Foreign Investment in the Mekong Region: Reducing Risk and Promoting Sustainable Development

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Dr. Zhou Goumei, Deputy Director General of the China-ASEAN Environmental Cooperation Center

On January 25-26, 2016 the U.S.-Asia Partnership for Environmental Law organized and co-hosted the “Foreign Investment in the Mekong Region: Reducing Risk and Promoting Sustainable Development” Symposium in Beijing in cooperation with the China-ASEAN Environmental Cooperation Center, Global Environmental Institute, and the Wildlife Conservation Society.  

Over the course of the last decade and a half since China first introduced its “Going Out” strategy, it has emerged as one of the largest sources of overseas foreign direct investment (OFDI) on the planet.  In 2012 China became the third largest source of OFDI behind the U.S. and Japan, and some observers predict that China will indeed overtake the U.S. within the next few years.  A large portion of investments being made by China OFDIChinese enterprises have focused on China’s neighbors in the Greater Mekong Sub-region -Myanmar, Laos, Cambodia, and Vietnam. While such investments can bring much needed economic development and improve standards of living in host countries, they also often impose adverse environmental and social burdens on disadvantaged local communities.

The Chinese government has begun to adopt measures designed to address the socio-environmental impacts of its OFDI.  For example, in 2012 the China Banking Regulatory Commission issued its Green Credit Guidelines, which, among other things, require Chinese banking institutions to develop environmental and social risk assessment criteria to determine credit ratings and access for potential clients.  Additionally, in June 2013 China’s Ministry of Commerce and Ministry of Environmental Protection jointly issued the Guidelines for Environmental Protection in Foreign Investment and Cooperation.  These guidelines take a step in the right direction by encouraging Chinese enterprises to, among other things, perform environmental impact assessments prior to implementing development projects, identify and mitigate environmental risks, engage with and respect local communities impacted by Chinese-sponsored projects, and be forthright with information on the environmental impacts of their activities and the measures they have adopted to comply with local laws and policies.  Nevertheless, these guidelines are limited by their applicability and lack of enforceability.  Meanwhile, environmental governance in the Greater Mekong Sub-region countries remains relatively weak, and they have yet to develop sophisticated environmental protection mechanisms capable of adequately managing the impacts of large foreign investment projects on their natural resources and biodiversity in a sustainable manner.

In order to address some of these issues, we organized this regional symposium that brought together government representatives, enterprise leaders, and NGO leaders from China, Myanmar, Lao PDR, Cambodia, and Viet Nam.  We heard presentations from the China Banking Regulatory Commission, the China-ASEAN Environmental Cooperation Center, Cambodia’s Ministry of the Environment, Viet Nam’s Ministry of Planning and Investment, DPA Cambodia, and Pan Nature Viet Nam, among others.  Among the topics discussed were China’s continued policy-making efforts to reduce the environmental and IMG_1728social impacts of its overseas investments, initiatives being taken by host country governments to encourage investment while address these issues, and some of the wonderful work that Vietnamese, Cambodian, and Chinese NGO’s are doing in this area.

The event presented an amazing opportunity to contribute to the strengthening of regional communication and cooperation on these important issues.  Both the Chinese and Mekong region governments have demonstrated an eagerness to promote the sustainable development of China’s increasing OFDI in the region, and the NGO’s working in this area are engaging in some very innovative and exciting work in cooperation with governments and enterprises to promote responsible outbound investment.  We hope that this represents an initial step toward improved management of the environmental and social impacts of China’s OFDI.

We would like to thank the United States Agency for International Development for its generous support of this event.  The opinions expressed herein do not represent the opinions or views of USAID.

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