EURO ASIA Journal of Management （Issue 44） - 在線閱讀

AIMANDSCOPEEuroAsiaJournalofManagement(EAJM)isdevotedtoprovideaforumfordiscussionoverawiderangeofmanagementissuesdefinedinthebroadsense.However,particularemphasesareplacedontheadvancementofmanagementtheoryandpracticeinAsia,especiallyChina,andtheEuropeancontinent.PublishedtwiceyearlybytheMacauFoundation,EAJMwelcomessubmissionsinthefollowingareas:Accountingandfinance,informationtechnologymanagement,strategicmanagement,cross-culturalandinternationalmanagement,organizationalbehaviorandlearning,humanresourcesmanagement,publicsectormanagement,corporategovernance,qualitymanagement,andtourismmanagement.EAJMwillincludescholarlypeer-reviewedpapersintheformofempiricalstudies,qualitativeinquiries,casestudies,aswellascriticalliteraturereviews.Fromtimetotime,specialsectionsareopenedfordebates,interviews,andcommentaries.EDITORIALBOARDNelsonAntónio,InstitutoSuperiordeCiênciasdoTrabalhoedaEmpresa,PortugalVirgíniaTrigo,InstitutoSuperiordeCiênciasdoTrabalhoedaEmpresa,PortugalCarlosNoronha,UniversityofMacau,MacauTiffanyLam,UniversityofMacau,MacauEDITORIALADVISORYBOARDTetsuoAbo,TeikyoUniversity,JapanDouglasAllen,UniversityofDenver,USANickBowen,Regent'sUniversityLondon,UKRobertBoyer,CentreD’etudesProspectivesD’economieMathematique,FranceEduardoGomesCardoso,InstitutoparaoDesenvolvimentodaGestãoEmpresarial,PortugalSuMiParkDahlgaard,LinköpingsUniversity,SwedenHarukiyoHasegawa,UniversityofSheffield,UKHideoInohara,SophiaUniversity,JapanJorgeCorreiaJesuino,InstitutoSuperiordeCiênciasdoTrabalhoedaEmpresa,PortugalEkkehardKappler,UniversityofInnsbruck,AustriaMartinKenney,UniversityofCaliforniaatDavis,USAMárioMurteira,InstitutoSuperiordeCiênciasdoTrabalhoedaEmpresa,PortugalTerutomoOzawa,ColoradoStateUniversity,USASungJoPark,FreeUniversityofBerlin,GermanyTanyaPhonanan,ASEANHumanResourceManagementFederation&ThompsonTelevisionThailandWanAhmadShaffie,MalaysianAssociationofHumanResourcesManagement&MenaraMaybankMalaysiaHannesStreim,BochumUniversity,GermanyKay-ChuanTan,NationalUniversityofSingapore,SingaporeRobertTerpstra,MonashUniversity,SunwayCampus,MalaysiaIngemarTorbiörn,UniversityofStockholm,SwedenTadashiUmezawa,ToykoKeizaiUniversity,JapanYouminXi,XianJiaotongUniversity,ChinaOliverYau,CityUniversityofHongKong,HongKongShumingZhao,NanjingUniversity,ChinaNote:TheviewsofarticlesmaynotbethoseoftheJournal.

11.TheImpactofInternalMarketingonOrganizationalCommitment:theMediatingRolesofCustomerOrientationandInternalCommunication......................................................................................................3-13LancyMac,FacultyofBusinessAdministration,UniversityofMacau,Macau,ChinaHoKitIengShirley,FacultyofBusinessAdministration,UniversityofMacau,Macau,China2.CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-2012........15-53CarlosNoronha,FacultyofBusinessAdministration,UniversityofMacau,Macau,ChinaWongSiMei,Sammi,FacultyofBusinessAdministration,UniversityofMacau,Macau,China3.AnAssessmentofOrganizationalReadinessforERPImplementation.....................................................55-77WaddahAlhakimi,ArabAcademyforBanking&FinancialScienceAmmarAlzahary,ArabAcademyforBanking&FinancialScience4.China’sSpecialEconomicZoneinAfrica:Context,MotivationsandProgress......................................79-103NelsonSantosAntónio,ISCTE-LisbonInstituteUniversity,Lisboa,PortugalShaoZhuangMa,ISCTE-LisbonInstituteUniversity,Lisboa,Portugal44CONTENTSVol.25No.1/2,December2015http://eajm.webnode.comIndexedinUlrich’sPeriodicalsDirectory,Cabell’sDirectoryofPublishingOpportunitiesinManagement,andEBSCOhostBusinessSourceComplete

EuroAsiaJournalofManagementIssue44,Vol.25,No.1/2,December2015,pp.3-13 THEIMPACTOFINTERNALMARKETINGONORGANIZATIONALCOMMITMENT:THEMEDIATINGROLESOFCUSTOMERORIENTATIONANDINTERNALCOMMUNICATIONLANCYMAC1andHOKITIENGSHIRLEY2ABSTRACTInternalmarketingisgrowinginimportancerecentlywithitsassociationwithpositiveemployeebehavior.However,relativelylittleempiricalresearchhasbeenconductedfornon-profitorganizations.Thepurposeofthisstudyistoinvestigatetheeffectofinternalmarketingonorganizationalcommitmentincorporatingtwomediators,namelycustomerorientationandinternalcommunication.Resultsshowthatthereisadirectpositiverelationshipbetweeninternalmarketingandorganizationalcommitment,butthemediationeffectsarenotsignificant.Resultsofthestudyindicatethateducationalinstitutionsshouldinstilltheinternalmarketingconceptintotheirmanagementstrategyinordertoimproveorganizationalcommitmentamongemployees.Keywords:internalmarketing,organizationalcommitment,customerorientation,internalcommunication 1FacultyofBusinessAdministration,UniversityofMacau.Email:Lancymac@umac.mo2FacultyofBusinessAdministration,UniversityofMacau.Email:ShirleyH@umac.mo

4LancyMacandHoKitIengShirley 4 INTRODUCTIONHumanresourceisunquestionablyakeyassetofanorganizationthatcanenhancecompetitiveadvantage(Wright&McMahan,1992).Inordertosurviveandout-performcompetitors,itisnecessaryfororganizationstoattractandretainmotivatedandtalentedemployees.Internalmarketingemergedasasetof“employee-friendly”managerialbehaviorstoaddressthisissue(Rafiq&Ahmed,2000).Firstproposedinthe1970s,internalmarketingsuggeststhatwhileitisimportanttofocusontheexternalmarketandcustomers,employeesasinternalcustomersshouldalsobeamajorconcernofthemanagement(Berry&Parasuraman,1991).Inorderforemployeestoeffectivelyperformtheirduties,theyshouldbeproperlyinformedand“sold”onthecompany’smarketingstrategies.Whenproperlydone,internalmarketingcanattract,develop,motivate,andretainqualifiedandsatisfiedemployees.Inthisstudy,therelationshipbetweeninternalmarketingandorganizationalcommitmentisbeinginvestigated.Studieshaveshownthatemployeeswithlowcommitmentcanbehazardoustoanorganization,whichmaypossiblyleadtobadorganizationalperformanceduetopoorserviceandhighercosts(Caruana&Calleya,1998).Onthecontrary,highorganizationalcommitmentcanleadtolowerabsenteeism,lowerturnover,andhigherbusinessperformance.Inaddition,wealsoproposethatinternalmarketingneedstoenablecertainbehaviorbeforecommitmentcanbeachieved.Inparticular,customerorientationandinternalcommunicationarethekeyexplanationsofhowcommitmentcanbeachieved.Throughinternalmarketing,employeesaremorelikelytodevelopamotivationtounderstandmoreaboutthecustomerstheyserveandbemorecustomeroriented.Ontheotherhand,theinternalcommunicationprocessresultingfrominternalmarketingcanfurtherenhanceemployees’understandingoftheircompany’smission,objectivesandgoalsandthusreinforcetheirdedicationtotheorganization(George&Berry,1981).Therefore,ourstudyseekstogaugethedirecteffectofinternalmarketingonorganizationalcommitmentaswellasthemediatingrolesofcustomerorientationandinternalcommunicationinsucharelationship.ThecontextofourstudyisaneducationalinstitutioninMacau.Whilemoststudiesoninternalmarketingwereundertakenwithprofitorganizationslikebanksorretailers,thisstudyseekstoprovideempiricalevidenceastohowinternalmarketingisessentialinanon-profitcontext.Whilemarketingtocustomersisessentialtothenon-profitsectors,internalmarketingislikewisealsocrucialforthesuccessofnon-profitorganizations.THEORETICALBACKGROUNDTheconceptofinternalmarketingwasfirstintroducedbyBerryandcolleaguesin1970s(Berry,Hensel&Burke,1976)inthecontextoftheserviceindustrytoaddresstheproblemofinconsistent

5TheImpactofInternalMarketingonOrganizationalCommitment:theMediatingRolesofCustomerOrientationandInternalCommunication 5 servicequality.Itisbasedonthenotionthatonlysatisfiedemployeeswilldeliverservicesthatcreatesatisfiedcustomers(George,1977).Sincethen,internalmarketingstartedtogaininterestintheareaofservicemarketingandwaswidelystudiedparticularlyamongfrontlineemployees.AccordingtoRafiqandAhmed(2000),internalmarketingis“aplannedeffortusingamarketing-likeapproachtoovercomeorganizationalresistancetochangeandtoalign,motivateandinter-functionallyco-ordinateandintegrateemployeestowardstheeffectiveimplementationofcorporateandfunctionalstrategiesinordertodelivercustomersatisfactionthroughaprocessofcreatingmotivatedandcustomer-orientatedemployees”(p.454).Itissuggestedthatsomecompaniesfailedtomarketwellsimplybecauseemployeeshaveinsufficientknowledgeandunderstandingofallstrategycomponentsandtheirinfluenceswithinthecompany.Itisarguedthatwithouteducatingtheconceptofmarketingtotheinternalcustomers,thatis,employees,itisdifficulttogetmarketingtoexternalcustomerright(Hung&Lin,2008).Therefore,itisimportanttobalancebothexternalandinternalorientations(Lings,1999).Onlywheninternalmarketingsucceedswillinteractivemarketing(betweenemployeesandcustomers)andexternalmarketing(betweencompanyandcustomers)beaccomplished(Gronroos,1984).Therearenumerousbenefitsofimplementinginternalmarketing,suchas,encouragingtheemployeestoperformbetter;empoweringtheemployeestobemoreaccountableandresponsible;creatingacommoncompanyvisionamongtheemployees;encouragingemployeestoprovidequalifiedservicetothecustomers;improvingtheretentionandinvolvementoftheemployees,etc.Giventhemanybenefitsofinternalmarketing,therearevariousattemptstomeasureit(Lings&Greenley,2005;Gounaris,2006),tostudyitsimpactonemployeeandcustomersatisfaction(Tortosa,Moliner&Sanchez,2009)andorganizationalperformance(Lings&Greenley,2009;Ahmed,Rafiq&Saad,2003).Wecanseeacloserelationshipbetweeninternalmarketingandhumanresourcemanagement(HRM)withstudiesaboundingonintegratingbothtoenhancebusinessperformance(Pitt&Foreman,1999).WethereforeidentifiedintheliteraturethatorganizationalcommitmentisthekeyconstructinHRMthatisrelatedtointernalmarketing.Organizationalcommitmentisconsideredanimportantconceptinorganizationalbehaviorasitishighlyrelatedtoemployeevoluntaryturnover(Becker,1960),employeesatisfaction(Huntetal.,1985)andorganizationalperformance(Mowday,Steers,&Porter,1979).Itisthe“strengthofanindividual’sidentificationwithandinvolvementinaparticularorganization”(Porteretal.,1974,p.604)andtendstobereflectedinanemployee’saffective,normativeandcontinuancebehaviortowardsthecompanytheyareworkingin.Thesearethekeydimensionsshapingorganizationalcommitment(Meyer&Allen,1984).Employeeswhoareaffectivelycommittedwillhavepositiveemotionalattachmentandidentificationwiththeorganization.Theyalsodisplayastrongsenseofbelongingnesstotheorganization,desiretoremainaspartoftheorganizationandarewillingtoidentifywiththeorganization’svaluesandgoals.Continuancecommitmentoccurswhentheindividualweighsuptheprosandconsofleavinganorganization,whichisseenasanextensionofBecker’s“side-bettheory”.Whenanindividualcommitstoandremainswithanorganizationduetofeelingofobligation,itcanbeidentifiedasnormativecommitment.Relatedtoorganizationalcommitmentistheconceptofinternalcommunication.Communicationisthecoreprocessoforganizing(Weick,1979).Organizationalcommunication

6LancyMacandHoKitIengShirley 6 encompassesmanyaspectsofcommunicationincludinginternal/externalandformal/informal.Internalcommunicationcanbedefinedasinteractionsbetweenasingleunitandapoolofindividualsinorganizationsatvariousaspectsandindifferentareasofprofession(Dolphin,2005).Kalla(2005)classifiesinternalcommunicationas“allformalandinformalcommunicationtakingplaceinternallyatalllevelsofanorganization”,whileOrsini(2000,p.31)definesitas“thefullrangeofwaysthatpeoplecommunicatewitheachotherwithintheorganization”.WelchandJackson(2007,p.183)considerinternalcommunicationfromtheapproachofstakeholderanddefineitas“thestrategicmanagementofinteractionsandrelationshipsbetweenstakeholdersatalllevelswithinorganizations”.Effectiveorganizationalcommunicationalwayslinkswithtransparentcommunicationbetweenseniormanagementandhissubordinates.Asaresult,theengagementandproductivityofemployeescanbeimproved.Thegeneralfunctionofcommunicationistoinform,direct,regulate,socializeandpersuadesoastoaffectthereceiverknowledgeorbehavior.Champoux(1996)identifiedtheprimaryfunctionsoforganizationalcommunicationasinformationsharing,givingfeedback,integrationtocoordinatediversefunctions,persuasion,showingemotionandinnovation.Similarly,MyersandMyers(1982)observetheprimaryfunctionsofcommunicationsasincoordinationandregulationofproductionactivities,socialization,aswellasinnovation.Inadditiontotheaboveconstruct,customerorientationisakeyfactorthatmayhelpfurtherexplainthecomplexrelationshipbetweeninternalmarketingandorganizationalcommitment.Customerorientationisoftenassociatedwith“marketorientation”,“marketingconcept”,and“customerfirst”.Initially,SaxeandWeitz(1982)identifiedcustomerorientationastheconceptofmarketingwhichisusedbysalespersonswheninteractingwithpotentialcustomers.Lateron,intheirstudyonmarketorientation,NarverandSlater(1990)positedcustomerorientationasthecentraldimensionmakingupamarketorientedfirm.Customerorientationsimplymeanshighlyfocusedoncustomers’currentandlatentneeds.Deshpande,Farley,andWebster(1993)consideredcustomerorientationas“thesetofbeliefswhichplacecustomer’sinterestsfirst,withoutexcludingthoseofotherpublicssuchasowners,managersandemployeeswiththeaimofmakingtheorganizationprofitableinthelongterm.”Customerorientationisimportantbecausecustomer-orientedserviceemployeescanprovideserviceswhichcanincreasecustomers’satisfaction(Dunlap,Dotson&Chambers,1988).Inaddition,customer-orientedemployeescandevelopalonglastingrelationshipbetweentheorganizationanditscustomersthatisfavorabletobothsides(Dunlap,Dotson&Chambers,1988;Saxe&Weitz,1982).WeproposedamodeltoexplaintheimpactofinternalmarketingonemployeebehavioraloutcomeasshowedinFigure1.Belowweexemplifythekeyhypothesesinvolvingtherelationshipamongthevariables.

7TheImpactofInternalMarketingonOrganizationalCommitment:theMediatingRolesofCustomerOrientationandInternalCommunication 7 FIGURE1ResearchModelHYPOTHESESOneoftheimportantconsequencesofimplementinginternalmarketingisinenhancingemployees’organizationalcommitment(Tansuhaj,Randall&McCullough,1991;Ifie,2014).Employeeswithlowcommitmenttendtoofferbadservicetocustomersandaremorelikelytoquitthuscreatinghighercoststotheorganization.Allorganizationsvaluecommittedemployees(Hunt,Chonko&Wood,1985)because,bybeingcommitted,employeesareemotionallyattachedtoandaffiliatedwiththeorganization,andisthereforecommittedtopursueitsgoals(Porter,Steers,Mowday&Boulian,1974).Onthecontrary,ifemployeesarenotsatisfied,itisnotdifficulttoimaginethattheywillnotbeabletosatisfytheexternalcustomerswhotheyserve(Ahmed&Rafiq,2002).Caruana&Calleya(1998)foundaconsiderablelinkagebetweeninternalmarketingandorganizationalcommitmentamongretailbankmanagerswhileTing(2011)foundadirecteffectamongelementaryschoolsteachersimplyingthateducationalinstitutionsalsoneedinternalmarketinginordertocultivateacommittedworkforce.Therefore,H1:Internalmarketingispositivelyrelatedtoorganizationalcommitment.Theroleofcustomerorientationinachievingorganizationalperformanceiswidelyacknowledgedindifferentsectors.Itisthemanifestationofthemarketingconceptattheindividualworkerlevel(Saxe&Weitz,1982).Rindfleisch&Moorman(2003)definedcustomerorientationas,“…thesetofbehaviorsandbeliefsthatplacesapriorityoncustomers’interestsandcontinuouslycreatessuperiorcustomervalue”(p.422).Customerorientationthereforemeansanattemptofservicepersonneltounderstandandmeettheneedsandwantsofthecustomers.Themainobjectiveofinternalmarketingistotrainupemployeestobecustomer-consciousandbemotivatedtoprovideremarkableservice(Papasolomou,2006).Inconclusion,internalmarketing

8LancyMacandHoKitIengShirley 8 cancreateasupportiveinternalenvironment,resultinginmotivatedandcustomer-consciousemployeeswhoengageincustomerorientedbehavior(Ahmed,Rafiq&Saad,2003;Gronroos,1984).Therefore,wehypothesizethat:H2:InternalmarketingispositivelyrelatedtocustomerorientationCommunicationistheactivityofconveyinginformationamongpeoplethroughvariouskindsofchannels.Argenti(1996)stressedtheimportanceofcommunicationachievedbyinternalmarketingwithorganizations“becomemorefocusedonretainingahappyworkforcewithchangingvaluesanddifferentdemographics,theyhavenecessarilyhadtothinkmoreseriouslyabouthowtheycommunicatewithemployees”(p.80).Thus,effectivecommunicationcanimprovetheproductorservicedeliveredbyfront-linepersonnel.However,inreality,manyorganizationshavelessknowledgeabouttheiremployeescomparedwiththoseontheircustomers,somarketing-basedcommunicationcanstimulatemoreinteractionandconnectionsbetweenthemanagementandtheemployees.Therefore,H3:Internalmarketingispositivelyrelatedtointernalcommunication.Withoutloyalemployees,anorganizationisunlikelytohaveloyal(long-termrelationship)customers(Reicheld,1996).Asmentionedearlier,thespiritofcustomerorientationistomakeemployeesbemorecustomer-consciousandbeawareoftheirneedsandtrytofulfillthem.Itis“anenduringpersonaldispositiontomeetcustomerneedsinanon-the-jobcontext”(Brown,Mowen,Donovan&Licata,2002,p.111).Theultimatepurposeofthisistoestablishalonglastingrelationshipwithcustomers.Withsuchvalue,itislikelythattheseemployeeswillenjoyhigherjobsatisfactionandthusbemorecommittedtowork(Donavan,Brown&Mowen,2004).Theargumentisthatservicestaffthatarecustomerorientedwillfindanaturalfitwiththeirjobandthuswillbemorehappyandcommittedtotheirfirm.Afterall,long-termcustomerrelationshipsshouldbestationedwithlong-termcommittedtrainedworkers(Boshoff&Allen,2000).Throughmeta-analysis,customerorientationisfoundtocontributetofavorableemployeejoboutcomesthroughenhancingtheirorganizationalcommitment(Zablahetal.,2012).Thus,H4:Customerorientationispositivelyrelatedtoorganizationalcommitment.Researchonbothinternalcommunicationandorganizationalcommitmenthasarousedattentionfrommanyorganizationssinceeffectivedeliveryofinformationleadstoaccountabilityandrespectfromtheemployees,whichinturncreateslong-termcommitmentfromemployees.Researchfoundthatpoorinternalcommunicationresultsinloworganizationalcommitment(Rodwell,Kienzle&Shadur,1998).BothGuzley(1992)andVarona(1996)foundthatthereisadirectlinkagebetweenorganizationalcommunicationandemployees’organizationalcommitment.Therefore,wehypothesizethatH5:Internalcommunicationispositivelyrelatedtoorganizationalcommitment.

9TheImpactofInternalMarketingonOrganizationalCommitment:theMediatingRolesofCustomerOrientationandInternalCommunication 9 METHODOLOGYDataCollectionDatawerecollectedfromapublicuniversityinMacau.Surveywasconductedbydistributingpaperquestionnairestoadministrativestaffmembersintheuniversityovera3-monthperiod.Atotalof105validquestionnaireswerecollected.MeasuresAllmeasuresarefrompreviousstudieswithsignificantadaptationtotheparticularcontextofthisstudywhichisaneducationalinstitution.InternalmarketingismeasuredusingthescaleofKelleretal.(2006).Customerorientationismeasuredbymodifyingthesellingorientation-customerorientation(SOCO)scalebySaxeandWeitz(1982).InternalcommunicationismeasuredusingQEEW(QuestionnaireontheExperienceandEvaluationofWork)byVanVeldhovenandMeijman(1994).Finally,themeasurementoforganizationalcommitmentisfromHunt,ChonkoandWood(1985).Alloftheabovearemeasuredona5-pointLikertscalewith1anchoring“stronglydisagree”while5being“stronglyagree”.RESULTSThescalesaretestedtobereliableasshownbyCronbachalphasrangingfrom0.644forinternalcommunicationto0.974forinternalmarketing.Table1showsthemean,reliabilityandcorrelationmatrixofthefourvariables.TABLE1:Mean,CronbachalphaandCorrelationmatrixItemVariableMeanCronbachalpha1231InternalMarketing3.2540.9741--2CustomerOrientation3.5870.8240.433*1-3Internalcommunication3.2810.6440.1560.237**14OrganizationalCommitment3.7050.8400.533*0.245**0.201***p<0.05,**p<0.01

10LancyMacandHoKitIengShirley 10 Totestformediation,multipleregressionisusedusingtheprocedureproposedbyBaronandKenny(1986).ResultsareshowninTable1.Resultsinmodel1and2showthatinternalmarketingispositivelyrelatedtocustomerorientationbutnottointernalcommunication.Therefore,H2issupportedwhileH3isnot.InModel3and4,wetestforthemediationeffectofcustomerorientationandinternalcommunicationontheinternalmarketing-organizationalcommitmentrelationship.Resultsshowthatinternalmarketinghasadirecteffectonorganizationalcommitmentwithouttheneedtogothroughthemediatingfactors.Therefore,H4andH5arenotsupportedwhileH1supported.TABLE2:RegressionresultsModel1Model2Model3Model4CustomerorientationInternalcommunicationOrganizationalcommitmentOrganizationalcommitmentInternalmarketing0.433***0.1560.533***0.487***Customerorientation----0.008Internalcommunication0.122F-statistics23.749***2.58440.907***14.325***R-square0.1870.0240.2840.298R-squarechange---0.014*p<0.05,**p<0.01,***p<0.001DISCUSSIONSANDCONCLUSIONSInternalmarketingisamanagementstrategythattreatsemployeesascustomersandjobsasproducts.Thisstudyinvestigatestheinfluenceofinternalmarketingonorganizationalcommitmentandweexplainthisrelationshipbyintroducingtwomediatorsincludingcustomerorientationandinternalcommunication.Theresultsofthisstudyclearlyindicatethatinternalmarketinghasadirectinfluenceonorganizationalcommitment,whilethemediatingeffectsofcustomerorientationandinternalcommunicationarenotfoundasoriginallypredicted.TheexpectedpositivelinkagebetweeninternalmarketingandorganizationalcommitmentisconsistentwiththefindingsofCaruanaandCalleya(1998)andBennettandBarkensjo(2005).Thisishardlysurprisingasinternalmarketingseekstotreatemployeesascustomerswhichinturnwillengagethemtobemorecommittedtotheorganization.ThisfurtherechoestheclaimthatmarketingandHRMishighlyrelated(Wei&Lau,2008).Wefoundnomediationeffectbythetwomediatorsincludingcustomerorientationandinternalcommunication.Nevertheless,wefoundthatinternalmarketingisdirectlyrelatedtocustomerorientation.Given

11TheImpactofInternalMarketingonOrganizationalCommitment:theMediatingRolesofCustomerOrientationandInternalCommunication 11 theimportanceofmarketorientationtofirmperformance,ourstudyprovidesempiricalevidencethatinternalmarketingcanenhancemarketorientation.Contemporaryresearchseemstoassumethatamarketingstrategydevelopedbythetopmanagementorthechiefmarketingofficerwillsellbyitselfandwillgetsupportfromtheemployees.Thereappearstobeaneedthat,likeallothermarketofferings,marketingstrategyhasfirsttobe“marketed”totheinternalcustomers(whoaretheemployees).Withoutclearunderstandingofthetruevaluesandmeaningsofthecurrentcompanystrategy,itisunlikelythatemployeeswillbedevotedto“market”onbehalfofthecompany.Ourfindingsservetohighlighttheimportanceofinternalmarketingincreatingamarket-orientedculture.WealsofailedtofindaneffectbetweencustomerorientationandorganizationalcommitmentwhichiscontrarytothefindingsofDonavanetal.(2004).Beingcustomerorienteddoesnotmeanthatemployeeswillbecommittedtoanorganization.Itislikelythatcustomerorientationwillhaveapositiveimpactonbusinessperformanceratherthanonorganizationalcommitmentwhichisapsychologicalpredisposition.Futureresearchwillneedtobedoneonhowcustomerorientationcanbetranslatedintoemployeebehaviorthatisinstrumentaltoorganizationaloutcome.Wearealsosurprisedtofindthatinternalcommunicationdoesnotenhanceorganizationalcommitment.Enhancingcommunicationmaynotnecessarilylureemployeestocommittotheorganization.Perhapsitalsodependsonwhethertheircompany’sstrategythatisbeing“marketed”tothemisconsistentwithwhattheyvalue.Bettercommunicationofastrategythatemployeesdonot“like”isunlikelytocreateacommittedworkforce.Therefore,furtherresearchwillneedtobedoneonmoderatorsofsuchrelationship.Theresultsofthisstudyshouldbeconsideredinlightofthecontextwherethisstudyisundertakenwithinaneducationalinstitution.Previousstudiesarelargelyconductedinserviceorganizationswiththetargetsamplebeingfrontlineserviceemployees.Ourdataarecollectedfromadministrativestaffwhoareservingeitherinternal(colleagues)orexternalcustomers(studentsandparents).Likeotherservicepersonnel,administrativestaffinaneducationalinstitutionarealsofacedwithmultiple“customers”.Notonlydotheyneedtoservestudentsandparents,theyarealsodealingwithteacherseveryday.Giventhatthefocusofthisresearchisonadministrativestaffratherthanteachers,theresultscanreadilybeappliedtoanyserviceorganization.Nevertheless,theextensionofinternalmarketingtotheeducationalsettingcanhelpprovidemoreevidenceontherelevanceofinternalmarketinginthenon-profitsector.Inotherwords,internalmarketingisessentialtoalltypesoforganizationswhetherprofitornon-profit.REFERENCESAhmed,P.&Rafiq,M.(2002).Internalmarketing:Toolsandconceptsforcustomer-focusedmanagement.Butterworth-Heinemann,Oxford.Ahmed,P.K.,Rafiq,M.&Saad,N.M.(2003).Internalmarketingandthemediatingroleoforganisationalcompetencies.EuropeanJournalofMarketing,37,(9),1221-42.Argenti,P.A.(1996).Corporatecommunicationasadiscipline–TowardaDefinition.ManagementCommunicationQuarterly,10,(1),73-97.

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EuroAsiaJournalofManagementIssue44,Vol.25,No.1/2,December2015,15-53CORPORATESOCIALRESPONSIBILITYDISCLOSUREBEHAVIOROFCHINESEBANKSINMAINLANDCHINA2008-2012CARLOSNORONHA1andWONGSIMEI,SAMMI2ABSTRACTInrecentyears,thegovernmentofChinahastakenmanyCSR(CorporateSocialResponsibility)actionswiththeaimtoimproveCSRdisclosurebehaviorinChina.Basedoncontentanalysis,thisstudyattemptstoanalyzeCSRdisclosurepracticesofmainlandChinesebanksagainsteconomic,social,andenvironmentalaspectsduringtheperiod2008-2012listedontheAsharesoftheSSE(ShanghaiStockExchange).Moreover,thispaperidentifiesanyconformance/non-conformanceaspectsofthebanksinrelationtotheSSErequirements.PoliticaleconomytheoryandlegitimacytheoryareusedtodescribethephenomenonofCSRdisclosureinChina.SincetheSSEissuedtheguidelinesandnoticetoalllistedcompaniesinMay2008,2008ischosenasthestartingpointforcomparisonandthetrendsareobservedforfiveconsecutiveyearsto2012.Inaddition,contentanalysisisusedtoinvestigatethesampledbanks’levelofadherencetotheSSErequirements.Keywords:CorporateSocialResponsibility,banks,China,disclosure1FacultyofBusinessAdministration,UniversityofMacau.Email:fbacn@umac.mo2FacultyofBusinessAdministration,UniversityofMacau.

