A Study on Tibet’s utlisation of Foreign Direct Investment (西藏自治区利用外商直接投资,) published in Shenzhen’s China Development Institute (综合开发研究院，中国深圳) ‘China Opening Journal’ 《开放导报》 April, 2013.
The authors highlight the low FDI inflows into the Tibetan Autonomous Region, and low utilisation of FDI in Tibet, even in comparison to other provinces in West China.
Part II highlights the Tibetan industries which can benefit from FDI, and the steps Tibet can take to attract more FDI, develop the economy, whilst preserving the local culture and ecosystem.
A Study on Tibet’s Utilisation of Foreign Direct Investment
3. Further analysis on expanding FDI utilisation
Along with the quick growth in the Tibetan Autonomous Region’s economy and opening up internationally, Tibet has huge potential to expand its use of foreign investment.
i.) Rapid development in Tibet’s socialist economy
Tibet has experienced 60 years of rapid economic growth, from 1959 to 2010 Tibet’s total output increased from CNY 174 million to CNY 50.75 billion, which when calculated at comparable prices, is an average annual increase of 9.1%; Whilst per capita output increased from CNY 142 to CNY 10,700. During this period, Tibet’s modern industry started from scratch, growing into a rich industrial system with Tibetan characteristics. Tibet also experienced a rapid rise in modern industries such as commerce, tourism, post and telecommunications, food and beverages, cultural entertainment, and the IT industry. Tibet’s quick growth has helped attract foreign capital in establishing production and market bases.
ii.) Established basic transport and communication networks
Presently Tibet already has a basic integrated air, rail and road transport system. Tibet’s 7 cities have 21 routes operated by 5 airlines, including links from Lhasa to Beijing, Chengdu, Guangzhou, Hong Kong, and Nepal. The completion of the Qinghai-Tibet line was the first railway line to the Tibetan Autonomous Region, and solved the historic transport bottleneck which had restricted Tibet’s development. 5 national highways connect with Lhasa on all sides, including the Qinghai-Tibet, Sichuan-Tibet and Mid-Nepal Highways. All of the Autonomous Region’s towns and over 80% of administrative villages are connected by public roads, comprising a total road network system of 58,000 km. Tibet has completed the following major communication connections: 2004 “county to county optical cable, town to town telephone”; 2007 “town to town fax”; 2010 “village to village telephone”; and June 2011 “town to town broadband”. Convenient transportation and communications networks have helped raise transportation and logistics efficiency, creating ideal conditions for foreign enterprise development and goods transportation to the rest of China and international markets.
iii.) Outstanding local industries attractive to foreign investors
With the country’s strong support, Tibet is in the process of forming six pillar industries, including tourism, Tibetan medicine, plateau biology and organic food and drinks. These industries are being urgently transformed into Tibet’s mainstay industries, containing numerous business opportunities, and relatively strong in attracting foreign investment.
a.) Tourism industry: Tibet possesses distinct places of cultural interest and is richly endowed in plateau nature and scenery, so the tourism industry has enormous potential. However Tibet still requires more capital investment in areas such as tourism and culture, exploitation of natural resources, development of scenic areas and construction of supporting facilities. Therefore foreign investment can accomplish much in this field.
b.) Tibetan medicine industry: Tibetan medicine has by means of a complete system of medical theory, natural abundance in medicine materials, and safe and effective recipes, established an important position in the world’s traditional medicine. In recent years the Tibetan medicine industry has experienced significant development, and is gradually becoming an important driver for economic growth.
c.) Unique plateau bio-industry and organic foods: Tibet is abundant in wild flora and fauna, thus can turn this resource advantage into an economic advantage. Tibet has large reserves of drinkable water rich in trace elements, so can vigorously develop mineral water, beer and health foods. Thus Tibet’s bio-industry and organic foods have huge development potential.
d.) Agricultural and livestock industry and ethnic handicrafts industry: Tibet has unique agriculture and livestock, such as plateau barley, Tibetan sheep, goat and Yaks, all of which have fine development prospects. Also strong are Tibetan ethnic handicrafts such as rugs, Thangka, Tibetan joss sticks and aprons, all of which have wide market potential.
e.) Mining: Tibet is rich in mineral resources, including known reserves of 18 minerals which rank in the nation’s top 10 of known reserves, 12 of these minerals whose known reserves rank in the nation’s top 5 known reserves, and known reserves of chromium and copper which rank first nationally. Mining is already the most important industry in Tibet. Thus it’s worth actively striving for and guiding domestic and foreign capital investment into developing the Tibetan mining industry and its environmental protection.
f.) Construction materials industry: The construction materials industry has a strong place in Tibet’s economy. During the 11th Five Year plan period, Tibet’s construction materials industry maintained an average 20% annual growth rate, spurring on expansion in the building materials and related industries. Going forward, along with the accelerating construction in all areas of Tibet’s economy, Tibet’s construction materials industry will inevitably enjoy great development. Therefore introducing foreign investment into this area could mean tremendous returns for the local economy and foreign firms alike.
iv.) Unrivalled connections with South Asia
Tibet, which has 4,000 km of border and 312 routes with five countries and one region of South Asia, has become an important land connection bridging East and South Asia. Following the completion of the Qinghai-Tibet railway, the East-South Asia passage has become one of the most quick and economical trade routes. It’s foreseeable that in the not too distant future, Tibet will become the main distribution and trading centre between China and India, East and South Asia. Along with the increase in trade between China and South Asian countries, both sides must gradually increase economic dealings such as reciprocal investment. There are now increasing numbers of Nepalese traders arriving in Tibet, along with the first wave of investment from India. Thus in bordering these other countries, there is much potential for Tibet to attract foreign investment.
