News Review

Copyright © 2007 John Wiley & Sons, Ltd and ERP Environment

* Correspondence to: Dr Stephen Frost, Asian and International Studies, Room B7522, City University of Hong Kong, Tat Chee Avenue, Kowlooon, Hong Kong, China. E-mail: [email protected] or [email protected]

Corporate Social Responsibility and Environmental ManagementCorp. Soc. Responsib. Environ. Mgmt. 14, 243–250 (2007)Published online in Wiley InterScience(www.interscience.wiley.com) DOI: 10.1002/csr.158

News Review

Stephen Frost*Department of Asian and International Studies, City University of Hong Kong, and CSR

Asia (Hong Kong)

MID-MARCH TO THE END OF MAY SAW A NUMBER OF HIGH PROFILE STORIES AROUND the

issue of land acquisition and usage (legal and illegal), a problem that looks set to continue

unabated and in fact has become a signifi cant source of risk for companies and investors

alike. Problems in China and India have brought to light the diffi culties associated with

economic development plans that clash with rural residents whose land is acquired. In related news,

Chinese companies in Africa faced similar issues in what appears to be a rising tide of resentment

against Chinese investment on the continent (a stark contrast to the often positive announcements from

offi cials in various African countries, who perceive such investment in more glowing terms). Both of

these stories involve the same themes: does business have the right to land used by farmers or other

local inhabitants?

Property Development and Land Acquisition and Usage

Land acquisition and usage, both legal and otherwise, was the subject of widespread reportage in China

during the period under review. Several high profi le cases dominated the mainland media for brief

periods, all of which saw companies portrayed in negative terms. In China, the main issue related to

property development that makes the press concerns migrant workers and the non-payment of wages

(sometimes for periods of two years and more). In these cases, however, the source of complaint and

sometimes protest is the ways in which land is sometimes acquired or the amount of compensation

paid.

The most widely reported case (in both China and abroad) about these issues concerned Yang Wu

and Wu Ping: a married couple living in Chongqing, who defi ed a developer’s plans for a large site in

the sprawling western metropolis. It also brought the Chinese term ‘nail house’ to prominence outside

of China (although it should be noted that ‘nail houses’ are by no means unique – nor unique to China

for that matter – but became something of a cause célèbre on the Internet and in the press).

The story of Yang and Wu started on 31 August 2004, when the announcement was made that people

living on A site acquired by Chongqing Zhengsheng Real Estate Company would be relocated due to

construction. Almost immediately, in September, the process of removing 280 households started.

Yang and Wu refused to move, and in September 2006 the developer sent in a negotiator to solve the

244 S. Frost

Copyright © 2007 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 14, 243–250 (2007) DOI: 10.1002/csr

problem of a lone household preventing construction. Negotiations broke down, and after a protracted

court battle initiated by the inhabitants the Chongqing court handed down a decision to remove them

on 30 March 2007.

Long before this stage, however, the developer had lost patience and excavated a pit approximately 20

metres deep, leaving the small two-storey dwelling atop a solitary plug of land in a construction pit of

considerable size (hence the term ‘nail house’). Yang’s and Wu’s refusal to vacate their house attracted

widespread media attention in China. In late March, the press ran stories calling Yang Wu the ‘most

stubborn person in Chongqing’ over he and his wife’s fi ght to stay on their island of land. In March, the

local press speculated that the pair had not been ejected in the normal manner due to public opinion

weighing on their side.

Adding to public support for Yang and Wu were several Chinese blogs that reported on the issue in

ways not usually available in the mainstream press. One of the reasons for the uptake of the issue abroad

was the newsworthiness of ‘new media’ reporting from a country where blogging and citizen reporters

are not as well developed as elsewhere.

In May, citizens in the national capital awoke to a report in the Beijing Times (10 May) that in turn led

to a remarkable photo essay on the People’s Daily (11 May) online site. The Beijing Times had originally

reported on an unidentifi ed demolition contractor that moved in to demolish houses in the Chaoyang

District of Beijing (at the upmarket Sun Palace development) at 3.00am while residents were still asleep.

