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Vietnam Update  our English newsletter will appear Quarterly and cover CSR and labor issues relating to Vietnam and the region.

 

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October 20, 2003

Issue 9

   
V I E T N A M      U P D A T E

from  GLOBAL STANDARDS

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Vietnam Labor Law Compliance CD Rom — UPDATED !
We have issued an important update to our Labor Law Compliance Reference, which includes a dozen updated regulations appearing during 2003, in Vietnamese and English. 

Included in the update are the following New & Update Regulations

Decree No.39/2003/ND-CP dated April 14, 2003 on employment (Replacing Decree No.72/CP)

Decree No.02/2001/ND-CP of January 9, 2001 detailing the implementation of the Labor law and the education law regarding job training.

Decree No.44/2003/ND-CP dated May 9, 2003 on labor contract (Replacing Decree No.198/CP)

Circular No.12/2003/TT-BLDTBXH dated May 30, 2003 on wages for laborers working in State enterprises.

Circular No.13/2003/TT-BLDTBXH dated May 30, 2003 on wages for laborers working in enterprises operating under the Enterprise Law.

Circular No 14/2002/TT-BLDTBXH
dated May 30, 2003 on wages of workers employed in foreign-invested enterprises and foreign or international agencies and organizations in Vietnam (Replacing Circular No.11/BLDTBXH-TT dated May 3, 1995)

Circular No. 15/2003/TT-BLDTBXH of June 3, 2003 guiding implementation of the provisions on overtime working in the Government’s Decree no. 109/2003/ND-CP of December 27, 2002

Circular No. 16/2003/TT-BLDTBXH of June 3, 2003 guiding implementation on working hours and rest time for workers doing seasonal jobs or processing export goods on orders.

Decree No.33/2003/ND-CP dated April 2, 2003 amending and adding to Decree No.41/CP on labor discipline and material responsibility.

Circular No. 10/2003/TT-BLDTBXH of April 18, 2003 guiding implementation of compensation and allowance regimes for workers subject to labor accidents or occupational diseases (Replacing circular no.19/LDTBXH-TT)

Circular No. 07/2003/TT-BLDTBXH of March 12, 2003 guiding the implementation of a number of articles of the government’s decree no. 01/2003/ND-CP of January 9, 2003 amending and supplementing a number of articles of the social insurance regulation promulgated together with the Government’s decree no. 12/CP of January 26, 1995 (Replacing circular no.02/1999/TT-BLDTBXH)

Circular No.08/2003/TT-BLDTBXH of April 8, 2003 guiding the implementation of convalescence and health restoration regime prescribed in the government’s degree no. 01/2003/ND-CP of January 9,1003 (Replacing circular no.11/2001/BLDTBXH-TT)


For more information, please send us an email at Laws@Global-Standards.com

Top 5 MBA Schools for CSR Leadership 

Leading MBA Programs for Environmental and Social Management

(in alphabetical order)

George Washington  

Michigan  

North Carolina (Kenan-Flagler)  

Stanford  

Yale  

York (Schulich)

The Aspen Institute recently announced the results of survey of leading Business Schools who are training tomorrows leaders in Corporate Social Responsibility (CSR).

Beyond Grey Pinstripes 2003: Preparing MBAs for Social and Environmental Stewardship is the fourth annual report on business school CSR performance. Seeking to emphasize the importance of preparing students for a more comprehensive approach to social and environmental stewardship, the report compares MBA programs on the basis of their accomplishments across both domains. Profiles of all 100 schools surveyed and further details are available online at:

http://www.beyondgreypinstripes.org/results/index.cfm

Vietnam News Briefs 
JC Penney set to place $500m in orders for clothing 

US retail giant JC Penney has pledged to place orders worth $500 million at Vietnamese clothing manufacturers over the next two years.

The Vietnam Investment Review quoted department store vice president, Rodney Birkins, as saying the firm expects to place apparel orders worth $200m this year alone.

"Our company's policy is to concentrate our production in a few countries which manufacture textiles and garments effectively and Vietnam is one of our targets."

"This is a long-term project which will help Vietnam prepare a better competitive position in the world market for when the quota system is removed for WTO members by the year 2005," he said. 

