27/11/15

Focus on Private Sector: Don’t pull out of war zones

civil war in Syria
Copyright: Robin Hammond/Panos

Speed read

  • Ending operations will worsen economic instability in vulnerable states
  • But firms must ensure revenue isn’t used to fund fighting
  • They can help peace efforts through medical aid and tech to monitor corruption

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Members of the Kimberley Process met last week in Angola to review progress in the fight against conflict diamonds. The meeting comes at a difficult time, with a recent Time magazine investigation suggesting the process, and similar efforts for other minerals, are failing. That’s because these programmes use a narrow definition of conflict — of wars between states or between a state and a single non-state actor — that covers little of the complex, multiparty civil and sectarian violence in the world today.

It’s difficult to determine when natural resources contribute to conflict. Not every conflict in a resource-rich country is a resource war. In complex, multiparty conflicts, it can be even harder to work out who benefits from resource revenues. [1]

“Not every conflict in a resource-rich country is a resource war.”

Maha Rafi Atal

Take this astonishing Financial Times investigation showing the Assad regime and Islamic State engaged in joint-venture businesses to manage Syria’s gas reserves. One Syrian gas company owner interviewed in the piece said: “This is 1920s Chicago mafia-style negotiation. You kill and fight to influence the deal, but the deal doesn’t end.”

The role of international businesses in conflict can be similarly murky. When territory where processing plants are located changes hands, workers are sometimes killed in purges, but a company might argue that its business is neutral in the conflict. Traditionally, business ethicists recommend divesting from such conflicts, especially when there’s a risk of company tax revenue being used to fund violence. Yet where companies have withdrawn from conflict zones in the past, their contracts have simply passed to firms with lower ethical standards. [2] Moreover, domestic companies will keep operating, as they have no option but to try to keep operating regardless of the conflict.

A shutdown is also undesirable. Conflict already wreaks economic havoc, and economic stability is a key part of peace-building. The economic damage of conflict can leave post-conflict societies ill-equipped for peace, and thereby push them back towards violence. This effect can be compounded if multinational businesses remove investment. In Nepal, for example, post-conflict economic stagnation — and the wartime withdrawal of Indian multinationals that historically dominated the economy — has impeded political progress. [3] With a new constitution only agreed this year (nine years after the civil war ‘ended’), the nation’s future is already imperilled by a dispute with Indian fuel suppliers.

Instead, companies should explore ways to operate ethically within conflict areas. First, don’t sell to, or share revenue with, combatants. Where conflict involves a government committing human rights abuses against its own citizens, withdrawal (to prevent business taxes being used support for violence) is the best option. But in other cases, multinationals accustomed to outsourcing management of local operations to subcontractors can avoid funding conflict by instead bringing conflict country operations — including plant security — under direct control. Employees of a firm whose accounts are monitored at headquarters are less likely to funnel funds into conflict than contractors who may hail from local communities caught up in the violence.

Second, while companies can’t make peace, they can focus their corporate social responsibility activities in conflict states on the structures needed to sustain peace if and when it comes. [4] These might include technologies to help citizens monitor corruption, or transport and social services that can and should be handed over to the local state when conflict ends. Companies could also lend financial support, security assistance, and logistics expertise to voluntary medical organisations, who provide critical services and conduct research, but often struggle to operate in conflict settings.

Third, in addition to employing local people, firms can train those who wish to start businesses or help them find financing. This is a worthy cause at the best of times, but in a conflict context, it can create a local economic base to help sustain future recovery.
 
Maha Rafi Atal is a PhD candidate at the University of Cambridge, United Kingdom, where she is researching the political effects of multinational firms acting as public service providers in the developing world. She was previously a journalist, including at Forbes, where she covered the intersection of business, development and international affairs. You can contact her on mra42@cam.ac.uk or follow her on Twitter: @MahaRafiAtal

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