The land is owned by the Beijing Xinji Property Development Co Ltd and negotiations with a handful

of remaining residents had broken down on 28 April over relocation compensation. Heavy earthmoving

equipment badly damaged the houses in the fi rst attempt, but some were still standing – but uninhabit-

able – when photographers arrived on the scene. As the photos published online graphically showed,

residents did not even have time to collect personal effects as they fl ed their rooms (or were reportedly

dragged in some cases). Representatives from the developer (Beijing Xinji) say the company did not give

the go-ahead for the demolition and the Tenglong Demolition Company – the offi cial demolition fi rm

contracted by Beijing Xinji – denied all knowledge of the mysterious early morning demolition. Police

said they were investigating.

Finally, pictures appeared on various websites in early May showing the house of Zhang Zhaolie, the

head of Shangyi Village (in Gurao Township located in the southern province of Guangdong). When Mr

Zhang and his family left their home (along with many other villagers), they stretched a banner across

the entrance gate to remind passers-by of a dispute over land. In Chinese characters the sign said ‘Give

me back my land, give me back my existence’.

The CSR connection to this story is not immediately apparent, but Gurao is part of the city of Shantou,

and it has become famous in China for its underwear factories. According to government statistics,

there were 396 knitting companies and over 200 family workshops making underwear in 2003–2004

for RMB 2.54 billion (US$330.8 million) in sales.

The products made in Gurao factories are exported to over 30 countries, and factories such as Shantou

Chun Wing Textiles state on their websites that they supply to brands including Maidenform, Warnaco,

Avenue, Leading Lady, JC Penney’s, Target, Mervyn’s Wal-Mart, Sear’s, Zellers, Marsylka and Chiecas

(a Japanese brand). Trouble has been brewing in villages such as Shangyi for some time over the rising

price of land and an alleged land grab by offi cials, who have profi ted by illegally selling plots to business

to build profi table underwear factories.

Things came to a head in early May, with one source (ESWN, 10 May) stating ‘A certain knitting

factory was besieged by almost 1,000 villagers who demand the boss to give a full accounting of how

he got the land’. No factory was named, but surely the chances are high that a brand is implicated in

this mess. Another report at ESWN (11 May) stated that ‘villagers turned around to a four-storey factory

that was allegedly illegally using public land’. The villagers smashed the windows in the factory and

News Review 245


issued a warning that the factory must move away by 15 May or ‘assume the responsibility about what

happens next’.

It is interesting to note that the state news agency – Xinhua (25 April) – reported that developers could

face fi nes of up to 10 percent of the total budget of their projects if they try to build without permission

or do not follow plans. A draft law proposed in late April said developments without planning permits or

deviating from approved plans would be stopped and the builders fi ned between 5 and 10 percent of the

project’s budget. If developers refused to halt construction, local governments would have the power to

close down the building site and demolish the partly built development. The tough draft law was discussed

for the fi rst time at the Standing Committee of the National People’s Congress (NPC). There was no word

on when it might be promulgated, nor any discussion of how such a law might be enforced.

Similar contests over land have emerged in India as well. Italian car-maker Fiat has become embroiled

in a dispute over a joint venture to produce cars with Indian conglomerate Tata. Three Italian unions

representing workers at Fiat have called on company management to take action to move the site of

the planned small car plant in Singur, West Bengal. At the centre of allegations is that the plant would

employ 2000 workers, but up to 30 000 people would lose their land and livelihood, including agricul-

tural labourers, marginal peasants, sharecroppers, cottage industry and other rural workers, who would

receive no compensation under the procedure.

Italian affi liates of the International Metalworkers’ Federation are urging Fiat for clarifi cation about the

establishment of the new production unit. According to press reports, the Fiat Group wants to produce

a ‘low cost car’. A joint statement from the Italian unions stated that ‘International and Indian labour

groups have voiced concern that such an industrial establishment would have a devastating impact on

the fertile agricultural area, which is home to about 22,000 inhabitants, many of whom would receive no

indemnity at all for the expropriation of their land. The area involved has in recent months been the site

of protest demonstrations and, unfortunately, repressive measures taken against the farmers including

the arrests of trade union leaders. The Fim, Fiom and Uilm National Secretariats in Italy are requesting

that clarifi cation be given on any participation of the Fiat Group in this initiative. They are demanding

that FIAT, together with Tata Motors, take initiatives so to ensure that the government of West Bengala

sets aside a location other than Singur in order to make the necessary industrial development possible

while safeguarding the living conditions of the agricultural community’.

