Nine steps that Asia investors can take for human rights--and for themselves.
Doing good helps you to do well, or so the conventional wisdom says. But doing good, and well, in Asia's totalitarian, semiauthoritarian or recently democratic countries is often a challenge. Here are nine pointers for navigating the shoals of doing business in the region.
Do due diligence. Make knowing basic human rights conditions in a country part of your investing due diligence. For example, in Indonesia, after Suharto's long military dictatorship, the gentleman in the nice business suit you are dealing with may very well be a former general with a nasty human rights record. Across Asia governments are making significant progress along the road of economic reform, but political and legal reforms sometimes lag. Some governments in Asia believe rights can be broken into bits, accepting only some economic rights and repressing the political rights that underpin a stable investment climate. But freedom of movement, assembly and speech, for example, are both political and economic liberties. Limits on any of these could constrict your bottom line. And how governments handle human rights issues can tip you off as to what you might face in the event of a corporate dispute or joint venture gone sour.
The rule of law should rule. Many governments have what is best called "rule by law," where political party or government officials are above the law and rarely brought to justice--for either human rights abuses or large-scale corruption. But fair trials and due process don't just benefit would-be dissidents. If your joint venture comes apart, you will want better than a kangaroo court to help dissolve your business relationship. You will not want to get into a bidding war for the favor of a judge in Vietnam or Pakistan. It is no accident that the still-bewigged barristers of Hong Kong, who so doggedly defend human rights, the rule of law and basic freedoms, are also among Asia's best courtroom lawyers for commercial enterprises.
Property rights and wrongs. You already care whether your intellectual property rights will be respected, but you also should care how officials respect other kinds of property rights. In several countries officials have a habit of turning private property into government property, with predictably unpopular results. In India the Enron scandal referred not to U.S. accounting shenanigans but to the company's deals with Maharashtra state officials to seize land without compensation and the suppression of the local protests that naturally followed. Make sure your factory is welcome, or at least tolerated, in the neighborhood by understanding just how you got the rights to operate there.
Joint ventures, not adventures. China's PLA: no. Singapore's EDB: yes. In addition to their military activities, People's Liberation Army officers and former officers are involved in industries from telecoms to real estate. It is generally sensible to avoid investing with armies, and those that have committed televised massacres can create serious reputational risks. The worst that has been said about the Economic Development Board of Singapore is that it focused too long on attracting chipmakers instead of biotech companies. Armies from Indonesia to Cambodia are in business today, but if you want the thrill of playing with soldiers, go down to your local recruiting office and sign up instead of making dodgy deals with generals. Remember, when things go bad, they have the guns.
Labor pains and gains. The rewards of an industrious, ambitious regional workforce are dissipated when forced labor enters the picture, as it can in Burma and China. Employ adults rather than children. Welcome independent inspectors who will spot problems that you may not notice and save lives and your reputation. Allow trade unions to operate freely in factories, as they will also help you hear about problems sooner rather than later. Don't subcontract and then act like what happens in the subcontractor's factory isn't your problem. As many garment companies have learned, sooner or later it will be.
Know the value of the free flow of information. Operate openly and demand the same from your hosts. It may seem nice that in some countries you won't have to worry about pesky journalists inquiring into the soundness of your financial backing or your safety record. At some point you may wish someone had asked basic questions of your competitors or the silent partner you had to take on but don't really know. It can be especially maddening if media fail to report accurately which government agency that week was actually in charge of granting the license you thought you had. And if you are in the information business, as Yahoo and Google are, you really should live up to your core value as a gateway to information and not become an information gatekeeper.
Today's great deal can be tomorrow's corruption headline. Across Asia some of the most corrupt leaders and governments also have some of the worst human rights records. In Cambodia, for example, corruption is the handmaiden of rights abuses. Want to make a deal? Go see Hun Sen's man, but remember that the land you are buying for your factory might have been a village that the bulldozers flattened without your knowledge but on your behalf. Those of you lining up to build Olympics venues in Beijing: Find out how that land came into the current "owner's" possession. Tens of thousands of Chinese are filing complaints for illegal forced evictions as China redevelops its urban areas. Participating in a construction project on someone else's land, however profitable, is not the kind of thing you will want to be answering questions about, either internally or from outside.
Natural resources can be a curse. In some countries natural resources such as timber, oil or gold--contributors to long-running conflicts in Burma, Indonesia and Cambodia--can be a major cause of human rights violations. Control over resources gives governments a strong incentive to maintain power, even at the expense of public welfare and basic human rights. In many resource-rich countries governments are abusive and unaccountable and grossly mismanage the economy to boot because they ignore the need to develop their human capital. Natural resources have a way of becoming the property of the few (often ruling family members). The resulting kleptocracies may offer what seem like good deals, but good luck when the price of doing business is summarily raised.
You have leverage. And you don't have to check your values at the door. When investing in a repressive political environment, find out whether you are going to be providing technology that helps a government suppress its people. Beijing has long been trying to quash political speech on the Web for China's estimated 103 million Internet users, but it got a boost this summer in content blocking from Microsoft, which bans the words "freedom," "democracy" and "human rights" on its Chinese Web products. Microsoft's electronic kowtow generated unwanted media attention. And ultimately China probably needs Microsoft as much as Microsoft needs China. In sum, when doing business in Asia, keep in mind Mao Zedong's instruction to "seek truth from facts" (even if he didn't practice what he preached). Know the human rights situation where you do business. Know who your partners are, even the silent ones. Know who is being helped by your investment--the people you employ in good conditions--and know who is being hurt. If you can't get your counterparty to budge, take your business elsewhere.