4. Countermeasures and suggestions to strengthen FDI utilisation
FDI has a positive effect through promoting Tibetan economic development, increasing levels of technology, and working with the local economy, so strengthening attraction and use of foreign investment is one of Tibet’s most important channels for economic development.
i.) Strengthen promotion aimed at foreign enterprises, and actively participate in China-foreign business events.
Presently Tibet has an insufficient level of promotion aimed at foreign investors, and business communications with other countries and regions needs improving. Tibet can take part in China-foreign exhibitions, hold trade conferences, product promotions, celebrations and festivals and similar activities, and promote exclusive policies for attracting foreign capital and favourable conditions for investment. Furthermore, promote Tibet’s abundant natural resources and huge development potential; broaden contacts with industrial and commercial figures from all over the world; facilitate interactive trade relations between Tibet and other regions; market Tibet’s famous and new special products along with Tibet’s splendid arts and culture, and magnificent nature and scenery, allowing the world to further understand Tibet, thereby attracting more and more investors to invest in Tibet.
ii.) Promote coordinated development between foreign investment and the Tibetan economy and resources
In light of Tibet’s current economic growth fundamentals, features and natural resources, Tibet is actively adopting the economic development strategy of boosting primary industry by accelerating the modernisation of agriculture, developing key areas in the secondary industry by strengthening industrial development and vigorous expansion of the tertiary industry by upgrading the service industry structure. Therefore Tibet should actively utilise foreign investment in the primary industry, in order to introduce advanced biotechnology, and seed, rearing and breeding technologies. With regards the secondary industry, Tibet should guide foreign investment into the energy industry, farm animal products processing, plateau biology and organic food and drinks, whilst in key areas develop the mining industry, transform the building materials industry, speed up the industrialisation of Tibetan medicine, encourage growth in the ethnic handicraft industry, and increase overall industrial strength. For the tertiary industry, Tibet should utilise foreign investment for developing tourism, deepening development of cultural attractions, eco-tourism etc., transform tourist products, and at the same time attract foreign logistics companies to develop a modern logistics industry.
iii.) Promote foreign investment with coordinated development of Tibet’s ecosystem
Given the fragile ecosystem, Tibet should follow a path of sustainable development, and with respect to the utilisation of foreign investment, pay close attention to the ecosystem and resource consumption, by implementing good environmental protection policy with strong veto powers. Tibet should also encourage foreign investment to popularise the use of clean energy, and use to the fullest extent new energy and renewable energy, such as leveraging suitable plateau surroundings for solar energy, wind power, geothermal energy, and other such new products and technology. Strictly control expansion of high energy consumption enterprises, encourage foreign companies to spread the use of energy conserving and environmental protection industrial practices, new technologies, new facilities and new materials. Introduce the latest foreign technology and increase the integrated utilisation rate of ferrous and nonferrous metals with associated mineral resources. Moreover, guiding foreign investment to develop the environmental protection industry, and eliminating economic activities that have harmful effects on resources and ecosystems, to guarantee an economic system that sustains ecology, and promote foreign investment in harmony with Tibet’s ecosystem.
iv.) Use development zones (and industrial parks) as a vehicle for attracting foreign investment.
Looking at foreign enterprise locations throughout the country, in every region they are frequently concentrated in development zones (industrial parks). In 2010, the country’s 90 economic and technological zones actual share of the total country’s use of foreign investment was 28.9%. Although Tibet’s development zones (industrial parks) are still in their early stages of development, they possess excellent environment, policies and locations, which will inevitably become areas for foreign investment congregation. Therefore Tibet should use development zones and technology parks in this manner, actively promote their construction, firmly grasp opportunities, loosen investment restrictions and reduce investment thresholds, optimise organisation, and take the initiative and drive forward on all levels. All in order to attract more foreign investment to Tibet, turning one location (a development zone or industrial park) into an entire area, thus enhancing Tibet’s industrialisation, and forming a complete supply chain.
v.) Continue improvements in infrastructure
Even though Tibet has already made great strides in basic infrastructure, there still exists room for improvement. For example the region presently has no major expressways, and road network density is only equal to 1/10th of the national average. Owing to Tibet’s unique geology and climate, roads are vulnerable to natural disasters, which poses a hindrance to Tibet’s economic development and attracting foreign investment. Therefore Tibet still needs to improve its basic infrastructure. In other words, to quickly construct along the Qinghai-Tibet railway and the “One river three rivers” transport hub, strengthen such transport and communications connections, promote construction of an economic zone within a radius of 4 hours from Lhasa to Shigatse, Lhokha, Nagchu, Nyingchi, making transportation and communications more smoother within the region. However quicker transport connections with the rest of the country are still needed, as are trade routes to South Asia, in order to create ideal conditions for Tibet’s economic development and to attract foreign investment.
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