: Super User; Region; 07 October 2011; Hits: 2229

Responding to Pressure Groups

Many companies are understandably worried about the potential impact nongovernmental organisations (NGOs) could have on their operations. Given this fact, it is somewhat surprising that few have any formal procedures in place to establish a dialogue with local and international human rights or environmentalist groups.

Yet companies that establish a pro-active stance in this regard are less likely to have serious problems further down the track.

One way to head off both local and international criticism about labour conditions is to take a proactive stance with respect to subcontractors. Nike, long criticised by NGOs for employing subcontractors with questionable labour practices, is a case in point.

Nike's move in 2001 to fund a study commissioned by the Global Alliance and carried out by a Jakarta think tank uncovered a number of uncomfortable allegations about overtime, sick leave and verbal abuse in its Indonesian factories. But the company also won kudos for its determination to fix the problems by launching independent investigations into the allegations and sending out compliance teams. The company also made the full report available on its website, and since then has followed up with independent reassessment reports outlining workers’ views of workplace improvements in Nike contract facilities.

Singapore-listed Golden Agri Resources, part of Indonesia's Sinar Mas Group, faced a similar situation in 2010 when Greenpeace launched a campaign to force the company to implement environmentally friendly practices in its vast palm oil plantations. Faced with the prospect of losing major customers such as Nestle, the company invited Greenpeace and other environmental groups to help it draw up environmental protocols that now recognised as among the best in the industry.

In dealing with the local population, dialogue should not be limited to discussions with the national government or the local elite. This can be a recipe for disaster, particularly when – as is still the case in many Asian countries – the results of formal elections are not necessarily a good indicator of public sentiment. Other moves designed to share the benefits of the investment with the local community rather than simply with the government (by way of taxes) also help. These include providing a high proportion of good jobs for locals (including managers) and using local suppliers.

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Key Political Risks

Asia is the fastest growing region in the world, and is likely to remain so in 2013. However, a number of risks cloud the picture.

The good news is that domestic demand in the region remains strong and should continue to cushion the impact of weaker external demand on overall economic growth. The completion of national elections in Japan and South Korea in December 2012 should also help reduce political uncertainties.

But Asian governments will need to guard against the adverse impact of prolonged easy financial conditions on inflation.

Rising inequality also continues to threaten social stability. Ethnic and religious rivalries remain just below the surface in many countries. When combined with government corruption and (in some countries) high youth unemployment, this could become a deadly mix. This seems particularly true of China.

Territorial disputes also require close monitoring. Much diplomatic activity in the new year is likely to be centered on finding ways to reduce tensions over resource-rich islands in the South China Sea, where Beijing's claims overlap with those of Japan, Vietnam and other Southeast Asian states. South Korea and Japan also have rival territorial claims.

North Korea remains the wild card. Inclined to believe its own propaganda, Pyongyang's new leadership could miscalculate, making belligerent moves that plunge the region into a military conflict that nobody wants.