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Drug Policy Briefing No.

33
November 2010

Alternative Development or Business as Usual?


China’s Opium Substitution Policy in Burma and Laos

A significant part of opium and its deriva-


tive heroin on the market in China origi- Conclusions & Recommendations
nates from the ‘Golden Triangle’ – roughly • The huge increase in Chinese agricultural
the area that spans northern Burma1, Thai- concessions in Burma and Laos is driven by
land and Laos. It supplies a large number of China’s opium crop substitution pro-
injecting drugs users in China, and is con- gramme, offering subsidies and tax waivers
sidered a major security concern by the for Chinese companies.
Chinese authorities.
• China’s focus is on integrating the local
To counter this threat, the Chinese gov- economy of the border regions of Burma and
ernment have launched opium substitution Laos into the regional market through bilat-
programmes in northern Burma and Laos. eral relations with government and military
The schemes, promoting agricultural in- authorities across the border.
vestments by Chinese companies, have seen
a dramatic increase in recent years. They • In Burma large-scale rubber concessions is
include large-scale rubber plantations and the only method operating. Initially informal
other crops such as sugarcane, tea and smallholder arrangements were the domi-
corn. Most contracts are made with local nant form of cultivation in Laos, but the top-
state and military authorities and down coercive model is gaining prevalence.
companies rather than with local
communities. • The poorest of the poor, including many
(ex-) poppy farmers, benefit least from these
Local authorities in Burma and Laos pro- investments. They are losing access to land
mote these mono-plantations as a way out and forest, being forcibly relocated to the
of poverty and opium cultivation by pro- lowlands, left with few viable options for
viding former poppy farmers with alterna- survival.
tive sources of income in regions bereft of
any other investment. Opportunistically, • New forms of conflict are arising from
some government officials have taken ad- Chinese large-scale investments abroad. Re-
vantage of their positions, financially bene- lated land dispossession has wide implica-
fiting from these projects. Although these tions on drug production and trade, as well
investments have brought some develop- as border stability.
ments, they have concomitantly caused
• Investments related to opium substitution
serious negative consequences for China’s
plans should be carried out in a more sus-
two neighbours.
tainable, transparent, accountable and equi-
Furthermore, it remains to be seen whether table fashion with a community-based ap-
China’s opium crop substitution policy is proach. They should respect traditional land
achieving its goals – to reduce opium culti- rights and communities’ customs.

Transnational Institute | 1
vation and provide sustainable alternative Laos increased from an estimated 1,600
local livelihoods in Burma and Laos – by hectares in 2008 to about 1,900 in 2009.5
promoting large-scale rubber and other However, Laos along with Thailand remain
mono-crop plantations. significantly less important ‘suppliers’ than
Burma.
The Chinese government have also donated
rice to local authorities in Burma to address The factors driving the recent increases are
food security problems of ex-poppy farm- diverse and complex. Opium cultivation is
ers. However, the business approach of strongly linked to poverty, which is not just
promoting mono-plantations is perceived a function of income, but is driven by a
by the local communities and international range of socio-economic and security-
development agencies as for profit only, related factors.6 As an EU statement out-
and they question the sustainability of the lines: ‘illicit drug crop cultivation is con-
Chinese approach. The image of the Chi- centrated in areas where conflict, insecurity
nese government and people in these re- and vulnerability prevail. Poor health, illit-
gions has consequently suffered. eracy and limited social and physical infra-
structure reflect the low level of human de-
OPIUM CULTIVATION IN BURMA velopment experienced by the population
AND LAOS in these areas.’7

Opium cultivation in the Golden Triangle Most growers are impoverished subsistence
steadily declined since the mid-1990s, when farmers from different ethnic minority
Afghanistan replaced it as the world largest groups in the remote mountains of north-
opium producer. However, since 2006 cul- ern Burma and Laos. These marginalised
tivation in the Golden Triangle has been on communities practice swidden upland rice
the rise again, bringing into doubt the vi- cultivation. The opium cash crops compen-
ability of the much-heralded ‘successful’ sate for the food shortages as not enough
reduction.2 rice can be grown to feed their families. The
crop also provides savings, is used for per-
The main increase in opium cultivation has sonal consumption and for medicinal pur-
been in Burma, where opium cultivation poses. Some communities still use it in tra-
has risen from an estimated 21,500 hectares ditional ceremonies and spirit worship.
in 2006 to about 31,700 hectares in 2009.3
The Kokang and Wa regions, traditionally Local demand from users coupled with in-
the main opium-producing areas, have re- creasing farm gate opium prices and si-
mained opium-free since local authorities multaneously decreasing prices of alterna-
implemented strictly enforced opium bans tive cash crops is also driving increased
in 2003 and 2005, respectively. cultivation. And the continuing conflict in
Burma is a further contributing factor, as
Opium cultivation has since shifted to virtually all the parties involved participate
southern Shan state, now the main pro- in the drug trade.
ducing area. Cultivation in Kachin state,
especially in the Sedun region near the The role of the global drugs market in de-
Chinese border, has also increased. North- termining opium cultivation levels in
east India has seen a spike in opium culti- Southeast Asia should also be taken into
vation.4 account. The Golden Triangle, no longer a
supplier to the important markets in
The Lao government has also banned Europe and the United States, is now pro-
opium cultivation, declaring the country ducing opium and heroin almost exclu-
opium-free in 2006. Existing only in very sively for the immediate region, which in-
remote and isolated areas, cultivation in cludes China.

