October 2012 Edition 15

WelcomeThis is the latest edition of “Hot Issues” from Burson-Marsteller’s Global Public Affairs Practice. “Hot Issues”focuses on new forthcoming legislative or policy issues that will impact business from around our global network of 150 offices in Latin America, Asia-Pacific, Europe, Middle East, Africa and North America.

The public policy dynamics in each country, let alone a particular region can be very different, demonstrated by the different experts we utilise in the countries where we operate. Conversely, there are similarities andyou can see this in some of the issues we have picked out.

Hot Issues are designed to give you a flavour of our global perspective and should any of the items raise particular interest with you, please contact the designated person listed with that issue.

01

India Debates Bold Economic Reforms

Medha Kalra - medha.kalra@bm.comEvelyn Kusnawirianto - evelyn.kusnawirianto@bm.com

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Indian Prime Minister Manmohan Singh has recentlyannounced a series of economic reforms that will allow foreign direct investors to hold majority stakes in enterprises in key sectors including retail, aviation,and broadcast. The announcement comes aftermonths of policy paralysis after several legislativeattempts to open up more sectors to internationalbusiness. Foreign companies will be able to hold up to51 percent stakes in the multi-brand retail sector, 49percent in domestic airlines and parts of the utilitiessector, and 74 percent in broadcasting. At the sametime, the government announced that fuel and cookinggas prices, which have long been subsidized by thegovernment, will also see a 14% hike.

Analysts have deemed economic reforms necessarygiven the country’s fiscal deficit at 6% of GDP, highinflation, slow economic growth, and a withdrawal of investment activities by foreign companies. Thegovernment’s decision to open up different sectors and increase the fuel price is widely seen to be firststeps in improving the efficiency of the overall economy, cutting the fiscal deficit and restoring economic growth. Allowing majority foreign directinvestment in the multi-brand retail sector is expectedto improve value and choice for consumers, create new jobs, and enable Indian farmers to increase theirearnings through more sophisticated distribution systems. Global companies like Walmart, Tesco, andCarrefour have welcomed the reform as they have beeneyeing the vast Indian market for years but have notbeen able to enter and expand their business due toadverse government policies. Companies like IKEA may also find it easier to enter the Indian market with the relaxation of foreign investment rules.

Opinions towards the reforms have been divided inIndia. Industry associations like the Federation ofIndian Chambers of Commerce and Industry have

endorsed the reforms, as have some of the smaller political parties, many prominent companies, and investors. However, analysts say that the reforms arethreatened by the exit of the Prime Minister’s largestally, West Bengal Chief Minister Mamata Banerjee, fromthe government’s coalition. Previous proposals to allowforeign investment in the retail and aviation industrywere stalled earlier this year amid opposition from theTrinamool Congress Party. With additional pressuremounting from nationwide strikes across India, led by opposition political parties and trade unions upsetover the opening up of the retail sector and the hike in fuel prices, many observers are concerned that thegovernment will again succumb to the opposition and withdraw the reforms.

Despite analysts’ predictions that the government willlikely persevere with these reforms given that generalelections are due in 2014 and the ruling coalition iskeen to see reforms push through to help promoteIndia’s economic recovery, businesses should remainvigilant about the potential for successful oppositioncalls to roll back or scale down reforms. They shouldstrengthen their engagement and form alliances withpolitical supporters and industry bodies to lobby thegovernment against any thoughts of backing down. In addition, as some political parties have opposed the measures to win constituents’ support, companiescan also engage in conversations with the public and the media to influence public opinion by communicating the benefits of a more open economy.Burson-Marsteller’s public affairs and media relationsteams are well-positioned to help companies in India achieve these goals.

Hong Kong Proposes Class Action RegimeIn an effort to expand access to judicial remedy, Hong Kong’s Law Reform Commission has proposed a class action regime to allow groups of people with a common complaint to sue as a class. Currently,Hong Kong only allows multiparty proceedings butthat approach is rarely practiced because it requiresclaimants to have the same contract, defense andrelief, and claimants also have to pay all or part of theiropponent’s legal fees if they lose. The Commissionrecommends that the class action regime adopt an incremental approach and start with consumerfraud and product liability cases involving goods, services, and real property in order to avoid a flood of unnecessary litigation. Purchasers of securities will not be covered until five years after the regime’s implementation.

