Paris Peace Accords 23 Oct. 1991

Monday, July 7, 2014

ANZ cuts off ties to Cambodian firm

ANZ cuts off ties to Cambodian firm

ANZ profits.
ANZ profits. Source: TheAustralian
 
THE ANZ Bank’s commercial rela­tionship with exploitative Cambodian company Phnom Penh Sugar has come to an end, with pressure applied by the bank over the group’s poor social and envir­onmental record resulting in the sugar plantation business refin­ancing with another lender. 

ANZ, through its 55 per cent-owned Cambodian operation ANZ Royal Bank, provided a loan facility to PP Sugar worth tens of millions of dollars to part-fund the establishment of a new sugar plantation and refinery.

However, the relationship broke down over the company’s inadequate response to a detailed project plan developed by ANZ, which was designed to remedy longstanding concerns about the use of child labour, forced evictions and military-backed land grabs.

Those practices were condemned by non-government ­organisations in Cambodia and became the subject of media headlines in Australia last ­January.

An ANZ spokesman confirmed yesterday that PP Sugar was no longer a customer.


“While I’m limited in what I can say about individual customers, I can confirm that PP Sugar has paid out its loan and is no longer a customer of ANZ,” the spokesman said.

The case illustrates the challenges of operating in developing markets, particularly for ANZ with its Asian super-regional strategy.

In some cases the bank has exit­ed relationships when the customer has not lived up to internationally accepted standards of behaviour, or failed to engage with governments, local communities and other interest groups, such as NGOs.

Earlier this year, ANZ executives reportedly met with representatives of more than 500 families evicted from their homes in 2010 to make way for a sugar crop in Cambodia’s impoverished Kampong Speu province owned by PP Sugar, a company controlled by Cambodian tycoon and ruling-party senator Ly Yong Phat.

The executives were told that a former Khmer Rouge battalion was involved in the evictions, and how families got $100 in compensation for land that had provided them with food and a livelihood. They also heard of food shortages because the land allocated for reset­tlement was infertile, and of schoolkids being used for labour.

Audits were prepared for both ANZ and PP Sugar. The audits were said to be needed to ensure compliance with the Equator Principles — a voluntary code adopted by 80 lenders around the world that prescribes “sound social and environmental standards”.

The principles, however, apply to project finance and were not relevant to the PP Sugar case.

Instead, ANZ invoked its own forestry and forests policy, which covers activities in forest environments and their associated communities, such as plantations, logging and primary processing.

Under the policy, the bank expects customers to manage, monit­or and report on social and en­vironmental performance against compliance criteria and specified targets.

PP Sugar is understood to have secured cheaper finance when all the compliance costs associated with the ANZ facility were factored in. The company, however, has made progress in some areas.

It put in place a zero-tolerance policy towards child labour and forced all its subcontractors to sign a declaration that they would not employ underage workers.

The company also held a forum with villagers and NGOs to hear the concerns they had in relation to social and environmental impacts from the plantation.

And it reached further financial settlements with other affected village families, although not all families accepted the compen­sation deal offered.

ANZ, for its part, is believed to have been unhappy with the pace of PP Sugar’s remediation efforts.


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