2 | Transnational Institute
CHINA’S WAR ON DRUGS Apart from addressing domestic consump-
tion, the Chinese government also has tried
Drug production and consumption, and to reduce opium cultivation in the region.
related infectious diseases, such as HIV/ To support the ‘People’s War Against
AIDS, are important security and health Drugs and AIDS’, in 2004 the central gov-
concerns for China. Burma is the major re- ernment set up the 122 State Council
gional producer of opium and heroin, as Working Group under the Ministry of
well of amphetamine-type stimulants Commerce, with 13 other ministries in-
(ATS). Most heroin available on the Chi- volved. This working group aimed to
nese market originates from Burma. Laos, stimulate and coordinate Chinese invest-
on the other hand, has transformed from ment in opium substitution plantations in
an opium production country into a key northern Laos and Burma.9
transit country, which is also a Chinese
concern. Some of the ATS available on the In 2005 the Yunnan Provincial Party Com-
Chinese market, especially in Yunnan mittee issued a policy document ‘Dissolv-
Province, also originates from Burma. But ing the Main Task of People’s War Against
China itself is also a major producer of Drugs for 2005’, and made the Yunnan
ATS, especially ‘ice’ (crystal methamphe- Provincial Commerce Bureau responsible
tamine), which is not produced in Burma. for organising and coordinating develop-
ment programmes ‘in the peripheries’.10
Drugs use in China has increased signifi- The following year, Yunnan province ap-
cantly since the 1990s, spreading out from proved a poppy substitution development
Yunnan Province, bordering Burma and programme for Burma and Laos, and cre-
Laos, to the country at large. In 1989 the ated a special Opium Replacement Fund.11
first epidemic outbreak of HIV/AIDS in Since then the Chinese government has
China occurred among injecting drugs been actively promoting the scheme and
users in the border town of Ruili, situated mobilising Chinese companies to take part.
on the main trade road to Burma.
The focus of the Chinese approach to re-
The early phase of the HIV/AIDS epidemic duce opium cultivation is on overall eco-
in China was predominantly driven by nomic development by integrating the local
unsafe practices such as needle sharing economy of the border regions of Burma
among injecting drugs users (IDUs), and Laos into the regional market, and
starting in Yunnan. By 2002 HIV/AIDS through bilateral relations with authorities
prevalence was found among IDUs in all 31 and businessmen across the border. Ac-
Chinese provinces. Drugs use levels in cording to the Chinese government, the
Yunnan remain among the highest in substitution projects have achieved several
China and the province therefore remains a successes: creating a new source of income
special concern.8 for farmers; hastening infrastructure con-
struction; improving knowledge and agri-
Alarmed by these trends, the Chinese gov- cultural production methods; putting into
ernment took a pragmatic approach and practice new theories on the fight against
began to implement harm reduction pro- drugs; and enhancing good neighbourly
grammes for drugs users, such as metha- relationships with adjacent countries.12
done treatment and needle exchange. But
in parallel, China maintains a harsh pun- However, inconsistencies between objec-
ishment regime, executing drug traffickers tives and actual impact, connections be-
and forcing recidivist drugs users into tween government, military and business-
treatment camps. High relapse rates raise men, and emerging local land conflicts de-
doubts about the efficacy of such coercive mand further scrutiny of, and open dia-
policy responses. logue about, these projects.

