Identifier
Created
Classification
Origin
07VIENTIANE259
2007-03-30 10:04:00
CONFIDENTIAL
Embassy Vientiane
Cable title:  

CHINESE RUBBER, SINO-LAO SCHOOLS, AND OTHER

Tags:  EAGR EINV ECON ECIN ELTN ETRD SMIG KRCM PHUM 
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VZCZCXRO9792
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHVN #0259/01 0891004
ZNY CCCCC ZZH
R 301004Z MAR 07
FM AMEMBASSY VIENTIANE
TO RUEHC/SECSTATE WASHDC 1060
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 2148
RUEHCN/AMCONSUL CHENGDU 0213
RUEHCHI/AMCONSUL CHIANG MAI 0539
RUEHGZ/AMCONSUL GUANGZHOU 0166
RUEHHK/AMCONSUL HONG KONG 7768
RUEHGH/AMCONSUL SHANGHAI 0015
RUEHSH/AMCONSUL SHENYANG 0052
C O N F I D E N T I A L SECTION 01 OF 05 VIENTIANE 000259 

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E.O. 12958: DECL: 03/29/2017
TAGS: EAGR EINV ECON ECIN ELTN ETRD SMIG KRCM PHUM
SCUL, SOCI, CASC, PREL, CH, LA
SUBJECT: CHINESE RUBBER, SINO-LAO SCHOOLS, AND OTHER
NORTHERN LAO ISSUES

REF: A. 05 VIENTIANE 0784

B. 07 VIENTIANE 0228

C. 07 VIENTIANE 086

D. 06 VIENTIANE 1152

E. 06 VIENTIANE 0804

F. 05 VIENTIANE 1044

VIENTIANE 00000259 001.2 OF 005


Classified By: Patricia M. Haslach for reasons 1.4(b) and (d)

C O N F I D E N T I A L SECTION 01 OF 05 VIENTIANE 000259

SIPDIS

SIPDIS

DEPT FOR EAP/MLS
DEPT FOR EAP/CM
DEPT FOR EAP/INR
DEPT FOR PRM/ANE
DEPT FOR EAP/INL
DEPT FOR G/TIP

E.O. 12958: DECL: 03/29/2017
TAGS: EAGR EINV ECON ECIN ELTN ETRD SMIG KRCM PHUM
SCUL, SOCI, CASC, PREL, CH, LA
SUBJECT: CHINESE RUBBER, SINO-LAO SCHOOLS, AND OTHER
NORTHERN LAO ISSUES

REF: A. 05 VIENTIANE 0784

B. 07 VIENTIANE 0228

C. 07 VIENTIANE 086

D. 06 VIENTIANE 1152

E. 06 VIENTIANE 0804

F. 05 VIENTIANE 1044

VIENTIANE 00000259 001.2 OF 005


Classified By: Patricia M. Haslach for reasons 1.4(b) and (d)


1. (C) Summary: Due to what one NGO director in Luang
Namtha Province described as a "gold rush" mentality, almost
every village in the province is growing rubber for export to
China. The Chinese have launched a "propaganda campaign"
taking credit for the replacement of poppy with rubber. Some
NGO representatives fear too much emphasis on rubber will
lead to environmental and food security issues. Sino-Lao,
awakened to the fact that Chinese language skills are of
increasing importance, recently opened new Chinese language
schools in Oudomsay and Luang Namtha Provinces. The section
of the Kunming-Bangkok Highway (A3) that traverses Luang
Namtha and Bokeo Provinces is expected to be completed in
late 2007. Completion of a new regional airport in Luang
Namtha City is planned for October 2007. According to NGOs
in Luang Namtha Province, prostitution has increased during
the past year and is "close to booming" along the Chinese
border. Bystanders who witnessed the January abduction of a
well-known Lao businessmen say police were responsible. This
cable follows up a number of issues raised in Ref A. End

Summary.

