Trea­sure Is­land or Debt Desert?

Ever dreamed of own­ing a desert is­land? Hainan has is­sued new rules to pro­mote the de­vel­op­ment of is­lands off its coast, but can de­vel­op­ers over­come the prob­lems of the past, which in­clude high costs, nat­u­ral dis­as­ters and the need to pro­tect the lo­cal ec

NewsChina - - CONTENTS - By Zhao Yi­wei and Xie Ying

Own­ing a desert is­land might be a dream for many, but it is one that the lucky few in China might fi­nally be able to re­al­ize, af­ter au­thor­i­ties in the south­ern is­land prov­ince of Hainan re­cently is­sued new reg­u­la­tions on how in­di­vid­u­als and pri­vate com­pa­nies can de­velop is­lands, so long as they are un­in­hab­ited, not part of any cur­rent ju­ris­dic­tion, and they are will­ing to take re­spon­si­bil­ity for them for up to 50 years.

It is not the first time that China has tried to en­cour­age de­vel­op­ment of desert is­lands by open­ing them to pri­vate in­vest­ment – back in 2003, China is­sued a man­age­ment reg­u­la­tion on the pro­tec­tion and util­i­sa­tion of desert sea is­lands, al­low­ing in­vest­ment by in­di­vid­u­als and pri­vate funds. At that time, China re­port­edly had more than 6,500 desert is­lands with an area of over 500 square me­ters, and those cov­er­ing a smaller area were thought to num­ber in the tens of thou­sands.

Yet, de­spite the abun­dant re­sources, few were ac­tu­ally will­ing to stump up the cash. Chi­nese me­dia re­ported that many is­lands un­der pri­vate de­vel­op­ment had sub­se­quently been aban­doned due to the ex­cep­tion­ally high cost of de­vel­op­ment or the neg­a­tive im­pact on the lo­cal ecol­ogy.

Open Is­lands

Ac­cord­ing to the sea is­land man­age­ment director from Hainan's Depart­ment of Ocean and Fish­eries (DOF), who would only give his sur­name Chen, Hainan's lat­est doc­u­ment on the pri­vate de­vel­op­ment of desert is­lands is not to en­cour­age de­vel­op­ment, but merely a de­tailed rule to en­sure the proper im­ple­men­ta­tion of China's Law on the Pro­tec­tion of Sea Is­lands and the Ap­proval Rules on the De­vel­op­ment and Util­i­sa­tion of Desert Is­lands is­sued by the former State Oceanic Ad­min­is­tra­tion (SOA). He re­vealed that so far, they have not re­ceived any ap­pli­ca­tions for pri­vate de­vel­op­ment of a desert is­land.

Ac­cord­ing to Chen, Hainan's lat­est docu-

ment has, com­pared to the prior doc­u­ment which was nul­li­fied in 2017, sim­pli­fied the ap­pli­ca­tion for­mal­i­ties. Now, it does not make a dif­fer­ence who has ju­ris­dic­tion over the is­land – a county or a city – an ap­pli­cant may di­rectly sub­mit their ap­pli­ca­tion to the pro­vin­cial DOF who will make a field in­ves­ti­ga­tion based on the ap­pli­ca­tion ma­te­ri­als be­fore they sub­mit them to the pro­vin­cial gov­ern­ment for fi­nal ap­proval.

To help ap­pli­cants to bet­ter mea­sure their de­vel­op­ment ca­pa­bil­ity and un­der­take the pre­lim­i­nary plan­ning which should be sub­mit­ted with the ap­pli­ca­tion, Hainan put its is­lands into six cat­e­gories based on their lo­ca­tion and func­tion, and de­fined the stan­dard fee for is­land use based on the de­gree of de­vel­op­ment. For ex­am­ple, an ap­pli­cant should pay 57,300 yuan (US$8,900) an­nu­ally for the use of a 10,000-square-me­ter is­land in a prime lo­ca­tion which will be de­vel­oped into a tourism spot. If an ap­pli­cant just plans to use a 10,000-square-me­ter is­land in a bot­tom-ranked lo­ca­tion for agri­cul­ture or farm­ing, they only need to pay 2,500 yuan (US$384) a year.

