In April 2019, the Second Belt & Road Forum for International Cooperation was held in Beijing, launching a new journey of the joint construction of the Belt & Road with high quality.
In the keynote speech at the opening ceremony of the forum, President Xi Jinping pointed out that we should work together for high quality development of Belt & Road Cooperation, fully implement the principle of extensive consultation, joint contribution and shared benefits, pursue open, green and clean cooperation, and follow a high-standard, people-oriented and sustainable approach.
The connotation of high quality development of Belt & Road cooperation was clarified. During the forum, relevant departments also released or launched the Debt Sustainability Framework for participating countries of the Belt & Road Initiative, Beijing Initiative for the Clean Silk Road, Cooperation Initiative on Silk Road of Innovation and Green Investment Principles.
Background of the High-Quality Belt & Road Construction
For some time now, some countries in Europe and the United States have questioned and made accusations against the Belt and Road Initiative.
First, the questions are about “best practices” or international rules. Some European and American countries believe that the Belt & Road Initiative does not comply with “internationally accepted rules”, including “transparency”, “environmental social security” and “debt sustainability”; fails to perform “free trade” or “fair competition”; undermines the ecological environment; disrespects the legitimate rights and interests of workers in the host country; and increases the debt burden of the host country.
Second, they believe that the Belt & Road is mainly a project involving Chinese enterprises, and that the information and operations in the early stages are opaque, favour Chinese enterprises, and gives preference to Chinese personnel, but is hardly open to local and international communities.
Third, they worry that the “China model” provides another option for the development of developing countries, and believe that the success of the Belt & Road represents the success of the “China Model” (huddling between government and companies), which will have a huge “imitation effect” in the world, damaging the efforts of the West to promote “democracy” and “good governance” in developing countries for many years and shake the “Washington Consensus” and “Western Democracy”.
Fourth, they feel anxious about the geopolitical and economic impact of the Belt & Road and worry that the Belt & Road will alter the supply chain, RMB will be widely used, and China’s technical standards will be widely accepted, making China a centre of the global economy, which in turn encourages countries along the Belt & Road to rely on or attach to China.
In view of this, major countries in Europe and the United States have actively developed and proposed various countermeasures.
First, they have implemented the programs such as the “Indo-Pacific strategy”, “high-quality infrastructure”, and the “Eurasian Interconnection Strategy”, and the United States has also strengthened the “long-arm jurisdiction” of the Foreign Corrupt Practices Act and other acts.
Second, they have strengthened the utilisation of foreign economic policy tools, such as the establishment of international investment and financing companies, so as to give full play to the role of international multilateral financial institutions and domestic policy banks, thereby helping domestic companies compete overseas.
Third, relying on the advantages of discourse resources, they have conducted public opinion attacks on the Belt & Road, creating concepts such as “sharp strength” and “debt trap”. In Addition, they have united with relevant countries along the Belt & Road to question and oppose the Belt & Road Initiative by supporting research and launching dialogue.
Fourth, they have promoted China to shift from “responsible stakeholder” or a role to “share the burden” to a role of “transfer burden”, so as to reduce the resources input in areas where China and the West have high overlapping interests or where China’s national interests are large enough.
In addition, although most developing countries have been backward in infrastructure for a long time, they are always pursuing the development of the concept, industry standards, and legal environment of the developed countries, and “third forces” such as civil organisations and media have great influence.
At the same time, the requirements of the international investment rules system are getting more and more stringent, emphasising more frequently the investment of companies in social responsibility, and environmental and social impact assessment is required for the whole cycle of the project, adopting the “Environment, Social Responsibility, Corporate Governance”.
In fact, since the beginning of the new century, the Chinese government and industry have recognised the benefits of responsible business practices and the risks of irresponsible behaviour. Research by OECD shows that production safety, risk control and integrity management are the main concerns of both domestic and foreign investment policies in China.
According to public information, since 2002, the Chinese government has issued nearly 40 policies related to investment and corporate investment operations, involving operational management, investment regulation, personnel management, environmental protection, and risk response.
Since 2008, all-round investment guidelines have gradually increased, and international rules have been incorporated into issues such as environmental protection, labour-capital relationship, corporate governance and other issues of concern to the international community.
