 238 projects such as industrial parks and trading centres, which would boost Ruili as a gathering place and gateway for economic activities and flows with the neighbouring Southeast Asian economies including a new oil/gas pipeline from western Myanmar into Yunnan.8

The new infrastructure investment strengthened Ruili’s role as an increasingly open land port. In December 2013, the Ruili Experimental Zone began issuing border passes for cross-border travel, which has facilitated the growth of cross-border tourism, especially Chinese tourists visiting Myanmar. The Experimental Zone also became a testing area for foreign current exchange making Ruili the first city in China to trade Myanmar’s currency of Kyat, and also the first county-level city in Yunnan province to establish a currency exchange centre. As of June 2015, Ruili completed hundreds of business deals amounting to over $160 million.9 The cumulative economic opportunities have raised Ruili’s population from around 10,000 in 1990 to over 150,000 today including temporary migrants.

Parallel to the cross-border economic boom has been the flow of illegal or illicit activities into and through Ruili. This is not surprising considering that the China-Myanmar border zone is infamous for gambling, commercial sex, drugs, and arms trafficking. Official figures show that Ruili has 7,700 people with HIV – the second-highest prevalence incidence rate in China behind a city in Sichuan province – and 53% of the sufferers come from Myanmar.10 Of the approximately 40,000 people from Myanmar entering and leaving Ruili, more than 200 are estimated to be prostitutes, 1.6% of whom may be infected with HIV. There are also around 30,000 people from Myanmar, many of them belonging to the persecuted minority group of Rohingya, living in Ruili, adding to the challenge of local governance. As part of a broader effort to deal with drugs and prostitution and thus maintain social stability, the local government has set up clinics for Myanmese citizens who are infected with HIV or who are drug addicts in Ruili including the provision of methadone treatment (see Figure 5).

Compared to Shanghai, Chongqing and Yiwu, the frontier city of Ruili bordering the less developed economy of Myanmar faces a different balance of opportunities and challenges. These however reflect the transformation of Ruili from a local place to a global city of sort.

Figure3

Figure 3: Regionalised Global-Local Production and Value Chains Into, Through, and Out of Shanghai and the Yangtze River Delta (YRD) Region Source: See Note 1.

A multinational company owns brand names, sets product specifications, subcontracts manufacturing and controls wholesale channels and retail markets. Shanghai (central hub of the YRD) contributes land, some capital, skilled labour, some production equipment, and management expertise; provides some producer services such as accounting, insurance, legal services, custom clearance, shipping logistics and increasingly R&D talent and outputs. Suzhou, Kunshan, and Jiaxing (secondary cities in the YRD) contribute medium-cost land and labour, intermediate inputs, manufacturing expertise, and also finished products to be moved (back) to Shanghai for exports.Wujiang, Qidu and Jiangcun (third-tier cities, fourth-tier towns, fifth-tier villages in the YRD) contribute lowest-cost land and labour, some raw processed materials, and ships parts and components to secondary cities for further assembling or manufacturing.

International Implications

Despite their huge differences in history and population size, these four cities have become both the driving force and bridging agents for their rapid growth, gradual regional integration and increasing global influence. They are no longer local places that they once were, although Shanghai has been global for a much longer time. They show us why they are key cities for China today and in the future. More importantly, these four cities point two critical international implications.

First, to understand what is going on across China and its extensive global impact, we need to understand China’s key cities much better. These cities not only continue to drive and sustain China’s geographically uneven growth but also play a key role in regional integration by creating more varied and largely beneficial global connections. We can no longer only focus on the megacities of Shanghai and Chongqing, although their massive scale and economic power will continue to matter a lot more to China’s and global economy than Yiwu and Ruili. The latter cities, and many more like them, will become more important over time as they catch up in development and help bring forth the lagging regions and generate more global integration.

 

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Figure 5: Drug Users from Myanmar Collect Doses of Methadone from a Clinic in Ruili, Yunnan Province, China Source: Photo by Jiang Dong, China Daily, July 10, 2014, p. 7.

Relative to the much larger and more diversified cities like Shanghai and Chongqing, cities such as Yiwu and Ruili face the more difficult choice of how to sustain their growth and play their respective regional or global roles. The narrowly specialised economy makes Yiwu vulnerable to the price volatility in the global economy. Yet diversification beyond Yiwu’s distinctive and entrenched strength is unlikely. The border location may lock Ruili into a developmental path built on border trade unless the city can maximise its gateway position to create wider economic ties with Southeast Asia. These uncertain and contingent conditions will continue to challenge the outside world to better understand these cities.

This article was first published here and is reposted with permission of the author.

References

*I express my gratitude to Yu Xue in Shanghai for her assistance in gathering the most up-to-date data in Figures 1 and 2. This article also draws from some of my collaborative work with former and current students at Trinity College, and research partners in the United States and Shanghai.

1. This figure was adapted from Figure 4 in Xiangming Chen, 2007. “A Tale of Two Regions in China: Rapid Economic Development and Slow Industrial Upgrading in the Pearl River and the Yangtze River Deltas.” International Journal of Comparative Sociology 48 (2-3): 167-201.

2. Ren, Yuan, Jiaming Sun and Jing Gan. 2015. “Shanghai: The Rise and Future of China’s Premier Global City,” Chapter in Research Handbook on Asian Cities, edited by Xiangming Chen, Sarah Moser and Ratoola Kundu (Edward Elgar Publishing, forthcoming).