Vietnam Investment Review


Workers laid off due to lack of contracts

Nearly 2,000 workers, mostly in the garment and footwear industries, were laid off after export contracts dried up, reports the Federation of Labor and Business Club in HCM City.

More than 700 employees at the Lan Huong Footwear Company and Youg Shen Limited Company in Hoc Mon District lost jobs because their State-issued export quotas were exhausted.

Three clothing enterprises, Quoc Te Garment Co, Woowang Vina Enterprise and Binh Minh Garment Co, laid off 200 workers, and at Thai Duong and Huy Hoang Garment firms, 50 workers were sent home.

Idled workers are normally entitled to 70 per cent of their salaries during a work stoppage.

Nguoi Lao Dong (The Laborer)

Workers walk off job at electronics firm

About 200 workers at Kimanson Company Limited, a Korean-owned electronics company based in HCM City’s District 9, walked off their jobs on Wednesday morning to protest an alleged breach of contract by management.

Employees say the company’s newly appointed general manager refused to give bonuses to workers for Vietnam’s National Day on September 2, as stated in an agreement signed by the Manager’s predecessor and the company’s trade union.

The Labor Federation and Bureau of Labor, Invalids and Social Affairs in District 9 tried in vain to meet with the management to settle the dispute, which remains unresolved.

Lao Dong (Labor)

Textile workers taught to prevent HIV/AIDS

The Vietnam Textile and Garment Corporation and the HCM City Confederation of Labor’s Social Activities Center organized a workshop for preventing and fighting HIV/AIDS. It was attended by workers from 50 textile and garment enterprises.

Surveys show that 80 per cent of workers in the textile and garment industry are from the provinces, live in boarding houses or private homes and are at risk of contracting the virus. Of the 70,000 HIV-positive cases so far reported, 15,000 are in HCM City and 70 per cent are among young people between the ages of 20 and 29.

Tuoi Tre (Youth)

200 workers strike at handbag maker

More than 200 workers at the Trang Nguyen Company Limited in Binh Chanh District, HCM City went on strike to demand that management abide by the Labor Code on work hours and contracts.

The company, which produces handbags for export, employs over 250 laborers but has signed three-month labor contracts with only 79 workers.

Frequent unpaid overtime has been demanded of workers, including night shifts and Sunday work.

Meeting with officials at the District Labor Federation, the managers of Trang Nguyen Co admitted their mistakes and vowed to abide by the law. After a two-day strike, the strikers returned to work.

Nguoi Lao Dong (The Laborer)

Labor unions settle two wildcat strikes

A labor dispute that led to a wildcat strike of 250 workers at Top-One Garment Company has been settled, says the Department of Labor, Invalids and Social Affairs of Go Vap District, HCM City.

In August the Taiwanese-owned company dismissed 202 workers without warning. No compensation was paid, and company management said the cutbacks were due to export order shortages.

They pledged to pay compensation for the lay-offs, including all allowances and social security.

Go Vap District’s Labor Federation and DoLISA also settled another dispute, convincing the management of Uyen Ninh Son Garment Factory to immediately pay July salaries to 250 workers. Delayed payment of salaries had led to a wildcat strike on August 20.

Nguoi Lao Dong (The Laborer)

List of hazardous jobs updated

A list of occupations considered "strenuous and dangerous" has been released by the Ministry of Labor, Invalids and Social Affairs.

Jobs added to the list are in the fields of: mining, metallurgy and engineering; electricity services; chemicals; confectioneries; textiles and garments; cigarette manufacturing; communication infrastructure; warehouses and docking parks; post and telecommunications; science and technology; agriculture; fisheries; and health services.

Lao Dong (Labor)

Building good labor relations helps curb disputes

Direct negotiations and reconciliation are the most cost-effective ways for businesses to resolve their labor problems, vice president of the HCM City Federation of Labor, Nguyen Huy Can, told a seminar on labor disputes.

 

Can said that, in order to be effective, solutions should be implemented through labor unions and need to balance the rights of both employers and employees.

 

Employers, trade union representatives and other officials at the seminar said greater clarity in labor agreements, more union representation, as well as further training for union leaders in negotiating skills and labor law would help to reduce the number and seriousness of disputes.

 

A member of the Go Vap District Party Committee, Do Van Tanh, said "establishing good relations between employees and employers is vital to help businesses minimize unnecessary labor disputes and thus create better conditions for their development."

