Category Archives: Governance

Report Card on Education in Southeast Asia

 

vn primary school

Eager primary school students in Vietnam

As dawn spills on to Ha Thuong, Vietnam, Bui Thi Bich Phuong is preparing for a long day of collecting waste coal from the nearby Mo Me coal mine and catching crabs at the edges of the fields near her house. If she’s lucky, she’ll eek out $4 today. As she’s washing her face, soon to be covered with coal dust, her son Nam is getting ready for his day at school. There, he’ll study a new curriculum of mathematics and literacy in a new classroom, both of which are paid for by the Asian Development Bank, who hopes it’s dawn for education in Southeast Asia, too.

Governments and development agencies, along with the UN, hope for more examples of the younger Phuong in Southeast Asia—bright students preparing for jobs in the service sector—than the older, agrarian Phuong. There are billions of dollars in education aid flowing into the region, most of which comes in the form of ADB loans and implemented by local governments. Is education really critical to development in Southeast Asia? Will the ADB’s programs be successful? There are few resources that answer these questions; this post hopes to provide insight to both, as well as providing case studies in Cambodia and Vietnam.

How important is education for Southeast Asia?

By investing in education, Southeast Asian governments and the ADB hope to approach developmental parity with their successful peers to the northeast. South Korea and Taiwan are the darlings of Asian development as they have made the jump from low-end to high-end manufacturing and are now centers of service and entertainment industries. “Gangnam Style” came from South Korea for a reason: the song parodies the high-end lifestyle in a Seoul district that only exists due to Korea’s rapid development. Taiwan, once a hub of simple computer assembly a-la China, is now a hub of computer design and engineering. Most assembly now takes place around Shanghai.

The transition to high incomes in these countries was not serendipitous; they had laid the framework for development through heavy investment in education at all levels. In 1993 a World Bank report praised these High Performance Asian Economies (HPAEs): “The growth and transformation of systems of education and training … has been dramatic … the HPAEs’ enrollment rates have tended to be higher than predicted for their level of income … By 1987, East Asia’s superior education systems were evident at the secondary level … Primary education is by far the largest single contributor to HPAEs’ predicted growth rates … Physical investment comes second … followed by secondary school enrollment.” Physical investment is a story for another day, right now the focus will be on education: primary and secondary.

public spending on education

So far, the path to development in Southeast Asia seems clear: invest in education while the economy produces low-skill intensive goods so, after a decade or two, the economy can transition to high-quality manufacturing. The graph above shows that the poor Southeast Asian countries spend less than 4% of GDP on education, while Thailand, a more developed country, spends more. Moreover, the poorest countries often neglect to report data to UNESCO. Surely simply spending more money will solve Southeast Asia’s problems?

Not so fast. Due to two different types of competition, these economies might have to transition faster than Taiwan and South Korea did. First, as other developing countries clue in (on their own accord or via a friendly push by the IMF) to the famous/infamous export-based model of development, the rise in international arbitable labor supply will keep wages low, limiting welfare gains like Taiwan and South Korea enjoyed. Second, exploitation of natural resources, plentiful in Southeast Asia, could lead to comparative advantage-killing inflation, further reducing competition. It is important to note that South Korea and Taiwan have few natural resources that would lead to this pesky trend. Therefore, Southeast Asia needs to hit the books sooner rather than later.

Assessment: How is Southeast Asia doing on education?

Not so good. The 1997 economic collapse among ASEAN countries had at least as much to do with lower export levels as it did with currency appreciation. Southeast Asian countries were unable to transition to high-quality exports as other countries (read: China) took the region’s market share in low-quality exports. The region has since recovered, with sustained growth rates in the high single digits. Nevertheless, the region’s better-perming economies, Thailand, Indonesia, and Malaysia, are arguably in the ‘middle-income trap’ of around ten thousand PPP-adjusted dollars per capita, years from becoming rich countries.

Southeast Asian countries as a whole will have to somehow leverage (read: educate) their substantial populations in order to develop past $10k per capita. There are three areas the region should focus on in order to improve their education prospects:

School Attendance: Somewhat surprisingly, the region, even including laggard countries like Cambodia and Laos, is almost at the worldwide average of 90% primary school attendance. Less surprisingly, survival rates, or the percent of school-aged children who complete primary or secondary school, are lower. In Cambodia, the Philippines, and the Lao PDR, primary school dropout rates are over 25%: poverty calls many students away from school in order to help out at home. In order for countries to improve their skill base, both enrollment and survival must increase.

primary school enrollment

3secondaryenrollment

Inequality: Like their counterparts in developed countries, urban children in developing nations attend school at higher rates than rural children. The gap in countries in Southeast Asia is larger, though, due to severe infrastructure constraints. Since many rural residents cannot afford a bicycle, let alone a car, children are limited to attending schools within a few kilometers of their house. This limits many children to a few years of primary school, which end when the grades offered in the local school do.

Besides economic inequality, Southeast Asian students have to deal with gender bias against both girls and boys. Girls face the more obvious bias: when pressured by resource limitations, many families call girls back from school before boys, who are assumed to be a more worthwhile investment. Many development agencies, especially the ADB, have remedied this problem to the point that in many countries more girls attend school than boys. The school gender ratio should match that of the population. Besides years of schooling, girls are also discriminated against when it comes to types of education, a problem that persists through secondary and vocational education. Responding to cultural stereotypes perpetuated in and out of school, girls self-select into traditionally female professions; employers respond by recruiting females to the same jobs. A comprehensive overhaul of education must include the systematic of gender stereotypes in classroom materials and instructor biases.

Skill Gap: Even students that complete tertiary education in many Southeast Asian countries often lack the skills needed by the companies that may hire these most educated workers. Vietnam’s own Ministry of Education reported that only 30% of college graduates had the skills demanded by the workforce. Other indicators of gaps in the quality of skills are a high education premium or a low unemployment rate, both of which indicate low high-skill labor supply. The latter indicator is produced below; Indonesia and the Philippines (more developed countries) have high unemployment rates, but the least developed countries with the greatest skill gaps have the lowest unemployment rates.

unemployment rates

The Philippines, however, serve as a warning of the effects of a reverse skill gap where high-skill supply is higher than high-skill demand. Until the 1990s, the Philippines had the highest tertiary education enrollment in the region. At the same time, macroeconomic fluctuations that discouraged fixed capital formation resulted in an unfriendly environment for professionals, leading to ‘brain drain’ where highly skilled workers went abroad to find work. As a result, remittances are now 13% of the Philippines GDP, exceeding FDI. The lesson is that graduates have to be able to find work quickly, otherwise educated, unemployed graduates will leave or worse: stay and start a revolution.

How is the ADB addressing education?

As Southeast Asia’s main development agency, the Asian Development Bank is providing the lubrication to meet the UN’s “Education for All” goal. Education is one of the ADB’s eleven focus sectors in development programs; in its Education 2020 report, the bank pledged $1.5 billion in education assistance between 2010 and 2012, 4% of its funds for loans and grants. There are three areas the ADB is focusing on specifically in the region: building new schools; increasing school and teacher quality; and decreasing the skill gap with vocational training.

Education for all

 

New Schools: A large, but shrinking, number of rural children in Southeast Asia do not have access to even primary education because their families can not get to the schools. Bicycles, motorbikes, and cars cost more than many families can afford, limiting the radius of education to a few kilometers. So, an easy area for the ADB to direct its loans to is building new schools, as the increase in enrollment is immediate and large. This solution, however, does not address the survival rate. Students will stay in school if they perceive education to be meaningful, which is largely dependent on teacher quality. Teachers that inspire students to achieve, and give them the intellectual tools to do so, are more likely to increase the survival rate than teachers who are not. Thus, the ADB must invest in school quantity and quality, though much of the focus is understandably on quantity, the lower-hanging fruit.

Indonesia is a cautionary tale for the ADB in this regard. Lush with oil money following a 1970s oil boom, the country built hundreds of new schools, but faster than teachers could be trained. Education quality subsequently decreased; some scholars say that quality is still decreasing. Consequently, the country lacks the high-quality development that HPAEs won in their own education investment. The difference is that investment in HPAEs was comprehensive, but investment in Indonesia was one-dimensional.

School Quality: Teacher and school quality must come at the same time as new school buildings, as well as permeate existing institutions. Unfortunately, as we will see, ADB reports mention construction of new schools much more often than they mention training new teachers. Education for All efforts have been remarkably successful in increasing the number students that want to attend primary school. Excellent. Now, the ADB and local education ministries must ensure that teachers will inspire students to at least complete primary school. One way to promote high-quality instructions is to vet teachers before they complete teacher training.

The ADB has been more successful in increasing the quality of curricula. The bank’s loans to education ministries usually require that education policy follow a decentralized approach, meaning tailoring curricula to local needs. Southeast Asian countries have the relatively unique characteristic of hosting a plethora of indigenous languages in addition to the official language. Classes taught in the national tongue can alienate ethnic minorities and discourage school completion. Fortunately, the ADB recognizes this problem and supports initiatives for local-language instruction. The bank could go further to ensure that more of classroom content is tailored to local conditions. While it is tempting to imagine every young villager going on to study at the national college and inventing a generator that runs on the sweat of foreign tourists, it is not realistic. Many students will finish primary school and forever remain in their village, so it is important to ensure that they are educated in the latest techniques to maximize their contribution at the local level.

Vocational Training: The ADB has also been successful in promoting vocational training. The skill gap in Southeast Asian countries exists because current curricula do not reflect the demands of employers at all levels. Existing state-provided vocational programs are insufficient because local governments cannot competently handle both vocation policy and program implementation. Further, women are often excluded from these programs, for reasons mentioned above. The ADB recognizes this opportunity for growth and ensures that some of its loans and expertise are directed to creating and reforming vocational programs.

For example, in Lao PDR the bank is implementing a Strengthening Technical Vocation Education and Training (STVET) that seeks to establish vocational programs in the employment-rich carpentry, construction, and maintenance industries. The program specifically includes a Gender Action Plan that requires women fill 20% of the spaces in these nontraditional training programs. The number might seem small, but it is much larger than the current 0-1% women enrollment in these areas. The STVET also has private sector programs in mining that require 40% of the students to be women, and has 50% quotas for programs that do include more traditionally female occupations. Overall, the ADB recognizes the need for vocational training that is accessible to all.

Cambodia at a glance

ADB programs in Cambodia include school construction and vocational programs. Since Cambodia lags the rest of the region in most educational indicators, these basic programs are important to establish a good educational foundation for the nation. For example, there are 48 students per teacher in Cambodia, higher than in 1990. A problem like this requires short-term focus on quantity rather than quality, which the ADB can easily address. In the future, though, the country will need to invest more heavily in teacher training programs in order to improve its educational prospects.

The ADB is laying the foundation for educational success in Cambodia by building new schools and information centers (or as non-development agencies call them, libraries). The $25 million Second Education Sector Development Project provides funds for 215 lower secondary schools, 15 upper secondary schools, and community development projects. The lower secondary schools incentivize children to finish primary school, which the World Bank cites as the most important reason for rapid development in the HPAEs, by providing further educational pathways. Previously, the children who did complete primary school were unable to attend secondary schools because there were too few within walking distance. The new schools will allow students to further explore their educational ambitions, overcoming the previous economic limitations. In addition to schools, the ADB and World Bank are building “public information centers” with books, internet access, and World Bank and ADB research (for aspiring development scholars), in order to allow poor people to access the internet and bright students to study beyond what their perhaps poor quality schools allow. The new infrastructure the ADB is building is admittedly the very first step to a well-educated society, but will solidify the currently unsatisfactory educational base.

Besides educational infrastructure, the ADB is also investing in vocational programs in order to educate people outside the Cambodian schools. A $45 million ADB loan for nonformal skills funded programs that help people like Thav Heat increase their productivity; instead of making one mat a week to sell to tourists, she can make 3-4 in a day. Similarly, Ley Leup, a farmer, learned how to use organic fertilizer to increase yields and decrease environmental damage. His income subsequently increased enough to buy more land, a motorbike, and a bicycle. This program also allows some, like Long Borin, to return home after working as migrant laborers due to higher income opportunities.

Vocational programs like these highlight the importance of education to low-income countries like Cambodia. With just a few weeks of training, these three individuals were able to use existing resources combined with new knowledge to improve their productivity and incomes. Education in general allows countries to become more efficient, using existing human and natural resources to their fullest extent.

Vietnam at a glance

Vietnam is an interesting case study because while the education system is more developed than lowest-income countries like Cambodia, it suffers from low quality and equality. ADB programs are generally focused on increasing marginalized peoples’ access to education while ensuring existing teachers reach the frontier of teaching methods. Vietnam is unique with respect to education in the region because in order for educational reforms to be fully effective, the state must also reform.

In 1996 the Vietnamese government launched a $71.5 million project, of which $50 million came from the ADB, in order to construct new schools and improve ethnic minority enrollment. The program was successful: the 366 new schools in 21 provinces and cities increased enrollment of ethnic minorities by 62% to 924,867 in the 2005/2006 school year. Further, all teachers were introduced to new curricula that included bilingual instruction. In a more recent project, the ADB targeted women and rural populations by constructing boarding schools with 50% female dormitories and ensuring that teachers are 50% women, compared to the national average of 10%. With respect to inequality, the ADB is ensuring that those at the left side of the Lorenz curve get access to not only basic education, but also high-quality basic education.

