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Clashes cast cloud over Tibet investment outlook

March 25, 2008

Cameron Dueck and Chen Jingsi
21.03.2008
SOUTH CHINA MORNING POST

Recent clashes between the authorities and pro-independence protesters
in Tibet have cast a chill over the region's tourism industry and
budding economy, but it is too early to tell whether companies will
shelve their longer-term investment plans.

Much of the new investment in Tibet is led by ethnic Chinese
entrepreneurs and tourists who may receive a cooler welcome in the future.

"This environment of tension will discourage enterprises from moving in
to invest," said Lobsang Sangay, a senior fellow at Harvard Law School
specialising in Tibetan affairs. "Unfortunately, the well-intentioned
may be more sensitive to the issue than those who are just profit mongers."

One of the most immediate effects of the riots has been a freeze on
Tibet's tourism industry, which contributed more than 14 per cent to the
region's gross domestic product last year. At 4.8 billion yuan (HK$5.29
billion), income from tourism was 73 per cent higher last year than in
2006, according to government figures.

Tour operators said they had been told by authorities not to apply for
licences as the central government attempted to shield the protests from
international scrutiny, leaving their businesses in limbo.

The Tourism Administration of Tibet confirmed that permit issuance was
not likely to resume until May at the earliest.

"We're waiting for news from the Tibet Tourism Bureau," said a sales
representative at Access Tibet Tour.

The opening of the Qinghai-Tibet railway in 2006 brought a flood of
domestic visitors. The Tibet Tourism Bureau reported that four million
tourists travelled to Tibet last year, up 60 per cent from 2006.

While most of those arriving by train are mainlanders, foreign arrivals
are expected to increase this summer as tourists plan excursions around
their Beijing Olympics visits.

Some tourists have cancelled their travel plans.

"Almost half of the bookings for April and May have been cancelled,"
said a sales officer at Pan-Tibet Travel, who said her employer had
instructed staff not to speak to reporters for fear that the publicity
might scare away customers.

However, a sales representative at Tang Dynasty Travel said no
cancellations had been received for the peak season of July and August,
for which it is almost fully booked.

Luxury hotel and tourism services have been rushing to set up operations
to serve the wealthier tourists stepping off the Qinghai-Tibet train.
What remains to be seen is whether companies fear enough the public
backlash of expanding into Tibet to reconsider those plans.

"Invest if it benefits the Tibetan people, as long as your business
activity doesn't just legitimise Chinese rule," Dr Sangay said.

One company with resort plans under way is Singapore-based Banyan Tree
Holdings.

"Banyan Tree Group is monitoring the situation as we have expansion
plans in China," said spokeswoman Valerie Loo. "Our resorts in Yunnan,
Banyan Tree Lijiang and Banyan Tree Ringha, which are close to Tibet,
are operating as usual."

Shanghai investment firm TZG Partners is investing US$100 million to
create Tangula Luxury Trains, a high-end rail service to Tibet. The cars
are being built and the company began taking reservations this month for
a service launch in September. A sales officer said they had not
received any cancellations.

Not just tourism operators are investing in Tibet. Li Zhexiao, manager
of the Tibet Securities office in Na Qu prefecture, said business was
affected by the stock market slump as well as the political unrest.
"Almost no one comes to our office to open an account these days," he said.

Tibet-related A shares have fallen heavily since news of the riots broke
on the mainland. Shares in tourism company Tibet Shendi are down 13 per
cent since the riots began, while technology company Tibet Galaxy lost
10 per cent and trading firm Tibet Tianlu fell 17 per cent, compared
with a 4 per cent fall on the Shanghai Composite Index in the same period.

"It will affect business in Tibet for just a while," said Zhang Baotong,
director of the regional development consultancy centre at the Shaanxi
Academy of Social Sciences. He said the recent protests were fuelled
more by internal factors than international influences. "I think
investors are too sensitive, but I understand them."

Danish brewer Carlsberg owns a 50 per cent stake in Lhasa Brewery.

"As some roads in Lhasa were blocked we could not distribute products as
usual. Production is still running but at a reduced scale," said
Carlsberg spokeswoman Berky Kong.

Tibet is also rich in untapped mineral deposits.

Canada's Continental Minerals Corp is developing the Xiangcun copper and
gold project west of Lhasa, with a predicted total investment of US$450
million.

Additional reporting by Agence France-Presse


Caption: Violent clashes between the authorities and protesters in Tibet
have put the freeze on tourism.
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