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  Business Times Singapore 19 Dec 06
Ethical tide starting to hit Asian firms
Asian business voluntarists need to understand the rules of the game
By Kai-Alexander Schlevogt

IN THE past, multinational companies from the West enjoyed the dubious privilege of being closely scrutinised by a new class of vigilant consumers and the avant-garde of ethical activists from their home countries.

Prominent corporate targets included Nike, which became embroiled in a much-publicised and costly uproar about the labour abuses of its contractors in Asia. It was unleashed by a single determined individual whom it ignored at first.

Levi Strauss customers boycotted the company's products when it planned to scale up commitments in China.

Now, the ethical tide is turning. Increasingly, governments, NGOs and individuals are tracking the business practices of companies of Asian countries, especially China.

For example, over 600 Chinese-funded companies set up shop in Africa in the last decade in search for cheap resources. Those range from oil (a third of China's total oil imports come from Africa), platinum, copper, timber and iron ore.

Paradoxically, Chinese companies were seen as acting like the imperialists that were condemned by Lenin for increasing domestic wealth by exploiting poorer countries. They are alleged of moulding political processes in their favour and neglecting human rights on their resource safari.

There are also concerns over their Trojan horse strategy of exporting to Europe from African countries to take advantage of their duty-free status.

Chinese banks, acting as value-free riders, are excoriated for ignoring voluntary international codes that minimise harmful investments. They extend credits to African borrowers with no concern to human rights, social conditions, the environment and repayment capacity.

As a consequence, those lenders are perceived as diluting international efforts to improve African conditions, for example, by making governments such as in Angola more accountable through conditional loans.

Besides, Chinese businesses do not shy away from exporting arms to blacklisted countries such as dictatorial Zimbabwe and genocide-ridden Sudan. In Darfur, such deals even undermined an UN embargo of arms sales to the local militia.

The local population, which witnesses the large-scale destruction of local industries by cheap Chinese imports, is also developing resistance to the new 'colonists' and 'invaders'.

Expatriate managers of a Chinese company in Zambia shot and wounded several workers rioting over wages. An explosion in a premise owned by another Chinese company in the country killed 46 miners. It is alleged that unskilled workers are assigned to dangerous jobs without adequate protection.

Aversion to Chinese investments and goods are rising in Europe and North America, too, leading to changes in foreign investment rules in the energy sector, for example.

Mainland Chinese businesses are not the only target of outrage. Taiwanese electronics-maker BenQ was heavily criticised for forcing its mobile-phone business in Germany into insolvency after only one year of operation. The acquisition forays of Indian companies often have been met by scepticism.

It is futile to examine the motives of Western critics, such as their desire to keep spheres of influence and curb the rise of emerging rivals. Pointing to their embarrassing colonial past does not help either.

The first law of publicity states that published opinion and perceptions constitute reality.

In view of strong vested interest and prejudices against the nouveaux riches, Asian investors must realise that a positive corporate image backed by determined acts of social responsibility is not an optional and cosmetic add-on, but the sine qua non for success abroad.

Hardened by unfettered and cutthroat competition at home, Asian business voluntarists need to understand that the rules of the game in other markets differ markedly and adjust their practices accordingly.

The choice is simple: Either profit ethically or die unethically!

If they simply continue current habits abroad, their strengths may well turn into weakness.

The ancient Chinese knew that when the tiger descends from the mountain to the plains, it will be bullied by the dogs!

The author, a former professor at Peking University and McKinsey & Co consultant, is an associate professor at the National University of Singapore Business School
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