16CarlosNoronhaandWongSiMei,Sammi16INTRODUCTIONBackgroundThereisnouniversaldefinitionforCSRtoday.Itisneitherincludedinlegislationnorpracticedsystematicallybycompanies.AlthoughthereisnofixedagreementofCSR,toprovideafoundationofaction,basicperceptionstillexists.CSRisaboutcompanies’integratingsocialandenvironmentalconsiderationsincommercialactionsandtheircommunicationswithstakeholdersonavoluntarybasisaccordingtotheEuropeanCommission(ThecommissionoftheEuropeancommunities,2002).CSRnormallyincludescomponentssuchascompliancewithlegalrulesandactionsthatgobeyondethicalandformalstandards.ThehistoryofCSRdatesbackto1824whenCadburySchweppesalreadyhadaclearunderstandingofitsobligationtostakeholders,realizingthatgoodethicsandgoodbusinessnaturallygotogether(Shen&Fleming,2008).CSRhasgonethroughalongjourneysincethe1920sandtheformationoftheAmericanindustrializationandthedevelopmentofWesternenterpriseschemes(Hoffman,2007).Ontheotherhand,CSRdisclosurereferstotheprovisionofinformationaboutaparticularfirmthatmayembraceanysubjectinanymediumtoanyparty,withtheaimofprovidingasolutionforimprovedaccountabilitytoawidearrayofstakeholdersonenvironmentalandsocietaltopics(Grayetal.,1995).Priorstudiesshowthatitissignificantforcompaniestotakeresponsibilityfortheiractionsbecausethesecouldaffectreputationandcorporatevalueifnot(Grayetal.,1995).Asaresult,companieshavestartedtodiscloseinformationconcerningtheirCSRbehavior.Theseorganizationshaveusedannualreportsasamainwaytoofficially(andlegally)discloseCSRinformation(Eng&Mak,2003).ThisWesternconceptofCSRwasintroducedintothebusinesscirclesinChinainthemid-1990s.Forexample,ChinaintroducedTradeUnionLaw(1992),EnvironmentalProtectionLaw(1994),ConsumerProtectionLaw(1994)andtheLaborLaw(1995),whichhaveallservedasfundamentalstandardsofCSRforcorporations(Lin,2010).After15yearsofnegotiations,ChinaachievedmembershiptotheWTO(WorldTradeOrganization)in2001(Kirby,2001).TheChinesegovernmenthasappearedtopayattentiontotheimplementationofCSRinordertofollowinternationalnormsandbecomemorecompetitiveintheglobalmarket(Fewsmith,2001).Besides,Chinaenjoyedgreateconomicexpansioninashorttimeduetorapidgrowthinglobalexchange.Exportsincreasedsignificantlyfrom$0.17billionin2000to$1.54billionin2010(TradingEconomist,2010).Chinahasbecomeoneofthelargestexportersintheworldandsoactivelytakespartintheglobalsupplychain.AsChina’sremarkableroleintheglobalmarketplacewillcontinuetoexpand,thesenseofimplementingCSRwillhavebecomemoresignificantnowbecauseitispartoftheWTO.

17CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201217ObjectiveandMotivationfortheStudyTheeconomyinChinahasbeengrowingrapidlyoverthepastfewdecades.TakingareviewofChina’sGDP,statisticsshowthatChina’sannualaveragegrowthinGDPpercapitafrom2002to2012was9.9%(Ross,2012).ChinapassedJapantobecometheworld’ssecondlargesteconomyin2010(Barboza,2010).Atthesametime,China’sremarkableeconomicgrowthhasbroughtaboutenvironmentalandsocialchallenges.Asaresult,demandfornaturalresources,suchaswater,powerandlandusage,hasincreasedremarkably,causingenvironmentalissuessuchasdesertification,globalclimatechange,watercontaminationandairpollution,whichhasledtootherproblemssuchasdamagetothehealthofcitizens.Thisperformsasaharmfulcycleandwillinfluenceeconomicsustainabilityinthelongrun(Economy,2003).ItisnolongerthecasewhereonlyWesterncompaniesareconcernedaboutCSRdisclosure.ThemediahashighlightedasequenceofproblemstoshowinsufficientCSRpracticesduringthepastfewyearsinChina.Usageofdisqualifiedsubstancesinconsumerproducts,employeesuicides,toxicemissions,energyunavailabilityandenvironmentaldegradationareallpopulartopics(Economy,2003).EnvironmentalpollutionisaseriousproblemforChina.Thecountry’scapital,Beijing,seespollutantsalwaysreachinghazardouslevels(Morelle,2014).FrominformationcontainedintheWorldBank’slistof2007,16oftheworld’s20mostpollutedcitiesarelocatedinChina(Lagorio,2007).However,China’sproblemhasbecometheworld’sproblem.TheabovenotonlyhaveanegativeimpactonthecommunityofChina,theyalsoaffectChina’sinternationalstatusasitsglobalinfluenceisexpanding.ItwillaffecteconomicsustainabilityinthelongrunandimpliesapoliticalchallengeandpressuretoChina.Theseenvironmentalandsocialproblemshavearousedtheattentionofthepublictothesocialresponsibilitiesofbusinessenterprises.Atthesametime,theroleofgovernmentincorporategovernanceseemstohaveincreasedwitheachroundofcorporatecollapseandscandal(Shen&Fleming,2008).Additionalgovernmentefforthasbeenintroducedtoconsolidatetheinternalcontrolsofcompaniesinordertoincreasethetransparencyandcredibilityofcompaniessoastogaininvestor’sconfidence.Asaresult,thesehavechangedChina’spolicyfocusfromsustainingeconomicgrowthtoachievingsocietalbalanceandenvironmentalharmony.Inthe2005NationalPeople’sCongress,ChinesePresidentHuJintaointroducedthepolicyguidelinesof“HarmoniousSociety”(Zheng&Tok,2007).Thishasbecomeabroadlyunderstoodsocio-economictargetoftheofficialpolicyoftheChineseCommunistParty.Moreover,Article5ofChineseCompanyLaw2006callsonacompanyto“…observesocialmoralsandcommercialethics”and“undertakesocialresponsibility”whenconductingbusiness(Lin,2010).InMarch2006,China’stoplegislatureformallyapprovedthe11thFive-YearPlanintheNationalPeople’sCongressfortheperiod2006-2010.Theplancovereddevelopmentstrategyandthegoalofbuildingaharmonioussocietyandscientificdevelopment.Thegoalsproposedcovernotonlyeconomic,butalsosocialdevelopmentandtheenvironment.Differentfromthepreviousones,the11thFive-YearPlanmadepublicaffairs,suchasareductioninpollution,energy

18CarlosNoronhaandWongSiMei,Sammi18consumptionandhealthcarecompulsoryindicatorswhileeconomiconesareonlyexpected.Table1showsthekeyindicatorsinthe11thFive-YearPlan.TABLE1:Selectedtargetsofthe11thFive-YearPlan(E:Expected;C:Compulsory)3IndicatorsUnit200520105-yearchangeTypeEconomicperspectiveGrossdomesticproductTrillionYuan18.226.17.5*EGDPpercapitaYuan13985192706.6*EEnvironmentalperspectiveReductionofenergyconsumption/unitGDP%---20CReductionofenergyconsumption/unitindustrialvalueadded%---30CReductionofemissionofmajorpollutants%---10CForestcover%18.220.01.8CSocialperspectivePopulationMillion130813600.8*CUrbanization%43474EUrbanemploymentincreaseMillion--45ETransferofrurallaborMillion--45EUrbanunemployment%4.25.00.8EUrbandisposableincomepercapitaYuan10493133904.9*ERuralnetincomepercapitaYuan325541504.9*EUrbanpopulationwithretirementinsuranceMillion17422349CCooperativehealthcareinthecountryside%23.5>80>56.5CAverageeducationalattainmentYears8.590.5ESource:11thFive-YearPlanofNationalEconomyandSocialDevelopmentofthePeople’sRepublicofChina.AlloftheseindicatorshighlighttheconcernsoftheChinesegovernmenttowardeconomicdevelopment,environmentandsociety,whichconstructaframeworkofCSRguidelinesthatcaninfluencethebehaviorsofcompaniesinChina.InMay2008,theSSE,whichisunderthecontroloftheChinaSecuritiesRegulatoryCommission,issued‘TheGuidelinesonListedCompanies’EnvironmentalInformationDisclosure’(hereaftertheguidelines)and‘NoticeonStrengtheningListedCompanies’AssumptionofSocialResponsibility’(hereafterthenotice),influencinglistedcompaniesdisclosurepracticesandperformance,whichisanimportantchangeregardingtheCSRdisclosuresinChina.Accordingtothesenotices,theSSElistedcompaniesshouldfulfilltheirsocialresponsibilitytowardstheinterestofstakeholders-suchasemployees-andfacilitateenvironmentalsustainabilityandeconomicdevelopment.3Numberinasterisksrefertoaverageannualgrowthrates.

19CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201219Asmentionedpreviously,environmentalissuesareasignificantconcerninCSRinChina.Despitebanksnotgeneratingdirectpollutionintheprocessofdoingbusiness,thefinancingdecisionsofbankscaninfluence,andbeinfluencedby,theenvironmentalperformanceandrecordsofthecorporationsorpotentialborrowerstheyprovidefinancingandcreditservicesto(Thompson&Cowton,2004).Theenvironmentstatusisconsideredtobeassociatedwiththeoperationofthebankingsectorwhenenvironmentalrisksareconvertedintoeconomicrisks.Forexample,environmentalriskcangeneratefinancialliabilitiestoabankifitconductsbusinesswithanenvironmentallyunfriendlycompany(Thompson,1998).Infact,thebankingsectorincludesadiversegroupofindividualsandistheengineofeconomicgrowthandthenation’sdevelopment(Achua,2008).Itplaysacriticalrolebecausetheindividualbanksarecentralactorsinaneconomy-theiractionswillinfluencetheeconomybothdirectlyandindirectly.Nowadays,banksprovideafullsetoffinancialservicestovariousparties,rangingfrompersonaltocorporatebanking.Forpersonalbanking,theyofferservicessuchasloans,wealthmanagement,exchangesettlement,andcreditanddebitcards.Forcorporatebanking,theyprovidetradeservices,fundsmanagement,corporatefinancingandsoon.Asaresult,theyinteractwithdifferentpartiesandstakeholdersinsociety,suchasbusinesspartnersandsuppliers,corporatemanagers,shareholders,industryanalysts,thegovernment,regulatoryauthorityandthemedia.Thenumberofbankingproductsandservicesofferedalsoimpliesthatthesocialresponsibilitiesofthebanksareimportant.AbetterunderstandingoftherelationshipofCSRdisclosureinthebankingindustryandthemotivesindisclosurewouldbevaluableinformationtothepartiesinvolved.Thebankingsectorisselectedinthisstudybecause,eventhoughbankshavebeenactivelyparticipatinginactivitiesofCSR,theyhavealwaysbeenexcludedfromin-depthqualitativeresearch;therefore,additionalresearchissignificantandvital.InvestorshavebecomemoreinterestedinemergingmarketslikeChina.Thus,Chinaisagoodmarketforobservationasitisdevelopingandtransitional,andcanprovideagoodbackgroundtoobservehowtheguidelines(issuedbythecentralgovernment)haveinfluencedthegrowthofvoluntaryCSRdisclosure.ResearchquestionAccordingtoMcIlroy(2008),thereisaneedforthebankingindustrytocarryoutriskmanagementandbanksareregulatedduetothepossibilityofsystematicrisk.Thesesystematicrisksappearbecausemarketparticipantstendtoputtheirself-interestastheirmainconcern.McIlroythusintroducedreformsbasedonthedimensionsofCSR,suchasincreasingthetransparencyofrisk(McIlroy,2008).ItcanbeobservedthatthereisanincreasingtrendforcompaniesinChinatovoluntarilyreportonCSR.Nowadays,allofthe“BigFour”accountingfirmshelptheirclientstodevelopCSRstrategiesandprovidecorrespondingadvisoryservices.AccordingtoKPMG(2011),thenumberofCSRreportsbylistedChinesecompanieshasincreasedfrom32in2006,to98in2007,169in2008,631in2009and663in2010(Dongetal.,2013).ThephenomenonoftheriseinCSRdisclosurehasraisedseveralquestions:1.WhydoestheChinesegovernmentissuesuchguidelines?Whatarethedrivingforcesof

20CarlosNoronhaandWongSiMei,Sammi20theSSErequirementsonCSRdisclosureonthebanks?2.Towhatextentdothebanksadheretotheserequirements?3.Whatarethemotivationsbehindsuchadherenceornon-adherence?TheresearchpurposeofthisstudyistoexplorethepatternsandextentofCSRdisclosurebehaviorsofthebanksinChinasincetheSSEnoticeandguidelineswereissuedin2008(researchperiod2008-2012).Inlinewiththispurpose,thestudywillbeexplainedintermsoflegitimacyandpoliticaleconomytheory,togetherwiththespecialfeaturesofChina.MethodologyThisstudyconcentratesonanalyzingtheCSRreportofbankslistedonChina’sSSE.Fivefinancialperiodswillbeconsideredafterthecentralgovernmentissuedtheguidelinesandnotices,from2008to2012.Thereareatotalof32suchcompanieslistedontheSSE’sAshareindex.Inordertogeneratesystematicresults,bankswillbechosenbasedonwhethertheyprovideCSRreportswithinthesametimeperiod.Thatis,companies’CSRreportswillbeexcludediftheyarenotavailableforalloftheyears.Thefinaldatasetcontainssevenbanks;atotalof35firm-yearobservations,witheachcompanyhavingfiveofthem.TheirCSRreportswereeitherdownloadedfrom“CSR-China”4orthebanks’websites.5Contentanalysiswillbeusedinthisstudyasthemethodofresearch.PriorresearchhasshownthatcontentanalysisisthemostcommonandwidelyusedmethodinCSRdisclosureresearch.Thisprocessisappropriateinthistypeofresearchbecauseitaimstoexploretheextentandqualityofcorporatesocialinformationdisclosure(Milne&Adler,1999).Oneofthekeyelementsoftheinvestigationofcontentanalysisistheselectionofunits,suchasnumberofwords,sentences,phrases,rowsandsoon.Bycountingthequantityofthese,patternsemergeaboutdisclosurebehaviorandlevels(Hooks&Staden,2011).Quantitatively,onecantransformtheseunitsintostatisticalinformation;qualitatively,thedatacanbeusedtoanalyzethemeaningofthetextanditsimplicationsandintentions.InviewoftheuniquecaseofChina,legitimacyandpoliticaleconomytheorywillbeusedtoexaminethemotivationofChina’sCSRdisclosurepracticebyconcentratingonthebankingindustry.AnalysiswillbegiventohowtheSSEguidelinesfromthecentralgovernmentactasapotentialforcetoaffectfirms’CSRreportingbehavior.Then,theactualdisclosureofthefirmswillbecomparedwiththemandatoryrequirementsandtrendswillbeobservedyearbyyear.4http://www.csrchina.net/index_ch.php5http://www.spdb.com.cn/chpage/c530/?COLLCC=3397028256&http://www.cmbc.com.cnhttp://www.icbc-ltd.com/ICBCLtd/Investor%20Relations/http://www.boc.cn/investor/http://www.bankcomm.com/BankCommSite/html/report/qiye/index.htmlhttp://www.bankofbeijing.com.cn/investor/index.htmlhttp://www.ccb.com/cn/investor/index.html

21CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201221LITERATUREREVIEWTheoreticalFrameworkforCSRDisclosureLegitimacyTheory“MuchofthedemandforCSDmaybeviewedastheresultofpublicdesireforinformationonwhichtobaseanopinionaboutwhetherornotacorporationis‘appropriate’or‘rightandproper’,i.e.toevaluatecorporatelegitimacy.Also,muchofthevoluntarysocialdisclosureissuedbycorporationsmaybeviewedaseffortsatlegitimation,i.e.effortstoachievethestatusoflegitimacy”(Lindblom,1994:3)Thequestionofvoluntarydisclosurebehaviorbyfirmshasarousedattentionfrombothacademicandbusinessfields.AftertheEnronscandalithasreceivedevenmoreattention.Itbecomesanindirectrequirementfromstakeholdersthatcompaniestakeresponsibilityfortheiractions(Grayetal.,1995).Thus,afailuretosatisfystakeholders’needscanresultinadecreaseinacompany’svalueandreputation.SomescholarshavementionedthatstakeholderpressureandgovernmentregulationhaveacomparativelyimportantroleonCSRinitiatives(Campbell,2007),aswellasaspectssuchastransparencyandaccountability.Inordertolegitimizetheirbehaviors,companieshaveimplementedCSRpracticesbasedonlegitimacytheory.ThistheoryhasalsobecomethemostcommonlyusedtheorytoexplainCSRdisclosure(Deegan,2002).ResearchshowsthatCSRisacomparativelysuccessfulmethodforcompaniestohandlerelationshipswiththeirstakeholders(Grayetal.,1995).Firmswithhighersocialresponsibilitywillhavebetterfinancialperformancethanthosewithlessresponsibility.Forexample,sociallyresponsiblecompaniescanincreasetheirsaleswhentheyattractconsumerswhocareaboutcorrespondingsocialissues(Levetal.,2010).Inrecentyears,legitimacytheoryhasbecomeaninsightfultheoreticalperspectiveinCSRdisclosureanalysis.Ithasbecomemoreimportantbecauseofwell-organizedinterestgroupsandtheneedoforganizationstorunsmoothlyincompetitiveenvironments.Thoseinterestgroupsincludepartieswantingtoinfluencepublicpolicy,suchasprofessionalassociationsandtradeunions(Neuetal.,1998).Inspiteofthis,somescholarsstatethatthereisnotmuchdetailconcerningthemeasurementoflegitimacy.Forexample,Suchmanobservedthat“Manyresearchersemploythetermlegitimacy,butfewdefineit”(Suchman,1995:572).Therefore,readersoftenhavetounderstanditthroughexamplesanddiscussion(Elsbach,1994),whichhasresultedinvariousdefinitionsoflegitimacy.Ingeneral,legitimacytheoryisconsideredtheperceptionofasocietyaboutfirms’actionsandoperationsbeingwithinsociallydeterminednorms(Suchman,1995).Usually,thisperceptioninvolvestheviewofrelevantstakeholders.Hybels(1995)identifiesfourcriticalorganizational

22CarlosNoronhaandWongSiMei,Sammi22stakeholders:state,public,financialcommunityandmedia.Hebelievesthatthesestakeholdersareinterrelatedwitheachother.Forexample,thepubliccaninfluencethestatethroughlobbyingorvoting;themediacaninfluencethefinancialcommunitybyconveyingpositiveornegativesignalstothepublic;andthestatecaninfluencethecommunitythroughlegislation,regulationandtaxation.Therearetwoclassesoflegitimacytheory:institutionallegitimacytheoryandstrategiclegitimacytheory.Atamacrolevel,Suchman(1995)suggestsinstitutionallegitimacytheoryas“ageneralizedperceptionorassumptionthattheactionsofanentityaredesirable,proper,orappropriatewithinsomesociallyconstructedsystemofnorms,values,beliefs,anddefinitions”(Suchman,1995:574).Itconsiderstheprocessesbywhichelementssuchasgovernment,religion,society,andcapitalismarestructuredandprovidesguidelinesforsocialbehaviorandhowbusinessesgainacceptancebysocietyasawhole.Ontheotherhand,Mathews(1993)explainsstrategiclegitimacytheoryas“organizationsseekingtoestablishcongruencebetweenthesocialvaluesassociatedwithorimpliedbytheirorganizationalconductandthenormsandboundsestablishedbythesocietyofwhichtheyarepart”(Mathews,1993:350).Thelegitimacygapexistswhencompanies’behaviorisdifferenttosocialnorms.Thisgapcanbereducedbyvoluntarilydisclosinghowcompaniesworktowardssatisfyingthesesocialbeliefsinannualreportsorstand-aloneCSRreports(Walden1997).Therearefourbroadstrategiesthatcompaniesmayadoptwhenaperceivedlegitimacygapexists(Lindblom,1994).1.Theycanmakealterationstotheirperformance,outputorgoalswiththeexpectationofrelatedpartiesandthennotifythemaboutthesechanges.2.Theycanchangetheperceptionoftherelatedpartiesthroughchangingtheirbehaviorbyshowingtheappropriatenessofitsperformance.3.Theycanadjustperceptionsbydeflectingattentionfromtheissueofconcernandrelatingthemselveswithotherissuesofhighlegitimatestatus.4.Theycantrytochangesocietalexpectationsoftheirperformancewhentheybelievethattherelevantpartieshaveincorrectexpectationstowardstheirperformanceandthusalignthemwiththoseofthecompanies.Inthissense,macrolevelinstitutionallegitimacytheoryconsidershowtheguidelinesofsocialbehaviorhavebeenestablishedfromasociallyconstructedsystemofrules,normsandbeliefs,andhasbeenacceptedbythesociety.Strategiclegitimacytheoryisconsideredasalayerundertheinstitutionallevel,inwhichanorganization(suchasthoselistedcompanies)seekstogainsupportfromsociety.PoliticalEconomyTheoryTheframeworkofstakeholderandlegitimacytheoryisderivedfrompoliticaleconomytheory.Politicaleconomytheoryisoneofthemostcomprehensivetheoriesintheworld,whichcanbeausefultoolwhenlinkingcomplexandimportantmatterstogether.Itanalyzesthecreationofpublicpolicyfromeconomictheoryandisdescribedas“thesocial,politicalandeconomicframeworkwithinwhichhumanlifetakesplace”(Grayetal.,1995:47).Itisalsogenerallyusedtoexplain

23CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201223thesocialandenvironmentalreportingbehaviorindevelopingcountries(Haider,2012).Therearedifferenttypesofpoliticalandeconomicactivitiesindifferentnationseveryday.Specifically,thisinvolvestherelationshipbetweentheproduction,distributionandconsumptionsystemofgoodsandservices,anditsmanagementinthegovernmentsystem.Fromthispointofview,politicsandlaw,economicsandinstitutionwithinwhichthesocialandeconomicsystem(suchascapitalism,communismandsocialism)takesplaceareinterrelatedwitheachother.Theprocessoftradinginvolvesavarietyofgroupsintheeconomicsystem.Eachpartyorgroupwillhavedifferentneeds.However,thiswillbeneededforcooperationoffiniteresourcesinordertogeneratethebestresultandtopreventanyconflictofinterestandstrugglesthatmayexistduetotheircompetition.Economistsandpoliticalscientistssometimesuseapproacheslikegametheorytorelatetothis(Keith,2010).Politicaleconomytheoryisusedtoanalyzeproductionandtradingactivities.Inasense,itiscorrelatedwithvariousforces,suchasthegovernment,law,customandeachinstitutionofpower,andtheeconomyofproductionandexchangeofgoodsandservices.Itisrecognizedthatcompaniescanachievesustainabilitywhentheyconsidertheirorganizationallifetogetherwithsocialandpoliticalperspectives(Grayetal.,1995).China’sCSRDisclosureEffortsInatransitionaleconomysuchasChina,thecentralgovernmenthasasignificantbasisoflegitimacy.BeforeChina’seconomicreformsin1978,nearlyallenterprisesinChinawerestateowned(Dollar,1990).Throughstateownershipandelectingleadersintothepoliticalsystem,firmsarenotonlyownedbuttheyarealsomanagedbythestate(Lin,2010).Thecentralgovernmenthasthepowertoallocatedifferenttypesofresourcessuchassubsidies,licensesandprojectapproval,andenterprisesarerequiredtosubmitprofitstothem(Lietal.,2008).State-ownedenterprisesrespondmoretopoliticalforcesratherthaneconomicones.Asaresult,policyadjustmentsatthecentrallevelcanhelpshapethebehaviorofcorporationsandactasoneofthemostsignificantcomponentstoinfluenceindustrialpractices.Sincetheopen-dooreconomicreformpolicylaunchedbyDengXiaoping-theCommunistParty’snewleadershipin1978-China’sprivatesectorhasexpandeddramaticallytobecomeoneofthemostimportantelementsinthesocialisteconomy.AccompanyingFDI(ForeignDirectInvestment),thereisahugeamountofcapitalinflowandtheeconomyofChinahasbeendevelopingspeedily(Wei,1995).ChangesintheeconomicsystemstructurehavebeenaccompaniedbychangesinthesociallifeoftheChinese.NotonlyisGDPgrowthaccompanyingthisfastdevelopment,aseriesofnegativeeventshavealsobeenlinked,whichdemonstratesweakCSRpracticesinChina.ThesenegativecasesbroughtaboutpressureandhaveraisedtheChinesegovernment’sawarenessovertheimplicationofCSRpracticesfortheseorganizations.TheChinesegovernmenthasconvertedtheseconcernsintopracticesandpoliciesinordertomaintainasustainableeconomyandaddresstheinterestsofstakeholders.Legitimacytheoryrelatestotheconceptaboutthe“socialcontract”withinpartiesinsociety.The“socialcontract”canbedividedintoimplicitandexplicitterms,where,implicitterms

24CarlosNoronhaandWongSiMei,Sammi24canberevealedthroughsatisfyingtheexpectationofthedifferentstakeholdersandexplicittermscanbesatisfiedthroughaligningthelawrequirementsimposedbythegovernment(Deegan,2002).“Organizationswilltakevariousactionstoensurethattheiroperationsareperceivedtobelegitimate”(Dowling&Pfeffer,1975:122).Acompanycanusecorporatedisclosureasamethodtolegitimizeitsongoingexistence.AsaresultofChineseeconomicreform,thesocietyrequiresanewreportinganddisclosuresystemtosatisfystakeholders’changedinformationneeds.Thecountry’sdisclosureenvironmenthastobeadjustedinordertoalignwithglobalstandardsandwillresultinabreakingofthe“socialcontract”whenfailingtodothis(Deegan&Rankin,1996).InMay2008,theShanghaiExchange,whichisunderthecontroloftheChinaSecuritiesRegulatoryCommission,issuedtwoimportantnewdisclosuresrequirementforlistedcompanies.Thesewere‘TheGuidelinesonListedCompanies’EnvironmentalInformationDisclosure’(ShanghaiEnvironmentalDisclosureGuidelines)and‘aNoticeonStrengtheningListedCompanies’AssumptionofSocialResponsibility’(ShanghaiCSRNotice),andweretwokeymilestonestounderscoretheimportanceofCSR.Underthese,listedcompaniesaremandatedtodisclosetherequiredinformationtothepublicinatimelymanner.Inadditiontofinancialreports,thesecompaniesareencouragedtoissueseparateCSRreports.TheSSEGuidelinesandNoticeAccordingtothetwodocuments,thecompanieslistedontheSSEshouldfulfilltheirresponsibilities,takingtheimportanceofstakeholdersintoconsiderationandpromotingsustainablesocialandeconomicdevelopment.Thedetailswere:1.Companiesshouldenhanceawarenessofcorporateresponsibilityasasocietymemberandmakecontributionsforthoseinterestedpartiesinsocial,environmentalandresourceusageaspects.2.TheyshoulddevelopastrategicCSRplanaccordingtotheirindustryandthecharacteristicsoftheirbusiness.Thestrategicplanshouldincludeatleastthecodeofbusinessethics,employeeassuranceandcareerdevelopmentstrategy,aresearchproposalforresourceusageandenvironmentalprotection,socialdevelopmentsponsorshipscheme,andaplantocarryouttheseCSRactivities.3.TheymaydisclosetheachievementsoftheirCSRactivitiesandalsodisclosetheminanannualCSRreportontheSSEwebsite.4.CompaniescandiscloseintheirannualCSRreportthesocialcontributionvaluepershare(SCVPS),whichisanewmethodofmeasuringacompany’svaluecreation.Thisfigureiscalculatedbyaddingthetaxgeneratedforthestate,salariespaidtoemployees,loaninterestpaidtocreditorsanddonationsmadetotheinterestedparties,minusanysocialcostsduetoenvironmentalpollutionandothernegativeimpactmadebythecompany.Thiscanencouragethepublictolearnmoreaboutthetruevaluecompaniescreatedforstakeholders.5.ListedcompaniescandrawuptheirannualCSRreportaccordingtotheirowncharacteristicsandshouldinclude:

25CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201225a.Theirroleinpromotingsustainabledevelopmentinsociety.Forexample,thiscanincludehealthandsafetyprotectionforemployees,supportgiventothecommunityandassuranceofproductquality.b.Theroleinenablingenvironmentalsustainabilitysuchasreducingenvironmentalpollution,protectinglivingcreaturesandsoon.c.Theroleinfacilitatingeconomicsustainability.Forexample,thevaluecreatedforcustomersthroughproductsandservices,futuredevelopmentandbetterjobopportunitiesforemployees,andtheeconomicreturnforshareholders.6.ForthoselistedcompaniesthatactivelypromoteCSRdisclosure,theShanghaiExchangeoffersmotivationssuchaspriorityelectionintotheShanghaiCorporateGovernanceSector,orsimplifiedrequirementsforexaminationandverificationoftemporaryannouncements,whichcanhelptopromoteacompany’simage.Theguidelinesstatethatitwilladoptthenecessarypunishmentagainstthosecompaniesandrelevantemployeeswhocannotsatisfythedisclosurerulesandregulationsbothtimelyandaccurately.However,ithasnotdescribedthetruemeaningof“necessarypunishment”.GlobalReportingInitiative(GRI)guidelinesItcanbeobservedthattheSSEguidelinesandnoticementionedabovecanbedividedintothreedimensions:economic,environmentalandsocial.Infact,theyareverysimilartotheGRI(GlobalReportingInitiative),whichisalsoconstructedbasedonthesethreedimensions.TheGRIiscentraltotheUnitedNationsEnvironmentProgram,proposingvoluntaryCSRreportingguidelinesfororganizations.ItdevelopsaframeworkthatoffersreportingprinciplesandspecificperformanceindicatorsfororganizationstofollowwhenpreparingCSRorsustainabilityReports.TheGRIhasbuiltatransparentandsustainablereportingframeworkbasedonthreedimensions:economic,environmentalandsocial.Theeconomicaspectincludeselementssuchasrevenue,retainedearnings,employeecompensation,policyofoperation,anddevelopmentofinvestment.Theenvironmentalaspectincludeselementssuchasaninitiativetoreduceenergyconsumptionandtheenvironmentalprotectionithascarriedoutonair,water,land,biodiversityandhumanhealth.Thesocialaspectincludeselementssuchasworkplacehealthandsafety,employeetrainingandretention,andhumanrights.ThedisclosurecontentofthethreeaspectsissummarizedinTable3.