At the 35th meeting of the China Central Committee Leading Group for Deepening Reform Comprehensively in May 2017, Opinions on Regulating Corporate Overseas Operation Conduct” were reviewed and approved, which requires standardising the overseas business behaviour of enterprises, focus on the construction of institutional mechanisms, highlight problem orientation, implement corporate responsibility, strict discipline in following the law, supplement the shortcomings of the institution, and strengthen construction of the compliance system for overseas business operations, to gradually form a standardised and orderly regulatory system with clear powers and responsibilities, power delegation and tightened oversight and strong risk control.
Subsequently, the Ministry of Commerce and the National Development and Reform Commission issued five regulations to further regulate overseas investment of companies, making clear that overseas enterprises should “avoid unfair competition, protect the legitimate rights and interests of employees, fulfil necessary social responsibilities, and pay attention to ecological environmental protection”.
Furthermore, it was proposed to further strengthen the compliance review mechanism for overseas investment, and establish and improve the system of overseas investment decision-making, financial management and accountability for violations.
The Code of Conduct for Overseas Investment Operation of Private Enterprises” promulgated in 2017, advocates “fulfilling social responsibilities”, and encourages overseas branches of private enterprises to establish a sound corporate social responsibility information disclosure mechanism, to disclose social responsibility information and performance in a timely manner, releasing social responsibility or sustainability reports regularly.
At the same time, as the first-line supervision body for the overseas business behaviour of Chinese-funded enterprises, the Economic and Commercial Office of the Chinese Embassy abroad has also increased supervision over the overseas behaviour of enterprises.
For example, in December 2017, the Economic and Commercial Counsellor’s Office of the Chinese Embassy in Ethiopia issued the “Notice on Strengthening the Self-discipline and Supervision of Corporate Overseas Behaviour”, which forbids destroying the local environment, dispatching labourers in violation of laws and regulations, defaulting on workers’ wages and infringing the legitimate rights and interests of labourers, or obtaining projects or support through bribery, money politics and other means.
In the field of anti-corruption, China joined the United Nations Convention against Corruption in 2005, and the Criminal Law has been repeatedly amended in line with the Convention. The Criminal Law Amendment (VIII) promulgated in 2011, stipulates that those who grant financial aid to foreign public officials or officials of international public organisations in order to secure improper commercial interests will be convicted of the crime of bribery and punished.
At the same time, the Chinese government has also taken anti-corruption cooperation in the construction of the Belt & Road as an important part of the entire international anti-corruption cooperation. In recent years, from the Beijing Anti-Corruption Declaration to G20 High-Level Principles on Cooperation on Persons Sought for Corruption and Asset Recovery, a series of “China Programs” and “China Propositions” are leading the international anti-corruption cooperation to develop in depth.
On the whole, China is expanding the scope of policies related to responsible investment, continuously refining the foreign investment supervision system, so that foreign investment supervision and guidance are entering the systematised and institutionalised stage. Therefore, the high-quality Belt & Road construction diligently responded to the concerns of all parties and demonstrated China’s greatest sincerity.
Challenges for the High-Quality Belt & Road Construction
The high-quality Belt & Road construction still faces a series of problems or challenges.
First, the current system of international rules is large and complex, which includes both formal intergovernmental agreements or global conventions and informal codes of conduct or practices, and covers both economic fields such as investment and trade as well as social and political fields such as the environment, labour rights, and anti-corruption. The subjects developed include the United Nations agencies with strong legality, as well as the OECD and a large number of international non-governmental organisations.
Second, the construction of the Belt & Road can be regarded as an extension of the development experience of China, which advocates strategic practices such as opening up, infrastructure first, and development finance. In its own successful process, China has not completely copied the norms set by Western or international institutions, but has followed a problem-oriented and step-by-step approach.
Third, China has always adhered to the principles of equality and mutual benefit, non-interference in internal affairs and no attached conditions in the process of foreign investment and assistance, and observing the laws and regulations of the host country in terms of environment, labour rights and interests.
However, the countries along the Belt & Road are mainly underdeveloped areas in Asia and Africa, where the local laws on environmental protection and labour protection are often imperfect, and corruption is frequent. As a result, the host country has no laws to abide by when settling a dispute, which is beyond the grasp of the laws and regulations of the home country.
Fourth, most of the so-called “international rules” are mainly promoted by developed countries. China and the developing countries are limited in participation, and some rules are not applicable because they are too demanding for developing countries.
However, we must also recognise that the Chinese government and enterprises, policies and practices still have a lot of room for improvement, and the relevant policies are generally lacking in cohesiveness, pertinence and normativity. Therefore, the building of rules and standards will be a key for promoting the high-quality development of Belt & Road, but it will also be a long-term dynamic process that requires the joint efforts and mutual learning of all parties.