Luang Namtha's Rubber Rush
--------------

2. (SBU) Most rubber planting in Luang Namtha and Oudomsay
Provinces has reportedly been focused on hillsides and
mountainous areas that have not previously been used for rice
cultivation. The government-controlled press in Laos has
praised rubber planting as a means both to eliminate
slash-and-burn agriculture and to reduce erosion on hillsides
that have been cleared of timber. In support of Chinese
rubber companies, Luang Namtha Province frequently uses its
public address system to recruit rubber workers. Companies
generally offer monthly salaries of $50 USD, a typical sum
for laborers in Luang Namtha Province. Still, some areas
previously used for rice cultivation as well as other areas
that were previously virgin forest are now being used for
rubber trees. Several NGOs and business representatives in
Luang Namtha are concerned that an expansion of this
practice, combined with a lack of any real oversight by the
government, will result in food security and environmental
issues.


3. (C) During meetings with the Adventist Development Relief
Agency (ADRA) and the German Society for Technical
Cooperation (GTZ) in early February, representatives of both
organizations informed PolOff that almost every village in
Luang Namtha Province is growing rubber for export to China.
The GTZ representative described the boom in rubber planting
as resulting from a "gold rush" mentality in which villages
have been clamoring to join others that have already been
providing rubber to six Yunnan-based companies, some of which
have set up local offices in Luang Namtha City. He noted
fears regarding a decline in the price of rubber, resulting
from a surge in supply from other countries already
producing, potential food security issues, as well as
livelihood changes that result from raising rubber as opposed
to other cash crops. (Note: In the past, villages that had
raised corn and soybeans for Chinese companies received less
than originally promised (Ref A). End Note). The GTZ
representative also suggested that labor in Luang Namtha
Province is insufficient given the level of rubber planting
taking place and the labor necessary in the future for
harvesting the rubber; he expects Chinese laborers to make up
the difference.


4. (C) The GTZ representative informed PolOff that a two-day
workshop on rubber was held in Luang Namtha City during the

VIENTIANE 00000259 002.2 OF 005


first week of February. The workshop was chaired by the
Director of the Luang Namtha Forestry Department, Dr.
Khamlek. The GTZ representative described Khamlek as an
informed official who wants to make sure that the province
"uses the investing companies to the province's advantage."
Khamlek reportedly argued that the province needs to
"supervise more closely the number and activities of rubber
companies in the province." He also advocated that contracts
should allow villages to sell two-thirds of their rubber to
the companies of their choice as opposed to the company that
supplied the seedlings and supported the initial planting.
(Note: The six rubber companies active in Luang Namtha are
all Yunnan-based companies. End Note).


5. (SBU) During an evening visit to Viengphoukha Village in
Luang Namtha Province, PolOff had a chance encounter with
nine Chinese businessmen, including rubber investors from
Yunnan Province as well as a Chinese counter-narcotics
officer who was leading the group. The group was in
Viengphoukha to sign a rubber contract with local officials
and had erected signage, similar to signs along highways
throughout Oudomsay and Luang Namtha Provinces, announcing
the replacement of poppy with rubber. In reality, the
signage is not near villages that have had a history of
growing poppy in recent years and was described by the GTZ
representative and others as a "propaganda campaign."

Abduction of a Lao Businessman
--------------

6. (C) Referring to the January abduction of Mr. Somphone, a
Lao businessman and ecotourism promoter in Luang Namtha City,
the GTZ representative recalled speculation that Somphone's
vocal opposition to what he reportedly regarded as excess
rubber planting in the province had upset some provincial
officials and may have been related to his abduction.
Somphone has not been seen since being abducted on January 18
(Ref C). Somphone and his American business partner are
joint owners of The Boat Landing Guesthouse in Luang Namtha
City. (Note: Somphone's abduction should not be confused
with the arrest of Khamsone, an employee of Natural Products
Incorporated, an American business in Bokeo Province (Ref C).
End Note).


7. (C) PolOff met with Somphone's American business partner
and his Lao attorney on March 26. The American noted that
bystanders, including two adult males who witnessed
Somphone's abduction from the roadside, said the abductors
were police. He also said Somphone had his cell phone with
him at the time of his abduction and that, according to Lao
Telecommunications Company, three days of phone records for
Somphone's number have been deleted from company records.
The last known call received was reportedly from a police
officer at 10:18 AM, just minutes before Somphone's abduction
as he was driving to a meeting at the police station - at the
request of police. Somphone's wife reportedly tried to call
him around 10:35, but his cell phone was turned off by that
time. Remarking that the problem is with Luang Namtha
police, the attorney told PolOff that she and Somphone's wife
had met with officials in Vientiane to request that central
government law enforcement officials investigate the case.