Transnational Institute | 3
The Chinese companies’ agricultural in- Some businessmen are even able to obtain
vestments under the crop substitution are several Chinese government subsidies for
often in areas of relatively lower elevation the same plantation.
and near roads, as these are more easily ac-
cessible. This practice fails to target (ex-) The Chinese government has set several
poppy growing areas, usually more remote conditions for companies participating in
and in higher elevations unsuitable for rub- this programme. Officially, these invest-
ber and sugarcane cultivation. Authorities ments have to contribute to socio-eco-
in northern Burma and Laos have resettled nomic development of the area. Ostensibly,
upland communities from the hills to the if the company performs well, the govern-
valleys and along roads where these planta- ment will subsidise a certain amount of
tions are established. This is intimately money per mu (15 mu equal 1 hectare).
connected to their policies to end shifting The government encourages diversification
cultivation and opium cultivation. of crops, but in practice, as mentioned
above, the results are almost exclusively
In contrast, other governments have sup- mono-plantations, usually rubber.
ported local and international NGOs in
Burma and Laos to promote socio-eco- Chinese companies complain that the sub-
nomic development, providing alternative sidies are difficult to obtain, and are not
livelihoods directly to the most vulnerable worth the paper work demanded. ‘The big
and (ex-) poppy growing communities. money for me is from exports to China. We
While these approaches differ in strategy, get tariff and VAT exemption,’ claims one
the general outcomes are similar in terms Chinese businessman. But all that notwith-
of moving upland subsistence farmers into standing, ‘From our perspective, it is over-
the lowland market economy.13 regulated.’14

China and other nations have supplied TNI researchers on the China-Burma bor-
emergency aid to ex-poppy farmers in Shan der have found that some Chinese traders
and Kachin states in northern Burma for abuse the schemes by pretending to plant
years. China donated 10,000 metric tonnes crops, but in fact are only buying up local
of rice directly to local cease-fire authorities produce from farmers in Burma, bringing it
across the border in 2007 and again in into China free of customs duty, and mak-
2008. Exactly how this aid was distributed ing inordinate profits. The Chinese gov-
by cease-fire remains unclear. Offers by ernment temporarily suspended the opium
international agencies to cooperate with the substitution programme in early 2010 to
Chinese to ensure emergency aid actually evaluate its successes and failures. This de-
reaches the neediest households have been cision may have been reached due to the is-
declined. sues discussed above.

THE CROP SUBSTITUTION SCHEME CHINA’S RESOURCE AND TRADE


DIPLOMACY
Chinese companies participating in the
cross-border development schemes receive China is keen to promote investment in
several state-subsidised financial incentives. Burma and Laos. China’s new role as major
These include easing bureaucratic hurdles regional investor was first articulated by a
for investment, relaxation of labour regula- 2001 official Beijing policy known as ‘zou
tions, subsidies and import tax and VAT chu qu’, literally translated as ‘to go out’.
waivers, and, most importantly, permission Motivated by China’s lack of raw materials,
to import crops produced under the the aim is to transform the country from a
scheme, as imports to China are subject to recipient of foreign investment into a major
import quotas which can be hard to obtain. overseas investor.15

4 | Transnational Institute
Rubber plantation in the Wa region in Burma. Photo: Tom Kramer

Promoting agricultural investment in and trade in northern Burma and Laos is of


Burma and Laos is clearly not solely gov- grave concern to Chinese authorities, as it
erned by concerns about opium cultivation. could cause further instability through
Rubber is a key strategic commodity for smuggling and other criminal activities of
China’s industry, together with coal, iron drug syndicates in Burma, Laos and China.
and petroleum. Domestically, rubber can
only be grown in Yunnan and Hainan Furthermore, economic development of
provinces, where further expansion is lim- border regions is strongly promoted by
ited by scarcity of suitable land. Rubber different levels of government in China in
plantations in Laos and Burma, where land order to overcome socio-economic dispar-
and labour are cheap and local land tenure ity between the centre and periphery,
nearly non-existent are of great strategic viewed as a potential source of conflict. In-
importance in satisfying China’s growing security in the border regions would also
domestic demand.16 threaten other important Chinese invest-
ments in northern Burma and Laos.
Security threats and the continuing conflict
in Burma, and to a lesser degree northern These include major hydropower projects
Laos, are a serious concern to the Chinese in Kachin state, the construction of new
government, which wants peace and stabil- overland pipelines to transport oil and gas
ity along its borders. Following a resump- from the Bay of Bengal to Yunnan Prov-
tion of fighting in the Kokang region in ince, large-scale mining ventures in north-
northern Burma in 2009, for example, the ern Burma and Laos, major new highway
Chinese government in a rare example of developments to better facilitate cross-bor-
open diplomacy called on the Burmese au- der trade, and, most recently, large-scale
thorities to properly handle domestic agricultural land concessions.
problems, maintain stability in the China-
Burma border region, and protect the secu- Providing food for China’s population is
rity and property of Chinese citizens in also an important national and provincial
Burma.17 Concomitantly, drugs production policy objective. To bolster Yunnan prov-

