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Viewing cable 07VIENTIANE409, Timber, Roads, and Rubber in Sayaboury Province

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Reference ID Created Released Classification Origin
07VIENTIANE409 2007-05-16 10:23 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Vientiane
VZCZCXRO6711
RR RUEHCHI
DE RUEHVN #0409/01 1361023
ZNR UUUUU ZZH
R 161023Z MAY 07
FM AMEMBASSY VIENTIANE
TO RUEHC/SECSTATE WASHDC 1225
INFO RUEHBK/AMEMBASSY BANGKOK 7300
RUEHCHI/AMCONSUL CHIANG MAI 0557
RUEHBD/AMEMBASSY BANDAR SERI BEGAWAN 0070
RUEHBJ/AMEMBASSY BEIJING 2172
RUEHML/AMEMBASSY MANILA 0925
RHHMUNA/CDR USPACOM HONOLULU HI
RUEABND/DEA HQS WASHINGTON DC
UNCLAS SECTION 01 OF 05 VIENTIANE 000409 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR EAP/MLS 
DEPT FOR G/TIP 
DEPT FOR DRL 
DEPT FOR INL 
DEPT FOR INR 
PACOM FOR HUSO 
MANILA PASS TO ADB FOR US/ED 
 
E.O. 12958: N/A 
TAGS: ECON EINV EIND EAGR ELTN ETRD ENRG SENV SOCI SMIG
SNAR, ELAB, KWMN, PGOV, PREL, LA 
SUBJECT:  Timber, Roads, and Rubber in Sayaboury Province 
 
Ref: A) 07 VIENTIANE 0390, B) 06 VIENTIANE 0674, C) 07 VIENTIANE 259 
 
 
1.  (SBU) Summary:  While Sayaboury Province is isolated from the 
rest of Laos due to a lack of transportation infrastructure, some 
significant road projects are currently underway, and others are 
expected to commence within the next two years.  Logging activity in 
the province has increased significantly in recent years and, in 
some areas, saw mill workers report that most of the hardwoods have 
already been cleared.  The provincial government does not enforce 
contractual obligations that require timber companies to plant 
seedlings in areas where timber has been cleared.  Instead, the 
province is looking to Chinese investments in rubber plantations as 
a means to reduce erosion in areas that have been cleared of timber. 
 The construction of a $900 million USD lignite-fired power plant in 
Hongsa District is expected to commence in 2008.  Brunei funded two 
new drug treatment centers in the province in 2006.  The President 
of the Provincial Lao Women's Union (LWU), noting the recent opening 
of a U.S.-funded training project for women in the northern part of 
the province, expressed her hope that the program can be expanded in 
the future to other districts in the province.  End Summary. 
 
Sayaboury Province 
------------------ 
2.  (U) Sayaboury Province is the fifth largest of Laos' 16 
provinces and has a population of over 338,000.  Among the major 
ethnic groups represented in the province, lowland Lao (61 percent) 
are the most numerous, followed by the Khmu (10 percent), Hmong (8 
percent), Leu (8 percent), and Plai (6 percent).  The province's 
2006 gross domestic product (GDP) was approximately $155 million 
USD, and per capita income was $460 USD compared to national per 
capita income of more than $500 USD.  Timber is the province's 
leading export and primary source of revenue.  The province is 
unique in that the Mekong River forms almost the entire northern and 
eastern borders.  With no bridges over the Mekong, the province is 
almost completely disconnected from the remainder of Laos.  The 
province shares a long land border with Thailand, but poor road 
infrastructure has restricted contact with Thailand, with the 
exception of a few areas. 
 
CARE International and Foreign Workers 
-------------------------------------- 
3.  (SBU) Mr. Somsack Bounyavong of CARE International's Sayaboury 
Province office informed PolOff that the province's investment 
climate is poor compared to many other provinces.  There are ten 
districts in Sayaboury Province.  CARE focuses its activities on 
Sayaboury District, which includes the provincial capital, one of 
the poorest in the country.  Eighty percent of Sayaboury District is 
covered by mountains.  The district has little paddy rice land and 
is primarily characterized by upland agricultural practices.  There 
are 120 separate villages in Sayaboury District, largely populated 
by ethnic Hmong and Plai.  CARE's activities in the district involve 
agricultural development, animal husbandry, and the protection of 
resources in minority areas. 
 
