Laos: Chinese company Sun Paper plans eucalyptus monocultures

21 Jul

More eucalyptus monocultures are planned for Laos.

By Chris Lang. Published in WRM Bulletin 144, July 2009.

A Chinese company called Shandong Sun Paper is planning to establish 100,000 hectares of eucalyptus plantations in Savannakhet province in central Laos. Of this area, the government has granted a 50 year land concession to Sun Paper for 30,000 hectares.[1] The remaining 70,000 hectares is to be planted by farmers on their own land, under contract to Sun Paper.[2] The US$15 million project is planned to start in early 2010.[3]

“We also plan to build wood pulp mills in Xepon or Phin district,” Sun Paper’s Deputy General Manager, Ying Guang Dong, told the Vientiane Times. Sun Paper plans to invest US$300-500 million to build a pulp mill with a capacity of 300,000 tonnes. “Then we will invest about US$1.8 billion for the second phase,” Ying said.[4]

Ying claims that the pulp mill will employ 10,000 people.[5] If true, it would be either the largest or the most labour intensive pulp mill on the planet. Sun Paper is China’s largest private paper company, with an annual capacity of more than 2.2 million tonnes of paper and paperboard.[6] It employs a total of about 7,000 people.[7] Botnia’s US$1.2 billion pulp mill in Uruguay, which has a capacity of one million tonnes of pulp a year, employs a grand total of 300 people.[8]

While Sun Paper exaggerates the number of people it will employ, it is at least honest about how much money it will provide to local communities: US$200,000. This money is supposed to build schools and health dispensaries, and to construct and maintain roads.[9] There are 44 villages in the concession area. That works out at about US$4,500 per village, which may be better than nothing, but not by much.

Sun Paper does not even plan to employ local people in its plantations. “Currently, we aim to use labor from Vietnam to cut the wood in the plantations,” Ying told the forestry industry information company RISI in February 2009.[10]

Before the pulp mill is built, the wood will be exported via the port of Da Nang in Vietnam. In March 2009, Sun Paper announced that it would invest US$15 million in a wood chip mill in Vietnam to process the wood from Laos.[11] From Vietnam, the wood chips will be shipped to Sun Paper’s plant in Yanzhou city in China. Part of Sun Paper’s operations in Yanzhou are run as a joint venture with International Paper.[12]

One problem that Sun Paper will run into is that there is not sufficient land available for large scale concessions in Savannakhet province. In October 2007, the Vientiane Times reported that “Savannakhet authorities are facing difficulties in supplying land for foreign investors, who have requested thousands of hectares over the past years for their projects.”[13] An Indian company, Birla Lao Pulp & Plantations Company Limited, is reported to be running into serious difficulties finding enough land for its proposed 50,000 hectares of eucalyptus plantations in Savannakhet province.

Sun Paper has carried out environmental impact studies and claims it will involve people living in the concession area in the decision-making and monitoring process.[14] It claims it is going to “employ” 50,000 people as tree growers. But there is a history of this sort of project in Laos, the most notorious being the Asian Development Bank’s Industrial Tree Plantation Project. In December 2005, the ADB’s Operations Evaluation Department concluded that the ADB project had “failed to improve the socioeconomic conditions of intended beneficiaries, as people were driven further into poverty by having to repay loans that financed failed plantations.”[15] Put another way, the farmers that Sun Paper hopes will grow its trees for them need their land to grow food on.

In 2007, the Lao government suspended the issuance of new land concessions “after learning such arrangements were negatively affecting local communities”, as the Vientiane Times put it. In May 2009, the government announced a Prime Minister’s decree on state land leases and concessions,[16] which once again allows large scale land concessions. Yet little has changed in Savannakhet. No new land has appeared in the province. So the questions remain. Where will Sun Paper find the land? Who will benefit? And why on earth did the Lao government agree to this project?

References

[1] “Gum trees to fuel Savannakhet paper production”, Vientiane Times, 25 June 2009.

[2] “Sun Paper looks to build pulp mill in Laos”, RISI PPI Asia, Vol. 11, No. 20, 20 October 2008.

[3] “Gum trees to fuel Savannakhet paper production”, Vientiane Times, 25 June 2009.

[4] “Gum trees to fuel Savannakhet paper production”, Vientiane Times, 25 June 2009.

[5] “Gum trees to fuel Savannakhet paper production”, Vientiane Times, 25 June 2009.

[6] Metso to supply fine paper machine to Sun Paper Group in China”, Metso press release, 15 January 2009.

[7] Shandong Sun Paper is set to build pulp mill in Laos”, China Forest Paper, 17 October 2008.

