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Guiding Chinese Investment: Government and NGO Collaboration

Guiding Chinese Investment: Government and NGO Collaboration. Douglas Whitehead Global Environmental Institute Exchange on Development and Environmental Issues Summit Parkview, Yangon, March 28 2011. Summary. Go Out Strategy Chinese FDI and its Environmental Challenges

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Guiding Chinese Investment: Government and NGO Collaboration

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  1. Guiding Chinese Investment: Government and NGO Collaboration Douglas Whitehead Global Environmental Institute Exchange on Development and Environmental Issues Summit Parkview, Yangon, March 28 2011

  2. Summary • Go Out Strategy • Chinese FDI and its Environmental Challenges • Environmental Challenges • Chinese Policies • International Guidelines • Domestic Policies and Guidelines • GEI Case Study • IPP Program

  3. The “Go Out Strategy” • Since early 2000s, guided byinst. like Exim bank • US$40.65 of outbound Direct Investment Overseas • Sectors: Timber, Hydropower, Plantations, Mining, Oil & Natural Gas • Regions: SE Asia, Africa, Latin America • China working to maintainImage as responsible super-power • Challenge: How to ensure best environmental impactoverseas?

  4. China’s FDI OverallSource: OECD Source: GEI By sector By Region (hydro)

  5. Environmental and Social Impact Merowe Dam, Sudan China Int’l Water and Electric Sedimentation, evaporation, resettlement • Environmental • Effects on biodiversity • Deforestation and Watershed degradation • Soil Fertility • Pollution and waste • Social • Community livelihoods • Cultural value • Potential Blowback • Project related risks • Effects on bilateral/regional relations Loango Oil Field, Gabon Sinopec Threat to 67,000 hectares in National Park Nam Ngum 5, LaosSinohydroPotential flooding damage to watershedcommunities(under-construction)

  6. What and Who is at Stake? • Chinese Government and Enterprises • China’s ecological deficit (WWF-CCICED) • Managing environmental and social risks (growing concern) • Host Countries • Governments: development priorities • Communities/indigenous peoples: livelihoods • Civil Society: Environmental/Social Welfare

  7. International Guidelines • Equator Principles • 2008 MoU with SEPA • One Chinese Bank signatory • UNEP: Finance Initiative (UNEP: FI) Principles for Responsible Investing • Growth in signatories from emerging marketinvestors • UN Global Compact • 139 Chinese Members by 2009 • IFC: Policy and Performance Standards • MoU with ExIm Bank, MEP • Support for China’s ‘Green Credit Policy • OECD Guidelines for Multinational Enterprises • No emerging market signatories • Global Reporting Initiative • Domestic Sustainability reporting in China • Extractive Industries Transparency Initiative • No support yet from China and India

  8. Domestic Policies: Greening Chinese Investment • Sustainable Investment Policies • 2002 Environmental Impact Assessment Law (NPC), among many • 2008 Guidance on Centrally OwnedEnterprises Fulfilling SocialResponsibilities (SASAC) • Market based instruments (DPS, EPBs, tax incentives, green credit, green insurance) • ISO 14001 Certification Requirements • FDI-Specific • 2007 Nine Principles on Encouraging and Standardizing Foreign Investment(State Council) • 2007 Guidelines on Sustainable Management of Overseas Forests by Chinese Enterprises (SFA, SEPA) • 2008 Guide to Strengthen Regulation on Listed Companies (SASAC)

  9. Policies: Green Finance • Green Lending • 2003 Observation of Equator Principles • 2007 SEPA Notice on Risk Pollution • Insurance • Guiding Opinions on Pollution Liability Insurance (SEPA) • Banks • Export-Import Bank • MoU with IFC on • Performance Standards • China Development Bank • CADF, includes EIAs • NGO Report:Environmental Report on Chinese Banks • Green Watershed, Green Earth VolunteersGEI • High Performing banks • Industrial Bank of China (EP) • Bank of China (Green Credit) • CCIC

  10. ‘Governance Gap’ • Chinese Side: Local Laws as Default • Exim Bank 2007 Code of Conductrequires investors to comply with local law enforcement • Conflicting Instructions:Economic and Commercial Councils’role in encouraging observance of host country law • Weak Host Country Governance • Law or Policy may be good on paper, but poor in execution (Zambia, Namibia) • Legislation or Policy may be piecemeal or • non-existent • Response: • Regional collaboration • Civil Society Support

  11. Opportunities: GEI’s IPP Program • IPP: Integrated Policy Package • Stakeholders • Chinese GovernmentGuidelines on Environmental ConductEnvironmental Policies on Chinese FDI • Chinese EnterprisesSinohydro Community Development ProjectNam Theun 2 WorkshopChinese Chamber of Commerce Workshop • Host Country GovernmentPartnership NLMA of Lao PDRPES and REDD Workshops • Further Pilots

  12. Integrated Policy Package • Policies: CCA, PES, EIA, CSR, REDD(?) • EIA: incorporated into legislative process of host countries • PES: Ecological services quantified, payments contributed through fund • CCA: Allocates how PES payments would go towards conservation; land use concessions; community involvement • CSR: Voluntary tool, mounting domestic pressure • REDD: carbon financed for reduced deforestation • Advantages: • Designed to address multiple stakeholders • Community Development benefits • Enhances civil society participation

  13. Model 1: Government-NGO-Enterprise Model Model 2: Guarantee Fund for Community Development and Environmental Protection

  14. Guidelines and Research: Government Collaboration • Guidelines • 2008 Guide on Sustainable Overseas Silviculture by Chinese Enterprises (SFA, with GEI) • 2009 Guide on Sustainable Overseas Forest Management and Utilization by Chinese Enterprises(SFA, MOFCOM, with GEI) • 2011 Guidelines on Environmental Conduct by Overseas Chinese Enterprises(MEP, MOFCOM, with GEI) • Research • Environmental Policies on Chinese FDI • Case Studies (Laos, Zambia…)

  15. Enterprise Pilot: Sinohydro • Sinohydro • MoU, GEI-Sinohydro • Environmental Institution • Nam Ngum 5 Hydropower Station • Sinohydro—BOT • EIA performed by Earth Systems • Community Development Upstream • Community Forestry • Cattle Breeding • Household Biogas: 40 digesters in Ban Chim Village

  16. Engaging Chinese Enterprises: Building Capacity • Workshop with Chinese Chamber of Commerce in Lao • Guidelines and Performance Standards • Environmental Risk Management • Incl. Chinee government (SFA, MEP, MOFCOM, MFA) and enterprises (ExIm Bank, Sinohydro, China Minmetals…) • Best Practices in Hydropower Development: GEI-WB joint conference • Nam Theun 2 Cascade Dams • Dialogue on Hydropower • Informal Knowledge Sharing Network • Challenges in future developments

  17. Host Country Partnership: Lao PDR • MoU with National Land Management Authority (NLMA) • Sustainable, Market-based Land Management • Capacity and InstitutionBuilding • Incorporate policy tools (PES)in Lao National Assembly • Trainings • PES • REDD • Other Lao Partners • Water Resources and Environment Authority • Ministry of Energy and Mining • Ministry of Planning Investment

  18. Conclusions • Environmental Policies on Chinese FDI growing stronger, but gaps remain • Stronger awareness of performance standards by enterprises • Strengthening host country governance vital • Government-Enterprise-NGO partnerships feasible and effective in enforcing responsible investment

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