If implemented, the class action regime will likelyadopt an “opt-out” approach so that people in thesame situation will be automatically covered in grouplitigations unless they opt out. The Commission alsorecommends that companies set up a litigation fundto pay legal costs or compensation, and that a publicfund should be set up for consumer claims. To avoidan abuse of class action lawsuits, judges will also begiven the power to decide if group litigation is the bestoption or if settlement outside of the court is moredesirable. The proposal to set up a class action regimeis perceived to be a result of the Lehman Brothersmini-bond matter in 2009 which has led to losses bytens of thousands of investors who have no viablemeans to sue banks for selling them the mini-bonds.Under this proposed regime, consumers who buy products sold by commercial banks and brokeragescan seek permission to sue as a class.

The class action proposal has generally been welcomedby the legal industry in addition to a number ofgovernment agencies and the Consumer Council.Large businesses and the financial industry are inopposition, including the Hong Kong Association of

Banks and the Hong Kong General Chamber ofCommerce. Analysts say a class action mechanismwould encourage higher standards of corporate governance as the potential to be sued in a classaction would mean additional risks for businesses.Insurance companies will also have to be aware of the potential additional costs the regime may bring to the companies they insure. In addition, when theregime eventually extends to securities buyers andshareholders, risks related to the listing, selling andprovision of investment advice for securities firms inHong Kong will be significantly increased if both theclass action regime and an earlier proposal to makeinitial public offerings sponsors liable for civil and criminal charges are adopted.

The Department of Justice has indicated its readinessto adopt the proposal and will work towards drafting a bill before the end of the year. Government bureausand departments have been asked to submit theirpositions on the proposal. While details of the proposed regime needs to be worked out by the relevant government institutions, businesses, financialfirms, and the legal industry are expected to lobby the government and policy makers to influence theoutcome of any draft bill based on their respectiveinterests. Companies are also advised to monitor thedevelopments of this new regime, start implementingsystems to identify and manage the risk of classactions, and communicate the potential changes the new regime will bring to the way they conductbusinesses. Burson-Marsteller’s public affairs teamstands ready to help clients support this strategic communications process.

02

Ian McCabe - ian.mccabe@bm.com Evelyn Kusnawirianto - evelyn.kusnawirianto@bm.com

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Australia Prepares for More Stringent Product MarketingRegulatory EnvironmentThe recent ruling by the Australian High Court toenforce a blanket plain packaging order on the tobaccoindustry has sent chills through other industries, especially the food and beverage industry, overconcerns that similar regulations will soon apply to

them. The High Court has ruled that, starting fromOctober, cigarette manufacturers in Australia will be required to use identical plain packaging with noexternal brand imagery and to carry prominent healthwarnings, while all other cigarette brands sold in

EU Commissioner for Justice and Home Affairs,Viviane Reding, is expected to table a proposal inOctober or November 2012 that would sanctioncompanies whose supervisory boards are composedof less than 40% women by 2020. The move comesafter a voluntary scheme failed to improve the gender imbalance in company boardrooms.

The proposal already faces strong opposition. Nine EU member states, led by the United Kingdom,have signed a letter to Commissioner Reding andCommission President Barroso, stating that they do not support the adoption of legally binding pro-visions for the presence of women on boardroomsat the European level. The nine member states (UK, Bulgaria, the Czech Republic, Estonia, Hungary,Lithuania, Latvia, Malta and the Netherlands), whowould prefer that such action be left to national

governments, have sufficient weight in the Councilto block the Commission’s eventual proposal.Germany and Sweden have not signed the letter,but do not support the Commission’s initiative.

In the European Parliament, the Greens/EFA Grouphave sent their own letter to Commissioner Redingand Commission President Barroso, urging theCommission to put forward a strong directive withbinding measures. MEPs from the committee onwomen’s rights and gender equality (FEMM) arelargely supportive of Commissioner Reding’s eventual proposal.

EU Commission plans for more women in the boardroom

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Australia will be obliged to do the same starting inDecember. The Australian tobacco decision is a globaltest case that has won the endorsement of New Yorkmayor Michael Bloomberg among others. The processhas been closely observed by other governments.