[8] Graeme Rodden (2008) “More than ‘just a mill’ – Botnia’s Fray Bentos mill”, Pulp & Paper magazine, RISI, 30 June 2008.

[9] “Savannakhet plantation impacts under study”, VientianeTimes, 24 June 2009.

[10] Annie Zhu (2009) “PM 22 shines for Sun Paper”, RISI, 28 February 2009.

[11] Yu Hongyan (2009) “Sun Paper to set up joint venture in Vietnam”, China Daily, 9 March 2009.

[12] “Sun Paper looks to build pulp mill in Laos”, RISI PPI Asia, Vol. 11, No. 20, 20 October 2008.

[13] “Savannakhet ‘heavy-hearted’ about land supply”, Vientiane Times, 18 October 2007.

[14] “Gum trees to fuel Savannakhet paper production”, Vientiane Times, 25 June 2009.

[15] Sector Assistance Program Evaluation for the Agriculture and Natural Resources Sector in the Lao People’s Democratic Republic, SAP: LAO 2005-17, Operations Evaluation Department Asian Development Bank, December 2005.

[16] “Govt resumes land concessions”, Vientiane Times, 16 June 2009.

6 Responses to “Laos: Chinese company Sun Paper plans eucalyptus monocultures”

  1. Chumroen Benchavitvilai 22 July 2009 at 3:41 am #

    There are still many non0productive land (waste land or non utilizable land ) in Savannaket and near by provinces along teh Lao-Vietnam border whcih are still contaminated with the mines and bomms(UXO) during the Vietnam War.
    It is the good chance for Lao to have the FDI from China to develop all these non utilizing land for the Eucalyptus plantation.

    Nothing to lose for the promotion of this project to turn all the available land to be productive land for the future of Lao.

  2. Chris Lang 22 July 2009 at 8:08 am #

    Thanks Chumroen. If there is so much “non-productive” in Savannakhet, why did the Vientiane Times report that the authorities having “difficulties in supplying land for foreign investors”? There are two other industrial tree plantation projects in the area – Birla and Stora Enso – which are also competing for land.

    In addition, Sun Paper plans for 70% of the eucalyptus to be planted by farmers on their own land. I’d be very surprised if farmers in Savannakhet have a total of 70,000 hectares of “non-productive” land to spare.

    I agree, however, that clearing UXO would be a good thing. I’m not sure that the only way of doing this is by establishing industrial tree plantations (although since the UXO is still there more than three decades after the war finished, perhaps it is).

    A serious concern is that Laos is getting very little from this project, until the pulp mill is built, but that could be many years in the future. The wood is to be exported – it won’t even be chipped in Laos. When (or if) the pulp mill is built, there will be the problem of pollution from the mill. Plus the fact that raw material has to be found to keep the mill running which would put huge pressure on farmers’ land (for conversion to plantations) and any remaining areas of forest.

    • JG 11 July 2012 at 10:21 am #

      I was just searching for info about the project because this topic came up in a conversation with some Lao expats (wife of a friend). We were talking about what life is like in Laos, and she mentioned the project. Her feeling was that it is a good opportunity to provide a source of income for the local people. Pity that the only thing that comes up when you google it is your article. It would be good to get a balanced opinion from people who the project can potentially benefit.

      I understand you are biased against the subject, but as you also hold yourself out to be a journalist reporting facts, please allow me to counter-balance the discussion by offering a slightly different view based on my experience in the developing world and conversations with Lao people.

      First, it seems like a billion dollar investment can have more job creation than just at the factory. I’m sure there are many more jobs created than just at the factory; I mean, how about the truck drivers, or the people who open a lunchtime restaurant for the workers, or those at the port? Money in the area means money in people’s pockets, even if some of this money is profit earned by the company. I think it’s called economic linkages. There is a net benefit. Farming is labor intensive in these countries, so I believe more jobs will be created than just at the paper factory.

      I wholeheartedly disagree with you on your statement, “…the farmers that Sun Paper hopes will grow its trees for them need their land to grow food on.” If you’re implying that people need to grow food on their land to feed themselves, this is incorrect. Anyone who has looked at the topic knows that there is enough food in the world to feed everyone. The problem is having the ability to buy the food (access to money) not food supply. If you give people a chance to earn money from their land, they’ll probably make enough to buy all of their food and have some left over for other things (maybe send their kids to school instead of to the fields?).

