Executive Summary

Thanks to the implementation of “going global” strategy, China’s OFDI has kept growing steadily, which\\\\\\\\r\\\\\\\\nnot only accelerated economy growth of host countries and created employment for local people, but\\\\\\\\r\\\\\\\\nalso helped to improve local infrastructure conditions such as transportation, communication, drainage,\\\\\\\\r\\\\\\\\nhealthcare and schools. However, Chinese companies still need to improve their capacity to realize\\\\\\\\r\\\\\\\\nsustainable development, especially in the areas of localization, environmental protection, community\\\\\\\\r\\\\\\\\ndevelopment, labor rights and information disclosure, among other areas.

It’s an important duty and opportunity for Chinese NGOs to promote the socially responsible development\\\\\\\\r\\\\\\\\nof China’s OFDI. Through cooperation and monitoring, Chinese NGOs can contribute to the implementation\\\\\\\\r\\\\\\\\nof China’s OFDI policies and regulations, and promote the communication between Chinese government,companies and stakeholders in the host countries to realise a win-win situation.

However, Chinese NGOs are still in the initial phases of internationalization. These NGOs, which pay\\\\\\\\r\\\\\\\\nattention to China's OFDI, are very limited in both number and capacity. To encourage more Chinese\\\\\\\\r\\\\\\\\nNGOs to engage in the responsible development of China’s OFDI, we need to provide supports to NGOs\\\\\\\\r\\\\\\\\nwith more knowledge in this field. However, there are still few studies which analyze the complicated\\\\\\\\r\\\\\\\\nstakeholders that Chinese companies face on the ground at the micro level with research on the\\\\\\\\r\\\\\\\\ninstitutional framework of host countries at a macro level.

Therefore, this research identified Myanmar as the targeted country and the LCMP as an example to\\\\\\\\r\\\\\\\\nexplore social and environmental law and policy framework as well as social and environmental impactsof FDI in Myanmar. Meanwhile, we try to analyze the con icts, challenges and the complicated relationsbetween stakeholders in the case and summarize the lessons and experience for Chines companies.


In general, the social and environmental impacts of China’s OFDI in Myanmar had no obvious differencefrom other foreign investments, but as China invested more in resource-intensive industries includinghydropower, petroleum & natural gas as well as mining sectors, the problems brought about upon local\\\\\\\\r\\\\\\\\ncommunities, the environment and labor rights caused by China’s investment are more obvious. Moreover,\\\\\\\\r\\\\\\\\nmost Chinese companies are in the beginning stage of “going global” and lack awareness, capacity and\\\\\\\\r\\\\\\\\nmechanism to cope with social and environmental issues. These limitations have triggered and worsenedthe con icts between Chinese companies and stakeholders.

Taking the LCMP as example, the project has aroused broad concern and wide stakeholders’ engagement\\\\\\\\r\\\\\\\\ndue to the crucial change of Myanmar institutional context and the complex background and problemsin the history of the project. In the ongoing con icts, Myanmar government was both the supervisor andpartner of the project, and their immature governance frame and capacity added to the severity of thecon icts. In an environment of relaxed social regulation, civil society (NGOs and CBOs) had the chanceto express their demands, which broadened the concern about and supervision of the project from\\\\\\\\r\\\\\\\\ngreater society. However, as the directly affected subjects, the villagers had varied demands, which were\\\\\\\\r\\\\\\\\ncharacterized by diversity and contradiction with each other. 

How to respond to the external political change and balance stakeholders’ demands is a great challenge for\\\\\\\\r\\\\\\\\nChinese companies. Sticking to the sole criterion of abiding by local laws and regulations is not enough for\\\\\\\\r\\\\\\\\nChinese companies to attain social license. Especially in developing countries like Myanmar, it has formed\\\\\\\\r\\\\\\\\na rather complex legal system and framework, which is still in a stage of rapid change after the periods of\\\\\\\\r\\\\\\\\ncolonization, civil war and democratic transition. However, Chinese policies on OFDI pay more attention\\\\\\\\r\\\\\\\\nto prior approval and lack effective supervision on the operation of projects, leading to a situation in which\\\\\\\\r\\\\\\\\nthey cannot support companies to cope with social and environmental problems.


