VZCZCXRO2894
RR RUEHCHI RUEHDT RUEHHM
DE RUEHVN #0674/01 2000656
ZNR UUUUU ZZH
R 190656Z JUL 06
FM AMEMBASSY VIENTIANE
TO RUEHC/SECSTATE WASHDC 0143
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBJ/AMEMBASSY BEIJING 1996
RUEHKO/AMEMBASSY TOKYO 1069
RUEHCHI/AMCONSUL CHIANG MAI 0447
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC

UNCLAS SECTION 01 OF 06 VIENTIANE 000674 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR OES, EB, AND EAP/MLA 
MANILA FOR USED/ADB 
DEPT PASS TO WORLD BANK USED 
 
E.O. 12958: N/A 
TAGS: ENIV ETRD PGOV LA
SUBJECT: TAKE ALL THE TREES, PUT 'EM IN TREE MUSEUM: 
DEFORESTATION IN LAOS 
 
VIENTIANE 00000674  001.2 OF 006 
 
 
¶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 
 
VIENTIANE 00000674  002.2 OF 006 
 
 
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 
controls. 
 
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. 
 
Showboat 
-------- 
¶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. 
 
 
VIENTIANE 00000674  003.2 OF 006 
 
 
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). 
 
VIENTIANE 00000674  004.2 OF 006 
 
 
 
¶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 
profits. 
 
¶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 
 
VIENTIANE 00000674  005.2 OF 006 
 
 
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 
plantation. 
 
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. 
HASLACH