26CarlosNoronhaandWongSiMei,Sammi26TABLE2:PerformanceIndicatorsproposedbyGRI3rdeditionCorePerformanceIndicatorEconomicaspectEnvironmentalaspectSocialaspectEconomicperformanceMaterialsLaborPracticesandDecentwork:1.Employment2.Labor/Management3.Occupationalhealthandsafety4.TrainingandEducation5.Diversityandequalopportunities6.EqualremunerationforwomenandmenMarketpresenceEnergyIndirecteconomicimpactWaterBiodiversityEmissions,effluents,andwasteProductsandservicesHumanrights1.Investmentandprocurementpractices2.Non-discrimination3.Freedomofassociationandcollectivebargaining4.Childlabor5.Forcedandcompulsorylabor6.Assessment7.RemediationComplianceSociety1.Localcommunity2.Corruption3.Publicpolicy4.ComplianceProductresponsibility1.Customerhealthandsafety2.Productandservicelabeling3.Marketingcommunications4.Customerprivacy5.ComplianceSource:http://www.globalreporting.org/reporting.ItcanbeseenthatChina’smajorstockexchangehastakenanactiveroletopromoteCSRdisclosurebyreferencingtheguidelineswithaninternationalframework,suchastheGRIGuidelines,andhastakenasignificantstepforwardtointernationalstandards.

27CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201227METHODOLOGYOFTHESTUDYResearchMethodsIngeneral,therearetwotypesofresearchdesignmethodologies:qualitativeandquantitative(Ticehurst&Veal,2000).Quantitativeresearchinvolvesnumericaldataanalysisformeasuringandvalidatingrelationshipsbetweendefinedvariableswhichwillbetransformedintouseablestatistics(Denzinetal,2003;Leedy&Ormrod,2005).Usually,thistypeofmethodologyisusedwhenthereisarelativelylargesamplesizefromwhichconclusionsneedtobedrawn(Ticehurst&Veal,2000).Qualitativeresearchisprimarilyexploratoryresearch,whichseekstodecodeandtranslatesituationsintermsofreasons,opinions,meaninganddivesdeeperintotheproblem.Researchersusingthismethodcangatherrichinformationfromwords,sentences,paragraphsandconductin-depthexploration,insteadofusingnumbersandgeneralizationsaboutpopulations(Neuman,1994).Thisanalysiscanhelpreaderstounderstandandmakeinterpretations.Moreover,becauseitcombinesdifferenttechniquesitcanprovideacomprehensiveconclusionofasocialphenomenonthatwillbemeaningfultomanagersinanorganization(Ticehurst&Veal,2000).Therefore,thesamplesizeandstructureistypicallysmallerandlessstructuredthanaquantitativeone(Bellengeretal.,1989).ThereareavarietyofmethodologiesusedwhenconductingCSRresearch,suchascasestudies,surveysusingquestionnaires,focusgroupinterviews,andlongitudinalstudies.AccordingtoMilneandAdler,‘theresearchmethodthatismostcommonlyusedtoassessorganizations’socialandenvironmentaldisclosuresiscontentanalysis’(Milne&Adler,1999,p.237).Contentanalysisisalsothesimplestmethodtoexplorethepresenceandabsenceofsocialresponsibilityinformation(Patten&Crampton,2004).Itisdefinedas‘atechniqueforgatheringdatathatconsistsofcodifyingqualitativeinformationinanecdotalandliteraryformintocategoriesinordertoderivequantitativescalesofvaryinglevelsofcomplexity’(Abbott&Monsen,1979:504).Thismethodenablesthetransformationofqualitativedataintoquantitativeformandallowsfurtheranalysisusingdifferentquantitativescales.ContentanalysishasbeenusedbroadlyasaresearchmethodinCSRdisclosurestudies.ThereareseveralwaystomeasuretheamountofCSRreporting(Unerman,2000).Quantitatively,contentanalysiscanbecarriedoutbymeasuringthenumberofwords,sentencesorpagestoindicatethecoverageofareportingissue(Grayetal.,1995).Qualitativelyitcanalsobeusedtoanalyzethemeaningbehinddisclosures.Contentanalysiscanbedividedintoindexstudiesandvolumetricstudies.Theformerisamethod,whichchecksifaspecificitemofinformationispresentornot.Alternatively,thelatterchecks“theoverallvolumeofdisclosure,mostfrequentlybycountingwords,sentencesorproportionsofanA4page”(Vourvachis,2007:8).Thisstudywillbeconductedbasedonthevolumetriccontentanalysismethod.TheCSR

28CarlosNoronhaandWongSiMei,Sammi28reportsofthesampledbankswillbereviewedtoexplorethesituations.Aqualitativeresearchmethodwillbeusedinsteadofaquantitativeoneinordertoanswerthe“what”and“why”questions.Themeaningbehinddisclosureswillalsobeanalyzedqualitatively.ThoroughcontentanalysiswillbecarriedouttoexaminetheCSRreportspublishedbythecompaniesofoursamplefortheperiod2008to2012.ConcerningthespecialfeaturesanduniquecharacteristicsofChina,legitimacyandpoliticaleconomytheorywillbeusedtoexaminethemotivationofChina’sCSRdisclosurepractice.Theactualdisclosureofthefirmswillbecomparedwithmandatoryrequirementsandobservationswillbemadeonthetrendsyearbyyear.UnitsofAnalysisResearchconductedbythevolumetriccontentanalysismethodrequiresthesamplingunitsandcodingunitstobedefined.SamplingUnitsSamplingunitsistheobjectofwhattoanalyze(Krippendorff,2004).ThereareanumberofwaysforcompaniestocommunicatetheirCSRinformationtothepublic,suchasthroughadvertising,annualreports,publicrelations,leaflets,corporatewebsites,andadvertisements.(Grayetal.,1995).Usually,companiesreportonCSRactivitieseitherinaparticularsectionoftheirannualreportsorinaseparateCSRreport.Itsoundsunwiseandunlikelyforaresearchstudytoincludeallexistingdata.Instead,itwouldbe‘justifiabletoemployannualandstand-alonereportsasthesamplingunitastheseshouldcontainthebulkofthedisclosedCSRinformation’(Vourvachis,2007:12).Investorsarethecorereadersofannualreports,whilestand-aloneCSRreportsmayhaveanevenbroaderreadership.Inthissense,theCSRinformationdisclosedinacompany’sannualreportmaynotbecomprehensiveanddetailedenough.InordertocapturetheessenceofCSRdisclosureinformation,focusisgiventoanalyzingtheCSRreportsofbankslistedontheSSE’sAshareindexofChina.Fivefinancialperiodsareconsidered(2008-2012),whichareafterthecentralgovernmentissuedtheguidelinesandnotice.Thecompanies’CSRreportswereeitherdownloadedfrom“CSR-China”orthecompanies’website.CodingUnitsCodingunitsisthedecisionofhowtoanalyze(Krippendorff,2004),determiningthevolumeandexistenceofdisclosure.Asmentionedpreviously,itcanbeconductedbymeasuringthenumberofwords,sentencesorproportionofpagesinagivendocument(Grayetal,1995).As“sentencesarefarmorereliablethananyotherunitofanalysis”(Milne&Adler,1999:243).Thisstudywillusesentencesasthecodingunits.

29CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201229CodingCategoriesItisobservedthattheSSEguidelinesandnoticewereformulatedwithreferencetointernationalguidelines(theGlobalReportingInitiative(GRI)guidelines),whichwillbediscussedinthenextsection.TheGRIhasbuiltatransparentandsustainablereportingframeworkbasedonthreedimensions:economic,environmentalandsocial.Similarly,thesethreedimensionswerealsoactingasthedirectionofdevelopmentintheapproved11thFive-YearPlanofChina.CSRdisclosureinformationneedstobecategorizedintosubcategoriesinordertomakefurtheranalyses.Thecategoriesshouldreflectthepurposesoftheresearch,beexhaustive,andbemutuallyexclusiveandindependent(Holsti,1969).InordertomeasurethelevelofCSRdisclosureofbankscorrespondingtotherequirementoftheSSEguidelines,theGRIframeworkwillbeemployedforthesubcategories:economic,environmentalandsocial.Thedescriptionsofthethreecategoriesareasfollow:1.Economic:Includestheimplementationofeconomicpoliciestostimulatedomesticdemandandpromoteeconomicgrowth.Forexample,creditandfinancialsupportgiventofarmersinruralareasandthedevelopmentoffinancialproductsforsmallandmediumsizedenterprises.2.Environmental:Includestheimplementationofpolicywithreferencetoenvironmentalprotection.Forexample,controllingcredittoahighlevelofenergyconsumption,wastemanagementandparticipatinginenergysavingactivities.3.Social:Thiscategoryincludesdisclosureabouthowthecompanyisconcernedaboutthecommunity.Forexample,anyinformationaboutemployeecareerplanninganddevelopment,fundingandsponsorshipactivities,aswellascharitydonationsandvoluntarywork.CodingProcessThecodingprocesswillbeconductedbydeterminingtheCSRrelatedsentencescorrespondingtothecategoriesabove,manually.ThecollectedCSRreportsaremainlywritteninChinese,butsomeareinEnglish.ToovercomethelanguagedifferencesoftheCSRreports,twochecklistsweremade.AppendixIincludesallthecategoriesandsubcategoriesinChineseandAppendixIIistheEnglishversionofAppendixI,whichistranslatedbyGoogleTranslate.Inthisway,writtenChineseandEnglishcanbecodifiedonthesamebasis.Moreover,inordertostandardizetheinterpretation,certaindecisionruleshavebeendeveloped.AppendixIIIincludesalloftheserelateddecisionrules.Inaddition,theCSRactivitieswillbequantifiedbyconsideringthecodedCSRsentencesinconjunctionwiththelengthofthereport(Hackston&Milne,1996).Thus,forexample,30relatedsentencesina30-pageCSRreportwillbedifferentfrom30relatedsentencesina300-pageCSRreport.Inthisway,itconsiderstheCSRsentencesinrelativeperspectiveratherthaninabsoluteterms.

30CarlosNoronhaandWongSiMei,Sammi30SampleSelectionAtotalnumberofsevencompanieswereselectedfrom32companieswhowereintheSSE’sAshareindex.Thereareatotalof35firm-yearobservations,whereaseachcompanycomprisesoffive.Table3providesabasicideaoftheselectedcompanies.TABLE3:SampledbanksselectedfromShanghaiStockExchangeSampledbank’sfullnameListingDateShanghaiPudongDevelopmentBankCo.,Ltd1999-11-10ChinaMinshengBankingCorp.,Ltd2000-12-19IndustrialandCommercialBankofChinaLimited(ICBC)2006-10-27BankofChinaLimited(BOC)2006-07-05BankofCommunicationsCo.,Ltd2007-05-15BankofBeijingCo.,Ltd2007-09-19ChinaConstructionBankCorporation(CCB)2007-09-25LimitationsFromthepopulationof32potentialcompanieslistedontheAshareindex,banksthatprovidedCSRreportswithinthesametimeperiodwerechoseninordertogeneratesystematicresults.Since2008istheyearofissuanceoftheSSEguidelinesandnotice,andisalsothestartingpointofobservationsinthisstudy,thosebanksthatjoinedtheindexafter2008wereexcluded.Also,forbankswhichCSRreportsarenotavailableforalltheyearswerealsoexcluded.ANALYSISSummaryoftheCSRdisclosurebehaviorofbanks2008-2012IntheSSEguidelines,itisrequiredthatlistedcompaniesdevelopastrategicCSRplanaccordingtotheirindustryandcharacteristicsoftheirbusiness.ThisresemblestheGRIguidelines,whichrequiresorganizationstoprovidedetailsofperformanceintermsofeconomic,environmentalandsocialparameters.OneoftheGRIperformanceindicatorsiseconomicperformance.Intermsoftakingtheroleinfacilitatingeconomicsustainability,allofthesamplebankshavereportedaboutanemployeeassuranceanddevelopmentplanintheirCSRdisclosure.Itisobservedthatallofthebankspayattentiontoemployee’srightsandinterestasstipulatedbylawssuchastheLabor

31CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201231ContractLaw.TheyalsotakeintoconsiderationEmploymentPromotionLawandtheLaborDisputeMediationandArbitrationLaw,guaranteeingemployees’rightssuchastherighttotakerest,holidays,performanceassessmentandcompensation.Besidestheassuranceofemployees,stafftrainingisalsohighlyencouragedbyallbanks.Allofthemhavedevelopedtheirownstrategiesandmechanismstoenhanceemployees’capabilitiesandcareerdevelopments,whichsupportthegrowthofindividualssoastoprovidebetterfuturedevelopment.TheGRIenvironmentalperformanceindicatormainlyaimstoreduceenergyconsumptionandtheemissionofwaste.ThiscorrespondstotheenvironmentalaspectoftheSSEguidelinesoffacilitatingenvironmentalsustainability.Again,theentiresamplehastakentheseintoconsiderationfortheperiod.Itisobservedthatthesamplebanksgenerallyusedthesamethreewaystocarryouttheirenvironmentalprotectionplan.First,theyhavepromotedthegreencreditpolicy,whichtightenedclassificationstandardsandthecreditgrantingstructureinordertoconsolidatethecreditriskmanagementofcompanieswithheavymetalpollution.Second,theypromotedthepaperlessandlow-energyconsumptione-bankingchannels,savinghumanresources,materialresourcesandreducingcarbonemissions.Third,theyraisedtheawarenessofenergyreductionandcultivatedanatmosphereofenvironmentalprotectiontotheirteamsinordertosupportagreenoffice.Ontheotherhand,intermsofthecodeofethics,in2008,fouroutofsevenbanksincludeditintheirCSRreports-thePudongBank,theMinshengBank,theChinaConstructionBankandtheBankofBeijing-andthisincreasedtoallbanksin2009.Thistrendremainedconstantuntil2012.ItisobservedthatthosebankswhofailedtoincludethecodeofethicsintheirCSRreportshavefocusedonaspectssuchasvision,companyprofileandcorporategovernanceinstead.TheSSEguidelinesallowthecompaniestoreportonthesocialcontributionvaluepershare(SCVPS),oneoftheparametersinmeasuringthisisdonationsmadetointerestedparties.ThisresemblesGRIpublicpolicyaboutfinancialandin-kindcontributionstorelatedinstitutions.Regardingthis,fiveoutofsevenbanksincludedthesocialdevelopmentsponsorshipschemeintheirCSRreportsin2008.ThesewerethePudongBank,theMinshengBank,theIndustrialandCommercialBankofChina,theBankofChina,andtheChinaConstructionBank.Whilein2009allbanksdisclosedit.Again,thistrendremainedconstantuntil2012.FortheBankofBeijingandtheBankofCommunications,itisobservedthattheyalsoengagedindonationsandpublicwelfare,andbothshowadonationhistorylistintheirCSRreportin2008.However,unlikeotherbanks,suchastheMinshengBank,otherthanmakingadonationtocharityorganizationsandshowingtheirsupport,thisbankalsodevelopeditsownscheme,policyandprojectsinsocialpublicwelfare.Thisincludedbuildingschoolsinpovertyareas,creatingacharityfundandorganizingavolunteergroup.Inatotalof35firm-yearobservations,theresultindicatesthatthe“social”categorycomprisedthelargestportionofCSRdisclosureduringtheperiod2008-2012,with2,070outofatotal4,777CSRrelatedsentencesandreceives43%oftheshare,whereasthe“economic”and“environmental”categoriesreceives38%and19%,respectively(Figures1and2).

32CarlosNoronhaandWongSiMei,Sammi32FIGURE1:SplitofCSRcategories2008-2012FIGURE2:Totalnumberofrelatedsentences2008-2012Social43%Economic38%Enviromental19%0500100015002000250030003500400045005000EconomicEnvironmentalSocialTotal

33CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201233Comparisonamongsampledbanks’CSRdisclosurebehavior2008-2012ThissectionobservesthetrendofCSRdisclosurebehaviorofeachsampledbankinrelationtothenumberofsentencesineachcategoryforeachyear.Asmentionedpreviously,CSRactivitieswillbequantifiedbyconsideringthecodedCSRsentencesinconjunctionwiththelengthofthereportinordertogeneratearesultinanobjectivemanner(Hackston&Milne,1996).Byusingthisrelativeconcept,eachbankwillbegivenascoreeachyear,whichiscalculatedbyusingthenumberofCSRsentencesdividedbythetotalnumberofpagesoftheCSRreports.YearlycomparisonoftheShanghaiPudongDevelopmentBankThetrendrevealedbyyearlycomparisonofthePudongBankisagradualincreaseinthenumberofsentencesperCSRreport,althoughthereisasmalldropin2011inthe“social”category.Inabsoluteterms,itincreasedsignificantlyfromatotalof92to185relatedsentencesperreportfrom2008to2012,a101%increase(Figure3).FIGURE3:ComparisonofCSRrelatedsentencesofthePudongBank2008-2012020406080100120140160180200EconomicEnvironmentalSocialTotal number ofsentences3812429263294914165314914568344714990365918520082009201020112012

34CarlosNoronhaandWongSiMei,Sammi34ThecodedCSRsentencesrelativetothelengthofthereportwillbecomparedsoastoidentifyascore,whichcanthendescribetheCSRbehaviorofbanksmoreobjectively.AnalysisoftheresultsshowthatthetotalnumberofsentencesaswellasthetotalnumberofpagesofthePudongBankbothincreaseeachyear(Figure4).FIGURE4:TotalnumberofsentencesrelativetopagesoftheCSRreportofthePudongBank2008-2012TheresultsshowthatthescoreofthePudongBankisthesamein2008and2009,whichis1.96.Overall,thereisagradualincreaseinscore,from1.96in2008to2.20in2012(Figure5),showingthatthePudongBankhasgraduallyincreaseditsCSRdisclosureeachyear.FIGURE5:ScoreofthePudongBank2008-201205010015020020082009201020112012Total number ofsentences92141145149185Total number of pages47726869841.961.962.132.162.201.801.902.002.102.202.3020082009201020112012

35CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201235YearlycomparisonoftheMinshengBankDespiteaslightdropinthe“environmental”categoryin2011,thewholetrendrevealedbyayearlycomparisontotheMinshengBankshowsagradualincrease.Inabsoluteterms,itincreasedfromatotalof74to154relatedsentencesperreportfrom2008to2012,a108%increase(Figure6).FIGURE6:ComparisonofCSRrelatedsentencesofMinshengBank2008-2012Analysisoftheresultsshowthatthetotalnumberofsentences,aswellasthetotalnumberofpages,oftheMinshengBankareincreasingeachyear(Figure7).FIGURE7:TotalnumberofsentencesrelativetopagesoftheCSRreportoftheMinshengBank2008-2012050100150200EconomicEnvironmentalSocialTotal number ofsentences13174474152046812520591043318601116723641542008200920102011201205010015020020082009201020112012Total number of sentences7481104111154Total number of pages3740414258

36CarlosNoronhaandWongSiMei,Sammi36AnalysisshowsthatthescoreoftheMingshengBankisgraduallyincreasing-from2.00in2008to2.66in2012(Figure8),showingthatthebankhasgraduallyincreaseditsCSRdisclosureeachyear.FIGURE8:ScoreoftheMinshengBank2008-2012YearlycomparisonoftheIndustrialandCommercialBankofChinaThistrendshowsthatthenumberofCSRrelatedsentencesoftheIndustrialandCommercialBankofChinahasgraduallyincreasedovertime.Inabsoluteterms,itincreasedfromatotalof125to212relatedsentencesperreportfrom2008to2012,a69%increase(Figure9).FIGURE9:ComparisonofCSRrelatedsentencesoftheIndustrialandCommercialBankofChina2008-20122.002.032.542.642.660.001.002.003.0020082009201020112012050100150200250EconomicEnvironmentalSocialTotal number ofsentences20208512527448615733448816542469117973469321220082009201020112012

37CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201237AnalysisoftheresultsshowthatthetotalnumberofsentencesintheCSRreportoftheIndustrialandCommercialBankofChinaisincreasingeachyear(Figure10).Ontheotherhand,thenumberofpagesremainsthesamein2008and2009,dropsto55in2010andthenincreasesagainin2011and2012.FIGURE10:TotalnumberofsentencesrelativetopagesoftheCSRreportoftheIndustrialandCommercialBankofChina2008-2012Nevertheless,analysisshowsthatthescoreoftheIndustrialandCommercialBankofChinagraduallyincreasesfrom2.08in2008to3.26in2012(Figure11).FIGURE11:ScoreoftheIndustrialandCommercialBankofChina2008-201205010015020025020082009201020112012Total number of sentences125157165179212Total number of pages60605559652.082.623.003.033.260.001.002.003.004.00

38CarlosNoronhaandWongSiMei,Sammi38YearlycomparisonoftheBankofChinaThetrendmadebyyearlycomparisonoftheBankofChinarevealsthatthereisanoverallincreaseinthetotalnumberofsentences.However,thereisadropin2011duetoadecreaseinthenumberofsentencesinthe“environmental”and“social”categories.Inabsoluteterms,itincreasedfromatotalof120to186relatedsentencesperreportfrom2008to2012,a55%increase(Figure12).FIGURE12:ComparisonofCSRrelatedsentencesoftheBankofChina2008-2012However,whenconsideringthetotalnumberofpagesthisshowsadifferentstory.AnalysisoftheresultsshowthatthetotalnumberofpagesintheCSRreportoftheBankofChinadoesnotgraduallyincreaseeachyear(Figure13),sometimesdroppingandsometimesincreasing.FIGURE13:TotalnumberofsentencesrelativetopagesoftheCSRreportoftheBankofChina2008-2012050100150200EconomicEnvironmentalSocialTotal number ofsentences5432341207325521508226611698220451479630601862008200920102011201205010015020020082009201020112012Total number ofsentences120150169147186Total number of pages5566615164

39CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201239Alternatively,whenconsideringthenumberofsentencesrelativetopages,theresultsshowthatthetrendisgraduallyincreasingfrom2.18in2008to2.91in2012(Figure14).FIGURE14:ScoreoftheBankofChina2008-2012YearlycomparisonoftheBankofCommunicationsDespiteadropin2012,thetrendmadebyyearlycomparisonoftheBankofCommunicationsinthetotalnumberofsentencesfrom2008to2012isincreasing.Inabsoluteterms,itincreasedfromatotalof134to152relatedsentencesperreportfrom2008to2012,a13%increase(Figure15).FIGURE15:ComparisonofCSRrelatedsentencesoftheBankofCommunicationsduring2008-20122.182.272.772.882.910.001.002.003.004.0020082009201020112012050100150200EconomicEnvironmentalSocialTotal number ofsentences60235113462235914461246014578296917663286115220082009201020112012

40CarlosNoronhaandWongSiMei,Sammi40ThetotalnumberofsentencesandpagesoftheBankofCommunicationsincreasedfrom2008to2011,however,bothofthemdroppedin2012(Figure16).FIGURE16:TotalnumberofsentencesrelativetopagesoftheCSRreportoftheBankofCommunications2008-2012Asaresultoftherelativeterms,theoveralltrendofthescoreofBankofCommunicationsisstillincreasing,from3.72in2008to3.90in2012(Figure17).FIGURE17:ScoreoftheBankofCommunications2008-201205010015020020082009201020112012Total number of sentences134144145176152Total number of pages36383846393.723.793.823.833.903.603.653.703.753.803.853.903.9520082009201020112012

41CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201241YearlycomparisonoftheBankofBeijingThetrendrevealedbyyearlycomparisonoftheBankofBeijingisdifferentfromtheotherbanksinthesample.Inabsoluteterms,thenumberofCSRrelatedsentencesresultsisinadynamicpattern(Figure18).FIGURE18:ComparisonofCSRrelatedsentencesoftheBankofBeijing2008-2012Again,itgeneratesadifferentpicturewhenweconsiderthetotalnumberofpagesoftheCSRreportwiththetotalnumberofCSRsentences.Thesearealsoprogressinginadynamicpattern(Figure19).TheresultsshowthattheoveralltrendofthescoreoftheBankofBeijingisstillincreasing,from2.51in2008to2.66in2012(Figure20).FIGURE19:TotalnumberofsentencesrelativetopagesoftheCSRreportoftheBankofBeijing2008-2012050100EconomicEnvironmentalSocialTotal number ofsentences33134288351546962717418535184396361130772008200920102011201202040608010020082009201020112012Total number of sentences8896859677Total number of pages3538333729

42CarlosNoronhaandWongSiMei,Sammi42FIGURE20:ScoreoftheBankofBeijing2008-2012YearlycomparisonoftheChinaConstructionBankInabsoluteterms,thetrendrevealedbytheyearlycomparisonoftheChinaConstructionBankisdecreasing.Itdecreasesfromatotalof146to123relatedsentencesperreportfrom2008to2012,a16%decrease(Figure21).FIGURE21:ComparisonofCSRrelatedsentencesoftheChinaConstructionBank2008-20122.512.532.582.592.662.402.452.502.552.602.652.7020082009201020112012020406080100120140160EconomicEnvironmentalSocialTotal number ofsentences40228414641259215856175012347215412246225512320082009201020112012

43CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201243However,itdoesnotreflecttherealtrendiftherelativeconceptisconsidered.Figure22showsthatbothtotalrelatedsentencesandpagesoftheChinaConstructionBankisalsodecreasingduringtheanalyzedperiod(Figure22).Inthissense,theoveralltrendoftheChinaConstructionBank’sscoreisincreasing,from2.03in2008to2.37in2012(Figure23).FIGURE22:TotalnumberofsentencesrelativetopagesoftheCSRreportoftheChinaConstructionBank2008-2012FIGURE23:ScoreoftheChinaConstructionBank2008-201202040608010012014016020082009201020112012Total number of sentences146158123122123Total number of pages72775857522.032.052.122.142.371.801.902.002.102.202.302.4020082009201020112012

44CarlosNoronhaandWongSiMei,Sammi44YearlycomparisonsummaryofthesampledbanksOverall,thescoreofCSRactivitiesofthesampledbanksrangesfrom1.96to3.90.Theyearlyanalysisofthescoretrendshowsthatthescoreisgraduallyincreasingforeachbankfrom2008to2012,meaningthattheCSRdisclosurescoveringthethreedimensionshavebeenexpandingandthesampledbanksarepayingmoreattentiontoCSRdisclosure.Table4summarizesthescoretrendforeachofthesampledbanks.TABLE4:SummaryofthescoreofthesampledbanksSampledBanksScore20082009201020112012AveragePudongBank1.961.962.132.162.202.08MinShengBank2.002.032.542.642.662.37ICBC2.082.623.003.033.262.80BOC2.182.272.772.882.912.60BankofCommunications3.723.793.823.833.903.81BankofBeijing2.512.532.582.592.662.57CCB2.032.052.122.142.372.15MotivationsofCSRDisclosureThissectionprovidespossiblereasonsbehindthetrends.Itwillalsodiscussthecriticalincidentsoreventsthattriggeredthechangesintermsofthepoliticaleconomyandlegitimacytheories.IncreasingimportanceofChinaintheglobalmarketTheChinesegovernmenthasintroducedseveralstagesofeconomicreformsincethelate1970s.Oneremarkablepolicy,the“OpenDoor”Policy,waslaunchedin1978byDengXiaopingandbroughtthesociallifeoftheChineseintoanewera.Thisbroughtuponcapitalinjectionfromforeigninvestorsandinnovationfromtechnologydevelopment.TheresultingeconomicdevelopmentnotonlyimprovedthequalityoflivesoftheChinesepeople,butalsochangedtheirtraditionalperceptionofsocialnorms,valuesystems,andbeliefstoaWesternorientedone(Kunkel,1970).WithaccessiontotheWTOin2001,Chinahasgraduallybecomeamajorparticipantintheglobalmarket.StatisticsshowthatChina’sannualaverageGDPpercapitagrowthfrom2002to2012was9.9percent(Ross,2012)andithasbecometheworld’ssecondlargesteconomy(Barboza,2010).Furthermore,Chinahasbecometheworld’sleadingcountryforcapitalinjectionandreceivedUS$69.5billioninforeigndirectinvestmentin2006(WorldBank,2007).TheincreasinginternationalstatusandeconomicpowerofChinaimpliesarisingconcern

45CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201245ofresponsibilityinmeetingdifferenttypesofneedsintheglobalmarket.Competitionintheglobalmarketisfierce.Nowadays,manycompaniesinChinaarededicatedtoestablishingsustainablebusinesspractices.Theyunderstandthatthiscangenerateagoodreputationandcreatevalueforacompany(WilsonandMusick,2003).TheUnitedStatesandtheEuropeanUnionaremajorexportmarketsinChina.Statisticsshowthatconsumersinthesemarketsaremakingapreferenceforproductsandservicesdevelopedinasociallyresponsiblemanner(Augeretal.,2003).Asaresult,toadapttothischangingpatternandtosatisfydifferenteconomicparties,corporationshavedevelopedanewdisclosurebehavior.“HarmoniousSociety”developmentstrategyBasedonthegeneratedCSRreportresults,themainfindingisthatthesampledbankshavebeenincreasingawarenessandputtingmoreeffortonCSRreportingsince2008.PriortotheissuanceoftheSSEguidelinesandnoticein2008,CSRdisclosureinChinawasnotwellregulatedandtherewasnostandardanduniformformatorcontent.AlthoughcompaniescanfollowinternationalstandardssuchastheGRI,theyarestillfreetoselectthetypeofinformationdisclosed.Thismaycreateaproblemwherecompanieswillsimplyattempttoprovidesubjectiveinformationsoastoreducecostsandtheburden.Suchpiecesofinformationmaynotbewellinterpretedandcannotconveytheirvaluablemessagetousers.SincetherearenomandatoryCSRdisclosureguidelinesandrulestofollow,thisimpliesthatcorporationsarenotresponsiblefordisclosingtheirCSRactivitiestothepublic.Thisencouragesunethicalbusinessbehaviorsindirectly.Asmentionedpreviously,themediahaverevealedmanynegativescandalsinvolvingcorporationsinChinaandhavebroughtaboutseriousdamagetothereputationandglobalimageofthecountry.TheCCP(ChineseCommunistParty)understandsthatthiswillaffecteconomicsustainabilityinthelongrun.SuchacontextcreatesapoliticalmotivetopromoteCSRdisclosure.Asaresult,theyhavetriedtoputeffortintofacingthesocialandenvironmentalproblemsthroughthelegalsystem.TheChinesecentralgovernmentactsasanimportantsourceoflegitimacyinChina.TheCCPisthesolerulingpartyinChinatoimplementimportantpolicies.ThepoliticalsystemofChinahasgonethroughseveralstagesofchangesoverthepastfewdecadessinceitsestablishmentin1949.Itisdividedintothreestages:theMaoZedongsocialismpoliticalsystemera(1949-1978),theeconomicreformandtheopendoorpolicy(1978-1992),andthe“marketeconomywithsocialistcharacteristics”since1992(Chiapello&Ding,2005).SincetherulingofDengXiaopinginthelate1970s,thegovernmenthasstartedtochangetheeconomyfromacentrallyplannedonetoamoremarketorientedone,whichiscalled“socialismwithChinesecharacteristics”.Inotherwords,Chinaisunderatransitionperiodbetweensocialismandcapitalism–the“middleway”economics(Bradley&Donway,2010).Itappearsthattbeeconomicpartiesinvolvedarenotfullypreparedtoregulatethemselvesduetothenewenvironment.Acountryshouldestablishlawsandregulationsunderthistransitionalperiodinordertoworkinparallelwiththechangingeconomy(IMF,2009).Asaresult,thecentralgovernmentbecomesthemainimportantdriveroflegitimacyandsustainabledevelopment.Inamacrosense,increasingpoliticalpressurefromthecentralgovernmentduetocorporateirresponsibilityappearstobethemaindriverinshapingthisdisclosurebehavior,and

46CarlosNoronhaandWongSiMei,Sammi46theSSEguidelinesandnoticeissuedinMay2008appeartobethemostapparentregulationinthiscontext.Increasingconcernabouteconomicdevelopment,environment,societyandthesocio-economictargetofbuildinga“HarmoniousSociety”(Zheng&Tok,2007)isoneoftheaimsoftheChineseCommunistParty.ItwasintroducedbyChina’sPresidentHuJintao,andshowsthatthenationalstrategyofChinaistoestablishasustainableenvironmentthatcanbedeveloped.Chinaadjustsitspolicysoastomakeitsgrowthsustainable.InChina’s11thand12thFive-YearPlan,itfocusedonmeasurestoaddressenvironmentalandsocialproblems,aimedtowardspollutionandenergyreductioninordertoincreaseprotectionforsociety.Non-performingloans(NPL)crisisinChinesebanksInrecentyears,theChinesegovernmenthasmadeanefforttosupportstate-ownedenterprisesduetonationaleconomicsafety(EconomyWatch,2013).ThebankingsystemofChinaisdominatedbygovernment-ownedandgovernment-controlledcommercialbanks.ThecentralgovernmentexertssignificantinfluenceovertheoperationsofChinesebanks,suchasthe“big-four”stated-ownedcommercialbanks:BankofChina(BOC),theChinaConstructionBank(CCB),theIndustrialandCommercialBankofChina(ICBC)andtheAgriculturalBankofChina(ABC).BankloansareamajorsourceoffinanceformostenterprisesinChina,accountingfor2.7timesthatfromtheissuanceofstockorbonds(PwC,2012).Inrecentyears,thecreditportfolioofthe“bigfour”state-ownedbanksinChinahasbeengrowingworseandcreatedahugeproportionofnon-performingloans(NPL)afteryearsofthecentralgovernment’smanagementofbankingoperationsinthecountry(Park&Sehrt,2001).AlthoughtheChinesegovernmenthadestablishedAMCs(AssetManagementCompanies)toimprovethesituation,Chinesebanks’NLPwasstillincreasingeachyear.Ernst&Youngestimatedthatthesefourstate-ownedbanksaccountedfor$358billionofNLPsinChinaattheendof2005(Ernst&Young,2006).OneofthereasonsforthehighNPLinChinesebanksisduetooperationalweaknesses.Chinesebanksdonothaveemployeeperformancemanagementsystemsandloanofficersarenotwelltrainedtoprovidegoodcreditandrisk-assessment.Forexample,theywillmakeadecisionaccordingtopastexperienceinsteadofconductingathoroughanalysisandcollectinginformationonaborrower’scredithistoryandfinancialperformance(Podpiera,2006).Table5summarizestheyearlyandaverageincreaserateofthesampledbanks.Inordertoconsidertherateofincreaseofthesampledbanksinaconsistentmannerandtomakebettercomparisons,theaveragerateofincreaseiscalculated.ItisobservedthatICBCreactsmostviciouslyandseesanaveragerateincreaseof10%.Asmentionedpreviously,the“bigfour”state-ownedcommercialbankscompriseICBC,ABC,BOCandCCB.Infact,ABChasthelargestamountofNPLamongthefourbanks,nexttoICBC,BOCandthenCCB(Bergeretal.,2009).SinceABCisnotoneofthesampledbanks,ICBCbecomesthebankthathasthelargestNPLbalanceinthisstudy.Thiscorrespondswiththeresearchfindings,wheretherankofNPLbalancecorrespondstotherankofincreaserateofthescoreofthe“bigthree”banks-ICBC,BOC,CCB-withanincreaseof10%,6%and3%respectively.ThisprovidesevidencethatabankwithahighNPLbalancetendstoincreaseitsCSRdisclosurebehavior,andviceversa.

47CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201247TABLE5:SummaryoftheyearlyandaverageincreaserateofscoreofthesampledbanksSampledBanksRateofincreaseofscore20082009201020112012AveragePudongBank0%0%9%1%2%2%MinShengBank0%1%25%4%0%6%ICBC0%26%15%1%8%10%BOC0%4%22%4%1%6%BankofCommunications0%2%1%0%2%1%BankofBeijing0%0%2%1%2%1%CCB0%1%3%1%11%3%Akeyconcernforsomestakeholders,suchasinvestors,iswhetherthebankscandealwiththeNPL.Althoughtheyseefiguresfromfinancialstatements,CSRreportscanprovideamorethoroughpicture.IntheeconomicaspectoftheCSRreports,bankswillprovideinformationsuchasratioofNPL,NPLbalance,informationaboutitscredibilityandloanstructure,statisticsofdifferentloantypes,andhowtoincreasecreditloaninputintotherealeconomy.Furthermore,bankswillalsodiscloseemployeetraininginformationinthesocialaspectsofthereport.Forexample,inthesocialaspectsoftheCSRreports,abankwilldiscloseaboutactivitiesinvolvingdevelopment,trainingandstudy.Thesepiecesofinformationconveyvaluableinformationtousersincludingthegovernment,investors,financialanalysts,customers,andborrowers.Asaresult,inresponsetotheinformationneedsofdifferentstakeholders,bankshavebeenincreasingCSRdisclosure.CONCLUSIONThissectionsummarizesthemainfindings,limitationsofthestudy,contributionsandprovidessuggestionsforfurtherresearch.FindingsoftheStudyTheanalysisofthestudyisdiscussedindetailinChapter4.Overtheperiod2008-2012,itisobservedthatthesampledbankshaveahighlevelofcomplianceofCSRdisclosurewiththeSSE’smandatoryguidelinesandnoticethatcoverthreedimensions:economic,environmentalandsocial.Moreover,theCSRdisclosureofthesampledbanksgraduallyincreasedoverthesampledperiod.Thisisevidencedbytheupwardtrendofthescoreattainedbyeachbankthroughcontentanalysis.

48CarlosNoronhaandWongSiMei,Sammi48InrespectofthemotivationoftheissuanceoftheSSEguidelinesandnotice,inabroadsense,thiswaspartlydrivenbythefactthatChinaisgraduallytakingupamajorroleintheglobalmarket,andpartlyduetothedevelopmentstrategyoftheChinesecentralgovernment.Inrespectofthedrivingforceofabank’shighcompliancebehavior,thisstudyfindsthattheNPLbalanceofbankshasapositiverelationshiprelatedtoCSRdisclosurebehavior.ThisimpliesthatabankwithahighNPLbalancetendstoincreaseitsCSRdisclosure.Therefore,banksshoulddiscloseCSRinformationinordertosatisfyinformationneedsofstakeholders.LimitationsThisstudyhassomelimitationsinrespectofitsscopeindatacollection.OnlybanksthatprovidedCSRreportsintheanalyzedperiodwereanalyzedinordertogeneratesystematicresults.BankswhoseCSRreportswerenotavailableforalloftheyearsandthosewhichjoinedtheindexafter2008wereexcluded.Furthermore,priorresearchhassuggestedthatacompany’sattitudeofdisclosurebehaviorwillshowinitsannualreports.CSRinformationmayalsobedisclosedtothepublicthroughadvertising,publicrelations,leaflets,corporatewebsites,andsoon(Grayelal.,1995).However,theselatterpieceshavebeenexcludedfromanalysis.ContributionsThisstudyhasmadeseveralcontributions.First,itshowstheeffectivenessoftheSSEguidelinesandnoticetothebankingindustryinrelationtotheCSRdisclosureintheShanghaiStockMarket.Second,thisresearchappliesthelegitimacyandpoliticaleconomytheoriesinexplainingmotivationbehindCSRdisclosurepracticeinChina.ResearchershaveyettoconductananalysisthatfocusesonthebankslistedontheSSEandreviewingthebehavioralchangesofCSRdisclosurebyapplyingthesetheories.Asaresult,thisbroadensthelistofavailablestudiesoninvestigatingtheCSRdisclosurebehaviorofChinesebanks.Third,ithasdiscoveredthepositiverelationshipbetweenNPLbalanceandthelevelofCSRdisclosureinaChinesecontext.ThiscanhelpbankingmanagerstofurtherunderstandtheimplicationsbehindtheNPL.ImplicationsforFurtherResearchThisstudyfocusesonanalyzingthelevelofCSRdisclosurebehaviormadebythesampledbanks.ItanalyzesthepatternsofchangeindisclosurebehaviorwithreferencetotheSSEguidelinesandnotice.Theanalysiswasconductedthroughtheuseofalegitimacyandpoliticaleconomytheoryviewpoint.However,itdidnotinvestigatewhetherstakeholdersfoundthedisclosureinformationuseful.Asaresult,itissuggestedthatfutureresearchexaminetherelationshipbetweentheusefulnessofCSRdisclosureintheShanghaiStockExchangeandtheeconomicbenefitsgeneratedforusers.Thetimeperiodselectedinthisresearchis2008-2012.The2008financialyearisselectedasthestartingpointmainlybecauseoftheissuanceoftheSSEguidelinesandnoticeinthatyear

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52CarlosNoronhaandWongSiMei,Sammi52環境綠色信貸政策，綠色金融，綠色辦公，綠色環保概念環保計劃環境相關獎項減少二氧化碳排放量減少污染廢棄物管理低能量消耗電子銀行渠道社會職業安全與健康員工培訓和教育職業發展計劃員工的滿意度員工福利社會發展的贊助，捐贈和慈善基礎設施建設志願者工作APPENDIXII:CSRCATEGORIESANDSUBCATEGORIESEconomicComplianceofrelevantlawsSustaincustomerrelationshipRaisingefficiencyandeffectivenessInnovationofproductsandservicesPromotesteadyandhealthyeconomicgrowthOperatingresultsandvaluecreationSupportthecoordinateddevelopmentofeconomiesBoostthedevelopmentofSMEs(smallandmediumsizeenterprise)EnhanceglobalservicesEnvironmentGreencreditpolicy,Greenfinance,Greenoffice,GreenconceptEnvironmentalprotectionplan

53CorporateSocialResponsibilityDisclosureBehaviorofChineseBanksinMainlandChina2008-201253EnvironmentrelatedawardsReduceCO2emissionsReducepollutionWastemanagementLow-energyconsumptionE-bankingchannelsSocialOccupationalsafetyandhealthStafftrainingandeducationCareerdevelopmentplanEmployeesatisfactionEmployeewelfareSocialdevelopmentsponsorship,donationandcharityInfrastructuredevelopmentVolunteerworkAPPENDIXIII:CSRDISCLOSURECODINGRULES1.Sentencesinfootnoteswillbeexcluded2.Tableandgraphrelatedinformationwillbeexcluded3.Thechairmanstatement,presidentreport,auditorreport,companystrategy,andappendixwillbeexcluded4.Accountingpolicydiscussionisexcluded5.Allsponsorshipactivityisconsidered,regardlessofamount6.Repeateddisclosurewillbeconsideredseparateeachtimeitismentioned7.Implieddisclosureandclearlystatedarebothconsidered

EuroAsiaJournalofManagementIssue44,Vol.25,No.1/2,December2015,55-77AnAssessmentofOrganizationalReadinessforERPImplementationWADDAHALHAKIMI1andAMMARALZAHARY2ABSTRACTManycompanieshavenotachievedsuccessinERPimplementation.ResearchershaveidentifiedthatmanyorganizationshaveexperiencedenormouschallengesinthecourseofimplementationandsomesufferedfromdisastrousERPprojects.Thus,itisnecessarytoperformanassessmentpre-implementationofERPduringtheplanningphasetoidentifythefirm’scurrentstateofreadinessforimplementationERPandaimtogiveERPprojectmanagerstograspacomprehensiveunderstandingofERPprojectvulnerabilityandhelpthemtostrengthenareasofweaknesswhichmayleadtoprojectfailurepriortoprojectimplementation.Inthisstudy,anewlookatthedeterminantsoforganizationalreadinesstoimplementanERPprojectispresentedandusingananalyticnetworkprocessapracticalframework,toolfortestingthefirm’scurrentstateofreadinessaredeveloped.Thefirm’scurrentstateofreadinessregardinganERPprojectcanbedeterminedandnecessarychangespriortoimplementationofERPsystemcanbespecified.TheassessmentfactorsareidentifiedaftercomprehensivestudyofcriticalsuccessfactorsonERPimplementation.TheproposedframeworkandthetoolisappliedandtestedinarealcaseinYemenandtheadvantagesareillustrated.Keywords:ERP,criticalsuccessfactors,readinessassessment,analyticnetworkprocess.1ArabAcademyforBanking&FinancialScience.Email:dralhakimi@gmail.com2ArabAcademyforBanking&FinancialScience.

56WaddahAlhakimiandAmmarAlzahary56INTRODUCTIONNowadays,thebusinessenvironmentisrapidlychanging.Companiesfacethechallengeofincreasingcompetition,expandingmarkets,andrisingcustomerexpectations.Thisincreasesthepressureoncompaniestolowertotalcostsintheentiresupplychain,shortenthroughputtimes,drasticallyreduceinventories,expandproductchoice,providemorereliabledeliverydatesandbettercustomerservice,improvequality,andefficientlycoordinateglobaldemand,supply,andproduction(Jafarietal,2006).TheconceptofEnterpriseResourcePlanning(ERP)canbeviewedfromdifferentperspectives.First,ERPiscomputersoftware.Second,itcanbeseenasameansofintegrationofallprocessesanddataofanorganizationandcreateacomprehensiveintegratedstructure.Third,ERPisasoftwarethatrequiresareengineeringprocesssothecompanyisabletoadapttotheERPsystem.ThegooddefinitionofERPismorethanasoftware,itisrestructuringbusinessprocessesassociatedwithenterprisesystem,apackagedsoftwaresolutionwithanewautomatedwayofeffectivelyintegrating,managingandcontrollingalmostallaspectsofbusinessprocesses,functionsandwide-resourcesfromdifferentareasofthebusinessbyusingacentralizeddatabase,ensuringthatallinformationisenteredonlyoncetobeabletoproduceandaccessinformationmanytimesinrealtimeenvironment(Mareai&Patil,2012).ERPsystemsareanewclassofsoftwarethattendstostreamlineorganizations'processesandsupporttheirdecisionsmaking.ThisconceptisnotnewininformationmanagementthoughandERPsystemsthemselvesareanextensionforaseriesofenterprisesystems."ERPsystemsaredifferentfromlegacysystemsinthatorganizationsuseERPtointegrateenterprise-wideinformationsupportingfinancial,humanresources,manufacturing,logistics,salesandmarketingfunctions"(Yousef,2010).Generally,anERPsystemisanintegrated,configurableandcustomizableinformationsystem,whichplansandmanagesalltheresourcesintheenterprise,streamlinesandincorporatesthebusinessprocesseswithinandacrossthefunctionalortechnicaldepartmentsintheorganization(Kronbichleretal.,2010).Inaddition,ERPsystemsaredefinedas“configurableinformationsystemspackagesthatintegrateinformationandinformation-basedprocesseswithinandacrossfunctionalareasinanorganization”,i.e.,thethingthathelpsorganizationsdealwiththesupplychain,receiving,inventorymanagement,customerordermanagement,productionplanning,shipping,accounting,humanresourcemanagementandotherbusinessfunctions"(Yousef,2010).Furthermore,ERPinternet-enabledsystems(ERPII)usetheinternettoextendtheirbenefits,SCM,CRM,ande-business,whichsupportservicestocustomersandsuppliersthroughinternettomeettheirneeds(Mareai&Patil,2012).TheimpactofERPexceedstheoperationalimprovementstofinancialbenefitswhereadoptingorganizationsoftenwitnessimprovementsinsomeoftheirfinancialindicatorslikeROIaswellasanincreaseinrevenueandreductioninoperatingcost.Infact,ERPsystemsareoften

57AnAssessmentofOrganizationalReadinessforERPImplementation57associatedwithmanychangesonbothoperationalandstructurallevels.Suchchangesshouldbecarefullyandgraduallydonetoavoidanyorganizationalresistanceandensureasmoothimplementationandutilizationforthesystem.EvidenceshowsaveryhighfailurerateinERPprojectseithertotallybycancellingitorpartiallybyexceedingtheallocatedbudget,timeornotmatchingtheexpectedbenefits(Yousef,2010).TheimplementationofERPisachallengingendeavoursinceitchangesthewaythecompanydoesbusinessandimpactspeople,systemsandthewholeorganization.Ifimplementedcorrectly,however,anERPsystemcanbringconsiderablebenefitstoanorganization,includingcostreductions,improvedresourcemanagement,betterdecisionmaking,qualityimprovements,productivitygainsandempowermenttoimprovetheaccuracy,timing,flowandaccessofdataamongusersandconsiderablecompetitiveadvantagetoachievestrategicobjectivesfortheorganization(Yousef,2010).Thesefundamentalimprovementshavetranslatedintosubstantialbenefitsonoperational,managerialandfinanciallevelsinorganizationsthathavesuccessfullyimplementedthenproperlyutilizedanERPsystem(Yousef,2010).Improvementstobusinessprocessescantakeoneofthreeforms(Sanchez&Bernal,2007):a)Improvingprocessreliabilitythroughsixsigmaandothertotalqualitytools,b)Reducingprocesscomplexitythroughleanmanufacturing,andc)Coordinatingtheindividualelementsoftheoverallsetofbusinessprocessesthroughenterpriseresourceplanning.ThebenefitsgainedbyanERPsystem,can,however,behardtocalculateandfewcompaniesexperienceasuccessfulrolloutandimmediatelyreceivetheanticipatedbenefits.Infact,researchindicatesthat51%ofERPimplementationsareunsuccessfulandcloseto20%ofERPimplementationsarescrappedascompletefailuresbeforecompletion(Yousef,2010).So,whatholdsbackanorganizationfromimplementinganERPsystem?TherearetwomajorobstaclestoanERPsystemadaptationdecision;thehugemagnitudeofcostsandthehighfailurerate.ERPisaverycostlyprojectthatrequiresthedeploymentofhugeresourcesthroughoutitslifecycle.Startingwiththeexpensivehardwareandsoftwareitselftothetrainingcourses,externalconsultants,periodicmaintenance,annuallicensing,upgradingandsoforth.BothreasonstogetherconstituteasolidbarriertoERPimplementationandraisedoubtstherealfeasibilityofthesesystems(Yousef,2010).IndustryanalyststendtoagreethatoneofthemajorreasonsforERPimplementationfailuresisthatemployeesareresistanttochangingthewaytheydotheirjobsandthereforeresisttheERPsystem(Yousef,2010).Theemployees’acceptanceoftheERPsystemiscriticalforERPimplementationsuccesssinceanERPsystemcannotproduceanypositiveoutcomeunlessitisadoptedandusedbytheemployees(Yousef,2010).Forthatreason,researchersaregivingmoreattentiontothestudyoffactorsthatimpactERPsuccess/failureinanattempttoincreasecertaintyandenablebusinessestoenjoyitsbenefitsatminimalrisks.ThisresearchwillexaminethemostcriticalfactorsthatimpactERPimplementationinYemeni’sHealthCareIndustry(i.e.thehospitalsthatimplementedanERPsystem).Thefactorsconsideredinthecurrentresearchhavebeendeterminedafteranextensivereviewingoftheavailableliteratureandpreviousstudies.Thesefactorshavebeendividedinto

58WaddahAlhakimiandAmmarAlzahary58threemaincategories:managerialfactorsincludingprojectplanandvision,systemselectionandtopmanagementsupport;projectfactorsincludingprojectmanagement,projectchampion,teamworkcompositionandvendorsupport;andorganizationalfactorsincludingbusinessprocessreengineering,communication,usertrainingandeducationandorganizationalresistancemanagement.PROBLEMSTATEMENTInrecentyears,manycompaniesaroundtheworldhaveimplementedERPsystemsandthenumberofcompaniesthatplantoimplementERPisgrowingrapidly.However,giventhesignificantinvestmentinresourcesandtime,manycompaniesdidnotachievesuccessinERPimplementation.ResearchershaveidentifiedthatmanyorganizationshaveexperiencedenormouschallengesinthecourseofimplementationandsomesufferedfromdisastrousERPprojects.ItisindicatedthatwhiletheERPfailureratemaybeevenmorethan50percent,about20percentofattemptedERPadoptionsaredestinedtobecompletefailures(Yousef,2010).Infact,ERPsystemimplementationhasneverbeenaneasyjob.Theassociatedrisksareoftenhighandwidelyvaryduetothemulti-dimensionalnatureofthesystemthatcrossesallfunctionalareasatmanylevels.Inadequateresources,poorplanning,unqualifiedteam,systemcustomizationandorganizationalresistancearesomeofproblemsthataretypicallyfacedinERPprojectandseriouslyimpacttheirsuccess.Asamatteroffact,evidenceindicateahighfailureratioinERPimplementationprojects.Moreover,90%ofERPimplementationsenduplateoroverbudgetand67%ofenterpriseapplicationinitiativescouldbeconsiderednegativeorunsuccessful(Yousef,2010).Hence,thisresearchattemptstoanswerthefollowingquestions:1.WhatarethecriticalsuccessfactorsforERPsystemimplementation?2.Whatisthecurrentstatusofanorganization’sreadinesstoimplementanERPsystem?3.Whataretheareastobeimprovedpriortotheimplementationstage?RESEARCHOBJECTIVESInlightofthequestionsandproblemstatementthathavebeendiscussedabove,thisstudyaimsto:1.IdentifyingthefactorsthatleadtoERPimplementationsuccess.2.DeterminingorganizationalreadinessforundertakinganERPsystem.3.IdentifyingareasofweaknessrelatedtoanERPinitiativewithintheorganization.4.EnablingERPprojectmanagerstoachieveacomprehensiveunderstandingofERPprojectvulnerabilityandhelpthemtostrengthenareasofweaknesspriortoprojectimplementation.

59AnAssessmentofOrganizationalReadinessforERPImplementation595.Managingthecostsandrisksassociatedwiththeprojectandavoidingmostofthechallengesintheimplementationstage.LITERATUREREVIEWTheEnterpriseResourcePlanningsystemisasetofmodules,eachofwhichworksonaparticularfunctionalareayetcanbelinkedtogethertoonemainaccessibledatabasebyallusersifauthorized.Itisasoftwarepackage,whichcomposesseveralmodules,suchashumanresources,sales,financesandproductionthathasbeendevelopedorintegratedbythevendor,throughorganizationintegrationofdatathroughimbeddedbusinessprocesses(Awang,2006).Itisabiginformationsystemthateverybodyhasaccessto(Yousef,2010).ERPsystemsareaninformationsystemthatmanages,throughintegration,allaspectsofbusinessincludingproductionplanning,purchasing,manufacturing,andsales,distribution,accountingandcustomerservice(Mareai&Patil,2012).Thisuniquedesigngrantsahighintegrationamongdifferentfunctionalareaswithintheorganization,streamliningtheirbusinessprocesses;reducingredundancyaswellasimprovingthequality,accuracyandsharingofdata.Additionally,ERPwasdefinedas“asuiteofintegratedsoftwaremodulesandacommoncentraldatabase”(Yousef,2010).Thedatabasecontainsdatafrommanydifferentdivisionsanddepartmentsinafirmandfromalargenumberofkeybusinessprocessesinmanufacturingandproduction,financeandaccounting,salesandmarketingandhumanresources,makingthedataavailableforapplicationsthatsupportnearlyallofanorganization’sinternalbusinessactivities.Whennewinformationisenteredbyoneprocess,theinformationismadeimmediatelyavailabletootherbusinessprocesses.AccordingtoDeloitteConsulting,anERPSystemisapackagedbusinesssoftwaresystemthatallowsacompanyto“automateandintegratethemajorityofitsbusinessprocesses,sharecommondataandpracticesacrosstheenterprise,andproduceandaccessinformationinareal-timeenvironment(Yousef,2010).Basically,theimprovementsinprocessesbroughtbyanERPsystemareevolvedfromitsinformation-integrationrole.AnERPsystemisatoolthatprovidesthecompanywithconsistent,reliable,timelyandaccuratedataaboutinternaloperationsandprocesses(Yousef,2010).Theseintegratedenterprise-computingsystemsprovideseamlessintegrationofalltheinformationflowingthroughanorganization.Generally,maincharacteristicsofERPsystemhavebeensummarizedasfollows(Yousef,2010):Thesystemcomprisesmanybusinessmoduleslinkedtogetherinasingledatabasesuchas:financial,manufacturing,accounting,inventorymanagementetc.Thesystemshoulduseacentralizedcommondatabase.Theintegrationbetweenthesystemmodulesshouldprovideseamlessdataflow,increasingoperationaltransparencythroughstandardinterfaces.