Transnational Institute | 5
ince’s efforts to provide food security, the facing difficulties in feeding their families.
provincial government is increasingly pro- Rampant logging that dominated most of
moting contract farming and agricultural the past decade and the recent growth of
concessions by Chinese companies in large-scale agricultural concessions, such as
Burma and Laos. rubber (locally known as ‘shwe phyu’ or
‘white gold’), have further marginalised
Other factors contributing to a stronger farmers from their land and livelihoods.
presence of Chinese agribusiness invest-
ment in northern Burma and Laos include: Since the mid-2000s, the uplands in Kachin
China’s liberalizing economy (including and Shan states have been transformed by
tariff reductions); an influx of Chinese mi- cash crop concessions. Large-scale rubber,
grant labour needing new work opportuni- as well as tea, sugarcane and cassava plan-
ties; the absence of legally binding regula- tations, among other crops, are concen-
tions for companies operating abroad; and trated along government-controlled roads.
accelerated infrastructure development In some areas whole mountains are now
connecting northern Burma and Laos with covered with rubber trees, the Golden Tri-
Yunnan. angle having morphed into a rubber belt.18

For landlocked Yunnan province, pro- Reliable figures are hard to obtain in Bur-
moting ‘harmonious’ regional cooperation ma, and data should be treated with great
is an important political-economic objec- caution. Official figures show that since the
tive. However, China’s ‘resource and trade government initiated rubber plantations in
diplomacy’ of the last decade has essentially 2004, 400,000 hectares were already grow-
promoted short-term economic gains for ing in 2008. This included some 12,000
Chinese companies. Their resource extrac- hectares in Kachin state, over 16,000 in
tion activities are threatening local com- northern Shan state (around the Lashio
munities’ livelihoods and land tenure secu- area), and 26,000 in eastern Shan state (the
rity, and have caused great damage to the Kokang and Wa areas). A confidential gov-
environment. They undermine China’s of- ernment report shows that rubber in Ka-
ficial policy of promoting ‘harmonious’ co- chin state alone was expected to continue
operation with neighbouring countries, and increasing from its 7,600 hectares in 2006
have the propensity to increase rather than to 40,000 in 2010. 19 This increase coincides
mitigate future conflicts. with the Chinese government push for
opium crop substitution since 2006.
WHITE GOLD IN NORTHERN BURMA
BUSINESS MODELS IN BURMA
Over the past decade northern Burma’s
landscapes have dramatically changed as a Much of this agro-investment is located
result of new Burmese and Chinese gov- within areas controlled by the Burmese
ernment policies, restive national politics military government, with permission
and border insurgencies, heavy resource granted from regional military command-
extraction flows, and growing Chinese pri- ers, and in some cases top regime officials
vate investment in multiple resource sec- from the capital, Naypyidaw. The govern-
tors. Not only have the physical landscapes ment has established a 30-year rubber de-
been altered by new finance regimes and velopment plan, with a goal of 600,000
heavy resource traffic, but so have the live- hectares and an annual production of
lihoods relying upon land and resources. 300,000 metric tonnes to be reached by the
year 2030. While the bulk of rubber is still
Despite the end of open warfare in ceasefire in the traditional growing areas in the
zones in northern Burma since the early south, most of the intended expansion is
1990s, subsistence farmers are increasingly northern areas bordering China.20

6 | Transnational Institute
But in the north rubber development is tion (KIO) and the smaller New Democ-
promoted as ‘crop development substitut- ratic Army–Kachin (NDA-K) signed con-
ing for opium poppy in border areas’. Ac- tracts with Chinese companies to establish
cording to national statistics, about 70 to 80 rubber and other plantations including
percent of all rubber produced is ex- sugarcane, bananas, watermelon and cas-
ported,21 but even this proportion is sur- sava, under the Chinese opium substitution
passed by the nearly 100 percent of rubber programme.25
grown in northern border regions exported
across the border to Yunnan. Most funding for the agriculture conces-
sions in northern Burma originates from
Local authorities have also promoted rub- Chinese businesses based in Yunnan, often
ber cultivation in their areas. Regional Kunming, but also including Hainan and
army commanders, ceasefire groups and other provinces. Burmese companies in fa-
local pro-government militias in Shan and vour with the military government often
Kachin states have aggressively supported but not always front the deals. The Chinese
rubber production this past decade. Some companies receive funding through China’s
of these concessions may not be included in national opium crop substitution pro-
national statistics if the contract is strictly gramme. Often the contracting authority in
between a Chinese businessman and local Burma acts as a figurehead for a Burmese
non-state military authorities. There are company (sometimes owned by a local
also discrepancies in national land data Burma Army or ceasefire/militia leader,
between and within ministries and depart- other times a well-connected local busi-
ments, and between government data and nessman) in a joint venture with the Chi-
the reality on the ground. nese company.

