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The Stakeholder Analysis For SEA of Chinese Foreign Direct Investment The Case of One Belt One Road Initiative in Pakistan
The Stakeholder Analysis For SEA of Chinese Foreign Direct Investment The Case of One Belt One Road Initiative in Pakistan
The Stakeholder Analysis For SEA of Chinese Foreign Direct Investment The Case of One Belt One Road Initiative in Pakistan
To cite this article: Yanying Huang, Thomas B. Fischer & He Xu (2017) The stakeholder
analysis for SEA of Chinese foreign direct investment: the case of ‘One Belt, One Road’
initiative in Pakistan, Impact Assessment and Project Appraisal, 35:2, 158-171, DOI:
10.1080/14615517.2016.1251698
The stakeholder analysis for SEA of Chinese foreign direct investment: the case
of ‘One Belt, One Road’ initiative in Pakistan
Yanying Huanga,b , Thomas B. Fischerb and He Xua
a
College of Environmental Science and Engineering, Nankai University, Tianjin, China; bEnvironmental Assessment and Management
Research Centre, School of Environmental Sciences, University of Liverpool, Liverpool, UK
for investors, there is a requirement to conduct Stakeholder analysis (SA) should be a key element
Environmental Assessment (EA). The World Bank (WB), in SEA, to be conducted in the early stages of the pro-
Asian Development Bank (ADB) and African Development cess and including all those that have an interest, or are
Bank (AfDB) all require their investment projects to follow affected by the plans, programmes or strategies (Abaza
associated procedures (Fischer & Nadeem 2014). The WB et al. 2004). Several scholars studied frameworks of stake-
requires business activities with environmental and social holder management, proposing different methods for
impacts to implement the Environmental and Social stakeholder analysis. The SA should identify key stake-
Assessment and Management System (ESMS) (Moss et al. holders and their interests, assessing the influence and
2015). AfDB requires its clients to conduct environmental importance of each stakeholder as well as the potential
assessment in accordance with its Environmental and impact upon each stakeholder. It should also identify
Social Assessment Procedures (ESAPs) (AfDB 2015). ADB how best to engage stakeholders (WWF 2005; Gauthier
classifies its projects into four categories based on their et al. 2011; IAIA 2002; Ren & Shang 2005; van Doren
impacts and applies different levels of environmental et al. 2013). Chinyio and Akintoye (2008) and Reed et al.
assessment requirements. For projects involving invest- (2009) consolidated the range of approaches that can
ment of ADB funds through financial intermediaries, ADB be used for stakeholder analysis and engagement. Yang
requires them to implement an Environmental and Social et al. (2011) identified practical approaches and meas-
Assessment and Management System (ESMS) (ADB 2003). ured the effectiveness of these. The professional liter-
All of these banks require all their investment projects to ature provides for some examples of environmental
follow similar assessment procedures, and stakeholder assessments that applied stakeholder analysis. In the
analysis forms an essential part in this (Hu et al. 2015). In field of waste management, social network analysis
February 2016, the Asian Infrastructure Investment Bank (SNA) and stakeholder analysis have been used in order
(AIIB) released a draft document of its environmental and to understand and examine the relationship among net-
social framework (AIIB 2016). This lays out a set of safe- works and stakeholders (Caniato et al. 2015, 2014). In the
guards to avoid, minimize or mitigate adverse environ- natural resource area, some researchers (Reed et al. 2009,
mental and social risks and impacts of the operations, Prell et al. 2009; Hjortsø 2004) conducted stakeholder
including environmental and social assessment, and analysis for participatory forest planning and natural
stakeholder engagement and consultation. resource management research. Ananda and Herath
In Pakistan, there are sound legal provisions for EA (2003) applied the AHP method to examine stakeholder
(Nadeem & Hameed 2008; Nadeem & Fischer 2011). The preferences into regional forest planning. Stakeholder
Pakistan Environmental Protection Act (PEPA) 1997 has analysis also serves as a key element for water resource
been the key legislation for EIA in the country. It requires management. (De Marchi et al. 2000; Fath & Beck 2005;
public participation and EIA review (GoP 1997a). Apart De Stefano 2010), analysing stakeholder imagination
from that, Pak-EPA developed EIA guidelines (Pak-EPA and perceptions of water issues by means of institu-
