Cablegate: Take All the Trees, Put 'Em in Tree Museum:

DE RUEHVN #0674/01 2000656
R 190656Z JUL 06





E.O. 12958: N/A

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1. (U) Summary: Laos' hardwood forests are rapidly being
depleted ravaged by timber interests from three adjacent
economies, with Japan and China as the largest final
destination markets. The GoL does not have the capability or
the will to manage the country's natural resources
responsibly. So-called protected areas are being cut with
little or no recourse to the laws that are supposed to
protect them. Tragically, the most common method for logging
is to clear-cut, and then pick and choose among the fallen
logs for the best pieces. Unique flora and fauna in as yet
unstudied ecologies are disappearing rapidly, and the chief
gainers are the Lao military. Donor-sponsored conservation
programs have foundered on GoL recalcitrance, though not
before disbursing funds, of course. End Summary.

There's always a trade-off...
2. (U) Minerals, timber, and hydropower are Laos' chief
exports, and all three industries have considerable impact
upon the environment. Mining makes a mess of topography,
pollutes rivers and nearby soils, and depletes non-renewable
resources. Hydropower involves changing the flow of rivers
and disrupts their ecologies, but at least results in clean
power generation. Timber could be a renewable natural
resource, if managed properly, but there is little chance of
that happening in Laos, as the entities making most of the
profit from it are the army and several large state-owned
enterprises (SOEs), with no effective scrutiny or controls on
their activities, and no stake whatever in conservation.

What's left, and how fast it's going:
3. (U) About 60-65 percent of Laos is forested in some sense
of the term, although most of it is degraded secondary
growth. However, the remaining pristine primary-growth
hardwood forests are still among the largest and most
valuable in Southeast Asia. The GoL's Ministry of Agriculture
and Forestry (MOAF) keeps a forest inventory showing 40
percent primary growth forest land, but that is much
exaggerated (international experts in Vientiane put the real
figure at about 15 percent, at most). These are disappearing
at a rate of about 3 percent per annum, according to
environmental NGOs (the GoL admits only .5 percent). This is
an utterly unsustainable rate for slow-growing hardwood
species, suggesting that Laos will be denuded of primary
forest cover within about a generation.

4. (U) In real terms the numbers seem more sobering. World
Bank estimates for Lao log production show a dramatic upward
swing over the last decade-and-a half, from 200,000 cubic
meters in 1990 to 900,000 in 2000, and currently estimated at
well over 1 million CM per annum. The reported export value
of timber for 2004-05 was $72 million. However, those are
official GoL figures, based upon weak reporting of
above-board logging. Illegal and unreported logging probably
doubles the volume. There was a strong dip in timber output
in official figures after the ban on raw log exports came
into effect, but the slack was not real, the logs just went
out undocumented. According to an environmental NGO working
near the Vietnamese border, the volumes exported actually
went up after the ban came in, due to buyer and consumer
fears about future supplies. The official figures are still
depressed because once the whole procedure had escaped the
GoL,s cursory scrutiny, it proved very difficult to get it
back again.

The slender reed of enforcement
5. (U) The only instrument for controlling logging in Laos is
a rickety and highly suspect annual quota system. Nominally
originating with MOAF as parts of a national yearly quota, in
fact the quotas are tailored to the advantage of provincial
and district officials, who have most of the say and divvy
their quotas among favored logging companies. Procedures for
allocating quotas are not made clear, or even made public
(the guidelines are not available, in print or online). For
example, there are supposed to be separate quotas for
domestic and export end-use, but these are not often invoked.
No matter, the quotas are meaningless anyway. In Salawan
Province for 2005, 7000 CM were allowed, but according to

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foreign forestry consultants working for MOAF, more than 10
times that amount was cut. The local authorities have other
tricks, such as systematically undervaluing large logs, or
pre-cutting, calling it wasted "fallen timber", and then
applying the quota to the still-standing trees. But these
subterfuges are seldom even necessary. In reality, the only
limits on logging are the capacity of logging companies and
the military to cut and haul. Logs are used in barter trade,
and province-to-province agreements with Vietnamese and
Chinese logging entities routinely end-run the cursory GoL

Sanctuary! Sanctuary!
6. (U) Scattered throughout Laos are 20 National Biodiversity
Conservation Areas (NBCAs), totaling some 2.9 million
hectares and meant to be flagship conservation zones. These
NBCAs have great potential for eco-tourism, which is
permitted, but has never been a top development priority for
the GoL. The value of these forests to science and
environmental conservation can scarcely be overestimated.
Scientists working in the region estimate believe that a
great deal of new materia medica could be discovered in these
eco-zones. New species of mega-fauna have been discovered in
them in recent years, and the insect and plant populations
are all but completely unstudied. Tigers, leopards, wild
pig, rhino, orangutans and gibbons range in these, their last
sanctuaries. Unfortunately for them, their last sanctuaries
are composed of billions of dollars worth of hardwood trees.

