The final of a three-part series, Crossing Borders: Chinese Agricultural Investment in Southeast Asia, this post questions assumptions about the central role of the state in Chinese investment in southern Laos. Parts one and two examined northern Burma and northern Laos respectively.
“In Cambodia, Chinese firms have turned mining and agricultural concessions in Mondulkiri province in the eastern part of the country into no-go zones for Cambodian police. Guards at the gates to two of them – a gold mine and a hemp plantation – shoo travelers away unless they are able to pay a toll. ‘It’s like a country within a country,’ quipped Cambodia’s Minister of Interior, Sar Kheng…”
“China’s billions reap rewards in Cambodia”, Washington Post, November 20, 2010
The above passage from the mainstream US press is useful for highlighting some of the recent language around territory, development and sovereignty which has accompanied increased Chinese investment into Mekong Southeast Asia. The basic narrative is that extractive resource companies, particularly from booming China, are taking advantage of liberalized policies as well as uneven governance and foreign investment procedures in the lower Mekong countries to secure long-term access to huge areas of land. In the process, thousands of rural smallholders and local communities without secure tenure over their traditional forest-lands face a stark new reality of enclosure, displacement and impoverishment, even as elite Lao, Cambodian or Burmese officials and Chinese company owners enrich themselves through quasi or extra-legal land lease arrangements.
In this posting I will argue that the dynamics of Chinese and ‘China-linked’ investment into the Mekong region are based less around states and their strategic interests (although these interests certainly exist) than the dynamics of global capitalism and accumulation. Moving beyond the “territorial trap” – or a spatial container view of states – and their sovereignties and political-economies helps to explain how concentrations of commercial power organized into global production networks are the primary driving force behind China’s entrance into the Southeast Asian plantation sector. I develop this argument by focusing on China-linked resource investments in southern Laos and specifically on a commodity sector which has been the focus for my research in the region for the past decade – fast growing tree plantations of eucalyptus and acacia.
Resource projects and companies represent the new face of the Chinese economic juggernaut moving into the Mekong. For some observers, such “frontier capitalists” and a new class of Chinese agri-business barons are seeking to extend extra-territorial control into Mekong countries as a means of extracting resource rents and profits, thereby extending Beijing’s geo-strategic zone of interest. When investments involve labour- intensive rubber plantations or railway projects, there is further concern that they will be accompanied by a permanent Chinese working or “settler” population as well.
Certainly, there are many China-linked concessionaires seeking access to land in the lower Mekong countries, and communities are being dispossessed by large-scale plantation sector developments. As previous posts in this series by Woods and Dwyer have highlighted, however, national and local politics and place-based histories are fundamental to how the politics of agri-business concessions are playing out, and to how the “last great enclosure movement in South East Asia” is proceeding.
Pulpwood plantations and pulp mills are a fascinating industrial technology and commodity system to study. The top 100 global forestry and paper firms generated $357 billion in revenues in 2008. If wood pulp were a country, it would have the GDP of a mid-tier industrialized state such as Iran or Taiwan. Understanding something of the “materiality” of wood pulp and paper is important to locate the political-economic dynamics within which pulp and paper is associated. To make the final product (usually paper), fibres within woodchips need to be broken down using large amounts of water, industrial chemicals and energy. Whereas para-rubber can be tapped and semi-processed (into tub-lumps, raw or smoked rubber sheets, or liquid latex) by farmer groups or small processing factories using fairly accessible technologies, woodchips are processed into bleached hardwood kraft pulp (BHKP) through highly capital intensive pulp mills. The world’s largest single line pulp mill, Asia Pulp and Paper’s Jinhai pulp and paper mill on Hainan Island in China, was built at a cost of US$1.3 billion. Its annual production of 1.3 million Adt (air-dried tonnes) of BHKP requires approximately 6.5 million m3 of annual wood supplies.
Figure 1: APP Hainan pulp mill (source here. All other photos by Keith Barney)
The large sums involved in the construction of such facilities means that financing is often raised on international capital markets, although in China much of the pulp mill expansion has been funded through state banks. Coastal China has been a major platform for pulp sector capacity expansion in the past decade, with firms including APP-China, Asia-Pacific Resources International Ltd., Oji Paper, Stora-Enso, and domestic Chinese firms such as Nine Dragons and Shandong Sun Paper, either proposing or completing greenfield pulp mills. Yet the very scale of these mills introduces another problem – the complex logistics of coordinating wood supplies at a competitive delivered price. Given rapidly rising land and labour costs within China, and increasing concern by provincial governments for environmental targets around tree cover, China-based companies need to secure overseas wood supplies. Brazil is far and away the lowest cost pulpwood producer globally, but long shipping distances to China renders the Brazilian strategy susceptible to rising freight charges linked to oil price spikes. In this context, Laos has emerged as an attractive plantation wood supply source for companies expanding in China. The locations for investment center upon southern Laos, where large areas of flat “degraded” forest are now within market distance to Vietnamese export ports via ADB-Greater Mekong Subregion-sponsored roads and export infrastructure. Fast-growing eucalyptus and acacia hybrids are the industry species of choice.
