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Large-scale investment on land: LESSONS LEARNT FROM VIETNAMESE INVESTMENT ON AGRICULTURE IN LAO Dr. Pham Quang Tu – Oxfam in Vietnam Vientiane, 14 March 2017 PRESENTATION OUTLINE 1. Overview of Vietnamese outbound investment 2. Field research findings 3. Recommendations to improve responsible business investment Page 2 OVERVIEW OF VIETNAMESE OUTBOUND INVESTMENT Context of Vietnamese outbound investment • Outwards investment of Vietnam has been increasing both number of project and capital, during period 1989- 2015: • Total of 1,049 outward investment projects; • Total registered capital nearly 21 billions USD; • Mekong sub-region, especially Lao and Cambodia are most popular destination of Vietnamese outward investment; • Agriculture – forestry – fishery is the second largest of Vietnamese outward investment, after mining; • In coming time, Vietnam will revise the Prime-minister Decision 236/QĐ-TTg dated 20/02/2009 on promotion of outward investment Outbound investment is strategic and promoted Page 4 Top 10 destinations of Vietnamese outbound investment* 6,000 5,000 Number of projects 250.0 Registered Capital (Million USD) 210.0 4,949 4,000 200.0 157.0 150.0 3,484 128.0 3,000 100.0 2,405 2,000 1,825 1,337 1,000 11.0 2.0 6.0 Venezuela Peru 0 Laos Cambodia Russia *: Cumulative until 31/12/2015 1,262 1,221 12.0 558 1.0 Algeria 50.0 41.0 472 3.0356 - Malaysia USA Myanmar Tanzania Source: GSO, 2016 Page 5 Top 10 economic sectors of Vietnamese outbound investment* 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 250 8,937 197 116 73 200 150 116 100 3,121 2,230 10 56 1,835 Number of projects *: Cumulative until 31/12/2015 4 1,163 33 25 606 50 29 569 492 265 Registered Capital (Million USD) Source: GSO, 2016 Page 6 132 0 INVESTMENT IN LAO PDR No. Sector No. of Projects 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Electricity, gas, steam, and air conditioning supply Agriculture, forestry and fisheries Arts, entertainment and recreation Mining and quarrying Financial, banking and insurance activities Manufacturing Construction Real estate activities Accommodation and food service activities Information and communication Wholesale and retail trade; repair of motor vehicles Water supply, sewerage, waste management and remediation Professional, scientific and technical activities Human health and social work activities Education and training Transportation and storage Administrative and support service activities Other activities Total 6 47 2 66 9 56 15 5 4 5 22 3 5 3 2 3 1 4 258 Source: Vietnam Ministry of Planning and Investment, June 2016 Investment capital (USD) 1,297,029,850 1,048,753,284 1,004,500,000 954,161,275 208,628,000 107,449,057 63,343,881 50,700,999 48,210,289 42,040,000 40,656,845 9,371,204 3,975,000 1,630,000 1,346,700 1,071,050 300,000 50,375,000 4,933,542,434 Page 7 FIELD RESEARCH FINDINGS RESEARCH VISITS 1. Government Agencies: Ministry of Agriculture and Forestry; Provincial and district agriculture and forestry departments in Attapeu, Champasak, Savannakhet provinces 2. NGOs: Global Association of People and Environment (GAPE), Japan International Volunteer Center, AVIL, IDP 3. Companies: Hoang Anh Gia Lai, Tin Nghia, Viet – Lao Rubber company, Vietnam Rubber Group 4. Local communities: Four communities in Attapeu, Champasak, Savannakhet provinces 5. In Vietnam: Headquarters of companies under VRG, Tin Nghia, HAGL Page 9 BENEFITS OF VIETNAMESE INVESTMENT According to Vietnamese authorities: 1. Investment in Laos and other countries helps Vietnam’s economy to integrate deeper in the global economy; 2. By investing in the neighboring countries, Vietnam can enhance its role and status in regional and bilateral relations; 3. Vietnamese businesses can gain more experience in overseas direct investment so that they can explore investment opportunities in other countries in the region and international. According to some Lao authorities: 1. Contribute to GDP growth; add tax resources for governments to use for public services 2. Employment for local people 3. Contributions to socio-economic development through the construction of schools, clinics, hospitals, roads…Page 10 CHALLENGES: Project preparation phase 1. Investors are aware of main procedures for investment in 2. 3. 4. 5. Lao PDR. However, procedures are subject to change Many projects approved at national level with little coordination to local authorities, while some land deals made with head of village without report to proper authorities Investors lack of proper investment plans and feasibility studies Communities often unaware of investments affecting them. Little public consultation on EIA. Limited monitoring and compliance by National Assembly or NGOs. Page 11 CHALLENGES: Land acquisition & compensation 1. Disputes over land boundaries are common; maps are 2. 3. 4. 