1997), and EIA Regulations (Pak-EPA 2000), consisting of tional analysis. Maguire et al. (2011) assessed stake-
procedure requirements and public consultation (Saeed holder involvement in the management of the marine
et al. 2012; Fischer & Nadeem 2014). However, in 2010, the environment through the analysis of their interest and
Eighteenth Amendment of the Constitution was passed awareness. Furthermore, Liu et al. (2013) developed an
by the National Assembly of Pakistan. It gives provincial indicator framework of integrated coastal management
governments exclusive powers to legislate on the subject by interviewing coastal stakeholders. Stakeholder anal-
of ‘environmental pollution and ecology’, which is also an ysis has also been conducted in terrestrial transport
opportunity for the capacity building of Pakistan provin- (Turcksin et al. 2011; Sun et al. 2015), aviation (Amaeshi &
cial environ-mental safeguards. There has been a defi- Crane 2006), flood management (Van Buuren et al. 2015)
nite shift in the use of SEA instruments in Pakistan after and the primary resource sector (Frost 1995). However,
2004. Several pilots were carried out in Pakistan, such as until now there have been no attempts of stakeholder
Pakistan Strategic Country Environmental Assessment analysis in the field of FDI management or investment
in 2006, Pakistan Strategic Environ-mental, Poverty programme related SEA.
and Social Assessment of Freight Transport Sector Wu et al. (2014) and Hu, Wang, et al. (2014) identified
Reforms (SEPSA) in 2011, Mainstreaming Environmental stakeholders involved in FDI, and created a 4 × 4 concep-
Sustainability into Pakistan’s Industrial Dev-elopment in tual matrix from the perspective of business, political,
2012, SEA of AJK Hydropower Development in 2014 and environmental and social stakeholders. Based on the
SEA of the Master Plan for Gilgit city in 2014. Also, one matrix, Hu, Pan, et al. (2014) and Hu, Chen, et al. (2014)
of its provinces, namely Balochistan has also made SEA qualitatively analysed the key players in Latin America
of plans and programmes as a mandatory requirement and South-East Asia. However, all of these studies have
(GoB 2012). Other Provinces are following suit. All of had limits with regard to clarifying the networks amongst
these SEA practices developed in Pakistan after 2004 stakeholders and making suggestions for future invest-
raised public awareness and promoted debate nation- ment according to the social and environmental priority
wide (Fischer 2014a). by communicating with stakeholders.
160 Y. Huang et al.
water. Furthermore, over 68 million people don’t have This figure representing a response rate of 16%, which
access to adequate sanitation (WaterAid 2016). As for is normal as a typical response rate for a self-adminis-
biodiversity, with its location and widespread ecolog- tered mail survey (15 to 20%) (Bhattacherjee 2012).
ical regions, Pakistan has a great variety of landscapes Furthermore, in similar studies, where expert opinions
and a rich diversity of life forms. This diversity has been were surveyed through questionnaires, a small number
substantially reduced over the long period of industrial- of responses were also used: Bragagnolo et al. (2012) sur-
ization and urbanization. Among the countries of South veyed a total of 12 experts; Polido et al. (2016) collected
Asia, Pakistan has the least variety of animals and plants 16 filled questionnaires; and Peterson (2004) obtained 26
per representative unit of area (ADB 2008). responses. The representative stakeholders in Pakistan
included ten from government, seven from academia,
six from environment or power companies and five from
Methodology
Environmental Consultancies and NGOs. Stakeholders
A stakeholder survey was conducted focusing on the were grouped into four main categories: (1) Government;
following issues: air (air quality, climate change); water Planning and Development Department (P&D), Water
(water consumption, water contamination and drinking and Power Ministry (W&P), Environment Department
water safety); biodiversity (threatened species, forest (ENV); (2) Academia; researchers in the fields of environ-
area); land (green spaces, agricultural land area); energy mental management (EM), environmental engineering
(renewable energy use, energy consumption, energy (EE) and biophysical science (BS); (3) Enterprise; compa-
efficiency, energy demand management, accessibility nies in the field of environment, planning, energy, elec-
to electricity) and, human settlement (transportation tric and waste management; and (4) others; including
convenience, employment and urbanization). NGOs, international organization and environmental
In the field of management, Freeman (2010) pro- consultants.