It means that a po­ten­tial de­vel­oper must have a clear idea of the lo­ca­tion, area, func­tion and de­gree of de­vel­op­ment of the tar­get is­land be­fore sub­mit­ting the ap­pli­ca­tion. But Hainan has not yet pub­lished a spe­cific list of is­lands open to pri­vate de­vel­op­ment. Chen said that the list must be based on the gen­eral plan­ning stated in the Law of the Pro­tec­tion of Sea Is­lands and that eco­log­i­cal pro­tec­tion is the top pri­or­ity.

Unaf­ford­able Cost

This may ex­plain why no one is bit­ing at the op­por­tu­nity. Few would have both the money and the abil­ity to de­velop and main- tain an un­in­hab­ited is­land while keep­ing the ecol­ogy in­tact.

This has been proved by past ex­pe­ri­ence – in April 2011, the SOA pub­lished China's first list of 176 desert is­lands for pri­vate de­vel­op­ment in eight prov­inces and mu­nic­i­pal­i­ties. Then SOA director Li Haiqing told me­dia that they hoped to in­crease do­mes­tic con­sump­tion by open­ing these is­lands for pri­vate in­vest­ment, but the ex­pected rush to de­velop fiz­zled out.

In 2011, Gaobao, an in­vest­ment com­pany based in Ningbo, Zhe­jiang Prov­ince (Zhe­jiang's ju­ris­dic­tion in­cludes over 40 per­cent of China's ma­rine is­lands), bought a lo­cal is­land for 20 mil­lion yuan (US$3.1M) in a gov­ern­ment auction, plan­ning to turn it into a des­ti­na­tion for yacht­ing. Con­struc­tion ground to a halt in the early stages in 2014, but not be­fore Gaobao had sunk 500 mil­lion yuan (US$76.9M) into the project. Gaobao told lo­cal me­dia that un­pre­dictable tides on the is­land and sum­mer ty­phoons of­ten forced them to stop work, and that the cost of gen­er­a­tors and trans­porta­tion of con­struc­tion ma­te­ri­als was three to five times that of land-based con­struc­tion. It was be­yond their fi­nan­cial ca­pac­ity.

Even when de­vel­op­ment has fin­ished, it is hard to gain re­turns quickly. In 2004, lo­cal busi­ness­woman Chen Xiaox­ian con­tracted to de­velop Zhuyu Is­land in Wen­zhou, Zhe­jiang Prov­ince, spend­ing five years and over three mil­lion yuan (US$0.5M) to make it into a scenic spot, only to find that the grow­ing num­ber of tourists threat­ened the lo­cal ecol­ogy. The scenic spot was fi­nally closed, and Chen, af­ter re­ceiv­ing one mil­lion yuan (US$153,846) com­pen­sa­tion from the lo­cal gov­ern­ment, re­fused to con­tinue with the sec­ond phase of de­vel­op­ment. Op­er­a­tions on the is­land have ceased.

Dan­men­shan Is­land in Ningbo shared a sim­i­lar fate. As China's first un­in­hab­ited is­land whose right of use was clearly granted by the lo­cal gov­ern­ment to Long­gang, an­other lo­cal in­vest­ment com­pany, Dan­men­shan was slated to be­come a one-bil­lion-yuan (US$153.8M) tourism re­sort with golf cour­ses and high-end restau­rants by 2020. The project, how­ever, ground to a halt in 2015 due to poor re­turns from phase 1. Lo­cal oceanic au­thor­i­ties said that up un­til 2017, the com­pany was still in­volved in a new scheme to im­prove op­er­a­tions on the is­land.