60WaddahAlhakimiandAmmarAlzahary60Thesystemmodulesworkinreal-timewithone-lineandbatchprocessingcapabilities.ERPsystemshouldbeflexibleandofferbestbusinesspractices.AnewtrendinERPsystemsisinternet-enabledsystemscalledERPII(Mareai&Patil,2012).THEBENEFITSOFERPThehugeinvestmentinITalonedoesnotdeliverERPbenefitsandthemanagementhastoemployclearlydefinedmeasuresandapportionresponsibilitiesfordeliveringbenefits(Mareai&Patil,2012).ERPisamulti-dimensionalsystemthatimpactstheperformanceoftheorganizationonmorethanonelevelandside.AnumberofstudiesunderlinethemajorimprovementswitnessedbythosewhoimplementanERPsystemingeneralwhileothersfocusonaspecificareamainlyfinancial.However,thereisaconsensusamongthesestudiesthatthesebenefitsaregraduallyrealizedovertime(Yousef,2010).TABLE1:MajorERPSystemBenefitsTangibleIntangible.Inventoryreduction·Personnelreduction·Productivityimprovement·Ordermanagementimprovement·Financialclosecyclereduction·ITcostreduction·Procurementcostreduction·Cashmanagementimprovement·Revenue/profitincrease·Transportation/logisticscostreduction·Maintenancereduction·On-linedeliveryimprovement·Informationvisibility·New/improvedprocesses·Customerresponsiveness·Integration·Standardization·Flexibility·Globalization·Y2K·Businessperformance·Supply/demandchainSource:ShathaYousef,CriticalSuccessFactorsinEnterpriseResourcePlanningSystemsImplementation,Jordan,2010.&KennethJ.Trimmer,LelaD.“Kitty”Pumphrey,CarlaWiggins,“ERPimplementationinruralhealthcare”,JournalofManagementinMedicine,16,(2/3),113–132.2002DespitethewidenumberofimprovementsthathavebeenlabeledasERPsystembenefits,researchfindsthatthesebenefitstakesometimethatcanextendtoyearsbeforeappearing.Onthecontrary,organizationswouldlikelywitnessadepressionoftheirperformance

61AnAssessmentofOrganizationalReadinessforERPImplementation61inthesixtotwelvemonthsafterthesystemgoeslive(DeloitteConsulting).MajorERPbenefitshavebeendividedintotangibleandintangible(seeTable1):OtherimportantstudiesdivideERPsystembenefitsintofivecategories(seeTable2):TABLE2:CategoriesofERPSystemBenefitsOperationalManagerial·Costreduction·Cycletimereduction·Productivityimprovement·Qualityimprovement·Customerserviceimprovement.Integratebusinessprocesses.Reducinginventorycosts.Improvingefficiency.Increasingprofitability.Improvingcustomersatisfaction·Betterresourcemanagement·Improveddecisionmakingandplanning·Performanceimprovement.Enhancinginformationquality.BusinessprocessimprovementStrategicOrganizational·Supportforbusinessgrowth·Supportforbusinessalliance·Buildingbusinessinnovations·Buildingcostleadership·Generatingproductdifferentiation·Buildingexternallinkages·Enablinge-commerce·Generatingorsustainingcompetitiveness·Buildingbusinessflexibilityforcurrentandfuturechanges·ITcostreduction·IncreaseITinfrastructurecapability·Changingworkpatterns·Facilitatingorganizationallearning·Empowerment·Buildingacommonvision·Shiftingworkfocus·IncreasedemployeemoraleandsatisfactionFinancial·ImproveAPD(accountpayabledays)·ImproveCR(currentratio)·ImproveIT(InventoryTurnover)·ImproveFAT(FixedAssetTurnover)·ImproveNPR(NetProfitRatio)·ImproveSC(SalesChanges)Sources:BelalMareaiandS.Y.Patil,TaxonomyofEnterpriseResourcePlanningSystem,ExcelJournalofEngineeringTechnologyandManagementScience,1,(2),2012.&ShathaYousef,CriticalSuccessFactorsinEnterpriseResourcePlanningSystemsImplementation,Jordan,2010.

62WaddahAlhakimiandAmmarAlzahary62ERPSUCCESSTheprojectmanagersandimplementationconsultants,oftendefinesuccessintermsofcompletingtheprojectontimeandwithinbudget.ButpeoplewhosejobistoadoptERPsystemsandusethemtoachievebusinessresultstendtoemphasizehavingasmoothtransitiontostableoperationswiththenewsystem,achievingintendedbusinessimprovementslikeinventoryreductions,andgainingimproveddecisionsupportcapabilities(Awang,2006).A“successfulimplementation”ofanERPsystemmeansthatthesystemisimplementedinacorrectandcompleteformatminimumcost,time,andhumanresources.Humanresourcescanbeinternalorexternalpersonnel.AsuccessfullyimplementedERPwillsoonstarttoproducetheexpectedandplannedbenefitsfortheenterprisesothatitcandevelopthecompetitiveadvantagesthatmanagementhadinmindwhenitdecidedtoacquirethesystem(Sanchez&Bernal,2007).Onanorganizationallevel,thematterofERPsuccessisrelativesomehowtothemotivationsbehindadoptingthesystemandthereturnsitwasexpecting.However,manystudiesaddressedcertaincriteriathatbasedonanERPsystemcanbelabeledeitherassuccessfulorfailed.Sneller’sstudyonMRPsystemsseesthatsuccesscanbedefinedintwodimensions:improvedperformanceandusersatisfaction.Improvedorganizationalperformancemainlyinincreasingtheinventoryturnover,increasedon-timedeliveries,decreasedleadtimes,anddecreasedmaterialshortageanddecreasematerialexpeditors.UserSatisfactionintermsoffunctionality,equipmentperformance,interactionfeaturesandofficeenvironments(Yousef,2010).Ingeneral,ERPsystemsuccessdependsontwomainaspects:achievingthegoalsforwhichERPsystemshavebeendesignedforfromonsideandmeetingtheuser'sexpectationsfromanotherside.CRITICALSUCCESSFACTORS(CSFS)Successisconstantdemandsforanyprojectthatidentifiesthecriticalfactorsthatleadtothatsuccesshavealwaysbeenabigconcernforprojects'managements.CriticalSuccessFactors(CSFs)aredefinedascriticalareaswherethingsmustgorightforabusinesstoflourishortheactivitiesthatmakethedifferencebetweensuccessandfailure-oratleastthedifferencebetweenincrementalresultsandbreakthroughresults(Yousef,2010).Criticalfactors’studiesforenterprisesystemssuccessarenotnew.Oneofthesestudieswasincludedchiefinformationofficers(CIOs)fromFortune100companiesandfoundoutthatthefivemostcriticalfactorsaretopmanagementsupport,theexistenceofaprojectchampion,ERPteamwork,projectmanagementandachangemanagementprogramandculture(Yousef,2010).

63TABLE3:CriticalSuccessFactors(CSFs)SuccessFactorsHolland&Ligth1999Cantu1999Esteves&Pastors2000Nahetal.2001Somers&Nelson2001Zhangetal.2002Akkermans&Helden2002Almasharietal.2003Umbleetal.2003Loh&koh2004Jiang2005Gargacya&Brady2005Ferrattetal.2006Jafarietal.2006Jiang&Qiu2007Nattwwee&Giriluckx2008Mokhtar2009Parijat2010Scorta2010Allnoudoostbcni20101-TopManagementSupport√√√√√√√√√√√√√√√√√√√√2-UserTrainingandEducation√√√√√√√√√√√√√√√√√√3-ProjectManagement√√√√√√√√√√√√√√√√√4-ClearGoalsandObjectives√√√√√√√√√√√√√√√5-ProjectTeamCompetence√√√√√√√√√√√√√√6-BusinessProcessRe-Engineering√√√√√√√√√√√7-CommunicationandCooperation√√√√√√√√√√√8-ChangeManagementProgram√√√√√√√√9-ProjectChampion√√√√√√√√10-ERPVendorsSupport√√√√√√√√11-ExternalConsultants√√√√√√√√12-SelectionERP√√√√√√√√13-MinimumCustomization√√√√√14-SuitabilityH/WandS/W√√√√√15-UserInvolvement√√√√√16-ManagementExpectation√17-SteeringCommittee√18-DataAnalysisandConversion/DataAccuracy√19-DefinetheArchitecture√20-DedicatedResources√AnAssessmentofOrganizationalReadinessforERPImplementation61inthesixtotwelvemonthsafterthesystemgoeslive(DeloitteConsulting).MajorERPbenefitshavebeendividedintotangibleandintangible(seeTable1):OtherimportantstudiesdivideERPsystembenefitsintofivecategories(seeTable2):TABLE2:CategoriesofERPSystemBenefitsOperationalManagerial·Costreduction·Cycletimereduction·Productivityimprovement·Qualityimprovement·Customerserviceimprovement.Integratebusinessprocesses.Reducinginventorycosts.Improvingefficiency.Increasingprofitability.Improvingcustomersatisfaction·Betterresourcemanagement·Improveddecisionmakingandplanning·Performanceimprovement.Enhancinginformationquality.BusinessprocessimprovementStrategicOrganizational·Supportforbusinessgrowth·Supportforbusinessalliance·Buildingbusinessinnovations·Buildingcostleadership·Generatingproductdifferentiation·Buildingexternallinkages·Enablinge-commerce·Generatingorsustainingcompetitiveness·Buildingbusinessflexibilityforcurrentandfuturechanges·ITcostreduction·IncreaseITinfrastructurecapability·Changingworkpatterns·Facilitatingorganizationallearning·Empowerment·Buildingacommonvision·Shiftingworkfocus·IncreasedemployeemoraleandsatisfactionFinancial·ImproveAPD(accountpayabledays)·ImproveCR(currentratio)·ImproveIT(InventoryTurnover)·ImproveFAT(FixedAssetTurnover)·ImproveNPR(NetProfitRatio)·ImproveSC(SalesChanges)Sources:BelalMareaiandS.Y.Patil,TaxonomyofEnterpriseResourcePlaningSystem,ExelJournalofEngineeringTechnologyandManagementScience,1,(2),2012.&ShathaYousef,CriticalSuccessFactorsinEnterpriseResourcePlanningSystemsImplementation,Jordan,2010.

64WaddahAlhakimiandAmmarAlzahary64TherearemanyresearcherswhohavediscussedandstudiedCSFsaffectingtheERPsystemimplementationbuttheirfocuseshavebeenbasedonthesizeofthecompaniesorwhetherdotheybelongtodevelopingcountriesornot.Inthisstudyandafterreviewingthepreviousstudiedfactors,agroupoffactorsperceivedasmajoronesinERPsystemsimplementationhavebeenconsidered.Thesefactorsweredividedintothreecategories:managerial,project,andorganizationalfactors.MANAGERIALFACTORSManagerialfactorsrefertotheparticipationsandactivitiesrequiredbyorganization’smanagementtoenhanceERPimplementationsuccess.Themainmanagerialfactorsviewedinpreviousliteratureandconsideredinthisstudyareasfollows.TopManagementSupportTopmanagementsupportisthemostimportantsuccessfactorinERPimplementationfromitsearlylife(Razmietal.,2008).Managementmustmonitortheprogressoftheprojectandplayanactiveroleinleadingthechange.Theinitialsupportoftopmanagementisfirstdemonstratedin“thewillingnesstoprovidethenecessaryresourcesandauthorityorpowerforprojectsuccess”(Yousef,2010).TopmanagementsupportinERPimplementationhastwomainfacets:providingleadership;andprovidingthenecessaryresources(Jafarietal,2006).AnotherimportantcontributionfortopmanagementinanERPprojectissettingofficialpoliciestograntemployees’cooperation,facilitatetheimplementationprocessandmaketherequiredchanges.Moreover,managementshoulddelegatesomeauthoritytomanagerstogetovertheoperationalandorganizationalobstaclestheylikelyfaceduringtheimplementation.Managersshouldlegitimizenewgoalsandobjectives(Nah,2001).Researchonprojectfailuresshowsthatprojectcancellationsoccurwhenseniormanagementdelegatesprogressmonitoringanddecisionsatcriticaljuncturesoftheprojecttotechnicalexperts(SomersandNelson,2001).ProjectPlan,Vision,MissionandGoalsAnERPplanshoulddecideinadvancewhattodo,howtodoit,whentodoitandwhoistodoit(Yousef,2010).Thebusinessplanwouldmakeworkeasierandimpactonwork(Nah,2001).ItisessentialtohaveaclearvisionfortheERPsystemandtoguidetheERPimplementation.Theprojectmissionshouldberelatedtobusinessneeds,businessvaluesandshouldbeclearlystated.Goalsandbenefitsshouldbeidentifiedandtracked.Thesystemgoals,deliverablesandexpectedbenefitsareconsideredalongwiththeprojectrisks,costsandneededresourcestojustifythe

65AnAssessmentofOrganizationalReadinessforERPImplementation65investmentsintheERPsystem(Razmietal.,2008).Itisimportanttosetthegoalsoftheprojectbeforeevenseekingtopmanagementsupport.PROJECTFACTORSProjectfactorsaredirectlyrelatedtothesystemitselfintermsofmanaging,installingandtraining.Themainfactorsinthiscategoryareasfollows.ProjectChampionTheprojectchampionplaysacriticalroleinimplementationsuccessintheentirelifecycleoftheimplementationproject.AProjectChampionrequiresastrongcharacter,skillandtheexperiencenecessarytoundertakeanERPimplementationanddelegateresponsibilitytoensureacceptanceofthesystembyendusersandkeepacloseeyeonthetechnologicalintegrationwithbusinessaspectsoftheERP(Mareai&Patil,2012).Projectsponsorcommitmentiscriticaltodriveconsensusandtooverseetheentireproject,andtheprojectleadershould“champion”theprojectthroughouttheorganizationandhaveagoodimpactintheflowingofERPimplementation(Nah,2001).AProjectChampionreferstohighlevelexecutivesponsorexistencewiththepowertosetgoalsandcontrolchangesandcontinuallystrivetoresolveconflictsandmanageresistance.ResourceAllocationERPimplementationdemandsvaluableresourcessuchastime,moneyandpersonnel.ResourcerequirementsarecriticaltorealizethebenefitsassociatedwithanERPpackageandshouldbedeterminedearlyintheproject.Theresourcesmustbeprovidedandallocatedbasedonaconsolidatedresourceplan(Razmietal.,2008).AssignResponsibilitiesProjectmanagementactivitiesspanthelifeoftheprojectfrominitiatingtheprojecttoclosingit(SomersandNelson,2001).ERPprojectmanagersshouldenjoyagoodtechnicalexperience,businessknowledgeandinterpersonalskills.Al-Masharistatedthat“thesuccessofprojectsisrelatedtotheknowledge,skills,abilitiesandexperiencesoftheprojectmanageraswellastheselectionoftherightteammembers”(Al-Mashari,2003).AssigningtheresponsibilitiesiscriticaltothesuccessofERPimplementation(Razmietal.,2008).Therearefivemajorpartsofprojectmanagement:havingaformalimplementationplanandthescopemustbeclearlydefinedandbelimited,arealistictimeframeandtimelinesforthe

66WaddahAlhakimiandAmmarAlzahary66project,havingperiodicprojectstatusmeetingsandmilestonesoftheproject,havinganeffectiveprojectleaderwhoisalsoachampion,andhavingprojectteammemberswhoarestakeholders.ProjectTeamworkandCompositionSinceERPimplementationdemandsmultipleskills,tohaveasuccessfulERPprojectanumberofthebestorganization’semployeesmustbeassignedtotheprojectteam.Basedonmanysurveys,involvingpeoplewithbothbusinessandtechnicalknowledgeintotheprojectteamiscriticaltoachievesuccess.Besideinternalstaff,studiesshowthatconsultantsplayakeyroleinERPprojects.Weltiarguesthatthesuccessofaprojectdependsonthecapabilitiesoftheconsultantsbecausetheyhavein-depthknowledgeofsoftware.Thus,theteamshouldhaveamixofconsultantsandinternalstaffsotheinternalstaffcandevelopthenecessarytechnicalskillsfordesignandimplementation(Yousef,2010).ProjectScopeThe“tripleconstraint”ofprojectmanagementspecifiesthreeoftencompetingandinterrelatedgoalsthatneedtobemet:scope,time,andcostgoals.ManyERPinstallationsfacescopecreepasaresultoflackingaclearplan(Somers&Nelson,2001).ThescopeoftheERPprojectmustbeclearlydefined.Itshouldbedeterminedwhetheronlyafewfunctionalunitsareinvolvedintheprojectorthesystemimplementationtakesplaceovertheentireorganization.Theaffectedbusinessprocessesarealsodeterminedintheprojectscope.Theprojectscopedirectlyaffectstheimplementationtimeandcostoftheproject.Aprojectscopethatistoobroadcancausesevereproblems.ItisalsoimportanttoestablishrealisticmilestonesanddeliverydatesfortheERPproject(Razmietal.,2008).ORGANIZATIONALFACTORSOrganizationalfactorsrefertotheorganizational,structuralandculturaladjustmentsrecommendedforasuitableenvironmentforERPimplementationsuccess.Thesefactorsarediscussedinthefollowingsub-titles.BusinessProcessRe-Engineering(BPR)HummerandChampydefineBusinessProcessRe-engineering(BPR)as“thefundamentalrethinkingandradicalredesignofbusinessprocessestoachievedramaticimprovementsincritical,contemporarymeasuresofperformance,suchas,quality,serviceandspeed”(Yousef,2010).SomersandNelsonstatedthatBRPplaysasignificantroleintheearlystagesofimplementationandthat“businessprocessesreengineeringshouldtakeplaceinteractivelytotakeadvantageofthe

67AnAssessmentofOrganizationalReadinessforERPImplementation67improvementsfromthenewsystemandcarriedoutwithnewideas”(Somersetal.,2004).Whileconsideringthereengineeringoption,“managingandcontrollingthequalityofbusinessprocessredesignisextremelyimportant”(Rosario,2000).BeforetheERPimplementationstage,itisimportanttoidentifyandimplementthenecessarychangestotheexistingsystemsandprocessoftheorganization.Completeness,compatibility,usabilityandintegralityofthecurrentsystemsandprocessesshouldbeachievedatasatisfactorylevel.Therefore,specificationsofthemostsuitableERPsystemandprocessesfortheorganizationcanbedeterminedmoreaccuratelyattherequirementsidentificationstage(Razmietal.,2008).ThisisimportantindesigningthesystemarchitectureandwillensurethattheselectedERPsystemwillreflectthecompletebusinessprocesses.CultureAsERPprojectsareaccompaniedbymanyenterprisewidechanges,theorganizationalcultureplaysanimportantroleintheimplementationstage.Itcanbeafacilitatororamajorimpedimenttochange.ThesuccessfulimplementationofERPsystemsrequiresacorporateculturethatemphasizesthevalueofsharingcommongoalsoverindividualpursuitsandthevalueoftrustbetweenpartners,employees,managersandcorporations(Razmietal.,2008).CommunicationAsharedvision,goalsoftheorganization,expectationsandtheroleofthenewsystemandstructuresshouldbecommunicatedtoemployees.CommunicatingabouttheERPprojectwithemployeesisessentialtobuildawarenessabouttheimportanceoftheseprojectstotheorganization.Thiswillencouragethemtocooperatewiththeimplementationteamandparticipateinchange.Anotherimportantpointthatshouldbecommunicatedwiththeemployeesishowthesystemwillimpacttheirjobs.Sumnersaysthatmanagersneedtocommunicatetheimportanceoftheproject,andtheemployeesshouldbetoldinadvancethescope,objectives,activitiesandadmitthatchangewilloccur(Yousef,2010).DecisionMechanismThecollectionofinformation,theeffectivenessandaccuracyofdata,andtheretrievalprocessaretheelementsofthedecisionmechanismthatplayanimportantroleintheERPproject.Itisalwaysnecessarytopossessaccurateandeffectiveinformationtomaketherightdecisions.Thespeedofinformationretrievalisanotherimportantfactorinmakingdecisionsattherighttime(Razmietal.,2008).

68WaddahAlhakimiandAmmarAlzahary68OrganizationalStructureTheorganizationalstructureandpositionhierarchymustbesuitablefortheERPimplementation.ThechangesmadebytheERPsystemmustbesupportedbyexistingmanagementbehaviorandcurrentjobstructuresoftheorganization.Thefunctionalunitsoftheorganizationmustbeinterrelatedproperlyandtheownershipofdataandprocessesmustbedefinedforeachunit(Razmietal.,2008).UserInvolvement,TrainingandEducationTheroleofpersonnelintheERPimplementationsuccessorfailureisinevitable.Thepersonnelinvolvementintheprojectarealsoimportant;becausetheywillactuallybetheusersofthesystem.Inaddition,theymusthaveenoughITskillsandknowledgeoftheERPconcept.Nahetal.saysthatsufficienttrainingcanassistincreasedsuccessforERPsystems(Yousef,2010).Managementshouldfocusontrainingcoursesandbewillingtoallocateallresourcesneededforthat.Twomaintrainingprogramshavetobesettled.Thefirstoneisaprofessionalandspecializedprogramfortheinternalteamthatwillhandletheimplementationprocess.Thesecondoneisforemployeesinotherdepartmentstoeducatethemaboutthesystem,itsutilizationanditsimpactontheirjobs(Razmietal.,2008).Preferably,trainingshallstartearlierthanthesystemimplementationtoinsurethatalltheuserswillbequalifiedtousethesystemeffectivelyandwalksidebysidewiththeimplementationconsultantstosolveanyproblemsthatmayoccurduringtheimplementationphase(Zhang).Thequalityoftrainingisveryimportantforagoodunderstandingandproperutilizationofthesystem.Consultantsplayakeyroleinthisphasebytransferringtheirknowledgetotheenduserseitherthroughtrainingprogramsorinteractionduringimplementation.Moreover,usersshouldbeinvolvedinthedesignandimplementationofbusinessprocesses(Holland).Theparticipationofemployeesinthatwaywouldincreasetheiracceptanceandsatisfactiontothenewsystemandpreventresistanceandchaosattheimplementationstage.ORGANIZATIONALREADINESSFORERPIMPLEMENTATIONERPprojectssufferfromahighrateoffailure.Mismanagement,unfulfilledexpectationsandmajorchallengesareprevalentintheimplementationofERPsystemsandsometimesturntheprojectintoacompletefailure.Thechallengesarecausedbyvariousriskfactorswhichhavebeenaddressedbymanyresearchers.ThesefactorsaffectthesuccessofERPprojectintheimplementationstage.Asetofthesefactorsmustbemeasuredatthebeginningoftheprojecttoavoidpotentialchallengesinlatterstages.Consideringthissetoffactors,itwouldbedefinitelynecessarytoassessthestatusofafirmpriortoERPimplementation.ThisassessmentdetermineswhetherthefirmisreadytoimplementanERPprogramornot.Extensivepreparationbefore

69AnAssessmentofOrganizationalReadinessforERPImplementation69implementationisthekeytosuccessofanERPprojectandwithoutproperreadinesstheprojectprobablyendstofailure.Ifthefirm’sreadinessisnotatasatisfactorylevel,thenmorechallengeswillbefacedduringtheprojectimplementation.Therefore,suchanassessmentmustbeperformednecessarilyatthepre-implementationphaseoftheERPproject.TheassessmentisactuallyameasurementofthecurrentconditionsoftheorganizationwhicharerelatedtoanERPimplementationprogram.Notonlyshouldthisassessmentidentifyafirm’scurrentcapabilitytoimplementanERPinitiative,butalsoidentifytheareaswhichareperceivedastheorganization’sweaknessesandmustbeimprovedtoachieveabetterstateofreadinessforERPimplementation.Thus,potentialrisksoftheprojectcanbereducedandmanyimplementationdifficultiescanbeavoided.Afterweaknessesareidentified,torectifythemsomeimprovementprojectsmustbedefinedandcarriedout.Consideringtheseimprovementprojects,betterbudgetandtimeestimatesneededfortheimplementationoftheERPcanbegiven.Itisalsopossibletopredictthelevelofsuccessachievableattheendoftheprojectonthebasisoftheidentifiedlevelofreadiness(Razmietal.,2008).FUZZYANALYTICNETWORKPROCESSAnalyticNetworkProcessTheAnalyticNetworkProcess(ANP),ageneralizationoftheAnalyticHierarchyProcess(AHP),isamulti-criteriaassessmenttoolfordecisionstructuringandanalysis.SaatyintroducedAHPasapowerfulandflexibledecisionmakingtechniquethathelpsdecisionmakerstosetprioritiesandchoosethebestalternative.ANPhasbeenappliedbymanyresearcherstomodelmanyproblemsindifferentareas(Saaty,1980).FuzzyANPalgorithmFuzzysettheorywasintroducedbyZadehtomanipulateinformationanddatawithnon-statisticaluncertainties.Itcanmathematicallyexpressvaguenessandsubjectiverelationships.ThefuzzyANPalgorithmforassessmentofERPreadinessisconstructedinsixstepsusingChang’sextentanalysismethod(Razmietal.,2008).Step1:TheANPframeworkiscomposedofagoal,asetoffactorsandrelatedsub-factors.Thecomponentsoftheframeworkarerelatedtoeachotherbydifferenttypesofconjunctivearrows(unidirectionalandbilateral)basedonrelationshiptypes.Step2:Thelocalweightsofthefactorsandsub-factorsaredeterminedbypairwisecomparisons.Inthisstep,thefactorsarecomparedwitheachotherassumingthatthereisnodependencyamong

70WaddahAlhakimiandAmmarAlzahary70them.Thegeneralquestionis“Howimportantisfactor/sub-factorAcomparingwithfactor/sub-factorB?”andtheanswerisalinguisticvariable.ThesevariablesaregiveninTable4.TABLE4:LinguisticVariablesToDescribeRelativeImportance(Razmietal.,2008)LinguisticVariablesforRelativeImportanceTriangularFuzzyScale(1)Equallyimportant(0.5,1,1.5)(2)Weaklymoreimportant(1,1.5,2)(3)Stronglymoreimportant(1.5,2,2.5)(4)Absolutelymoreimportant(2,2.5,3)Step3:Inthisstep,theinnerdependencematrixofeachfactorisconstructedregardingtheotherfactorswithfuzzyscale.Thegeneralquestionis“HowimportantisthefactorAwhencomparedwithfactorBoncontrollingtheotherfactors?”andtheanswerisoneofthelinguisticvariablesgiveninTable2.4.Then,relativeimportanceweightsofthefactorsarecalculatedandarrangedintothedependencematrix.ThismatrixismultipliedwiththelocalfactorweightscalculatedinStep2todeterminetheinterdependentweightsofthefactors.Step4:Theglobalweightsforthesub-factorsaredeterminedbymultiplyingthelocalsub-factorweightswiththeinterdependentweightsofthefactortowhichitbelongs.Step5:Thesub-factorsaremeasuredusinglinguisticvariablesgiveninTable2.5.TABLE5:LinguisticVariablesToMeasureSub-Factors(Razmietal.,2008)LinguisticVariablesforSub-factorsFuzzyScale(1)Verylow(0,0,25)(2)Low(0,25,50)(3)Medium(25,50,75)(4)High(50,75,100)(5)Veryhigh(75,100,100)Step6:ThereadinesslevelofafirmfortheERPprojectisdeterminedwithasumofproductsoftheglobalweightofeachsub-factorobtainedfromStep4withitsassignedlinguisticvalueobtainedfromStep5.

71AnAssessmentofOrganizationalReadinessforERPImplementation71RESEARCHMETHODOLOGYResearchmethodologyisacriticalcomponentofanystudy,byprovidingtheroadmapforhowthestudywillproceedandhowthequestionswillbeanswered.Thissectionpresentsthetheoreticalandpracticalframeworkthatwasthebasisforthisstudy.Inthissection,theresearcherdevelopedapracticalframeworkusingafuzzyanalyticnetworkprocessconstructedtoassesstheorganizationalreadinessforanERPimplementation.Theresultofthisassessmentdeterminesthecurrentstatusofanorganization’sreadinesstoimplementanERPsystemandidentifiestheareaswhichmustbeimprovedpriortotheimplementationstage.THEASSESSMENTFRAMEWORKERPReadinessFactorsThefactorsusedintheassessmentareidentifiedafterathoroughstudyofcriticalsuccessfactors(CSFs)ofERPimplementations.TheERPimplementationCSFshavebeenaddressedandanalyzedinERPliteraturevastlybymanyresearchers.

72WaddahAlhakimiandAmmarAlzahary72ThoseCSFswhichmustbeattendedespeciallyinthepre-implementationphaseofanERPprojectwouldbeidentifiedasthefactorsofreadinessassessment.Altogether,fourteenfactorswereidentifiedastheassessmentfactorsafteracomprehensivesurveyonERPimplementationCSFs.Then,thesefactorsareclassifiedintothreecategoriesas“Managerial”,“Project”and“Organizational”.DesignANPFrameworkforOrganizationalReadinessAssessmentTheAnalyticNetworkProcess(ANP)modelforassessmentoforganizationalreadinessisconstructedconsideringthefactorsdescribedandisshowninFigure1.FIGURE1:ANPFrameworkforOrganizationalReadinessAssessmentforERPImplementationTheproposedmodeliscomposedofthreestageshierarchically:goal,factorsandsub-factors(listedintheboxoffactors),whicharerelatedtoeachotherbymeansofconjunctivearrows.TheorganizationalreadinessassessmentforERPimplementationisthegoalofthemodel.Theassessmentfactorsidentifiedfromtheliteraturearecategorizedintothreemainfactorsandtheunderlyingfactorsbelongingtoeachmainfactorareconsideredasthesubfactors.Bilateralarrowsarealsousedtodescribetheinnerdependenciesamongthefactorsandanalyzetheireffectsoneachother.TheproposedANPmodelisaccompaniedbyfuzzysettheorytoassessthereadinesslevelofafirmtoimplementERPsystem.