posed a framework equivalent to three levels of stake- Once the list of stakeholders was identified, further
holder analysis: eliciting stakeholder maps (rational investigations were carried out to better understand
level), relationship scanning (process level) and their characteristics and perspectives. Stakeholder
exchanges with stakeholders (transactional level). In Analysis or Stakeholder Mapping has evolved in recent
this vein, stakeholder analysis followed three objec- years as a technique for analysing the likely interests and
tives: (1) to identify and categorize stakeholders in the actions of stakeholders (Johnson et al. 2008). The method
process of Chinese FDI in Pakistan, and to recognize of stakeholder mapping was applied in this study as a
their knowledge and interests as well as power, and visual analysis for investigating stakeholders’ perspec-
attitude (identification level); (2) to investigate the tives and characteristics to Chinese FDI in Pakistan.
relationship of stakeholders and rank their impor-
tance (investigation level) and (3) to communicate with Table 2. Scoring table used to investigate stakeholders’ charac-
stakeholder about their understanding for the priority teristics.
of environmental and social issues (communication Parameter Scores
level). The purpose was to seek stakeholders’ charac- Knowledge about Chinese FDI in 1. No knowledge
Pakistan 2. Some knowledge
teristics, and to make recommendations for Chinese 3. Good idea
FDI in Pakistan by avoiding environmental and social 4. Plenty of knowledge
5. Complete, accurate and total
challenges and seizing the opportunities noted by knowledge
stakeholders particularly. Interest about Chinese FDI in 1. No interest
Pakistan 2. Little interest
3. Moderate interest
4. Considerable interest
Identification level 5. Great interest
Attitude towards Chinese FDI in -Strongly negative
An initial list of stakeholders was identified using Pakistan -Negative
three criteria: (a) authors contributing to the book -Neutral
-Positive
‘Environmental Impact Assessment Handbook for -Strongly positive
Pakistan (Fischer 2014a)’; (b) attendees of the IUCN Involvement during the process of 1. Not at all
Chinese FDI in Pakistan 2. To a little extent
‘Improvement of EIA Curricula of Tertiary Level Academic 3. To a moderate extent
Institutions: EIA teaching in Pakistan workshops (Fischer 4. To a considerable extent
2014b)’; and (c) affiliation to national professional SEA 5. To a large extent
Information available about Chi- 1. None
networks. Stakeholders thus identified were then asked nese FDI in Pakistan 2. A bit
to make suggestions for other actors who have a stake 3. Moderate
4. A lot
with Chinese FDI. In this way, applying the snowball 5. Extensive
method, the stakeholder list was continuously extended Influence towards other stakehold- 1. No influence
ers during the process of Chinese 2. Little influence
by new stakeholders (Alameddine et al. 2011). FDI in Pakistan 3. Moderate influence
A total of 244 questionnaires (see Appendix 1) were 4. Considerable influence
5. Great influence
sent out and 39 were returned, of which 28 were valid.
162 Y. Huang et al.
Figure 2. Power versus interest grid, with knowledge and attitude about Chinese FDI in Pakistan as attribute for stakeholders.