 

Many businesses do not have a code of ethics or fail to inform employees of labor rules, resulting in conflicts and discipline violations. This was a factor in the labor strikes at both the South Korea–Vietnam Garment Company and the Hue Phong Leather Shoe Company.

 

The director of the Hue Phong Leather Shoe Company, Nguyen Kim Quat, said "regardless of the causes, conflicts between employers and employees only result in the company’s decreased credibility within the business community and a lower level of commitment from disheartened workers."

 

Only around 40 per cent of all private and foreign-invested enterprises throughout the country currently have trade unions.

VNS

ITC blaze sparks insurance row
State insurer Bao Minh has taken the International Trade Center (ITC) to court, alleging it bears responsibility for the tragic blaze last year, resulting in massive property damage and loss of life for American International Assurance Vietnam (AIA), Bao Minh’s client.

Coincidentally, ITC was also a Bao Minh client and in its suit before the Ho Chi Minh City People’s Court last week, Bao Minh called on the trade center to repay $500,000 to the insurer, the amount the company paid out to AIA for its property losses last year.

AIA had signed a property and liability insurance contract with Bao Minh when it rented representative offices and agent training classes in the trade center building. The ITC, owned by the Saigon Jewellery Company (SJC), was also ensured by Bao Minh in a property insurance contract valued at $820,000.

A Bao Minh official reported that under terms of a recent agreement between SJC and Bao Minh, the insurer had the right to withhold $200,000 from a total claim of $820,000, while awaiting a verdict from the court which convened in September.

“It is very normal to ask the owner of a building to pay our client if they are responsible,” the official said.

The insurer said the ITC’s violation of fire-safety regulations and poor management had led to the fire. However SJC maintains that they were not solely responsible for the fire and that Bao Minh would be in legal violation if it they fail to pay their claim.

ITC director Doan Thanh Thoai said the insurer could ask SJC to refund the money, “But they violated what we had committed to in our insurance contract as they have yet to pay us enough compensation.”

So far, Bao Minh has paid the ITC owners $553,336 of the $820,000 specified in their insurance contract.

Insurance experts have said it would not be easy for Bao Minh to counter claim money from ITC because it had not directly caused the fire. 

Police investigations concluded the fire was caused by the carelessness of workers who were soldering metal in the Blue Disco, during renovations. The workers and their boss have been charged and are still awaiting sentencing.

Thoai said that after the fire ITC had repaid around $160,000 to AIA out of the company’s yearly rent of $333,335, which had been prepaid.

VIR

Survey on street children & child labor
"The problem of child labor needs to be solved as part of HCM City’s social and economic development program," according to Dr. Do Thi Loan.

Presenting the results of her research survey at a recent seminar at the HCM City Economics Institute, she suggested that it would be impossible to eliminate the problem of street children, but that the Government would needs to try control the numbers of working children and protect them from dangerous jobs and abuse.

Her research found that over half of the working street children were over 12 years of age, with about one-third between the ages of six and 12. Most of the children surveyed had already worked in HCM City for over two years.

The survey found that 53.6 per cent of working children were supporting their impoverished families, while another 23.6 per cent were earning money for themselves and 9.7 per cent had been forced to work by their families.

Many of the working children were the largest income earners in their families, Dr Loan found.

Some 42% of working children earned around VND20,000 (US$1.30) per day, 39% earned between VND6,000 and VND10,000, while only 10% earned more than VND20,000.

More than 50 per cent of child laborers worked more than seven hours a day.

Loan found that about 60 per cent of the beggars lived with parents or relatives, and those adults saw begging as an easy, high-income job with no start-up costs.

She found that apart from begging, the working children sold goods on the street (40 per cent), sold lottery tickets (28.4 per cent), performed manual labor (21.6 per cent) or shined shoes (8.3 per cent).

A senior official of the HCM City Committee for Population, Family and Children, Phan Thanh Minh, told the seminar that poverty was the main reason for child labor.

Minh said that street children and child workers were exposed to many dangers. The survey revealed 30 per cent of working children had no idea about drugs or HIV/AIDS, while 18.4 per cent reported sexual abuse.

Loan suggested that the authorities should make it easier for working children to study or attend vocational training.