While there is a possibility that a World TradeOrganization appeal by the tobacco industry may overrule the High Court’s decision, the ramifications of this ruling extend far beyond the tobacco industryin Australia. It is expected that intense regulatoryoversight of one industry will inevitably encouragecampaigners to look at other areas of business thatattract highly polarized opinions. The idea that a company can manufacture and sell a legal productand yet be denied the freedom to brand their productshas set a very interesting precedent for moregovernment regulations in the marketing of productsfrom industries that are associated with health orother societal concerns. Companies in sectors such as gambling, food and beverage, pharmaceutical andliquor are paying close attention to the developmentof this case as they are concerned that they will become susceptible to similar regulations.

Already in the food and beverage industry, Australia’shealth policy experts, consumer groups, and mediahave seized the momentum following the tobaccoplain packaging order to call for the introduction ofmore stringent regulations for fast food marketing.Measures proposed include banning fast food adsduring children’s television primetime, labelling ofmenus, and implementation of a front-of-the-pack“traffic-light” labelling system. The traffic-light system, which would require colour-coded ratings to

the levels of sugar, fat and salt on the front of the foodpackages, has been recommended by The IndependentPanel Commissioned for the Review of Food Labels,with a decision expected to be announced by the endof 2012. The industry has argued that the system canbe misleading for consumers, but with opponentsincreasingly calling for measures akin to the tobaccoindustry to be applied to the food and beverage industry, the likelihood of implementation of sometype of labelling system will increase.

As the regulatory environment for the food and beverage industry in Australia comes under scrutiny,companies in highly regulated industries are expectedto seek platforms to engage both supporters anddetractors in an effort to remain active in regulatoryconversations. Companies should ensure that theyhave a comprehensive stakeholder identification andengagement program in place to build and strengthenalliances. Participation in relevant industry associationsis also crucial to get involved in policy debates early in the process. In addition, companies should extendtheir corporate responsibility activities beyond philanthropy and include specific measures to address the core issues that affect their industry.Burson-Marsteller has the expertise to help companies in such industries as food and beverageand pharmaceutical to navigate the increasingly stringent regulatory environment in Australia.

Steve Bowen - steve.bowen@bm.com Evelyn Kusnawirianto - evelyn.kusnawirianto@bm.com

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Rob Mack - Robert.Mack@bm.com

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04

UK: Leading the Open Government Partnership

The UK government has recently taken over thelead of the Open Government Partnership (OGP), a multilateral initiative launched in 2011 that aimsto secure commitments from governments to promote transparency, empower citizens, fight corruption, and harness new technologies tostrengthen governance. The OGP includes 57 member states and is overseen by a steeringcommittee of governments and civil society organisations (CSOs).

A key step in a country’s participation in the OGPinvolves establishing ongoing public consultationbetween government, citizens, CSOs and the privatesector on the development and implementation ofOGP National Action Plans. The expansion of thedialogue between governments and the private sector presents an opportunity for businesses toexpand their position in the public sector servicedelivery space. Francis Maude, Minister for theCabinet Office, has said: “Transparency drives prosperity and growth. It shines a light on under-performance and inefficiencies in public services andallows citizens and the media to hold governments to account." The UK government believes this

collaborative approach, driven by the publication of government data, will help to design and deliverbetter services for less.

As lead chair, the UK is committed to promoting the argument that greater transparency drives sustainable growth, improves public services, promotes innovation and reduces corruption. To ensure national commitments are turned intoactions the UK will also create an IndependentReporting Mechanism.

The coming months of consultation will mean theOGP’s 57 member governments will be more opento in-depth discussions on how to improve publicpolicy. This presents an opportunity for business to take a leading role in the open governmentconversation ahead of a high level plenary meetingto be held in London in March 2013 to discuss theOGP’s overall progress.

The government coalition parties in Norway haveagreed to change the customs regulations fromadding a fixed amount to a certain percentage ontop of the price of each kilo of certain agriculturalproducts imported. This will take effect from 1stJanuary 20131.

The change in regulations will lead to increasedcustoms on the products on beef, lamb and firmcheeses. This has led to a heated public debate inNorway. The reforms are of great importance to theCentre Party (former Farmers’ Party) which holdsthe Minister of Agriculture and Food, to satisfy their core voters after a tough settlement in theagricultural negotiations this spring. Norwegiancompanies are worried that the customs changewill reduce their ability to import goods as the prices will rise, leading to less competition and poorer service to consumers. Major employer organizations are concerned the restrictions will

lead to counteractions from trading partners andworsen the conditions of Norwegian exportingcompanies.