Higher education will lag, however, if the Vietnamese government does not change its state owned enterprise system. Now, state firms get cheap credit at the expense of the private sector, so state firms can hire the highest-quality labor. Since state firms are often not allowed to produce for the world market, output is constrained by insufficient domestic demand, meaning that the state companies cannot hire as many high-paying jobs as they would if they produced for the world market. As a result, these high-skill, high-paying jobs generate rents (the advantage workers gain from working at a state firm) that can be as high as two years of state sector salary. Meanwhile, the private sector has only low-skill jobs that offer low returns to high education. Further, the state sector jobs that do exist often demand credentials rather than actual skills, a problem so bad that Vietnam’s own Ministry of Education estimates that only 30% of college graduates with credentials actually have the skills they need to perform the jobs they want. This is a problem the ADB cannot address; change must come from within the Vietnamese government if it wants to develop in the long-term.

Concluding Thoughts

Education is important for development in the short term because export-focused industries require basic skills, and in the long term because high-income countries are powered by high-income, high-skill people. Southeast Asian countries for the most part meet world averages for basic educational indicators, but lag in teacher quality and educational equality. ADB programs have been more or less sufficient in meeting demand for schools in under-served regions, and should soon shift to higher quality teaching. Some easy targets are better teacher training and reforming the rote memorization practice so popular in Asian countries. In order to reach and overcome the middle-income trap, Southeast Asia must commit to high quality education in the decades to come.

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Filed under ASEAN, Education, Governance, Regional Relations, SLIDER

The US Rebalance in Vietnam & The Philippines

In Southeast Asia, the United States has rebalanced its attention to a vital region while seeking to avoid alarming China. The Obama Administration’s comprehensive efforthas engaged a diverse array of countries, strengthening ties with both unlikely partners and longtime allies. Coupled with a brief study of American interests in the region, an examination of the strategy applied to two countries – Vietnam and the Philippines –reveals little cause for the Chinese concern that America is pursuing a policy of containment.

VIETNAM

In Vietnam, the U.S. has succeeded in creating a partnership with a nation that was a bitter foe just forty years ago. Perceiving China’s recent policies as a disturbing sign of greater assertiveness to come, Vietnam has felt it necessary to hedge against its neighbor by pursuing a closer relationship with the United States.

The driving force behind this reconciliation has been China’s provocations in the South China Sea, which have infuriated the Vietnamese government and its people and caused them to view China as a potentially destabilizing force in the region. The May 2014 placement of a Chinese oil rig within Vietnam’s Exclusive Economic Zone (EEZ) marked a highpoint in the tensions, sparking deadly anti-Chinese protests in Vietnam and naval incidents in the area of the drilling.

Vietnamese and Chinese vessels clash near the disputed oil rig. Photo: Getty Images

Vietnamese and Chinese vessels clash near the disputed oil rig. Photo: Getty Images

Chinese diplomacy has not eased Vietnamese concerns. Rhetoric regarding the South China Sea has been inflexible: in 2010, officials labeled the region one of China’s “core interests,” joining only Taiwan and Tibet. At a meeting concerning the South China Sea the same year, in which all disputant states were present, Chinese Foreign Minister Yang Jiechi reportedly stared at Singapore’s Foreign Minister while pointedly stating, “China is a big country and other countries are small countries, and that’s just a fact.” In the eyes of Vietnam and its fellow Southeast Asian States, this threatening tone has confirmed fears inspired by China’s aggressive policy in the region.

While some American observers have gone so far as to call for a full treaty alliance with Hanoi, several barriers will keep a degree of separation the two countries. The first is Vietnam’s policy of the “three nos”: no military alliances, no foreign military bases on Vietnamese territory, and no dependence on any countries for help in combating other countries. The last point is particularly important in the context of Vietnam’s history: when China invaded in 1979, the Soviet Union – having signed a defense treaty with Hanoi just a year before – declined to come to its aid. This history provides Vietnam with a powerful warning against reliance on powerful but distant allies.

Another analogy that suggests restraint is the ongoing conflict in Ukraine. Looking to Moscow once more, Vietnam sees a disturbing example of how a major power will react to its small neighbor aligning with a rival. Of course, the comparison is imperfect, but the degree of similarity between the two cases is striking nonetheless.

The greatest constraint upon Vietnamese diplomacy is its economy’s dependence upon trade with China. China is Vietnam’s largest trade partner, and the source of many of the inputs critical to its burgeoning manufacturing industry. While some worry that tensions could lead to a trade war, economic concerns have thus far won out, and the Vietnamese government has been careful to avoid pushing China too far.

The Rebalance

Even with these constraints, Vietnam has welcomed American efforts to deepen ties on diplomatic, economic, and military fronts. The rebalancing is directed toward all of Asia, but extra attention has been directed toward Vietnam – a prominent victim of China’s actions in the South China Sea, and a country with an especially dynamic and promising economy.

America has promoted Trans-Pacific Partnership (TPP) as the main pillar of its economic rebalancing to Asia. The United States, Vietnam, and 11 other Asian-Pacific nations are currently negotiating the deal,which seeks to reduce both tariff and non-tariff trade barriers while maintaining high standards for intellectual property, the environment, and labor rights. American officials have said they would welcome China, but it is widely acknowledged that the deal’s standards are too stringent for China to adhere to. Vietnam also faces challenges to joining, especially with its reluctance to reform state-owned enterprises and labor rights. Its presence in the negotiations is a testament to the determination of both America and Vietnam to deepen their economic ties.

TPP

Current members negotiating the TPP. Image: The New York Times

 

Diplomatically, the bulk of American efforts are directed toward the region rather than individual states. With regard to the South China Sea disputes, the United States has recognized that no single Southeast Asian state can hope to receive bilateral negotiations with China on equal footing. As a result, it has worked quietly to promote a closer unification of the Association of Southeast Asian Nations (ASEAN), which wields significant influence but, like all regional organizations, is held back by the disagreements of its member states.

Even with the region-wide focus of diplomacy, however, a rapid exchange of interstate visits has reflected Vietnam’s importance. American congressional delegations and Administration officials have met with the Vietnamese with increasing regularity, and Gen. Martin Dempsey’s 2011 trip marked the first visit by a Chairman of the Joint Chiefs of Staff since 1971.Nguyen Phu Trong, the General Secretary of Vietnam’s Communist Party and the country’s supreme leader, will make his first visit to the United States this June.

America’s military policy constitutes the most visible aspect of its rebalancing strategy, and naturally draws the bulk of Beijing’s complaints. In Vietnam, the U.S. has coupled emphasis on exchanges and cooperation with direct (although minor) military aid. Military-to-military ties have grown greatly in the past decade, particularly with the introduction of an annual Naval Engagement Activity (NEA), which pairs each navy in noncombat exercises. In 2014, the Secretary of the Navy also invited Vietnam to join the biannual, U.S.-led RIMPAC exercises, the largest naval exercise in the world.

While noncombat exercises are a mild form of cooperation, American promises of military aid to Vietnam reflect a much stronger commitment to rebalancing. In December of 2013, Secretary of State John Kerry announced $18 million in aid to Vietnam to “boost maritime security.” A portion of the money was earmarked for the purchase of five unarmed patrol boats for the Vietnamese Coast Guard – a minor increase, but symbolically significant. Additionally, Japan – the linchpin of American security in the Pacific and another country locked in a territorial dispute with China – provided Vietnam with an additional six boats, worth $5 million. And in 2014, the U.S. eased its ban on providing Vietnam with lethal arms, opening the door to a number ofsystems for its coastal defense.

Military Spending Infographic

THE PHILIPPINES

In the Philippines, the U.S. is working to further deepen its relationship with a treaty ally and longtime partner. After a brutal war with the United States that left it an American colony, the Philippines maintained a better relationship with its conqueror than most countries, and upon gaining independence sought American protection throughout the Cold War. While Filipinos resentment of U.S. military bases led to an American exit in the 1990s and a slight chill in relations, the Philippines remains one of America’s closest allies in the region.

Philippine-American Timeline Infographic

As with Vietnam, the Philippines’ desire to draw even closer to America is explained by Chinese tactics in the South China Sea. The Sino-Philippine conflict has actually been significantly more contentious. Because it shares no border with China, is less economically dependent, and has signed a mutual defense treaty with America, the Philippine government has been less constrained by geopolitics than its Vietnamese counterpart. (It should be noted, however, that the U.S. has declined to clarify whether this defense treaty applies to Philippine claims in the South China Sea.)

These circumstances have enabled the Philippine government to apply for international arbitration of its disputes in the South China Sea, a step that Vietnam considered too divisive. China has objected, stating that it will “neither accept nor participate” in the arbitration, and maintained its political stance of indisputable sovereignty throughout the South China Sea. It is highly unlikely that the suit will achieve any result.

In spite of greater economic insularity than Vietnam, the Philippines has still fallen victim to what isperhaps China’s greatest asset: economic coercion. China has employed this strategy often, taking advantage of its large domestic market and the control the state retains over the economy. In June of 2012, it reacted to a confrontation with the Philippine Navy by cutting off Filipino banana imports. Justifying the policy as a health regulation, China succeeded in choking an important industry and driving Manila to adopt a conciliatory tone.

The Rebalance

Economically, the United States and the Philippines are already quite close. America is the Philippines’ second-largest trade partner (after Japan) and its biggest investor. Still, the Obama Administration has worked to further enhance the relationship. While the Philippines does not currently take part in the TPP negotiations, it has expressed interest, and high-level officials from each country have met to discuss what its participation would look like. In 2011, the fiftieth anniversary of the bilateral defense treaty, the two countries signed a five-year Partnership For Growth (PFG) agreement, designating the Philippines as a priority area for American development assistance. That same year, the Millennium Challenge Corporation (a government agency) signed a five-year, $434 million compact to combat poverty and encourage growth in the Philippines.

Trade Growth Infographic

While historical closeness, cultural similarity, and the depth of Philippine-American exchange have already created close ties, American diplomats have sought to further reinforce the relationship. The two countries recently began holding a Bilateral Strategic Dialogue to institutionalize the regular exchange of ideas. And in 2011, Secretary of State Clinton visited the Philippines to release a joint Philippine-American declaration,reaffirming that the alliance had “never been stronger.”

The military aspect of rebalancing has consisted of naval aid, closer cooperation and training, and – most importantly – a strengthened defense treaty. Having always depended on its American counterpart, the Philippine Navy is one of the weakest in the region. Its flagship is a 45-year-old cutter, donated by the U.S. Coast Guard in 2011. The U.S. has offered an additional ship, communications equipment, and training, but recognizes that no amount of aid will enable the Philippines to unilaterally defend against Chinese naval incursions.

The true cornerstone of the military rebalance is a ten-year enhanced defense pact negotiated in 2014. The agreement creates no permanent bases, an option that then-Secretary of Defense Chuck Hagel dismissed as a “return to an outdated Cold War mentality.”Instead, it invites rotational deployments of American ships and advisers, which will significantly escalate military presence in the region. It also opens the door to greater commitments of military aid to the Philippines.

The symbolic value of a return to the Philippines, just over twenty years after public protest forced the closing of American bases at Subic Bay and Clark Air Force Base, is indicative of the region’s tense atmosphere. Some anti-American sentiment remains, stalling the agreement in a legal challenge that is now before the Philippine Supreme Court. Still, Philippine officials are confident that the case will be thrown out when a decision is reached.

Assessing American Intentions Throughout Southeast Asia

In spite of American efforts to paint the rebalance in nonthreatening terms, Beijing has frequently voiced its concern that the strategy aims to encircle and contain China. These complaints have especially been directed at the military components of these partnerships with Vietnam and the Philippines. China – at least publicly – eyes these moves suspiciously, and assumes that realist, hegemonic motives dominate American intentions.

For many reasons, however, this theory does not hold water. Even if China were to be excluded from the equation, a shift in attention to Asia would remain eminently logical. The War on Terror absorbed American resources in the Middle East for a decade after 9/11, but never promised long-term benefits to the national interest. Nor does any other region offer the dynamism and promise of Asia, which officials and scholars predict will be at the center of international affairs for decades to come

While China’s era of incredible growth is finally slowing, the rest of Asia is only beginning to take off. Asia holds more than half of the world’s population and is projected to account for half of its economy by 2050. Southeast Asia in particular holds much of this untapped potential, and four of the ten ASEAN states already rank among the world’s 20 most competitive economies.

With this unparalleled importance in mind, it becomes clear that the rebalance is simply an alignment of American resources and commitments with its interests – and that if anything, criticisms should question if the policy has gone far enough. With a globally integrated economy and worldwide commitments and interests, the United States does not see itself as having the option to neglect such a crucial region.

The rebalancing strategy has also emphasized the importance of improved relations with China. While public statements have often put America and China at odds, particularly over territorial disputes, diplomatic and military coordination have improved considerably. The annual, Strategic and Economic Dialogue receives a great deal of attention, and institutionalizes the frank exchange of positions between the two countries. Communication has been at the heart of American efforts to ease Chinese suspicions. For example, the Administration even privately briefed China on its plans before embarking on President Obama’s 2014 trip to Asia, in which he announced the enhanced defense treaty with the Philippines.

In responding to fears of containment, it is also important to note that a struggling China would be a disaster for America’s economy and interests. As Gen. Martin Dempsey, the Chairman of the Joint Chiefs of Staff put it in 2014,“I worry more about a China that falters economically than I do about them building another aircraft carrier.” The American and Chinese economies are deeply intertwined, and economic turmoil could also provoke political instability in China and East Asia– the last thing the United States would like to see.