In late February, the Hindu (27 February) reported that police lathicharged protesters led by social

activist Medha Patkar when they gathered near the fence of the Tata Motors’ car factory, which is planned

at Singur in Hooghly district. ‘It is not us but the police who are creating terror and a law and order

problem in Singur’, Ms Patkar said on arrival from Singur. She alleged that the police lathicharged a

group that was non-violent and was only chanting slogans.

On 9 March, the West Bengal Government signed a land lease agreement with Tata Motors for the

latter’s small car project. The West Bengal Industry Secretary, Dr Sabyasachi Sen, signed the agreement

on behalf of the State Government, while Mr Debashish Som, Managing Director of West Bengal Indus-

trial Development Corporation (WBIDC), signed on behalf of WBIDC. Speaking to reporters later, Dr

Sen said a 90-year lease agreement had been signed with Tata Motors for the project. While 645 acres

of land would be earmarked for the mother plant, 290 acres would be set aside for auto ancillary units

that would be set up there. Dr Sen declined to mention the price Tata Motors would have to pay for the

90-year land lease. He pleaded his inability to provide further details of the lease agreement since the

State Assembly is now in session.

Several days earlier, Tata Motors and Fiat India Private Limited announced the commencement of

the new Tata–Fiat dealer network to sell both Tata and Fiat branded cars, along with service and sales of

spare parts, in 11 cities across India. The Tata–Fiat dealer network will comprise 25 existing Tata Motors

Passenger Vehicles dealers and three existing Fiat India dealers.

246 S. Frost


Fresh tension erupted in May as around 200 farmers clashed with the police to reclaim their land

acquired for the project. The Trinamool (Trinamul) Congress (the group leading the farmers) claimed

that around 20 protestors were injured in the violence. The different parties met on 24 May to try and

resolve the issues, and as of late May the local government had agreed to consider providing farmland

to those whose land would be lost to the new car plant.

The Fiat–Tata car plant is only one of a number of serious confrontations between federal and state

governments and rural inhabitants. India has embarked on a program of developing special economic

zones (SEZs) across the country. For instance, in early June, the government gave its formal approval for

the development of 24 SEZs, including zones for steel, textiles, electronic hardware and export goods.

One of the most hotly contested sites is at Nandigram, a rural area in Purba Medinipur district in

West Bengal, where the government has slated an area for development as an SEZ for chemical plants.

Since 3 January, the site earmarked for the new SEZ has been the subject of a heated controversy. On

14 March, police entered Nandigram after a gram panchayat offi ce was attacked (Rediff News, 23 March).

The ensuing melee resulted in the deaths of a reported 14 locals. The shootings infl amed public opinion

to such an extent that parliament was disrupted for fi ve successive days.

In all of these cases, whether they are in China or India, the core of the issue relates to the right of

government and business to acquire land for development purposes. Fiat has found itself embroiled in

a row in India, but will surely not be the last foreign investor to do so.

Chinese Companies in Africa

The last year or so has seen an explosion of commentary (from positive to negative) on rising Chinese

investment in Africa. In general, the argument has been over the infl uence of China on the continent,

particularly over resource acquisition and claims that China may well be a new colonial power. Chinese

oil companies in places such as Darfur have also come under sustained attack from some quarters (and

led to small but high profi le divestments in the US). These negative portrayals are obviously refuted

by China, which argues that Chinese companies are good for Africans, especially when they operate in

areas where other companies will not. Commentators have paid far less attention, however, to some of

the consequences for Chinese investment (and Chinese CSR) of being in areas other companies may

balk at.

Events in late April provided an insight into what can happen when Chinese companies fail to take

non-fi nancial risks into account.