"They need knowledge and experience to prevent them from falling into crime or being abused," she said. "It is unrealistic to eradicate child labor in HCM City. The authorities should prevent children from working in dangerous jobs, and control the level of child labor."

She said there were three ways to manage child labor: by placing children in foster care, returning children from other provinces to their families and developing programs to allow these children to study as well as work.

She proposed that the authorities should establish penalties for organizations or individuals exploiting children and to pay more attention to poor families.

While 67.5 per cent of the parents thought the family was the most appropriate environment for children, but 96 per cent of these parents had no idea of their children’s legal rights.

VNS

Workplace accidents increase unchecked
Nationwide, workplace accidents and occupational diseases are increasing at an alarming rate, the Director of the Institute of Scientific Research on Labor Protection reported.

There are now 19 accidents per 1,000 laborers, Le Van Trinh told participants at a seminar on labor protection in HCM City, while from 1996 to 2001, on-the-job accidents increased about 130 per cent.

The Institute’s survey of 1,017 factories across the nation found that the accident rate is significantly higher than official Government statistics. Over a five-year period, Government officials cited an average rate of work-related accidents of only 2.17 per thousand workers, Trinh said.

The survey also found 17,416 laborers suffering occupational diseases and receiving social insurance in 2002, but officials expected the true number to be much higher, as many workers go without health check-ups and incidents go unreported.

Each year, about 20,000 laborers suffer from work-related accidents. Of these nearly 41.7 per cent suffer from silicosis, lung damage brought on by inhaling silica, frequently used in making glass and concrete, the survey said.
It found that most workplace accidents occurred in cities, especially those with high economic growth rates.

Labor safety officials blame the increase on poor inspection procedures, lax punishment of irresponsible employers, and workers’ failure to use protective equipment. Poor working conditions, a lack of emphasis on safety, and an unwillingness to comply with labor regulations are some of the other factors, officials said.

The Labor Ministry proposes to tighten workplace safety laws and regulations to curb the rise in the number of workplace deaths and mobilizing specialized workplace inspection agency for enforcement. 

The ministry reports that workplace accidents killed 265 people in the first six months of 2003, exceeding the recent yearly average of 414 fatalities, according to the Inspectorate Board of Labor Security (IBLS) under the Ministry of Labor, War Invalids and Social Affairs (MoLISA).

More than 500 people sustained serious injuries at work between January and July this year, as compared to an annual average of 3,075 serious injuries recorded by official statistics.

IBLS figures show violations of safety standards and regulations cause 44 per cent of work accidents every year, with unsafe machinery causing another 7.8 per cent. The rest result from a lack of safety training for workers, IBLS said.

Construction, mining and electricity sectors reported the highest number of accidents. On-the-job deaths in the construction sector account for between 16 and 29 per cent of total fatalities annually, mining 10-15 per cent and electricity 17 per cent. 

IBLS director Tran Mai said establishing an inspection agency with sole responsibility for occupational safety, occupational heath and hygiene conditions was an urgent need.

“The main causes of occupational accidents are poor working conditions, a lack of basic safety standards and sluggish action on the part of management to improve them,” Mai told a national meeting on labor inspection in Hanoi.

Mai said it was impossible for the country’s 400 labor inspectors to manage the country’s large and growing manufacturing base.

“I believe the proposed agency will help raise employers awareness and responsibility for occupational safety and health at manufacturing plants and in hazardous occupations, with frequent inspections and hefty fines,” Mai said.

MoLISA is also working on a plan for a fund to improve working conditions and compensate workers and their families for job-related injuries or deaths, by having employers contribute between 0.2 and 1 per cent of their payroll for victims of workplace accidents.

VNS, VIR

Road fatalities rise again 
Deaths from road accidents rose sharply in July, with a senior traffic safety official attributing the rise to increasingly lax traffic supervision and enforcement.

Bui Huynh Long, chief administrator of the National Committee for Traffic Safety, announced more than 1,650 accidents occurred across the country in July, killing 986 and injuring nearly 1,700. This represented an increase of 71 fatalities over June.

Long said that a major crackdown on traffic violations managed to reduce the number of accidents thought April. During the first six months of implementation, Resolution 13 saw a remarkable fall in road accidents – by 25 per cent over the same period of last year, while fatalities fell 11 per cent.