3. Chen, Xiangming. 2014. “Steering, Speeding, Scaling: China’s Model of Urban Growth and Its Implications for Cities of the Global South.” Pp. 155-172 in The Routledge Handbook on Cities of the Global South, edited by Susan Parnell and Sophie Oldfield. London and New York: Routledge.

4. Chen, Xiangming and Julia Mardeusz. 2015. “China and Europe: Reconnecting Across a New Silk Road,” The European Financial Review (February-March): 5-12.

5. Figure 11.1 in Xiangming Chen, Anthony Orum and Krista Paulsen. 2012.Introduction to Cities: How Place and Space Shape Human Experience. Oxford: Wiley-Blackwell.

6. Burchill, Billy. 2015. “The Diverse Effects of Globalization: Yiwu, China and Hartford, CT.” A senior thesis for the Urban Studies Program, Trinity College, Hartford, Connecticut.

7. Same as Note 6 above.

8. See Chen, Xiangming and Curtis Stone. 2013. “China and Southeast Asia: Unbalanced Development in the Greater Mekong Subregion.” The European Financial Review (August): 7-11.

9. Chen, Xiangming and Curtis Stone, “Relocating the City in Transborder Spaces: Relative Urbanity, Catch-up Development, and Contested Governance in the China-Southeast Asia Borderland.” Chapter under preparation for The SAGE Handbook of Urban Sociology: New Approaches to the Twenty-first Century City, edited by Ricky Burdett and Suzanne Hall (Sage Publishers, forthcoming).

10. Shan Juan. 2014. “Clinic on frontier of AIDS care,” China Daily, July 10, p. 7; extracted from http://usa.chinadaily.com.cn/epaper/2014-07/10/content_17709424.htm.

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What’s Old is New Again: Predictions for Southeast Asia 2016

Will there be more skirmishes in the South China Sea in 2016? Photo: Getty Images

Will there be more skirmishes in the South China Sea in 2016? Photo: Getty Images

Much can change in a year’s time. In January 2015, Singapore’s Lee Kuan Yew was still alive, Aung San Suu Kyi’s future as leader of Myanmar was quite uncertain and East by Southeast was not making any predictions about international affairs in Southeast Asia. But again, much can change in a year’s time.

2016 will be a critical period for geopolitics in the region, as new strategic relationships are formed and existing ones strengthened. Many experts talk of a growing polarization of the region as countries position themselves between the US and China, a trend due in large part to rising tensions in the South China Sea. The conflict will take center stage in 2016. Look for the the Netherlands-based Permanent Court of Arbitration to publish its initial findings on the Philippines’ case against China in the first half of 2016. Despite not ruling on sovereignty issues, the outcome of this case will likely anger China and lead to a more aggressive stance towards the Philippines and other claimants. As the Philippines and Vietnam rely more heavily on the US for security guarantees in the South China Sea, more US flyovers and naval patrols in the contested waters are to be expected. Look for the US Navy to begin to use Vietnam’s Cam Ranh Bay for “maintenance” purposes and to park its ships on a somewhat permanent basis  in the Philippines’ Subic Bay after joint military exercises finish in April 2016.

Conversely, look for the emerging Sino-Thai regional axis to be solidified in 2016. This relationship, despite not bringing much to the languishing Thai economy, will tighten the ruling junta’s grip on power. Thailand’s long drift towards authoritarianism will add further strains on ties with the US, its long-term external security power. Of course, the permanent white elephant in the room in Thailand is the king’s health. With his majesty in poor health, lese majeste cases will continue to multiply as the junta’s concern grows.  His death and the subsequent succession struggle would likely send the country into chaos, even with the army in control. Such a collapse of the Thai political structure would have major repercussions for the region’s stability.

Laos is also in for a tough year ahead. Its chairing of ASEAN will do more to highlight its shortcomings than celebrate its successes. With the opening of Xayaburi Dam, Don Sahong Dam scheduled to break ground in 2016 and preliminary studies beginning on a third Mekong dam at Pak Beng, there will be renewed calls from the international community for Laos to reconsider its hydropower plans for the Mekong River. The landlocked country’s lack of finesse in dealing with the South China Sea conflict will also draw criticism, all punctuated by continuing questions about the kidnapping of Lao activist Sombath Somphone.

In Cambodia, the political impasse between the ruling Cambodia People’s Party and the Cambodia National Rescue Party will continue through the first half of 2016. Expect strongman Hun Sen to find an 11th hour solution paving the way for opposition leader Sam Rainsy to return from self-imposed exile to begin preparing for the 2017 parliamentary elections.

Barring another major fracture in Thai politics, Vietnam’s National Party Congress will mark the region’s most significant political transition in 2016. Nguyen Tan Dung is likely to be selected as Vietnamese Communist Party chairman, with Truong Tan Sang staying on as president or similar role to balance Dung’s reformist tendencies. Dung’s leadership will be key as Vietnam implements the Trans-Pacific Partnership, a painful process that will force Vietnam to learn to run and walk at the same time. Dung’s princeling son, Nguyen Thanh Nhgi, will also be elevated to the Central Committee and has a bright path ahead if his father can lead the country into a new era of high economic growth and balanced relations between the US, China and Russia.

