Bauchowitz, Stefan
(2014)
A race to the middle: governance in the extractive industries and the rise of China.
PhD thesis, London School of Economics and Political Science.
Abstract
The extraction of natural resources, most importantly petroleum, is associated with weak governance, economic underperformance and environmental degradation and companies from the oil and mining sectors are often able to exploit host countries’ insuffcient regulatory environments. Since the mid-1990s the corporate social responsibility agenda as well as increased regulation by companies’ home governments has partly addressed the externalities of natural resource extraction.
On the face of it, the rise of China and the increased international presence of statowned Chinese oil and mining companies challenges the effectiveness of these efforts. The companies’ foreign ventures have been accompanied by increased activity of the Chinese government in diplomacy and development cooperation with resource-rich countries, mainly in Africa but also elsewhere. Criticism commonly levelled at China includes
its diplomatic and financial support for human-rights abusing regimes, and the destabilisation of world raw materials supplies and markets, both in the form of diplomacy and development aid. Seemingly unconstrained by regulation and public opinion at home, Chinese oil and mining companies are able to leverage their home government’s support and thus gain preferential access to natural resources.
This thesis challenges this view. It argues that the assumptions about China’s role are misplaced and do not account for changes in Chinese behaviour. In an industry where corporate and state actors have a less-than-stellar record, China is quickly catching up with the emerging global standards. The reasons for this have to do with the way that governance gaps in the extractive industries are increasingly being filled by civil regulation.
By now, numerous regulatory initiatives — in the form of industry voluntary codes of conduct and corporate social responsibility, multi-stakeholder initiatives as well as host and home-government as well as financial market regulation — seek to mitigate the negative impacts of natural resource extraction. Civil society pressure has helped create norms on governance in the extractive industries that have led to the establishment of a transnational web of regulation which large companies — regardless of their origin — cannot easily escape.
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