In Shan state the vast majority of rubber Certainly for government-controlled areas,
concessions are sprouting up in the Wa re- joint ventures are more common than en-
gion in United Wa State Party–controlled tirely Chinese-owned contracts since hav-
territory. The Wa authorities in partnership ing a Burmese partner eases various hur-
with Yunnan Chinese businessmen have dles, including taxes. Chinese businessmen
converted entire mountain slopes into agri- first establish a deal with local Burmese
cultural concessions. Wa leaders claim to army officers, militia or ceasefire group
have provided income opportunities for leaders, or occasionally national military
former poppy growers by promoting about leaders, depending on size and location of
33,000 hectares for rubber, 13,000 for tea the project.
and 6,600 for sugarcane.22 Some smaller
rubber concessions have been granted by IMPACT ON FARMERS
other ceasefire groups and local militias in
northern Shan state, such as areas between The surge in agribusiness investments in
Lashio and the Yunnan border at Muse,23 northern Burma has greatly impinged on
and north-eastern Shan state in the heart of local food security, land tenure and local
the Golden Triangle around Kengtung and resource access, resulting in a toxic sce-
Tachilek townships.24 nario of deforested lands, degraded land-
scapes, land confiscation, fenced-in cash
TNI research in Kachin state in northern crops, landless farmers and lack of alterna-
Burma shows a wide variety of rubber con- tive local employment.
cessions: the Burma Army Regional North-
ern and Northeast Command, the Forest In the Wa region, the establishment of rub-
Department, cease-fire groups, local com- ber plantations has had a deep impact on
panies and individual local businessmen. local communities already facing dire pov-
Both the Kachin Independence Organiza- erty and food insecurity following the strict

Transnational Institute | 7
opium ban implemented in 2005. Local seven years and require significant invest-
authorities have relocated ex-poppy farm- ment before then, which ordinary farmers
ing communities to areas near rubber in these regions cannot afford. The com-
plantations to provide low-wage or free mercial plantations have decreased land
labour. Plantations have in some cases been available for farming to the poor commu-
established on land confiscated without nities, while at the same time increasing
compensation from local farmers.26 competition for labour during the peak sea-
son, making it difficult for the few farmers
The establishment of many large mono- left with land to find workers. So the poor-
plantations in the Wa region has severely est of the poor, who are in most need of al-
limited access to land for food crops and ternative sources of income following the
grazing, further destabilising local liveli- opium bans, hardly profit from it.
hoods. Farmers are not involved in any de-
cision-making processes regarding the es- THE LATEX BOOM IN LAOS
tablishment of these plantations in the Wa
region. They never see a contract, which is Rubber plantations became established in
made between the Wa authorities and Chi- Laos a decade earlier than in northern
nese businessmen. Burma. The socio-economic and political
differences between Burma and Laos
In northern Shan state, from the area translate into dramatically different types of
around the town of Lashio to the Yunnan organisation and who benefits from it. The
border, local militias, ceasefire groups and new influx of Chinese overseas investment
the Burma Army are making deals with in agricultural commodity production in
Chinese businessmen to establish various Laos has promoted a concessionary devel-
agricultural plantations, most notably rub- opment model at the cost of smallholder
ber. The old Burma Road leading towards farms. Only villagers with connections to
the border has become a gateway for the their ethnic relatives across the Yunnan
crop, with rubber trees stretching along the border in Xishuangbanna prefecture have
hillsides on both sides of the route. the capacity to maintain the latter form.

In Kachin state, particularly in the western In the mid-1990s two concurrent processes,
part along the Yunnan border, plantations, one supported by the Laos and Chinese
mostly rubber but also watermelon, sugar- governments and the other by villagers’
cane and cassava are proliferating along own initiatives, spearheaded rubber devel-
government-controlled roads and around opment in northern Laos. The first project
towns and roadside villages. Ceasefire in Ban Had Ngao village in Luang Namtha
groups, such as the KIO and NDA-K, are province, backed by the local government,
also making deals for concessions in terri- began in 1994. Other villages in the prov-
tory under their control. Companies rely ince soon engaged in rubber cultivation
on labour migration from central Burma through informal cross-border contacts
rather than hiring local villagers. Farmers with Chinese entrepreneurs, often from the
are forcibly dispossessed of their land, be it same ethnic group.
their house, orchard or swidden plot. With
no compensation and no opportunity to From about 2000 to 2005, the Luang Nam-
work as plantation labourers, they are left tha provincial government encouraged
with few viable choices. rubber development through business and
bilateral government linkages with neigh-
Farmers could potentially make a good bouring Chinese county governments. In
profit from their own tea or rubber planta- addition, the Lao government passed a new
tions if they had access to land and capital. law promoting foreign investment. Many
The trees produce rubber only after about contingent factors converged during this

