International companies in
post-conflict reconstruction
THE ROLE AND GOVERNANCE OF THE
PRIVATE SECTOR
Dr Peter Davis
13th March 2011
Companies in post-conflict reconstruction
 My research seeks to answer 2 questions
 What impacts do companies have in post-conflict
reconstruction processes?
 How are companies integrated into those processes?
 Why look at this topic?
 Significant increase in study of post-conflict in past 20
years
 But corporate role within this not understood

Session on this described as “ground-breaking” at Post-Conflict
People conference in London, November 2008
Why a growing focus on conflict-affected zones?
 More wars
 Estimated 150 conflicts since 1945
 28 million deaths

Twice the toll of WW1
 Recognition of collateral impact
 The injured


Economic development


Estimated 90 million since 1945
Lebanon’s GDP still estimated to be 50% below 1974 level by 1994.
Survivors’ livelihoods

Angola has lost 80% of its farmland because of landmines
 Global geo-politics
 Under-pinned by the Liberal Peace thesis
 More latterly by conviction that failed states would harbour terrorists.
What causes conflict? Varying explanations (1)
 Statecraft?
 War is “a continuation of political intercourse, with the addition of
other means.” (Clausewitz, 1832)

This explanation works less well in a world where most conflicts are intrastate.
 Inter-communal grievance?
 Conflict an irrational activity, derived from “essentially inexplicable
primordial qualities.” (Pugh & Cooper, 2004)

Conflict the result of disputes such as religion, ethnicity, power etc
 Economic greed?
 “War occurs if the incentive for rebellion is sufficiently large relative
to the costs.” (Collier-Hoeffler, 2004)

High correlation between low levels of income and conflict risk.
What causes conflict? Varying explanations (2)
 The result of weak state power?
 States that are unable to project power through their territory
(Holsti, 2006)
 Warlord states
 Rentier states
 The ‘New War’ thesis?
 ‘Identity politics’ - identity based on national, religious, linguistic
or ethnic factors – as key cause of conflict

Driven by ‘globalisation’
 All of the above?
 ‘Levels of analysis’ approach

International Social Conflicts, which “are neither pure international
(interstate) conflicts, nor pure social (domestic) conflicts, but sprawl
somewhere between the two.”(Maill, Ramsbotham and Woodhouse,
2007).
What actually is reconstruction all about?
 Reconstruction as sets of different tasks
 For example, as defined in Post Conflict Reconstruction
Essential Tasks Matrix (US Department of State)

Though not defined until 2005!
 The ‘tasks’ of reconstruction divide into four
overlapping but roughly sequential clusters:




Physical security, trust-building and stability
Creating a peace infrastructure
Governance, political transition, and self-government
Economic development that is broadly based
Corporate impacts in 3 post-conflict theatres
 Based on in-depth research (literature & field work)

All 3 countries rather a mixed bag
 Azerbaijan



Huge wealth from oil
‘Greater Baku’ vs rest of the country
Absence of coherent reform process
 Bosnia


Physical reconstruction impressive, but remains a frozen conflict
Political dead-lock, only broken by use of OHR powers

A colony of the international community?
 Rwanda



Hugely ambitious reform plan – Vision 2020 – but how realistic?
Economy remains highly aid-dependent
Questionable governance
Impacts: Economic Development
 Financial impact the most obvious
 Azerbaijan: BTC alone estimated cost $3.7bn
 Rwanda: $350m Kivuwatt power generation facility
 Wider impact of applying normal business models

Training and local partner development
 Local procurement
 BP spends $1.5bn on local suppliers (cf c $800m on foreign
suppliers)
 Bralirwa estimates it provides employment for 35,000
families.
 “A certain professionalism”
 International rules of the road for business – surely more
effective than donor BDS programmes?
 Failure to attract further FDI is why Rwanda and
BiH remain unhealthily aid-dependent.
Impacts: Infrastructure development
 ‘Hard infrastructure’ – physical stuff
 Largely a state-run activity
 Some notable exceptions


Azerbaijan: BTC and oil infrastructure
Rwanda: Kivuwatt / solid fuel generation
 Importance of ‘soft infrastructure’
 Construction as well as reconstruction
 The private sector is best placed to provide much of
what’s needed for a modern state

Banking sector reform


Educational frameworks



Makes functional the financial fundamentals donor agencies develop
HP/ Cisco in BiH
Business Centre in Baku
Commercial value chains