Looking at the lessons and experience of the LCMP, it is important that Chinese companies need to work\\\\\\\\r\\\\\\\\nwith third party especially NGOs to carry out ESIA and community consultation based on the rules of FPIC,\\\\\\\\r\\\\\\\\nto dynamically evaluate and monitor the demands and attitudes of stakeholders and set up mechanism for\\\\\\\\r\\\\\\\\naffected groups to express their demands, which will help companies to lower social and environmental\\\\\\\\r\\\\\\\\nrisks and better their reputation.

This is a good opportunity for Chinese NGOs, which are capable of recognizing the demands ofstakeholders such as the communities and NGOs from bottom to top and  nding an acceptable mannerto communicate with Chinese government and companies and organizing dialogues between companies\\\\\\\\r\\\\\\\\nand stakeholders. They can also contribute to improving the legal and policy system of the host countries\\\\\\\\r\\\\\\\\nand improve the governance capacity of local government so that local government can provide a stableenvironment for investment and supervise companies’ social and environmental performance ef ciently.

Though these are important chances for Chinese NGOs in the process of “going global”, many\\\\\\\\r\\\\\\\\nrequirements are put forward on NGOs. It not only requires Chinese NGOs to understand the social and\\\\\\\\r\\\\\\\\nenvironmental impacts brought by investments more comprehensively and deeply, but also to understand\\\\\\\\r\\\\\\\\nthe restraints and challenges Chinese companies are facing in host countries. This knowledge is crucial\\\\\\\\r\\\\\\\\nfor Chinese NGOs to define strategy in this field. Besides, it is also necessary for Chinese NGOs to\\\\\\\\r\\\\\\\\nunderstand the politics, laws and policies, culture and customs of host countries, especially the demands\\\\\\\\r\\\\\\\\nand power of communities and NGOs. However, Chinese NGOs that meet such requirements are currently\\\\\\\\r\\\\\\\\nvery few, and most of them need improvement on capacity and practices. Based on the findings and\\\\\\\\r\\\\\\\\nconclusions, we propose the following suggestions to the Chinese NGOs and companies.

1. Suggestions to Chinese NGOs

Chinese NGOs should pay attention to OFDI and international development agendas while devoting\\\\\\\\r\\\\\\\\nthemselves to local issues and sharing information with civil society in host countries about Chinesepolicies and decision-making mechanisms, which will support these organizations to communicate with\\\\\\\\r\\\\\\\\nChinese government and companies ef ciently.

Chinese NGOs should communicate with Chinese companies more extensively to understand companies’\\\\\\\\r\\\\\\\\nchallenges and capacity limitations, to identify what they can contribute to the real problems, and to study\\\\\\\\r\\\\\\\\nthe macroscopic context such as the politics, legal systems, culture and civil society of host countries, and to analyze the power and demands of stakeholders and assess the potential risks and feasibility of their\\\\\\\\r\\\\\\\\nstrategy and plans.

Chinese NGOs could contribute to monitoring the social and environmental performance of China’s OFDI\\\\\\\\r\\\\\\\\nand share with Chinese companies about the international standards, best practices and experience which\\\\\\\\r\\\\\\\\nwill support Chinese companies to improve social and environmental policies.

2. Suggestions to Chinese companies

When investing in developing countries with weak legal systems, Chinese companies could adopt\\\\\\\\r\\\\\\\\ninternational social and environmental standards to eliminate the potential risks caused by political unrest\\\\\\\\r\\\\\\\\nand legal reform in host countries.

Chinese companies should cooperate with NGOs to assess the social and environmental impacts\\\\\\\\r\\\\\\\\ndynamically, to analysis the power relationships among stakeholders and get their feedbacks on\\\\\\\\r\\\\\\\\ncompanies’ social and environmental policies.

In the initial stage of the project, Chinese companies should make efforts actively to understand the\\\\\\\\r\\\\\\\\ndemands and requirements of affected stakeholders especially local villagers and NGOs, to balance the\\\\\\\\r\\\\\\\\ninterests between local government and other stakeholders, and to set up regular communication and\\\\\\\\r\\\\\\\\ncomplain mechanism to respond to stakeholders’ demands.