Chinese technician Ren Feng (right) works at the site of the sixth section of the Mombasa-Nairobi railway project. China and Kenya signed a deal co-financing the construction of the railway in May 2014 (XINHUA)

Tanzania is one of the least developed countries in the world and its outdated infrastructure severely impedes its economic development, according to the United Nations. It had no national broadband network prior to 2009, until the China International Telecommunication Construction Corp. (CITCC) started construction on Tanzania's fiber optic network.

The surge in availability and lower costs have prompted an explosive growth in Internet users and have enabled Tanzanians to enjoy electronic services such as e-banking, e-money, e-commerce and e-health. Makame Mbarawa, Tanzania's Minister of Communication, Science and Technology, remarked in November 2014 that since the first two phases of the project went into operation, the communication costs in Tanzania have been reduced significantly, with telephone and Internet costs being cut by 57 percent and 75 percent, respectively.

This is only one of several examples in which Chinese companies are assuming increasingly prominent roles in overseas markets. By the end of 2014, 18,500 Chinese domestic investors had set up 29,700 establishments in 186 countries and regions, said the 2015 Report on the Sustainable Development of Chinese Enterprises Overseas, the first of its kind that was published in Beijing in November.

The United Nations Development Program, the Research Center of the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC), and the Chinese Academy of International Trade and Economic Cooperation have worked together for over a year to deliver this research, based on the largest survey to date of Chinese enterprises' perceptions of their own sustainable development performance.

Zhang Jincheng, a fellow at the SASAC Research Center and one of the authors said that the report is based on the analysis of first hand data collected via questionnaires, corporate interviews and feedback from stakeholders. More than 250 Chinese enterprises operating overseas have responded to the questionnaire, among which 36 percent are state-owned enterprises (SOEs) and 63 percent are privately owned business.

In the report, "sustainable development" is defined as meeting the needs of the present without compromising the ability of future generations to meet their own needs. "The concept of sustainable development is closely related to that of corporate social responsibility. Sustainable development is a shared goal in our economy, society and environment enhancement. Therefore, responsible enterprises should live up to this broader social expectation," the report states.

"Overseas Chinese enterprises actively take on corporate social responsibility--in 2014, the tax paid to the host countries by Chinese enterprises totaled $19.15 billion; while also hiring 833,000 local staff," said Qian Keming, China's Vice Minister of Commerce. "In the future, the Ministry of Commerce (MOFCOM) will continue to improve the interconnection among policies and establish a fair, stable and transparent outbound investment cooperation policy system for a better overseas sustainable development environment."

The survey also shows that Chinese companies report their overseas business performance as generally positive, with 13 percent of them being very profitable, 39 percent being just profitable and 24 percent breaking even. However, the remaining 24 percent claim to be in the red for the time being.

Supporting local partners 

According to the report, nearly 90 percent of globalized Chinese companies state that they attach great importance to their host countries' national development strategies, policies and plans. Out of which 40 percent incorporate those elements into their own development strategies and operations.

Besides improving local infrastructure, international Chinese companies self-report that they have been transferring their technologies and management experiences to partners in the host countries in ways that are tailored to the local markets.

Findings show that 87 percent of the surveyed Chinese companies have transferred their technology capabilities to the host countries or have technological cooperation with them. Around 80 percent of Chinese companies believe that there are positive splash-effects to the host countries' suppliers and subcontractors, helping to improve their technological and managerial capacities.

Sustainability  

A widely reported concern among developing countries is that foreign companies have no regard for local environmental impacts of their work.

"In the course of overseas operations, companies should mitigate any impacts on the environment and ecosystem," the report stresses. "In countries with fragile ecosystems and relatively underdeveloped laws and regulations, the self-discipline and accountability of companies are particularly important."

The survey results show that 80 percent of companies believe that their operations will not have an impact on local biodiversity and 18 percent said that there would be an impact. In their analysis of their effect on local biodiversity after years of overseas operations indicates that the companies that have "gone global" for less than five years believe that they have had less impact than those that have operated abroad for more than five years.

A growing number of Chinese companies are becoming aware of the significance of creating positive relationships with the communities for improved business operations.

The Minerals and Metals Group (MMG), for instance, an overseas corporation affiliated with China Minmetals Corp., has a mine located in Sepon of southern Laos' Vilabouly District. This area is noted as one of the poorest and most underdeveloped districts in the country despite its rich mineral resources. The MMG set up the Sepon Development Trust Fund within the mining site to manage and operate development projects in local communities.

The trust fund contributes $750,000 a year for the Vilabouly District on community development programs for public roads, power lines and medical equipment. MMG has channeled a large amount of manpower, material and financial resources into local educational projects, established a center for the preservation of cultural heritage, sponsored the Vilabouly village clinic and provided funding for community hospitals. Between 2013 and 2015, MMG pledged $1.38 million to the "1,000 Day Project" jointly launched in southern Laos with the United Nations International Children's Emergency Fund and the national health authority to combat malnutrition among children aged 1,000 days or less.

More interaction needed 

Still, the report finds that some Chinese companies have yet to build effective communication mechanisms to exchange ideas with the stakeholders of host countries and the international community. Where interaction does occur, it is often hampered by Chinese companies' inadequate communication skills and capabilities, often leading to environmental and community-related disputes.

In addition, there is often a disparity between the international community's opinions on Chinese companies' behaviors and these companies' self-perception, which, combined with the companies' slow and passive responses, tends to widen misunderstandings between the two sides, says the report.

Wang Xiaoguang, head of Beijing Rongzhi Corporate Social Responsibility Institute, said that to invest abroad, Chinese companies must enhance communication with non-governmental organizations, media and local people. In some countries, the locals do not have adequate information about China. If Chinese companies go and isolate themselves from the local people, misunderstandings may arise, ultimately arousing negative rumors and actions among residents.

China's Policies for Sustainable Development Overseas 

In recent years, the Chinese Government has formulated a series of policies and guidelines to promote overseas sustainable development, among which 33 are still in effect and have had positive impacts, according to the Report on the Sustainable Development of Chinese Enterprises Overseas.

Safety in production and operation, and risk management are major concerns for China's policies on overseas investment. Of the 33 policies promoting sustainability, at least eight are related to the personal safety of employees as well as workshop and operational safety. In August 2010, MOFCOM released the Overseas Security Risk Warning and Information Notification System in Overseas Investment and Cooperation, offering guidance to companies on following the shifting global security climate and adopting effective measures to prevent and mitigate various risks.

The Chinese Government encourages fair competition, as well as reinforcing a credibility system for companies engaging in overseas investment and cooperation. In March 2013, MOFCOM issued the Provisions on Regulating Competition in Overseas Investment and Cooperation. In July 2013, the Trial Measures for Negative Credit Record in Overseas Investment, Cooperation and Foreign Trade was jointly released by MOFCOM and nine other government agencies, clearly stating that companies and individuals with bad credit records shall be registered to provide risk warnings to domestic and overseas stakeholders.

As for environmental and social policies, the Chinese Government has issued documents such as the Guidelines on Sustainable Forest Cultivation for Chinese Enterprises Overseas and the Guidelines on Environmental Protection in Overseas Investment and Cooperation, as well as the Guidelines on Security Management of Overseas Chinese Enterprises (Institutions) and Staff, which altogether offer guidance on environmental protection measures to Chinese companies and foster positive labor relations.

(Compiled by Beijing Review )

Copyedited by Bryan Michael Galvan

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