Corruption scandals will continue to keep a stranglehold on Indonesian and Malaysian politics. In Indonesia, President Joko Widodo’s efforts to prop up a sagging economy will be hampered by an unstable cabinet and nagging questions relating to 2015’s Freeport corruption scandal. In Malaysia, Prime Minister Najib Razak will continue to face intense public scrutiny over the 1MDB scandal. It is possible that Najib will use a new national security law to muffle Malaysian civil society’s calls for his resignation.

After refreshingly open elections in 2015, 2016 will be a year of political posturing for Myanmar. As Aung San Suu Kyi and her victorious National League for Democracy take power in early 2016, the military will position itself to retain many of its past privileges. Look for Than Shwe and the other generals to create a formal post in the government for Aung San Suu Kyi, who is legally barred from the presidency, in a bid to define and contain her power as head of the NLD. Those expecting radical change from the NLD government will be disappointed – there will be little structural political reform, the NLD’s foreign policy will be largely similar to Thein Sein’s, and the ethnic reconciliation process will still muddle along. However, look for the new ruling party to permanently shut down the Myitsone hydropower project and consider suspending the Salween river’s cascade of dams in order to push along the ethnic peace process.

Like 2015, this year will see a further intensification of the Rohingya refugee crisis. However, with the world’s eyes adjusted to seeing the plight of refugees, there will be more attention paid to the issue and Aung San Suu Kyi will receive pressure from both Western and Muslim-majority countries to solve the problem of Rohingya persecution in Myanmar. Another ethnic group that came to the forefront last year, China’s Uighur population will also stay in the news in 2016. Increased crackdowns in their home Xinjiang province will force more refugees into Southeast Asia, and lead to a handful of Uighur-related terrorist attacks, both foiled and executed, in Thailand and Indonesia.

The regional economy will see decreased growth in 2016 as a result of slowing growth and structural issues in the Chinese economy. Chinese money will still flow south as the One Belt One Road strategy is rolled out and the Asian Infrastructure Investment Bank officially opens for business. Contrary to some expectations, the AIIB’s first loan recipient will not be Myanmar, but either Laos or Cambodia.

On the other side of the coin, the US-led Trans-Pacific Partnership will begin the ratification process in a number of regional countries this year. Our bets on order of approval are Singapore first, followed by Brunei, Malaysia and Vietnam. Indonesia will likely commit to the TPP by the end of the year while Thailand’s economic struggles under the military junta will push it closer to joining. Much of the US-ASEAN Sunnylands conference in February will be centered on TPP ratification, along with South China Sea issues and counter-terrorism cooperation, and will serve to solidify relations between the US and the bloc. ASEAN leaders will be looking for assurances of American commitment to the region during the next administration and they will likely receive them. Of course the future of the TPP and the US Rebalance to Asia lies in the fate of the US Presidential elections and our prediction is that America’s first woman president will keep the Rebalance at the forefront of her foreign policy – after all it was her idea.

Last but not least, the Asian Economic Community will be the same on January 1, 2017 as it was at the head of this year – a half-baked dream with little hope of success.

To all of the East by Southeast readers and their families, we wish a you happy new year and much joy and success in 2016!

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Mekong lessons: Reflecting on October trip to Southeast Asia

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I’ve just returned from my first business trip to Southeast Asia with the Stimson Center’s “Team Mekong.”  Below are a few lessons learned and brief observations from our visits in Bangkok, Kunming, Phnom Penh, Can Tho, Hanoi, and Saigon.

Good ideas gain currency

Before I joined the Stimson team in June, I must confess that my outlook on the future of the Mekong region was not filled with optimism. I cannot begin to describe how refreshing it is to join a team that is developing pragmatic and innovative solutions to some of the region’s toughest issues. Moreover, it’s extremely satisfying to watch the deployment of an idea gain momentum among decision makers and begin to take on a life of its own. Simply put, ideas work. At public forums in Bangkok, Kunming and Hanoi and in meetings with regional government officials Stimson’s “Team Mekong” launched a more refined version of the concept of the need for a “New Narrative” on Mekong hydropower development first mooted by my colleagues, SEA Program Director Rich Cronin and Research Associate Courtney Weatherby this March. The New Narrative challenges the current narrative that the construction of 11 dams on the Mekong’s main stem is a prevailing ‘domino theory’ of inevitability based on an emerging body of evidence. Stimson’s most recent report and its main argument can be found here, but it was encouraging to hear the idea confirmed when well informed hydropower experts placed their bets on no more than five dams, all of them above Vientiane excepting Don Sahong.

So if the Lao PDR government is banking on income generated from the construction of eleven main stem dams but only gets five in the end, shouldn’t it consider alternatives? Considering the known and unknown costs of downstream effects on fisheries and livelihoods, it seems prudent for Laos to give the entire basin development plan another look.  As a sustainable, one-country alternative to relieving the pressure of hydropower development on the Mekong’s main stem along with the unbearable downstream costs related to impacted fisheries and livelihoods, the Stimson team is continuing to develop the concept of a Laos national power grid designed for both the export of hydropower and national electrification as an alternative to Laos’ current economic development plan.