Police statistics for the year show over 267,000 cases of violations of road regulations and fines collected of VND31.7 billion (US$2 million). The department seized over 1,300 cars, 14,000 motorbikes and nearly 3,900 drivers licenses.

VNS

Disabled dream of jobs and self-employment
Physically challenged people in Vietnam have set up their own business association to protect their rights and push for the Government and business community to help provide them with vocational training and jobs.

The Vietnam Association of Business Enterprises of Persons with Disabilities held its first congress in Hanoi in September, with 130 delegates representing more than 400 businesses belonging to the disabled.

Delegates at the congress discussed problems such as incentive policies for disabled business people and assistance for them to establish companies.

The director of the office of the National Co-ordinating Council on Disability in Vietnam (NCCD), Nghiem Xuan Tue, said countries around the region have adopted a seven-point program to help disabled people as part of the second Decade for the Disabled of the Asia-Pacific Region (2003-12) – an initiative of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP).

Vietnam has pledged to implement all seven points, and additionally press to raise people’s awareness and sensitivity to the physically challenged, Tue said. 

Tue said the disabled are able to do many things, and have abilities and enthusiasm that many normal people do not have. But they face limited job opportunities due to lack of opportunities for training and education and because employers are often reluctant to employ disabled people.

Physically challenged women, who account for a large proportion of the more than 5 million disabled people, must cope with many more difficulties than men in job hunting.

He said the NCCD paid a lot of attention to helping disabled women, and with the Women’s Union, it has set up an action plan for disabled women for the next two years. Women will take part in training courses, and will receive information on gender equality, reproductive health and small business management.

Vietnam now has more than 5 million disabled people. Nearly 70 per cent are of working age, but only 3.3 per cent of them have a stable job. More than 400 businesses nation-wide now employ some 20,000 disabled people. 

VNS

Amid strong growth, Garment quotas revised for '04

A revised quota allocation for US garment exports in 2004 has been announced by the ministries of trade and industry.

The new system gives preference to companies, which have a proven export track record in the US, with 75 per cent of the quota going to these established producers, 5 per cent more than this year’s ratio.

Companies which have large, long-term contracts for the US market will get 5 per cent of the quota, up from 3 per cent, and companies which use substantial local materials will receive 7 per cent, up from 3 per cent.

Some 12 per cent will go to new-entrants or companies with strong production in non-quota categories, expanding production capacity, modern equipment, or located in remote areas.

Meanwhile, the Vietnam Textile and Apparel Association plans to explore new markets, improve personnel training and raise its profile on the web, as part of its trade promotion strategy for the coming year.

"The strategy plays a significant role in helping the industry’s businesses carry out their trade promotion plans," said Le Quoc An, association chairman.

Key projects include: setting up a Vietnam training center for industry personnel; implementing phase two of a web portal for garment exports; and surveying new markets in Africa and elsewhere, while re-evaluating existing markets in Russia and Eastern Europe.

In the first nine months of this year, Vietnam’s clothing and textiles industry is forecast to earn US$2.9 billion, more than 50 per cent higher than the same period last year, according to the trade ministry.

VNS

 
MNCs pressed to uphold environmental standards 

Asia's remarkable growth has lifted millions from poverty. But economic success has come at a heavy cost. Environmental degradation in the region is now "pervasive, accelerating and unabated," according to the Asian Development Bank.

In the past four decades Asia has lost half its forest cover and half its fish stocks. China, the region's biggest economy, has suffered chronic air pollution from burning coal, water pollution from untreated waste and soil erosion from deforestation. 

The environmental implications of Asia's growth could reverberate around the world. "With 1.3bn people and an official goal to quadruple economic growth by 2020, China's environmental performance will not only determine the well-being of its own people but will have consequences for the whole planet," says Klaus Toepfer, executive director of the United Nations' Environment Programme.

There is also a wider lesson to be learned from the development challenges facing Asia. Is pollution simply the price of development? Does this generation have to endure an environmental tragedy for the sake of future generations?

Not in the opinion of a World Bank report on "Greening Industry". In what it described as "an intriguing and hopeful story", it said that many developing countries have already turned the corner in the fight against industrial pollution.

