By All Means Necessary (14 page)

The environmental consequences of weak rules in resource-rich countries can be compounded when corruption is possible. In a survey of three thousand business executives conducted by Transparency International, Chinese companies placed second only to their Russian counterparts as those most likely to bribe when doing business abroad.
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In Mozambique, for example, one civil society activist has noted that bribery is rampant in the logging sector. He described the problem of illegal logging with regard to China as significant and the result of malfeasance on the part of both countries:

When the [Mozambican civil] war was over, the United States and other countries invested a great deal of money in de-mining [i.e. removing land mines]; the United Nations and other donors footed the bill. Then the Chinese started cutting in those areas for timber. There is no capacity to deal with it. There is a small, unprepared group linked to the Agriculture Ministry, but they have little technical expertise in forestry. There is a high propensity for bribery.
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As Chen and Zhou suggest, however, Chinese companies pay a steep reputational price when their environmental performance is poor. In 2005, the China Metallurgical Group Corporation paid $1.4 billion for the option to develop the Ramu nickel mine in Papua New Guinea (PNG). MCC held 61 percent of the project, while other Chinese investors as well as the Australia-based Highlands Pacific held the rest. The deal was agreed to at the highest levels between PNG's Prime Minister Michael Samore and the Chinese government. In 2010, the Chinese leadership extolled the potential of the Ramu mine to improve Sino-PNG relations. Li Keqiang, who was soon to become the premier of China, referred to the mine as representing “win-win cooperation” between China and PNG. He even went so far as to say that as a result of MCC's dedication to sustainable development and corporate social responsibility, the Ramu nickel mine was a “model for cooperation in mineral resources and other fields” between the countries.
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Yet the reality on the ground, like that of most mining projects in PNG, turned out to be different. The mine was beset by environmental and land tenure problems from the start. More than 95 percent of PNG land is privately owned, with much of it controlled by various tribes. According to China's Ministry of Commerce, the tribal borders are ill defined, leading to constant conflict over correct ownership; indeed, land tenure issues inflamed by past Western mining investments led to a long-running civil war.
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In the MCC case, PNG landowners consistently asserted that their concerns were ignored and that they were falsely represented by “landowners associations who represent[ed]…only selected clans.”
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The landholders held a large demonstration in January 2012, which ended in chaos; during the mayhem, the man whom MCC recognized as representing the landholders—despite the landholders' claims to the contrary and who had previously spent time in jail for “abusing genuine landholders”—died.
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Pollution also stoked discontent. MCC announced that it planned to dump 100 million tons of heavy metal and toxic mine waste into the Basamuk Bay near the mine over a twenty-year
period. This method of deep-water disposal has been used at a number of mining sites throughout the world, but it is highly controversial.
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Although the company claimed its dumping system was safe for the environment, critics immediately pointed out that 150 meters did not qualify as “deep sea” and that the EIA undertaken by MCC's partner Highlands Pacific was “sloppy, ” ignoring the identification of the types of toxins in the tailings, the consequences of depositing tailings on the seabed, and the impacts of the tailings on marine life.
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The PNG government initially attempted to protect MCC, passing an amendment to the country's environment act that prevented resource companies from being prosecuted over environmental damage. As in the case of the Ichimpe mine in Zambia, however, the advent of a new set of leaders in PNG changed the relationship between the mining company and the government. In January 2012, the newly installed government of Peter O'Neill revoked the act. The environment minister stated, “Repealing the Environment Act Amendments is a big first step for myself and the O'Neill-Namah government in restoring the proper rights of landowners to be able to protect their interests.”
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In April 2012, the minister of environment and conservation shut down the mine, citing concerns that a slurry pipeline had been built too close to a major highway and was not raised on steel supports as the law required. He admitted, under questioning by the Eastern Highlands governor in a parliamentary hearing, that there had already been problems when the pipeline was moved onto a major road.
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The legal battles were significant. In 2011, the National Court judge David Canning acknowledged that the dumping would seriously harm the lives and future of thousands of coastal people and that the environmental consequences of the dumping would be irreversible. But as he also noted, MCC had a permit, the dumping was permitted for ten years, and an injunction might affect investor confidence. On an appeal in December 2012, the court came down with a split decision supporting MCC's ability to dump the tailings into the sea. However, protests have continued.
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The PNG experience points to the potency of any Chinese resource acquisition efforts that encounter concerns over land ownership. This is on acute display when Chinese companies' investment target is land itself.

