Human rights and international business - role of international businesses in protecting human rights - Column - Brief Article

USA Today (Society for the Advancement of Education), Nov, 1997 by Llewelyn D. Howell

In the midst of Southeast Asia's recent financial crisis, Malaysian Prime Minister Mahathir Mohamad pointed an accusatory finger at American money speculators as a primary source of the problem. He implied that one or more of them had a political agenda which was being served by economic punishment of Malaysia and other members of the Association of Southeast Asian Nations (ASEAN). Commentators, reading between the lines for the most part, determined that the Prime Minister's ire was directed in particular at George Soros, a businessman-speculator with a strong political bent whose activities in support of a variety of causes long have drawn attention around the globe. The cause in this particular case was the matter of human rights in Burma (renamed Myanmar by the challenged government, though the world mostly has ignored the change). Malaysia had been instrumental in bringing Burma into full membership in ASEAN despite its record of human rights abuses and authoritarian and arbitrary rule. Mahathir seemed to think that international business interests had intervened on the side of human rights activists.

The Clinton Administration already had imposed restrictions on U.S. business in Burma, stopping all new investment until the government restored some measure of democracy and began to observe human rights standards. The objective was to punish Burma by limiting economic development, which these days is advanced by private foreign direct investment as much as by aid projects or loans from international banking institutions. The limits on economic development, in turn, are intended to pressure the ruling military junta in Burma to change its ways on human rights. The most immediate limit is not on Burma, though.

The impact will be felt first by the U.S. companies that are prevented from initiating operations in Burma, a nation of nearly 50,000,000 people and considerable potential as a manufacturing site and long-term market. Businesses from other countries--including ASEAN members Malaysia, Indonesia, Thailand, and Singapore--are sure to step in to take advantage of opportunities left by American firms. Japanese companies and the Japanese government continue to place opportunity over the perception of cost of human rights infractions.

Some interesting questions are raised by this configuration of penalty, perceived penalty, and limited and missed opportunities. One is critical: Do U.S. and other international businesses have good reason to be concerned about human rights problems in countries where they operate? Is this enough to take risks in financial markets or involve themselves directly in political situations to bring about changes in government policies?

There is support for the argument that foreign businesses ought to be concerned about human rights circumstances--and directly involved. The most common human rights abuses include violence by the authorities against the population, arrest and imprisonment without trial, the use of imprisonment or even slave labor, discrimination creating deprivation, tight government control of belief systems through the education process, centralized control of procreation, and limits on information and communication. Each of these has implications for business operations.

There is a larger issue as well. In a volatile world that is characterized by growing economic interdependence, foreign investors have looked increasingly to political risk insurance from bodies such as the Overseas Private Investment Corporation or the Multilateral Investment Guarantee Agency to protect them from arbitrary government intervention and from production and market damage related to civil conflicts and international war. Studies have shown that, in those systems where human rights are denied, governments tend to interfere with foreign business operations more frequently, resulting in measurable, if insurable, losses to investing firms. Human rights violations are a correlate of domestic divisions and disputes that result in civil wars. They, in turn, disrupt markets, divert production, disturb labor forces, and destroy capital plants.

Doing business in a country where human rights violations are common is to know that trouble is ahead. Any company with the slightest sense of strategy would seek to avoid the damage. By steering away from those environments where human rights are not respected, businesses put pressure on the violators to mend their ways. Simple self-protection, stemming from self-interest, becomes involvement in the effort to curb human rights violations.

Moreover, the indirect consequences of human rights issues must be considered by international corporations. Because development assistance increasingly is delivered through sponsored or supported private investment instead of direct foreign aid, successful foreign investment is seen as successful assistance. If such assistance is given to governments with reputations as abusers of human rights, product boycotts by opponents in other markets can result in a net decrease in profit for the firm. Such efforts affected investors in Burma and apartheid South Africa, in some cases resulting in the firm's withdrawal from the market, at considerable loss.