Private Sector Development: Actors
Any successful peacebuilding strategy inherently relies on a multi-stakeholder engagement process with a wide variety of actors. In this section we will discuss those directly involved with conflict and peacebuilding or "insiders", such as the state, civil society and private businesses; and the "outsiders" representing global initiatives, international organizations and NGOs, UN agencies, specific campaigns and the multi-lateral lending banks. This dichotomous distinction is crude and the terms may refer to a number of different possible dimensions. However, the very fact of violent conflict accentuates this distinction by localizing firm staffs and supply chains, and generally encouraging the flight of foreign-owned or operated firms. "Ultimately, the impact of any intervention will be limited unless supported by a wide and, ideally, diverse range of companies, associations, and private sector individuals."1 Each plays a unique and important role in contributing in some way to the process, while problems of lacking coordination, standards, norms or unity in purpose create a difficult operating environment.
2 In the maximalist tradition of the developmental state, these responsibilities are supplemented by a mandate to engage in economic planning by setting industry recovery and development strategy and partner with the private sector. Many authors advocate for a proactive model in which the state is more than a mere force creating the right regulatory environment for markets to function. The potential for cooperation between state and private actors cannot be underestimated, particularly in fragile post-conflict business climates; partnership is critical for setting the infrastructure and policy priorities that effective private sector development requires.
An equally important function of the state is the protection of human rights against potential abuses, including by the private sector as well as encouraging responsible business practices. Specifically, the right to free association is critical in raising labor standards in weak states, since the disciplinary power of the government is diminished. The former obligation is outlined in the Special Representative's 2007 report, stipulating the state's protective role against abuses by non-state actors; "the treaty monitoring bodies generally recommend that States take all necessary steps to protect against such abuse, including to prevent, investigate, and punish the abuse, and to provide access to redress."3
Judith Tendler4 and Salo Coslovsky5 argue that strategies of environmental and regulatory compliance in the developing world often rely beneficially not just on brute enforcement, but also on pedagogy (disseminating information and teaching how to do things better) and bargaining (arranging mutually beneficial deals between the perceived beneficiaries and victims of negative externalities). In the context of war-weakened states, such alternative approaches may sometimes prove more cost effective, though disciplining capital must be balanced with attracting it in the first place. Additionally, the Government has a role to play in promoting conflict-sensitive business practices through the adoption of CSR voluntary guidelines.6
[Back to Top] 7 To the second, local NGOs may fill in the service delivery shortfalls that typically grow during conflict. To the third point, NGOs can conduct "peace and conflict impact assessments" to ensure that development aid "does no harm" and builds peace.8
Local NGOs can be "a source of detailed local knowledge and they may be able to achieve practical goals more efficiently than parties coming in from outside would be able to. In addition, supporting such organizations can also help to avoid a 'brain drain' from a post-conflict country, as they can provide employment for educated individuals."9 Specifically they can also play a role as "insider" mediators, and can support the establishment of participatory governance and collaboration on reconstruction and development projects often better than international NGOs given their familiarity with local people and customs. Their roles might include assistance in re-building social infrastructure, strengthening delivery of basic social services and social integration.
On the negative side, local NGOs may lack the know-how and capacity to design and implement effective projects. Furthermore, there is large body of planning and political science literature that problematizes their claim to "represent civil society." Local NGOs may be dominated by local elites, pushing agendas that are not supported by marginalized groups.
Specific private sector activities that NGOs can take up also include: facilitating the rapid re-establishment of income earning activities; identification and implementation of quick impact micro-projects; and capacity building activities that can quickly ensure the re-integration of ex-combatants, refugees and displaced persons into their communities.10
Local business actors, civil society and peacebuilding
The Berghof Handbook provides a framework for understanding the roles of local business actors and civil society in peacebuilding:
- Civil society/politics: Political leaders
- Business: Big business
Middle range leaders
- Civil society/politics: Academics, intellectuals, NGO leaders, etc.
- Business: National company CEOs; business associations
- Civil society/politics: Indigenous NGOs, local leaders, community groups
- Business: Small and medium-sized enterprises (SMEs), market traders
Nick Killick et al., "The Role of Local Business in Peacebuilding," (Berlin: Berghof Research Center for Constructive Conflict Management, February 2005), 18, www.berghof-handbook.net/uploads/download/killick_etal_handbook.pdf.
[Back to Top] 11 Owners and managers of these businesses often play a prestigious role in society, and may be well-connected via multiple business or social networks, giving them access to resources.12 The inclusion of local businesses in peacebuilding initiatives is often crucial to their success.13 At the micro level, businesses comprising the bulk of the informal local economy are dynamic innovators and entrepreneurs, representing future growth,particularly when supported by international donors through microfinance projects or business associations. 14 During wartime, local businesses are more likely to switch their inputs from imports to locally-sourced materials, thereby helping to curb the urban-rural divide and the emergence of monopolistic/ monopsonistic relations between buyers and sellers.