73AnAssessmentofOrganizationalReadinessforERPImplementation73DeterminingtheExpectedGlobalWeightsofSub-factorsTheresearcherwilldeterminetheexpectedglobalweightsofsub-factorsbasedontheconsultationoftheERPexpertswithextensiveexperienceinanumberofERPimplementations(Razmietal.,2008).Theresultofcalculatingtheglobalweightsofthesub-factorsaregiveninTable6,andthemostimportantsub-factorsthataffectreadinessforERPareidentified.TABLE6:GlobalWeightsofSub-FactorsFactorsWeightonOrganizationalReadinessManagerial0.29Topmanagementsupport0.181ERPimplementationvision0.035ERPmissionandgoals0.075Project0.11ProjectChampionship0.031Resourceallocation0.015Assignresponsibilities0.011Projectteam0.030Projectscope0.023Organizational0.60BusinessProcessRe-engineering0.26Culture0.094Decisionmechanisms0.038Organizationalstructure0.043Communication0.078Userinvolvement,TrainingandEducation0.086CalculatingtheReadinessLevelUsingtheGlobalWeightsofSub-factorsThetestwillbeorganizedonapagewiththreecolumns,namelyfactorsandsubfactors,scalevalues(StronglyDisagree=0,Disagree=25,Undecided=50,Agree=75,Stronglyagree=100),andorganizationalreadiness(seeTable7).Theoperationofthetestingwillbecompletedaftercheckingthefieldofthescalevaluesinfrontofeachfactorandthenpressingtheresultbuttontoshowtheresult.

74WaddahAlhakimiandAmmarAlzahary74TABLE7:LinguisticValuestoSub-factorsandLevelofReadinessFactorsScaleValueOrganizationalReadinessManagerialTopmanagementsupportERPimplementationvisionERPmissionandgoalsProjectProjectChampionshipResourceallocationAssignresponsibilitiesProjectteamProjectscopeOrganizationalBusinessProcessRe-engineeringCultureDecisionmechanismsOrganizationalstructureCommunicationUserinvolvement,TrainingandEducationReadinessScoreTheResultSupposethat:N:no.ofsubfactors.M:scalevalue.W:weightvalue.O:Organizationalreadiness.I:integer.R:Readinessscore.Equationformula:R=∑(Mi*Wi)=∑Oi:i=1..NToolandPreTestTheresearcherdevelopedatooltoassesstheorganizationreadinessforERPimplementationbyprojectmanagersanddecisionmakers.Thistoolisconnectedwithadatabasetostoreallinformationlikeprofileandgeneralinformationabouttheorganization,testing,results,and

75AnAssessmentofOrganizationalReadinessforERPImplementation75summary.ItwillhelptheERPprojectmanagerstoachieveacomprehensiveunderstandingofERPprojectvulnerabilityandtostrengthenareasofweaknesspriortoprojectimplementation.Alsomanagingthecostsandrisksassociatedwiththeprojectandavoidmostofthechallengesintheimplementationstage.1.Profile

76WaddahAlhakimiandAmmarAlzahary762.TestingOrganizationalReadinessforImplementationCONCLUSIONThisstudy,first,elaboratedtheimportanceoforganizationalreadinessassessmentpriortoemployinganERPsystem.Itwasshownthatthisisacomplexdecisionmakingproblemwithparametersthatcanbestbeexpressedinlinguisticvalues.Suchvaluesarebasedonexpertjudgment.Therefore,inordertodealwiththisproblemappropriately,thefactorscontributingintheassessmenthavebeenidentifiedafteranin-depthstudyofCSFsonERPimplementation.TheattributesrelatedtoERPimplementationhavebeenclassifiedintothreemaincategoriesof“project”,“managerial”,“organizational”andarrangedinanetworkstructure.TheresultsofthepretestillustratedthatitistooearlytostarttheERPprojectfororganization.ItwassuggestedthatthefirmisbetteroffdoingsomepreliminarypreparationtoincreasethereceptivityofthepersonnelfirstpriortoinitiatingtheERPproject.ItshouldbenotedthatthecostofusingtheproposedmodelisnegligiblefortheorganizationcomparedtothehugecostofafailedERPsystem.Despitethefactthatfurthervalidationoftheproposedmodelisleftforfutureresearchandthelongtermbenefitsofusingthemodelwillonlybeprovenovertime,theproposedmodelandtoolisapractical,easytousetoolworthconsideringforrealcaseproblems.ItisdevelopedsuchthatitcanbeusedbyanyorganizationtoassessthereadinesstoimplementanERPsystem.TheresultshelptoreducepotentialrisksoftheERPprojectandavoidmanychallengesduringthecourseofsystemimplementation.

77AnAssessmentofOrganizationalReadinessforERPImplementation77Theweightsusedinthemodelexplaintherelativeimportanceoftheassessmentfactorsandsub-factors.TheywereassignedbytheexpertsaccordingtotheirknowledgeonsomepreviousERPprojectsindifferentorganizations.Sincetheweightsdependalwaysonthecasebeingstudied,alltheexperts’judgmentsmustbemodifiedforanynewcase.Moreexampleswouldbeadvantageoustofine-tunethemodelandtoinvestigatetheweightsassignedtotheassessmentfactorsfortheproblem.ThecorrelationamongorganizationalreadinesslevelandsuccessinachievingthegoalsoftheERPprojectisnotedasanotherinterestingsubjectofresearch.REFERENCESAl-Mashari,M.,Al-MudimighA.,Zairi,M.(2003).Enterpriseresourceplanning:Ataxonomyofcriticalfactors.EuropeanJournalofOperationalResearch,146,(2),352-346.Awang,A.B.(2006).CriticalSuccessFactors(CSF)forERP.HospitalUniversityScience,Malaysia.Belal,M.&Patil,S.Y.(2012).Taxonomyofenterpriseresourceplanningsystem.ExcelJournalofEngineeringTechnologyandManagementScience,1,(2).Nah,F.,Lau,J.&Kuang,J.(2001).CriticalfactorsforsuccessfulimplementationofenterpriseSystems.BusinessProcessManagementJournal,7,(3),285-296.Stewart,G.(2000).OrganisationalreadinessforERPimplementation,AmericasConferenceonInformationSystems,USA.Razmi,J.,Ghodsi,R.&Sangari,M.S.(2008).AfuzzyANPmodeltoassessthestateoforganizationalreadinessforERPimplementation,Iran,IEEE.Trimmer,K.J.,Pumphrey,L.&Wiggins,C.(2002).ERPimplementationinruralhealthcare.JournalofManagementinMedicine,16,(2/3),113-132.Nguyen,H.V.(2011).CriticalSuccessFactorsforERPAdoptionProcess.LAPLambert.Sanchez,N.&Bernal,L.E.(2007).DeterminationofcriticalsuccessfactorsinimplementinganERPsystem:AfieldstudyinMexicanenterprises.InformationTechnologyforDevelopment,13,(3),293-309.Francoise,O.,Bourgault,M.&Pellerin,R.(2009).ERPimplementationthroughcriticalsuccessfactors’management.BusinessProcessManagementJournal,15,(3),371-394.Rosario,J.(2000).Ontheleadingedge:CriticalsuccessfactorsinERPimplementationprojects.BusinessWorld.Jafari,S.M.,Osman,M.R.,Yusuff,R.M.&Tang,S.H.(2006).ERPsystemsimplantationinMalaysia:Theimportanceofcriticalsuccessfactors.InternationalJournalofEngineeringandTechnology,3,(1),125-131.Yousef,S.(2010).CriticalSuccessFactorsinEnterpriseResourcePlanningSystemsImplementation.MBAthesis,MiddleEastUniversityforGraduateStudiesDepartmentofAdministrativeSciences,Jordan.Somers,T.&Nelson,K.(2004).AtaxonomyofplayersandactivitiesacrosstheERPprojectlifecycle.Information&ManagementJournal,41,(3),257-278.Kronbichler,S.A.,Ostermann,H.&Staudinger,R.(2010).AcomparisonofERP-Successmeasurementapproaches.JournalofInformationSystemsandTechnologyManagement,7,(2),281-310.Saaty,T.L.(1980).TheAnalyticHierarchyProcess.NewYork:McGraw-Hill.Somers,T.M.&Nelson,K.(2001).Theimpactofcriticalsuccessfactorsacrossthestagesofenterpriseresourceplanningimplementations.Proceedingsofthe34thHawaiiInternationalConferenceonSystemSciences,IEEE.

EuroAsiaJournalofManagementIssue44,Vol.25,No.1/2,December2015,79-103 CHINA’SSPECIALECONOMICZONEINAFRICA:CONTEXT,MOTIVATIONSANDPROGRESSNELSONSANTOSANTÓNIO*andSHAOZHUANGMAABSTRACTAsmoreandmorecountriessetfootinAfrica,thereisagrowingattentiononChina’sroleandengagementintheregion.Theapproachesareverydiverseandifsomearemoreskeptical,otherspraisefactorsthatparticularlyshapeChina’scurrentmovetoAfricasuchasafocusondevelopmentcooperationandonestablishingstrategicpartnerships.ThesewouldalsoaddthatChinahashadaverypositiveandinfluentialroleinAfricathroughaidingmanycountriestosolveimminentproblemsandtoassistwithknowledgetransfer.Inthispaper,wefirstdiscussthecontextofthelaunchingofSpecialEconomicZonesinAfricabyexaminingthehistoricdevelopmentoftheSino-Africarelationship,andanalyzeChina’smotivationsforestablishingtheSpecialEconomicZonesinthecontinent.Finally,wepresentthelatestprogressoftheSpecialEconomicZones’developmentanddiscusshowtheycontributetowardthepresenceofChinainAfrica.KeyWords:SpecialEconomicZones,China,China-Africarelationship *Correspondingauthor,ISCTE-InstitutoUniversitáriodeLisboa,Lisbon,Portugal.Email:nelson.antonio@iscte.pt

80NelsonSantosAntonioandShaoZhuangMa 80 INTRODUCTIONAfricaneedsitsowndevelopmentmodel.WhatwecouldtakefromChinaisthespecialeconomiczonesandtry,anddothesamehere.-GarthShelton,UniversityofWitwatersrand,JohannesburgForlongforgottenandadjourned,Africahasrecentlyraisedanewandsharpinterestinthemainworldpowers.Thissuddeninterest,whichhasintensifiedinthelastcoupleofyears,isdrivenbythevastenergyandmineralresourcesoftheAfricancontinentandbyitspotentialfordevelopment.AsmoreandmorecountriessetfootintheregionthereisnewattentionbeingpaidtoChina’sroleandengagementinthatpartoftheworld.Theapproachesareverydiverseandifsomearemoreskeptical,otherspraisefactorsthatparticularlyshapeChina’scurrentmovetoAfricasuchasafocusondevelopmentcooperationandonestablishingstrategicpartnerships.ThesewouldalsoaddthatChinahashadaverypositiveandinfluentialroleinAfricathroughaidingmanycountriestosolveimminentproblemsandtoassistwithknowledgetransfer.ForsurethereisnotasinglemotivetothisrelationshipandtoaddressthemanyanglesthroughwhichitcanbejudgedisacontributiontounderstandingnotonlytheAfricancontinentbutthenatureofthemanyintereststhatinterplayintheregion.Infact,itisnotonlyChinathatisinterestedinAfrica.BeyondEuropeandtheUnitedStatesofAmerica,thereisJapanandemergingcountriessuchasBrazilandIndia,allofthemwithgrowingpoliticalandeconomicinterestsinthecontinent.InthispaperwefirstdiscussthecontextofthelaunchingofSpecialEconomicZonesinAfricabyexaminingthehistoricdevelopmentoftheSino-Africarelationship,andanalyzeChina’smotivationsforestablishingtheSpecialEconomicZonesinthecontinent.Finally,wepresentthelatestprogressoftheSpecialEconomicZones’developmentanddiscusshowtheycontributetowardthepresenceofChinainAfrica.CHINESESPECIALECONOMICZONESAlthoughspecialeconomiczonesfirstappearedinplaceslikePuertoRico(1951),Ireland’sShannonAirport(1959)andTaichung,Taiwan(1965),mainlandChinaistheworld’sforemostsuccessstoryinusingSEZstobuildupindustrialcapacity(Knoth,2000).China’sreformprogrambeganin1978withthecreationofspecialeconomiczones–designatedgeographicareaswithliberalpoliciesandtaxincentivestoattractforeigncompanies.Thisopeningallowedtheexperienceofcapitalismandattractednewtechnologiesandcapital.TheestablishmentofthefirstfourSpecialEconomicZones(SEZs)-Shenzhen,Zhuhai,ShantouandXiamen,in1980intheSouth(Zeng,2011)anditsincreasingexpansiontotheEastandthentoallChina,aregood

81China’sSpecialEconomicZoneinAfrica:Context,MotivationsandProgress 81 examplesofthisstrategy.China’sentryintotheWorldTradeOrganization(WTO)in2001meanstheendofthisstrategyandthebeginningofChina’scompleteopeningtotheForeignDirectInvestment.Afterthirtyfiveyears,theChineseStatehasbecomeaninfluentialplayeronthepolitical,economicandculturallevelsintheinternationalcommunityandSEZshavebecomeanimportantstrategyforChinatobuilditssoftpoweraswecanseefromthecaseofAfrica.CHINAINAFRICA:FIVESTAGESForabetterunderstandingofrecentpolitical,culturalandcommercialhistoryoftherelationshipsbetweenChinaandAfrica,wedistinguishthefollowingperiods:1stPeriod:TheChineseaidtoAfricainthecontextofthecoldwarandBandungConference(1955-1960)OnOctober1,1949,MaoZedongdeclaredthefoundingofthePeople’sRepublicofChina(PRC).ChinabecameamemberofthecommunistworldorblocandChinaandtheSovietUnionsignedanallianceandfriendshiptreatyinFebruary1950.MaoinitiallyhadnointerestinAfricaorLatinAmericaand,atfirst,didnotofficiallyrecognizeAfricanStatesthatbecameindependent.OnlyaftertheBandungConference(April,1955),didChinagainaninterestinAfrica.InBandung,Indonesiaand29Afro-AsiancountriesfoundedwhatwouldbetheNon-Alignedmovement.Inthisconference,theleadersofthecountriesdeclaredtheirrenunciationofcolonialism,refusingthelogicofblocs(SovietsagainsttheWest).Onthisoccasion,PrimeMinisterZhouEnlaisupportedtheAfricancountries’fightagainstcolonialismandimperialism.From1960(theyearofthebreakupbetweenChinaandSovietUnion),BeijingtriedtoinfiltratetheNon-AlignedmovementtoguideitsAfricandiplomacysoastosupportthemovementsfightingcolonialismtogainindependence.Forexample,by1957whenGhanagaineditsindependenceandKwameNkrumahbecameheadofthatsocialiststate,manyvisitswereexchangedbetweenChineseandGhanaianofficials.Inturn,therelationshipswithTanzania,alsoasocialiststate,hasantecedentsgoingbacktothe1930sandintensifiedinthelate1950sandearly1960sbeforethecountry’sindependencein1964.2ndPeriod:TheRivalrybetweenChinaandSovietUnioninAfrica(1960-1974)In1962therelationsbetweenChinaandtheSovietUnionwerebroken.Withthebreakup,theAfricancontinentbecamethestageforthefightbetweenChinaandtheSovietUnion.ThefightagainstcolonialisminAfricadidnotconstituteaprioritytoMoscowwhileChinasupportedmostoftheliberationmovementsthatwerefightingcolonialism.ChinaestablishedstronglinkswithsocialistAfricancountriesthatwerenotalignedwiththeSovietUnion.Forexample,China

82NelsonSantosAntonioandShaoZhuangMa 82 establishedallianceswithGhana,underKwameNkrumah’governance,withMali,underModiboKeitaandwithGuinea,underSékouTouré.InSeptember1960,SékouTouréwasreceivedintriumphinChina.ItwasinthepeakofSino-SovietrivalrythatZhouEnlaitravelledtoAfrica,from14December1963to4February1964tovisittenAfricancountrieswithwhomChinahaddiplomaticrelationships:Egypt,Tunisia,Morocco,Mali,Ethiopia,Ghana,Somalia,Burundi,andGuineaConakry.ZhouEnlaisignedseveralcommercialandcooperativeagreements.InAccra,Ghana,theChineseprimeministerdeliveredaspeechontherelationshipsbetweenChinaandAfricaemphasizingthatsuchrelationswerebasedoneightfundamentalprinciples:equalitybetweenpartners;mutualbenefits;respectforsovereignty;utilizationofgrantsandloanswithoutinterest;reinforcementofthebeneficiary;supplyofthebestequipmentsproducedinChina;andlevelingthelivingconditionsofChineseworkinginAfricatothoseoflocalpopulation.TheseeightconditionshavelaidthefoundationforallsubsequentgovernmentalinteractionsanddevelopmentassistanceprogramsofChinainAfrica.3rdPeriod:CooperationbetweenChinaandtheUnitedStatesandtheabandonmentofAfricabyChina(1975-1989)Thebeginningof1970wasmarkedbyaclimateofcooperationbetweenChinaandtheUnitedStates.MaoZedongdiedinSeptember1976and,somemonthslater,theCulturalRevolutionwasputtoanend.Comingbacktopowerin1978,DengXiaopingdecidedtogiveprioritytoChina’seconomy,andpoliticalissuestookasecondarystanceandwiththemthesupportofrevolutionarymovementsinAfrica.Inthebeginningofthe1980s,theChineseadventureinAfricawasasemifailure.TheAfricanliberationmovementspreviouslysupportedbyBeijingturnedtotheSovietUnionandChinawasonlyabletoplaceafootintheAfricancontinentthroughits“softpower”ofeconomicaid.4thPeriod:NewChineseinterestinAfrica(1989-2000)AftertheTiananmenincidentinJune1989,themagnitudeoftheinternationalprotestsdisturbedtheChineseauthorities,whowerenotusedtobeingcriticized,andturnedtoAfricaforsupportininternationalinstancesas,forexample,AfricancountriesrepresentedmorethanaquarterofthevotesintheGeneralAssemblyoftheUnitedNations.ManyAfricanleadersjoinedBeijing’ssidesuchasAngola’spresidentJoséEduardodosSantosandNamibia’spresidentSamNujomawhileBlaiseCompaoré,thepresidentofBurkinaFasso,visitedtheChineseleaderstoshowhissupport.From1989to1992,ChineseofficialsmultipliedtheirvisitstoAfricainordertostrengthentherelationships.AsDengXiaopingcontinuedtheliberalizationoftheeconomy,BeijingquicklyrealizedthatAfricawouldconstituteagoodmarketforitsproducts,infactanopportunityforbusinessandnotonlyarecipientofdevelopmentaid.Fromyear1995,ChinashiftedtheplayfromgovernmenttoenterprisesinthecooperationwithAfricabydiversifyingtheaidingmodesandfunds,promotingcooperationwithenterprisesofbothsidesandintegratingaid,investment,andtradetogether(Yao,2013).

83China’sSpecialEconomicZoneinAfrica:Context,MotivationsandProgress 83 In1996,theChinesepresidentJiangZeminmadeadiplomatictriptoAfricaanddevelopedaproposalwithfivepointsasabasisfortheSino-Africanrelationships:(a)friendshipamongthecountries,(b)totalequalitybetweenthepartners,(c)noninterventionintheinternalaffairsoftheotherpartner,(d)internationalcooperationand(e)beneficialdevelopmentforthetwoparties.Afterhisvisit,Chinaestablished11“InvestmentDevelopmentandTradePromotionCenters”intenAfricancountries:Mozambique,Cameroon,Gabon,Tanzania,Zambia,Nigeria,CoteD’Ivoire,Guinea-Conakri,MaliandEgypt.Thesecentershaveacommercialmission:toofferlegal,accounting,financial,materialandtechnicalassistancetoChinesebusinessesandentrepreneurs,whowanttogotoAfrica.In1998,China’sStatePlanningCommittee,forthefirsttime,formulatedAfricanInvestmentPlanning,basedoncomprehensiveanalysisofinvestmentareas,scalesandobjectives.ThismarkedastrategicturningpointinChina’sinfluenceinAfrica,fromanaidandtradeorientedapproachtoaresource-basedinvestmentapproach.AndAfricabecameastrategicterritoryforChina’s“going-out”(zuo-chu-qu)strategyduetoitsabundantresourceswhentheChinesegovernmentpursuedtheout-reachingglobalstrategyattheendof20thcentury.5thPeriod:StrategicPartnershipinAfrica(2000-present)ThelaunchofForumonChinaAfricaCo-operation(FOCAC)in2000inBeijingmarkedaneweraforChina’srelationshipwithAfrica.Ministersfrom44Africancountries,representativesof17regionalandinternationalorganizationsparticipatedintheconference.Theconferencechartedthedirectionforthedevelopmentofanew,stableandlong-termpartnershipbetweenChinaandAfricancountries.Followingthe3rdFOCACin2006,theChina-AfricaDevelopmentFundwasfoundedinJune2007withUS$1billionofinitialfundingbytheChinaDevelopmentBanktostimulateandfacilitateChineseinvestmentinAfrica.AlonewiththestrategicmeasurestakenfromChina,China’sforeigndirectinvestmentintoAfricagrewdramatically.Forinstance,ChineseFDIinAfricarosefrom520millionUSdollarsin2006to3.173billionin2011.Uptotheendof2011,China’saccumulatedinvestmentinAfricahadreached16.2billionUSdollars,with2,054Chineseenterprisespresentedin51Africancountriesandregions(Yao,2013).Aswecansee,theChinesediplomacyinAfricamovedfromapolitical/ideologyapproachtoaneconomicapproach,andtheenterprises(mainlytheStateOwnedEnterprises)weremoreinvolved.GROWINGCRITICISMSAGAINSTCHINAINAFRICAChina’sgrowinginfluenceinAfricaaccompaniescriticismfromtheAfricanandWesterncommunity.Thesecriticismscanbesummarizedasfollows.Neo-colonialism:ThisclaimisbasedonChina’sinterestintheabundanceofnaturalresources.China’sdemandforresourcesisseenascreatinganewscrambleforAfrica,andisinterpretedasanalternativetoimperialistorcolonialpowers(He,2009).

84NelsonSantosAntonioandShaoZhuangMa 84 De-industrialization:Forinstance,MoeletsiMbeki,thedeputychairmanoftheSouthAfricanInstituteofInternationalAffairs(SAIIA)notedthat(Mbeki,2006),AfricasellsrawmaterialstoChinaandChinasellsmanufacturedproductstoAfrica.ThisisadangerousequationthatreproducesAfrica’soldrelationshipwithcolonialpowers.Thisequationisnotsustainableforanumberofreasons.First,Africaneedstopreserveitsnaturalresourcestouseinthefutureforitsownindustrialization.Secondly,China’sexportstrategyiscontributingtothede-industrializationofsomemiddle-incomecountries.ThreatofGovernance:SomecriticsassertthatChineseapproachinAfricaunderminethegoodgovernanceinitiativesAfricansseekonthecontinent(Alden&Davies,2006)duetoChina’snon-interferenceofinternalaffairspolicyandChinesefirms’lackofconcernforcorporatesocialresponsibility.AsWhiteandAlves(2006)noted,ItiscrucialthatChinarealizestheneedtobecomeresponsiblestakeholdersintheinternationalpoliticaleconomicsystem.Itneedstorecognizethatunqualifiedrespectforsovereigntywillnotensurethatengagement,beitcommercialoraid-related,isgoingtobenefitthemajorityofAfricans.…ChinacannotdisregardAfrica’sneedforimprovedgovernance,orindeedthegoalsoftheAfricanUnionandNepad.Inaddition,asnotedbyAfricaResearchInstitute(2012):China’sunwaveringcommitmenttonon-interferenceintheinternalaffairsofsovereignnationsisalluringtoAfricangovernments.Americanofficials-andhumanrightsgroups—havedecriedthenon-interferencepolicyasadirectchallengetothedevelopmentofopen,democraticgovernmentsinAfrica.ThecitedexamplesincludeChina’scooperationwithAngola(Yao,2013).EmploymentandImmigrationIssue:ChineseenterprisesinAfricaareaccusedofusingtheirownlabor,whichhasbeennotedbyscholars(White&Alves,2006)andthepoliticalleaderlikePresidentObama.Itwasreportedthattherewere40,000ChineseinNamibiaandaround100,000ChineseinSouthAfrica.AshepreparedtohostU.S.-AfricanLeadersSummitinWashington,DC,inAugust2014,BarackObamatalkedtoTheEconomistbysayingthat(TheEconomist,2014):MyadvicetoAfricanleadersistomakesurethatif,infact,Chinaisputtinginroadsandbridges,numberone,thatthey’rehiringAfricanworkers;numbertwo,thattheroadsdon’tjustleadfromtheminetotheporttoShanghai,butthatthere’sanabilityfortheAfricangovernmentstoshapehowthisinfrastructureisgoingtobenefittheminthelongterm.Chinesegovernmentisawareofthisissue.WhentheChinesegovernmentmediareporteda5,000strongworkforcearrivinginKenyainAugust2014tobuildtherailwayfromNairobitoMombasa,itstressedthattheseworkersworkedwith30,000localcolleaguesontherailwayproject(www.people.com.cn,2014).Insummary,China´sengagementinAfricabasedonthe“hardpower”ofaid,tradeandinvestmentencountersincreasingchallengesintheinternationalcommunity.Thereisanecessity

85China’sSpecialEconomicZoneinAfrica:Context,MotivationsandProgress 85 forChinatodevelopanewstrategythatfocusesmoreon“softpower”(He,2009).ThesoftpowermayleverageChina’sexperienceandAfrican’sresourcestodevelopanAfricancapabilityforamoresustainablerelationshipbetweenChinaandAfrica.Toachievethat,SpecialEconomicZonesareagoodstartingpoint.SomeseethatthestrategyofSEZsisanaturalstepfortheChinesegovernment’scontinuedengagementinAfricaduetothepotentialbenefits(Zhang,2011):1)transferChina’sexperienceandexpertiseofSEZstodevelopAfricancapabilities(knowledgetransferandcapabilitybuildinginAfrica);2)transferandleverageAfricanresourcesforlocaleconomicdevelopment,whichofcoursewillreducethecriticsofChina’sexplorationofAfricanresourcesforitsownbenefitathome;3)“employlocalandmanufacturelocal”willhelpAfricanemploymentandindustrialization;4)developindustrialclusterswhichnotonlyhelphostcountrieseconomydevelopment,butalsoprovideunifiedplatformsforChineseenterprises.CHINESESPECIALECONOMICZONESINAFRICAUndertheBeijingActionPlan,fromFOCAC2006,thePRCGovernmentannounceditsintentiontodevelopbetweenthreeandfiveSEZsontheAfricancontinent,toserveasenclavesforChineseinvestmentinkeyAfricanstates.ThefirsttwozoneswereestablishedinZambia(mininghub)andMauritius(OceanRimtradinghub).Itisclearthatthesezoneswereinpartintendedtofulfill“softpower”politicalgoals,inparticulardemonstratingtheefficacyofsomeaspectsofChina’sdevelopmentmodelandsharingitwithfriendlycountries(Brautigam&Tang,2011).Fortheseresearchers,thisisnotthewholepicturebyanymeans.Intheiropinion,thezoneswerealsointendedtohelpChina’sownrestructuring,allowingthelaborintensive,lesscompetitive,“mature”industries,suchastextiles,leathergoodsandbuildingmaterialstomoveoffshore.TheyreinforcetheirinterpretationwithsomecommentsbyChineseofficials.Forexample,theChineseambassadorinZambiaputitthus:‘WealsowouldliketointroducematureChineseenterpriseswithcomparativeadvantagestoZambiatohelpaddressthecountry’sover-relianceonimportandmanufacturedgoods’(Brautigam&Tang,2011).Inotherwords,SEZswillserveas“onestone,twobirds”byreleasingthepressuresofthecriticismsChinafacedinAfricaandfacilitatingChina’seconomicrestructuringathome(Zhang,2011).