Ac­cord­ing to Zhou Shifeng, director of the Zhe­jiang De­vel­op­ment and Plan­ning In­sti­tute, a ma­jor rea­son be­hind the fail­ures lies in de­vel­op­ers sig­nif­i­cantly un­der­es­ti­mat­ing what it takes to de­velop an is­land.

“Many is­lands suf­fer nat­u­ral dis­as­ters like ty­phoons which badly im­pact the con­struc­tion, and it needs huge amounts of cap­i­tal to build in­fra­struc­ture and fa­cil­i­ties, but there are no short-term re­turns,” he told mag­a­zine Ori­en­tal Out­look in 2009.

His words were echoed by Zhu Ren­min, the de­vel­oper of Lian­hua Is­land, one of the few suc­cess­fully de­vel­oped and op­er­ated pri­vate is­lands in Zhe­jiang. In 1992, Zhu, director of the Eco­log­i­cal Restora­tion Cen­ter un­der Zhe­jiang Univer­sity, bought the right to use the is­land for 40 years, and trans­formed it into an ex­per­i­men­tal site for hu­man eco­log­i­cal restora­tion stud­ies. “I've put 50-60 mil­lion yuan (US$7.7-9.2M) into the is­land,” he told Newschina. “Most of these is­lands must be de­vel­oped from scratch. Putting in in­fra­struc­ture like roads, power and com­mu­ni­ca­tion is a mas­sive drain on re­sources, and since we weren't al­lowed to use the stone re­sources on the is­land, we had to trans­port

all the con­struc­tion ma­te­ri­als from out­side, which was an­other huge sum of money... You can't imag­ine just how much it will cost for the fu­ture up­keep of the place.”

“I have spent ev­ery penny in my pocket on the is­land and I also set up a foun­da­tion to [fi­nan­cially] sup­port its fu­ture up­keep... Don't even think of earn­ing money if you in­tend to de­velop a desert is­land,” he added.

Eco­log­i­cal Pro­tec­tion

Lian­hua is open to tourists free of charge, and is praised as a model for pri­vately de­vel­oped is­lands. How­ever, Zhu said that Lian­hua's ex­pe­ri­ence could not be du­pli­cated, since few in­vestors would be as pro­fes­sional as him in eco­log­i­cal pro­tec­tion or would be will­ing to put so much into it. “Peo­ple who are ig­no­rant of ecol­ogy will earn no money from de­vel­op­ing a desert is­land, they'll just end up de­stroy­ing the lo­cal ecol­ogy,” Zhu warned.

Chen Ping­ping, deputy director of the Oceanic Econ­omy In­sti­tute un­der the Na­tional In­sti­tute for South China Sea Stud­ies, told Newschina that she holds a con­ser­va­tive at­ti­tude to­ward the pri­vate de­vel­op­ment of desert is­lands. “We have seen a lot of un­rea­son­able plan­ning, short­age of in­fra­struc­ture and un­der-es­ti­ma­tion of the cap­i­tal needed to de­velop them. Worse, lack of aware­ness about eco­log­i­cal pro­tec­tion as well as a lack of pro­fes­sion­als in is­land de­vel­op­ment will re­sult in ir­re­versible dam­age to an is­land and its sur­round­ing ma­rine ecol­ogy,” she told Newschina.

Truth be told, the “ir­re­versible im­pact” Chen Ping­ping men­tioned has al­ready taken place. Ac­cord­ing to data from the SOA, 806 desert is­lands have al­ready dis­ap­peared from China's ma­rine wa­ters, over 700 of which were re­claimed, 66 were de­stroyed for stone mining and the re­main­ing 30 dis­ap­peared nat­u­rally. Zhou Shifeng re­vealed that his sur­vey in 2009 found that the num­ber of desert is­lands in Zhe­jiang Prov­ince has con­tin­u­ally de­clined, al­ready sev­eral hun­dred less than in 1990.