On 1 May, the Chinese Foreign Ministry confi rmed that the seven Chinese employees of the Zhongyuan

Petroleum Exploration Bureau (a subsidiary of Sinopec – one of China’s largest companies and ranked

23rd on the Fortune Global 500) kidnapped by the Ogaden National Liberation Front (ONLF) in Ethio-

pia had returned home safely after intervention by the International Committee of the Red Cross. On a

more sombre note, it also announced that the bodies of nine other Chinese nationals killed in the attack

on the facility in the small town of Obala about 120 km from Jijiga, the capital of the state of Somali

(Ogaden), were airlifted home in coffi ns.

The safe arrival of seven employees of the China Petroleum and Chemical Corporation (Sinopec) was

cause for celebration at the start of a week-long holiday in China to celebrate International Labour Day,

but the attack on Sinopec’s oil exploration subsidiary in Ethiopia may give the company and perhaps

Chinese policy-makers cause to ponder the merit of oil exploration in politically unstable areas. Chinese

oil companies have already been accused of propping up a genocidal regime in the Darfur region of

Sudan, and elsewhere in Africa critics such as Carolyn Bartholomew, a member of the US China Eco-

nomic and Security Review Commission, claim that ‘in Africa, as elsewhere in the world, the Chinese

News Review 247


government has shown that it is eager to embrace dangerous and or unsavoury regimes in order, among

other goals, to secure access to oil’. Feng Zhang, an analyst at the Foreign Policy Centre think tank in

London, disagrees, and like others argues that ‘Chinese companies are building roads and hospitals,

and generally going where western companies do not dare to go. I understand the concern over human

rights but so far China’s interest has been very good for Africa’.

The most interesting aspect of Feng Zhang’s claim in light of the murder of nine Chinese employees

in Ethiopia is for which Africans are Chinese interests benefi cial? This is not an easy question to answer,

but some background to the situation in the politically contested area of Ogaden in the southeast corner

of Ethiopia is useful in any effort to get at the truth.

Southeast Ethiopia is an area dominated by Somali pastoral nomads. It came under partial Ethiopian

control during the great European carve-up of Africa in 1884, and was fully subsumed in 1954. Since

then, the area has been devastated by either wars or cyclic droughts and is one of the poorest regions

in one of the world’s poorest countries. From the 1960s, local Somalis resisted state policies from the

central government in Addis Ababa to varying degrees, with the region nowadays largely under the

control of the ONLF. The ONLF is demanding the cessation of what it argues is longstanding suffering

at the hands of the Tigray People’s Liberation Front (TPLF) – the ruling party, whose standing army in

the region numbers 100 000 and acts as ‘courts, judges, prosecutors, executioners and police’, and the

right of self-determination.

Ethiopia has a population of around 64 million, distributed across nine regions. It is routinely listed as

the poorest country on earth. The Somali region has the second largest number of inhabitants (around

4–5 million, or 8 percent of the population). Successive Ethiopian governments have not allowed the

Somalis to join the army, police and security services, although it is alleged that forced conscription of

young Somalis to join the army and fi ght in other troubled regions of Ethiopia has been quite common

(although they are often not paid).

Other alleged abuses and denial of rights include denial to basic education and health services, general

lack of electricity and communications in the region, no sealed roads, lack of potable water, no major

development projects, no regular farming due to attacks from TPLF soldiers, no civilian airfi elds, no

right to travel freely, no civilian courts, denial of Somalis to develop their own mass media, no freedom

of expression or mass assembly, no NGOs, denial of employment opportunities and lack of religious

freedom (and claims by the central government that Somalis are fundamentalists and thus a terrorist

threat). Allegations also include the detention, torture and death of thousands of Somalis in jails, and

the fl eeing of hundreds of thousands to escape extrajudicial killings, looting of livestock and the rape

of women.

People in the region feel abandoned by the international community. The example of then World

Bank chief economist Nicolas Stern’s praise of the ruling government on a visit to Addis Ababa in

October 2001 is widely used to support this claim. Stern is condemned in the region for saying that an

untested program initiated by the government ‘constituted a dynamic and comprehensive strategy, with

very good prospects of generating sustained long-term growth and empowering the poor to participate

strongly in this process’. Somalis believe that such programs, supported by Western donor nations and

multilateral agencies, have provided no benefi ts to them or their region. With only 0.45 percent of the

Ethiopian cabinet (and 4 percent of the House of Representatives) comprising people from the Somali

region, Somalis have little faith that their interests will ever be met.