Figures 2-3: Logs and pulpwood harvesting in Savannakhet province (2005)
Table 1 (below) highlights the primary China-linked, large-scale pulpwood plantation projects underway in Laos.
|China- linked Company/ Location of Expansion Project||Pulp Mill Production Capacity||Associated Pulpwood Plantation Investment in Laos|
|Oji Paper (Japan)
(Nantong, near Shanghai)
Listed on the Tokyo Stock Exchange (TSE) and the Nikkea 225 index.
|700,000 Air Dried Tonnes per year Bleached Hard-wood Kraft Pulp mill project, under construction.
US$1.95 billion investment
400-800,000 tonne / year fine paper mill (start up date by 2015)
|Oji-Laos Plantation Forestry Ltd. (LPFL)
Proposal for 50,000 hectares in central Laos. Approximately 22,000 hectares planted in Bolikhamxai and Khammouane. Possibly expanding into Xieng Khouang.
Oji-Laos South Proposal for 30,000 hectares in southern Laos (Attapeu, Sekong, Salavane). In land zoning phase.
For assessments of their local livelihood outcomes see Barney (2007)
|Shandong Sun Paper (Shandong province, China)
Joint venture with International Paper (USA)
Listed on Shenzhen Stock Exchange (SZSE)
|400,000-tonne/yr cartonboard mill, Shandong China (in operation)
Proposal for a 300,000 tpy BHKP mill in Phine district, Laos
Sun Paper has recently issued international orders for heavy pulp mill industrial machinery in support of the pulp mill project at Meuang Phine (it is forwarded that a start up is planned for late 2012), although it is not at all clear from where the company will be securing the wood to supply this mill.
|Sun Taven Company
Proposal for 100,000 hectares. including 30,000 hectares of company-leased plantation area and 70,000 hectares of outgrower / contract farming arrangements in Xepon and Phine districts, Savannakhet.
Existing concession is 7,200 hectares. Reportedly encountering conflicts with local landowners. No Environmental or Social Impact Assessment (ESIA) has been conducted, which is required by the Lao Water Resources and Environment Agency (WREA).
Reported established plantation area about 450 hectares.
|Asia Pulp and Paper (APP-China) Jinhai, Hainan Island
The parent company, APP is listed on the Singapore Stock Exchange (SGX) and the NYSE
|APP Jinhai is the largest single line pulp production facility in the world
1.3 million ADT / year BHKP pulp mill, which could expand to 2.2 million ADT/year
Additional proposal for a Guangxi greenfield 1.2 million tonne/year BHKP mill and two 300,000 tonne/year APM pulp lines. Decision status uncertain.
|APP Gold East Company
Land survey stage, requested 9,000 hectares, Salavane province
Reportedly, the company has been allocated 900 ha of land in Ta Oy District and has commenced operations without an ESIA, which is required by WREA
|Stora Enso (Finland), Guangxi province (proposed)
Stora Enso is listed on the Dow Jones Sustainability Index, the FTSE4Good index, amongst other ‘green’ company indices.
|Proposal for a 1.2 million tonne / year BHKP pulp mill in Guangxi. Decision status uncertain.||Proposal for 35,000 hectares in the border districts of Savannakhet and Saravanh Provinces (Xepon, Nong and Ta Oy).
Established planted area to date less than 1,000 hectares. Company is following Lao investment law and socio-environmental regulations. Working with an integrated pulpwood and smallholder agroforestry model, combined with UXO clearance.
Table 1: China-Linked Pulp and Paper Projects with Plantation Expansion Plans in Laos
A number of points stand out in this summary. First is the heavily transnational character of the actors involved. There are China-domiciled forestry companies investing in Laos (e.g., Sun Paper, APP-China), but also major pulp sector multinationals who are seeking to expand their manufacturing base in the lucrative China market (e.g., Oji Paper, Stora-Enso). These firms are major corporate players, with operations linked into global production networks. Oji’s 2009 revenues of US$13.5 billion and Stora-Enso’s of US$12.5 billion were more than double the GDP of Laos in the same year.