The grid would be designed to optimized trade-offs related to the food- water-energy nexus on a basin wide scale. On this trip, we received much encouragement for the national power grid concept from regional government officials, but challenges still remain in convincing Laos as to why national electrification will provide more benefits than the current plan.  As a suggestion, Vietnam, as a most concerned state in regard to downstream impacts can, share the story of the benefits of rural electrification with its neighbor through the history of its own development.  Further, Vietnam’s electricity demand is increasing at 12% year-on-year prior to the TPP and could act as a major purchaser of power generated from a Laos’s national grid.

No clear trends on the China Factor.

I see no clear evidence that China’s state-owned enterprises are trending toward improving practices in Southeast Asia or that there is a concerted move from policy-motivated concessional projects to those based on financial viability. A few firms might be making improvements here or there, but even these firms are not willing to release the details and data supporting these so-called improvements. In the case of Hydrolancang’s Lower Sesan 2 project in Cambodia, the developer claims its fish passages will be successful in protecting vulnerable fish species, but will not release the research or plans for those fish passages for public observation or scrutiny. The message for Hydrolancang and other similar Chinese dam developers hasn’t changed: “We’ve conducted 100% of research relevant to these projects, and we’re confident that all problems will be solved. You only need to trust us.” But trust is built on results and transparent public relations. China simply runs a poor track record on these factors in the Mekong region.

A surprising development is that China’s firms are playing the victim when discussing their Southeast Asian projects. Officers of these firms claim Beijing put them to task on these projects while the firms have to bear the risks and interact with prickly civil society groups, unwarranted Western criticism, and unstable host governments – the Myitsone dam serves as a case in point. Yet they fail to acknowledge the unbalanced stream of benefits granted by concessional contracts or the processes through which these benefits are gained.

Further, these firms often claim to strictly follow the laws and regulations of host countries related to environmental and social impacts. Yet weak states like Laos, Myanmar, and Cambodia have promulgated little to nothing in terms of environmental or social safeguards, so these claims of being responsible legal investors are interpreted as trite and non-persuasive.

Lastly, some anecdotal evidence points to Chinese money earmarked for overseas infrastructure development drying up in this latest round of China’s economic downturn. This discovery supports emerging conversations that Chinese firms are investing in more commercially viable or “bankable” projects. However, at the same time China’s One Belt One Road initiative appears to be creating a pool for free money given out on soft terms to any firm interested in constructing a project vaguely related to the objectives of the One Belt One Road whatever they may be. When weighing whether or not China’s upcoming investment on Mekong main-stem dams in the pipeline will be based on strategic motivations or sound financial decision making, this last point is particularly concerning.

New institutional frameworks are forming to coordinate regional policy making.

It’s becoming increasingly clear that the Mekong River Commission is NOT the institution to solve the big issues rising the Mekong region, though it still constitutes the only treaty-based intergovernmental organization in the region, and its technical review of the Xayaburi dam and its anticipated critique of the Don Sahong project have caused both developers to delay the projects and spend hundreds of millions on significant engineering changes and additional fisheries research. But in terms of actual governmental engagement, other institutions and bilateral arrangements are beginning to fill this gap. The US-led Lower Mekong Initiative (LMI), for instance, in its still nascent form aims to promote higher standards on water resource management and assessment of infrastructure development within the region. The LMI brings together the line ministries of the four MRC countries and Myanmar several times a year in working groups both on functional “pillars” and cross-cutting issues like the water-energy-food nexus, and the prime ministers of the LMI countries meet in the wings of the annual ASEAN-US Leaders Meeting, where transboundary issues and impacts from hydropower dams and other major infrastructure projects can be raised to the extent that the leaders are willing to engage on them.

In response to both the US-led LMI and the waning power of the MRC, China is assembling a multi-lateral organization for joint river basin management called the Lancang-Mekong Dialogue Mechanism (LMDM). Mekong watchers should pay attention to the outcomes of the first vice-ministerial meeting of the LMDM on November 12. Further, Cambodia is negotiating a transboundary environmental impact assessment treaty with Laos and Cambodia, Laos, and Myanmar are authoring new sets of environmental and social safeguards related to infrastructure development.

These frameworks are all coming together quite quickly. Yet even the US led LMI is said to be underfunded, uncoordinated, and unsure of its product. China’s forming of its own river basin organization is a welcomed foray into multi-lateral diplomacy, a realm often eschewed by the Chinese, but the intent and purpose of this organization is unclear. Serious cooperation on the use of the water and hydropower development will be highly limited so long as China refuses on national security grounds to provide downstream countries with the results of its hydrological and water quality studies, or the operation of its dams and other water releases from its monster reservoirs.  And whether or not new safeguards in the Mekong’s weakest countries will have teeth or just pay green-washing lip-service is unknown.  These developments all deserve our close attention.

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Yunnan border zone slated to cost 200 billion yuan

New infrastructure projects, like the Kunming-Singapore Railway, will be passing through southern Yunnan on their way to Southeast Asia.

New infrastructure projects, like the Kunming-Singapore Railway, will be passing through southern Yunnan on their way to Southeast Asia.

Investment and development money continues to pour into southern Yunnan’s Xishuangbanna. Weeks after the largest resort in the province opened near the city of Jinghong, prefectural officials unveiled plans for a new economic zone with an eye-popping price tag.

The Mengla Economic Zone, according to plans approved this summer by the Yunnan Development and Reform Commission, will span 4,500 square kilometers, centered around Mengla County (勐腊县). Initial estimates place the cost of the multi-purpose undertaking at 200 billion yuan (US$31.4 billion). The zone spans 240 as-yet unclear projects reportedly focusing on the sectors of agriculture, education, logistics, processing, tourism and transportation.