Zhe­jiang's Zhoushan, China's only ar­chi­pel­ago city, has 1,390 is­lands, and earned around 40 bil­lion yuan (US$6.2M) from its ma­rine econ­omy by 2007, ac­cord­ing to Ori­en­tal Out­look, but most of its 100 de­vel­oped is­lands were “coarsely de­vel­oped” and “purely for com­mer­cial util­i­sa­tion,” in­sid­ers said. In 2008, Zhoushan re­clas­si­fied its lo­cal un­in­hab­ited is­lands, con­clud­ing that only 300 more were suit­able for de­vel­op­ment, with the rest all de­fined as those that need pro­tec­tion and preser­va­tion.

Hainan was sub­ject to a sim­i­lar prob­lem, and has been of­ten crit­i­cized by me­dia for blindly de­vel­op­ing ma­rine re­sources. In early 2018, the Hainan gov­ern­ment was warned by the cen­tral su­per­vi­sion team of the former Min­istry of En­vi­ron­men­tal Pro­tec­tion ( MEP) that some lo­cal coastal cities and coun­ties have de­stroyed the ma­rine ecol­ogy by il­le­gally re­claim­ing land for real es­tate projects. For ex­am­ple, Phoenix Is­land in Sanya, the south­ern­most city in Hainan, should have been used as an in­ter­na­tional port as planned, while its de­vel­oper ac­tu­ally used it to build ho­tels on, which has se­verely eroded the west­ern coast­line of Sanya Bay and ag­gra­vated pol­lu­tion in the Sanya River.

Many ex­perts have at­trib­uted such blind and even il­le­gal de­vel­op­ment to poor man­age­ment by au­thor­i­ties, point­ing out that the laws re­lated to desert is­lands lag far be­hind the de­vel­op­ment and that over­lap­ping func­tions of dif­fer­ent min­istries have ob­structed smooth and ef­fi­cient man­age­ment.

Dur­ing this March's struc­tural re­form of the State Coun­cil, the Chi­nese gov­ern­ment com­bined the SOA, the Min­istry of Land Re­sources and the State Bureau of Sur­vey­ing and Mapping into the new Min­istry of Nat­u­ral Re­sources and re­named the former MEP to the Min­istry of Ecol­ogy and En­vi­ron­ment. It was be­lieved to be a ma­jor move to stream­line the man­age­ment of nat­u­ral re­sources and to fur­ther em­pha­size eco­log­i­cal and en­vi­ron­men­tal pro­tec­tion. That is why Director Chen em­pha­sized dur­ing the in­ter­view with Newschina that eco­log­i­cal pro­tec­tion is the top pri­or­ity in the pri­vate de­vel­op­ment of desert is­lands and that they re­quire ev­ery ap­pli­cant to in­clude how they in­tend to pro­tect and su­per­vise the lo­cal ecol­ogy into their pre­lim­i­nary de­vel­op­ment plan­ning.

It ac­tu­ally sets up a “hid­den bar­rier” for po­ten­tial ap­pli­cants, ac­cord­ing to Zhu. Yet, both he and Chen Ping­ping found it was good for the long-term ben­e­fit of is­lands. “[Com­pared to the eco­nomic re­turns], I'd rather see is­land de­vel­op­ment draw more peo­ple's at­ten­tion to pro­tect­ing ma­rine ecol­ogy and spread­ing ma­rine cul­ture,” Zhu said.

Chen Ping­ping added that she be­lieves Hainan's abun­dant nat­u­ral re­sources, pleas­ing cli­mate and its ad­van­tages brought by trade free zones and ports will fi­nally at­tract prop­erly qual­i­fied de­vel­op­ers, as long as the au­thor­i­ties abide by the rules they have set out in their lat­est doc­u­ment.

“Peo­ple who are ig­no­rant of ecol­ogy will earn no money from de­vel­op­ing a desert is­land, THEY’LL JUST END UP DE­STROY­ING THE lo­cal ecol­ogy”

An in­ves­ti­ga­tion team ex­am­ines the eco­log­i­calen­vi­ron­ment on a desert is­land of the Xisha Is­lands, South China Sea

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