86NelsonSantosAntonioandShaoZhuangMa 86 FIGURE1:China’sSpecialZonesinAfricaThreemaindriversseemtounderpinChina’sSEZstrategyinAfrica(Zncharaz&Nowbutsing,2010):1.Thesearchformarkets:exploringtheuntappedpotentialofAfricanmarkets,wherepurchasingpowerisexpectedtoriseincomingyearsduetosustainedeconomicgrowthandrisingpercapitaincome.EvidenceinsupportofthiscanbeseenintheChineseexportflowstoAfrica,whichhaveexpandedtenfoldfrom$5billionin2000to$50billionin2008.ThismarketseekinginvestmentgoesbeyondAfrica,asChinaalsoenvisagesprocessingsomeofChina’sproductionintheregion,inordertobenefitfrompreferentialaccesstodevelopedmarkets(USandEU).TianjinTEDASuezEconomicandTradeZone,EgyptJiangsuOrientalIndustrialPark,EthiopiaJinfeiEconomicandTradeCooperationZone,MauritiusOgunStateEconomicandTradeCooperationZone,Nigeria,andLekkiFreeTradeZone,LagosState,NigeriaNonferrousMetalMiningGroupIndustrialZones:ChambishiandLusaka,ZambiaCHINA’SSPECIALECONOMICZONESINAFRICA

87China’sSpecialEconomicZoneinAfrica:Context,MotivationsandProgress 87 2.Thesearchfornaturalresources:notonlyexploringbutalsoprocessingrawmaterials(thusaddressinglocalconcerns)andexportingtotheregionandtoChina.ThecreationofSEZsforthisspecificpurposeallowsChineseenterprisestofaceWesterncompetitionmoreefficientlyinasectorwheretheystartatadisadvantage,beinglatecomersandingeneralpossessinginferiortechnology.3.ThedevelopmentofChineselogisticsinAfrica:supplyinginfrastructureacrossAfricathatwillallowChinatoconnectitsindustrialproductionacrossthecontinent,whileatthesametimeprovidingaframeworkminimizesrisks,thusencouragingChineseinvestorstoventureinAfrica.

88 TABLE1:OverviewofChina’sofficialAfricantradeandeconomiccooperationzonesCountryArea(km²)StartingYearChineseDevelopersSectorsofActivityStatusasofMay2014Zambia(Chambishi)11.582003ChinaNonferrousMiningGroup(85%share)Copperandcobaltprocessing29enterprisesregisteredinZoneswithanactualtotalforeigninvestmentof$169million.Zambia(Lusaka)5.7,1stPhase:1.632003Logistics,Trading,Manufacturingandprocessing,RealEstateEgyptSuezeconomicandTradeCooperationZone9.12,1stPhase:1.342008TianjinTEDA60%,China-AfricaDevelopmentFund40%Textiles&garments,petroleumequipment,high/low-voltageelectricalapparatus,constructionmaterialsandchemistryAccumulatedinvestmentof$90.66million,and32enterprisesregisteredinZone;AgreementsignedinApril2013toexpandadditional6km²toaccommodate150-180enterprises,creating40,000jobs.NigeriaLekkiFreeTradeZone30,1stPhaseI:11.79,Start-up:4.2(completed3.12)2006ChinaRailwayConstructionCorporationLtd.57.3%,China-AfricaDevelopmentFund32.5%,ChinaCivilEngineeringConstruction17.2%,NanjingJiangningEconomicandTechnologicDevelopmentCorporation2.6%.Equipment&telecommunicationmanufacture;Transportationequipment&engineeringplantassembly;Trade;TourismandRealEstateAsofMay2014,36enterprisesregisteredinZonewithactualinvestmentof$126million.NigeriaOgun-GuangdongFreeTradeZone100;1stPhase:20,start-up:2.52007ZhongfuIndustrialZoneManagementCompany(GuangdongXinguangInternationalGroup(51%)andGuangdongZhongnanChuangzhanGroup(49%)Constructionmaterials&ceramics,ironware,furniture,hardwareandelectricalequipment,pharmaceuticalsAsofJune2013,34enterprisesregisteredinZone;AsofMay30,2012,workersinZone1798,including1619Nigerian(90.16%)and177foreigners(9.84%).NelsonSantosAntonioandShaoZhuangMa 86 FIGURE1:China’sSpecialZonesinAfricaThreemaindriversseemtounderpinChina’sSEZstrategyinAfrica(Zncharaz&Nowbutsing,2010):1.Thsearchformarkets:exploringtheuntappedpotentialofAfricanmarkets,wherepurchasingpowerisexpectedtoriseincomingyearsduetosustainedeconomicgrowthandrisingpercapitaincome.EvidenceinsupportofthiscanbeseenintheChineseexportflowstoAfrica,whichhaveexpandedtenfoldfrom$5billionin2000to$50billionin2008.ThismarketseekinginvestmentgoesbeyondAfrica,asChinaalsoenvisagesprocessingsomeofChina’sproductionintheregion,inordertobenefitfrompreferentialaccesstodevelopedmarkets(USadEU).TianjinTEDASuezEconomicandTradeZone,EgyptJiangsuOrientalIndustrialPark,EthipiaJinfeiEconomicandTradeCooperationZone,MauritiusOgunStteEconomicandTradeCooperationZone,Nigeria,andLekkiFreeTradeZone,LagosState,NigeriaNonferrousMetalMiningGroupIndustrialZones:hambishiandLusaka,ZambiaCHINA’SSPECIALECONOMICZONESINAFRICA

89 CountryArea(km²)StartingYearChineseDevelopersSectorsofActivityStatusasofMay2014MauritiusJinfeiEconomicandTradeCooperationZone2.11,Start-up:0.752006ShanxiJinfeiInvestmentCor.(TaiyuanIron&SteelCompany34%,ShanxiCokingCoalGroup21%,ShanxiTianliGroup12.5%andChina-AfricaDevelopmentFund32.5%)Productsprocessing;Logisticsandstorage;BusinessandTrade;TrainingandEducation;RealEstate,TourismandGreenEnergyStartedconstructioninSeptember2009;Actualinvestmentof$38.31million;AsofMay2014,4enterprisesregisteredinZone.EthiopiaEasternIndustrialZone5;completed2.332007JiangsuQiyuanGroup,JiangsuYonggangGroupCo.,Ltd,Zhangjiagangyangyangpipe-makingcompany,ZhangjiagangFreeTradeZoneJianglianInternationalTradingCo.,LtdMetallurgy;Electricmachinery,andconstructionmaterials20enterprisesregisteredinZonewithanactualof$57.52million(planninginvestmentof$400million).Source:AllfromofficialwebsiteoftheMinistryofCommerceofthePeople’sRepublicofChina(http://www.mofcom.gov.cn/)exceptNigeriaOgun-GuangdongFreeTradeZonefromthezone’sofficialwebsite(http://www.zfnig.com);forChinesedeveloper,thedataadoptedfromYao(2013).China’sSpecialEconomicZoneinAfrica:Context,MotivationsandProgress 87 2.Thesearchfornaturalresources:notonlyexploringbutalsoprocessingrawmaterials(thusaddressinglocalconcerns)andexportingtotheregionandtoChina.ThecreationofSEZsforthisspecificpurposeallowsChineseenterprisestofaceWesterncompetitionmoreefficientlyinasectorwheretheystartatadisadvantage,beinglatecomersandingeneralpossessinginferiortechnology.3.ThedevelopmentofChineselogisticsinAfrica:supplyinginfrastructureacrossAfricathatwillallowChinatoconnectitsindustrialproductionacrossthecontinent,whileatthesametimeprovidingaframeworkminimizesrisks,thusencouragingChineseinvestorstovenureinAfrica.

90NelsonSantosAntonioandShaoZhuangMa 90 TheChinesegovernmentclaimedthatattheendof2011,theaboveSEZshadachievedtheaccumulatedproductionvalueof$4.52billionandcontributedtothehostcountrieswithtaxesof$143millionandemploymentof11,761localemployees(Yao,2013).TheestablishmentofSEZsinAfrica:anoverviewLaunchedasadiplomaticcommitment,theonustovetanddirecttheestablishmentofChineseSEZsinAfricaremainswiththeMinistryofCommerceofthePeople'sRepublicofChina(MOFCOM),PRC.MOFCOMrunsthetenderprocessaimedatidentifyingtheappropriateChinesecompaniestobedelegatedthetaskofdeployingtheagreedSEZplans.Followingthis,theChinesegovernment,throughitsvariousministries,fundsandsub-bodies,grantsthedevelopersforayingintoAfricawiththesepilotzones,numeroussupports.AccordingtoBrautigamandTang(2011),thelistoffiscalmeasuresincludes:ouptoaUS$44milliongrantfromMOFCOM;ouptoUS$294millionlong-termloansfromMOFCOM;o30%subsidiestocoverthecostoffeasibilitystudies,travelling,marketstudies,initiallandrentfromTradeandEconomicCooperationZoneFundofMOFCOM.TheChinesestateisalsosupportivetoinvestingcompaniesfromChinawhichsettleintotheseSEZsinAfrica:oreimbursementofhalfoftheirmovingexpenses;oexportandimporttaxrebatesonmaterialssentforconstruction;oeaseofaccesstoforeignexchange;oeligibilitytoapplytoMOFCOM’sSpecialFundforEconomicandTechnologicalCooperationgrantingarebateofupto100%ofinterestpaidonChinesebankloansforfiveyears.Certainprovincialgovernmentsalsoaddtotheincentivesandgiveawayadditionalfinancialaidandassistance.ChinaAfricaDevelopmentFund(CADF),anoff-shootofChinaDevelopmentBank(CDB)too,providesloansandpartnershipinvestmentopportunitiestoChineseSEZsinAfrica.Currently,CADFundsupportsLTFZ,NigeriaandEgyptTEDASEZ.Similarly,setupin1994,EXIMBankhasamongitstasks,tofinanciallyassistoverseas.Similarly,setupin1994,EXIMBankhasamongitstasks,tofinanciallyassistoverseasChineseexport,investmentandconstructionprojects.SinceSEZsareessentiallyinfrastructuraldevelopment,ChinesedevelopersarethereforeeligibletoseekgrantsorloansfromEXIMBank.Forexample,fortheZambia-ChinaEconomic&TradeCooperationZone(ZCCZ),ZambiareceivedaconcessionalloanofUS$208millionfromEXIMBankinordertofinancetheconstructionofitsminingplant.AshedescribesthismoveoffinancialassistancebyEXIMBanktoChineseSEZsinAfricaas“developmentassistance”duetoSEZs’largeinfrastructuralcomponent,Davieslinksthetwoconcepts(i.e.ChineseSEZsinAfricaandDevelopmentAssistance)toasimilaroutcome.DevelopmentassistancebyChina,whichmainlycomprisesofconcessionalloans,involvesadistinctprocedureandconsequencewherebythecountryseekingfinancialaidforaninfrastructuralprojectbecomesadebtorofaChinesestatewithouthavingreceivedanytangibleloan.Thefollowingdiagramexplainstheprocess(Daviesetal.,2008).

91China’sSpecialEconomicZoneinAfrica:Context,MotivationsandProgress 91 FIGURE2:StructureofconcessionalloansbyEXIMbankChinaSource:Daviesetal,2008.Therefore,ifChineseSEZsinAfricaarereceiversofconcessionalloans,thisindicatestowardsthepossibilitythatthezonessubjecttheAfricanhoststatestofurtherindebtednessvis-à-visChina;especiallyincaseswheretheChineseSEZdeveloperhastheAfricanstateasajointventurepartner.Thepilotzones,ontheSEZs,involvethreeparties:Chinesedevelopers,AfricangovernmentsandtheChinesegovernment.TheChineseenterpriseshavebeentheprimaryactorsinthedevelopmentstage.AfricangovernmentssometimespartnertheChinesefirm,asnotedbelowinNigeria.Althoughitdoesnottakeadirectroleindevelopingthepilotprojects,theChinesegovernmenthasprovidedvariousformsofassistancetotheChinesecompanieswhoinitiatedtheseprojectsandwontheofficialtenders.

92NelsonSantosAntonioandShaoZhuangMa 92 FIGURE3:PartnersInvolvedonthePilotZonesCHINESE GOVERNMENTAFRICAN GOVERNMENTCHINESE DEVELOPERSTheChinesegovernmentprovidedmaterialandnetworkingsupportforthezonedevelopers.Thewinnersofthetendercompetition–theofficialpilotzones–wereeligibleforgovernmentsupportthroughspecialfunds.Inaddition,theChinaAfricaDevelopmentFund(CADF),anequitycapitalinstrumentsetupbyoneofBeijing’sofficialpolicybanks,ChinaDevelopmentBank(CDB),decidedtoinvestinatleastthreeofthesevenpilotzones(NigeriaLekki,MauritiusandEgypt)foratotalofUS$100million.SomeprovincialandmunicipalgovernmentsinChinaprovidedadditionalfundsforthepilotzones.Forexample,JiangsuprovinceandSuzhoumunicipalityannouncedthattheyintendedtoprovideasubsidytotheEthiopianOrientalzoneofoverRMB100million.Furthermore,inNovember2009,theChinesegovernmentannounceda$1billionfundforAfricansmallandmediumenterprises,whichcouldbeusedtohelpsomeofthemtoinvestinthenewzones.TheChinesedevelopersofthesevenpilotzonesinAfricaincludebothstate-ownedandprivateenterprisesfromChina.TheZCCZagreementwasnegotiatedbetweentheCNMC(supportedbytheChineseMinistryofCommerce,theAssociationofChineseSEZandthelocalembassy)ontheChinesesideandtheZambianDevelopmentAgency(ZDA),theMinistryofCommerce,TradeandIndustryandtheMinistryofFinanceontheZambiansidewithintheframeworkoftheMulti-FacilityEconomicZones(MFEZ)Act.AccordingtotheZCCZ

93China’sSpecialEconomicZoneinAfrica:Context,MotivationsandProgress 93 management,thelandleaseisfor76yearsinChambishiand80yearsinEastLusaka.Secrecysurroundingthenegotiationshasresultedinstrongcriticismoftheagreementandawidespreadbeliefthatthelandwasfreeofcharge.AlthoughbothZDAandtheZCCAmanagementhavedeniedthis,theamountpaidbytheChineseremainsundisclosedandisbelievedtobeverylow.Thepreferentialpoliciestobeimplementedinsidethezonehavebeenfarlesscontroversial,astheyfollowcloselytheincentivesstatedintheMFEZAct.InvestmentincentivesintheChambishiandEastLusakaZCCZsarethesame.Theseareexemptionfromtaxondividendsforfiveyearsfromtheyearoffirstdeclarationofdividends;0%corporatetaxforfiveyearsfromthefirstyearprofitsaremade,with50%ofprofittobetaxedinyearssixtoeight,increasingto75%inyearsninetoten;0%importdutyrateonrawmaterials,capitalgoodsandmachineryforfiveyears;anddefermentofVATonmachineryandequipmentimports.Thedeveloperisresponsibleforprovidingtheon-siteinfrastructure,includingroads;telecommunications;electricityandwatersupply;andfacilitiesforadministration,commerce,exhibitionsandtraining.AlthoughdesignedtoattractprimarilyChineseprivatecapital,thezoneisopentootherforeigninvestorsaswellaslocalentrepreneurs.Thereis,however,aninvestmentthresholdofUSA$500,000.AllforeigninvestorsarerequiredtoregisterinZambia.Africanhostgovernmentsregulatethezone’sactivitiesandpromisetoprovideincentivesfortheirdevelopment.Mostofthepilotzonesaregovernedbystandardpackagesofincentivesofferedbyhostgovernments,withoutspecialadditions.Theseusuallyincludetaxholidays,andwaiversonimporttariffsforrawmaterialsandinputs,alongwithrestrictiononstrikeactivity.Somehostgovernments,likeEgyptandZambia,considertheChineseSEZsasanessentialpartsoftheircountries’neweconomicstrategies.Ineach,newregimesforspecialeconomiczonesormulti-facilityeconomiczonesweredevelopedseparatelyfromtheChineseinvestments,andtheChinesedeveloperswereamongthefirsttotakeadvantageofthenewincentives.Morethansixyearssincethelaunchesandstillawaitingbenefitsoutoftheirinvestments(Cowaloosur,2012),itcannotbedeniedthattheAfricangovernmentsareverymuchawareoftheforthcomingresultofthegambletheyhaveplayedbywelcomingtheChinesezonesonthecurrenttermsandconditions.AstheconcernedAfricanleaderstrytosuppresstheiranxietyandseeknewwaystoresuscitatethezones,theirstrategiesindicatetowardstherealizationthattheirprincipalfaultis:tonothavebeenanactive,maybeeven,anequalshareholdingpartnerintheChineseSEZsintheircountry.ThecorrectanswerstowhytheAfricanstateschosetoendtheirroleintheChineseSEZsestablishedintheircountriesatthegateofthesezones,canonlybegivenbythoseactorswhoparticipatedinthenegotiationsofthesebilateralagreements.Nevertheless,anunderstandingofthelargercontextpointstowardstwopossibilities:(1)theconsciousnessofthehostcountriesregardingtheirownlackofexperienceinzonemanagementascomparedtoChina‘ssuccessfulSEZhistory,(2)theAfricangovernmentsconcededtodemandsforamaximumcontrolofthezonewhichtheChinesedevelopersmayhaverequested.However,thepossibilityofthelatterscenarioisreinforcedthroughthestoryofChina-JianglingFreeTradeZone,Algeria.ThisprojectwasinitiatedunderthesameSEZinAfricaconcept,butwascancelledaftertheAlgeriangovernmentenactedreformsrequiringforeigninvestorstoformpartnershipswithlocalfirms,wherebytheAlgerianpartnersmustholdthemajorityoftheshares.Evennow,thereareseveral

94NelsonSantosAntonioandShaoZhuangMa 94 elementsoftheChineseSEZsinAfricaconceptthatallowsforarectificationofaffairs–ashasbeenpursuedbyNigeria.Forinstance,thefactthatChineseSEZsdevelopinphases,wherebythemasterplanofeachphasehastobeapprovedbythehostcountry,leavesroomforthehostAfricancountriestorenegotiateandbringthedevelopmentoftheSEZstomatchtheirexpectationsanddevelopmentobjectives.WhiletherehasbeensubstantialinfrastructureinvestmentinSEZregions,itcanberegardedas“developmentassistance”,asfarasitaidseconomicdevelopmentintheregion.Yetthisisnotnecessarily“aid”,asthetypeofthefinancingisnotclear,andmaywellbepredominantlycommercialinnature.TheseSEZsfocusonstrategicindustriesandprovideliberalizedinvestmentsenvironments.Themodelofdedicatedgeographiczoneswhereinvestingcompaniesenjoypreferentialeconomicpoliciesisbynomeansunique.NumerousAfricangovernmentsareestablishingsuchzonesintheircountriesasanattempttoattractforeigndirectinvestmentespeciallyinlabor-intensivemanufacturingindustries(Kenya,EgyptandMauritius).WhatmakesthisdevelopmentuniqueisthatithasbeeninitiatedbytheGovernmentofthePeople’sRepublicofChina.Ratherthanbeinginitiatorsofthisprocess,AfricangovernmentsareratherrecipientsofChinese-initiatedspecialeconomiczones.TheseSEZswillrequirelargeamountsofinvestmentininfrastructure,bothwithinthezonesandlinkingthemtoportsandtheregionalmarkets.Ifcompletedasenvisioned,theinfrastructurecorridorswillprovidetheessentiallinkagesbetweenthefragmentedAfricanmarketsandhaveapositiveimpactuponregionalintegration.TheSEZsarepositionedtobecomeAfrica’sneweconomicnodes,withoneestablishedineachregionofthecontinent.ChineseSpecialEconomicZonesinAfrica:theprogressAssaidabovethereare,nowadays,sevenChineseSpecialEconomicZonesinoperation.Inthispoint,wewillgiveabriefintroductionofallthem,plustheoneinAlgeria,thatdidn’tstarttheoperationsduetosomeproblemsbetweentheAlgeriangovernmentandtheChineseenterprisesinvolvedintheproject.1.NonferrousMetalMiningGroupIndustrialZonesChambishiandLusaka,ZambiaChina’sfirstSEZinAfricaistobeinChambishi,Zambia’scopperbeltregion.InFebruary2007,PresidentHuJintaopaidanofficialtoZambia.HustayedinZambiaforthreedays,thelongestofanystateduringhisAfricanvisit.ThiswasinterpretedbymanyobserversasaclearindicationoftheimportanceChinaattributestoitsrelationswithZambia.Behindtheusualrhetoricandthedifferentmeasuresandassistancepackagesannounced,designedtofurtherboostbilateralrelations,themostimportantannouncementwastheestablishmentoftheSEZfocusingontheminingsectorinChambishi,intheheartofZambia’scopperbelt.TheChinesegovernmenthascommittedUS$800mininvestmentcreditforitsfirmstotapinto.Thezone’sanchorinvestmentwillbeaUS$250mcoppersmelterforlocalbeneficiation.In2007ChinaEXIMbankgrantedaUS$208millionconcessionalloanfortheconstructionofplantinfrastructure.Thiscanberegardedas“developmentalassistance”.Upto60,000jobswillbecreatedintheSEZthatenjoysdutyandtaxincentivesforChinesefirms.China’sstrategicsupplylineofcopperwillbesecuredthroughtheinvestment.TheregionisacommodityrichstrategiccenteroftheAfricanmining

95China’sSpecialEconomicZoneinAfrica:Context,MotivationsandProgress 95 industry.NotonlydoesChinaseektosecureasupplylineofcopperfromtheSEZbutothercommoditiesareplentifulintheregion,includingcobalt,diamonds,tinanduranium.TheideaofestablishingaSEZostensiblysurfacedin2004,initiatedbyNon-FerrousMetalsCorporationAfrica(NFCA).TheNFCAistheZambiansubsidiaryofChinaNon-FerrousMetalMiningGroupCompany(CNMC,aminingSOE),whichhadbeenexploringChambishicoppermineinZambia’sCopperbeltsince1998.TheNFCAapproachedtheZambiangovernmentwithaproposaltosetupanindustrialparkforcopperprocessinginChambishi.Lusakarespondedtotheideawithgreatenthusiasm.However,anongoingreviewofthelegalframeworkinZambiadelayedtheproject’scommencement.ThenewMulti-FacilityEconomicZones(MFEZ)regulationsenvisagingtheprovisionofacompetitiveenvironmentforinvestorstoprocessZambia’snaturalresourceswithinitsborders,wasissuedfinallyin2006(theZambiaDevelopmentAgencyActnº11of2006).Thatsameyear,aswerefer,Chinaannounceditsintentiontoestablishthreetofiveeconomicandtradeco-operationzonesinAfricaasaninstrumenttopromoteeconomicdevelopmentwithintheframeworkoftheForumonChina-AfricaCooperation.TheEastLusakaZCCZcoversanareaof5.7squarekilometersadjacenttoLusaka’sinternationalairport.Takingadvantageofitsproximitytotheairportfacilities,thissubsectionwasdesignedtoworkasaninternationalcommercialhub.Itaimstocreatealightindustrycluster(manufacturing,assemblyandpackingofgoods)thatisconnectedtonon-ferrousmetals(householdappliances)aswellasothersectors(garmentandfoodprocessing),wholesalefacilities,logisticsandrealestate.TheZCCZagreementwasnegotiatedbetweentheChinaNon-FerrousMetalMiningGroupCompany(CNMC)(supportedbytheChineseMinistryofCommerce,theAssociationofChineseSEZandthelocalembassy)ontheChinesesideandtheZambianDevelopmentAgency(ZDA),theMinistryofCommerce,TradeandIndustryandtheMinistryofFinanceontheZambiansidewithintheframeworkoftheMFEZAct.AccordingtotheZCCZmanagement,thelandleaseisfor76yearsinChambishiand80yearsinLusakaEast.Secrecysurroundingthenegotiationshasresultedinstrongcriticismoftheagreementandawidespreadbeliefthatthelandwasfreeofcharge.AlthoughbothZDAandtheZCCAmanagementhavedeniedthis,theamountpaidbytheChineseremainsundisclosedandisbelievedtobeverylow.Thepreferentialpoliciestobeimplementedinsidethezonehavebeenfarlesscontroversial,astheyfollowcloselytheincentivesstatedintheMFEZAct.InvestmentincentivesintheChambishiandEastLusakaZCCZsarethesame.Theseareexemptfromtaxondividendsforfiveyearsfromtheyearoffirstdeclarationofdividends;0%corporatetaxforfiveyearsfromthefirstyearprofitsaremade,with50%ofprofittobetaxedinyearssixtoeight,increasingto75%inyearsninetoten;0%importdutyrateonrawmaterials,capitalgoodsandmachineryforfiveyears;anddefermentofVATonmachineryandequipmentimports.Thedeveloperisresponsibleforprovidingtheon-siteinfrastructure,includingroads,telecommunications,electricityandwatersupply;andfacilitiesforadministration,commerce,exhibitionsandtraining.AlthoughdesignedtoattractprimarilyChineseprivatecapital,thezoneisopentootherforeigninvestorsaswellaslocalentrepreneurs.TheChambishiZCCZiscurrentlyChina’sonlyETCZinoperationinsub-SaharanAfricaand,eventhen,onlypartiallyso.Theon-siteinfrastructure(phase1)wasfinishedattheendof

96NelsonSantosAntonioandShaoZhuangMa 96 2011.Themasterplanhasbeendesignedtoaccommodate50to60companies.MostofthesecanbetracedbacktotheCNMC,asasignificantnumberoftheinvestorsaresubsidiariesoforcompaniesaffiliatedwiththeCNMC.MostoftheremainingcompaniesareChineseconstructioncompaniescarryingoutinfrastructureprojectsinthezone.Theyhaveregisteredinsidethezonetoenjoytheincentiveitprovides.Thebiggestshowpieceinsidethezoneisthecoppersmelter,recruitingnearlyhalfofthe6658employeesworkinginsidethezone(934ofwhomareChinese).ThereappearstobesomepolicyuncertaintybetweenPRCandZambianGovernmentsoverwhichfirmsarepermittedtoinvestinthezoneandqualifyforinvestmentincentives.ThelackofclarityoverpolicyfrombothgovernmentsisofconcernandneedstobeaddressedinordertomaximizethelocaldevelopmentalbenefitsthatSEZwilloffertotheAfricanprivatesector.Forexample,theZambiaEnvironmentalManagementAgency(ZEMA)hasre-opened,on13February2013,theChambishiCopperSmelter(CCS)whichwasorderedtoshutdownforallegedlypollutingtheenvironment.AccordingtoZEMAprincipalinformationandcommunicationofficerIreneLungu-Chipili,theagencyhadpermittedCCStoreopentheplantunderspecifiedconditions.MsChipilisaidtheagencywouldcontinuetomonitorCCStoensurecomplianceoftheEnvironmentalManagementAct.Shesaidalso,thatSEMA’sinspectionshadrevealedthatCCShadputinplaceadequaterehabilitationandoperationalmeasurestoreducesulphurdioxideemissionstothesatisfactionoftheagency.ThefirmhadputinplacelogisticsforcompensatingaffectedfarmersandwasmakingconsultationswithKalulushiMunicipalCouncilandotherGovernmentdepartments.Ms.ChipiliexplainedthatZEMAreceivedcomplaintsinJanuary,2013fromseveralfarmersintheChambishiareaofKalulushidistrictthatavarietyoftheircropshadbeendamagedbyacidraincausedbysulphurdioxidefumessuspectedtohavecomefromCCSLimited.AccordingtoMOFCOM,asofMay2014,atotalof29ChineseenterprisesworthUS$169millionhavebeensetupintheZambiaMFEZ(includingChambishiandLusaka).2.JinfeiEconomicandTradeCooperationZone,MauritiusThenextChineseSEZwasannouncedinJuly,2007andwaslocatedinMauritius,whichprovidesastrategicdestinationforaChineseinvestmenthub.TheUS$500millionmanufacturingzonewillhouse40Chinesebusinesses,creating5,000jobsforlocalsand8,000forChinesecontractors.Keyinfrastructureprojectstobebuiltincludetheconstructionofafishingport,adam,aroadsprojectfromVerduntoTerreRougenearPortLouisaswellasanewtowndevelopmentathighlands.Itiswell-situatedintheIndianOceanrimregion;itisanoffshorefinancialcenterwithattractiveinvestmentlaws.MauritianfirmsarewellintegratedintotheeconomiesofSouthAsia.MauritiusisalsoamemberoftheSouthernAfricanDevelopmentCommunity(SADC)andtheCommonMarketforEasternandSouthernAfrica(COMESA),amarketof350millions,andthusenjoyspreferentialmarketaccessintotheAfricanregion.FinallyMauritiushasasizeableethnicChinesecommunity(around40,000inapopulationof1.3million)thatisactiveintradingwithChina.AlthoughthisagreementcontainsaconfidentialityclauseasrequestedbytheChinese,mostdetailsbecamepublic.FivehundredmillionUSdollarsininvestmentswerepledged–thelargestsingleforeigndirectinvestment(FDI)projectinMauritius(Alves,2011).Landwasleasedfor99years($3ha/year,toincreaseby50%after20yearsandby50%every10yearsthereafter).