One of the outcomes of this political contest has been the formation of the Ogaden Liberation

Front, which was formed in 1963 and transformed into the Ogaden National Liberation Front in 1984.

According to the ONLF’s own website (www.onlf.org), the organization is the result of a ‘public desire

for a truly independent voice for the liberation of Ogaden’. It states that it as ‘both an advocate for and

defender of the people is dedicated to restoring the rights of Somalis in Ogaden to self-determination,

248 S. Frost


peace, development and democracy’. Whether this is true or not is beside the point; the fact is that they

exist, draw support and have enough military power in Ogaden to ensure that the TPLF cannot claim

full control of the region.

On 24 April, the ONLF released a statement on its website stating ‘Before dawn this morning, at

0430 AM local time in Ogaden, the ‘Dufaan’ commando unit of the Ogaden National Liberation Front

(ONLF) conducted a military operation in the vicinity of Obala, 30 km North-West of Degah-Bur in

Northern Ogaden. The operation targeted 3 military units of the TPLF regime who were guarding an

oil exploration fi eld. TPLF forces in Obala have now been wiped out with many having surrendered to

ONLF commandos. The oil facility has been completely destroyed. The ONLF has stated on numerous

occasions that we will not allow the mineral resources of our people to be exploited by this regime or

any fi rm that it enters into an illegal contract with so long as the people of Ogaden are denied their

rights to self determination’.

The message was a clear rebuttal of TPLF claims that it controls the area, but also a message to oil

companies operating there. The statement continued ‘It is not a safe environment for any oil explora-

tion to occur. We urge all international oil companies to refrain from entering into agreements with

the Ethiopian government as it is not in effective control of the Ogaden despite the claims it makes. Oil

investments in Ogaden will result in a similar loss for any fi rm that believes assurances of security it

receives from the Ethiopian government which has never been in effective control of Ogaden’.

In a further communiqué, also posted online, the ONLF gave an even clearer message to the Chinese

government: ‘The ONLF has informed the Chinese government in the past that it would be unwise to

pursue discussions with the TPLF as it was not in a position to guarantee the safety of any fi rm operat-

ing in Ogaden nor was it in a position to enter into contracts with foreign companies for Oil exploration

in Ogaden. Unfortunately this warning fell on deaf ears’.

On 26 April, as the Chinese press carried stories of the nine dead and seven kidnapped Sinopec

employees in Ethiopia, the ONLF published an ‘Open letter to the people and government of China’.

Portions of the letter are worth publishing for the issues it raises. ‘For nearly one hundred years’, it

begins, ‘our people have been subjected to persecution including, killings, torture, arbitrary arrest and

other forms of abuse by successive governments in Ethiopia’. It goes on to state that the only option left

open to Somalis in Ogaden is self-defence. It goes on, ‘In the midst of this struggle, the TPLF regime,

hungry for resources, has engaged in efforts to entice foreign oil companies to come and operate in

Ogaden’. But the crux of the letter is as follows:

‘China is a great world power and with power comes responsibility. China has recognized the

struggles of peoples throughout the world but in the case of Ogaden, it appears that this did not

happen. Despite our clear statements that Ogaden is a battle zone where the torture, killing and

arbitrary arrest of our citizens has become commonplace, a Chinese oil company chose to begin oil

exploration activities in Ogaden. We urge the government of China to recognize the plight of our

people and cease all cooperation with the Ethiopian government in the area of oil exploration until

such time that there is a legitimate form of self-government in Ogaden. . . . In short, the current

regime in power in Ethiopia should be shunned not partnered with by the government of China. The

people of Ogaden will not benefi t from oil exploration. Instead, the revenues will be used to enrich

the elite members of the TPLF who will in turn use it to continue to persecute our people and many

others. The ONLF would like to assure the people of China that your citizens are safe, healthy and

well treated. Our primary concern is their security and it was necessary to remove them from the

battlefi eld for their own safety. Chinese citizens were not the target of our attack and their deaths

resulted from munitions exploding during the battle. The Ethiopian troops we engaged with took

no steps to protect them during the battle and instead some troops treated them as human shields.

