Business and peaceful development in fragile states

Abstract

Large-scale investments in fragile states - in Latin America, Africa, the former Soviet Union and Asia - become magnets for conflict, which undermines business, development and security.

International policy responds with regulation, state-building and institutional reform, with poor and often perverse results. Caught up in old ways of thinking about conflict and fragility, and an age-old fight over whether multinational corporations are good or bad for peaceful development, it leaves business-related conflicts in fragile states to multiply and fester.

Surveying a new strategic landscape of business and conflict, Brian Ganson and Achim Wennmann conclude that neither company shareholders nor advocates for peaceful development need, or should, accept the growing cost of business-related conflict in fragile states. Drawing on decades of experience from mainstream conflict prevention and violence reduction efforts, as well as promising company practice, they show that even acute conflict is manageable when dealt with pragmatically, locally and on its own terms.

The analysis and conclusions of this Adelphi book will interest policymakers, business leaders and community advocates alike - all those hoping to mitigate today's conflicts while helping to reduce fragility and build a firmer foundation for inclusive development.

Notes

1 Robert O. Collins and James M. Burns, A History of Sub-Saharan Africa (Cambridge: Cambridge University Press, 2007), p. 346.

2 Merle Lipton, Capitalism and Apartheid: South Africa, 1910–1986 (Aldershot: Wildwood House, 1986), p. 119.

3 Ibid., p. 134.

4 Ibid., p. 229.

5 Gay W. Seidman, Manufacturing Militance: Workers' Movements in Brazil and South Africa, 1970–1985 (Berkeley: University of California 6 Press, 1994), p. 135.

6 Philip Hirschsohn, ‘Negotiating a Democratic Order: Learning from Mediation and Industrial Relations’, Negotiation Journal, vol. 12, no. 2, 1996#, p. 142.

7 Joseph Lelyveld, ‘The Many Faces of Barlow Rand Ltd’, New York Times, 11 April 1982.

8 Nel Marais and Jo Davies, The Role of the Business Elite in South Africa's Democratic Transition: Supporting an Inclusive Political and Economic Transformation (Berlin: Berghof Foundation, 2015).

9 John Locke, Second Treatise (1689).

10 John S. Mill, Principles of Political Economy (London: Hackett, 1848), p. 582.

11 Howard V. Perlmutter, ‘The Tortuous Evolution of the Multinational Corporation’, Columbia Journal of World Business, vol. 4, no. 1, 1969, pp. 9–10.

12 Erik Gartzke, Economic Freedom and Peace. Economic Freedom of the World – 2005 Annual Report (Vancouver: The Fraser Institute, 2005), p. 34.

13 Ibid., p. 39.

14 Thomas L. Friedman, The Lexus and the Olive Tree (New York: Anchor, 1990), p. 248.

15 Thomas L. Friedman, The World is Flat: A Brief History of the Twenty-First Century (New York: Farrar, Straus and Giroux, 2005), p. 421.

16 Michael Doyle, ‘Three Pillars of the Liberal Peace’, American Political Science Review, vol. 99, no. 3, 2006, p. 466

17 Roland Paris, ‘Peacebuilding and the Limits of Liberal Internationalism’, International Security, vol. 22, no. 2, 1997, p. 56.

18 Articles of Agreement of the International Monetary Fund, adopted 22 July 1944, https://www. imf.org/external/pubs/ft/aa/#intro.

19 Dominique Strauss-Kahn, ‘Economic Stability, Economic Cooperation, and Peace – The Role of the IMF’, Remarks at the Global Creative Leadership Summit, New York City, 2009.

20 IBRD Articles of Agreement, http:// s iteres ources .wo rld bank.o rg/ EXTABOUTUS/Resources/ibrd-articlesofagreement.pdf.

21 IDA Articles of Agreement, http://www.worldbank.org/ida/ articles-agreement/IDA-articles-of-agreement.pdf.

22 John Williamson, ‘A Short History of the Washington Consensus’, in Narcís Serra and Joseph E. Stiglitz (eds.), The Washington Consensus Reconsidered: Towards a New Global Governance (Oxford: Oxford University Press, 2008), pp. 14–30.

23 History and quotations from World Bank sources: http://www. ifc.org/wps/wcm/connect/CORP_ EXT_Content/IFC_External_ Corp orat e_Sit e/ Ab out +IF C/ IFC+History.

24 Ibid.

25 African Development Bank Group (ADBG), Supporting the Transformation of the Private Sector in Africa: Private Sector Development Strategy, 2013–2017 (Tunis: ADBG, 2013).

26 Karl Wohlmuth, Good Governance and Economic Development: New Foundations for Growth in Africa (Bremen: Universität Bremen, 1998), p. 13.

27 IFC, Improving Lives: IDA & Conflict-Affected Areas – Creating Opportunity in Strife-Torn Environments, Annual Report, 2015 Online Report (2015).