To investigate stakeholder characteristics, the has higher power, status and popularity. The centrality
respondents answered questions on knowledge of a point can be determined by reference to three dif-
(Question 2), interest (Question 3), attitude (Question ferent structural attributes: degree, betweenness and
4) and their power (Question 5–7) on a 1–5 scale sys- closeness. Degree centrality measures only the number
tem (see Table 2). The power of the stakeholders was of nodes that are directly connected to others without
valued by synthesizing their involvement (Question 5), considering the indirect connection between nodes.
the information available (Question 6) and their influ- Likewise, betweenness centrality only measures the
ence (Question 7). According to their interest and power degree of ‘intermediary’ effect. The closeness centrality,
value, a power/interest matrix was formulated. The lim- which refers to the distance between nodes, primar-
ited number of stakeholders in each group may bias the ily represents the capacity of stakeholders to analyse
results. Therefore, in the matrix the power and interest resources, information and methods within the network
value of each group were described in the form of an (Freeman 1978). Beauchamp (1965) used closeness to
interval (Figure 2). By grouping stakeholders in these design organization with ‘optimum…efficiency’ in com-
matrixes, Chinese FDI could be conducted with better munication. Sabidussi (1966) defined the most central
communication and implementation. point in a network as the one with the minimum cost or
time for communicating with all other points. Therefore,
this paper uses the concept of closeness centrality to
Investigation level
rank stakeholder importance and the weight of them.
In this study, we employed social network analysis (SNA) The absolute value is the sum of the shortest distance
to explore stakeholders’ relationships and importance between one node and the other nodes in the diagram
(Question 8). The respondents were asked to list other over the network size minus one (Sun et al. 2015). The
related organizations or actors they interacted with, and equation (1) shows the extent of connection and close-
to rate the level of interaction with the actors they had ness centrality of point pk (Beauchamp 1965; Daly &
listed (Question 9 and 10). The score from 1–5 of the ties Haahr 2009), where n is the number of reachable nodes
indicates their relationships between individuals, groups, in the network and d (pi, pk) representing the length of
and institutions. A higher value would indicate that a the geodesic line between nodes pi and pk. Thus, close-
node has a closer relationship with other nodes. ness centrality represents a value for the stakeholder’s
It is not practical and usually not necessary to engage capacity to obtain resources and influence in the net-
with all stakeholder groups with the same level of inten- work, and is chosen to measure the weights of stake-
sity all the time. Therefore, calculating stakeholders’ holders when calculating the environmental and social
weights according to their relevance could promote issues’ prioritization.
stakeholder engagement.
n
In social network analysis (SNA), the concept of cen- ( ) ∑
Cc pk = (n − 1)∕ d(pi , pk ) (1)
trality indicates the central position of the individual who i=1
Impact Assessment and Project Appraisal 163
Figure 3. Social network for Chinese investment in Pakistan with stakeholder weights (score on 1 (lowest)–5 (highest) scale shows
the closeness degree among stakeholders).
Notes: The categories in this figure are the groups that stakeholders have contact with and mentioned in the questionnaire, instead of the respondents.
164 Y. Huang et al.
Figure 5. Prioritization matrix of social and environmental impacts in the process of Chinese FDI in Pakistan.
in Pakistan as three groups rank them as top concerns. By calculating the responses of all stakeholder groups
All stakeholders are convinced that the Chinese FDI by their weights, the prioritization matrix of the total
in Pakistan will bring strongly positive impacts on all impact and total concern of 18 social and environmen-
energy issues (e.g. energy use, accessibility to electric- tal issues are shown in Figure 5. The issue of greatest
ity, renewable energy use, energy efficiency and energy concern is underground water. However, overall stake-
demand management), as most of the Chinese invest- holders believe the impact of FDI on it will be neutral.
ment is in the area of clean energy. Similarly, employ- Enterprises and others thought there would be a slightly
ment rates and transportation convenience are also high negative impact on underground water in coal mining
and are expected to have a strong positive impact as and power plant areas. However, government thinks that
well. Air quality received the most negative results. All negative impacts could be minimized by conducting SEA
stakeholders believe Chinese investment in Pakistan will or implementing mitigation measures. Furthermore, one
have negative impact on local air quality (Figure 5). This of the stakeholders mentioned the international relation
is therefore a major challenge for Chinese investment, with neighbouring countries, such as India. The Indian
requiring special attention. Government has particular concerns on the China-
There are also some issues with divergence of impact Pakistan Economic Corridor that is part of OBOR which
by different stakeholder groups. Water resource con- includes projects in territory claimed by India. The OBOR
sumption is an important environmental issue which may be a potential economic opportunity but it also
receives attention from government, enterprises and threatens India’s current dominance in its backyard – the
others. Government believes that the impact on water Indian Ocean region (Madan 2016; Mishra & Small 2016).
