Published by: World Tibet Network News, Wednesday, October 9, 1996

By Jane Macartney

LHASA, China, Oct 9 (Reuter) - For 36 years Tibet's biggest leather factory gushed pollution into one of the world's cleanest rivers and haemorrhaged losses.

But help was at hand when Tibet's scenic beauty and devout Buddhist people enchanted visiting German Chancellor Helmut Kohl in 1988.

German aid has since poured in, along with German technicians, transforming the plant into a rare model of environmental awareness on the roof of the world. It has also made its first net profit.

Manager Li Jishan glowed with pride as he described the modernisation wrought at his plant over the last few years.

"When I first came here in 1961 things were really backward. We lived in tents. Can you imagine?" he said in an interview with Reuters.

The leather factory was moved to Lhasa in 1959 from Golmud in neighbouring Qinghai province to provide footleather for thousands of soldiers sent to garrison Tibet after an abortive uprising by Tibetans seeking independence in 1958.

As a state-owned firm that processes yak skins into shoes and handbags it had little incentive to turn a profit. That is slowly changing.

Last year, the China-Germany Joint Venture Lhasa Leather Factory of Tibet reported a profit of 200,000 yuan ($24,000) -- a modest sum but the first in its history.

"We have a good future, our efficiency is good...and with German assistance we are placing great emphasis on environmental protection," said Li, adding that he expected another profit this year.

"The German side is very strict, especially on environmental protection," he noted. "But we get along with them very well."

One problem identified by the German side is one common to most of China's state-owned firms -- the huge surplus labour that is the legacy of jobs-for-life socialism.

"We have had arguments with the German experts who want to fire someone, for example," said Li. "But they have come to understand our point of view and our system."

However, German officials still warn that keeping on a couple of hundred extra staff is bound to affect profits.

German officials said the plant had been an environmental disaster when they arrived, with its tannery spouting stinking waste into the nearby rushing Tolungchu river.

"It was in really bad shape with terrible environmental problems," said Niels von Keyserlingk, director of the office of the German Development Corporation in Beijing that oversees aid to the plant.

"Before, the water was untreated and flowed into the river causing many problems," he said. "But things have been very nicely done. There is no pollution."

All chemicals are recycled now and a German-manufactured system cleans the water, separating waste that is dried for use by local farmers as fertiliser.

"The water that flows into the river is absolutely clean," said von Keyserlingk, who visited the plant last May.

A cement factory on the opposite bank belching dust into the clear mountain area could pose a new environmental hazard.

Germany has given 15 million deutschemarks ($9.8 million) in aid to the plant, which has been allowed to register as a joint venture and thus qualifies for the generous tax breaks and holidays that Tibet offers to foreign investors.

German money has helped to buy the latest in leather processing machinery as well as sewing machines, waste elimination plants and even new solar energy panels that are heating water for the factory.

Sales have soared. The factory held an eight percent share of the Tibet shoe market for years, but in 1994 that jumped to 20 percent and nearly doubled again in 1995 to a 36 percent market share.

"Our products are really popular because they are all leather, and people want that kind of quality," Li said.

The factory is trying to boost sales to the rest of China as well as overseas exports, particularly to neighbouring Nepal.

But it faces awesome transport handicaps in shipping goods from a city that has no rail links and must send merchandise more than 1,000 km (600 miles) over some of China's most difficult roads to the nearest railway station.

"We still need to raise quality and produce more different styles of shoes to compete in the market," said Li, who has clearly picked up some tips from his German market-savvy experts.

"Either you learn to swim in the market or you drown."