Factories are cleaner than a decade ago and total emissions are starting to fall even in areas where industry continues to grow rapidly. "The clean-up has begun because developing countries have decided that the benefits of pollution control outweigh the costs," says the report.

A similar point is made by the Association for Sustainable and Responsible Investment in Asia, a Hong Kong-based not-for-profit group: "Only 10 years ago, corporations and investors would have seen China as a pollution haven where environmental standards were allowed to 'let slip' and of secondary importance to rapid economic growth.

"However, the authorities have tightened their grip and businesses setting up in China can expect growing levels of scrutiny."

Foreign investors can play an important role. "Stronger enforcement of these regulations is needed by government and market forces can reinforce government action," says ASRIA.

The pressure on companies to adopt higher environmental and social standards is being applied through supply-chain initiatives and the growth of "socially responsible" investment funds.

Shareholder activists are targeting companies operating in developing countries. In the US, more than 300 shareholder resolutions were filed last year, up from 223 in 1999.

Calls for companies to produce sustainability reports received more than 20 per cent of the votes on average, while resolutions about climate change, human rights and labor standards attracted more than 10 per cent of votes.

The International Finance Corporation argues that championing environmental and social issues serves companies' own interests. It can help them save costs, increase revenues, reduce risk, build their reputation and improve access to financing.

"There are compelling commercial reasons to take action, despite a common assumption that sustainability is a luxury which emerging markets cannot afford," it concludes.

But the question of how far companies should take responsibility for social and environmental problems remains hugely controversial. At last year's World Summit on Sustainable Development, partnerships between business, governments and non-governmental organizations (or NGOs - often the most effective voices for the concerns of ordinary people in the international arena), were hailed as the most promising approach to turning good intentions into practical action.

Already, private provision of health, education and water has increased in poor countries over the last two decades, as a result of a lack of government funds, poor quality public provision and pressure to liberalize the economy, according to the UN's recently-published Human Development Report.

But the growing role of the private sector has often met with fierce opposition from local communities and NGOs. This year's Kyoto water summit, which was meant to focus on how access to water and sanitation could be improved, was dogged by bitter arguments over the implications for poor communities of entrusting water provision to large private-sector companies.

Many NGOs and community groups also distrust attempts by multinationals to reduce the damage they inflict on the environment through their operations. These attempts have continued to gather pace this year, most recently in a decision by Shell and 15 leading mining companies to treat World Heritage Sites as "no go" areas for exploration.

But environmental initiatives of this sort are criticized as inadequate by many observers in academia and NGOs. "In the absence of stronger forms of regulation and more concerted civil society pressure, the process of greening business in developing countries will remain lukewarm," says a report on The Greening of Business in Developing Countries, sponsored by the United Nations Research Institute for Social Development.

This report also criticized companies for failing to promote sustainable consumption. "Initiatives associated with corporate environmentalism rarely encourage consumers to adopt very different consumption patterns that would significantly reduce environmental degradation," it said.

This criticism highlights a central concern about the gap between the efforts of businesses to reduce their impact on the environment and the worsening state of the planet. This partly stems from the relatively small number of businesses that are integrating social and environmental factors into business decisions.

But in addition, environmental improvements are being overtaken by economic growth and increased demand for goods and services.

A growing world population and increasing affluence will pile on the pressure. The biggest aspect of the problem is global warming, which is likely to result in more extreme storms, floods and droughts that will, in turn, pose a threat to development. "Climate change will further reduce access to drinking water and negatively affect the health and food security of poor people in many countries of Africa, Asia and Latin America," according to a recent reports by the World Bank and other multilateral development-oriented institutions.

Here, once again, the remarkable growth of the Asian economies underlines the seriousness of the challenges. If car ownership in China, India and Indonesia reached the global average, 200m vehicles would be added to the global fleet, twice the number of all cars in the US today, according to UNEP.
It argues that the earth's ecosystems could not cope with the widespread adoption of the consumption and production patterns found in developed countries. Environmental degradation could undermine future economic growth and pose a substantial obstacle to poverty reduction.

Clean production processes and sustainable consumption patterns must become a crucial component of the development agenda, according to UNEP's Mr. Toepfer. "We must delink economic growth and environmental degradation."