Chinese ships expanding land in the South China Sea. Image: Center for Strategic and International Studies

Chinese ships expanding land in the South China Sea. Image: Center for Strategic and International Studies

Beijing may blame America for regional sentiment turning against it, but it would be better served by turning the mirror on itself. China’s policy in the South China Sea has done much more damage to its stature in Southeast Asia than American actions conceivably could. With aggressive expansion, including incursions into both Vietnamese and Philippine Exclusive Economic Zones, China has flouted both regional and international norms and laws. Its inflexible and even threatening rhetoric and diplomacy have only compounded the problem.

Only this behavior can explain why a country like Vietnam has sought greater friendship with the United States, or why ASEAN has pursued greater unity in dealing with other countries. China may well regret its policies in the South China Sea: in pursuit of territorial gains, it has sacrificed regional influence and reputation, thus containing itself.

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Filed under China, Current Events, Foreign policy, Governance, Philippines, Regional Relations, SLIDER, South China Seas, Trade, Vietnam

Bright City Lights: Urban Trends and Futures in Southeast Asia

Traffic congestion in Bangkok

Traffic congestion in Bangkok

This year, Jakarta earned the unsavory title of “World’s Worst Gridlock.” The city of 23 million is now reputed for having to most congested streets in the world. Another Indonesian city, Surabaya, took the number four spot. If you continue down the rankings to number eight, you will find yet another Southeast Asian metropolis – Bangkok.

The tendency for gridlock in these cities is more than a daily inconvenience for residents. These levels of traffic congestion are indicators of a trend in the wider Southeast Asian region. In this part of the world, urban populations are growing faster than municipal and national governments can handle.  When managed sustainably, cities can be a valuable vehicle for economic development and socio-demographic transition. For example, cities can facilitate productive trans-border connections and slow birthrates, which enables more women to enter the workforce. Nevertheless, urbanization is a double-edged sword.

Rapid, unplanned growth results in unsustainable development that threatens social, economic, and environmental stability.  In a landmark report that analyzes 10 years of urbanization data from East Asia, the World Bank suggests that urbanization in East and Southeast Asia will have “long-lasting effects on the region’s social, economic, and environmental future.” Understanding the growth trends in Southeast Asia will boost the region’s ability to avoid the pitfalls associated with the rapid type of urbanization that has been observed over the past decade.  In other words, the region needs to pay attention to these changes if they don’t want to spend the rest of their down time stuck in traffic.

Dominant Urbanization Trends

Between 1990 and 2010, Southeast Asia increased its urban population by at least 12%, per United Nations estimates. The fact that Asian cities are growing is not a fresh realization, but few observers of these phenomena have questioned how these cities are growing, instead of just how big.

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For example, in the past 10 years, East Asia has experienced more urban growth in small- and mid-sized cities than in major metropolitan areas. This has several more nuanced implications for the region. Successful development in smaller metropolitan areas could relieve much of the pressure put on high-population areas. For example, a Thai development strategy used tax breaks to encourage people to take up residence in the regions outside of Bangkok . Unfortunately, the government failed to provide infrastructure and facilities to support business development in outlying regions. Bangkok remained the prime area for investment, and the program floundered.

Megacities like Bangkok often gain international reputations that afford them opportunities to advertise for foreign direct investment.Small and mid-sized cities, on the other hand, have to fight for attention and funding from national governments and lack the resources necessary to advertise to a wider range of investors. Take the case of Ho Chi Minh City and Da Nang, two metro areas in Vietnam. Ho Chi Minh City is the country’s largest city and Da Nang was only about an eighth of HCMC’s size in 2011. However, the rate of urban population change in Da Nang was 4.5% as of 2010 and HCMC was 3.9%. While this may appear to be a narrow margin between two cities, imagine the national impact when every mid-sized city in a country grows at this rate. The need for infrastructure would surely outpace the investment available to these smaller metropolitan areas.

laos.vte

In addition to major growth in small- and mid-sized cities, the fastest growth of urban population was experienced in East Asia’s low- and middle-income countries, namely Laos, Cambodia, and Vietnam. Japan, South Korea, and even Thailand place far behind these countries in their rates of urban land and urban population increase.

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The less developed countries in the region face administrative and financial challenges on a national level, which creates an environment where a single city in the country, often times the capital city, experiences the majority of the urbanization. The massive, resource-hogging cities that result are known as “primate cities” in the vernacular of urban studies scholars. Concentrating an entire country’s political, cultural, and economic capital in one area creates national vulnerability if there is a crisis in that single city.

Urban primacy is especially detrimental for a country when there is massive migration to the core and a development lag in the country’s periphery. This phenomenon plays out the same way in developing countries across the globe: Rural poor migrate to urban areas in search of better economic opportunities, but financially and administratively inept governments cannot provide migrants with adequate resources for finding jobs and homes. Densely populated and amenity-poor settlements result as migrants join the informal economy of the city.

Bangkok, Yangon, Phnom Penh, Vientiane, Jakarta, Manila, and Kuala Lumpur have all reached primacy within their respective countries. As previously mentioned, Bangkok is one city that has acknowledged its primate city status and attempted to reduce its dominance of Thailand’s geography. Countries such as Cambodia and Myanmar will also need to take steps to ensure that Phnom Penh and Yangon do not morph into unsustainable networks of unplanned settlements. The challenge lies in the fact that countries like Cambodia and Myanmar lack the administrative and financial capacity to shift rural to urban migration trends. However, it is promising that smaller cities in the region are doing most of the growth, even if they have a long way to go before they can compete with these metro areas.

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Finally, Southeast Asia’s urban populations are growing faster than the region’s urban land. At present, the main reason for dense urban growth in the region can be attributed to the lack infrastructure available on the periphery – a far cry from the smart growth policies that many cities implement to promote compact growth. Even so, high-density urban growth is associated with many positive outcomes when it is effectively provided for. Namely, high-density development tends to have fewer negative environmental consequences than urban sprawl. Kuala Lumpur is actually an exception to this trend in Southeast Asia, and has been criticized for failing to compact its urban growth. A heavy reliance on automobiles has been detrimental to the city, but other emerging urban areas in the region have the chance to get ahead of the car craze and promote smart growth that emphasizes efficient land use and practical transportation.

By and large, dense urban growth still has a number of caveats. As mentioned, the reason density in the region is high is due to a lack of amenities outside of core cities. If population growth outpaces the ability of the core to provide services, the quality of life in many cities will quickly degrade. Overcrowding is also a serious challenge that many cities in the developing world are faced with, and Southeast Asia is no exception. Comprehensive urban planning will be necessary to prevent overcrowding from becoming another major trend in the region.

Urban Planning and Governance: Missing Links

When you combine all of the formulas for urban growth in Southeast Asia, the results are two-sided: There is potential for inclusive, sustainable urban areas, but there is also a chance for the region to mushroom into a clutter of poorly planned development. When planning is neglected, poverty, environmental degradation, and land use conflicts ensure. For Southeast Asian cities to avoid falling victim to, say, the level of air quality degradation that many Chinese cities now face, spatial planning and good governance are crucial.

A 2009 assessment of urban governance prepared for UN Habitat is grim: the report asserts that the capacity of both local and national governments in the region is fragmented and weak, with a serious lack of simple management skills and adequate budgeting for necessary infrastructure. “Good” urban governance requires transparency, political will, and funding, but many Southeast Asian governments underperform in all three categories. There is always a propensity for countries to urbanize, regardless of political stability. With that being said, Southeast Asia’s urbanization trends alone illustrate that not all growth is good growth. A solid political environment at least ensures that there is a structure for discussing urban needs when they arise, although definitive actions need to be taken if there is going to be any change.

Administrative fragmentation is another burgeoning obstacle for Southeast Asian boomtowns. This term refers to the spillover of growth from one municipality into neighboring jurisdictions. One example is Manila’s urban area, which spans 85 municipalities and seven provinces. The World Bank predicts that many of the growing small- and medium-sized cities will soon experience this type of administrative challenge, if they are not experiencing it already.  Different jurisdictions often struggle to coordinate plans for infrastructure development and management, leaving many areas underserved.

The ecosystems impact of such trans-boundary urban areas is also notable because rivers, lakes, and forests require cooperative management.  Overcoming administrative fragmentation appears daunting in a region where political stability is scarce, but regional planning associations have proved to be an effective way to manage fragmented urban areas. The Metro Manila Development Authority (MMDA) is one such organization tasked with monitoring urban development, but it struggles with a low budget and limited regulatory power. Even so, the future of many urban agglomerations in the region would look brighter if such organizations were widely utilized. Urban management organizations have the ability to pull multiple institutional actors together when questions arise about different stakeholders’ opinions.

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Urban Futures

Southeast Asia’s urban population has not yet reached 50% of total population, an indicator that more urban growth is still to come. The future of the region’s urban areas will in part be dictated by the trends that have been observed in the past decade, but also by events that remain to be seen. Climate change is one of the foremost worries in the region, but political stability and economic productivity will also play roles in the ability of the region’s cities to develop sustainably. Metropolitan areas in the region need to get ahead of urban growth and expansion in order to take some of the uncertainty out of the future.

Climatology experts maintain that no part of the world will remain unaffected by climate change, but Southeast Asia is actually a particularly high-risk area. A number of Southeast Asia’s urban centers falter in climate change scenarios that involve sea level rise, drought, saltwater intrusion, and severe weather events, and famine. As metropolitan areas in the region continue to develop, resilience is a topic that needs to be kept in mind. Cities like Bangkok and Ho Chi Minh need to have planes in place for flooding and typhoon events. Manila needs to ask itself how to feed a metropolitan area of 16 million if crop productivity plummets due to droughts or heat waves.

Besides the need for climate change adaptation measures, Southeast Asia also represents a large market for mitigation efforts. By reducing dependency on cars and carbon-based energy sources, the region can bypass being a part of the carbon problem. China and the West used coal to fuel their urban expansion, but Southeast Asia has the opportunity to exclude GHG heavy industries and develop using environmentally sound technologies. As new attempts at international climate treaties are rolled out, it will be interesting to see where many Southeast Asian nations fall on the spectrum of mitigation requirements.

Historically, developing countries have been held to lower emission reduction standards than countries in the developed world, but countries like Malaysia and Thailand have potentially reached a threshold where they will be counted among the world’s more developed countries, and thus required to reduced their emissions further. In any case, climate mitigation is good for Southeast Asia if it means that the impacts of climate change on the region will be softer than current predictions.

Political stability is also a recurring obstacle for a number of Southeast Asian countries. Years of stability and growth have been punctuated by sudden regime changes that have reduced the level of confidence both Southeast Asian nationals and outsiders have in the region’s governance. Urban planning is an intensely political process, so the status of a country’s national government directly effects urban development. If establishing effective national governments proves to be too much of a challenge for parts of the region, how can we expect urban management to get the attention that it requires?  Metropolitan development authorities and NGOs could potentially help cities weather the storm if political institutions fail, but finding consistent, effective governance is critical for the future of Southeast Asia’s cities.

Future economic development in Southeast Asia will also continue to shape urban areas in the region. Low-cost manufacturing has played a significant role in growing many of the region’s largest cities, but that may change as smaller urban areas take up lower-technology manufacturing as well. Some suggest that economic outcomes are better in regions where the largest cities take on service industries and high-tech manufacturing and the smaller cities concentrate low-tech industries. However, this is impossible if the infrastructure needs of smaller cities remain unmet. Investment in Southeast Asia’s small- and mid- sized cities is an important step that the region can take to move towards greater economic output.

Urbanization in Southeast Asia has reached a clear bottom line: In order to reap the benefits of healthy, innovative urban areas, the region needs to raise its expectations for planning and governance. If current regional urbanization trends continue to play out, there is potential for Southeast Asia to be the home of several highly productive urban areas. Investing in small and mid-sized cities will create robust national economies and capitalizing on dense growth will keep the environmental impact of cities to a minimum. However, if planning and coordination are left on the wayside, the region will be set on a course for vulnerability to any sort of crisis that should arise.

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Southeast Asia’s Illicit Wildlife Trade: International Cooperation Necessary to Find Solution

On Wednesday March 25, immigration authorities confiscated 492 black spotted terrapin pond tortoises at the Tiruchirappalli International Airport in India. Identified as merely carriers, the five passengers with tortoise-laden luggage seemed unaware of their baggage contents and were merely promised 10,000 Rupees each for transportation, a sum of about $800 USD. Bound for Bangkok, this shipment of tortoises represents the largest attempted volume of wildlife trafficking at the Trichy Airport and highlights the trans-boundary nature of the illegal wildlife trade in Southeast Asia.

Preceded only by the arms and drug trade, illegal wildlife trafficking represents the third- largest illicit trade in the world. As a region, Southeast Asia remains among the most critical in terms of severity and volume of wildlife trafficking. According to the United Nations Office on Drugs and Crime 2013 Threat Assessment, China represents the leading consumer country in the East Asia and Pacific region, with consumption levels in South Korea and Japan on the rise. Driven by high demand in East Asia for animal products in the form of food, traditional medicine, and decoration, the illegal wildlife trade in Southeast Asia is responsible for approximately 25% of the global industry, according to estimates made in 2005. Facilitated by expanding transportation infrastructure in Southeast Asia and the region’s porous international borders, the trans-boundary wildlife trade presents numerous governance challenges to the region’s developing nations. Not only does the illegal wildlife trade threaten Southeast Asia’s ecosystem biodiversity, but the industry also impedes economic growth and regional security because of its ties to drug trafficking and terrorism. While the role of each country within Southeast Asia is different regarding the illicit trade of live animals and their parts, the countries of the region must work together in order to develop viable governance solutions for the issue.