The latter of the these is perhaps most important to national planners. Connecting cities in Yunnan to Southeast Asia by rail has long been a goal of the Bridgehead Strategy, which looks to integrate the province’s economy more closely to those of its international neighbors. Mengla County borders Laos and is one key component in plans to build a web of railway lines by 2020 which will further connect Southeast Asia with Kunming.

Progress, however, has been slow on multiple fronts. The Kunming-Singapore Railway — the main trunk line of the planned network — was once expected to open in 2015. However, due to ongoing financial disagreements between China, Laos and Thailand, completion projections have been pushed back at least five years.

In that time, a branch railway along the recently opened Kunming-Hekou line will be extended 500 kilometers south to the border town of Mohan (磨憨) in Mengla County. When finished, the railway will pass from Yuxi through Pu’er, Jinghong and Mohan before linking up with a 44.5 billion yuan (US$7 billion) Chinese-built high-speed line running to Laos’ capital, Vientiane.

The newly announced Mengla Economic Zone appears to be a very expensive kick-starter of sorts. Its launch is not only aimed at furthering Chin’s Bridgehead Strategy, but also seems designed to convince Laos — which is wagering half its annual GDP on the railway project — that Chinese intentions are serious and longstanding.

Regardless of the effects on Laos, the economic zone is another enormous financial shot in the arm for largely rural Xishuangbanna. Less than one month ago, real estate conglomerate Wanda opened a 15 billion yuan (US$2.36 billion) resort and development area of its own in the prefecture. The goal for such a sizable investment, in the words of company chairman Wang Jianlin (王健林), is to “…revolutionize Yunnan’s tourism industry“. One way or another, it looks as if sleepy Xishuangbanna is in for drastic changes in the coming years.

The preceding article was written by Patrick Scally and originally posted on GoKunming. It is republished here, in its entirety, with full permission from the author. 

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Report: “Mismanagement” stalling building projects across China

Work continues on the Darui Railroad in western Yunnan Image credit :cr8gc

Work continues on the Darui Railroad in western Yunnan. Image credit: cr8gc

Hundreds of highway and railroad projects are facing delays or otherwise running far behind originally envisioned construction timetables. This, according to a report issued by China’s National Audit Office, is a result of local governments improperly managing infrastructure funds — actions thought to have a direct effect on the country’s stalling economy.

In total, the audit of projects nationwide looked into 815 infrastructure programs across the country. More than 20 percent — 193 in total — were found “to be experiencing significant implementation lags due to a lack of funds or poor initial planning.” Together, the behind-schedule ventures represent government investment of 287 billion yuan (US$45.2 billion).

The architects of China’s economy have traditionally relied heavily on state-funded building projects as a means to revitalize the financial system in times of decline. Therefore, those lagging behind schedule due to mismanagement or misuse are seen as harming the economy in two ways, according to the audit. Not only are funds not being spent as quickly as they are authorized, but the benefits to localities through which new infrastructure projects pass must wait idly for any expected economic uplift.

In Yunnan, this is especially true in the province’s west. A railroad from Dali — traveling through Yongping, Baoshan, Mangshi and terminating at Ruili on the Burmese border — was originally expected to be completed in 2014. It will provide some of the most populated regions in western Yunnan direct rail access to Kunming for the first time ever. However, due to cost over-runs and awkward mountainous terrain, the line is now expected to open as late as 2019.

In an effort to speed up construction along the single-track Darui Railroad (大瑞铁路), Beijing injected a further five billion yuan (US$788 million) in annual funding for the endeavor beginning in 2012. The 335 kilometer railway is 75 percent tunnels and bridges, making for difficult surveys and slow progress, especially in places where engineers must dig under theGaoligong Mountains.

The railway was first conceived of in 1938 as a way to connect Kunming with the British colony of Burma. The outbreak of World War II scuttled those plans. However, they have since been resurrected as one part of the massive BCIM trade corridor, which Beijing hopes will one day provide an overland link between Kunming and seaports on the Indian coast some 2,800 kilometers away.

This post was originally published on GoKunming and written by Patrick Scally. It is reprinted here, in its entirety, with permission from the author. 

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Solving Southeast Asia’s drug problem

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Image of the Golden Triangle where Thailand, Laos, and Myanmar meet.

The Obama administration has once again named Myanmar and Laos to its list of twenty-two countries determined to be major drug trafficking countries or major drug transit countries. The White House memo, issued on Monday, noted that Myanmar “failed demonstrably during the last twelve months to make sufficient or meaningful efforts to adhere to their obligations under international counternarcotics agreements.” The United States, however, did extend Myanmar a National Interest Waiver to promote democracy and avoid reduction of aid to Burma as a result of the designation.

The Golden Triangle, an area formed roughly by the upland frontier areas of Thailand, Laos, Myanmar, and China, was the world’s leading opium producer from the 1960s to the 1980s. But just less than ten years ago, it was moving toward opium free status as deepening economic ties with a rising China brought new investment and governments supported crop substitution programs in the region. Now, opium, methamphetamines, and other drugs from the Golden Triangle are once again flooding regional and global markets.