Sino-Lao Open New Chinese Schools
--------------

8. (SBU) PolOff visited two new Chinese schools that are
owned by Lao citizens of Chinese origin (Sino-Lao) in
Oudomsay and Luang Namtha Provinces. The new school in Xai
City, Oudomsay Province, was established in mid-2006. The
school currently has 80 students and seven teachers, four of
whom are from Mengla, Yunnan Province, China. The other
three teachers are Sino-Lao. The student body is 80 percent
Sino-Lao, while the remaining 20 percent includes both
Chinese citizens from China and ethnic Lao. The school
provides instruction in Chinese, Lao, and English. Reliable
statistics are unavailable on the number of Sino-Lao and
Chinese citizens in Xai City, but it is noteworthy that the
city is often regarded as one of the most Chinese cities in

VIENTIANE 00000259 003.2 OF 005


Laos. However, according to Oudomsay officials, only 275
Chinese citizens are legally present in Xai City, with a
total of more than 1000 legally present in the province. In
February 2007 Chinese citizens working in Xai City estimated
to PolOff that their numbers are now more than 1000, compared
to estimates of around 500 in mid-2005 (Ref A).


9. (SBU) While in Luang Namtha City, PolOff visited the
newly-constructed Lao-China Friendship School. The school is
large enough to accommodate about 150 students. The Sino-Lao
owner planned to open the school in March 2007. The owner
had already hired three teachers from Mengla, Yunnan
Province, China as well as a few Sino-Lao to teach at the
school. Some of the Sino-Lao working at the school had
studied Chinese in Mengla. The teachers were already
present, and the school was in the process of registering
students. Sino-Lao teachers and administrators at both the
Chinese school in Oudomsay and Luang Namtha cited increasing
Chinese economic activity and the resulting advantages of
speaking Chinese as reasons for opening the schools. (Note:
Based on GoL sources, Chinese investment makes up roughly 90
percent of total Foreign Direct Investment (FDI) in Oudomsay
Province and more than 92 percent in Luang Namtha Province,
not including the more than $120 million USD Boten Golden
City Project (Ref B). End Note).

Infrastructure Developments
--------------

10. (U) The A3 Highway in Laos is now complete from Boten on
the Lao-China border to just beyond Luang Namtha City.
Between Luang Namtha City and Houaysay City, Bokeo Province,
there are several sections of the highway still under
construction. Currently the trip from Boten on the Lao-China
border to Houaysay on the Lao-Thai border takes slightly over
four hours. The trip is expected to take two hours when the
222 kilometer highway is completed. Lao officials maintain
that construction will be completed in late 2007, slightly
behind schedule. Survey work has begun for the construction
of a bridge from Houaysay to Thailand's Chang Khong Province,
which will finalize the highway connection between China and
Thailand through northern Laos when it is completed. The
Chinese and Thai Governments have agreed to share the costs
of the bridge (Ref D).


11. (SBU) The construction of a new regional airport in
Luang Namtha City began in April 2006 and is expected to be
completed in October 2007. The project is funded by an Asian
Development Bank (ADB) loan of $4.25 million USD and is being
constructed by Thai Sorkhemmalath Industry Company. The
airport runway will be 1,600 meters in length and 30 meters
wide, roughly equivalent to the runways of the airports in
Savannakhet and Champassak Provinces and longer than those in
Oudomsay and Luang Prabang Provinces. Besides domestic
flights, the airport will also accommodate flights between
Luang Namtha City and Jing Hong in China's Yunnan Province.
There are reportedly discussions regarding potential flights
to Burma as well.