Recommendations on Promoting the High-Quality Belt & Road Construction
In order to cope with the “great changes in the world unseen in a century” and adapt to the requirements of the joint construction of the Belt & Road cooperation with high quality, Chinese enterprises involved in the Belt & Road construction, need to take various measures comprehensively and make efforts in multi-aspects.
The first is to raise awareness and unify thinking. Most Chinese-funded enterprises are unclear about the strategic objectives of foreign investment, the necessity of participating in the Belt & Road construction business, and the role of overseas business in the overall business structure of the company, so they should develop corresponding strategic planning and implementation plans based on comprehensive combing and analysis of overseas business, and make dynamic adjustments.
The second is to improve compliance awareness, ability and system building in environmental protection, labour capital relationship, compensation for demolition, community participation, and anti-corruption.
The third is to strengthen the research and judgement of the general trend and analysis of key factors, carry out public opinion tracking, and strengthen security assurance and risk response.
The fourth is to attach importance to improving the quality and effectiveness of various projects, enhancing the sense of gain for the general public in the country where the project is located, enhancing the interests of the people of the participating countries, and obtaining the support of the relevant parties to the greatest extent.
The fifth is to do a good job of commercial feasibility assessment, and make emergency plans as soon as possible, especially to formulate exit strategies for any potential problems that have not been resolved during the contract negotiation process, and strive to find reliable and trusted partners to share risk.
The sixth is to make innovations in corporate social responsibility practices, attach importance to publicity and communication, enhance corporate brand building, and strengthen exchanges for confidence building.
Core Experience of the China-Myanmar Oil & Gas Pipeline Project
Taking the China-Myanmar oil and gas pipeline project in-depth research as an example, this project overcomes the difficulties of complex terrain, ecological diversity, weak social support, constraints of local material procurement and human resources, and the transformation of the Myanmar government, to successfully pipe the gas and oil. Moreover, the overall goal of zero accidents, zero pollution, zero occupational injuries, and zero social safety incidents has been achieved with consistency, which has accumulated rich experience and can provide reference for major Belt & Road cooperation projects.
In addition to the high degree of attention of both governments, the core experience of project success also includes the following aspects: First, adhere to the concept of openness and co-construction and commercial operation for strategic projects, and follow the generally accepted international rules in project construction, procurement, and operation.
For example, the China-Myanmar natural gas pipeline project adopted the equity structure of “four countries and six parties”. During the construction process, the project selected outstanding enterprises through public bidding, ensuring the high quality of contractors, suppliers and partners such as legal, auditing and tax consulting agencies, and attached great importance to the participation of enterprises in the host country.
Second, adhere to high quality, high standards, and introduce standards that are generally supported by all parties. For example, they strictly complied with standards related to international pipeline projects such as the American Petroleum Institute (API) and the American Society of Mechanical Engineers (ASME).
They also employed a third-party engineering supervision company to implement full-process monitoring of all contractor construction quality to strictly control construction quality. Taking the system of the “trinity” of health, safety and environment (HSE) as the carrier, they strictly implemented responsibility system for safety and environmental protection, and employed international third-party evaluation agencies twice to evaluate the environmental and social impacts of the project.
Besides this, they introduced independent third-party environmental supervision to monitor and check the environmental protection and land restoration during the construction process, and formulated plans for soil and water conservation and ecological restoration along the pipeline according to local conditions, so as to restore the land form along the pipeline to the greatest extent and at full speed.
Third, adhere to the sharing of development benefits, and focus on localised operations and corporate social responsibility. The project has made substantial contributions to Myanmar’s fiscal revenue by paying road rights fees, transit fees, taxes and investment dividends, and has provided clean and low-cost energy for Myanmar’s local industrial development and residents’ lives through measures such as oil and gas unloading.
Fourth, they paid attention to the management of public relations, and transform from “do something but say nothing”, “do more and talk less” to “do more and talk more”.
During the construction and operation of the project, some Myanmar media and non-governmental organisations produced false reports and provocative attacks on the project, which had a negative impact on the project and even the national image of China.
The China-Myanmar oil and gas pipeline project company responded positively, and strengthened communication with the parties and generating publicity through several media conferences, media days, project videos, publication of corporate social responsibility reports in Chinese, English and Burmese, and opening the Facebook account in a Burmese version, and positive results have been achieved.