Facing the challenges presented by the illicit wildlife trade in Southeast Asia requires international cooperation, within the East Asia and Pacific region as well as globally. Ratified in 1975, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) was among the first international efforts to mitigate the illegal wildlife trade. CITES establishes lists of species, the trade of which is illegal without proper documentation, and requires that its member parties regulate the trade of these species through national legislation.  Currently, CITES has 180 member parties, including all of the countries in Southeast Asia, China, and the United States. However, CITES merely provides a framework for enforcement and requires country cooperation to effectively reduce illegal wildlife trafficking.  Although putting an end to the illegal wildlife trade in Southeast Asia remains an ambitious task, the efforts of CITES and ASEAN Wildlife Enforcement Network (WEN) have generated legislative headway in the region. Recent collaboration between China, the United States, and the member states of ASEAN suggests that wildlife trafficking is a dilemma that, just as the trade itself, transcends national boundaries.

Overview of the Illegal Wildlife Trade in Southeast Asia

Before introducing the various cooperation efforts in Southeast Asia aimed at combatting the illegal wildlife trade, we must first have an understanding of the unique set of ecological, economic, and security challenges that the industry presents to the region. Globally, Southeast Asia represents a hotspot for the illegal wildlife trade. Figure 1 presents data collected via a real-time, online surveillance system designed to track reports of illegal wildlife trade worldwide. Although these data do not reflect every instance of illegal wildlife trafficking, they provide a good base for comparing the trade between different regions.

According to the numbers I collected from the system on April 7, 2015, reports of illegal wildlife trade in Southeast Asia vastly outnumber every other region in the world. Because the region also contains numerous biodiversity hotspots, the illegal wildlife trade in Southeast Asia threatens some of the most ecologically productive ecosystems on earth. Inextricably tied to economic development, sustainable agriculture practices, and natural resource bases, maintaining ecosystem services remains of utmost importance to developing nations. The United Nations Environmental Crisis Assessment agrees, stating, “Healthy ecosystems provide the platform upon which future food production and economies are ultimately based.” As the single largest threat to vertebrate species extinction in Southeast Asia, the illegal wildlife trade undoubtedly threatens ecosystem health as well as economic development within the region.

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Black market value of commonly-traded wildlife products in Asia-Pacific region. Measured in USD. Figure 1: Information gathered on April 7, 2015 from http://www.healthmap.org/wildlifetrade

 

The Southeast Asian illegal wildlife trade represents a lucrative business. Figure 2 shows maximum market value data for various commonly traded illegal animal parts, information collected by the U.S. Congressional Research Service in 2008. Currently, a kilogram of rhino horn is approximately worth as much as a kilogram of gold in Vietnam. In terms of the monetary value of the wildlife trade worldwide and regionally in Southeast Asia, the illicit nature of the industry prevents researchers from making completely accurate estimations. However, the UNODC suggests that the illegal wildlife trade in in the East Asia and Pacific region is, conservatively, worth around 2.5 billion USD annually, while a Brookings Institute report suggests that the value for Southeast Asia alone is closer to 8-10 billion USD.

The magnitude of and range between these values demonstrates that the illegal wildlife trade in Southeast Asia represents a substantial economic problem, the scale of which is largely uncertain, due to a lack of regulation and research. The economic threats posed by the illegal wildlife trade range from a potential decrease in eco-tourism due to species loss to large-scale development impediment as the trade perpetuates a cycle of poverty within Southeast Asia’s rural regions. For example, the vast majority of those who illegally harvest wildlife in the East Asia and Pacific region happen to be rural individuals seeking to boost their low income levels. Therefore, as an enterprise born out of desperation and the lack of financial resources, the illegal wildlife trade, particularly the specialized traders at the top of the industry, benefits immensely from keeping rural individuals poor. Thus, the continuation of the illegal wildlife trade in Southeast Asia does not bode well for the region’s economic future.

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Figure 2: Information from U.S. Congressional Research Service on maximum market prices for commonly-traded animal products worldwide

 

Illegal wildlife trafficking also carries significant national security implications. In Africa, for example, ties between poaching and terrorist groups have proved particularly alarming. Although less is known regarding the connection between wildlife trafficking and other criminal organizations in Southeast Asia, the region’s illegal wildlife industry maintains strong ties with poaching throughout Africa. While this tie does not necessarily suggest that wildlife trafficking in Southeast Asia is directly connected to African terrorists groups, the connection can generate security threats in the form of government corruption.

Vietnamese demand for rhino horn for use in traditional medicine spurred a sharp increase in rhino poaching in South Africa during 2013. The World Wildlife Fund recognizes government-level corruption as a contributing factor to the trade of rhino horn in the country, as officials allow free passage to select individuals transporting rhino horn. Not only does corruption in the illegal wildlife trafficking industry hinder enforcement efforts, but it also leads to political instability, as the national government loses the respect of its citizens as well as other nations.

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On a similar note, Vietnam’s ties with rhino poaching in South Africa demonstrate that Southeast Asia plays a diverse set of roles in the global wildlife trade. Because the countries of Southeast Asia simultaneously serve as source, transit, and demand points for live wildlife and animal parts, tracking the origin of species traded in the region proves incredibly difficult. Similarly, the trade itself encompasses a complex set of actors. As a relatively low-risk, incredibly lucrative crime, wildlife trafficking presents an appealing option for impoverished individuals at the poaching and transportation levels as well as for experienced criminals at the highest level of the trade, hoping to supplement other illicit industries. Those responsible for the transactions are rarely caught and the transporters generally take the blame, as in the black spotted tortoise case at the Trichy Airport earlier this year. The inability to identify ringleaders within the industry perpetuates the illegal trade, as the individuals caught in the process (poor transporters and poachers) are easily replaceable. Fundamentally, the illegal wildlife trade exploits low levels of law enforcement prevalent in Southeast Asia’s developing countries, and thus undermines existing legal efforts aimed at reducing the trade.

CITES and Southeast Asia

The illegal wildlife trafficking situation in Southeast Asia is dire and benefits no one but those at the top of the trade. Nevertheless, international attention to Southeast Asia’s illegal wildlife trade has undoubtedly increased since CITES was first established. The timeline below shows the location history of the CITES Convention of the Parties (CoP). Occurring every two to three years, these conventions essentially assess the progress of member countries in terms of illegal wildlife trafficking enforcement. Held in Bangkok, the 2004 convention was the first CoP held in Southeast Asia.

In 2013, Bangkok again served as the convention host, becoming the only city to host two CITES CoP’s. CITES’s focus on Bangkok reflects international recognition that the illegal wildlife trade in Southeast Asia, specifically Thailand, is in desperate need of regulatory help. Last year, CITES issued a warning to Thailand, asserting that if the national government continued to let its ivory market go unregulated by March 2015, it would face wildlife trade sanctions. As of 2013, Thai laws permitted the trade of domesticated elephant ivory; however, due to a lack of market regulation, poached African elephant ivory could easily make its way into the market. There has been no word thus far as to whether Thailand met CITES demands by the March deadline.

Timeline

CITES is undoubtedly a useful international organization that provides information and baseline regulatory practices to its member countries; however, CITES framework must be implemented in national legislation and then carried out at major transportation centers in order to be effective. Refocusing on the recent wildlife trafficking case at the Trichy Airport, the black spotted tortoise (Geoclemys hamiltonii) falls under Appendix 1 of CITES, a list reserved for species threatened with extinction. While this listing did not deter those attempting to transport the tortoises to Bangkok, it did allow officials to halt this potential transaction and suggests that CITES protocol is being implemented, to some degree. Furthermore, a look at the CITES website news and highlights shows that ASEAN and China are making regulatory progress in the eyes of the international community regarding the illegal wildlife trade. For example, on March 11, “CITES commends leading Chinese courier companies’ zero tolerance towards illegal wildlife trade” was followed by an April 2 report titled “ASEAN member States discuss enhancing regional cooperation to combat poaching and illegal trade in wildlife.”

These positive reports regarding the illegal wildlife trade in the East Asia and Pacific region reflect CITES attention to and support of the region’s efforts. And CITES praise of China and ASEAN is not unwarranted. A group of courier companies thought to make up approximately 95% of China’s market agreed to a “Zero Tolerance” pledge with regard to the illegal wildlife trade at a World Wildlife Day symposium. The CITES website recognizes this action as a huge step because “courier service is being used as by far the most important means of transport…in the illegal trade chain.” On the ASEAN side of the equation, member states met from March 30 to April 1 of this year for a Regional Forum on Combatting Wildlife Trafficking. Held in Malaysia, the forum emphasized the importance of collaboration and cooperation in controlling the illegal wildlife crime that continues to plague the region. However, CITES openly recognizes that more work must be done on the part of national governments, listing China, Malaysia, the Philippines, Thailand, and Vietnam among eight countries of “primary concern.”

ASEAN-WEN’s Role in Halting Illegal Wildlife Trade

Although the process of ASEAN incorporation into CITES was gradual, all ASEAN countries were member parties by 2004. As CITES’ report suggests, recent cooperative strategies have been adopted to staunch the illegal flow of live animals and their parts throughout Southeast Asia, through the lens of ASEAN. Among these strategies include the formation of the ASEAN-WEN at the 2004 CITES CoP in Bangkok.

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Number of ASEAN countries that were also member parties to CITES over the past four decades

 

Self-defined as “a regional intergovernmental law-enforcement network designed to combat the illegal wildlife trade,” ASEAN-WEN maintains connections with CITES, U.S. Fish and Wildlife Service, and U.S. Department of Justice. The inclusion of two U.S. federal entities signifies a strong link between the efforts of ASEAN-WEN and the United States. Member states of ASEAN, despite the organization’s strong tendencies towards non-interference, seem to welcome U.S. input with regard to the region’s fight to stop the illegal wildlife trade.

Earlier this year, the Obama administration designed a plan to track and target wildlife traffickers worldwide using American intelligence agencies. President Obama has recognized that the ivory and rhino horn markets in Asia have grown tremendously and the problem represents an “international crisis.” During the aforementioned Regional Forum on Combatting Wildlife Trafficking, the United States served as the symposium’s co-host. While the relationship between the U.S. and ASEAN-WEN is an important factor in slowing the trade, China’s role as the region’s largest consumer of illegal wildlife products makes its inclusion in cooperative enforcement efforts vital.

China-U.S. Cooperation: The Future of Tackling the Illegal Wildlife Trade in Southeast Asia

ASEAN will not be able to combat the region’s illegal wildlife trade alone. With the majority of demand for wildlife and animal products coming from outside of the region, Southeast Asia’s wildlife trafficking problem fully includes China and thus requires Chinese cooperation in enforcement efforts. Joining CITES in 1981 shortly after its opening and reform, China’s cooperation in regulating the illegal wildlife trade is essential to reducing wildlife extraction in Southeast Asia as well as Africa. The International Fund for Animal Welfare praised China in 2014 for destroying six tons of ivory in an effort to discourage the trade and promoting several campaigns to dissuade Chinese citizens from buying items made with animal parts. The campaign photograph below utilizes a play on Chinese characters to grab the attention of Chinese consumers and decrease the demand for animal parts in luxury items.

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Image Source: International Fund of Animal Welfare http://www.ifaw.org/united-states/news/new-year-china-comes-new-campaign

 

 

While little cooperative action has taken place thus far, the illegal wildlife trade represents an issue in Southeast Asia through which the U.S. and China can effectively cooperate. Often viewed as competitors in the region, U.S.-China collaboration on the issue of the illegal wildlife trade could slow the flow as well as provide a common goal towards which the U.S. and China could work. Though somewhat vague in its direction, the 2013 U.S.-China Strategic and Economic Dialogue generated conversation surrounding China-U.S. cooperation in combating the illegal wildlife trade worldwide. Both countries recognize that a thriving illicit wildlife trade bolsters organized crime and, therefore, severely threatens national security as well as legal economic enterprises. Jointly tackling the illegal wildlife trade could strengthen positive ties between the U.S. and China, particularly with regard to Southeast Asia.

Reducing Southeast Asia’s illegal wildlife trade not only enhances the region’s ecosystems, economic development, and regional security, but also unites national governments in the name of a common cause. Already the region has seen some progress: Vietnamese demand for rhino horn dropped by over 33% during 2014 after a series of public information campaigns disproving the effectiveness of its medicinal uses. Not only do these information campaigns seem to have been effective, but they also shows that the Vietnamese government responded to internal and external concerns regarding the country’s negative role in the global wildlife trafficking industry.

As other Southeast Asian countries as well as China continue in their efforts to regulate the wildlife trade within their own markets, international cooperation is vital in significantly reducing the trade and targeting the individuals responsible. With a large portion of illegal animal products coming into the region from Africa and then crossing multiple borders once arriving in the East Asia and Pacific region, controlling transit points in the region and developing effective law enforcement practices is key. Because animal products harvested and traded within Southeast Asia often end up China and the United States, the governments of the United States and China also have a responsibility to reduce demand and can work collaboratively to stop the supply.