8 | Transnational Institute
time (as they did in Burma), such as a spike contract farming arrangements without re-
in rubber prices, bad weather destroying porting to their local government agencies
rubber crops in southern China and gov- to avoid government oversight and taxes.28
ernment curtailment of rubber expansion
in Xishuangbanna. But (as was the case in LAOS RUBBER DEVELOPMENT MODELS
northern Burma), it was the implementa-
tion of China’s opium crop substitution A variety of arrangements are currently
policy that provided the main impetus and being implemented following national and
capital to subsidize the Chinese agricultural local government mandates, villager prefer-
development boom in northern Laos. ences and Chinese business practices. Pro-
Nearly all large-scale official Chinese vincial governments usually promote a
rubber investments in northern Laos are ‘2+3’ contract-farming model, by which
part of China’s opium replacement policy.27 villagers provide land and labour (the ‘2’)
and investors contribute capital, technique
Formalisation through bilateral agricultural and market access (the ‘3’). The profit-
development agreements has led to a recent sharing arrangement is 70 percent for the
surge in large-scale rubber establishment in villagers, and 30 percent for the companies,
northern Laos. The availability of official which pay various taxes to the government.
Chinese investment through provincial This ‘cooperative’ arrangement between
government channels has also influenced farmers and investors is intended to lessen
the business model, regarding both small- coercion. But confusion remains regarding
holder contract farming and large-scale how villagers ‘provide’ land and labour.29
concessions.
While provincial governments promote
The confusing mixture of informal and this model as an exemplary form of devel-
formal rubber contracts, both smallholder opment, what often develops is a conces-
and concession, has led to a jump in sion-type arrangement. In reality, more of a
planned and already planted rubber, which ‘1+4’ scheme is implemented, in which vil-
appear to far out-pace the earmarked total lagers only provide the land, in exchange
by national government authorities. The for only about 30 percent of any future
Lao central government seems to have lost profits (reversing the shares of the ‘2+3’
control over local authorities allotting con- model). Villagers may opt to provide wage
cessions. These dramatic and rapid changes labour for the plantations, but sometimes
raise serious concern about the future of labour comes from outside the village.
the upland communities.
The ‘1+4’ concessionary model arrange-
In Luang Namtha province, where the rub- ment has a more top-down governance ap-
ber boom had encouraged heavy invest- proach than the ‘2+3’, which in theory of-
ment, 16,000 hectares of rubber were fers greater decision-making power to vil-
planted in November 2007, only 4,000 lagers. Under the ‘1+4’ model, large Chi-
hectares less than 20,000-hectare cap set in nese companies approach the provincial
the province for 2010. In just Muang Sing and national authorities that subsequently
district alone, 6,500 hectares were planted exert pressure on lower government levels
by the end of 2007, with over 75 percent of to procure enough land to fulfil the con-
the villages growing rubber. Muang Long tract in that district.
district had planted 1,700 hectares by 2007.
In Oudomxai province, by mid-2008 4,600 The different development models are dif-
hectares of a planned total 34,000 were ficult to identify in practice. The main dis-
growing. Actual planted area is higher than tinction is the type of investment: small-
official totals because many villagers are holder investment through familial ties and
making deals with informal investors for informal contracts versus large-scale,

