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TIN News Update / 5 November, 1996 / total no of pages: 3 ISSN 1355-3313

The industrial and power sectors in the Tibet Autonomous Region are set to double in size over the next five years as part of plans for rapid industrialisation of the region, according to announcements by the local authorities. The rate set for the increase in power supply in Tibet is nearly six times greater than the rate set for China's energy sector in the same period.

The target, which calls for an increase in electrical output of 223% by the year 2000, was announced last June but was not widely noticed because of translation errors in official press statements. Internal publications now obtained by TIN from Lhasa give details of long-term plans for the region and reveal that the expansion of power supply is set to continue at a similar rate for 25 years.

The long-term plans, which have not been published, show that the electricity supply will be increased to 23 times its present size by the year 2020, and that secondary industry in Tibet will expand to 14 times its current size over the same period.

Annual output of electricity is scheduled to increase from the 520 million kilowatt hours (kwh) produced last year to 12 billion kwh in 2020, according to the documents. The target dwarfs plans by Beijing, themselves considered ambitious, to expand power supply in China sixfold over the same period.

The attempt to double electricity output in the next five years will require an annual growth in power generation of 17% in an area where the average increase in electricity production over the last 10 years has been 7%. Even in China as a whole electrical production has grown by an average of 9.5%. in the last decade.

INDUSTRY TO GROW BY 1,400% IN 25 YEARS -

The increase in power supply in Tibet is at the heart of a strategy which aims within the next five years to make secondary industry in Tibet grow by 15.5% per year, so that its annual output will jump from producing around 660 mln yuan in value last year to 1,340 bln yuan in the year 2000. The sector is due to continue to expand rapidly so that it will produce 9.5 bln yuan by the year 2020, according to the documents.

Secondary industry, which includes mining, processing and manufacturing, at present contributes only 15% of Tibet's annual domestic product and has remained static in size for decades. Within five years the secondary sector is expected to consume half of all available energy in the Tibet region, and 73% of all energy ten years later.

The documents seen by TIN were written last year by the "Drafting Committee of the TAR Territory Plan" in conjunction with the TAR Planned Economy Committee. The documents give the first known details of the rapid industrialisation ordered by the Third Forum on Tibet, a high-level policy session convened by China's State Council in Beijing in July 1994 which called for immediate modernisation, arguing that it would reduce political as well as economic problems in the region, which is seen as being over-reliant on farming and herding.

"The proportion of secondary industry in Tibet's GNP will be increased in the future so that the abnormal industrial structure will be changed," the Third Forum decided, according to the People's Daily, China's main paper, at the time. The newspaper identified minerals, forests and animal products as "the three major resources [which] will be developed, utilised and processed so as to become pillar industries in Tibet" and reported that Tibet would aim at a steady 10% annual growth in its economy.

The documents show that the real target for long-term growth of the whole economy is closer to 7.5% per year, which means that total economy in Tibet will grow to six times its current size in the 25 years. But at the same time the output of secondary industry will increase more than 14 times, while the output from the primary sector will increase less than three times, bringing its share of Tibet's domestic product down from 45% at present to 20% in the year 2020.

The tertiary sector, which includes tourism, shops and services and which at present contributes a third of Tibet's GDP, is planned to increase sevenfold in the same 25 year period, so that it will come to dominate the economy and provide half of the region's annual GDP.

ELECTRICAL CAPACITY TO INCREASE BY 230% IN 5 YEARS -

Although the amount of electricity produced in Tibet last year represented an increase of 49% since 1990, the region is producing an annual average of 217 kwh for each person in the population - less than a third of the electricity produced per person in China, a ninth of the world average, and about one fiftieth of the amount produced per person in the United States. The shortfall in energy supply is made up by burning wood or animal dung and by transporting around 130,000 tons of oil a year into the region.

Distribution of electricity in Tibet is uneven, with under 4% reaching rural areas, where 80% of the population live. The bulk of electricity goes to Lhasa, but even there supply is sometimes 40% short of demand, according to the documents.

The Third Forum called for the power of electrical generators in Tibet - known as their installed capacity - to be increased from the present 193 megawatts to 450 megawatts by the end of the decade, an increase of 233% - ten times the increase achieved in the last five years. The growth in power generation is planned to continue at a similar rate well into the next century to reach 2,580 megawatts by the year 2020.

The Tibet plans are dependent on the success of current attempts to relaunch the Yamdrok Tso hydro-project, 100 km south-west of Lhasa which at completion should have 90 megawatts of installed capacity providing 200 million kwh of output per year - a third of the planned increase for the region. But the Yamdrok project is already years behind schedule after a major tunnel collapsed last year. The project site was visited by the regional governor in September and is still included in the latest plans, but its name was omitted from a recent Chinese press statement about power projects in the region and the cost of bringing it into operation is believed to have tripled.

Tibet has exploitable hydro-electric resources with a capacity of 60,000 megawatts, but electrical construction in much of the area is prohibitively expensive, and many of the rivers involved flow into other countries, making full exploitation politically complex. Details of how the Third Forum targets will be achieved remain unclear.