The success of CITES strongly suggests that international cooperation and strict national enforcement are the keys to reducing the illegal wildlife trade. Yet, as demonstrated by the trade’s continued prevalence throughout the world, particularly in Southeast Asia, more work must be done. Cracking down on the illicit wildlife trade in Southeast Asia represents a significant cooperation opportunity for the U.S. and China, and taking this opportunity could bring positive results to relations between the two nations while also effectively reducing the illegal wildlife trade in Southeast Asia.

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Who’s afraid of China’s One Belt One Road Initiative?

A month ago China unveiled an action plan for China’s controversial One Belt, One Road initiative. The action plan introduces a series infrastructure development projects and trade related agreements along three Silk Roads emanating from China and reaching as far as Europe, Africa, and South America. It undoubtedly will be the subject of scrutiny as analysts and pundits on both sides of the Pacific chime in to make hasty comparisons to China’s 14th century maritime expansion and the more recent U.S. led Marshall Plan.  Some may even go as far to equate the One Belt, One Road to Japan’s pernicious WWII era East Asia Co-Prosperity Sphere – this analogy, to the Chinese, is ultimately insulting.

Scrutiny and false comparisons aside, China and the world will be made economically better off by a successful implementation of the One Road, One Belt initiative.  China estimates the total benefit stream for investors and firms that participate in the initiative to reach an astronomical USD 21 trillion. Moreover, the prospects of such benefits are particularly timely at a time when global aggregate demand is on a downslide.   During a series of fall 2013 visits to Asian neighbors, China’s president Xi Jinping first announced the One Road, One Belt proposal as an umbrella concept describing three economic belts extending westward from China toward Europe and Africa.  The three economic belts roughly follow historical trade routes linking China with the West and are known as the New Silk Road, South Silk Road, and the 21st Century Maritime Silk Road (See map).

One Belt One Road

According to the Chinese Foreign Ministry, the initiative seeks to strengthen economic collaboration, improve road connectivity, promote trade and investment, promote currency conversion, and bolster people-to-people exchanges.  The timing of the initiative is critical.  China’s current development trajectory requires an infusion of economic growth emanating from its under-developed interior using an outward focused plan to export its finished products abroad while importing much needed raw materials and foodstuffs from the rest of the world.

The catchword among the planners of the Belt and Road system is youwai zhinei (由外至内) or ‘to bring the outside in.’ This concept reveals the actual logic of the plan as an outward looking plan that fills domestic economic needs first. Xi Jinping is betting his political future, and by extension, the continued legitimacy of the Chinese Communist Party, on this plan to solve China’s economic woes and deliver successful reforms.  Thus, criticism should not pontificate on how the initiative is China’s grand strategy for global domination, but rather focus on assessing the efficiency of the various related project and prognosticating whether Xi can drive the initiative’s benefits home in time to stave off an economic slowdown.

To address current criticism, pundits are quick to draw historical comparisons to when Ming dynasty Admiral Zheng He, a court eunuch whose naval fleets, sailed as far as the east African coastline collecting tribute and expanding China’s sphere of influence.  To be sure, Zheng He’s ships were equipped with soldiers and were not simply diplomatic missions.  However, historian Jeremiah Jenne Executive Director of The Hutong in Beijing says, “Zheng was not trying to conquer or colonize in the name of the Ming Court. China gets into a lot of trouble in contemporary diplomacy because there seem to be elements in the foreign policy and military establishments and a whole swath of the general population who have trouble separating tributary arrangements from actual control and sovereignty.”

Jenne’s comments are generally made in reference to China’s historical claims to most of the South China Sea, many of which are based on Zheng He’s naval explorations.  However, on equal measure, Western detractors of the One Belt One Road plans should also not claim Zheng He as a world conqueror or challenger to the status quo.

Some analysts suggest the cheap financing and aid packages attached to the One Belt One Road plan are part of a political strategy for China to placate its neighbors over territorial disagreements with trade incentives and cash.  China indeed ill-advisedly attempted this strategy in the mid 1990s with its economic cooperation strategies vis-à-vis mainland Southeast Asia, but its track record with this strategy, particularly with Vietnam and Indonesia is spotty and has not produced desired results.

Yun Sun, resident fellow and Chinese foreign policy expert at the Stimson Center in Washington D.C. does not quite agree with the view that One Belt, One Road is motivated primarily by strategic and political calculations. She says, “The plan is primarily an economic campaign designed to serve China’s economic restructuring and export needs. It will benefit the region, as well as China.”  She admits the initiative will inevitably have a political impact and Beijing conceivably sees the political benefit as a part of the package.

“Using the counter-factual approach,” continues Sun, “China would still pursue One Belt, One Road without South China Sea disputes, so we can’t really say that the South China Seas or mending ties due to disputes there is the cause of China’s One Belt One Road.”

The post-WII Marshall plan which successfully lifted both the US and Europe out of its post-WWII economic woes and acted as the keystone to US led global restructuring models such as the Bretton Woods system indeed serves as a useful comparison to the One Belt, One Road initiative.   While we should be mindful that there is no guarantee the plan will deliver the local and global economic benefits that China hopes for, we should be more mindful that unlike the Marshall Plan, China has no economic restructuring model to offer the rest of the world, its stock of soft power is not necessarily improving, and this plan, still in its proposal stage, will be no easy sell.

To provide a comparison, China’s scorecard in regard to economic belt and road development in mainland Southeast Asia is murky and has contributed much to its current reputation rising regional power with unclear intentions.  Vietnam has stringently followed China’s export-led growth model and as a result is currently heading toward dire and inexorable economic straits unless it considers other alternatives.  Even in poor countries like Laos, where mid-to-high-value Chinese exports are not preferred to Thai or even Vietnamese products, scant evidence exists to demonstrate the “Made in China” image is improving.

The record of Chinese firms abroad in regard to environmental protection and labor practices is abysmal in countries like Laos, Myanmar, and Cambodia with no evidenced improvement in corporate social responsibility practices. Tied to this, Xi Jinping’s anti-corruption crackdown will reveal deep corruption and graft in many of China’s overseas infrastructure development projects.  Moreover, Xi Jinping is pledging to break-up the monopolies of many of China’s powerful state firms – construction and energy firms are already in his sights – thus, it is unclear who will build the One Belt, One Road projects.

To reiterate, these are the issues that deserve scrutiny and attention rather than the high-level rhetoric of China’s grand strategy.

Liu Jinxin, regional logistics expert and chief architect of the Bangladesh-China-India-Myanmar Corridor (a westward stretching leg of the South Silk Road – see map), says that the greatest challenge facing the One Belt, One Road strategy is in China’s public relations strategy.  “Too many out there misunderstand China’s intentions, and factions, particularly within democratic countries, will misinterpret the benefit flows that this plan will deliver.”  Liu also cites the need for harmonizing legal structures between cooperative partners in sectors related to trade, commerce, and logistics.  “China will learn the most from this process, specifically through interaction with countries in Europe where the rule of law is strong.  However, since China’s legal system is not based on rule of law, it will be difficult for China to emerge as a conversation leader on this initiative.  In many ways China’s role is passive.”

Thailand’s refusal to pass a regional cross-border transportation agreement sponsored by the Asian Development Bank (which China and other mainland Southeast Asian states have ratified) is reflective of Liu’s commentary.  The ratification of this agreement would require the break-up of many entrenched factions within Thailand’s customs and inspection agencies as well as the military – a move these powerful groups are unwilling to budge on despite Thailand’s overall enthusiasm for economic cooperation with China.

When applying a critical eye to the One Belt, One Road initiative, its best to begin with a consideration toward the feasibility of such a project and looking at China’s real capabilities. Many worthwhile questions arise amidst such an inquiry, and certainly no one should take for granted that China can pull such an endeavor.  The functionality of the initiative is to push China successfully through its next wave of economic reforms promising further stability to East Asia and delivering a substantial contribution to global economic growth.

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Kunming party chief falls to corruption probe; held post for less than 8 months

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Former Kunming party secretary, Gao Jinsong

 

It’s official: there is no government posting more inauspicious than that of Kunming Communist Party Secretary.

On April 10, the Yunnan discipline inspection commission announced that current Kunming party chief Gao Jinsong (高劲松) is being investigated for “serious violations of party discipline and law,” official jargon for corruption. He had served as the Yunnan provincial capital’s party chief for less than eight months.

Gao, 51, is the third consecutive Kunming party chief to have fallen victim to President Xi Jinping’s anti-corruption campaign. His predecessor, Zhang Tianxin (张田欣) was forced to step down in July 2014 and Qiu He (仇和), who held the post from 2011-2014 was investigated just last month.

Before assuming his post in Kunming, Gao Jinsong was the Communist Party secretary of Yunnan’s Qujing prefecture from 2012 to 2014. Along with Kunming party secretary, Gao was also party secretary of the city’s garrison command. He was not, however a member of Yunnan’s standing committee, the top level of party leadership in the province.

According to a report by Caixin, Gao’s investigation is linked to the case against Bai Enpei (白恩培). The former Yunnan provincial party secretary, Bai was investigated for corruption and in August 2014. Gao reportedly gave Bai Enpei millions of yuan in bribes. “Bai and his wife confessed … regarding the bribes they took, which implicated many officials currently in office,” Caixin cited an anonymous Yunnan official as saying.

Gao’s investigation marks a new direction for the current anti-corruption drive. When Gao was announced as the replacement for the disgraced Zhang Tianxin in August 2014, many locals thought him to be a safe choice. It was assumed that the central government had properly vetted him and that his term as party secretary would last longer than eight months. It’s obvious now that something went wrong.

It is certainly possible that Gao’s investigation is directly related to the Bai Enpei case. However, the investigations and court proceedings in official corruption cases are done behind closed doors, the details of which are only released through state-run media.

Indeed, it would make sense that Gao Jinsong had corrupt dealings with Bai Enpei. Bai, who was the provincial secretary from 2001 to 2011, was a kingmaker of Yunnan’s party leadership and Gao’s political rise coincided with Bai’s tenure.

Regardless of the exact details of Gao’s case, what is becoming clearer with each disgraced official is that the central government is displeased with Yunnan. It is a troubling new face of the province’s relationship with Beijing.

In the early 2000’s provincial leaders took pride in their appointment to serve as China’s chief representatives for carrying out the country’s economic policies and cooperation initiatives with neighboring Southeast Asia.  Now the Yunnan provincial leadership’s role is tarnished and uncertain.

In an action plan for China’s One Belt, One Road Initiative revealed last month at the Bo’ao Forum, Yunnan province was not listed as a key province despite its geographic significance in the current and future development of the South Silk Road.  Furthermore, the future of Luosiwan International Trade City, which acts as a logistics hub for all Chinese goods travelling overland into Southeast Asia, is surrounded by uncertainty after its owner, Liu Weigao, was arrested for corruption earlier this year.

In the past thirteen months, the entire Communist Party leadership of Yunnan has fallen one by one to charges of corruption. That the man chosen to replace one of these fallen leaders has now been investigated himself for graft only reinforces the notion that something is wrong in Yunnan’s politics. Is it that the profits from province’s tin and copper mines are too tempting for these top officials? Is it their connections to the disgraced security czar Zhou Yongkang and his Sichuan-based clique? Or is it something else?

Whatever the reason, Yunnan’s relationship with the center is clearly troubled with no solution in sight. Those next in line for the province’s party leadership will be desperate to find one; their role in China’s development in Southeast Asia depends on it.

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Filed under China, Governance, SLIDER, Yunnan Province

Liu Weigao: The Developer Behind Qiu He’s Curtain

Capture1

Jiangsu businessman Liu Weigao at a meeting of the National People’s Congress in Beijing.

 

The following translation is a detailed exposé of Liu Weigao, the Suqian businessman whose exploits brought down Qiu He, the Vice-Party Secretary of Yunnan  Province.  The smartly crafted article written by Southern Weekend reporter Liu Jun was published on March 19 on the Phoenix News site.  The author is careful not to directly connect Qiu He to Liu Weigao, but the implications are extremely salient.  Moreover, the report links both Qiu and Liu to the deaths of two villagers.  After Qiu was placed under investigation on March 15, word passed quickly around Kunming that villagers died in the demolition of a village overseen by Qiu’s team.  A keen reader will note the usage of citations from the Kunming Daily that ridiculously support the work of the Kunming leadership demonstrating government control of the local media.

In Suqian, Liu Weigao went by the nickname “Half the City.” Others,  in private quarters, called him the “Godfather of Urban Construction.”

Li Xiong, a villager from Hongren village who protested his village’s demolition was severely beaten by three unidentified assailants one night while returning home.  At the local village department overseeing the demolition of Hongren village, an itemized account log reads: November 2010, hire people to take care of Li Xiong, spent 30000 RMB.  These notes were handwritten.  A line on May 16, 2010 shows “Purchased two wooden coffins, 1200 RMB.”

On March 17, 2015, Zhonghao (中豪) Commercial Group’s official Weixin account posted a notice saying its board chairman Liu Weigao (刘卫高) resigned from his position. Ever since the March 15 announcement of Vice-Provincial Party Secretary Qiu He’s (仇和)arrest, the media has been paying high attention to the name Liu Weigao.

Many signs of Liu’s demise appeared before the March 15 announcement.  Liu Weigao was a Jiangsu provincial representative to the National People’s Congress, but he was absent from this year’s recently concluded meetings in Beijing.  Many sources told to Southern Weekend reporter Xiu Lu that long before this year’s Spring Festival, Liu had already been taken away for official investigation.  Meanwhile in Suqian (宿迁), Jiangsu, many had noted that most of Liu’s real estate and investment projects had already come to a standstill.