4.  (SBU) Most economic activity in Sayaboury District, as well as 
the province as a whole, is timber-related.  Besides timber, other 
leading exports include non-timber forestry products as well as 
commercial crops such as corn and sesame.  According to Somsack, 
most foreigners present in the province are associated with the 
timber industry.  While the Thai are the most active within the 
timber industry, he described Chinese and Vietnamese as being much 
more active across a range of occupations.  For example, he said 
Chinese and Vietnamese represent the majority of those selling tools 
and electronics as well as providing auto repair, electronic repair, 
and construction-related services. 
 
5.  (U) During a visit to a Chinese merchant's electronics shop in 
Sayaboury District, PolOff asked about the price of a Chang Hong 
brand television on his store shelf.  The Hunanese merchant advised 
PolOff not to buy the television he had pointed to because, as the 
merchant said, "it is a fake."  He told PolOff that he had real 
Chang Hong televisions in the back room for sale to those who could 
afford them and went on to note that more than 70 percent of the 
Chinese products his shop sold were counterfeit.  Referring to the 
 
VIENTIANE 00000409  002 OF 005 
 
 
Chang Hong televisions, he noted that Chang Hong is a high-quality 
brand and too expensive for most Lao people.  Using Chang Hong and 
other well-known labels, he said, several smaller electronics 
manufacturers in China produce less expensive televisions for the 
Lao and other less affluent markets. 
 
Timber Exploitation 
------------------- 
6. (SBU) Sawmills dot the landscape throughout Sayaboury Province. 
According to saw mill workers and villagers in several districts, 
logging activity has increased significantly over the past few 
years, and hardwoods have almost been completely cleared in some 
areas.  Logging concessions are reportedly granted by the provincial 
government based on the advice of the Province's Department of 
Agriculture and Forestry.  In Sayaboury District alone, there are 
eight sawmill operations, and most small roads, bridges, and canals 
are reportedly funded by timber companies in exchange for timber 
quotas.  The provincial government Fund is also made up of revenues 
from timber exports and reportedly funded more than half the cost of 
the more than $2 million USD provincial government administration 
building. 
 
7. (SBU) During a March 15 meeting, Mr. Bounlay Khamphoumy of the 
Sayaboury Province Department of Agriculture and Forestry described 
timber as the province's primary export and leading source of 
revenue.  He remarked that, while companies have contractual 
obligations to plant seedlings in areas that have been cleared of 
timber, the provincial government does not enforce that aspect of 
the contracts.  He noted that there are serious erosion and water 
supply problems in many areas where timber has been cut.  He added 
that many provincial officials believe the province will have 
serious environmental problems in years to come.  While noting that 
"it's not the best method," he described the planting of rubber 
trees as one means to protect against erosion in areas where timber 
has been cut. 
 
Rubber Investments 
------------------ 
8.  (SBU) Bounlay also indicated that the provincial government is 
counting on rubber to play a major role in the province's economic 
future.  He noted that the province is working with Chinese 
investors to promote rubber planting throughout the province. 
Currently, two Chinese rubber companies are active in the province. 
According to Bounlay, two types of arrangements have characterized 
rubber investments.  The first arrangement requires the Chinese 
company and its workers to plant and tend rubber trees on a land 
concession.  These rubber plantations are intended to be models for 
villagers to follow.  The second method requires the Chinese company 
to provide technical expertise and sign an agreement to purchase 
rubber produced by the villagers.  This arrangement relies on local 
villagers to tend the rubber trees as well as provide the land. 
 
9.  (SBU) According to Bounlay, the concession fee per hectare is $5 
USD per year.  Standard concessions are for 30 years and primarily 
involve areas that have been cleared of timber.  He told PolOff that 
the primary benefits the province gains from rubber investments are 
the ability to provide work for villagers and the revenue that 
villagers will receive from selling rubber.  (Note:  Rubber trees 
generally require seven to eight years to reach maturity; therefore, 
it will be several years before villagers receive any revenues.  End 
Note.)  In discussing rubber concession agreements that have already 
been reached, he said a 900 hectare concession has been granted to a 
Chinese company in southern Sayaboury Province.  The same company's 
request for an additional 3,500 hectares is currently being 
considered.  A second company has requested 500 hectares in each of 
the five northern districts of the province.  (Note:  Several small 
concessions - 25 to 100 hectares - have already been granted in the 
two northern districts of Hongsa and Ngeun.  End Note.) 
 
