International companies in post-conflict reconstruction

1. International companies in post-conflict reconstruction The role and governance of the private sector Dr Peter Davis 13th March 2011

2. 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

3. 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 • Estimated 90 million since 1945 • Economic development • 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.

4. 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 intra-state. • 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.

5. 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).

6. 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

7. 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

8. 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.

9. 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 • Makes functional the financial fundamentals donor agencies develop • Educational frameworks • HP/ Cisco in BiH • Business Centre in Baku • Commercial value chains • Starbucks in Rwanda

10. 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

11. 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

12. 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.

13. 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.

14. 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’

15. Governance in post-conflict environments

16. 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)

17. 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’

18. 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?

19. Thank you: now a shameless plug… “Corporations, global governance and post-conflict reconstruction” Available for pre-order from Routledge from May 2011