Foreign Business in Tibet? Investor Beware

TAIPEI (TheStreet) -- Foreign trade in Tibet grew more than 152% last year to $3 billion, the state-run China Daily newspaper says. The world's highest railway at more than 4,000 meters above sea level has brought other economic benefits to the same far-away, Chinese mouthpiece Xinhua News Agency adds.

You would think Tibet is a hot place for investment. Try again. Tibet is a frigid region in the Himalayas of southwestern China. Its ethnic Tibetan people are poor, and their ever-edgy relations with China's ethnic Han majority have sparked a run of riots, self-immolations and government crackdowns over just the past five years that I can best remember.

Avoid shares of foreign companies that have invested there without other reasons to pick their stocks. The money isn't rolling in yet, and some signature MNCs have already come under huge international pressure to leave.

The 1.2 million-square-kilometer region of 2.84 million people, such as yak herders and orange-robed Buddhists, surely has attracted foreign attention. A Tibetan government in exile headed spiritually by the Dalai Lama is based in neighboring India. Activist groups that want more ethnic Tibetan autonomy in China work out of Australia, the United Kingdom and the United States.

China's army entered Tibet in 1950 and secured it the following year. After an uprising in 1959, China installed its own political system, decisively ending traditional rule by religious figureheads known as Lamas. Today the Chinese government aims to develop Tibet, making locals better off in the process, along with other parts of relatively poor western China.

Whether or not Tibet has gained from China's investment since the railway opened in 2006, activist groups have come down hard on participating international companies, usually those in mining or tourism. Their well-practiced global publicity campaigns have dented the reputations of firms in Tibet and discouraged other companies from making the long railway journey at all.

For example, the Australia Tibet Council did a "successful campaign" against Sino Gold Mining in 2003, council communications manager Kyinzom Dhongdue says. Its campaign motivated the Sydney-based company to leave Jinkang mine in Eastern Tibet a year later, the group says on its website. Eldorado Gold of Canada bought Sino Gold in 2009.Because of the Sino Gold campaign, global mining giant Rio Tinto ( RIO) decided against digging in Tibet "for political reasons," Dhongdue says.

Activists say mining will bring physical harm to Tibetans and represents neo-colonialism in the already volatile region. There's even a website, stopminingtibet.com, dedicated to keeping miners out an area that's obviously believed to be loaded with minerals.

In a more recent case, the group Free Tibet has gone after Intercontinental Hotels ( IHG). Its 2,000-room resort hotel planned for the regional capital Lhasa will cater to ethnic Han Chinese, Free Tibet says in a statement online. Most local Tibetans presumably couldn't afford a room for the night. The statement also alleges that hotel chain "display their ignorance about Tibet" in defending their plans for the resort.

Activists often see the Han Chinese as occupiers in a region that Beijing should leave alone."Given that more than 95% of visitors to Tibet are Chinese, and that business facilities will have to rely on Chinese trade, we are also concerned that the hotel's presence will further entrench the occupation and may even be used as the venue for discussions by the (Chinese Communist Party)," says Alistair Currie, campaigns and media office with Free Tibet in the United Kingdom. Starwood Hotels ( HOT) is already on the ground managing the St. Regis Lhasa Resort.

If you really want gold from a Tibet investment, try the Chinese airlines, but check out their overall financial flight plans first. Despite the 1,956-kilometer-long railway, ballyhooed in state media as a major engineering feat, people generally find it faster and more comfortable to fly to Lhasa from other parts of China.

Air China, China Eastern Airlines ( CEA), China Southern and four smaller state-run peers are assured business as long as passengers of any ethnic group find Tibet appealing for any reason. Among them are packs of foreign tourists.

China still makes a case for the railway. Tibet received 10.58 million tourists last year, a "sharp surge" over 1.8 million in the railway's infancy in 2006, Xinhua reported this month. It added that more than 297 million tons of cargo had been delivered by rail in the same seven years.

Tibet's GDP has more than doubled from 34.2 billion yuan ($558 million) to 70.1 billion yuan since the railway opened, the news agency said.

But let's look at where the foreign money came from. Sorry, Starwood and Eldorado. Turning back to the China Daily report, Tibet saw a leap in "general trade" and "small-scale trade" with south and central Asian countries. India and Nepal, to name just two, share a border with Tibet. Xinhua particularly cites an ethnic handicraft industry.

I concede this: If you find a Tibetan craft shop that's publicly traded in New York, go ahead and buy a few shares.

At the time of publication the author had no position in any of the stocks mentioned.

Ralph Jennings is on LinkedIn.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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