Figures 4-6: Forest Clearing and interviewing villagers at the Oji-Laos Plantation Project, Pakkading District (2006)
The information in the table also shows much of the work of actual tree planting remains to be done with the pulpwood sector in Laos. The area of acacia and eucalyptus plantations in Laos will thus increase rapidly in the coming years, meaning there is still time to exert positive changes on how this industry will move forward. In addition, some companies, including the Sun Paper plantation and pulp mill project, appear to be proceeding with their plans in Laos with very little transparency. Others appear to be more at the proposal stage of investment (e.g. APP Gold East).
There is a panoply of global institutions and actors involved in the forestry and paper sector. The multinational character of plantation pulpwood investments in Laos that are oriented towards the China market thus becomes clearer, and even more so when one considers that a significant proportion of the paper produced from the Chinese mills will go into packaging materials which support China’s global manufactured exports (see Bosshard 2008). It is also worth noting that rural spaces within China have been the focus of large investments in plantations to supply the new coastal pulp mill projects, and these projects have been associated with land conflicts with local Chinese communities. For instance, a recent Rights and Resources Initiative (RRI) report reveals that local officials, middlemen and land brokers used illegal and coercive means to secure control over land from farmers and communities in support of Stora Enso’s 120,000 hectare pulpwood project in Guangxi Autonomous Region. It is worth recalling that, according to some estimates, up to 70 million households (over 300 million people) have faced the loss of their land in China in the past two decades, an astounding figure which dwarfs the peasant enclosures happening in Burma, Laos and Cambodia combined. 
Some of these companies are more attuned to social and environmental concerns than others. For example, while companies such as Sun Paper have not released any ESIA studies to date, Stora-Enso’s plantation and agro-forestry efforts in Savannakhet has been meeting all Lao regulations and adopting international best practice measures, including community outgrower models which integrate timber and food production.
Figure 7: Intercropping rice and rattan and fast growing trees, with background swidden landscape, Stora Enso plantation, Ta Oy District
Figure 8: Stora Enso Plantations in Nong District, 2010. The unconventional 1×7 meter spacing of the trees opens up the possibilities for agricultural intercropping models with local farmers
Figure 9: Vietnam War bomb crater in Stora Enso plantation, Ta Oy District, 2010
In many ways, the core issues of pulp plantations are less about the states of China and the Mekong countries than about the organization and dynamics of transnational accumulation, a form of global capitalism that pits the weak against the powerful. In the forestry and paper sector farmers, communities and plantation workers face increasing pressure against the interests of rent-seeking corporations and their state backers. Let us be clear – even best practice plantation companies in Laos are securing long-term access (50-70 years) to village land in exchange for wage labour rates and social programs which, despite at times representing important material improvements for local livelihoods, still direct the vast majority of the resource rents and profits back to global shareholders and produce cheap paper for the international consumer market. Impoverished and largely illiterate upland Lao villagers living on the edge of food security are not in a strong bargaining position when companies, backed by a paternalist-authoritarian state, come in search of plantation land. Labour opportunities with pulpwood plantations are not lucrative, and work can be sporadic. What opportunities that exist can be tilted away from villagers when plantation firms import their workers from elsewhere, as was often the case with Oji-LPFL’s pulpwood project during my field research in Hinboun district in 2007 (see field report here).
For forestry and paper firms, the underlying logic of pulpwood plantation expansion into places such as Laos is ultimately expressed not through a sort of an exceptional ethic of corporate greed, or a na├пve dream of “sustainable and participatory market-based development”.  If the foremost concern of the plantation operators I speak to could be summed up, it might be expressed simply in terms of delivered wood costs – the price of a volume of logs or woodchips calculated at the factory gate or at the container ship terminal (e.g. FOB- the ‘free on board’ price). Both Chinese and Western “green” listed firms ultimately operate within this profit imperative. Some firms are more responsive to eco-social certification initiatives and green consumerism, and others are less comfortable operating in opaque, “frontier” governance contexts. For all global firms, however, there are powerful incentives to enhance bottom line calculations, including through various forms of rent seeking, including accessing land through coercive means, or securing (underpriced) concession areas in countries with forest governance and regulatory problems, including those of Southeast Asia.