consumption should be positive (0.71), as they appear Overall, the opportunity of the investment with regard
to believe that government will bring forward positive to energy and human settlement is obvious, especially
action. For example, more restrictive environmental energy use and employment rate, which rated with ‘high
legislation and implementation will happen under inter- concerns’ and ‘positive impacts’ by respondents. Water
national observation. According to ENV, FDI in Pakistan quality issues, such as groundwater water quality and
will have benefits in resulting in better environmental drinking water safety are also under positive impact of
planning, management and monitoring (from the com- FDI. The challenge of investment is concentrated on e.g.
ments of the questionnaire). Thus, the impact on water air quality. This has the most serious influence. Water con-
consumption might be positive with an improved indus- sumption should also be paid more attention, consider-
trial structure (composition effect) and more advanced ing the large amount of water needed for construction of
production technology (technical effect) (Copeland & infrastructure and operation of power plants. These issues
Taylor 1994). However, enterprises and others consider are identified as high assessment priority areas and repre-
the investment impact on water consumption to be neg- sent a real challenge for Chinese FDI. Biodiversity and land
ative, −1.5 and −1.0, respectively, which are reasonable use in Pakistan will be influenced by Chinese FDI. However,
given that the construction of associated infrastructure the issue is not urgent at this moment, as it can be miti-
and operation of power plants consuming water. gated through forward looking environmental planning.
166 Y. Huang et al.
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(A) Introduction
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Transport Policy. 41:103–116. ty (China) and we are conducting a study to explore the opin-
Turcksin L, Macharis C, Lebeau K, Boureima F, Van Mierlo J, ions of several important actors who are interested in social
Bram S, De Ruyck J, Mertens L, Jossart JM, Gorissen L, et al. and environment impact and Strategic Environmental Assess-
2011. A multi-actor multi-criteria framework to assess the ment (SEA) of the Chinese foreign direct investment (FDI). As
stakeholder support for different biofuel options: the case an important actor about such topic, it is crucial for us to ob-
of Belgium. Energy Policy. 39:200–214. tain your opinion and that of your organization.
Van Buuren A, Potter K, Warner J, Fischer T. 2015. Making The information obtained through these interviews will be for
Space for Institutional Change? A comparative case study the direct use of the researchers, and will be presented in a
on regime stability and change in river flood management paper without identifying individual opinions.
in the Netherlands and England Int J Water Governance.
3:81–100. (B) Background of Chinese Investment in Pakistan
van Doren D, Driessen PPJ, Schijf B, Runhaar HAC. 2013.
Evaluating the substantive effectiveness of SEA: towards a In 2013, the Chinese Government proposed ‘One Belt One
better understanding. Environ Impact Assess Rev. 38:120–130. Road’ strategy (OBOR), which creates multiple economic corri-
Wagner UJ, Timmins CD. 2009. Agglomeration effects in foreign dors encompassing more than 60 countries to encourage the
direct investment and the pollution haven hypothesis. investment among those countries. As one of six internation-
Environ Resour Econ. 43:231–256. al economic corridors, the China-Pakistan Economic Corridor
170 Y. Huang et al.
(CPEC) plans to connect China to the Persian Gulf through the 3 = moderate; 2 = a small amount; 1 = rarely exchange infor-
quickest route. mation)
In April 2015, during a visit by China’s president to Pakistan, China (E) Your Opinion on Taking Environmental and Social Issues
has announced to invest $46 billion by 2030, which it is hoped into Account
will end Pakistan’s chronic energy crisis and ‘transform’ it into a
11. Please score the potential social and environmental im-
regional economic hub. The investments – equivalent to roughly
pact of Chinese FDI in Pakistan. (2 = strongly positive impact;
20% of Pakistan’s annual GDP – are related to the Gwadar Port as
1 = positive impact; 0 = no impact; −1 = negative impact;
well as energy, transportation and infrastructure sectors.