Sweden and Denmark point at the difficulties facedby European companies exporting their goods toNorway and the signal this sends to a Europe stilltackling an economic crisis. EU’s ambassador toNorway, János Herman, has made it clear that the EU is discouraging protectionist tools and isworking to develop a more liberal agricultural policy. The EU Commission is currently consideringa response to Norway’s decision which is likely to be critical to the implementation of the newregulations.

ContactJohn Young - john.young@bm.com

ContactJulie Remen - julie.remen @bm.com

Norway: International disagreement on the new customs regulations

1. Norway is an EFTA member and part of The Agreement on the European Economic Area (EEA). This is a commitment to the free movement of goods, services,persons and capital throughout the 30 EEA states. However, agriculture and fisheries policy, as well as the custom union are not covered by the EEA.

05

Honduras: Land conflicts

African palm oil and sugar producers in Honduras havehad large tracts of land invaded by peasant farminggroups over the last three years. Northern Hondurashas been exposed to much violence as gunfights ensuebetween these peasant activist groups and securityguards hired privately to protect these lands from further invasion.

The conflict originated prior to the coup of 2009, which deposed President Manuel Zelaya. During histenure, Zelaya proposed land reform, which would give campesinos access to this land, arguing that thiswould be a “reclaiming of ancestral lands”.

Current landowners defend the legal purchase of theselands, as well as the right to private property, and claimthat these invasions have affected revenue, reputation,and access to international loans. The violence has setthe stage for local economic instability and uncertainty,affecting potential and current foreign directinvestment, and as a result, employment levels havesuffered. These allegations also come at a time whenHonduras is negotiating free trade agreements with Mexico and the European Union.

The Government is powerless in this conflict – localpolice and the army are struggling to control the

situation, and attempts to pacify campesinos throughgovernment purchases of parts of these lands havebackfired.

Land conflicts are not new for Honduras. The country has faced criticism in the past over theinfluence and power of the United Fruit Company.Much of Central America faces similar issues regarding land reform.

The invasions and criticism towards large landholdershas expanded to Guatemala, where palm oil, sugar and mining industries have also comeunder intense scrutiny.

Given Burson-Marsteller’s experience in Honduras, the public affairs team in Miami is working with clients in Honduras to support crisis and reputationmanagement, as well as strategic CSR efforts, andstands ready to delve into further targeted analysisshould the need arise.

Colombia: Auction process for 4G technology

The Colombian Ministry of Information Technologyand Communications expects to conclude the process to assign 4G licenses before the end of2012, through a radio spectrum public auction.

The auction includes incentives for those companies that will operate this 4G technology to promote the mass use of mobile Internet.Therefore, the participating operators shoulddesign commercial offers to enable students andteachers of public institutions with low incomelevels to access 4G services.

The terms and conditions of the auction are beingdiscussed in Congress. One of the main topics is to stimulate greater competition in the sector bytaking proper measures. After discussions end, thestatements will be published for those interestedin participating in the auction.

So far, 11 companies have expressed an interest to enter the auction: 4G Americas Ahciet, Azteca

Communications, Avantel, Claro (formerly Comcel)Colombia Movil (Tigo), Directv, ETB, GSMA, Nokia,Telefonica (Movistar) and UNE.

This process is very important for the country's future development. Colombian advances in technology are growing and this represents a great opportunity for mobile technology operators to take part in the Government's decision to create more and better tools for high-speed Internetin the country. For the Ministry of InformationTechnology and Communications, increasing broadband speed in mobile telecommunications is a crucial factor for the country to achieve high levelsof competitiveness and to help in reducing poverty,through IT inclusion.

ContactSantiago Fittipaldi - Santiago.fittipaldi@bm.com

ContactMiguel Angel Herrera - miguel.herrera@bm.com

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Companies throughout the United States are closelywatching the current Presidential campaign, knowingthat the outcome of November’s election could bringsignificant changes for workplaces across America –particularly in the way that companies are allowedto communicate with their employees.

U.S. labor unions, which currently represent only one-in-14 employees in the private workforce, energeticallybacked President Obama’s inaugural bid in 2008.Frustrated by the continuing decline in union membership, labor hoped for new laws, morerestrictions and tougher penalties on business, alldesigned to make unionization easier. After an initialfour years under the Obama Administration, keylegislative efforts have failed and regulatory actionsby the National Labor Relations Board (NLRB) havebeen muted. A legislative measure that would havefacilitated unions’ ability to sign-up new membersfailed after extensive lobbying by both business andlabor – although unions have vowed to continue pushing for change.