Transnational Institute | 9
mostly foreign, companies with top-down Another development model almost com-
investment contracts. Villagers tend to fa- pletely untouched by existing research is
vour small-scale unofficial arrangements the role of the Laos Army in rubber conces-
because of the greater trust among parties, sions. Due to its sensitivity, the government
more secure financial return, better under- has made any investigation difficult, if not
standing of land use rights and familial impossible. The army has been obtaining
ethnic social linkages.30 rubber concessions relatively independ-
ently of formal government allocation and
But in some cases villagers desire the more foreign investment processes. According to
concessionary ‘1+4’ model because compa- one report, no less than three Chinese
nies retain more control over their rubber companies hold contracts with the Luang
production, and the concomitant business Namtha provincial army for rubber.33
pressures. Villagers get paid every season as
wage labourers, and don’t have to contend BENEFITS AND COSTS
with the demands and stresses that the
‘2+3’ model often requires. If the more Serious concerns arise regarding the long-
concessionary approach is attractive be- term economic benefits and costs of rubber
cause villagers earn some compensation for development for poor upland villagers.
their years of labour until rubber is tapped, Although some economic benefits are de-
this option is not free of problems. rived from rubber development, the villag-
ers enjoying these new resource revenue
Tension exists between proponents of streams are not the poorest.
smallholder and concession models, and
Wealthier farmers with savings and better
between provincial/district and national
social networks can more easily tap bene-
government agencies on how to proceed
fits; hence socio-economic gaps are devel-
with rubber development. For example, the
oping in the communities.34 Households
provincial governments in three northern
with access to land also profit more from
provinces, Luang Namtha, Bokeo and Ou-
rubber development. Some well-positioned
domxai, all agreed on promoting small-
households are able to convert communal
holder plantation development instead of
forestland into unofficial private land, oc-
land concessions for rubber. However, the
casionally obtaining formal land titles.35
national government supported large-scale
rubber concessions operated by influential Land encroachment and clearing are cre-
Chinese companies, such as Yunnan Rub- ating environmental problems, such as loss
ber, a Lao subsidiary of Yunnan State of forest biodiversity and increased soil ero-
Farms.31 sion, not to mention villager’s loss of access
to forest products when forests are clear-
Although the formal bilateral concession-
cut. There is evidence of illegal logging oc-
ary model arrangements are becoming in-
curring in order to clear land for the plan-
creasingly prevalent in northern Laos, the
tations.
contribution of unofficial contracts estab-
lishing smallholder plantations through The coercive nature of rubber development
small investors is not insignificant. These in Laos, even in the so-called ‘2+3’ model,
sorts of informal, often verbal, contracts differs from northern Burma in that labour
continue to play an important role in is not forced per se nor is land automati-
transferring technical expertise to upland cally confiscated. But as the case of Ban
villages comprising similar ethnic identi- Homxay village in Oudomxai province il-
ties.32 This more decentralized, voluntary, lustrates, a ‘use it or lose it’ rule is applied
smallholder process facilitated by cross- to existing land rights within the conces-
border intra-ethnic group identity is com- sion zone. If villagers there refused to par-
pletely absent in northern Burma. ticipate in the rubber project they had to

10 | Transnational Institute
give up their land use rights.36 Only wealth- Partnership on Alternative Development Project
(GLO/I44), May 2010.
ier villagers with land access rights to the
7. EU Presidency Paper, Key points identified by EU
demarcated concession area had the privi- experts to be included in the conclusion of the open-ended
lege of deciding whether or not to sell their intergovernmental expert working group on international
land (even if technically against national cooperation on the eradication of illicit drug and on
alternative development, 4 July 2008,
laws), receive compensation, or to opt for
UNODC/CND/2008/WG.3/CRP.4.
rubber tree management with the company.
8. See, Tom Kramer, Martin Jelsma and Tom Blickman,
Withdrawal Symptoms in the Golden Triangle, A Drugs
Without access to capital and land to be-
Market in Disarray, TNI, January 2009; HIV/AIDS Asia
come involved in rubber concessions, up- Regional Program Yunnan (HAARP Project), First Year
land farmers practicing swidden cultivation Project Progress Report, HAARP Yunnan Office
(many of whom are (ex-) poppy growers) 02/ 07/ 2009.