28 IFC, Telling Our Story: Frontier Focus (Washington, DC: IFC, 2011), p. 12.

29 IFC, Final Report on CASA's First Cycle (2008–2013) (Washington, DC: IFC, 2014), p. 7.

30 United Nations Conference on Trade and Development (UNCTAD) data. Accessed 14 January 2016 at http://investmentpolicyhub.unctad. org/IIA.

31 Hermann Abs and Hartley Shawcross, ‘The Proposed Convention to Protect Private Foreign Investment: Introduction’, Journal of Public Law, vol. 9, no. 1, 1960, p. 115.

32 International Centre for the Settlement of Investment Disputes (ICSID), The ICSID Caseload: Statistics – Issue 2013–2 (Washington, DC: ICSID, 2013).

33 MIGA, 2008 Annual Report (Washington, DC: MIGA, 2008), p. 5.

34 David Gaukrodger, Investment Treaties and Shareholder Claims: Analysis of Treaty Practice (Paris: OECD, 2014), p. 3.

35 Fourth Report of the Independent Expert on the Promotion of a Democratic and Equitable International Order, Alfred-Maurice de Zayas, Submitted in Accordance with Assembly Resolution 69/178. A/70/285 (2015), p. 13.

36 Blacksmith Institute, The World's Worst Polluted Places: The Top Ten of the Dirty Thirty (New York: Blackstone Institute, 2007), pp. 24–5.

37 Kenneth J. Vandevelde, ‘The Economics of Bilateral Investment Treaties’, Harvard International Law Journal, vol. 41, no. 2, 2000, p. 499.

38 Zachary Elkins, Andrew T. Guzman and Beth A. Simmons, Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960–2000, working paper, University of Illinois, University of California at Berkeley and Harvard University (2004), p. 4.

39 Elliot Berg, Accelerated Development in Sub-Saharan Africa: A Plan for Action (Washington, DC: IBRD, 1981).

40 Wohlmuth, Good Governance and Economic Development.

41 Ibid., p. 38.

42 Ibid., p. 41.

43 Ibid., p. 42.

44 African Development Bank (AfDB), Addressing Fragility and Building Resilience in Africa: The African Development Bank Group Strategy 2014–2019 (Tunis: AfDB, 2014), p. 9.

45 Joseph E. Stiglitz, ‘Is There a Post-Washington Consensus Consensus?’, in Serra and Stiglitz, The Washington Consensus Reconsidered, pp. 41–56, at p. 41.

46 Ibid., p. 43.

47 John Williamson, ‘What Should the World Bank Think About the Washington Consensus?’, World Bank Research Observer, vol. 15, no. 2, 2000, p. 262.

48 Stiglitz, ‘Is There a Post-Washington Consensus Consensus?', p. 43.

49 Williamson, ‘A Short History of the Washington Consensus’, p. 27.

50 Craig Burnside and David Dollar, Aid, the Incentive Regime, and Poverty Reduction, Policy Research Working Paper 1937 (Washington, DC: World Bank, 1998).

51 Robert Wade, ‘Japan, the World Bank, and the Art of Paradigm Maintenance: The East Asian Miracle in Political Perspective’, New Left Review, no. 217, 1996, pp. 3–36; Alice Amsden, Jacek Kochanowicz, and Lance Taylor, The Market Meets its Match: Restructuring the Economies of Eastern Europe (Cambridge, MA: Harvard University Press, 1994).

52 Independent Evaluation Group (IEG), Engaging with Fragile States: An IEG Review of World Bank Support to Low-Income Countries Under Stress (Washington, DC: IEG, 2006), p. xxii.

53 Organisation for Economic Co-operation and Development (OECD), ‘Monitoring the Principles for Good International Engagement in Fragile States and Situations’ (Paris: OECD, 2007), p. 22.

54 World Bank, World Development Report 2011: Conflict, Security and Development (Washington, DC: World Bank, 2011), pp. xi–xii.

55 IDA Resource Mobilization Department, IDA's Support to Fragile and Conflict-Affected States (Washington, DC: World Bank Group, 2013), p. 2.

56 African Legal Support Facility, ‘Agreement for the Establishment of the African Legal Support Facility’, http://www.afdb.org/fileadmin/ uploads/afdb/Documents/Legal-Documents/Agreement%20for%20 the%20Establishment%20of%20 the%20African%20Legal%20 Support%20Facility%20(ALSF).pdf.

57 World Bank and United Nations Environment Programme (UNEP), Expert Consultation: Geo-mapping Extractive Resources in g7+ Fragile States (Washington, DC and Geneva: World Bank and UNEP, 2013).

58 United Nations, A New Global Partnership: Eradicate Poverty and Transform Economies through Sustainable Development (New York: United Nations, 2013), p. 9.

59 Dani Rodrik, ‘Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Bank’s “Economic Growth in the 1990s: Learning from a Decade of Reform”’, Journal of Economic Literature, vol. 44, no. 4, 2006, pp. 974, 979.

60 Fund for Peace, Fragile State Index (2015), http://fsi.fundforpeace.org.

61 Brian Ganson, Risk and Risk Mitigation in the Oil and Gas Sector in Uganda (Geneva: Geneva Peacebuilding Platform, 2012).

