Commercial diplomacy

Chinese President Xi Jinping delivers his final speech during the closing session of the Forum on Africa-China Cooperation at Sandton on December 5 in Johannesburg.
Chinese President Xi Jinping delivers his final speech during the closing session of the Forum on Africa-China Cooperation at Sandton on December 5 in Johannesburg. AFP

Commercial diplomacy

We have seen Chinese President Xi Jinping travelling the world in broad smiles carrying with him a very important two-folded mission: expand the market for made-in-China products and help Chinese businesses access natural resources wherever they originate.

Some commentators have lamented the fact that Chinese businesses have won lucrative bids in Afghanistan at the detriments of US bidders although the US had spent trillions of dollars there trying to restore peace and keep stability, two vital requisites conducive to creating a business friendly environment.

While quality and the merits of an application should be taken seriously when assessing a bid, it often is the top leadership that dictates the outcome, especially in the developing world.

China has also become Africa’s largest trading partner, surpassing the US. Unlike the American, the Chinese leadership can choose to be as pro-business as it wishes.

For one thing, major businesses in China are state-owned companies. In this sense, President Xi Jinping appears to effectively serve as the CEO of Chinese big business and seems to be good at it.

But being pro-business requires more than smiling, handshaking and having intimate talks. So-called development aid can also play a role. China has quickly become a major unconditional donor in most developing countries that have abundant natural resources and raw materials.

Possibly, the high returns on investment that Chinese proposals may offer could be a determinant of course but, from a legal and compliance point of view, China also has another important edge over all other serious competitors. Indeed, relaxed regulations might have allowed them to excel in the foreign lands.

It seems rather unlikely to have a case in which a Chinese business owner may be prosecuted for bribery that occurs outside of China. In other words, it would be easy for Chinese investors to come in, take the natural resources, make money, pay the local leaders and pack. This essentially was what former secretary of state Hillary Clinton viewed as China’s “new colonialism” in Africa.

On the contrary, the US Foreign Corrupt Practices Act and the UK Bribery Act both make it a criminal offence to bribe a foreign official.

These two Western laws have extensive extraterritorial jurisdiction. American and British companies, even if the country in which they operate does not punish corruption, must avoid all bribery.

Often regarded as very stringent, the UK Bribery Act defines a foreign public official as (i) anyone holding a foreign legislative or judicial position; (ii) anyone exercising a public function for a foreign country, territory, public agency or public enterprise; or (iii) any official or agent of a public organisation in a foreign country.

The application of this British law outside the UK could be one of the reasons why it is difficult for British companies to do business in a country where corruption is a major concern. The UK Trade Envoy Lord Puttnam had to be encouraged to learn that there is a firm commitment to stamp out corruptible acts in Cambodia, for instance.

At the end of the day, there is no denying that developing countries need investment, but investors desire to make money.

In a world of growing economic regionalisation full of fierce competition across countries and continents, heads of governments are expected to lobby hard for their investors and to protect them wherever they might end up investing. It is not uncommon to see presidents and prime ministers accompanied by business owners on their official overseas visits.

Those leaders should be as best as they can in carrying out a rewarding commercial diplomacy. But they must also seek to create a sustainable commercial diplomacy by striking the right balance between revenue and reputation in order to nurture public trust at home and abroad.

Specifically, leaders should learn to become good salespersons, effective negotiators and zealous promoters on behalf of their investors. But this nice-guy-skills-set is only one side of the coin.

The other side, the serious one, is to always make it crystal clear to the hosting country that it must be zero tolerant toward corruption, that integrity be integrated into the code of business practices and law.

They must keep on reminding the hosting country officials that highly ethical and long-term businesses don’t look at just making quick money but are far more interested in investing where there is fair and clean competition, which is in the best interests of the hosting country in the long run.

Dr Virak Prum, LLB, LLM, received a PhD in international development in 2006 from Nagoya University.

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