As the Chinese seek secure sources of agricultural products, their efforts stir controversy. Grassroots and occasionally official protests related to China's overseas farmland acquisition have occurred in countries as diverse as Australia, Argentina, New Zealand, Kazakhstan, and the Philippines. In the Philippines, even though the government is eager to further agricultural trade with China, people have protested the investment. Popular opposition there led to the suspension of an agreement to lease almost three million acres of land for the production of hybrid corn, rice, and sorghum to be shipped back to China.
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And in Kazakhstan, protests arose over an agreement to lease one million hectares of farmland to grow soy and other crops.
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One protestor claimed that “the Chinese have only one aim—to take our land.” At the same time she placed equal blame on the Kazakh government: “The Chinese are not to blame. It's our corruptible officials.” Another argued, “We see the potential for a situation whereby one day, when it comes to repaying nearly $20 billion to China, we will have no money and no oil—because the oil is no longer ours….We will start giving away our territory.”
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In Brazil in 2010, the government announced a new interpretation of its land laws, which prohibited foreigners from purchasing land in Brazil except as minority stakeholders in joint ventures. This move was not explicitly targeted at China, but according to Brazilian agricultural officials the explosion of Chinese interest in land purchases contributed to the decision to revise the formal understanding of the law.
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Importantly, some Brazilian governors and business leaders in soybean-rich states concluded that most of the Chinese companies were not serious about doing business. According to a business official, “all the local governments in China have funds for foreign direct investment that they must spend, and a trip to Brazil is not a bad way to spend the money.”
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Chinese agricultural firms' efforts to purchase large tracts of land in Argentina have also raised both environmental and nationalist alarm bells. The failure of a $1.5 billion investment in the development of some 320, 000 hectares of unused agricultural land in Argentina's Río Negro Province by Heilongjiang's Beidahuang Group reflected such concerns. The associated lease was scheduled to extend for twenty years, allowing the Chinese company to produce soy, corn, wheat, barley, and sunflowers. The deal was publicized by Río Negro Province as a “food production agreement, ” while local opposition called it a “land grabber's instruction manual.”
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Challengers to the deal also raised concerns over the environment. Conservation biologist Raul Montenegro observed that Río Negro's government officials violated a number of laws, since they “didn't do any tests on the land to measure the possible impacts of these activities, nor did they consult anybody before signing the agreement.” He also noted that investment by China was of particular concern to many in Argentina: “China is the country most affected by the extension, intensity, and economic impact of land degradation. So it is difficult to believe that they won't make the same mistakes with their land in Río Negro as they have in their own country.”
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In December 2011, the Argentinian Congress passed legislation restricting ownership by a foreign individual or company at 1, 000 hectares and placed a 15 percent cap on the amount of land available to foreign landowners, of which no single nationality can own more than 30 percent. Land that contains or borders major and permanent water bodies is further barred from foreign land ownership. As in the case of Brazil, the Argentinian decision was at least partly influenced by the rapid rise in Chinese demand.

Even some Chinese officials are uncomfortable with the country's overseas investments in agricultural land. Xie Guoli, a senior official at the Ministry of Agriculture, commented, “It is not realistic to grow grains overseas, particularly in Africa or South America. There are so many people starving in Africa, can you ship the grains back to China?”
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Others fear that closer integration with the international community will breed dependency. As Minister of Agriculture Han
Changfu stated in 2012, China “will not and cannot” rely on imports to feed itself.
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However, these cautionary voices are drowned out by others. A few Chinese officials, for example, have spoken publicly of their desire to have their agricultural workers farm land abroad. In 2007, the head of EXIM Bank, Li Ruogu, suggested that Africa has plenty of land but not a correspondingly significant level of agricultural production. His answer: “There's no harm in allowing [Chinese] farmers to leave the country to become farm owners [in Africa].” Moreover, Li promised the bank would support this effort through investment and project development, and help with the sale of products.
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There is a fear, not entirely unfounded (though still usually exaggerated), that China will simply export a large number of its people and, in the process, some of its problematic domestic practices. One African leader referred to an oft-cited estimate of one million Chinese farm laborers working in Africa—widely understood to be nowhere close to reality—as “catastrophic.”
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Enthusiasm for Chinese investment in resource-rich countries often centers on the potential for new jobs directly in resource production. The reality of Chinese investment as a jobs program, however, is more complicated.

Chen and Zhou's research on Chinese firms' practices overseas lays out a number of labor-related issues. They note that these companies often take advantage of low labor costs. This means they tend to gravitate toward projects that are inherently predisposed to supporting lower wages (mines of marginal quality, for example), perhaps not an economic problem for the resource-rich countries but certainly a public relations problem for the Chinese. (Many of the higher-quality resource projects have also been taken by Western firms that invested far earlier than the Chinese, often leaving the latter with more challenging mines of marginal quality.) Moreover, some of the companies tend to hire only Chinese citizens for certain
tasks or operations, a practice that often results in “dissatisfaction and anger among local trade unions and workers.” In addition, because the enterprises don't have experience negotiating with trade unions and are used to government support and intervention, they find themselves “largely ineffective” in managing labor disputes that arise abroad.
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Chinese companies often pay workers considerably less than typical rates paid by multinationals and ignore workers' rights, desires for vacation time, and need for a safe work environment. Australian scholar Graeme Smith's study of conditions in PNG mines notes that when mineworkers with previous experience at both Chinese-run mines and non-Chinese-owned mines were asked to compare the two, all reported negatively on the living and working conditions at the former in comparison to the latter.
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The difficulties can also be compounded by cultural factors. For example, a report prepared for the Extractive Industries Transparency Initiative (EITI) that focuses on Africa concluded that “language barriers, cultural differences and misunderstandings arising from these are impediments to communication and interaction between Chinese, African and Western stakeholders in Africa that should not be understated.”
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The investment of China's Shougang Group in Peru's Marcona mine reads as a textbook example of many of these phenomena. The Marcona district in southern Peru is famous for its spectacular location on the Pacific Ocean. For Beijing's Shougang Group—one of the oldest SOEs (the company was founded in 1919) and the country's sixth-largest steel company—however, the lure of the remote region was not its stunning coastline but its rich deposits of iron ore.
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The Marcona mine, with reserves of almost one billion tons of iron ore (a large-sized mine, similar to the Belinga mine in Gabon), was originally discovered and developed in the 1950s by Americans before being nationalized by Peru in the 1970s. In 1992, Shougang made history by becoming the first Chinese company to invest in Latin America with its purchase of the Marcona mine. The investment was also, for a while, the biggest foreign investment in Peru.