More attention has focused on the NLRB and its role in setting – and readjusting – the guidelines forappropriate workplace communications. The NLRB is governed by five members appointed by thePresident, and a majority of the current members are former labor union officials. The work of theBoard has been overshadowed by Constitutionalarguments over recess appointments made by thePresident without Congressional review, as well asethics charges levied against key officials. However,

important policy debates have occurred over proposed“employee rights” posters and other communicationsmandates and restrictions.

For corporate communicators, among the most-watched areas of NLRB influence surrounds socialmedia, and companies’ abilities – or lack thereof – to guide what employees can say and distribute viaFacebook, Twitter or other social media outlets. Inseveral cases closely watched by business, the NLRBhas generally ruled that employees have great latitude in what they can post, despite theiremployers’ wishes. Moreover, the agency has ruledthat many companies’ social media policies are “overly broad” and need to be re-written, even if no evidence exists that employees have ever disciplined under such policies.

Many believe that the re-election of PresidentObama to a second and final term will escalate laborpressures for dramatic regulatory and legislativechanges, while the election of Gov. Romney wouldbring more pro-business approaches. Nonetheless,companies are refocusing their efforts on buildingstronger cultural bonds with employees throughenhanced communications no matter who is elected,which supports better business performance as wellas greater engagement during difficult challenges.

U.S. Elections Set Tone for Future of Workplace Communications

Only months ago, high-speed rail plans in the UnitedStates seemed derailed, with governors in Florida,Ohio and Wisconsin rejecting federal funding to support plans for their states, citing spendingconcerns. Congress also cut the White House's six-year, $53 billion budget request.

While it could be another year or two beforeCongress approves additional funds, most of theallotted $10 billion in the 2009 economic stimulusact is still intact. Those dollars were slated for high-speed rail and higher-speed rail (90 to 110 mph).About 153 projects are now in the works to use

$9.6 billion of the funding, according to the FederalRailroad Administration.

The largely tax-funded and government-run natureof high-speed rail makes it a gamely target for politicalconservatives. Critics say it will never be successfulbecause of Americans’ dependence on cars and thatPresident Obama’s original budget plan did not men-tion most funding would be spent on track upgrades,not true bullet trains, which some argue is outdatedtechnology. Conservatives also argue that most fundingwould go towards rail projects in the population-heavy Northeast corridor and in California, both

US: Tracking High-Speed Rail Progress

Wade Gates – wade.gates @bm.com

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heavily Democratic areas. Other smaller projects are slated for corridors running from Portland, Ore.,to Vancouver, British Columbia; from St. Louis toChicago; and from Washington, D.C., to Charlotte,N.C.2

In recent months, however, Amtrak unveiled a $150billion upgrade plan – including high-speed rail service – for the Northeast rail corridor that stretchesfrom Boston to Washington, D.C., and California'sLegislature approved $5.8 billion to start constructionon a 220 m.p.h. rail line, starting in the state's Central Valley.

In addition to government-supported plans, TexasCentral High-Speed Railway is hoping to run a privately-funded Texas bullet train between Houstonand the Dallas/Fort Worth Metroplex within a decade. Planners estimate the Texas Central projectwill need about $8 to $12 billion in investment ,

unlike California’s state-run project with budget projections originally at $34 billion, then $43 billionand $68.4 billion, and most recently being estimatedto cost $98.5billion.

The combination of federal funding spurring construction on high-speed rail lines and upgrades to existing infrastructure in multiple states with private interests like Texas Central Railway looking to develop might just be enough to get the vision ofhigh-speed rail back on track in the United States –and with it will come not only opportunities for economic development, but also criticism and localcommunity issues.

Matt Burns – matt.burns@bm.com

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2. Clayton, Mark. "Obama Plan for High-speed Rail, after Hitting a Bump, Chugs Forward Again." CSMonitor.com. Christian Science Monitor, 21 Aug. 2012. Web.20 Sept. 2012. <http://www.csmonitor.com/layout/set/print/USA/2012/0821/Obama-plan-for-high-speed-rail-after-hitting-a-bump-chugs-forward-again>.