5. old or unclear Companies often begin clearing land immediately after licensing Law requires compensation but rates are ad-hoc Villagers lack information about rights and contracts Many villagers lack land title; no compensation for untitled land (such as forest) Page 12 Cultural conflict in land clearance A local cemetery within the area of a Vietnamese investor’s plantation was violated by the company. According to the local people, the village’s cemetery, used to include 47 gravesites. The company flattened the whole area, leaving only one big tree still alive in the area that used to be the cemetery. Although the people reported this, it did not persuade the company, who responded that Lao people do not have cemeteries but cremate their dead. Actually, this is true for the ethnic Lao majority, but not for the Brau ethnic people in this area who bury the dead according to their traditional customs. Up to now, the company has not taken any responsibility for destroying the graves (The locals also reported the two staff who flattened the graves). (Field research in Attapur, May 2016) Settlement of compensation in Attapur Compensation for land loss at the local level is either settled between land owners and companies directly, or negotiated in a consultation conducted by the chairman of the province and a land clearance committee composed of relevant stakeholders, with participation of local households. In one village, people said that the compensated amount was equivalent to people’s revenue for one season of cultivation on that land; typical compensation rates varied from 3-5 million kip (about US $360 -600) per ha for rice farming land and 200,000-500,000 kip ($24-60) per ha for land close to the forest. The villagers said that it would cost them 60-100 million kip ($7,250-12,090) per ha to obtain land elsewhere. Page 14 CHALLENGES: Project implementation 1. Evidence of infrastructure improvements 2. Law requires that 90% of workers are Lao, but many 3. 4. 5. 6. 7. companies say they are unable to recruit local workers Many local workers lack contracts and social security Living conditions for workers cited as poor Extensive use of pesticides and herbicides Most of interviewed companies said the “CSR” is helping to build some basic infrastructures and provide charity in the important occasion. No company has a clear CSR policy Some companies started to think and apply wider concept about CSR. Page 15 Corporate Social Responsibility (CSR) • “In my point of view, CSR policy means that labor use must be accompanied by technical training; labor protection policies must be applied for workers doing hard jobs; and we must ensure that we contribute to the development and construction of public works and comply to Lao policies and laws including tax. • “I have just been assigned here for a month and a half, but I observe that there are more than 30 children who are not going to school, since they follow their parents who are working on the farm. So, in the coming time, the company will organize Lao language classes for them. I and my staff will also participate in this class to communicate better with local communities.” (A Vietnamese investor in Laos) RECOMMENDATIONS TO IMPROVE RESPONSIBLE INVESTMENT Understanding the Responsible Investment Voluntary contributions to community development, charity and other social and environmental efforts. Traditional understanding of CSR Understand and address business impact on society, to avoid adverse impact and maximize the benefits for all. Responsible Investment Improve responsible investment 1. Strengthening government policies, policy enforcement and companies’ compliance. Article 51 on Vietnamese 2014 Investment Law regulate: “Investors making overseas investments shall comply with this Law, other regulations of law, laws of the countries or territories in which investments are made (hereinafter referred to as host countries), and the international agreements to which the Socialist Republic of Vietnam is a signatory, and take responsibility for overseas investments they make”. EIA, FPIC, land acquisition & compensation, conflict resolution… 2. Voluntary guideline for Vietnamese outbound investment in agribusiness Page 19 Outline of voluntary guidelines Opening • • • • Acknowledgements Pioneers Group Introduction Guideline introduction: Objectives, Scopes, Usage Principles-based Approach Content • Recommendations for each stage of the investment process • 20 Examples Annexes: Useful information •Some Conflicts Resolutions Mechanism •Laws on related investment (Vietnam, Laos and Cambodia Laws, international human rights treaties,) • International safeguards policies, Guidelines for reference •Useful contacts Principles-based approach PROTECT Based on UN Guiding Princinples on Business and Human Rights National Laws of companies in business relationships Policies from financial fundings Home country’s Laws Company policies through its business relationships Host country’s Laws International Human Rights Laws People and Nature Reconciliation Guideline Framework Land Labor Environment Culture/ Indigenous Peoples Investment steps Preparation Implementation Closing Risk Identification Recommendations How-to-do References and Examples