7. (U) The premier (and largest) example of an NBCA is the
353,000-hectare Nakai Nam Theun watershed area in Khammuan
Province. It is supposed to be strictly protected under the
terms of the project agreements among the Nam Theun II (NT2)
Hydropower Consortium of Investors, the GoL, and the WB,
which gave the political risk guarantees necessary for the
project to obtain financing with the understanding that no
logging whatever would be allowed. The Nakai NBCA has been
the centerpiece of the NT2 Consortium's claim that the dam
and its works would ultimately benefit both the environment
and the people of Laos. Anxious to get the dam, in 2002 the
GoL even allowed the WB to conduct a logging survey, using
LandSat photography, a report that remains the best benchmark
for measuring violations of the logging ban in that area.
According to foreign experts working in the NBCA, the
Vietnamese are logging in its eastern reaches, but thus far
the GoL has largely abided by the agreement.

8. (U) Some practical imperatives also militate to protect at
least the western (watershed) reaches the Nakai NBCA. Nearly
all of the terrain in Laos is extremely vertical, and
denuding it of trees results in immediate and severe erosion.
Some conservationists who might be inclined to scoff at any
suggestion that Lao law really protects any of these areas
nevertheless take heart from the fact that erosion from the
Nakai watershed behind Nam Thuen II would gum up a very
expensive dam. That may or may not happen, but in any case
Nakai is but one of 29 such areas, averaging about 150,000
hectares each. In the remaining 19 monitoring is lax to
non-existent, and in several, logging has been extensive.

Carte Blanche for Vietnam
9. (SBU) Over the past five years the Chinese have been able
to horn into Laos' buyer's market in timber in a big way, but
no one can yet hold a candle the deal the Vietnamese have
enjoyed for decades. The Lao regime was originally the
creature of the Vietnamese, who installed it in 1975. In
exchange for this, the Lao owe a "war debt" of undisclosed
magnitude. Apparently what this means is free, or nearly
free timber for Vietnamese government and many of its wood
products SoEs for as long as it lasts. The voracious
Vietnamese wood products production sector is wholly
de-coupled from any remaining domestic sources of supply
(some 450 production facilities and industry growth of about
70 percent per year since 2000), but it still retains a
home-field advantage in Laos.

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Love of (rhino) sausage and respect for the law: Lao Forest
laws and regulations
10. (U) In theory, the forests in Laos are protected by Prime
Ministerial Decree 164 (1993), along with a Forestry Law
(1996), amended in 1999 and 2002 to prohibit the export of
raw logs in order to foster domestic wood products industries
and value added exports). Specifically, they are protected
from logging, road construction, mining and all other forms
of exploitation, &except in special cases, with special
permission8. There's the rub ) as it turns out just about
all cases of exploitation are in some sense special.

11. (U) Articles 5, 48-54 of the Forestry Law provide for
having the nation's forests contribute to development, and
reserve to the GoL the right to grant concessions or to
otherwise allocate forest lands for exploitation. As is the
case with all natural resources and most land, the GoL is the
steward, holding everything in the name of "The People". In
effect, this leaves no one safe in their holdings (certainly
not those with undocumented, traditional claims, as hill
tribes usually profess). Meanwhile the government exploits
the forests at will. The MOAF authorities nominally in charge
of Lao forests work through its Department of Forestry and
Office of Forest Inventory. In fact though, the real
authority is wielded by the Lao Army, which helps to finance
itself with timber sales, mostly to Vietnamese buyers.

12. (U) In addition to domestic Lao law, some international
agreements purport to affect Laos, forests, chiefly the UN
Convention for Conservation of Biodiversity (ratified by the
GoL in 1996). All this seems to suggest that there is plenty
of forest protection under the law, in agreements, and in
regulations. In reality Vietnamese, Thai, and Chinese timber
interests, as well as exotic species traders, are gutting the
forests, and fast. Despite their supposedly sacrosanct
status, the NBCAs and even the national parks are being
logged. NGOs working in Salawan report that the Phou
Xiengthong NBCA in that province is being clear-cut by
Vietnamese loggers and no longer qualifies as a forest at
all. Other NBCAs in the south-central part of the country
have had logging roads cut right though them, for there is
not enough NBCA staff even to notice and report this, let
alone stop it. The Xe Sap NBCA in Salavan Province, and the
Dong Ampham in Attapeu, reportedly no longer exist. Chinese
logging interests are reported to be active in all four NBCAs
in the northern province of Huaphan, and post has confirmed
that the Chinese are beginning to cut in the Nam Ha NBCA in
Luang Nam Tha. Some domestic saw mills have benefited from
the ban on log exports, but raw logs are still exported
routinely to two of three neighboring importing countries.

