Published by: World Tibet Network News, Sunday, October 6, 1996

By Jane Macartney

LHASA, China, Oct 6 (Reuter) - Are you a businessman looking for generous tax breaks, lengthy tax holidays, easy loans, clean air and spectacular scenery?

Then Tibet may be your answer -- that is if you don't mind the high transport costs, frequent power outages and temperamental telephone lines.

Beijing has given unparalleled privileges to try to attract foreign investors to this remote, rugged, restive and poverty-stricken region.

Those policies are starting to pay off, albeit slowly, officials said.

"This year circumstances are rather improved as a result of our new policies to foreign investors," Wang Yaju, vice-director of the Department of Foreign Trade and Economic Cooperation (DOFTEC) of the Tibet Autonomous Region, said in an interview.

He said Tibet officials approved and oversaw the establishment of 61 joint ventures between 1988 and 1995. The new, preferential policies unveiled last year had already paid off with 14 new foreign investment projects approved in the first eight months of this year, he added.

Wang said he was optimistic that a planned $48 million Summit Kymco Motor Co, a 50:50 venture between Taiwan's Kwang Yang Motors and Tibet's Summit Motor to produce motorcycle engines in neighbouring Sichuan province, would be successful. The plant would be registered in Tibet, pay taxes to that region and enjoy its tax breaks.

Most in Tibet's tiny community of foreign investors seemed attracted both by the tax holidays and the scenic beauty. For example, John McKay, from Santa Cruz, California, set up the Tibet Plateau Cashmere Co with a U.S. company and a private Tibetan partner. The three-way partnership will process Tibetan cashmere with the ultimate goal of producing finished knitwear.

The joint venture is exempt from income tax for the first five years after it makes a profit, and then pays only half the national rate of tax for the following five years.

Wading through the Chinese bureaucracy for the necessary permits was a frustrating and time-consuming process, McKay said, echoing the experiences of other investors in the region as well as throughout much of China.

Red tape appeared to be less entangling than in other regions, however.

Investors said they had considered the risks from possible anti-Chinese riots, but believed the profits outweighed potential losses.

"I don't think this (unrest) is very likely," said McKay.

"There's enough control here that it would cut off anything before it got started," said another businessman who declined to be identified. "Tibetans are resigned to it and accept the way things are."

Kesang Rigdol, a Nepali Tibetan who set up his Tibet Snowland Restaurant in the centre of the city last year, did not dodge the difficulties of setting up business in a land supposed to be the fabled Shangri-La.

Rigdol owns 63 percent and invested $40,000 in the restaurant, which many say is the best eatery in Lhasa, while his Tibetan partner holds 37 percent and provided the site.

"Everything we were able to do was because of the policy on joint ventures," he said.

Despite the long, bitter winter that keeps away most of the tourists who are his main customers, Rigdol is already considering setting up a second joint venture, a dairy farm.

"We can't get good quality milk and cream here," he said, adding that skilled labour was a serious problem.

Rigdol employs Nepali cooks and had hoped to teach Tibetans the skills of cuisine. "But Tibetans don't seem to want to learn; they are not interested at all."

Foreign trade officials said they welcomed such small ventures, but were also eager to lure bigger investments, while recognising that the lack of a railroad, power shortages and limited flights hampered their bargaining power.

As part of a move to publicise opportunities in the vast, resource-rich but inaccessible region and escape their communications difficulties, DOFTEC is preparing to launch a site on the Internet, the worldwide computer network.

Wang said investors in power plant, mineral resources and infrastructure were more than welcome.

Officials of the Tibet Department of Geology and Minerals said they were hoping the regional government would soon issue special regulations covering foreign investment in the region's underground resources.

Tibet wanted foreign firms to join forces in exploration for mineral resources, particularly copper, chromite, antimony and borax, said department vice-director Wang Baosheng.

"This could lead to good opportunities for them to take part in exploitation of these resources," he said. "This place has great potential, if you invest here you will have very good returns."

But in this field too, Tibet's awesome distances and lack of power are handicaps.

Tibet Plateau Cashmere's McKay declined to speculate on how long it would take before he could turn a profit, but said he was optimistic that a combination of quality raw materials with imported technology, easy repatriation of profits and duty-free machinery imports were a winning formula.

Rigdol warned that misunderstandings between foreigners and Tibetans were a major pitfall.

"People expectations of each other are too high," he said. "The important thing for a foreigner is to find a good joint-venture partner and to learn the habits and way of life of the Tibetans."