−2 = strongly negative impact)
(C) Basic Information
No. −2 −1 0 1 2 No idea
Date: 1 Air quality
Name (only for internal use): ............................................................... 2 Climate change (change in mean
Your Position and Organization: ......................................................... rainfall, risk of flooding)
Email: .................................................................................................... 3 Water quality
4 Availability of clean drinking water
5 Water resources consumption
(D) Your Opinion on Chinese FDI in Pakistan 6 Underground water depletion
7 Deforestation
1. Have you ever heard about ‘One Belt One Road’ (OBOR) 8 Total number of threatened species
strategy or China-Pakistan Economic Corridor? 9 Energy use
10 Renewable energy use
A. Yes 11 Energy demand management
12 Energy efficiency
B. No 13 Accessible to electricity
14 Area of agriculture land
2. How well do you think you understand Chinese FDI in Paki- 15 Area of green spaces for public use
stan? (5 = complete, accurate and total knowledge; 4 = plenty 16 Urbanization
of knowledge; 3 = good idea; 2 = some knowledge; 1 = no 17 Employment rate
knowledge) 18 Transportation convenience
3. Are you interested in Chinese FDI in Pakistan? (5 = consider- Comments: apart from the list above, what are the potential
able interest; 4 = some interest; 3 = moderate interest; 2 = lit- benefits and potential threats on environment and society
ter interest; 1 = no interest) brought by Chinese FDI in Pakistan?
4. Which of these categories best describes your attitude to- 12. Please rate your concern over the following social and
wards Chinese FDI in Pakistan as the background described? environmental issues in Pakistan. (5 = extremely concerned;
4 = very concerned; 3 = moderately concerned; 2 = slightly
A. Strongly positive concerned; 1 = not at all concerned)
B. Positive
C. Neutral No. 1 2 3 4 5
D. Negative 1 Air pollution
E. Strongly negative 2 Climate change (change in mean rainfall,
risk of flooding)
5. To what extent do you/your institution involve over Chinese 3 Water contamination
4 Drinking water safety
FDI in Pakistan? (5 = to a large extent; 4 = to some extent; 5 Water resources shortage
3 = to a moderate extent; 2 = a little extent; 1 = not at all) 6 Underground water depletion
7 Deforestation
6. Do you/your institution have many, some, or no resources 8 Total number of threatened species
and information about Chinese FDI in Pakistan? (5 = exten- 9 Energy shortage
sive; 4 = a lot; 3 = moderate; 2 = a bit; 1 = none) 10 Renewable energy use
11 Energy demand management
7. Do you feel you/your institution could affect other actors’ 12 Energy inefficiency
behaviour or FDI process in any way? (5 = considerable influ- 13 Accessible to electricity
ence; 4 = some influence; 3 = moderate influence; 2 = little 14 Loss of agriculture land
15 Reduction of green spaces for public use
influence; 1 = no influence) 16 Urbanization
17 Employment rate
8. Are you/your institution in contact with other stakehold- 18 Transportation convenience
ers that are interested in Chinese FDI in Pakistan (authorities,
companies, groups, organizations, etc.)? Please list them. Comments: are there any other environmental and social is-
sues you think are important but that are not included in the
9. Regarding the previous list, please rate the level of interac-
list?
tion with them. (5 = always; 4 = often; 3 = sometimes; 2 = rare-
ly; 1 = never) 12. Any suggestions for other contacts for completing the
questionnaire?
10. Regarding the previous list, please quantify the exchange
of information with them. (5 = a large amount; 4 = some;
Impact Assessment and Project Appraisal 171