Economic organization and production in both China and the Mekong countries is being shaped by the broader competitive pressures involved in transnational capitalist dynamics, and through corporate-controlled global commodity and production networks. Workers and peasant farmers in both China and the Mekong countries are being displaced from local environments and subjected to the full force of a globally competitive market. Wealth is being created through these intensively managed plantations, but little trickles down to the local communities whose land is enclosed. This is generating significant tensions across the region, and has profound political implications for agrarian communities and the politics of regional development and agrarian transition in Southeast and East Asia. It remains to be seen whether social movements and civil society institutions from the Mekong region, China and internationally can devise protective counter-measures to these forces of dislocation in a way that recognizes the common experiences of maginalised plantation workers and local communities, across national and regional borders.
China and China-linked companies are not engaged in a take-over of southern Laos. Drawing upon ideas of global production networks, this post has aimed to explain how China fits into a broader picture of restructuring in the global forestry and pulp industry, and I point to some of the broad implications in terms of investment flows and plantation concession deals in the country of Laos. As Woods and Dwyer have shown previously in this series, national to local institutions and regulatory environments play a key role in how China-linked commodity networks become territorial “facts on the ground”, which ushers in political-economic and environmental transformations. Using multi-scaled and historically-informed research approaches based in political economy, political ecology and local ethnography offers important advantages over abstracted understandings of “globalization from above”, as well as interpretations which box China and the Southeast Asian countries into the “territorial trap” of state-centric analysis.
Figure 10: A Lao village in Atsapangthong district, 2005
Keith Barney is a Doctoral Candidate in the Department of Geography at York University in Toronto. His research in Laos was supported through the International Development Research Centre (IDRC), the Social Science and Humanities Research Council (SSHRC), and the Faculty of Forestry, National University of Laos. He is currently completing his dissertation. Email: [email protected]
 On the ‘territorial trap’, see: Agnew, John (1994). “The Territorial Trap: The Geographical Assumptions of International Relations Theory.” Review of International Political Economy. 1: 53–80. See also: Arrighi, Giovanni (1994). The Long Twentieth Century: Money, Power and the Origins of Our Times. London: Verso. On global production networks, see: Coe, Neil, Martin Hess, Henry Wai-chung Yeung, Peter Dicken and Jeffrey Henderson (2004). “Globalizing’ Regional Development: A Global Production Networks Perspective.” Transactions of the Institute of British Geographers. 29: 468–484. Coe, Neil, Peter Dicken and Martin Hess (2008). “Global Production Networks: Realizing the Potential.” Journal of Economic Geography. 8: 271–295. Bridge, Gavin (2008). “Global Production Networks and the Extractive Sector: Governing Resource-based Development.” Journal of Economic Geography. 8: 389–419.
 Scott, James (2009). The Art of Not Being Governed. New Haven: Yale University Press.
 There is one other major pulpwood project ongoing in Laos–the 50,000 hectare Birla-Lao Pulp and Plantation Company project, associated with the Indian multinational Aditya-Birla group. This company has approximately 10,000 hectares planted in Savannakhet and Khammouane provinces, although it has been reported that the company has been encountering problems and local conflicts with their land acquisition program.
 See: Walker, Kathy (2008). “From Covert to Overt: Everyday Peasant Politics in China and the Implications for Transnational Agrarian Movements.” Journal of Agrarian Change. 8 (2,3): 462–488.
 With respect to environmental and social impact assessment (ESIA) regulations in Laos, PM/Decree No. 135 (25/05/2009) on State Land Leases and Concessions Article 11 indicates that: “Anyone who wants to lease state land must create a business feasibility study and a social and environmental impact assessment certified by the concerned sectors” (unofficial translation). It is still unclear however if there are area-based thresholds which would necessarily trigger an ESIA for a land lease or concession project. In any case, many plantation projects have proceeded into the implementation phase without any apparent submission of an ESIA to the national regulator (the Water Resources and Environment Agency).
 See Michael Lewis (2008) on the recent financial crisis: “He thought the cause of the financial crisis was ‘simple. Greed on both sides–greed of investors and the greed of the bankers.’ I thought it was more complicated. Greed on Wall Street was a given–almost an obligation. The problem was the system of incentives that channeled the greed.” Lewis, M. (2008). “The End.” Condé Nast Portfolio. December, 2008. http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom
 Hart-Landsberg, Martin and Paul Burkett (2006). “China and the Dynamics of Transnational Accumulation: Causes and Consequences of Global Restructuring.” Historical Materialism. 14(3): 3–43.
 See also e.g., Neilson, Jeff and Bill Pritchard (2009). Value Chain Struggles: Institutions and Governance in the Plantation Districts of South India. Malden: Wiley-Blackwell.