Sex Trade a Growing Concern
--------------

12. (SBU) During a February 13 meeting with an Adventist
Development Relief Agency (ADRA) representative in Luang
Namtha City, PolOff was informed that most women and girls
working in the sex industry in Luang Namtha are ethnic Khmu
(the largest ethnic minority group in Laos). The ADRA
representative noted that the sex workers, most from
Oudomsay, Luang Prabang, Luang Namtha, and Bokeo Provinces,
tend to move among establishments within the region. While
indicating that the number of establishments in Luang Namtha
City with prostitutes had increased during the past year, he
remarked that many establishments had changed their operating
methods and no longer provide sex services in house.
Instead, clients pay the bars, discos, and restaurants
(usually the equivalent of $2 to $3 USD) to take the sex
workers to other locations where the actual cost of sex
services is agreed upon between the client and the sex worker.

VIENTIANE 00000259 004.2 OF 005




13. (C) While he did not have access to Lao Government
statistics, the ADRA representative said officials were
surprised by recent reports of increased HIV infection rates
in Luang Namtha Province. Noting that Population Services
International (PSI) meets with sex service workers once each
week to promote HIV and STD awareness, he remarked that it is
not commercial sex workers but rather ethnic Khmu and Akha
women and girls in rural villages who are the most vulnerable
to HIV infection. While GoL and NGO health education
campaigns do not regularly reach these populations, he said
Chinese traders and rubber investors do. He added that ADRA
has a mobile clinic that has offered health services in some
of these areas and that ADRA had found unexpectedly high
rates of STDs among women and girls. Paralleling the ADRA
representative's comments, the GTZ representative in Sing
District on the Chinese border described prostitution in Sing
as "close to booming."

Not Friendly to Friends of the Upland Farmer
--------------

14. (C) On February 14, PolOff met with the General Manager
of Friends of the Upland Farmer (FUF),an American
agricultural company that has operated in Luang Namtha
Province for more than a decade. More than 6,000 people,
mostly ethnic minorities, produce corn, soybeans, rice, and
other agricultural produce for the company. On the day of
PolOff's visit, Lao and Chinese trucks were arriving at the
company's distribution area to pick up more than 100 tons of
corn for delivery to buyers in China. The company's last two
years have been the most profitable in its history. However,
despite good relations with growers, the company has been
plagued with problems because of its perceived religious
activities. Since early 2006, the GoL has not renewed the
company's business and tax licenses. Repeated requests by
the company for a reason have gone unanswered. (Comment:
The Embassy has offered assistance on several occasions and
has maintained close contact with the company, but to date
the General Manager has preferred to address the issue on his
own. (Ref D). End Comment).

Comment
--------------

15. (C) Most villagers in Luang Namtha who are growing
rubber are doing so on their own because of the perceived
potential financial benefits. Even outside Luang Namtha many
have started growing rubber based on the wealth generated by
a few Luang Namtha villages that were among the first to grow
rubber and now have mature rubber trees. While there have
certainly been deals and contracts between officials and
rubber companies, to date post is not aware of any government
deals in Luang Namtha and Oudomsay Provinces that have forced
villagers to vacate their lands to make room for rubber
concessions. This, unfortunately, is not the case in
southern Laos and some other northern provinces where
villagers have been asked to move to make room for rubber
concessions.


16. (C) While rubber is generally regarded as a good cash
crop for northern Laos, there are long-term concerns
regarding market prices, food security, and environmental
effects. The extent of flooding in Luang Namtha Province in
2006 was partly blamed on the unregulated planting of rubber
trees, which has reportedly involved the clearing of virgin
forest in some areas of the province. As is endemic
throughout Laos, the personal short-term interests of
district and provincial level officials usually take
precedent over the long-term interests of villagers.


17. (C) Vocal opposition to anything that is supported by the
government - at any level - is not tolerated. According to
speculation, Somphone's opposition to extensive rubber
planting may have been related to his January abduction. The
GoL has indicated that it is interested in development of
civil society, and the Prime Minister's Office is reportedly
drafting a decree that will allow the development of civil

VIENTIANE 00000259 005.2 OF 005


service organizations. However, given the intolerance of
many Lao officials for views of people such as Somphone that
are counter to government policies and/or the personal
interests of officials, the development of civil society in
Laos appears a distant dream.
HASLACH