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2011年7月25日 星期一

Chinese Agribusiness Investment in Mekong Countries: Are Overseas Economic Expansion Strategies Doing Local Communities Good? (Part 1)


It has been 10 years since Chinese government started to carry out the “Zou Chu Qu” (走出去,Going Out) economic and diplomatic strategies in 2001. The policy’s purpose is strategically activating the Chinese overseas investment in order to deal with its domestic lack of raw materials. The key commodities are included, not only petroleum, iron, coal, but also the agricultural produce. The agribusiness going out is promoted widely and has reached different regions, including Latin America, Africa and Southeast Asia, etc.

Chinese agribusiness is proliferating in the five Mekong countries; Vietnam, Cambodia, Thailand, Laos and Burma. Pros and cons coexist; on one hand, Chinese government sees it as the means of supplying the fast-growing domestic demand, agribusiness sees it as opportunities of less cost and more profit, and recipient countries see it as a method of agitating economy. On the other hand, the policy has caused a lot of controversies, such as the land grabbing conflicts between local communities and businesses, environmental degradation and pollution, bribery and poverty, etc.

These problems occur mostly in the three poorest countries in Mekong region, i.e. Burma, Laos and Cambodia. The cases in Burma and Laos have more to do with the “Opium Replacement Policy” which is originally implemented by Yunnan government to eliminate the opium plantation and smuggling in the Golden Triangle. The Yunnan Government claims that during the Eleventh-Five period (year 2006~year 2010), more than 100 companies from Yunnan have done the Opium Replacement projects in Burma and Laos. The rough statistics shows that the total plantation area is more than 3 million mu (1 hectare is equal to 15 mu), with the accumulated investment of more than CNY 1 billion. The plantation is concentrated in 7 provinces in Northern Laos, and Shan and Kachin States in Burma.[1] However, the situations in the three countries are all driven by “Going Out” and “Soft Power Diplomacy”, which has raised the overseas agribusiness investment policy t to national level in names of economic expansion and collaboration.

Rubber in Laos and Burma

Rubber has been one of the vital strategic resources in China. After several decades of massive production, the environmental degradation and land shortage, along with the fast-growing industrial demand and over-reliance on rubber import, China started to seek rubber plantation overseas. Laos and Burma are the priorities for the sake of their cheap land cost, and secondary consideration of their cheap labour.

The Opium Replacement policy started to be implemented in 1992. The main purpose is replacing the opium plantation with other crops in Golden Triangle, including rubber, sugarcane, cassava, etc. Since the main cause of the opium plantation is the long-term poverty experienced by the local villagers, most of whom do swidden cultivation in the mountainous areas where other economic resources hardly reach, the policy has the objective of offering better income for them. In addition, it was far earlier than Going Out, and it was not until its ascent to national level and Going Out that the two countries in the Triangle got the Chinese-invested agriculture boom, especially rubber plantation.

Northern Laos and Burma are influenced by the Chinese offshore rubber plantation most, and almost all large-scale rubber plantation and concession in northern Laos and northern Burma are the result from the subsidies incentives of Opium Replacement and Going Out, although other foreign institutions and national governments also have the related promotions to some extent.

Rubber Boom and Land Concession: Local People’s livelihoods are affected in Northern Laos

Based on the regulation of Opium Replacement, the minimum plantation area is 10,000 mu to obtain the subsidies. Therefore, the regulation is already bias to Chinese companies which have the capacity of doing large-scale plantations.

Yunnan State Farm’s investment in Northern Laos is under the national directive by Vice President Wu Yi, and most Chinese rubber companies operating in the area are privately owned and motivated by the direct subsidies, including to the cost of exploration stage, land, etc.

In order to operate in Northern Laos, land concession and contract farming are the most common ways for the Chinese agribusiness. Due to the majority of smallholder farmers and provincial governments’ preference in Luang Namtha, Bokeo and Oudomxai, these three provinces formed an official consensus that land concessions should not be given to the investors, however, they could not resist while the Opium Replacement started to be strongly introduced. And even Yunnan Rubber, a Lao subsidiary of Yunnan State Farms, obtained a concession of 214 ha in Sub Tod, Luang Namtha.[2] This case should be viewed as the national level’s agreement between Laos and China; Yunnan Rubber has a national contract signed by the Chinese Prime Minister, to develop 2.5 million mu (or 166,667 ha) of rubber in four provinces of Northern Laos, including Luang Namtha, Bokeo, Sayabouri and Oudomxai, of which 0.5 million are to be developed as demonstration plantations, i.e. concessions.[3]

Land grabbing conflicts are sometimes cause by the continuous collusion between the Lao military and Chinese companies, and very often the Lao authority is ignorant or intentionally ignorant about the unofficial military contracts with the investors. The Lao army sees rubber as a promising income generating activity. Without the capacity to develop plantations on its own, the army looks across the border for partners. At least three different Chinese companies contract with the provincial army to plant rubber, including Ruifeng along the Mekong River in the Long district, Heli along the eastern border of the Mom cluster in Sing district, and a third company also in Mom to the west.[4]

Local villagers are the victims under the collusion, since the concession which is supposed to use the military land often triggers the dispute over the legitimate ownership belonged to military or local people. For instance, the military concession in Ban Chagnee forced local swidden cultivation farmers to cede their land with gunfire, and the food security started to be threatened.

Is Contract Farming in Northern Laos Better than Land Concession?

In addition to land concession, the other common way operated by Chinese agribusiness in Northern Laos is contract farming. The contract farming is often carried out as “2+3”, i.e. the villagers provide land and labour (“2” production elements), and investors provide capital, technique and market access (“3” production elements). And the villagers get the 55%~70% of the proceeds, which are valued by the market price of the latex. Although “2+3” is promoted by the provincial governments, “1+4” scheme is more common in reality; meaning villagers get paid according to the land they offer, the proceeds are base on 30% of the market latex price and the payment time can be tapping time or before it. Sometimes the companies obtain a certain share of rubber trees to avoid the legal procedure of land concession. In the “1+4” case, villagers can be waged labour of the investors, but sometimes the plantation is too big to employ all the all of the local population.

Because of the both schemes with the precondition of land titles and the income uncertainty of 7 years before tapping, most the beneficiaries are villagers who have the formal access to land and certain economic resources, and contract farming is supposed to benefit them more than concession. Nevertheless, upland farmers who have been practicing swidden cultivation and have no formal land titles are even more marginalised. Ironically, upland farmers account for the majority of opium growers or ex-opium growers. The contract farming introduced by the Chinese agribusiness obeying to Opium Replacement can hardly help the poorest of the poor, but coerce them to relocate and abandon swidden cultivation practices, which mean the food self-sufficiency for them.

(To be continued)



[1]
Xinhua News, Jan. 1st, 2011

[2] Rubber Boom in Luang Namtha: A Transnational Perspective, Weiyi Shi, Feb. 2008

[3] Rubber Boom in Luang Namtha: A Transnational Perspective, Weiyi Shi, Feb. 2008

[4] Rubber Boom in Luang Namtha: A Transnational Perspective, Weiyi Shi, Feb. 2008






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