In just the past two months alone, 26mn methamphetamine tablets were seized in Yangon, Myanmar and 1.5 tons of marijuana packed into coffee shipments from Laos were seized in Cambodia. Earlier this year The New York Times ran a series of exposes on opium production and heroin addiction in Myanmar’s conflict-ridden Shan and Kachin states. The United Nations estimates that Myanmar’s poppy cultivation has tripled since 2006 and takes up almost 150,000 acres.

Despite recent spurts of economic growth in Myanmar and Laos, flagging economic conditions on the countries’ peripheries and civil war in Myanmar are pushing marginal peoples toward the production of opium. Lucrative cash crops like opium won’t make farmers rich, but hired labor on an illegal opium farm in Kachin state will earn $8 per hour compared with $2.50 working on a legal farm.

A new push factor for upland drug production in Laos and Myanmar is the arrival of small-scale agricultural investors from China’s neighboring Yunnan province. Their projects, often set up on lowland concessions granted by national or local governments, utilize less local labor and thus create a landless poor classes that literally ‘head for the hills’ to cultivate opium. Another new addition to the landscape is recently built highways and other infrastructure development projects that link urban centers but often ignore the periphery. Poor road conditions in upland areas cannot facilitate logistical support or encourage investment that could promote legal and productive agricultural activities in upland areas. And once the opium makes its way down narrow trails to the lowland areas, the highway serve as quick conduits for global distribution networks.

Being out of reach from state security and legal institutions – which typically underperform at any rate in Laos and Myanmar – permits opium farmers and trafficking middlemen to operate with impunity. Upland Southeast Asia is not the only place affected. Evidence shows drug use is on the rise in China and within Southeast Asia’s growing urban and rural middle classes. Moreover, crackdown efforts in lowland areas of these countries has only pushed production further into upland areas which are harder to reach.

Efforts to control and stem opiate production in Laos and Myanmar are often focused on identification and eradication. Government agencies locate productive areas and destroy illegal crops. This often forces rural peoples into poverty or drives villagers to new, more remote areas ripe for opium production. The UN and China have introduced crop substitution as a solution in Myanmar and Laos. But this “big state solution” often fails in its implementation because it neglects the needs of upland agriculture and flounders in its long term commitment to solving the problem.

In 2007, China’s crop substitution programs looked to be succeeding in reducing opium production. However, poor investment in infrastructure and low commitment to technical assistance created a situation where alternative cash crops could not compete on a global market and upland farmers were left high and dry.

Investments in coffee and rubber – often seen as more lucrative cash crops – take three to seven years to yield a harvest. This, coupled with falling global food prices and high transportation costs due to lack of infrastructure, discourages alternative investment. As a result, crop substitution investments in sugar, buckwheat, coffee, and rubber have consistently failed or are currently flagging in upland Southeast Asia.

To effectively curb the production of opium and other illegal drugs in upland areas of Myanmar and Laos, expenditure on agricultural extension programs and infrastructure such as paved roads and logistical facilities must increase to attract suitable investment into these areas. Advances in the peace process in Myanmar and resultant spurts of legitimate economic growth in the country’s ethnic autonomous states will do much to curb opium and methamphetamine production. Laos, however, is a different story. Even peace cannot stem opiate production, with its current set of weak institutions dictated by the fiat of a few powerful families with strong ties to China. Counter-narcotic efforts are vital to stop the flow of opium and methamphetamines in Southeast Asia. But they must be paired with viable economic solutions for the upland farmers involved in drug production.

This article was first published here on The Diplomat website on September 17. 

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Filed under China, Current Events, Economic development, GMS, Governance, Laos, Myanmar/Burma, SLIDER, Thailand

Kunming-based think tank fighting Myanmar forest loss

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A new project promoting agroforestry as a sustainable alternative to current farming practices in the uplands of Myanmar is underway. Led by the World Agroforestry Centre‘s East and Central Asia regional program, and approved by the country’s Minister of Environmental Conservation and Forestry (MECF), the undertaking aims to reforest mountainous landscapes prone to degradation.

The project will initially be carried out in the Burmese states of Shan and Chin on a relatively small scale of six hectares. When made viable both environmentally and economically, Naypyidaw has pledged to expand the program — and around the capital has already begun to do so — as Myanmar is in dire need of workable solutions addressing its growing forest loss.

At the World Agroforestry Centre (ICRAF), farming practices are seen as part of the problem.Shifting cultivation involves clearing forest for the cultivation of crops. After a cropping period that can be as short as one or two years, the land is fallowed for up to ten, allowing the forest to grow back. Not intrinsically bad, shifting cultivation is increasingly rare due to the shrinking availability of land, as well as current government policies.

Pressed to grow more food, villagers now usually clear forest permanently, often for monoculture plantations of sugarcane or rubber. Allowing no natural regeneration and depriving the landscape of a diversity of trees, this change of land use harms livelihoods and ecosystems.

A promising and healthy alternative, according to ICRAF reports, is the deliberate reintegration of trees that positively interact with crops and livestock on and around farms. “Agroforestry is the ideal solution for uplands,” explains Dr Dietrich Schmidt-Vogt, lead researcher for the ICRAF project. “Agroforestry can drastically reduce the need for expensive chemical fertilizers and noxious pesticides while boosting yields and diversifying income sources.”