15% of the new electricity needs in the current Ninth Five Year plan will be met by 17 power stations already being constructed or extended as part of the 62 development projects launched by the Third Forum in 1994. The 17 power projects are minute by Chinese standards, adding only 39 megawatts in electrical capacity, and will cost 1.2bn yuan (US$144.6 mln). This means that each kilowatt of installed capacity in Tibet is costing $3,700 per kw.

The money for those 17 projects was raised from central funds in Beijing or from rich coastal Chinese provinces - Fujian province, for example, is paying 40 mln yuan ($4.8 mln) to build a 1.6 megawatt power station at Menling in Kongpo - a cost of $3,000 per kw - and Hainan Province is spending 24 mln yuan ($2.9 mln) to build a 1.2 megawatt station at Tengchen in Chamdo, representing a cost of $2,400 per kw. Liaoning province is paying 46.7 mln yuan ($5.6 mln) to construct a 0.96 megawatt station at Nyenrong in Nagchu, equivalent to $5,860 per kw, nearly twice the average rate for small hydro-power stations.

Since the tunnel collapse at Yamdrok, which has not been officially acknowledged, the Chinese press has been avoiding mention of Yamdrok and has been concentrating on efforts to construct a power station at Drigung, 100 km north-east of Lhasa, but has not been seen to give any indications of its capacity or cost.

FOREIGN FUNDING FOR POWER PROJECTS -

The Chinese authorities are increasing funding of Tibetan development by making municipal and provincial governments in inland China responsible for funding and manning projects in Tibet. So far 14 inland Chinese provinces and cities "have established links with seven localities in Tibet, offering aid and assistance to them on a regular basis", Xinhua announced last August, and others are expecting to join them as Tibet emerges as a safe investment proposition in Chinese eyes.

China now appears to be looking to other Asian countries to fund the expansion of Tibetan infrastructure and is offering substantial incentives, according to indications from the Lhasa Economic and Trade Fair, held in the Tibetan capital last August.

Two of the 39 projects offered to delegates at the fair, which only covered Lhasa prefecture, were power stations - the conversion of the "Qiaga" power station in Meldrogongkar, expected to cost $700,000, and construction of the "Xiajiao" project in Taktse, listed at $8.4 mln, and the second most expensive project on offer.

Although some details of the Lhasa Trade Fair were publicised in English before the meeting, no mention of the event has since been seen in the official media. Delegates at the same Fair last year reported that almost all the delegates were Chinese or Tibetan businessmen from inland China or overseas, and that documents were not offered in English, suggesting that the organisers did not expect to attract western investors.

This year the authorities again appeared to be concentrating on Chinese and overseas Chinese investors, but on the first day of the fair it was announced that groups from Japan and South Korea were visiting the region, suggesting that Asian countries are being targetted as potential funders for development in Tibet and particularly for infrastructure.

The South Korean visit was presented as a cultural event, but the official press reported that Tibet's regional governor had told the Japanese delegation that Tibet's new development plans would lead to a restructuring of the economy and would strengthen the grounds for "cooperation" between Tibet and Japan.

"There is great potential for the development of relations between Tibet and Japan in various fields, especially when Japanese friends gain a better understanding of the advantages of Tibet's resources, and also the preferential policies set by the central government," Gyaltsen Norbu told the delegation from the Japan-China Friendship Association, according to a Xinhua report on 12th August.

The Japan-Tibet talks appear to have focussed on persuading the Japanese government to invest in infrastructure development and electrical supply in Tibet. The head of the Japanese team was said by the Chinese side to have "expressed his hope that Japanese governmental funds would be invested in such areas as Tibet's infrastructure, electric power and cultural relics preservation," according to Xinhua. Japan is already involved in funding oil and gas surveys and extraction in Xinjiang.

In recent years Beijing has succeeded in attracting substantial foreign funding for energy projects in China, and by the end of 1994 there were 64 large and middle sized power projects (over 250 megawatts each) in which foreign funding, totalling about $14.5 billion, had been used, according to the Financial Times in September last year.

The amounts sought from investors at the Lhasa Trade Fair were very small by comparison - a total of $65 mln at an average of $1.7 mln per project, according to a list published in the official paper "China Daily" on 28th July - but the type of investment opportunities on offer reflected China's keenness to get heavy industry going in Tibet once the power supply is in place.

Besides the two hydro-electric plants, investors were presented with 37 projects of which 28 were secondary sector industries. Most of these involved basic and intermediate manufacturing, including six chemical processing enterprises and four cement plants. Two of the most expensive projects involved mining - exploiting an unspecified "metal ore" in "Jiamaduo" and extracting copper at "Tianggon" in return for an investment of $7.23 million each. The two mines were among 15 projects which were available for whole rather than partial ownership by a foreign investor.

The delegates were offered seven food processing enterprises, including a fish farm in Chushul and a fishmeal processing plant in Damshung, although Tibetans rarely eat fish. Light manufacturing industries on offer included factories making carpets, clothes, woollen items, horn combs and incense sticks. Only four projects were offered from the tertiary sector - three large retail complexes and a $700,000 tourism project to develop the "Namtso Lake tour attractions of Damshung County". Investors who set up large or medium sized projects in energy, communications or farming in Tibet are given the most benefits by the state, and are exempt from income tax for the first six years, and pay only 5% income tax in the next four years.