The first effort to encourage conservation in Laos
--------------------------------------------- -----
13. (U) During the late 1990s the Finnish Government, in
conjunction with the World Bank and Sweden's SIDA, sponsored
forest inventory studies in Laos and prompted Lao
participation in the Forestry Stewardship Council (FSC),
which issues certifications of responsible forestry policies
to countries seeking western markets for their wood products.
That was a well-intended but unrealistic enterprise. The Lao
have almost no value-added procedures in country, and sell
most of their timber to their neighbors. Lao wood that goes
far a-field (chiefly to Japan) is so sought-after that
importers are most unlikely to rock the boat over
environmental standards. The Lao therefore have little need
for such certificates.

14. (U) Nevertheless, the GoL paid lip service to the
WB/Finnish/Swedish FSC program for several years, and thereby
gathered in a large amount of project-related aid, but they
never enforced the program's inventory and conservation
provisions. The first thing they were meant to do with the
money was to set up Village Forestry Authorities to encourage
and monitor conservation on the ground. In effect, Lao
villagers were to be paid for behaving responsibly toward
their forests (defined as: making forest inventories,
selecting appropriate trees for harvesting, respecting
quotas, and sharing profits fairly among the several levels
of government and local people).

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15. (U) In fact, such grass-roots organizations are not
permitted in Laos, except under the rubric of the Communist
mass movements or trade associations. The FSC plan finally
foundered during 2005, for several reasons. No accurate
forest inventory was ever completed in any part of the
country. Quotas were ignored and protected forests were
clear-cut (even in areas closely monitored by foreign project
personnel, who stood helplessly by as Vietnamese loggers
ignored their protests and eradicated their assigned areas).
Furthermore, the GoL has consistently refused to allow the
villagers their share of either project funds or logging

16. (SBU) An international expert assigned to oversee the FSC
pilot project has told Post that in his view the GoL never
had any intention of complying with any significant aspect of
the program. Finland does not have an Embassy in Laos, and
the Finnish ex-pat staff seldom left Vientiane - preferring
to leave the work of monitoring to NGOs and Lao or hired
third-country "experts". The WB presided benignly, but did
little to ensure that the project was accomplishing anything.
In his view, the GoL's real goal all along was to profit as
much as possible from unregulated logging, to dismantle the
village forests, and to resettle the people in places where
their activities would be more easily kept under the
government's thumb. The fact that the project was well-funded
and poorly managed made this easier and more profitable for
them. The expert related that all through the nearly six
years of the project the GoL continually demanded funding in
larger and larger amounts, but refused to implement anything
that was effective or meaningful.

Donors to the rescue with... more money and another plan
--------------------------------------------- -----------
17. (U) In 2003, with the difficulties in the first FSC plan
increasingly evident, the GoL's forest management policies
were refined and codified in a &Forestry Strategy to the
Year 20208 - a document sponsored and driven by donors. It
called for reforestation in areas already cut, and a
re-planting policy to accompany all future logging. In fact,
the farthest the GoL has ever gotten in reforestation has
been to classify all commercial planting of rubber and
eucalyptus as reforestation - after all, they are trees, and
the forests were clear-cut in part to make room for these
plantations, especially in the far north of the country where
Chinese rubber interests have swarmed into Phongsali and
Luang Nam Tha Provinces. Meanwhile, in the GoL's version of
main deforestation problems in Laos, the chief culprit is
slash-and-burn agriculture by politically suspect minorities
in the uplands. There something to this, as a flight over the
northern provinces shows. Swathes of forest go up in smoke
throughout the dry season as people clear land and plant dry
rice and other hard-scrabble crops. The great and growing
population pressure on these fragile ecologies is an
unintended consequence of donor-run public health campaigns
to reduce infant mortality, but the real culprit is the GoL,
particularly the army, as the real depredations country-wide
result from rapacious logging, not from farming.