Thirty years ago Liu Weigao got his start in Yiwu, Zhejiang.  He then slowly made the transition from northern Jiangsu to southwestern Kunming.  He started with a small company with registered capital of 5mn RMB (800,000 USD) which he then transformed into an empire of ten major firms valued at over 1bn RMB (150mn USD).  This empire went by the name of Zhonghao, and now Zhonghao will forever be associated with the name of a fallen official.

 

Designs for the X square kilometer New Luosiwan International Trade City

Designs for the 8 square kilometer New Luosiwan International Trade City

A Key Project

Among Zhonghao’s empire, the Zhonghao Luosiwan International Trade City (中豪螺蛳湾国际商贸城) is Liu Weigao’s magnum opus.  Luosiwan International trade city is a golden line of connected buildings stretching for hundreds of meters and is located 15 kilometers from downtown Kunming.  The locals prefer to call it Luosiwan (螺蛳湾).

New Luosiwan’s first and second phase buildings are five meters high with banners sporting the lofty slogans “Go Out into the World” and “Face the Future” hanging on its outer walls. Its entryways are cluttered by delivery companies and cargo trucks continuously drive in and out. Alongside of the complex are countless banks and hotels showing that “Asia’s top comprehensive commercial firm” (the slogan printed on Zhonghao’s stationery) was not built on the waves of a false reputation.

But this is only a small part of Luosiwan’s territory.  According to Liu Weigao’s plans, Luosiwan’s final size reached 12000 mu or more than 8 square kilometers.  It’s important to note that Kunming city’s area is only 98 square kilometers with Luosiwan accounting for 8% of that space

luosiwan

New Luosiwan’s main entrance

 

Five years ago, Luosiwan’s site was a barren farmer’s field located on the eastern banks of Dianchi, in Kunming’s outer reaches.  Now with more than 5.8bn RMB (935mn USD) invested around Luosiwan, it’s more like a new city in the midst of development.  Some praise Liu Weigao’s capabilities, but others look at him with disdain suggesting that without the government’s support behind him, he wouldn’t have such capabilities.

In 2008, Zhonghao entered Kunming amidst the frenzy of a major building phase where the new Kunming Party Secretary Qiu He called for the demolition and rebuilding of 300 urban villages.

In February 2008, a group of twenty-five businessmen from Yiwu, Zhejiang arrived in Kunming to survey commercial opportunities. This group was led by Liu Weigao.  In May of the same year the group decided to begin to replicate the Suqian model of economic development, and set Kunming in its sites as its priority testing ground.  Ground was broken on September 2008, and in April of the following year the roof was finished on the 1.2mn square meter marketplace which opened for business the following November.

“Within one year, an investment miracle happened in Kunming. Kunming’s investment efficiency is very high.” This is how Zhonghao’s board chairman, Liu Weigao appraised Kunming’s investment atmosphere at the May 9, 2009 annual meeting of Zhejiang investors.

This type of speed was not made possible without the “kind efforts” and support of the Kunming government.  According to a report in the Kunming Daily, to promote the development of Luosiwan International Investment City, the Kunming municipal government set up a leading small group to hold regular meetings to follow up on the progress of related projects and to assist with problem solving when the project came across difficulties and challenges.

A farmer tends his fields near the New Luosiwan site.

A farmer tends his fields near the New Luosiwan site.

For the three years after 2008, Zhonghao “attacked the city and seized territories” repeatedly grabbing extremely cheap land with extremely low effort. Public reports show on September 23, 2008, the Kunming municipal land bureau auctioned off seven parcels of state land totaling 877 mu (58 hectares) at a value of 780mn RMB (125mn USD).  Within five minutes the only bidder at the auction, incidentally from Zhonghao, purchased the land.  The construction of New Luosiwan’s first phase was secured.

A portion of this was farmland belonging to Hongren village.  Li Zhaorong, a villager from Hongren, recalled in a Southern Weekend report that at that time the government told villagers the use of the sold land was for public purposes.  The government did not mention the construction of Luosiwan.  At that time the standard for land compensation was 160,000 RMB  (25,800 USD) per mu, but in the end villagers in Hongren only received 60000 RMB per mu (9677 USD).

Zhu Xiaoyang, a professor from Peking University’s sociology department, conducted long term research on Hongren village and was a witness and participant in the resistance movement inside of Hongren.  She claims that at the time villager were compensated, surrounding land was valued at least 1.5mn RMB (241,000 USD) per mu.

When New Luosiwan opened for business, the old Luosiwan market in downtown Kunming announced its closing.  There was only one reason for closing –for the betterment of the New Luosiwan.  The official explanation was to “comprehensively direct vendors in their transition to the new Luosiwan.”  According to a Kunming Daily report, the Kunming Municipal government put on a special closing event for the Old Luosiwan market on November 17, 2009 two weeks before its official closing date.  At the event, the government head of Xishan district (where the old market was located) proclaimed the completion of the New Luosiwan Market.  He urged the vendors still operating at the old market to positively support and follow the directives of the Kunming municipal party and government organs.  He displayed confidence in the future of New Luosiwan.

But this only one side of reality, as many vendors resisted the forced relocation.  Yet their efforts had little effect.

Former Yunnan CCPCC Vice-chairman Yang Weijun remembers receiving the vendors’ petitions.  From the perspective of an old Kunminger, the demolition of the old Luosiwan market entirely was a mistake of the sitting municipal leadership.  “The old Luosiwan market had more than twenty years of history and received more than 200,000 customers per day.  It was the largest distribution center for everyday commodities in all of Yunnan and perhaps all of Southwest China.  How can you just shut a place down with business as good as that?  And then move 15 kilometers out into the suburbs?” he told Southern Weekend reporters.

The Hand Behind the Curtain

No outside protests were going to stop Liu Weigao’s New Luosiwan project. In fact, the deeper his steps, the larger the project grew.  In March 2010, a land sale’s sole bidder, again representing Zhonghao, grabbed four parcels of land for 1.07bn at 1.8mn RMB per mu (290,000 USD per mu) to be used in the Luosiwan’s second phase.  One year later at another land auction, the only bidder, also from Zhonghao, bought up twenty-seven parcels of land totaling for 6.4bn at 3.5mn RMB per mu (564,000 USD per mu). That auction lasted less than three minutes.

A Southern Weekend report revealed during the construction of New Luosiwan’s 2nd and 3rd phase, not all of the land was used to build the commercial space. A portion of the land was used to build private real estate.  For example, in the 3rd phase among the twenty-seven parcels of land purchased, only eight were used for commercial purposes.  Eleven were used for residential space.  Taking commercial land and illicitly converting it for residential purposes has been an unspoken rule of the real estate industry for years.  Zhonghao is known to exploit this rule to the extreme.

On Luosiwan’s grounds, Southern Weekend’s reporters observed that Zhonghao’s real estate projects occupy the periphery, and possibly in aggregate outsize Luosiwan’s commercial space.  In February, 2010 Liu Weigao established the Zhongwang(中望) real estate company with a registered capital of 250mn RMB (40mn USD) with Zhonghao as the majority shareholder.  Zhongwang’s first project was the 1500 mu (100 hectare) Zhongwang City (中望城) – across the street from New Lousiwan.

Zhongwang City’s first phase construction was unsurprisingly smooth. In August of 2014, Zhongwang purchased the largest parcel of land for sale that year at 1.79bn RMB (288mn USD).  The land is located in Yiliu subdistrict’s Wula village in Guandu District and was comprised of nine parcels of land totaling 569.47mu (38 hectares).  Because of this purchase Zhongwang was named Yunnan’s land king.  The auction was the same as previous years – only one bidder from Zhongwang was present.

Luosiwan 2007

Google satellite image of future New Luosiwan site, 2007. Tami, Wula, and Hongren villages occupy the periphery.

Luosiwan 2015

Google satellite image of New Luosiwan site, 2015. Only Hongren village remains near the upper left corner.

 

The land grabbed by Zhonghao has been done so entirely in the name of demolishing Kunming’s urban villages (城中村). A Kunming Daily report said it is out of step for a major commercial port of China to be surrounded by urban villages.  “This is an effective project for integrating the rural and urban areas and to improve residential environment and transportation.  It has great significance for improving the image of the city.”

But surveys conducted by Southern Weekend discovered that Tami village, Wula village, and Hongren village, all affected by the New Luosiwan project were in fact not zoned as “urban villages.”  They were only torn down after the Yiliu sub-district applied to the Guandu district government for demolition.

An internal document from Guandu District reads that on November 3, 2009 the Guandu office responsible for speeding up urban village demolition approved the request of Ailiu sub-district and agreed to proceed with the destruction of the three villages.

The Guandu district government has always been responsible for taking the lead on demolition related to the New Luosiwan project.  Zhonghao, from beginning to end, has never been at the front of the action.  Li Zhaorong says he’s never seen Zhonghao talk directly to the Guandu government, but in actuality Zhonghao has always been behind the curtain providing support.

According to many documents acquired by Southern Weekend, Zhonghao’s people have participated in the entirety of the planning related to demolition in Guandu district.  The minutes of meetings regarding demolition related to the New Luosiwan project show that Chen Hongbing, Wang Zaizhang, Xu Dingsheng, Chen Qianfei (陈红兵、王存章、徐定生、陈钱飞)were in attendance.  All four are upper management at Zhonghao.

In another internal document procured by Southern Weekend, eleven Zhonghao employees were listed on the roster of Hongren Village’s demolition team.  They were sent from Zhonghao’s finance, cartography, and office departments.

The demolition progress hit a snag when it reached Hongren village.  Among 1300 families that lived there, only sixty agreed to move.  Hongren village had just been built according to regulations related to the construction of China’s new socialist countryside program.  Those living there had only recently moved in, yet now their homes faced immediate demolition.  The villagers were not interested in an extra cent of compensation to coax them to pick up and move again.

The demolition of Hongren village was to be carried out by its own government office. On May 20, 2010 at 9:00am, forceful demolition of Hongren village was begun. Headed by the demolition team from Hongren village government – more than 500 chengguan, guards, and policemen were on hand.  Zhonghao had five employees on site to oversee maintenance and provide material support.  Amidst the chaos, one villager was blinded.  Li Zhaorong was one of the “Five heroes who resisted demolition” (抗拆五君子). He recalled to Southern Weekend reporters that one of the other “heroes” Li Xiong was beaten by three unidentified persons in the middle of the night.  Three others were sent to the local jail and not released until the next morning.

Southern Weekend also procured handwritten documentation from the Yiliu sub-district demolition command center, “November 2010, hired people to take care of Li Xiong’s, spent 30000 RMB.  On May 16 2010 a line showed “Purchased two wooden coffins, 1200 RMB.”

Not only did Zhonghao grab the homes of villagers. It also swallowed land previously purchased by other real estate developers.  Sources close to the situation have told Southern Weekend that it was industry owners and government officials who blew the whistle on Liu Weigao.

The Liberator’s Realm of Fortune

Many people are clear that the completion of New Luosiwan was a replication of Liu Weigao’s investment experience in Suqian, Suzhou. Looking back at Liu Weigao’s journey, Yiwu was where he got his start, but Suqian was his realm of fortune.

Media reports suggest that Liu Weigao is from Suqian’s Shuyang county, but there is no certainty to this information. Southern Weekend can report that Liu Weigao was born in Qingyanliu village in Zhejiang’s Yiwu City. Interestingly Qingyanliu Village is famously known as the “Number one village for online vendors” (网店第一村).

With only a high school education, Liu Weigao got his start selling socks.  After a ten year struggle, his Zhejiang Suli company registered in 2003 with an initial startup capital of 160mn RMB (25.8mn USD).  In that year, Zhejiang province stopped the approval of new industrial land and Liu’s sock industry faced the risk of losing his supply of capital.  This shock forced Liu Weigao to Suqian and ultimately is responsible for his rise.

This time was also a positive period for Suqian’s fortunes.  In 1996, Suqian was the poorest of Jiangsu’s thirteen cities.  That year Suqian’s leadership began to attract investment by promoting the city for economic development to outside investors.

Liu Weigao traveled from Yiwu to Suqian to conduct investment surveys two days after receiving an invitation from Suqian officials.  He decided to invest in the city’s economic development zone and expand his sock industry.  Three years after settling in Suqian, he began to search for other investment opportunities.

At that time Suqian was home to an old wholesale market established in 1997 with an area of 130,000 square meters.  Its market base was weak, product selection narrow, and was lacking in both customers and vendors.  Although the Suqian government provided numerous policies to promote commercial activity, in 2005, the market’s commercial sales were less than 500mn RMB (80mn USD).

Then Liu Weigao proposed to build a new market on the site of the old one, but this plan would restrict the scale of the market’s potential.  Later, the city government sold him a parcel of land in which Liu Weigao invested 2.6bn RMB (420mn USD) to build a brand new, bigger market.  This market was a direct copy of Yiwu’s successful small commodities market.  Liu Weigao was eager for the world to know of his new project.

Ground was broken on August 1, 2005 on the Suqian-Yiwu International Trade City (宿迁-义乌国际商贸城)more familiarly known as the Suqian Small Commodities City (宿迁小商品城).  Liu Weigao’s efforts were promoted with high praise from the Suqian government.  In June of that year, the Suqian Party headquarters held a meeting to promote the construction of Liu’s market.  The saying at the time was “Building a big market and opening big development will expand accumulation” and “Work hard to create a large market, strengthen the attraction of Suqian’s markets.”