Communities involved with the initiative have provided sites on which to demonstrate the new agroforestry methods. The researchers hope to incorporate trees that fertilize the soil — such as Himalayan Alder — and to jointly search with villagers for alternative income sources. This will provide a feedback loop between scientists, non-government organizations and farmers, with the three groups learning and adjusting together. The work is largely funded with a grant by international donor consortium Livelihoods and Food Security Trust Fund.

Dr Peter Mortimer, a soil scientist at ICRAF, speaking of support received from MECF, said, “Having strong backing on all levels is so important for this type of project, and we have a feeling that Myanmar and its people will prove great partners and an example for similar projects elsewhere.” While heavy flooding in Chin State has complicated progress, trees are now ready to be planted and the first cropping cycle will coincide with the start of the next wet season.

This article written by Patrick Scally was originally posted here on the GoKunming website.

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Filed under Agriculture, Current Events, Economic development, Environment and sustainability, Myanmar/Burma, SLIDER, Sustainability and Resource Management

SMEC’ed About the Head

What is it about No that SMEC doesn’t understand?

SMEC, an Australian based services company that morphed out of the Snowy Mountains Engineering Corporation, was recently handed a petition containing 23,7171 signatures opposing a dam that would effectively divide war-shocked Shan state in Myanmar in half.

They are the  public face of a consortium planning a giant dam on the Upper Salween river at Mong Ton in Myanmar.  It’s not the first time they have been told the idea stinks.  Maybe they are heroically taking one for the gang; the disaster prone Three Gorges Corporation,  the very shonky Sino Hydro, the Myanmar Electricity Power  Enterprise,  and state energy monopsony  Thai Electricity Generating Authority (EGAT).  Then there is a UK team of engineers Malcolm Dunstan and Associates, involved in dam building in Myanmar in the past and, because of human right violations on the sites, placed on UK’s Burma Campaign’s ‘Dirty Company’ list. SMEC might well soon be down there with them.

SMEC has been meeting the people of Shan state, seeking agreement for the Mong Ton dam to be built on the upper Salween in Shan State. They have faced serial rejection. Meetings have been cancelled due to local hostility. Old Shan women have risen to their feet, their voices rich and challenging, telling the SMEC representatives that having survived years of war, they refuse to let their ancestral lands be drowned to produce unneeded electricity for China and Thailand.

SMEC’s habit of giving gifts of cloth bags, bottled drinks and snacks to people they interview has as angered local villagers, who view these as bribes. They report SMEC repeatedly pushes the ‘positive’ impacts of the dam, appearing deaf to protests, while attempting to persuade them to sign documents they don’t understand.

On July 22nd, a group of villagers returned the bags they had been given by SMEC surveyors, and instead presented them with anti-dam posters. A Shan joint statement calls SMEC’s assessments process “simply a sham, aimed to rubber-stamp the Mong Ton dam plans, rather than objectively assess (sic)  the project’s actual impacts.”

In April this year the Australian Federal Police raided SMEC’s international’s headquarters in New South Wales ‘as part of an investigation into allegations of foreign bribery – it was unclear if this was associated with the Myanmar project.

‘Many of our highly respected stupas and pagodas, such as Ho Leung temple, will be destroyed.’ said Hkyaw Seng, whose village is close to the construction site. The 700 years old Ho Leung Temple, on the eastern bank of the Salween is famous throughout Shan State, with tens of thousands of pilgrims travelling there every March.

In the Australian context, this might be compared to submerging St Patrick’s Cathedral in Melbourne  to power New Zealand.

Burma Battlers

Along with other ethnic states of Myanmar, Shan state suffered intense warfare for over 20 years and sporadic clashes since. It is the biggest of Myanmar’s seven ethnic states with population of around 8 million people, half of whom are  Shan.

During that long war many abuses were committed by the Burmese Army, include arbitrary execution and detention, torture, looting, rape, forced relocation and forced labour.

Shan and Karen representatives reported to this correspondent that SMEC’s work has been obstructed by political instability, increasing military presence and growing community resistance. In May Burmese Army tanks were photographed in Kunhing, whose renowned ‘thousand islands’ in the Pang tributary will be submerged by the dam reservoir. They fear opposition to the dam will trigger military violence.

Four SMEC officials went to the Wa capital in early July this year, seeking to survey the Wa Special Administrative Region. They were ‘advised’ to return at a later date by leaders of the China-backed United Wa State Army, possibly due to growing political and military tension between UWSA (notoriously linked with cross border drug trade) and Burmese government; tensions that erupted into fighting in Mong Ton township in early June 2015. SMEC is now effectively unable to carry out surveys in a large swathe of Wa-controlled territory along the eastern bank of the Salween above the planned Mong Ton dam.

The US$10 billion (2015 estimate) hydropower dam will flood an area nearly the size of Singapore, virtually bisecting  Shan state and destroying around a hundred communities. You can replace houses but not communities which are organic social structures built on trust mutual support and shared histories. It is the very strength of these communities that enabled their people to endure the hardships of war. Locals report that tanks are returning, as are armed guards. A Chiang Mai lawyer with connections to the Shan, told this correspondent recently ‘local media report that the project has started, and in a conversation we had… a few weeks ago, there is a camp of mostly Chinese engineers doing testing near the site. They said that the river near that area is off limits to all people and that warning shots were fired at a boat that got too close. The contact was not sure who fired the shots.’