10.  (SBU) Bounlay informed PolOff that no concessions will require 
villagers to move, except in areas where the villagers are not 
considered "permanent."  PolOff, however, had met with a villager in 
Ngeun District who indicated that he and 10 other households were 
required to move to make room for a 25 hectare concession for rubber 
seedlings.  Near Yang Village in Ngeun District, PolOff visited with 
 
VIENTIANE 00000409  003 OF 005 
 
 
more than 20 Lao Leu women who were digging holes for planting 
rubber trees on a 100 hectare Chinese concession. They told PolOff 
that Chinese investors had indicated that they would pay 3,500 kip 
per hole dug for the planting of rubber trees.  The villagers 
anticipated additional earnings for caring for the trees, but no 
agreements had been made.  (Note:  On May 8, 2007, Prime Minister 
Bouasone Bouphavanh announced he had issued a decree halting the 
approval of future land concessions for industrial tree plantations, 
perennial plants, and mining projects involving areas of 100 
hectares or more until a more comprehensive national strategy could 
be devised.  End Note.) 
 
Power Plant Investment 
---------------------- 
11.  (SBU) In 1994, the Government of Laos (GoL) allowed a Thai 
company to begin exploring an area in Hongsa District as a potential 
site for a lignite-fired power plant.  The total announced 
investment was estimated to be $900 million USD at the time. 
Following almost 13 years of survey and exploration work, the 
company, Banpu Power Company of Thailand, finally gained GoL 
permission to develop the power plant in 2006.  Construction of the 
power plant is expected to begin in late 2008 or early 2009, with 
completion in 2012.  The plant is expected to have generating 
capacity of 1,800 MW, most of which will be exported to Thailand. 
The Thai company behind the development of the Hongsa Lignite Power 
Plant - a joint venture with the GoL - has pledged a budget of $16 
million USD as compensation for villagers (360 families) who must 
relocate from the area.  (Note:  The GoL recently agreed to allow a 
Thai company the right to survey for a potential hydropower project 
on the Mekong River in Sayaboury Province as well.  The project, 
which is valued at more than $1 billion USD, also received a bid 
from an American company (Ref A).  End Note.) 
 
Road Infrastructure Developments 
-------------------------------- 
12.  (SBU) While timber companies have funded several of the smaller 
roads and bridges in the province - such as the one currently being 
built to connect the Governor's home village to Sayaboury town - in 
exchange for timber quotas, there are also several large road 
projects that are funded by international donors and the GoL. 
According to the Road and Bridge Department of the Lao Ministry of 
Communication, Transport, Posts and Construction, the following 
roads are either currently being constructed or will be constructed 
in Sayaboury Province in the near future: 
 
--Road 4A from Sayaboury District to Hongsa District with an 
extension to the border of Oudomsay Province; length 116 kilometers; 
construction dates 2006 - 2010; funding from the Asian Development 
Bank (ADB) and the GoL. 
 
--Road 4A from Hongsa District to Ngeun District; length 120 
kilometers; date of construction not determined; expected to be 
funded by the Hongsa Lignite Power Plant Project. 
 
--Road 5356 from Ngeun District to Pakbeng, Oudomsay Province; 
length 49 kilometers; construction dates 2006 - 2009; funding from 
grant aid and loan money from the Thai Government. 
 
--Road 4 from Xieng Ngeun District, Luang Prabang Province through 
Sayaboury Province from northeast to southwest toward the border 
with Thailand at Kenthao District; length 370 kilometers; 
construction dates 2008 - 2012; funding from ADB, Organization for 
Petroleum Exporting Countries (OPEC), AusAID, and the GoL.  (Note: 
This is the only Sayaboury road project that includes a planned 
bridge over the Mekong between Sayaboury and Luang Prabang 
provinces.  End Note.) 
 
--Road 11 from Pak Ton Village in Vientiane Municipality to Vang 
Village in Vientiane Province near the Sayaboury border; length 42 
kilometers, construction dates 2005 - 2009; funding from ADB. 
(Note:  While the road only extends to Vang Village, it links with 
another ADB road project completed in 2006 that extends to the 
Mekong River just across from Paklay District, Sayaboury Province. 
While the GoL is seeking a donor to fund a bridge, the current 
project does not include a bridge connecting Vientiane and Sayaboury 
 
VIENTIANE 00000409  004 OF 005 
 
 
provinces.  End Note.) 
 