97China’sSpecialEconomicZoneinAfrica:Context,MotivationsandProgress 97 Thiscanbesaidtohavebeenthehighestconcessionmadecomparedtootherforeigninvestors,but,notably,thelandwasnotgivenforfree,asoriginallyrequestedbytheChinese.Subjectto15%corporatetax,theChineserequestedazerotaxconcession,butnoconcessionsweremade,andtheMauritianauthoritiesmaintainedthesametaxtreatmentasforallotherforeigninvestors.ProvisionwasmadeforMauritianpassportsforalimitednumberofChineseinvestors(onepassportforeveryUS$500,000ofinvestment),whichwasanotherimportantconcession.Freeportstatuswasconferred,whichmeantdeveloperswereexemptfromcustoms.OneofthePRCGovernment’sleadingpolicybanks,theChinaDevelopmentBankwillbethemainfinancieroftheprojectandthemajorityofChinesefirmswillhavetheiroriginintheChineseprovincialeconomyofShanxi.Oneofthezone’smaininvestorsisShanxiTianliEnterprisesGroup–adiversifiedandstateinfluencedindustrialgroupwithitsrootsinShanxiprovince.Investmentwillbeinmanufacturingwithspecificsectorstargetedthatincludelightindustrialgoods,medicineproduction,textilesandelectricalgoods.DespitethisfavorableinvestmentenvironmentandthehistoricalandculturallinksstemmingfromitslongestablishedChineseminority,China’sinvestmentinMauritiushasbeenrelativelysmallandveryirregularovertheyears(Alves,2011).Inthe1980sand1990s,anumberoftextilecompaniesfromHongKongrelocatedtoMauritius,luredbythepreferentialaccesstoUSandEUmarketsandothertradepreferences,aswellasthefiscalandEPZincentivesthatthegovernmenthadputinplacetorevitalizethesector.However,thesecompaniesfledthecountrywhenthethird-countryfabricderogationundertheAfricanGrowthandOpportunityAct(AGOA)wasnotrenewedin2003andapparelquotascametoanendin2005.By2008,onlytwoChinesetextilecompaniesremainedinMauritius:HongKong–ShanghaiCo.LtdandTianliSpinningCo.Ltd,acompanyfromShanxiprovincethathadbeenpresentontheislandsince2001.InOctober2006,TianliproposedthedevelopmentofanintegratedindustrialzoneinMauritius,afterwhichtheMauritiangovernmentignitedtheprocessofestablishingtheChineseSEZinMauritiusattheFOCACIIImeetinginBeijinginDecember2006.Againstallodds,theMauritiangovernmentvigorouslypushedtheproject.Despitelackingnaturalresourcesandalargemarket,Mauritiuspursuedthisobjectivebyemphasizing:a)itsconsolidatedsoftinfrastructurethatisabsentinmostAfricancountries;b)itssocialandpoliticalstability,economicfreedomandrapidmovetofreetradeandafriendlybusinessenvironment.Amongtheotheraspectshighlightedweretheruleoflaw,transparency,accountability,independentjudicialpowerandaveryappealinginvestmentlegalframework;itsprivilegedpositionasagatewaytotheSouthernAfricanDevelopmentCommunityandtheCommonMarketforEasternandSouthernAfricaofwhichitisamember-state,aswellasitspreferentialaccesstomarketsintheUS(AGOA,over6,400productsdutyfree)andtheEU(EconomicPartnershipAgreement);itsstrategicgeographiclocation,notonlyasabusiness/servicesplatformbetweenAsiaandAfrica,butalsoacriticalrouteforChinesemerchantshipsintheIndianOcean;itshistoricallinkswithChinaandlong-standingsupportfortheoneChinapolicysince1972.Thefirststageinthisprocesswastolocatetheproject.Afteridentifyingafewpossibleplots,thefinalchoicewas211hectaresinTerreRiche,ontheoutskirtsofPortLouis,whichwasjustifiedbyitsproximitytotheport,sincethiszonehadinitiallybeenprojectedtobeanindustrial

98NelsonSantosAntonioandShaoZhuangMa 98 zoneforexportstoAfrica.Thelandplotisprimeland,strategicallylocatedneartheportandbeaches,andbetweenPortLouis(capital)andGrandBaie,themaintouristhub;itisanideallocationforthehospitality,housingandservicessectors.ThenegotiationsbetweentheBoardofInvestment(BOI)andTianli(withMOFCOMsupport)ledtothesigningofaframeworkagreementbetweenTianliandtheMauritiangovernmentinMarch2007fortheestablishmentofanSEZ,whichbecameknownasTianliproject.TheSEZwastobeexclusivelyforChineseinvestors,arequestbytheMauritiangovernment,whichwasjustifiedbytheperceptionatthetimethatthearrangementwouldensurethefullcommitmentandresponsibilityoftheChinese.ItwouldalsoavoidthediversionofotherFDIflowsthatMauritiuswouldreceiveanyway.TheagreementalsoestablishedthattheMauritiangovernmentwasresponsibleforprovidingtheoffsiteinfrastructure:roads,water,electricityandtelecommunications,whileTianliwouldbeinchargeofdevelopingtheonsiteinfrastructureoverthesubsequentfiveyears,whichhadamuchhigherestimatedcost(MUR2420billion).Thezonewasexpectedtocreate40000direct,indirectandmultiplierjobs.Tianlilaterrevisedtheoriginalplanstoestablishafreeportzoneforlightmanufacturingandtrading,tocreateanindustrialandservicezonesoastoaligntheprojectwiththegovernment’saimofbecomingaservicebridgebetweenAsiaandAfrica.By2007–2008,theprojectcametoahaltduetoanumberofreasons.Firstly,theallocatedplotwasagriculturalland,whichwasbeingleasedtoprivatefarmers(107intotal).Someofthefarmersrefusedthecompensationofferedbythegovernment,whichmeantthattherelocationprocesstookmuchlongerthanpredicted.Furthercontributingtotheproject’sdelaywereenvironmentalconcernsandoperationalconstraintssuchasthedisagreementbetweenMauritianandChinesearchitectsandTianliawaitingclearancefromChineseauthorities.Finally,withtheonsetofthefinancialcrisisin2008,anumberofconcernsaroseregardingthefeasibilityoftheproject.Theseincludedtheabilitytoattractinvestorsinsuchanunfavorableenvironment,andTianli’sreducedfinancialcapacitytodeveloptheprojectonitsown.TheprojectwasfinallyunblockedfollowingPresidentHuJintao’svisittoMauritiusinFebruary2009.Duringthevisit,theMauritianprimeministerexpressedhisconcernstoHuJintaoabouttheuncertainfutureoftheSEZ.UponhisreturntoChina,HuJintaogaveinstructionstotheShanxiProvincialGovernmenttotryandsolvetheproblem.Itwasinthiscontextthattwomajorcompanies(SOEs)fromShanxiProvincejoinedTianliinearly2009,asmasterdevelopersoftheSEZprojectinMauritius:TaiyuanIron&SteelCompany(TISCO),currentlytheworld’slargestproducerofstainlesssteel,whoseturnoverisdoubletheGDPofMauritius;ShanxiCokingCoalGroup,amajorcoalproducerinChina,whoseturnoveris150%largerthantheGDPofMauritius.TISCO,ShanxiCokingandTianliareregisteredinChinaastheJinFeiInvestmentCompany,hencetheSEZnamechangefromTianlitoJinFei.ThesethreecompaniesjoinedCADF,thefourthequitypartnerregisteredinJune2009inMauritiusunderthenameofJinFeiEconomicandTradeCo-operationZone(JFET)withfinancialcapitalof$80million.AsofMay2014,therearefourenterprisesregisteredinthezonewithanactualinvestmentofUS$38.31million.3.LekkiFreeTradeZone,NigeriaTheLekkiFreeTradeZone(LFTZ)islocated60kilometerseastofLagosalongsideanewplanneddeep-waterport.TheprojectisajointventurebetweenaconsortiumoffourChinesecompanies

99China’sSpecialEconomicZoneinAfrica:Context,MotivationsandProgress 99 andNigerianinterests,includingtheLagosstategovernment.ThegovernmentofLagosstateprovided165squarekilometers(16,500hectares)ofland–ofwhich30squarekilometers(3,000hectares)hasbeenofficiallytransferredtothejointventuresofar–andtherighttoa50yearfranchise.Theprojectwasinitiatedin2003byChinaCivilEngineeringConstructionCorp.(CCECC),whichhasbeenoperatinginNigeriaformorethanadecade.ThecurrentshareholdersincludeChinaRailwayConstructionCorporation,CADF,CCECCandNanjingEconomicandTechnologicDevelopmentCorporation.InNovember2007,theLekkizonewonsupportinthesecondMOFCOMtender.Thezonearedividedintosixsections:a)Transportationequipment,b)Textileandlightindustry,c)Homeappliancesandcommunications,d)Warehousing,e)Exportprocessingandcommunications,andf)livingandbusiness.ThefirstphaseoftheprojectwillserveonlyormainlyChinesecompanies(Brautigam&Tang,2011).Butaccordingtothesameauthors,aNigerianpartner,however,indicatesthatthezoneisopentoallinvestors,andthelistofinvestorsthathavesignedtheMOUsincludesmainlynon-Chinesecompanies.AsofMay2014,therearethirtysixenterprisesregisteredinthezonewithanactualinvestmentofUS$126million.4.OgunStateEconomicandFreeTradeZone,NigeriaOgunStateEconomicandFreeTradeZoneislocatedintheIgbessaregionofOgunstate,30kilometersfromLagosInternationalairport.ItsshareholdersincludeGuangdongXinguangInternationalGroup,China-AfricaInvestmentLtd.,ChineseCCNCGroup,andtheOgunstategovernment.Theprojectoriginatedfroma2004studyofSouthChinaUniversityofTechnologyonthefeasibilityofsettingupaGuangdongeconomictradecooperationzoneinNigeria.ThisreportwasusedforthesuccessfulbidbyXinguangInternationalGroupinthefirstMOFCOMtenderin2006.ByJuly2009,severalChineseenterpriseshadbeguntobuildstaffhousing.In2013,XinguangInternationalGrouptransferreditsequity(51%)toZhongfuCorporationandthezoneisundertheadministrationofZhongfuIndustrialZoneManagementCompany.Thezonehasatotalareaof100squarekilometers,whichwillbedevelopedintotwophases.PhaseIutilizes20squarekilometers(2,000hectares)withanestimatedinvestmentof$500million;withinthis,thestart-upzonewillbedevelopedon250hectares,withaninvestmentof$220million.Thezonewillfocusprimarilyonlightmanufacturing,includingconstructionmaterialsandceramics,ironware,furniture,woodprocessing,medicine,smallhomeappliances,computer,lighting,andpaper.Thedevelopersaimtoattractmorethan100enterprisestothezonewithinfiveyears,and700-800companieswithin10years.Accordingtonewsreleasedonthezone’swebsiteonJune242013,thefirstphaseofthezonecovered2.5squarekm²withaninvestmentof$200million,andsofar34companieshaveregisteredtoinvestinthezone.

100NelsonSantosAntonioandShaoZhuangMa 100 5.TianjinTEDASuezEconomicandTradeZone,EgyptTianjinTEDASuezEconomicandTradeZone,isastate-leveloverseaseconomicandtradecooperationzoneapprovedbytheChinesegovernment.Itsdevelopment,constructionandoperationareundertakenbyEgyptTEDAInvestmentCompanythatwassetupinEgyptbyChina-AfricaTEDAInvestmentCo.,Ltd.acompanythatwasjointlyincorporatedbyTianjinTEDAInvestmentHoldingCo.,LtdwhichdominatestheconstructionofTianjinDevelopmentAreaandChina-AfricaDevelopmentFund.ThecooperationzoneislocatedatthejunctionofEurope,AsiaandAfricatothenortheastofEgypt,situatedattheRedSeaSuezGulfnorthwesteconomicregion,southofSuezCanal,120kmawayfromCairo,and40kmawayfromSuezCity.Itcoversatotalareaofabout9.12km²,andithascompleted1.34km²ofthefirstphase.In1994,EgyptinitiateddiscussionswiththeChinesegovernmentwiththehopeoflearningfromChina’sSEZdevelopmentexperience.In1998,thetwogovernmentssignedamemorandumofunderstanding(MOU)toconstructajointindustrialzoneinoneofthethirteenblocksoftheNorth-WestSuezEconomicArea(NWSEA),locatedjustbelowthesouthernentranceoftheSuezCanal.AftertheMOUwassigned,theChinesegovernmentappointedTEDAInvestmentHoldingstocarryoutthetask.TEDAandfourEgyptianpartners,ArabContractorsCo.,NationalBankofEgypt,NationalInvestmentBankandtheSuezCanalAuthority,formedajointventure,Egypt-ChinaCorporationforInvestment(ECCI),inwhichTEDAheld10%oftheshares.TEDAfoundthatitsminoritysharedidnotgiveittheclouttoseeitsideasandproposalsimplemented.Frustratedbythejointventure,TEDAdecidedtoexperimentbystartinganewandmoresuccessfulzonefocusedonsmallandmediumChinesefirms,andwithoutEgyptianpartners.In2000,TEDAsetupanewcorporation,SuezInternationalCooperationCompany,whichboughtonesquarekilometerofthelandheldbyECCItodevelopanindustrialparkforsmallandmediumenterprises,focusingonChineseclients.Bylate2009,thiszonewasfullydevelopedandthespaceswerecompletelyrentedout.TEDA’soriginalinvestmentintheSMEindustrialparkwasmodestandtherewerenoplansforexpansion.WhenthefirstMOFCOMtenderforoverseascooperationzonestookplacein2006,TEDAdidnotparticipate.However,whenMOFCOMannouncedthesecondroundoftendersfor2007,TEDAdecidedtosubmitaproposal.TheysubsequentlywonsupportfortheirproposaltoexpandtheSMEparkintotheEgyptSuezCooperationZone(ESCZ).InJuly2008,TEDAestablishedajointventurewithEgyptianinterests(EgyptTEDA)todevelopthezone,butthistimeTEDAheldthemajorityoftheshares.InOctober2008,theChinaAfricadevelopmentFundalsoagreedtoinvestintheESCZ.Thestartareaofthecooperationzoneisdividedintothetextileandgarmentindustrialarea,oilequipmentindustrialarea,automobileindustrialareaandelectricindustrialarea.Thecooperationzoneisnowbuildingacomprehensiveservicecenterofabout100,000m²,includingone-stopservicecenter,businesshotel,apartmentandcommercialfacilitiesandthefirstphaseoftheprojecthasbeencompletedandputintousebytheendof2009.Atpresent,theChineseenterprisescoveringtheindustriesofoilequipment,lightindustries,textileandgarmentshavebeensettledinthecooperationzoneandshowedasatisfactoryresultinbusinessperformance.TheESCZplannedtofosterfourclusters:textilesandgarments;petroleumequipment;automobileassembly;andelectricalequipment.

101China’sSpecialEconomicZoneinAfrica:Context,MotivationsandProgress 101 CompanieslocatedonthenewEgyptianSEZ,whereaChinesecompanyisconstructinganoverseaszone,enjoyanewincentivepackageoflowertaxes,butperhapsmoreimportantly,theycanalsoobtainEgyptiancertificatesoforiginfortheirproducts,andthustakeadvantageofEgypt’svariousinternationaltradeagreements.ThecooperationzonewillbecomeabridgeheadofChineseenterprisestohaveafootholdinEgyptandaccesstoAfrica,theMiddleEastandEuropeanmarkets,anewoverseasprocessingandmanufacturingbaseofChineseenterprises,andastagetocarryoutbilateralandmultilateraleconomicandtradecooperation.AccordingtoChinaDaily(28April2013),theEgyptiangovernmentsignedaninvestmentwithTEDACorporationtodeveloppartofajointindustrialzoneneartheSuezCanal.Egypt’seconomicauthorityandTEDAsignedthe45yearcontractunderwhichinvestmentprojectswillbeestablishedinanareaofsixsquarekilometersintheindustrialzone.TEDAchairmanLiuAiminsaidhiscompanyaimstoinvest$500millionintheareaandbringin$2billioninthenearfuture.Henotedalsothat:“Wealreadybroughtinvestmentsofabout$600millionthorough38investmentprojectsintheChina-EgyptSuezEconomicandTradeCooperationZone”.AsofMay2014,therearethirtytwoenterprisesregisteredinthezonewithanactualinvestmentofUS$90.66million.6.JiangsuOrientalIndustrialZone,EthiopiaChinawillinvesttobuildEthiopia’sfirstindustrialparkatDukem,37kmfromAddisAbaba.Constructionoftheindustrialparkbeganin2009andisexpectedtobecompletedin2014.Theindustrialparkwillbebuiltona2squarekmplotandfinancedbytheChina-AfricadevelopmentFund.QiyuaninitiatedtheideaofbuildinganindustrialzoneinEthiopiaandtheparticipationofYonggang,amuchlargerconglomerate,guaranteedfinancingsothatitwonthesecondMOFCOMbiddingin2007.Later,twoadditionalZhangjiangcompanies,JianglianandYangyangAssetManagementjoinedtheproject.Whencompleted,upto80companiesinvolvedintextiles,leatherandmanufacturingconstructionequipmentareexpectedtoinvestintheindustrialzone,whichisintendedtohelpEthiopiatoemulateChina’spatternofaccelerateddevelopment.Theindustrialzoneisalsoexpectedtocreate20,000localjobs.ZhangjiangFreeTradezonewasbroughtinasatechnicalpartner,butnotasashareholder.BecauseoftheChinesepartners’financialdifficultiestheareaofthezonehasbeenreducedfrom5to2squarekilometers(500to200hectares)andtheinvestmentfromRMB1billiontoRMB690million.Thestart-upareais100hectares.Thefirstprojectinthezone,acementplantbeganproductionin2010.AsofMay2014,therearetwentyenterprisesregisteredinthezonewithanactualinvestmentofUS$57.52million.7.Algeria-ChinaJianglingFreeTradeZoneAlgeria-ChinaJianglingFreeTradeZonewillbedevelopedbyJianglingAutomobileGroupfromNanchang,JiangxiprovinceandZhongdingInternationalGroup.JianglingAutomobile,oneofChina’sflagshipcompanies,hasmorethan40salesagentsinAlgeriaandby2007,hadtakenone-thirdofAlgeria’sautomobilemarket.ZhongdingInternationalGroupisthearmforoverseasconstructionandengineeringofPingxiangCoalGroup(PKCC).PKCChasbeenoperatinginAlgeriaformorethan17yearsandconstructeddozensofmediumandlargeprojectsthere.RespondingtoMOFCOM’scallforapplications,theJiangsuprovincialgovernmentcoordinated

102NelsonSantosAntonioandShaoZhuangMa 102 anefforttolinkPKCCandJianglingAutomobileGroup,bothbasedinJiangxi,toestablishaplatformfortheenterprisesofJiangxitogoglobal.TheywoninthesecondMOFCOMbiddingroundin2007.TheAlgeriazonewasprojectedtohaveatotalinvestmentofUS$556millionandalandareaof500hectares,withafirstdevelopmentphaseon120hectares.Itplannedtoattract30-50Chineseenterprisesintoanindustrialparkfocusingonautomobilesandconstructionmaterials.DuetosomeconflictsbetweenthedevelopersandtheAlgeriangovernmenttheSEZisstillunderdiscussion.CONCLUSIONSInthelastdecade,manythingshavebeenwrittenaboutChina’sroleinAfrica.Approachestothissubjectrangefromaskepticalpositiontoanencouragingone.Accordingtotheskeptics,ChinaisonlyinterestedinAfricanresources(oil,minerals,andagriculturalproducts)andintheAfricanmarketinordertosellitsproducts;hence,itisoccupyingtheplaceoftheformercolonialists.Oncesatisfied,ChinawillleaveAfrica.Fortheoptimisticperspective,ChinahasdevelopedapositiveroleinAfrica,helpingAfricancountriessolvetheirproblemsandtransferringhelpfulChinese-basedknowledge.TheSEZsareoneproductoftheChinesebasedknowledgeandaswesawtheywereofferedbytheChineseauthorities.Theirimplementationhasraisedmanyproblems,fromlandpossessiontopollutionandlaborconditions.ItisouropinionthatChinaislearningtodealwiththeoutsideworld,buttheyaregoodlearners.REFERENCESAfricaResearchInstitute(2012).Betweenextremes:ChinaandAfrica.Briefingnote,October,accessed7August2014,http://www.africaresearchinstitute.org/files/briefing-notes/docs/Between-extremes-China-and-Africa-P2E56236DQ.pdf.Alden,C.&Davies,M.(2006).AprofileoftheoperationsofChinesemultinationalsinAfrica.SouthAfricanJournalofInternationalAffairs,13,(1),83-96.Alves,A.C.(2011).ChineseeconomicandtradecooperationzonesinAfrica:thecaseofMauritius.OccasionalPaperNo.74,Johannesburg:SouthAfricanInstituteofInternationalAffairs.Ancharaz,V.D.&Nowbutsing,B.M.(2010).ImpactofChina-Africainvestmentrelations:anin-depthcasestudyofMauritius,reportsubmittedtoAERC,15-16.Brautigam,D.&Tang,X.(2011).AfricanShenzhen:China’sspecialeconomiczonesinAfrica.JournalofModernAfricanStudies,49,(I),27-54.Cowaloosur,H.(2012).Theabsenteelandlord:AfricanstateinChinesespecialeconomiczonesinAfrica.Conference,ThePowerofAfrica,May,Paris.Davies,M.Edinger,H.Tay,N.&Naidu,S.(2008).HowChinadeliversdevelopmentassistancetoAfrica.CenterforChineseStudies,UniversityofStellenbosch.

103China’sSpecialEconomicZoneinAfrica:Context,MotivationsandProgress 103 He,W.(2009).TuiDaoGaoQiang:LunZhong-FeiGuanxiZhongdeRuanshiliJianshe(Pollingdownthehighwall:buildingtheChina’ssoftpowerinSino-Africarelations).WestAsiaandAfrica,7,5-12.Knoth,C.(2000).Specialeconomiczonesandeconomictransformation:theCaseofthePeople'sRepublicofChina.PhDThesis,UniversitätKonstanz.Mbeki,M.(2006).Editorial,SouthAfricanJournalofInternationalAffairs,13,1,7-9.RenminRiBao(People’sDaily)(2014),August7.TheEconomist(2014).ThepresidentondealingwithChina,accessed7August,http://www.economist.com/blogs/democracyinamerica/2014/08/economist-interviews-barack-obama-1.WhiteL.&Alves,P.(2006).ChinainAfrica:arelationshipof(Un)equalsinthedevelopingworld.SouthAfricanJournalofInternationalAffairs,13,1,55–62.Yao,G.(2013).ZhongguoDuiFeizhouTouziHezuodeZhuyaoMoshijiTiaozhan(MainmodelsandchallengesofSino-Africainvestmentcooperation).WestAsiaandAfrica,5,103-117.Zeng,Z.(2011).HowdospecialeconomiczonesandindustrialclustersdriveChina’srapiddevelopment?WorldBankpolicyresearchworkingpaper.Zhang,Z.(2011).ZhongfeiJingmaoHezuoqu:ZhongfeiJingmaoGuanxiXindeZengzhangdian(China-Africaspecialeconomiczones:anewgrowthpointofChina-Africaeconomicrelationship).WestAsiaandAfrica,2,59-65.

EDITORIALCORRESPONDENCEAllcorrespondenceincludingsubmissionshouldbesenttothefollowing:InEurope,Prof.NelsonAntónio,EscoladeGestão,InstitutoSuperiordeCiênciasdoTrabalhoedaEmpresa(ISCTE),Av.dasForçasArmadas,Lisboa,Portugal.Email:nelson.antonio@iscte.ptInAsia,DrCarlosNoronha,FacultyofBusinessAdministration,UniversityofMacau,Taipa,Macau,China.Email:fbacn@umac.moBUSINESSCORRESPONDENCEAllcorrespondenceincludingordersandsubscriptions,advertisements,backnumbers,andoffprintsshouldbeaddressedtoDrTiffanyLam,UniversityofMacau,Taipa,Macau,China.Email:fbakpl@umac.moSUBSCRIPTIONRATESUnitedStates,Europe,andSouthAmerica,US$19.50peryearincludingpostageAsia,US$13.50peryearincludingpostageChinaandHongKong,HK$67peryearincludingpostageMacau,MOP$61peryearincludingpostageORDERINGINFORMATIONTogetherwiththeOrderForm,sendadraftorinternationalmoneyorderoftheappropriateamountmadepayableto‘MacauFoundation’.PUBLISHER’SINFORMATIONMacauFoundationAv.deAlmeidaRibeiroNo.61-75,CircleSquare,7º-9ºandar,MacauTel:(853)28966777Fax:(853)28968658Email:ieinfo@fm.org.moHomepage:http://www.fmac.org.moHOMEPAGEhttp://eajm.webnode.com

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SUBMISSIONGUIDELINESAuthorsarerequestedtosubmittheirworkinaccordancewiththefollowingguidelinessoastofacilitatethereviewprocess.1.Manuscriptssubmitted,writteninEnglish,shouldbeoriginalandnotpublishedorunderconsiderationelsewhereunlessauthorizedbytheeditorialboard.2.Eachmanuscriptsubmittedwillbereviewedbytheeditorialboardforitsgeneralsuitability.Ifjudgedtobesuitable,adoubleblindreviewprocessbytworeviewerswilltakeplace.Theeditorialboard,basedonthesuggestionsgivenbythereviewers,willdecidewhetherthemanuscriptshouldberejected,revised,oraccepted.3.Thescholarlypeer-reviewedarticleshouldnormallybebetween4,500to7,500wordsincludingreferences,footnotes,tables,figures,andtheircaptions.Includeanabstractofapproximately100wordsandinformationaboutthenameoftheauthor(s),affiliation,address,contactdetails,andemail.Thenameoftheauthor(s)shouldnotappearwithinthearticletext.4.AnelectronicversionofthemanuscriptinaformatcompatiblewiththeWindowsenvironmentshouldbesubmittedviaemailtoProf.NelsonAntonio(inEurope:nelson.antonio@iscte.pt)orDrCarlosNoronha(inAsia:fbacn@umac.mo).5.Sectionsandsub-sectionsshouldbeclearlydifferentiatedinalogicalway.Sectionsshouldbetypedinboldcapitalswhilesub-sectionsaretypedinboldlowercaseletters.Avoidtheuseofmorethantwolevelsofsections.6.Tables,charts,andfiguresshouldfitthejournal’spagesizeandclearlylabeledandcaptionedwithheadingsandnumbers(e.g.Table1,Figure1,etc.).Instructionsshouldbegivenonputtingtheminthetext(e.g.inserttable1abouthere).7.Allmathematicalnotations,numbers,andsymbolsmustbetypewritten.8.Themanuscriptshouldbetypeddouble-spaced,fontsize12.9.ReferencingissimilartotheHarvardsystem.Includebibliographicinformationinthe‘References’onlymaterialscitedinthetext.Avoidtheuseoffootnotesandendnoteswheneverpossible.10.Citationandreferenceguidelines:Singleauthor:Roth(1995)/(Roth,1995)Twoauthors:SnowandHerbiniak(1980)/(Snow&Herbiniak,1980)Morethantwoauthors:Tayloretal.(1996)/(Tayloretal.,1996)Withpagenumbers:Roth(1995:201-202)/(Roth,1995:201-202)Sameyear’spapers:Harvey(1997a,1997b)/(Harvey,1997a,1997b)Multiplepapers:(Pfeffer,1994;Poole&Jenkins,1996;Tayloretal.,1996)Book:Chandler,A.P.(1990).ScaleandScope.Cambridge,MA:Belknap.Multipleauthors:Spencer,A.M.&Hazard,H.A.(1988).InternationalCompetitiveness.Cambridge,MA:Ballinger.Articleineditedvolume:Murphy,L.R.(1988).Workplaceinterventionsforstressreductionandprevention.InCooper,C.L.&Payne,R.(eds.)Causes,CopingandConsequencesofStressatWork.Chichester:JohnWiley.Non-Englishlanguage:Maekawa,K.(1993).GendaiKigyoKenkyunoKiso(BasicResearchonModernBusinessEnterprises).Tokyo:TokyoKeizaiShinposha.Journalarticle:Tushman,M&Anderson,M.(1986).Technologicaldiscontinuitiesandorganizationalenvironments.AdministrativeScienceQuarterly,31,(3),83-92.Conferencepresentation:Gill,J.&Butler,R.(1997).Trustinthedynamicsofjointventurepartnerselectionandoperation.Paperpresentedtothe12thLVMHConference:PartnershipsandJointVenturesinAsia,February7-8,Fontainebleau:INSEAD.Thesis:Conrad,L.(1999).Controlissuesintheregulationofprivatizedindustries:Acasestudyofthegasindustry.UnpublishedPhDthesis,UniversityofEssex.Magazinearticle:Asiaweek(1999).Designsonthefuture.April23,56-58.Newspaper:Joong-AngIlbo(CentralDailyNews)(1997).July14.11.Apdfoffprintfileandacompletecopyoftherelevantjournalwillbesenttotheauthoraboutfourweeksafterpublication.12.OnceacceptedandpublishedbyEAJM,itisassumedthattheauthor(s)agreetotransfercopyrightoftheworktotheMacauFoundationincludingfullandexclusiverightstopublicationinallmedia.However,theauthor(s)retaintherighttoreprinttheirarticle,afterpublicationinEAJM,inanyworkwithouttheneedoffurtherpermissioninwritingfromtheMacauFoundation.13.PhotocopiesofarticlespublishedinEAJMareallowedforpersonalacademicandclassroomuse.

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