      My friend’s wife said the people there are excited about an opportunity to earn money, rather than just feed themselves. I think by far this is the biggest industrial investment in the area. Subsistance farming is a miserable and difficult life (I thought differently until I experiened it first-hand), and I think you are making the judgment based on a ‘developed world’ frame of mind and the ‘idyllic countryside’ myth. I don’t think you’re suggesting Lao people would be better off without the investment, working as subsistance farmers, do you? Sometimes, people from developed countries have a very firm idea what people from poor countries should do. Only that people from developed countries would never actually do this themselves. We preach what medicine people should take, but we don’t take it ourselves.

      I’m sure there will be some give and take, but in the end it sounds like Laos has something to gain. I think you are too pessimistic about the whole thing. Not all developing world industrial projects are disasters for the local people. Some good things need to be heard as well.

      Thank you.

      • Chris Lang 19 November 2012 at 5:55 pm #

        Thanks for this comment JG. Having seen the impact of similar billion dollar investments in pulp mills and industrial tree plantations on local communities and their environment, I’m afraid I don’t share your optimism about this project.

        True, not every development project is a disaster, but there is a record of impacts on local communities from pulp and paper development in the Mekong Region. (See this report for more details.)

        Having said that, I agree with your comment about the sentence “…the farmers that Sun Paper hopes will grow its trees for them need their land to grow food on.” The point I was trying to make is that currently farmers’ livelihoods are dependent on using the land. If this is going to change, the farmers should be allowed to be involved in that decision. I was not arguing that people must grow their own food, forever.

        Construction has now started on the pulp mill. Yet there is no public information about where the company plans to source the timber for its mill. So far the company has planted a few hundred hectares of plantations – way too little to supply the mill.

  3. Chris Lang 19 November 2012 at 5:42 pm #

    Paper maker launches project in Savannakhet

    Vientiane Times
    2 June 2011

    A Chinese-owned company, Sun Paper Holding Lao, plans to plant trees on 2,000 hectares in Savannakhet province this year to supply its paper production facility.

    The company held a ceremony at its plantation in Xepon district on Monday, with Savannakhet provincial Governor Mr Vilayvanh Phomkhe and Vice President of Sun Paper Industry Joint Stock Company Mr Pai Mao Lin among those in attendance.

    The Sun Paper Industry Joint Stock Company, which is located in China, is the parent company of Sun Paper Holding Lao.

    Mr Lin said the Sun Paper Industry Joint Stock Company produces high quality paper for packing, general use and artistic work. The firm is listed on the Chinese stock market. It has 12,000 staff, assets valued at US$3.3 billion and generates revenues of US$4 billion per year.

    The company has conducted several feasibility studies in Laos since 2007. In November 2008 the company signed a Memorandum of Understanding with the Lao government. On November 23, 2009, it signed a project development agreement for an industrial tree plantation and construction of a paper production factory. On September 15, 2010, the company signed a land concession for an area of 7,324 hectares.

    “The launch of this tree plantation today is a milestone for paper production in Laos by Sun Paper and is an important step towards strengthening the investment of the company,” Mr Lin said at the ceremony.

    Sun Paper is the biggest paper production enterprise in China, using modern technology and integrated tree plantations to produce high quality products.

    He said the company’s initial investment in Laos of about US$200 million focuses on the production of raw materials through the processing of 300,000 tonnes of pulp with the cooperation of local people.

    Within 10 years the company expects to have invested a total of US$2 billion in the project and have the capacity to produce 1.5 million tonnes of pulp for use in manufacturing 1.5 million tonnes of paper.

    The company has a target to produce 3 million tonnes of paper per year at the facility.

    The company expects to pay US$110 million to the government in taxes and royalties each year and hopes to see gross production value at the plant reach US$2.2 billion in the next 10 years.

    The project expects to create 3,000 jobs for administrative staff and employ more than 30,000 manual workers.

    Sun Paper Holding Lao has invested in a plantation nursery covering 200 hectares, which so far contains 4 million saplings.

    The firm has completed planting trees on 700 hectares and expects to increase that to 2,000 hectares by the year’s end.

    The company also will encourage local people to plant trees by supplying them with seedlings and teaching them cultivation techniques. The company will then purchase the trees once they are mature.

    The project creates opportunities for local people to effectively use their own land to create extra income in line with the government’s policy to eradicate poverty.

    The company will plant numerous trees and add more value to its products, thus generating revenues for the government and improving the living conditions of local people step by step.

    Mr Lin expressed belief that with strong support from all government sectors the company will be able to achieve its goals.

    The tree plantation ceremony was attended by Vice Governor of Savannakhet province Dr Souphan Keomixay and representatives of the project consultant company Mr Vongsavan Vorachit and Mrs Thoonsavan Sichanthongthip.

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