News Review 249


The death of Chinese citizens in the battle was an unfortunate and unintentional result of war’.

The communiqué concludes ‘We hope that the government of China will consider the plight of our

people as it engages with the TPLF regime in Ethiopia and show the world that it is a great power

that will not invest in areas where there is clear, deliberate and systematic repression of civilians’.

Three days later, on 29 April, seven Chinese citizens and two other non-combatants were transferred

to the Red Cross after a cease-fi re was agreed to by the Ethiopian government. The ONLF subsequently

claimed that the TPLF regime has begun a crackdown targeting civilians in Jijiga, the capital of Ogaden.

As soon as the Chinese citizens were released, the ONLF expected the crackdown to broaden to other

areas in Ogaden.

Perhaps the only thing certain in this whole situation is that there is no clear solution to the enormous

problems that beset the area. Nevertheless, questions remain about the role Chinese oil exploration can

play in assisting some sort of peaceful settlement. The ONLF clearly has the fi repower and soldiers to

ensure oil companies rethink their profi t margins, and Sinopec and the Chinese government may well

believe statements by the group that it controls the area. At stake now is whether Sinopec will return

(and if so, under what conditions?).

Other large oil companies in Africa have faced similar issues. Shell was confronted with international

outrage after the Nigerian government hanged nine environmental activists in 1995 (and even the most

cursory glance at the Shell Nigeria website shows how hard the company is working now to win over

stakeholders). Exxon Mobil (along with multilaterals such as the World Bank) has found itself defend-

ing Esso-Chad’s Chad–Cameroon Pipeline (with questions raised over the amount of money locals will

actually see from the oil piped).

These issues are not simply about money. At stake is an entire way of seeing development. More and

more companies have started to expand their vision of how they should comport themselves in develop-

ing nations, and what role they can play in national development. The Chinese government, particularly

in its pronouncements on CSR, has routinely in the last two years called on business (both local and

foreign) to play a role in sustaining a harmonious society and underpinning the development process.

It is not an unreasonable request.

With China seeking to play a more constructive role in the global economy, its major companies may

need to think more carefully about what role they too will play and whether they are aligned with govern-

ment efforts. It is unclear, however, just what the solution is in this case. China has good relations with

the Ethiopian government, and other Chinese companies have signifi cant investments in the country.

In fact, on the day the ONLF released the Chinese workers to the Red Cross, the state-owned Ethiopian

Telecommunication Corporation (ETC) and ZTE, a Chinese telecom company, signed a US$158 million

agreement on three telecom service expansion projects.

If CSR is to develop in China, it must include the rising number of companies that invest or operate

offshore. Just as nationals of developed countries sometimes complain that they should not be judged

by the behaviour of some of their worst offshore performers, so too in future may Chinese citizens.

Now is the time for Chinese companies to strategically assess what good behaviour might mean in

developing countries.

Conclusion

Companies seeking to operate where land use is contested have found themselves having to deal

with tense standoffs – sometimes resulting in deaths – involving locals adamant that their right to the

land is as valid as (if not more than) that of the companies involved. The risks associated with these

250 S. Frost


confrontations are obvious, and range from fi nancial and reputation loss to deaths of employees and

local people. In China and India, both foreign and local companies have found themselves having to

deal with locals who do not accept the right of business to simply acquire land for their own purposes.

In the African case, Chinese companies are discovering the same types of risk. The answers are by no

means clear, but in all cases it seems that due diligence did not move beyond a traditional fi nancial

analysis. Companies will need to assess social risk much more carefully prior to projects requiring con-

tested land, even when local governments assure them that they have the right to the land. As the cases

above show, talking with the government is not enough; other stakeholders may have rather different

views. Doing business in places such as China, India and Africa requires more than doing the sums

and getting government approval.

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