have few alternatives but to work as wage 9. Qu Jianwen, Summary Report of the Development of
Poppy Substitution in the Peripheries of Yunnan
labourers on agricultural concessions. They Province, presented at TNI-GTZ Second Southeast Asia
are forced to accede to government reloca- Informal Drugs Policy Dialogue, Bangkok, 19-21 April
tion programmes or to economic factors, as 2010.
they have no other means of income. 10. Ibid; Yunnan Provincial Document No.6 (2005),
issued in May 2005.
This pattern of development in the uplands 11
1. Yunnan State Council, The Approval of the State
matches very closely the national govern- Council for the Poppy Substitution Development Pro-
gramme carried out in Myanmar and Northern Laos,
ment plan to eradicate shifting cultivation State Document No.22, issued on April 3, 2006.
and resettle villagers into the lowlands 12
2. Qu Jianwen, op. cit.
along roads. The scenario is similar in 3. Baird and Shoemaker, ‘Unsettling Experiences: In-
13
northern Burma and Laos, although ternal resettlement and international aid agencies in
through somewhat different processes of Laos,’ Development and Change, 38(5): 865-888, 2007.
dispossession and governance frameworks. 4. Interview with Chinese businessman, December
14
2009.
The primary role of Chinese investment,
5. China’s ‘Tenth Five-Year Plan for National Eco-
15
and specifically China’s opium crop substi- nomic and Social Development’ for the period 2006-
tution policy for agricultural development, 2010, aims to invest US$60 billion overseas. See Weiyi
is undisputed. Shi, Rubber Boom in Luang Namtha: A Transnational
Perspective, GTZ, February 2008, Page 24.
166. Weiyi Shi op. cit.; Li Chenyang and Lye Liang Fook,
NOTES ‘’China’s Policies Towards Myanmar: A Successful
1. In 1989 the military government changed the official Model for Dealing with the Myanmar Issue?’ In: Li
international name of the country from ‘Burma’ to Chenyang and Wilhelm Hofmeister (Eds.), Myanmar,
‘Myanmar’. Using either has since become a highly Prospects for Change, Singapore 2010.
politicised issue. The UN uses the latter, but it is not 7. Tom Kramer, Burma’s Cease-fires at Risk; Conse-
17
commonly used elsewhere in material written in English quences of the Kokang Crisis for Peace and Democracy’,
about the country. Therefore ‘Burma’ will be used TNI September 2009.
throughout this publication. This is not mean to be a 18
8. Tom Kramer, From Golden Triangle to Rubber Belt?
political statement. The Future of Opium Bans in the Kokang and Wa
2. Former UNODC Executive Director Antonio Maria Regions, TNI Drug Policy Briefing No. 29, July 2009.
Costa for instance wrote: ‘The Golden Triangle is 19
9. Ministry of Agriculture and Irrigation, Myanmar
closing a dramatic period of opium reduction. A decade- Long Term Implementation of Project, First Quarterly
long process of drugs control is clearly paying off.’ Report of Implementation, December 3, 2009.
UNODC, Opium Poppy Cultivation in Southeast Asia:
20. The planned targeted areas amount to about 145,000
Lao PDR, Myanmar, Thailand. October 2007.
hectares in Shan state and 56,000 hectares in Kachin
3. UNODC, Opium Poppy Cultivation in Southeast Asia: state, Myanmar Perennial Crop Enterprise (MPCE).
Lao PDR, Myanmar, Thailand. December 2009.
21.. Hla Myint, The Role of Myanmar Rubber Planters
4. TNI research 2009-2010. and Producers Association (MRPPA) in Natural Rubber
5. UNODC, 2009 op. cit. Development and its Recent Activities, International
6. Tom Kramer, An Assessment of the Impact of the Rubber Conference, Siem Reap, Cambodia, 2007.
Global Financial Crisis on Sustainable Alternative 22. Interview with UWSA Vice-Chairman Xiao Min
Development Key Determinant Factors for Opium Poppy Liang, 23 February 2009; From Golden Triangle to
Re-cultivation in Southeast Asia, UNODC Global Rubber Belt op. cit.

Transnational Institute | 11
23. Interviews, June 2009. Forestry Training Center for Asia and the Pacific. Bang-
24. LNDO, ‘Rubber Mania: Scrambling to supply China, kok, 2010.
can ordinary farmers benefit?’ Undercurrents, Issue 3, 29. Sittong Thongmanivong et al, op. cit.
2009. 30. Ibid; Antonella Diana Socioeconomic Dynamics of
25. TNI research 2009-2010. Following government Rubber in the Borderlands of Laos, Unpublished field
pressure on all cease-fire groups, the NDA-K has trans- report. Research School of Pacific and Asian Studies,
formed into three separate Border Guard Forces under Australian National University, April 2006.
Burma army command. The KIO has so far refused to 31.. Weiyi Shi op. cit.
do so, as its demands for political reform have not been
32. Antonella, Diana op. cit.; Weiyi Shi op. cit.; Alton, C.,
met.
Blum, D., and Sananikone, S. Para Rubber Cultivation in
26. From Golden Triangle to Rubber Belt, op. cit. Northern Laos: Constraints and Chances, Study for Lao-
27. Weiyi Shi op. cit. German Program Rural Development in Mountainous
28. Ibid; Fujita, Y., et al. Dynamic land use change in Sing Areas of Northern Lao PDR, Vientiane 2005.
District, Luang Namtha Province, Lao PDR, 2007, Inter- 33. Weiyi Shi op. cit.
national Program for Research on the Interactions be- 34. V. Manivong and Cramb, R.A., Economics of
tween Population, Development, and the Environment Smallholder Rubber Production in Northern Laos, 51st
(PRIPODE), Faculty of Forestry, National University of Annual Conference of Australian Agriculture and
Laos; Sithong Thongmanivong et al, Concession or Resource Economics Society, Queenstown 2006.
Cooperation? Impacts of recent rubber investment on
35. Vongkhamor et al op. cit.; Qu Jianwen, op. cit.
land tenure and livelihoods: A case study from Oudomxai
Province, Lao PDR, National University of Laos, Rights 36. Sittong Thongmanivong et al, op. cit.
and Resources Initiative and the Regional Community

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