TIGHTENING BELTS: TWO REGIONAL CASE STUDIES ON CORPORATE SOCIAL RESPONSIBILITY

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EXECUTIVE SUMMARY The Belt and Road Initiative (BRI), previously known as the One Belt One Road (OBOR), is a key strategic initiative unveiled by Xi Jinping in 2013 that aims to establish several economic corridors between China and Eurasia over land and South East Asia over sea. The initiative has been analysed from various strategic perspectives, with its impact on labour conditions for both Chinese and foreign workers perhaps less so; though there have been instances, such as in Piraeus in Greece, where the issue was brought to the fore. The M4 motorway project in the Islamic Republic of Pakistan is co-financed by the Asian Development Bank (ADB), the Asian Infrastructure Investment Bank (AIIB) and the Department for International Development (DFID). The Netherlands is a stakeholder in both the ADB and the AIIB. The ADB is the ‘lead co-financer’ and it is their safeguard policies that are applicable on the project. The ADB, alongside other Multilateral Development Banks such as the World Bank, has in the past been subject to public scrutiny with regard to its compliance with international human rights standards, as well as the Core Labour Standards (CLS) of the International Labour Organisation (ILO). In response to external pressures, in 2001 the bank became one of the first MDBs to commit to push for full compliance with the CLS and national labour laws. Nevertheless, it has not proceeded to integrate them into its internal policies; this has, as we have seen in the context of the M4 project, diminished the practical relevance of its original commitment to the CLS. The Loan Agreements between Pakistan and the Asian Development Bank are unequivocal on the issue, stipulating that the borrower “shall ensure, that the core labour standards and the Borrower’s applicable labour laws and regulations are complied with during Project implementation”. It also stipulates that “contractors, other providers of goods and services, and their subcontractors, engaged under contracts for Works, have Works contracts…”. But the empirical data, consisting of interviews conducted with workers involved in the M4 project, has evidenced the widespread informality of labour relations around the M4 project: many workers were not officially employed by subcontractors, some of which may themselves not be registered companies. This context 4  and structure also make it much easier to evade compliance with regard to right to unionise and collectively bargain, as well as increasing the risk of other CLS violations, such as the recourse to child labour or forced labour. While the ADB is imposing extensive reporting obligations on the Borrower for certain other issues (environmental impacts, resettlement policies), it does not extend them to labour rights. We believe that our findings warrant a much more extensive monitoring of labour conditions in ADB projects. Table of contents Contributors v Part I. From Boardroom to Building Site: The Belt and Road Initiative and the M4 Motorway in Pakistan’s Punjab Province Executive Summary 3 Introduction: Don’t Check the Boxes, Check the People 5 1: Background, Financing and Local Context 11 2: The Belt and Road Initiative and the China-Pakistan Corridor 19 The Belt and Road Initiative 19 CPEC 24 IFI Safeguards: The ADB and the AIIB 27 3: Asking the Workers Themselves: A Case Study of Workers’ Rights 35 Methodology 35 Themes in the Interviews 36 Marginalized Labour Groups 51 CPEC 53 Conclusion 57 4: Construction Workers in Precarious Conditions and the Role of Labour Inspectorates 59 The Labour Inspectorate in Pakistan 62 Inspections on the Worksite: Paper and Practice 69 Empowering the Pakistan Labour Inspectorate 72 Conclusion 76 5: The Asian Development Bank, Core Labour Standards and the M4 Highway Project 79 Introduction 79 Multilateral Development Banks and Human Rights 80 MDBs’ Approach to Integrating Human Rights 83 The Asian Development Bank and Labour Rights 85 The ADB’s CLS Commitments in Action 89 Conclusion 93 x Part II. From CSR Seminar to Sweatshop: Detecting North Korean Forced Labour in Textile Supply Chains Addendum: States and the Private Economy in their Occasional Joint Roles in Labour Exploitation: A Methodological Consideration xiv Executive Summary 99 Introduction: From CSR to Sweatshop 101 1: Dandong, the DPRK, China, and Labour 105 Historical Context 105 Dandong’s Economy 108 An International Trade 111 Conclusion 113 2: Dandong as a Special Economic Zone 115 A Special Economic Zone with Boundless Future Ambitions 115 Special Economic Zones: Globally on the Rise 119 Outsourcing to DPRK 125 Conclusion 130 3: Export Processing via North Korea 133 The Context 134 Empirical Data on the Chinese Company Networks 141 US Shipments 194 Summary 212 4: North Korean Labourers in China 215 Introduction 215 Numbers and Locations of North Korean Workers 216 Recruitment Process, Visas, and Confiscation of Documents 220 Wages 224 Working Conditions 227 Living Conditions, Surveillance, Restriction of Personal Freedom 231 Conclusion 234 5: Garment Production in the Prison Camps and Political Annihilation Camps 237 Introduction 237 What Garments are Produced? 242 The Production Process 243 Punishment 248 State-organized Forced Labour and Slavery 250 xi Summarizing the Indescribable 253 6: The Role of Overseas Companies: How Policies do not Match Local Needs 255 Awareness and Current Policies 255 Risk Analysis 258 7: The Corporate Responsibility to Respect Human Rights and North Korean Forced Labour in the Garment Industry 261 Introduction 261 The Responsibility to Respect 263 The OECD Guidelines for Multinational Enterprises 267 The Dutch Agreement on Sustainable Garment and Textiles 272 The U.K. Modern Slavery Act 277 Conclusion 279 8: Addressing North Korean Forced Labour by Means of International Economic Sanctions 281 Concluding Observations 292 Appendices Part I 295 Appendices Part II 371 Bibliography Part I 403 Bibliography Part II 415