The Burma river network (BRN) asserts that large dams are being constructed on all of Burma’s major rivers and tributaries by Chinese, Thai and Indian companies. The dams are causing displacement, militarization, human rights abuses, and irreversible environmental damage – threatening the livelihoods and food security of millions. The power and revenues generated are going to the military regime and neighbouring countries.

Role Play

So what is an Aussie company doing there?

‘It is not SMEC’s role to provide recommendations as to whether the Project should proceed. The findings of the EIA/SIA will be presented to the Government of Myanmar, who will decide (with other sources of information) whether to proceed with the Project.’ (Pro forma response from SMEC).

SMEC’s role has been to complete the Environmental and Social Impact Assessments. The general idea is for both these studies to be submitted to the government to be signed-off (or, as happens too often, paid off) and plans for mitigation put to the villagers and agreed to before work can start. However a local council member in Mong Ton, seconding the lawyer’s report, said that despite the local people’s disapproval, earthworks were already underway along the ridge of the mountain, as was confirmed by Kai Khur Hseng, a spokesperson for the Shan by phone from the Thai-Myanmar border.

‘Well you would expect that,’ said environmental consultant Dr Sean Foley in neighbouring Laos. ‘They borrow lots of money to build the dam and no doubt to pay off officials. The longer they delay, the more interest they have to pay, so it’s in their interest to get moving, and pay the necessary fees to ensure the EIA is agreed to. The ‘soft’ items like compensation to villagers and relocation construction are usually where all the cost savings are made.’

As for the social impacts, it should be obvious, when confronted with a room full of people who are largely farmers and whose land is about to be flooded, wearing ‘No Dams’ headbands, that maybe, just maybe, these people think the social and economic costs are not worth it. Despite SMEC’s claims to hold free and fair consultations the presence of local militias and pro-government representatives in meetings inhibited villagers from asking questions.

A message sent to SMEC’s local senior manager, Michael Holics, which asked how much forest was going to be destroyed, how many tonnes of concrete to be used was met with a pro forma response  (see above), the same response given to questions related to resettlement, land allocation, livelihoods, and fish stocks. Tropical dams are under scrutiny, found to emit as much greenhouse gas as coal fired power plants with similar energy output, while devastating huge areas of land.

SMEC’s job has already been done by International Rivers (IR) and other local groups who have listed the environmental and social factors mitigating against building the dam. Pianporn Deetes of IR told this correspondent that tens of thousands of ethnic people living on the floodplains near the dam site have already been forcibly relocated. ‘All dams planned on the Salween River will greatly disrupt the riverine ecosystem and destroy the livelihoods of peoples living along the river.’

SMEC could hardly avoid the fact that in 2007, the dam consortium was given land on which to build an office, land confiscated from Wan Mai village. In the way of the then-incumbent military junta, landless villagers were forced to attend the ground-breaking ceremony for the dam. Further north, the Mekong, Salween and Yangtze rivers flow in parallel for at least 300 kms, creating a World Heritage listed biodiversity area that is being destroyed by megaprojects like hydropower dams. In short, SMEC whose office centred CSR principles would have this project in Australia booed off the field, seem undeterred.

Sai Khur Hseng reported that wars and forest destruction had taken its toll on mega-fauna like elephants but that  ‘Survivors habitat will be drowned by the dam.’ Myanmar’s laws have not been reformed in keeping with global standards and do not provide for compensation or relocation.

Paul Sein Twa, reported that business cronies of the regime have already been clear-felling formerly dense teak forests around the dam site. Director of the Karen Environmental and Social Action Network (KESAN), Twa told Mongabay that proposed multiple dams would do irreparable damage to the Salween Basin extending across, China, Myanmar and Thailand. The basin is “home to the world’s last great teak forest, to dry-season islands rich with crops, and to healthy fisheries upon which many people depend. This river is of vast ecological and cultural value, and it is worth preserving for present and future generations.’

Did the Earth Move for You

The Mong Ton dam wall, some 241 meters high, would be one of the highest in the region. The area is very prone to earthquakes and warning has been issued about impending risk of a serious movement of the nearby Sagaing fault after the Nepal ‘adjustment’. The collapse of such a dam would be disastrous.  Scientists have warned of additional  +7 scale adjustments in the next decade and have clearly advised against dam building. A dam this size could itself cause a seismic event, as happened in Sichuan China.

The Himalayan and Tibetan glaciers appear to be melting faster than earlier predicted, offering increased flows in the short-term but ‘dry ice’ in the future.

Twa agreed the dam also poses a threat of catastrophic flooding, should the region’s seismic activity lead to an earthquake-induced dam failure.

Asia is engaged in a orgy of dam building, pushed heavily by China and Thailand, whose urban elites stand to profit mightily from such investments. In this part of the world rivers are integral to life, providing food, transport and irrigation to countless communities.

Myanmar’s government has not publicly addressed villager’s complaints, but have praised the Salween dam projects as benefiting local populations, securing critically-needed electricity for Myanmar and leading to peace. But the opposite appears to be true, with the poor losing hard-won security and military build ups occurring daily. Maybe SMEC’s shareholders should understand the implications of the company’s activities and make their discontent clear.

The author of this article has chosen to publish anonymously.

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Filed under Current Events, Economic development, Energy, ethnic policy, Governance, Myanmar/Burma, SLIDER