Financial Times

http://www.wbcsd.org/plugins/DocSearch/details.asp?type=DocDet&DocId=2705

IFC's Equator Principles for Responsible Lending

The banking sector's new social and environmental issue management framework raises the stakes in project finance, says Belinda Howell.

The International Finance Corporation (IFC), the private sector investment arm of the World Bank has recently been working with a dozen or so other international banks from nine countries to create a framework for revolutionizing project finance.

Signatories to the principles will commit to a framework that ensures all projects financed will demonstrate a socially responsible approach and reflect sound environmental management practices. These are known as the Equator Principles. 

The banks that have signed up account for almost a third of the international project finance community - US$25 billion in 2002 alone. It seems a viable proposition, but now the banks must roll up their sleeves and really get serious about implementation. After all, the only alternative is a minefield of very real deal breakers in terms of future liabilities.

Why now?

In 2000, an accident at a minerals reprocessing facility in central Europe led to a catastrophic release of dangerous chemicals from a waste pond into the Danube. This caused devastation to a large section of the river. The operating company was in compliance with its permit conditions and had been trying to act responsibly. However, a chain of events - none in themselves catastrophic - led to the accident and the placement of the company into administration to protect it from lawsuits being filed by the Hungarian government for more than US$100 million. 

The lesson here for international investors is to do more than simply rely on local procedures and minimum requirements but also to implement and monitor international best practice while taking an integrated risk control strategy.

Compliance to the letter of the World Bank / IFC standards or legislation is achievable, but their real value to investors will only be realized with appropriate stakeholder consultation and accurate and timely assessment of the social, environmental and economic impacts. 

Does it have teeth?

So what happens if the Equator Principles are judged to have been contravened? To meet the spirit as well as the letter of the Equator Principles will present great challenges. The bankers will want to ask themselves how meaningful specific consultations really are, how concerns raised are dealt with and communicated and how much and in what form local employment and compensation transpires. They’ll also need look at how effectively social and environmental management systems are implemented in practice and how the economy was affected and developed in both the long- and short-term. To do all this costs time and effort but it is a worthwhile investment if ultimately it protects society, the environment, the local economy and the bank's reputation. 

The banks may have to accept that the 'soft' social, environmental or economic issues can break a deal, just as technical and financial issues can. 

While signing up to the Equator Principles alone will not protect the signatory banks or their reputations, the banks should be congratulated for making public their commitment to these principles - not only by the corporate responsibility community, but also by their own investors. As Jane Fuller, the Financial Times' finance editor, wrote in June, "Companies which are less exposed to social and environmental risks are more highly valued by the market." Ms Fuller argues for companies to take a rational cost-benefit approach to corporate responsibility rather than sign up for tick-box approaches.

The driver for some banks to sign up to the Equator Principles was their continued ability to attract, recruit and retain the best workforce. 

According to Peter Woicke, executive vice president of the IFC, "[The banks] realized that without the best graduates they cannot compete, and the best people want to work for companies which pay attention to environmental and social issues."

To succeed in protecting their reputation with investors, employees and other stakeholders will require more than the bank chief executive's copperplate signature. It will demand integrating social, environmental and economic risks and issues into the process - right from the beginning of project financing. This will need to be continued throughout impact assessment, permitting and construction, the life of the operation, closure and rehabilitation of the local community, restoration of the environment and the long term development of the economy. A tough challenge, but one the banks must be prepared to commit to. 

EthicalCorp

http://www.ethicalcorp.com/content.asp?ContentID=1184

ONLINE RESOURCES

ASrIA Social and Environmental Reports

ASrIA (The Association for Sustainable & Responsible Investment in Asia) has posted several interesting reports to its web site recently.

These include:

SRI In Asian Emerging Markets

Provides up-to-date information about Sustainable and Socially Responsible Investment (SRI) in Asia's emerging markets and advice on next steps for development of SRI in Asia.

China: The Investment Agenda for Building an Environmentally Sustainable Economy

Summary health check of China’s environmental challenges and overview of the country’s legal framework with a view to setting out an agenda for investors building on recommendations from the World Bank and others.

Labor Standards in China, The Business and Investment Challenge

Overview of labor standards issues relating to investing in China. This report takes a pragmatic view of the real issues on the ground in China, including loopholes in local labor laws, difficulties of third party verification and the influence of the All-China Confederation of Free Trade Unions.