Brunei-Funded Drug Treatment Centers 
------------------------------------ 
13.  (U) In March 2007, Mr. Khamkeo of the Sayaboury Province 
Commission for Drug Control informed PolOff that opium cultivation 
and addiction had declined dramatically in recent years.  In 2003, 
for example, he said there were more than 550 hectares of opium in 
the province and more than 1,500 consumers.  In comparison, there 
were only six hectares in 2006.  As of March 2007, he said there 
were only 493 confirmed opium consumers in the province. 
Methamphetamine and adhesive (glue sniffing) addicts currently make 
up the bulk of the province's drug users.  Khamkeo estimated that 
there were more than 900 methamphetamine and adhesive consumers, 
noting that sniffing glue and other adhesives is common among youth 
aged 14 - 16 years.  He added that the province does not have 
facilities that are operational to treat such addictions yet. 
 
14.  (U) The Government of Brunei has completed two $100,000 USD 
drug treatment facilities in November 2006.  While each facility is 
expected to employ seven to eight staff, the facilities have not yet 
been furnished and are not yet open.  Each facility is expected to 
accommodate 70 people, with separate facilities on the compound for 
men and women.  One facility is in Sayaboury District and the other 
is in Ngeun District.  The province provided $15,000 for each 
facility and constructed roads to each.  The provincial government 
will also provide staff salaries but has been seeking a donor to 
fund furniture and equipment.  Mr. Khamkeo estimated an additional 
need of $7,000 USD for each of the two drug treatment centers for 
furniture, equipment, and an administrative office on each 
property. 
 
Lao Women's Union President 
--------------------------- 
15.  (U) On March 15, PolOff met with Ms. Thavee Panlak, President 
of the Sayaboury Province Lao Women's Union (LWU).  The provincial 
LWU has worked with Save the Children Australia (SCA) on a long-term 
Integrated Rural Development Project that, among other things, 
establishes micro-credit programs in rural areas.  SCA has been 
active in the province since 1992 and has worked with the LWU since 
1998.  In March 2007, SCA began a vocational training program for 
ethnic minority women in Khop and Xienghoun Districts - two of the 
province's most remote districts.  The project was funded by the 
U.S. Government through its annual Women's Issues Fund (WIF) and 
provides tailoring, weaving, and basic marketing training for women 
in these districts. 
 
16.  (U) In terms of out-migration, Ms. Thavee described the 
province's three southernmost districts of Paklay, Botien, and 
Kenthao as the most vulnerable.  She estimated that approximately 
2000 men and women from Sayaboury Province - mostly from these three 
southern provinces - worked in Thailand in 2006.  She further 
estimated that 70 percent were women and 30 percent were men, most 
of whom were working in Thai provinces that border Sayaboury.  Most 
men were working as manual laborers while women were mostly employed 
as domestic workers.  She estimated that five percent of women 
migrants were involved in the Thai sex service industry and related 
entertainment work.  Noting that the biggest challenges facing women 
include the lack of educational facilities in or near their villages 
and a lack of job opportunities, she said she hopes the WIF project 
in northern Sayaboury Province can be expanded to other districts in 
the future. 
 
Comment 
------- 
17. (SBU) Illegal timber cutting is often cited as a problem in 
Laos.  Unfortunately, the lack of government enforcement of legal 
timber contracts and the scale of government-approved logging in 
provinces like Sayaboury appear to be much more of an issue than 
illegal timber cutting.  While rubber plantations are part of the 
provincial government's plan for increased economic development, 
several Sayaboury officials cited Luang Namtha Province as 
exemplifying what they do not want - rubber planting in nearly every 
region of the province without regard for environmental and food 
security factors (Ref C).  Given the provincial government's 
 
VIENTIANE 00000409  005 OF 005 
 
 
performance in regard to enforcing timber contracts, however, it is 
doubtful the provincial government will have the will to refuse 
proposed Chinese rubber investments.  Post is hopeful the Prime 
Minister's decree regarding the temporary cessation of land 
concessions of more than 100 hectares, and the plan to devise a 
comprehensive government strategy, will result in a more coherent 
and sensible national policy. 
 
18.  (SBU)   The Hongsa Lignite Power Plant project represents a 
significant investment.  If this project and the planned hydropower 
project cited in Ref A both come to fruition, Sayaboury Province 
would stand to receive foreign direct investment (FDI) of more than 
two billion USD over the coming several years.  Apart from these two 
planned investments and a few million USD in rubber project 
investments, the province has received only a few million USD in FDI 
since 1994.  With the two large-scale energy investments on the 
horizon, the tests for the GoL and the provincial government will 
be: whether or not they encourage the projects to be implemented in 
such a way as to provide employment and opportunities for residents 
of the province, and whether or not they require the two projects to 
be constructed according to international environmental standards. 
 
HASLACH