Starbucks in Rwanda
Impacts: Security, Trust and Stability
 Workplaces as connectors in society
“Opportunity for trust-building through repeated lateral
interaction” (Pickering)
 Hiring on ability - Bralirwa, Rwanda / KPMG, BiH
Long term stability
 BP will be in Azerbaijan until at least 2025
 Heineken has committed to long-term presence
 How long will the donor community maintain a presence?
BTC pipeline
Part of the ‘normal’ world
 “Mutzig: the taste of success”
However, FDI can be de-stabilising
 Russian and Serbian investments in Entities, not BiH





Impacts: Governance
 Azerbaijan: EITI and the Oil Fund

Azeri macro-economic model
 International standards of accounting and practice
 Bralirwa sites audited to same ISO standards as all Heineken
sites
 Anti-corruption codes
 Diagnostic impact
 FIC White Paper (BiH) and RPSF Investment Climate Survey
(Rwanda)
 However, also problems


Need for post-conflict sensitivity – banks in BiH
APET deal – undermined federal structures in BiH
Governing corporations in global affairs
 Continuing dominance of the states system
 Realism is alive and well
 Governance is a “top down affair, with state-dominated
institutions a given” (Ruggie. J. 1993)
 The norm remains the “rootedness of all capital in
discrete national formations.” (Held, D. and McGrew, A.
2002)
 Globalisation has not changed this.
A “growing asymmetry”
 “Mainstream IR theory is utterly deficient in assessing the political
power of these (corporate) actors.”
Fuchs, D (2005). The Commanding Heights: The Strength and Fragility of Business
Power in Global Politics. Millennium: Journal of International Studies 2005 Vol 35.
No 3
 “Firms are basically functioning like governments, [taking on] the
mantle of authority as contraction of government authority and the
expansion of private regulatory authority are generally accepted by
societies… Legal formalism identifies state/ public authority as the
only legitimate authority, rendering non-state/ private authority a
theoretical and empirical impossibility. As an ontological non
sequitur, private authority is thus not part of the discourse of
responsible and accountable governance.”
Cutler, A Claire. (2002) Private International Regimes and Inter-Firm Cooperation. In
Rodney Bruce Hall and Thomas Biersteker (eds), The Emergence of Private Authority
in Global Governance.
Some efforts to square the circle
 UN Global Compact (est 1999)
 Designed to “bring companies together with UN agencies, labour
and civil society to support universal environmental and social
principles
 10 “universal principles” in human rights, labour standards, the
environment and anti-corruption.
 In Larger Freedom (2005)
 Annan’s template for UN reform
 Envisages non-state involvement in Human Rights Council
 Raises profile of Economics and Social Council
 Specifically speaks of the importance of “a dynamic private sector”
 UN Secretary General’s Special Representative on
Business and Human Rights (2011)

‘Protect, Respect, Remedy’
Governance in post-conflict environments
Governance and
engagement processes
used by state-based
institutions
Governance and
engagement processes
used by international
companies
Strategic decision-making
Reconstruction
strategy
Engagement of the
corporate sector in
processes to define
priorities and strategy for
the reconstruction process
Pro-active awareness
Companies operate in a
way that takes account of
the wider development
perspective
Tactical/ operational
activity
Project/ issue partners
Development agencies
work with corporations to
deliver aspects of the
reconstruction
programme
Collateral impacts
Companies undertake
‘business as usual’, with
little or no strategic
awareness.
Governance by state institutions
 Reconstruction strategy
 Strategic fora exist for donors, eg Rwanda Development
Partners
 Private sector is excluded
 Project/ issue partners
 More widespread, eg
EITI
 Sustaining Partnerships to Enhance Rural Enterprise and
Agribusiness Development (SPREAD)

Governance by corporates
 Pro-active awareness
 Heineken, Rwanda
 BP, Azerbaijan
 Engagement with initiatives like EITI
 Collateral impacts
 “What war? / “we don’t get involved in political issues”
 HP/ Cisco in BiH
 ‘Night of 1000 dinners’
Post-conflict: the importance of the private sector
 It is impossible to create a stable, durable modern state
without engaging the corporate sector.

Yet no real attempt made by development community to engage
corporations strategically
 Corporates have impacts whether the political architecture
acknowledges them or not

Indeed, the very absence of foreign investors can militate against
successful reconstruction
 Need for strategic engagement, not a tactical, ad hoc approach
 Need for symbiotic relationships – who is best placed to do what?
 Ignore CSR departments and activities – they’re irrelevant
 Private sector needs to be in from the beginning
 If FIC analysis of Bosnia is right now, why were companies not asked in
1995?
Thank you: now a shameless plug…
“Corporations, global governance
and post-conflict reconstruction”
Available for pre-order from Routledge from May 2011