Befuddling ourselves systematically
18. (U) In the "Year 2020" document Lao forests are listed in
a complex taxonomy, based on the GoL's eight-fold
classification of land according to use: agricultural,
forest, construction, industrial, communication-dedicated,
cultural heritage dedicated, national defense, and
water/wetlands. At first glance only the &forest8 category
would seem to apply, but forests can be classified (and used)
as any of the other seven kinds of land. In practice then,
this is one of many ways that forests can wind up being cut
down under cover of a legal fig-leaf, by simply designating
them as "national defense" or "industrial".

19. (U) Superimposed upon the "Forest" category are five
cross-cutting classifications: 1. Production Forests are
available for logging and the use of forest-dwelling
ethnicities (supposedly), so long as there are &no negative
environmental impacts8 and the harvesting is sustainable. 2.
Conservation Forests (the National Bio-diversity Conservation

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Areas or NBCAs), in which the original environment and
ecology is meant to be strictly conserved. 3. Protection
forests, in which watersheds and soil erosion problems are to
be addressed by keeping the forest cover intact (also
includes forests deemed to be of importance to national
security). 4. Regeneration Forests, young (replanted or
naturally occurring) forests, mostly in areas in which the
primary tree cover has already been logged out. 5. Degraded
Forests, which are damaged or destroyed and available for
cultivation, livestock grazing, or other industrial uses.

20. (U) Most of the forest land in Laos falls into the first
and the last two categories, but all the categories can
overlap considerably. More to the point though, the whole
classification scheme is essentially fictional in that it
reflects the desires of donors rather than the practices of
the Lao Government. There is not enough rule of law in Laos
to enforce conservation regulations even if there were any
intention of doing so. The system, when it is used at all, is
manipulated, mostly by loggers and local authorities but also
by MOAF. The most common ploy: Although intended as a
classification of lands to be restored to forest cover, in
practice "Degraded Forests" constitute a catch-all into which
any area the Lao Army or other timber interests wish to cut
can be placed, sometimes with the justification that some
logging has already taken place, so might as well cut down
the lot. The GoL, in general, prefers to have as much forest
as possible classified as "degraded", as that makes it a
simple matter to cut it down and convert the land to rubber

Logging practices
21. (U) While logging in Laos is just about always done
rapaciously, with no thought to conservation or
reforestation, there are some national differences in
methods. Thai timber buyers recently told Emboff that the
Chinese competition has become so intense that they now find
in necessary to travel into Laos, whereas before they could
simply place orders by phone or through an intermediary.
Chinese timber buyers have indeed flooded northern Laos, and
probably undergo few formalities as they extract timber.

22. (SBU) In theory, MOAF approvals are needed for all
exports, and in practice these can be had for a
consideration. Along the major road arteries, at least, the
GoL's writ runs. Post has had first-hand experience of how
large bribes move from buyers (mostly Japanese) to the top
ranks of the MOAF to ensure smooth exports of logs through
Vietnam, where they are picked up by Japanese ships at Da
Nang Port. International buyers enter Laos and do their own
deals with Provincial governors, thereby cutting the central
GoL out almost completely, and guaranteeing that the revenues
never reach the national treasury - though the Army
reportedly always gets its cut.

23. (U) According to NGOs working in these areas, Vietnamese
logging methods are the most wasteful, as more than 60
percent of what is cut is left to rot on the ground. Grades
of logs are not assigned, and the companies apparently do not
brief their cutting teams very closely on what constitutes
the most valuable stock. The supply is simply treated as
inexhaustible, so there is no incentive for companies to
reduce in-forest waste. The most straightforward deal is for
the Lao military to cut the timber and deposit it in
track-side clearings on the west slope of the Anamite
Mountains, to be picked up by (mechanically superior)
Vietnamese trucks. The most valuable species, such as
Rosewood, are hunted out by Vietnamese loggers in old
American flying crane helicopters captured from the South
Vietnamese at the end of the Indochina war. These huge trees,
often worth as much as 20 to 30 thousand dollars apiece in
destination countries, are cut by teams dropped from the
helicopters, then plucked out and flown away to Vietnam.

24: (SBU) Comment: In Laos, several expensive World Bank and
Asian Development Bank programs mounted over the past decade
to promote conservation have turned out to be wasted money
and time. Deforestation in Laos follows the same sorry
pattern as other parameters of political, economic and social

VIENTIANE 00000674 006.2 OF 006

stagnation. The three thriving economies around Laos use the
country as a quarry, and the GoL hasn't the means, the will,
or the intention of stopping them, though they are adept at
presenting themselves to donors as deserving of more
assistance to accomplish it. The root reason is simple. The
money that timber brings in is in large part used to support
the military. End comment.

© Scoop Media

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