Should businesses invest in conflict-prone areas, with all the attendant risks and uncertainties? When they do so, can they be a force for good? And, if they are, what are the ways to get more businesses to invest in fragile areas that can use the resultant job creation and economic stimulus to foster peace?
President Juan Manuel Santos of Colombia, who won the Nobel Peace Prize for bringing Colombia’s 50-year civil war to an end, spoke of his country’s experience to say the private sector can utilize the opportunity for growth to invest in nearly untouched areas, and do things quickly through technology and expertise. Citing the example of Nestlé, which has been in Colombia for a long time, he said the private sector brings the required money and technology, can partner with the government, and everyone benefits.
For businesses that can gain much from investing in fragile areas, “doing no harm” is a rather minimalist approach, said Sipho M. Pityana, Chairman of AngloGold Ashanti in South Africa, asserting that his company’s value is to leave communities better off than when it starts business. He said his company often works in countries where regulatory frameworks are underdeveloped. The approach in such cases is to understand the developmental challenges, use frameworks that are successful in more advanced economies, and work hand-in-hand with governments. In countries such as the Democratic Republic of Congo, they attempt to create a socio-economic infrastructure to address issues such as skill development by not bringing in outside experts, but rather training engineers locally and helping local businesses by procuring locally. So as not to delegitimize small, artisanal and traditional miners, his company takes them on board to work with them while ensuring that they accept and adopt the prescribed environmental and safety norms.
A lot depends on the government coming up with a regulatory framework, Pityana said, while citing his company’s experience in Ghana, where it obtained support to reclaim a mine overrun by illegal miners, thanks to the company’s strong relations with the local community, which saw the benefits it gained from ensuring the smooth functioning of the mine in the shape of jobs, for example.
Investing in fragile areas is not only philanthropy, but also helps to create value for shareholders and society, said Peter Brabeck-Letmathe, Chairman of Nestlé, Switzerland. He said it is difficult to convince the private sector – risk can be managed, but uncertainty is the problem – and businesses cannot do it alone. They can only work in partnership with international institutions, governments and communities. Relating Nestlé’s experience of working with farmers in Sudan, he said that, when conflict broke out and it became impossible for the company to operate in the country, the company stayed in touch with the farmers on social media to assure them that it would be back as soon as it became physically possible to do so.
Philippe Le Houérou, Executive Vice-President and Chief Executive Officer of the International Finance Corporation (IFC), said his organization lends without government guarantee, so attracting the private sector to places such as Afghanistan and Iraq is not easy. It demands nothing short of a shift from tapping a market to actually creating a market, and from approving a project to designing a project, and working locally with entrepreneurs at the ground level. Speaking of a project in Myanmar, He said it took the IFC two years of providing technical assistance with accounting, governance, environmental and labour standards, etc., before the project could begin.
Le Houérou made a case for restarting the use of overseas development assistance – or what is now called blended finance – so that more entrepreneurs are willing to put their money there. He also emphasized the need for building community relations, and cited the IFC’s experience with financing an electricity transmission network from hydropower-surplus Kyrgyzstan and Tajikistan to power hydropower-deficient Pakistan through conflict-ridden Afghanistan. All along the line, he pointed out, development programmes for local communities have been carried out to ensure their support so that the transmission lines are secure.
Rania A. Al Mashat, Adviser to the International Monetary Fund (IMF), pointed out that fragility comes not only out of violence and conflict, but also from mismanagement of economic policy. States need to make policies that are transparent and stable, with clear and clearly-stated objectives and procedures that do not exacerbate fragility, she said. In such cases, the private-sector can help legitimize the state and its efforts to combat fragility, she added.