In 2006 Suqian celebrated its tenth anniversary as a municipality.  Liu Weigao’s market was complete with a physical area of 1.46mn square meters.  In August 2006, China’s most popular television show “One Song”(同一首歌) came to Suqian.  At the Suqian taping Liu Weigao spent an estimated 8mn RMB (1.3mn USD), and because of this he shot to stardom gaining the reputation of the wealthiest businessman in Suqian.

From 2002 onward “Attracting financing and investment” was the top priority for economic development according to Suqian municipal government.  The taping of “One Song” was a perfect way to hit the government’s objectives.  After airing on China Central Television, Suqian’s image received a major boost.

One month after the taping, Liu Weigao was honored as a “Top Minister for City Construction” (建市十大功臣) at the municipality’s year-end meeting.

Liu Half-the-City

After “One Song” Liu Weigao’s reputation climbed to its zenith.  In January of 2007 Liu Weigao was elected head of the Suqian Chamber of Commerce in a landslide victory. He represented Suqian at the annual Jiangsu provincial meeting of top commercial investors.  There he proclaimed “When I chose to invest in Suqian, I fell in love with its openness and tolerance.”

Moreover, the license plate number, N00000, on his ostentatious Rolls Royce suggested that he did not simply enjoy a typical relationship with the local government.  He was the talk of the town.

From here, Liu Weigao’s investment in Suqian expanded.  He began to expand his scope of real estate investments and won contracts to build many government and public buildings.  He easily bought up parcels of land in Suqian’s most valuable downtown areas, particularly those close to Xihu Road (西湖路).  Here he built the giant Zhonghao International Market (中豪国际广场) and Zhonghao International Mall (中豪国际星城) and afterwards began construction on Phoenix City(凤凰美地), a giant real estate project, in addition to other projects.

After he invested in Kunming, Liu Weigao returned once again in 2010 to invest in Suqian.  This time his proposed project was even bigger: the 11 square kilometer Canal Cultural City – a mixed commercial residential site with a large exhibition center and more than twenty tourist sites.  It was known as China’s largest Grand Canal themed project.

On November 29, 2010, Suqian government leaders proclaimed “After construction the Canal Cultural City will be Suqian’s international calling card.”

In Suqian, Liu Weigao went by the nickname “Liu Half the City” (刘半城).  Others in private quarters called him the “Godfather of Urban Construction”(城建教父 ).

According to the report of an anonymous high-level Suqian official, Liu Weigao’s motivations for returning to Kunming were unclear, but one can assume his endeavors in Kunming had reached high levels of success.  Otherwise he would not have been able to make such an enormous investment in the Canal Cultural City.

When the Tree Falls, the Monkeys scatter

In August 2014, Zhonghao’s annual commercial income reached 35bn RMB (5.6bn  USD) ranking it as the top private firm in Yunnan province.  Zhonghao was also in preparation to list its holdings on the Hong Kong stock market.  But last October Kunming Municipal Land and Resources Bureau (国土局) issued a list of twenty-five firms which owed money on land deals.  One of those firms was Zhonghao.  It is critical to note that prior to this announcement, Kunming’s top leadership had been reshuffled in Xi Jinping’s anti-corruption drive.

Zhonghao was not prepared for days like this.  Vendors at New Luosiwan still held Liu Weigao with much contempt as a rude and arbitrary businessman.  One vendor recalled to a Southern Weekend reporter that originally vendors were required to pay five year’s rent up front, but now were required to put up six year’s rent.  Some vendors in the New Luosiwan’s first phase zone engaged in physical altercations with Zhonghao’s management because Zhonghao forced them to move to the recently opened third phase zone to improve the atmosphere.  They refused, saying, “With business this good, on what basis are they forcing us to move?”

Opposite from his Kunming experience, back in Suqian, Liu Weigao continued to rein in honors and political resources.  In 2013 he was selected as a Jiangsu Province representative to the Chinese National People Congress.  Liu was one of only six representatives from Suqian.

On October 1, 2013 Liu Weigao’s theme park, Canal Paradise (克拉嗨谷), opened on the grounds of the Grand Canal Cultural City.  With a total size of 450,000 square meters, it is known as northern Jiangsu’s largest theme park.  After an initial positive reception, the interest in the park has gradually lessened.  Tickets cost 150 RMB per person and many in Suqian remark that the park is too expensive.

Canal Park

Google satellite image of a portion of the Canal Cultural Park. Liu Weigao’s Canal theme park is center bottom with the Tianxi real estate developments bordering above.

 

In addition, most of the commercial space for rent at the park’s entrance is empty.  Those who do conduct business there are barely getting by.  A manager of a local restaurant told Southern Weekend reporters that rent for a 100 square meter space is 30000 RMB (4830 USD) per year.  But she has less than three or four customers per day with some days attracting no business at all.  A nearby shop posted a “for rent” sign on its doors only after doing two months of business.  To date, no one has responded to the offer.

Across from the Grand Canal Park, sits the Grand Canal Tianxi(天玺) real estate project.  Construction stopped here earlier this year.  Barren and grey, the half-finished buildings show off huge advertisements “Grand Canal City gives you a piece of blue sky and green pastures”  In addition another advertisement sports a promise unlikely to be kept, “Buy in the spring, and move in this fall.”

Only ten or so guards watch the empty construction site.  The doors and walls of the site are pasted with banners saying “Because of Grand Canal City’s major violations, the construction on this project terminated on February 1, 2015.”

Kunming’s New Luosiwan Market is equally quiet.  The deeper you walk into it, the more you discover it’s a ghost town.  Inside New Luosiwan’s second phase building, Southern Weekend reporters discovered that most of the stalls above the third floor are empty.  One of the stall owners said he’s losing money daily, not even making enough to pay rent.  The finished sections of phase three are even more barren.  Surrounding phase three are real estate projects as big as several football pitches.  Some have finished work while some are still under construction.  Very few people are moving in.

At the end of 2014, word on the Suqian’s streets was that Liu Weigao’s capital flow was on the rocks. A source close to the situation told Southern Weekend reporters that banks were tightening their debt structures and forced Liu Weigao to pay back a portion of his own debt.  They had no further loans to issue him as well.  Another source close to Liu Weigao told Southern Weekend reporters that at this time Liu Weigao’s capital was drying up.  Liu realized at meetings in both Kunming and Suqian that he was being treated differently and was caught weeping several times.

A reliable source also told Southern Weekend reporters that early in January 2015, Liu Weigao had been taken away for investigation by Zhejiang’s Commission on Discipline and Inspection.  At that time, Suqian municipal government began to find other firms to finish a portion of the construction projects previously started by Liu Weigao.

Another source told Southern Weekend reporters that in the last two years Liu Weigao’s capital flow began to dry up as Kunming’s pace of development slowed. Many of Liu Weigao’s cooperative partners defaulted on their debt payments.

In Zhonghao’s Suqian headquarters, an employee told a Southern Weekend reporter that Liu Weigao’s troubles will not affect the business of the company.  Everything is normal here at the company.  He said, “This company doesn’t solely belong to Liu Weigao, rather it belongs to its board. And there are many board members.”

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Infrastructure money continues to pour into Kunming

Planning Map of Kunming Subway System Image: Kunming Rail Transit Group

Planning Map of Kunming Subway System Image: Kunming Rail Transit Group

The seemingly unlimited supply of development money made available to Spring City urban planners shows no signs of letting up. A new report released by the municipal governmentreveals 340 billion yuan (US$54.3 billion) has been allocated to “accelerate” construction, especially on the city’s metro, railway and highway systems, over the next five years.

Referred to as the “Comprehensive Transportation Campaign” (CTC), program costs include having at least six fully functioning metro lines by the year 2020, up from the current number of two-and-a-half. When finished, the above- and below-ground sections of the Kunming Metro will cover 206 kilometers. Three additional lines are also under consideration, but will not be finished by 2020.

It is not only the metro that will receive huge amounts of funding. So too will railway ventures designed to make Yunnan more connected not only to the rest of China, but also to its Southeast Asian neighbors. Among the 12 railroads receiving CTC money is a line that will one day connect Lhasa to Shangri-la and then Kunming, a bullet train to Shanghai and other railways linking up with Chongqing, and cities in Guizhou, Myanmar and Vietnam.

In addition to the expenditures for the metro system and vast railway upgrades, the Comprehensive Transportation Campaign will add more than 20 newly built or drastically expanded traffic expressways radiating outwards from the Spring City. The network of roads is planned to connect all of the “economically important cities of central Yunnan” and in some cases drastically reduce driving times.

One other key initiative involves logistics and Dianchi Lake. To facilitate all of the planned trade coming into and leaving Kunming once the aforementioned projects are completed, an enormous “integrated transport hub” is under consideration for Chenggong. If approved — and it appears the money has already been set aside — a 458 million yuan (US$73 million) shipping and receiving facility would be built on the shores of the lake, complete with a wharf.

The CTC’s 340 billion yuan price tag should provide a significant economic jolt to a city already in the throes of a long-lasting and frenetic building boom. In 2014, the entire province saw 70 billion yuan earmarked for infrastructure work — a number almost matched by annual CTC outlays for the Spring City alone. It appears provincial leaders, and those in Beijing, are still quite serious in their intentions to transform Kunming into a hub connecting greater China with Southeast Asia and beyond.

Editors note: This article was originally published on GoKunming and written by Patrick Scally. It is republished here, in its entirety, with permission from the author.

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Qiu He, top Yunnan official, ousted for corrupt land deals

Qiu He

Qiu He, Former Vice Party Secretary of Yunnan Province Photo: GoKunming

The Ides of March did not bode well for Yunnan province’s most controversial official.  Qiu He, Yunnan’s Vice Party Secretary  is being investigated for alleged corruption by the government’s corruption watchdog agency for “serious violations of discipline and law”, a common euphemism for graft.

State media reported the opening of the Central Commission for Discipline Inspection (CCDI) investigation into Qiu on Sunday March, 15.

Qiu He was in Beijing at the time of the announcement, attending the yearly National People’s Congress there, along with the rest of the Party leadership from Yunnan.

He is the latest in a number of top Yunnan officials to have been nabbed for corruption in the past year. Following the investigation of former vice governor of the province, Shen Peiping, in March 2014, former Kunming Party Secretary Zhang Tianxin and former Yunnan Party Secretary Bai Enpei were all taken down for graft.

Before taking up the position of deputy Party secretary of Yunnan in 2011, Qiu He was the Party secretary of the provincial capital, Kunming, starting in late 2007.

A controversial city-builder 

Originally from Jiangsu province, Qiu was known as an anti-graft crusader and free market reformer. He began his meteoric rise in politics as the Party secretary of northern Jiangsu’s Suqian city, where he privatized local hospitals and schools and reformed the city’s infrastructure.

In Kunming, Qiu began his tenure by organizing a taskforce to ensure city officials arrived to work on time and limited their lunch breaks to thirty minutes.  Within a week of taking office in 2007 he instituted a policy linking local political futures of local officials to waste water pollution into the feeder rivers of Kunming’s Lake Dianchi, one of China’s most polluted bodies of water.   His passionate speeches on Yunnan’s development often highlighted the need to turn Yunnan from a backwater frontier province into a fast-developing regional hub.

He was the catalyst for a swath of controversial infrastructure projects in Kunming, including a new international airport finished in 2012 and an expansive subway system, still under construction and over budget.  The fog-stricken location of Kunming’s Changshui international airport, 40km outside of the city is a common source of frustration for Kunming’s citizens.  During the winter months, the airport will often close unexpectedly, stranding thousands of passengers and costing airlines millions.

Among Kunmingers, Qiu He is also known for demolishing a majority of Kunming’s 300-plus “urban villages” – poorly-constructed, low-income neighborhoods that dotted the city’s modern landscape. Many of these villages were replaced by housing developments built by businessmen from Jiangsu, Qiu He’s home province.  While Qiu He’s economic polices are often attributed to the skyrocketing rates of growth in Yunnan province (average 12% over last 5 years), now that China’s real estate market is cooling off, the Spring City’s blue skies are marred by dense and unsightly high-rise housing projects, many of which have completely stopped construction.  During Qiu He’s tenure, this pattern of unfettered real estate development was also copied in scenic and popular tourist regions such as Dali and Xishuangbanna, greatly decreasing their natural and cultural values.

 Attracting outside investment proves fatal 

While rumor and speculation are bound to follow the announcement of Qiu’s takedown, many cite deals made with his Jiangsu and Zhejiang business connections as reason for the investigation.

The New Luosiwan International Trade Center, with an area of more than 3 million square meters, is one of the world’s largest warehouse distribution centers and the final stop before Chinese-made goods are shipped onto destinations in Southeast Asia. It was built with an investment of more than 3 billion renminbi ($500 million) from Liu Weigao, a Jiangsu businessman most famous for establishing Yiwu’s China Commodity City, the world’s largest small commodities market, in Zhejiang province. Qiu He knows Liu, a National People’s Congress representative to Jiangsu’s Suqian city, from his time as Party secretary there. Once in Kunming, Qiu He recruited Liu to invest in New Luosiwan as part of his economic development policy. When the CCDI announced an investigation into Liu Weigao in February 2015, speculation circulated that Qiu He’s downfall was imminent.