Most of these reports are available as a free download from:

http://www.asria.org/publications

Mekong Capital & Mekong Enterprise Fund

Mekong Capital manages the $18.5-million Mekong Enterprise Fund, a Venture Capital Development Fund investing in SMEs in Vietnam, Cambodia and Laos.

Backed by the Asian Development Bank (ADB), the Nordic Development Fund (NDF), the State Secretariat for Economic Affairs of Switzerland (SECO), the Finnish Fund for Industrial Cooperation Ltd. (Finnfund), Belgian Investment Company for Developing Countries (BIO) and others, the fund also partners with the Mekong Project Development Facility (MPDF) to provide technical assistance and management support to SMEs it invests in. 

The Mekong Capital web site hosts a number of useful reports and resources for Vietnamese SMEs or those interested in SRI and private sector development in Vietnam.  

For more information please visit:

http://www.mekongcapital.com

http://www.mekongcapital.com/html/downloads.htm

READINGS:  New & Noteworthy

Walking the Talk: The Business Case for Sustainable Development

A CEOs perspective on corporate responsibility, arguing that integrating sustainable development goals into corporate strategy will provide lasting shareholder value and immediate bottom-line returns. 

more...

Can Labor Standards Improve Under Globalization? 

The authors move beyond the debate on the relative merits and risks of a social clause in trade agreements and focus on practical approaches for improving labor standards in a more integrated global economy. They examine what is being done and what more needs to be done to ensure steady and tangible progress toward universal respect for core labor standards. While concluding that the ILO should have primary responsibility for labor standards, the book also suggests that the WTO should consider how to address egregious and willful violations of core labor standards.

more...

Globalization and Its Discontents

Joseph Stiglitz's book explains the functions and powers of the main institutions that govern globalization--the International Monetary Fund, the World Bank, and the World Trade Organization--along with the ramifications, both good and bad, of their policies. He strongly believes that globalization can be a positive force around the world, particularly for the poor, but only if the IMF, World Bank, and WTO dramatically alter the way they operate, beginning with increased transparency and a greater willingness to examine their own actions closely.

more...

Saving the Corporate Soul -- and (Who Knows?) Maybe Your Own... 

Even those who think the idea of a "corporate soul" is an oxymoron will be persuaded by journalist David Batstone’s whip-smart suggestions for how values can reinvent an organization’s bad behavior. Saving the Corporate Soul alternates examples of principled companies like Clif Bar and Timberland with those of innovative leaders such as Denny’s CEO Jim Adams, who recovered from a $54 million racial discrimination lawsuit to create a company hailed for its recruitment of minorities. Batstone demonstrates his core belief that "companies thrive once they align the ethics of the company with the values that drive its workers and customers."

more...

The Sustainable Company: How to Create Lasting Value Through Social and Environmental Performance 

Corporations can indeed do well by doing good, argues this dutiful if not entirely convincing manifesto on responsible capitalism. The author's beliefs that there are no unresolvable conflicts between shareholders and other stakeholders, or between profit and ethics, may strike readers as wishful thinking, and his assumption that self-interest will impel corporations to clean up their act can seem optimistic, but well-meaning executives will find much food for thought here if they can digest it.

more...

The Planetary Bargain: Corporate Social Responsibility Matters 

This book suggests corporate social responsibility (CSR) can create prosperity for both corporations and the people they serve. It presents the case for a worldwide agreement, or "planetary bargain", between private and public sectors and discusses the implications, presenting case studies and research on international companies who have adopted socially responsible programs.

more...

Harvard Business Review on Corporate Ethics 

Resolving today's most pressing questions about business behavior has become a priority in today's corporate environment. In deciding how to act, managers reveal their inner values, test their commitment to those values, and ultimately shape their characters. Readers of this collection of articles will learn to identify the theoretical and practical issues of recognizing and responding to ethical dilemmas and will find the link between good ethics and good business.

more...

Links to these and other titles can be found on our web site at: 
www.Global-Standards.com/Readings.htm
Links to other reports are available from the Global Standards web site at http://www.global-standards.com/Links.htm
Resources on CSR, labor standards and the Vietnamese Labor Code are at http://www.global-standards.com/DownloadResources.htm

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