62 Ibid.

63 OECD, ‘Freedom of Investment at the OECD’, http://www.oecd.org/daf/inv/investment-policy/foi.htm.

64 World Bank, World Development Report 2011, p. 80.

65 Jenick Rodan, ‘How to Negotiate an Oil Agreement’, in Macartan Humphreys, Jeffrey D. Sachs, and Joseph E. Stiglitz (eds), Escaping the Resource Curse (New York: Columbia University Press, 2007), pp.89–113.

66 Brian Ganson, ‘How Do We Put all the Pieces Together: Tetra Leval’s Food for Development Office’, in Brian Ganson (ed.), Management in Complex Environments: Questions for Leaders (Stockholm: International Council of Swedish Industry, 2013), pp. 158–65.

67 See Fragile States Index 2015, http:// ffp.statesindex.org.

68 See http://www.transparency.org/ country#BGD.

69 OECD, Fourth High Level Forum On Aid Effectiveness: Busan Partnership For Effective Development Co-Operation (Paris: OECD, 2011), p. 10.

70 United Nations Global Compact (UNGC) and Principles for Responsible Investment, Guidance on Responsible Business in Conflict-Affected and High-Risk Areas: A Resource for Companies and Investors (New York: UNGC, 2010), p. 1.

71 Luc Zandvliet, Yezid Campos Zornosa, and David Reyes, Efforts to Operate Constructively in a Context of Conflict: Best Corporate Practices in Colombia (Cambridge, MA: CDA, 2004), p. 46.

72 Interview by Brian Ganson.

73 OECD, OECD Guidelines for Multinational Enterprises (Paris: OECD, 2011), p. 7.

74 Ibid., p. 3.

75 Ibid., p. 32.

76 OECD, OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (Paris: OECD, 2013).

77 International Peace Information Service, Mineral Supply Chains and Conflict Links in Eastern Democratic Republic of Congo: Five Years of Implementing Supply Chain Due Diligence (Paris: OECD, 2015).

78 OECD, OECD Guidelines for Multinational Enterprises, p. 3.

79 Joris Oldenziel, Joseph Wilde-Ramsing and Patricia Feeney, 10 Years On: Assessing the Contribution of the OECD Guidelines for Multinational Enterprises to Responsible Business Conduct (The Hague: OECD Watch, 2010), p. 12.

80 OECD, OECD Guidelines for Multinational Enterprises, p. 17.

81 Ibid., p. 3.

82 Ibid.

83 UN Global Compact and PRI, Guidance on Responsible Business in Conflict-Affected and High-Risk Areas, p. 6.

84 Ibid., p. 2.

85 Ai Ohara, Ajinomoto Co.: Better Nutrition, Brighter Future in Ghana (New York: Business Call to Action, 2013).

86 See New Alliance for Food Security and Nutrition, ‘Cooperation Frame-work to Support the New Alliance for Food Security and Nutrition in Mozambique’ (2012), p. 2.

87 Claire Provost, Liz Ford and Mark Tran, ‘G8 New Alliance Condemned as New Wave of Colonialism in Africa’, Guardian, 18 February 2014.

88 Shannon Kindornay and Fraser Reilly-King, Investing in the Business of Development: Bilateral Donor Approaches to Engaging the Private Sector (Ottawa: The North-South Institute and Canadian Council for International Co-operation, 2013), p. 1.

89 Paul Hollesen, ‘How Can We Be the Catalyst for Change? Sandvik Mining and Construction Zimbabwe’s Wellness Programme’, in Ganson, Management in Complex Environments, pp. 50–7.

90 World Gold Council (WGC), Conflict Free Gold Standard (London: WGC, 2012), p. 1.

91 Accord on Fire and Building Safety in Bangladesh, 13 May 2013, http:// bangladeshaccord.org/wp-content/ uploads/2013/10/the_accord.pdf.

92 See http://www.oecd.org/daf/anti-bribery/G20_Anti-Corruption_ Action_Plan_(2013-2014).pdf.

93 UNDP, UNDP Global Anti-Corruption Initiative (GAIN) 2014– 2017 (New York: UNDP, 2014), pp. 17, 18.

94 The series of reports by CDA from 2002 to 2015 are available at http://www.cdacollaborative.org/publications.

95 Merrick Hoben, David Kovick, David Plumb, and Justin Wright, Corporate and Community Engagement in the Niger Delta: Lessons Learned from Chevron Nigeria Limited's GMOU Process (Cambridge, MA: Consensus Building Institute, 2012), p. 2.

96 http://www.voluntaryprinciples. org.

97 Ibid.

98 UNGC, Business for Peace (New York: UNGC, 2013), p. 5.

99 World Bank, World Development Report 2011.

100 Ibid., p. 65.

101 Ibid., p. 122.

102 Ibid., p. 157.

103 Ibid., p. 158.

104 Ibid., p. 258.

105 Ibid., p. 249.

106 Ibid., p. 286.

107 Ibid., p. 274.

108 ICMM, The Role of Mining in National Economies (London: ICMM, 2014), 3.