World Summit likely to fail in regulating multinationals

World Summit likely to fail in regulating multinationals

Tantri Yuliandini, The Jakarta Post, Nusa Dua, Bali

The upcoming World Summit on Sustainable Development in Johannesburg will likely fail to regulate multinational companies as a demand for a universal code of conduct for them met with strong opposition from the United States.

A heated debate ensued on the sidelines of the preparatory committee meeting for the summit here on Wednesday when representatives from international non-governmental organizations (NGOs), delegates from Hungary, Japan, the United Kingdom and Indonesia, faced a representative from the U.S. delegation, Robert F. Cekuta, in an open dialog.

The head of the Indonesian delegation, Makarim Wibisono, said that Indonesia as well as the Group of 77 developing countries (G-77) agreed that corporate accountability was important for implementing sustainable development.

He said the group was pushing for the inclusion of the wording "enhance corporate responsibility and accountability," in the Chairman's Text, but the possibility it would be inserted into the document was slim.

The Chairman's Text, an action plan and basis for implementing sustainable development principles, already accommodates corporate responsibility, but on a voluntary basis.

Voluntary initiatives, however, would not be forceful enough to hold powerful multinationals, Matt Phillips, from Friends of the Earth International, said, adding that corporations would then have the choice of not implementing the initiatives.

Multinational companies have been accused of contributing significantly to the practices of unsustainable development. They have been accused of transmitting an environmentally unsound production system, hazardous materials and products to developing countries.

Cases of environmental violations by multinational companies abound, particularly by multinational mining giants, such as the States' Freeport McMoran in Irian Jaya and Newmont mining in Peru; the United Kingdom's Premier, and France's TotalElfFina in Burma, according to the California-based NGO, Project Underground.

Felia Salim, the former Indonesian Bank Restructuring Agency (IBRA) deputy chairman, commented that legal systems in most developing countries were too weak to face powerful multinational companies.

"We must take affirmative action at an international level. Not only the management must be addressed but the shareholders must also be addressed directly because companies are accountable to them," she said.

Felia attended the dialog as representatives of the private sector in Indonesia.

Head of the Hungarian delegation, Tibor Farago, said also that a global framework was needed to regulate multinationals through an international convention on corporate accountability, otherwise governments would not be able to face them.

"An international mechanism is needed to talk to multinational corporations, to question them and make them report (to governments and the people)," he said.

Cekuta, the director for policy analysis and public diplomacy at the U.S. Department of State's Bureau of Economic and Business Affairs, called the proposed international convention on corporate accountability "unimportant".

He reasoned that local laws were enough to hold multinational corporations accountable for their actions if local governments strengthened the practice of good governance and promoted transparency with multinational corporations.

Therefore, there was no need for an international convention, he argued.

"The first recourse to hold multinational companies responsible for the damage done in other countries is through the government where the company is located. They (multinational corporations) should behave overseas the same as they would behave in the United States, if not they should be held accountable," he said.

The U.S. -- together with Japan, Canada, Australia and New Zealand -- form a powerful negotiation force under JUSCANZ in the deliberations of the Chairman's Text, which contains a set of actions to pursue sustainable development.

JUSCANZ is accused of fighting for the interests of multinational corporations instead of the general public.