According to one source at a local bank who wished to remain anonymous, Qiu’s demise was a popular topic of discussion at the office. Liu Weigao had millions in savings seized after he was investigated in February, along with a number of business loans associated with New Luosiwan that have yet to be paid back. The source and the source’s colleagues knew of Qiu He’s connection to Liu Weigao and openly speculated prior to Sunday whether Qiu would be investigated himself.

In fact, Qiu was scheduled to visit the bank’s local offices in downtown Kunming this week for an investigation of the bank’s performance. The source and colleagues spent the weekend at the office preparing for the Vice Party Secretary’s visit. However, the work appears to be all for naught, after Qiu did not come back from Beijing Sunday.

An even bigger target

Despite his controversial track record in Yunnan, Qiu He was known as an official who cared more about his promising political path rather than benefiting financially from his position. Qiu was an extremely cautious politician who is known only to have met with supplicants during office hours, and not in decadent KTV parlors or in exclusive social clubs.

Whereas 2014 saw a raft of top Yunnanese officials taken down for their connections to the disgraced Zhou Yongkang, Qiu He’s investigation appears unrelated. Instead it may mark a shift in focus from the Sichuan-based clique that formed under Zhou to an even bigger target.

Qiu He is associated with a political faction related to Li Yuanchao, current vice president of China. Li, the former Jiangsu Party Secretary from 2003 to 2007, is a major power broker in the province and likely oversaw Qiu He’s rise. Behind Li Yuanchao however, stands former President Jiang Zemin, who oversaw the country’s development in the 1990s. Jiang’s clique includes officials from Shanghai, Zhejiang and Jiangsu.

Qiu He could be the first top official from the Jiang clique to be taken down during Xi Jinping’s current anti-corruption campaign. Further fueling speculation of a crackdown on the Jiang clique, the Governor and Provincial Party Secretary of Jiangsu province were nowhere to be found at this year’s recently concluded “two sessions” (lianghui). Some analysts see current President Xi Jinping’s crackdown on corruption as serving the dual purpose of restoring the public’s confidence in the Party and eliminating Xi’s political rivals.

Many Kunmingers welcomed news of the downfall of former top Yunnanese officials Bai Enpai, Shen Peiping, and Zhang Tianxin with support and expressed satisfaction; however reactions to Qiu He’s ousting are mixed, particularly among investment groups from outside of Yunnan.  A source close to the situation remarked that many of Kunming’s Jiangsu businessmen left the city after hearing about Qiu’s investigation. His friends with connections to Qiu, many of whom are responsible for large chunks of Yunnan’s commerce, have all cancelled their cell phone subscriptions and are currently unreachable.  Their fears, understandably justified, lie in speculation that once Xi’s political rivals are eliminated, those businessmen connected to them will soon come under the gun.

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Filed under China, Current Events, Economic development, Governance, SLIDER, Yunnan Province

Laos Vegas: Rolling the dice on rural development

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In Lao PDR, there are three large casinos presently in operation: the Savan Vegas Hotel and Casino, the Kings Roman Casino and the Dansavanh Nam Ngum Resort. They are facing controversies over forced evictions, dispossession of farmlands belonging to the local rural communities, and are ridden with mafia-style armed fights among rival casino and investor factions. In January 2005, China’s anti-gambling campaign forced many casinos and small gambling houses to move to countries on China’s southwestern border including Myanmar, Laos, and Vietnam. Meanwhile, Lao officials and others, including middlemen and land developers, are reaping the cash benefits from this so-called rural development.

“The damned Chinese are taking over Laos,” the words spat out of a farmer whose nickname is Khoua living in the northern province of Luang Nam Tha. He was mouthing what most Lao people believe. Rural people dispossessed of land, urban dwellers witnessing the slow demise of their once elegant cities, all blame the mainland Chinese. Their presence is increasingly obvious, whether it be in the high speed motorcades blasting though Luang Prabang or in the proliferation of Chinese enterprises and their gargantuan construction projects, many of which lie echoingly empty and idle after completion. The influx of Chinese workers is affecting the local people’s chances of employment or skills training. But in the midst of frustration about the Chinese presence, what often goes unremarked or largely forgotten is that the Chinese are there as a direct result of the investment policies of the Government of Lao PDR, with many benefits from power to wealth being reaped by a long line of Lao officialdom.

When the author visited the area in November 2012, there were massive boards advertising the latest megaproject. Some provinces like Oudomxai north of the capital are more Chinese than Lao. That being said migrations and state borders have shape-shifted over the centuries blurring ethnicities and cultural loyalties. But what is obvious is the anger and resentment aimed at China while at the same time failing to recognise the agency and responsibility of the Lao government in ceding land and concessionary deals in return for investment and bribes.

This development complexity is best exemplified in the huge (and often bizarrely designed) casinos and gambling establishments that are expanding under the same perseverating rhetoric of development and poverty alleviation by which large dams and roads are being built. While these casinos have been written about in the mainstream media, very little analysis has been done about what they mean for rural people and their livelihoods.

Ferries bringing patrons across from Thailand and China for gambling (Photo by Melinda Boh.)

Ferries bringing patrons across from Thailand and China for gambling (Photo by Melinda Boh.)

From Chiang Saen in Thailand’s north, the white colonnaded building across the river, topped with a huge gilt crown is a bizarre sight. From Huay Xai in Laos, a potholed road through farmlands leads to the casino complex. The car suddenly jolt-lands on to thick cement, marking the casino’s boundary in Dork Ngoui Kham. Half an hour later we spot the golden cupola, its clock set on Beijing time, marking Bokeo Province’s Special Economic Zone (SEZ) office.

The nearby King Roman casino reveals plaster toga-clad statues alongside Chinese patriarchs and the symbols of the newest local religion: gambling. Parked nearby were two stretch limousines. Inside the building, men in suits gambled at the tables. “Kunming officials doing a site inspection,” was the official story from an attendant.

The only Lao person we saw was a farmer on a dust-covered motorbike with his equally dust-covered wife, narrowly avoiding being pushed into the Mekong River by the boat passengers.

The concession area includes archaeological treasures, importantly the ruins of a 16th century city reputedly built by King Setthatirat. Other remnants, possibly from the Mon empires of the first millennium CE, are considered to be of World Heritage value. Instead they may end up under the runway of an international airport planned to bring patrons in, but fiercely resisted by the local farmers. History will be replaced by what appears to be a gambling based narco-empire, where anything goes. For Laos, it means that some of the most fertile arable land and considerable archaeological treasures would soon be buried under asphalt to feed the gambling industry.

Stretch limousines pick up selected high rollers from the airport (Photo by Melinda Boh.)

Stretch limousines pick up selected high rollers from the airport (Photo by Melinda Boh.)

Civilising

Defending the casino and entertainment complex, a senior Chinese manager told researcher Pal Nyriri: “Before it was opium and drug businesses. There were no roads, no electricity … Laos is developing and it [the casino] is good for them.”

Zhang Wei, the casino’s principal developer, told Thai sociologist Pinkaew Laungaramsri of Chiang Mai University: “The biggest obstacle is that villagers … do not understand us. We have rented all the land and forest … but they … cut … or burn them. We can’t go around, arresting or beat up (sic) and fine the villagers who burn our gardens … it will cause ethnic issues.”

A local NGO worker, requesting anonymity, recalled taking a Chinese delegation to the site in 2009. “The three Government officials, a journalist, an environmentalist and a few academics were shocked at what they saw. ‘This gives China a bad image,’ they said. When we stopped; a crowd of up to 70 to 100 village people assembled shouting that they would not give up their land. The area is one of the most fertile and productive in Laos.”

They pointed to a white Humvee. “That’s the local official. Zhang gave him and the (Lao) police the same cars.”

China may see itself as a civilising influence, drawing on its long and remarkable history, using its wealth and dynamism to bring rapid economic growth. But with its entrepreneurs building casinos like those at the Lao border, China risks reinforcing its growing reputation for exploiting its neighbours.

Because although it’s the Lao government’s party apparatchiks and provincial officials whose signatures and rubber stamps bless these casino developments, it’s China that gets the bad press, a point clearly understood by the visiting Chinese delegation. The development of ‘legal/ illegal’ states through the formation of SEZ’s has enabled the Lao government to consolidate power, and amass wealth, patronage and control, while portraying itself as a helpless lackey of China.

Laos is fast gaining a reputation as a lawless state. It has shown unwillingness to arrestwildlife trafficker Vixay Keosavang while it faces continuing criticism for its intransigence in not being serious about investigating the high-profile disappearance of Magsaysay award winner Sombath Somphone. Moreover, Laos continues to face allegations of human rights violations, money laundering and profligate illegal logging that are causing both international concern to its many foreign donors and local frustration.

The so called “red carpet”, the road being paved pink for the patrons (Photo by Melinda Boh.)

The so called “red carpet”, the road being paved pink for the patrons (Photo by Melinda Boh.)

SEZs and other confusions

The casinos in the SEZ epitomise the complexity of the modernist zeal with which the Government of Lao and China pursue investment. Observers like Danielle Tan have noted the SEZs bring a post-socialist neo-liberal model to the Lao-China border zones. For nations that expound socialism and wisdom of central control, this is a strange choice. Neo-liberalism increases state income through taxes, exploits labour and expropriates land from traditional owners and farmers. The renowned sociologist Pierre Bourdieu considers neoliberalism “a program for destroying collective structures”, and even nations themselves.

With their confused legal frameworks and ambiguous status, SEZs invites all sorts of temptations. The implicit freedom tempts the seamier side of legitimate trade and investment particularly in the fabled Golden Triangle. Added to this mix, the Chinese fascination with gambling and luck makes Bokeo’s proximity all too tempting.

Along with disappointed losers, Tan found evidence of drug sales and money laundering, while Li Quan a London based tiger conservationist, told the Global Times that Lao casinos were trading posts for endangered species. Others are worried about child trafficking, rape and tax farming 1.

Tan alleges that the former military junta and drug lord Lin Mingxian is a major investor in the King Roman Casino, a charge denied by Zhang Wei. Ying and Zhang, of China’s Institute of Contemporary International Relations (CIR) and part of the 2009 delegation, agreed, writing, “While the nominal boss of the Casino in Bokeo is a Fujian native with a Hong Kong passport, it is … likely… the real investor is a drug cartel from Myanmar.”

The other side of China’s double jeopardy is legitimacy. The Bokeo casino is a photocopy of those in Mong La (Myanmar) and Boten (Laos) both managed by Zhang Wei, and both closed by China after evidence of mafia-style gunfights and crimes. However the King Roman is within Lao sovereign territory, while the others were on international no man’s land.

The Vice Prime Minister of the Government of Lao PDR, Somsavat Lengsavad, reacted to China’s concern about ongoing casino development with assurances that no further concessions would be granted as “casinos were a bad model for Laos.” But barely six months later in March 2014, the Vientiane Times announced plans for another casino in the South.

In total forty-nine SEZs are planned. How many will have casinos is anyone’s guess, and pose a serious concern to China.

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Size matters

The CIR’s critical appraisal of Laos’ transparency backs Nyiri’s research revealing that the Government of Lao granted the Hong Kong registered King Roman group a concession for the Bokeo land in 2007, after a down payment of US$850,000.

Lao government media KPL reported 827 hectares were ceded for 40 years; the maximum allowed under Lao law, but at variance to the company’s own estimation of 10,300 hectares for 99 years. In 2010, Zhao reported the new casinos would be bigger in scale than those in Boten, bragging that US$500 million would be spent developing the site, more than ten times the Laos national health budget.

A resident of Huay Xai who declined to be identified, admitted the casino is run down: “The paint’s peeling and shops boarded up. Less people visit now. One rich guy hired some [Lao] cops to protect him, but they shot him and took his money. Despite joint patrols, we still have shootings, as the Chinese mafia are using the place as a staging post. Gamblers are afraid. As for the organic farms and markets they promised, well who would buy the stuff? The farmers who lost their land are now broke and they used to produce what the casino promised but never delivered.”

“The casino’s still trying for the airport, but there is well-organised resistance. The locals called in Thai TV. The Lao police arrested two cameramen and held them for two weeks. The Thai government responded by closing the border until they were released. Now it’s a stand-off. The PR risk is too high.”

China has its own problems with crime. What it does to curb the influence of its neighbour will be interesting to see.

Post script: In late 2013, the Lao media announced that the farmers had been given their promised settlement. The casino had agreed to pay a compensation amount that was found satisfactory to the government. Many on the Lao agribusiness list-serv cheered.

Following up on this story, I was told by the above long term resident of the area (new laws in Laos restricting critical media make me reluctant to name anyone for fear of recrimination) that the company had in fact offered compensation way over the odds as the farmers had been both successful in gaining publicity and in holding out, fearing the same poverty that had mired their neighbours.

But the informant said the Lao government refused to give their imprimateur to the negotiated rate fearing that the amount offered would set an unhealthy precedent for other areas of Laos, so the farmers were given a significantly reduced amount. Hence the term “found satisfactory to the government” does not mean what one might have assumed.

This article was written by Melinda Boh for the Mekong Commons website and published here on 1/31/15.  It is reposted in its entirety with permission from Mekong Commons and the author.  ExSE is excited to begin a new cooperative partnership with the Mekong Commons team in sharing analysis and reporting.

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Filed under China, Economic development, Governance, Laos, Mekong River, SLIDER