The controversial Ramu nickel mine in Papua New Guinea is set to be part of Papua New Guinea's first Special Economic Zone, writes Alex Harris. Such zones allow foreign companies to take advantage of cheap labour costs and lax environmental regulations, but cause misery and suffering for local people. 

THE RAPID GROWTH of China as a supply centre has seen its rise as an economic powerhouse, that is itself now ‘off-shoring’ to cheaper labour locations with even more lax environmental regulations…such as Papua New Guinea.

Chinese companies have already been granted large manufacturing zones – referred to as ‘special economic zones’ – guaranteeing exemptions from taxes and import duties.

Far from being a boon to the local population of a poor country desperate for employment opportunities, Chinese companies have been exempted from the immigration laws of PNG and have already imported thousands of Chinese labourers to construct factories.

At a recent state visit to China, Prime Minister Michael Somare welcomed Chinese investment in a diverse range of industries, including mining, logging of old growth forest, palm oil plantations and commercial fishing, for which even Exclusive Fishing Zones have been created.

An economic zone as described, called Pacific Marine Industrial Zone (PMIZ), will be built in Madang, fronting the pristine Astrolabe Bay that is also the proposed site of the dumping of millions of tonnes of mine waste material from the Australian-Chinese joint venture projects, Ramu nickel mine (Highlands Pacific and MCC) and Yandera Copper mine (Marengo Mining and NFC).

The PMIZ will house facilities for all the above-listed industries, including a tuna processing plant. Clearing of 216 hectares and building of a wharf and other infrastructure is expected to commence early 2011. The refinery for the Ramu nickel mine is presently under construction at Basamuk, Madang.

Such are the extraordinary benefits bestowed upon the Chinese for these investments, opposition Member of Parliament, Belden Namah, took a full page advertisement in local newspapers recently demanding the government show where was the national benefit of such deals, so skewed in favour of Chinese corporations, and so great a threat to the environment. He is yet to receive an answer.

With local landowners physically intimidated and allegations of bribery at the highest levels, the legal battle to protect Astrolabe Bay from the mine waste dumping of Ramu Nico (MCC) Limited has already revealed how the local population might be treated as this presence and influence grows.

And with China’s reputation for human rights and environmental care such as it is, this does not auger well for PNG or other nations who might also find themselves an attractive destination for Chinese investment. Timor, Fiji and Australia included.

It is beholden on all corporate customers of these companies (Australian and Chinese), all financial services providers such as ANZ, Westpac and HSBC who are signatories to the Equator Principles, and all investors – especially institutional investors who are signatories to the United Nations Principles of Investing – to examine their portfolios for the companies involved, because your own reputations are right now at serious risk.

The world is watching.

Source: ‘China rising: Your reputational risks with it’ by Alex Harris, The Reputation Report.  Read the full article here.