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Collaborative for Development ActionPerhaps unique among the initiatives reviewed by this report, respected peacebuilding institute the Collaborative for Development Action (CDA) has initiated a multi-year process to carry out field-level assessments of extractive-sector projects in conflict-sensitive locations and share lessons learned. Its results should at this time be among the first ports-of-call for extractive sector project managers. CDA seeks through externally-funded field assessments carried out in partnership with mining, timber and oil & gas companies, to understand how specific corporate operations affect conflict and how conflict affects corporate operations, and to evaluate the company's social investment efforts as a conflict management tool.15
Transparency InternationalTransparency International is a global civil society organization that aims to fight corruption. Well known for their advocacy efforts and partnerships, they sponsor international multi-actor forums such as the "Anti-Corruption Corporate Compliance" in December 2008 or linking with United Nations Conference on Trade and Development (UNCTAD) Intergovernmental Working Group of Experts. Advocating for an informed and empowered civil society role as a reliable corporate watchdog, it prescribes tools such as "OECD Guidelines to Tackle Corruption".16 Its Social Accountability International's publication, "Business Principles for Countering Bribery," can be tailored to the needs of small and medium businesses to address both bribery of public officials and private transactions, including methods for ensuring anti-bribery commitments from their entire supply chains.17
OxfamOxfam has recently assumed a leadership role in integrating private sector development objectives into its development programs. Its expanded private sector development (PSD) program is proving popular with donors, host countries and local citizens that stand to benefit from the job creation and economic opportunities such strategic investments can create.18
International AlertInternational Alert is an established independent peacebuilding organization that works in 20 countries and territories globally to build foundations for peace and security in communities affected by violent conflict.19 It also engages in multilateral dialogue with international institutions (EU and UN among others) on policy formulation. Its strong advocacy for business sector integration of conflict sensitive practices as a base for economic development has been influential in converting emerging interest in corporate social responsibility (CSR) and ethical practices adoption by multinational corporations (MNCs) into tangible strategies and tools by addressing the skills and experience gap of MNCs toward these dual-serving objectives. Publications such as "Conflict sensitive business practices guidance for extractive industries" provide practical guidance for multinationals to build their capacity for developing more responsible operations.20
Global Reporting InitiativeThe Global Reporting Initiative (GRI) offers multinational corporations (MNCs) clear public reporting guidance on social, environmental and economic issues related to their operations by providing "'core' and 'additional' (optional) performance indicators as well as guidelines for reporting on governance structures, management systems and stakeholder engagement activities."21
International Institute for Sustainable DevelopmentSustainable markets and responsible trade has become a priority for the International Institute for Sustainable Development, launching in 2007 with UNCTAD the multi-year "Sustainable Commodity Initiative" which aims to "improve the sustainability of international trade by promoting economies of scale, efficiency, equity and transparency in the design and implementation of voluntary supply chain initiatives." It also promotes sustainable corporate business by assisting in creating enabling conditions for the responsible and transparent use of voluntary initiatives. Its structure is based on public policy, standards and voluntary initiatives, globalization of services, financing, technical assistance, sustainable commodity initiative, and sustainable public procurement.22
[Back to Top] 23 This broadly inclusive coalition maximizes potential for reaching a highly ambitious mandate for global peace and security, partly by expanding a state-centered framework of international relations to include private and non-state actors as key players in the application of international law.24
Critics of this inclusive approach suggest that any corporate influence in UN processes may compromise the impartiality and neutrality of the organization or limit the unique access of its Southern member states in UN decisions and priority-setting. Furthermore, they contend this worrying development threatens marginalized groups from the globalization movement, often the same vulnerable groups its programs strive to protect and serve. They fear this undue influence could jeopardize the effectiveness and credibility of UN efforts to reach these groups or to be critical of MNCs in cases where their presence may be harmful to conflict prevention and sustaining the peace.Critics advocate for at least better evaluation of chosen partners and a steadier hand in applying coherent, consistent and appropriate impact assessments where most needed.25 The launch of the noteworthy "Global Compact" initiative, discussed in a later section, has yielded early promise in leveraging global reputation capital with peer pressure of other companies and public demand for more socially responsible business practices.
United Nations Development Programme (UNDP)UNDP is the largest UN agency working in poverty eradication and development. It aims to break the cycle of poverty, address the root causes of crisis. Its programs in crisis and post-conflict countries center on a range of capacity strengthening, needs identification and recovery programs, similar to the kind of work it does in other countries. At present, the scope of UNDP's portfolio in the private sector includes a noteworthy 530 programmes in more than 100 countries, with a value of over US $100 million a year. One worth mentioning is their "flagship" program encouraging pro-poor investment, called the Growing Sustainable Business (GSB).26
United Nations Industrial Development Organization (UNIDO)The United Nations Industrial Development Organization (UNIDO), established in 1966, is a specialized agency of the UN and operates independently with its own constitution, member states, policymaking organs and budget. UNIDO promotes productive employment and economic development through manufacturing and trade capacity building. UNIDO serves as the leader for implementing the Montreal Protocol for the elimination of ozone depleting substances and the Stockholm Convention for the elimination of persistent organic pollutants (POPs).27 UNIDO's Private Sector Development Branch focuses on utilizing the employment potential of small and medium enterprises (SMEs) in combination with increased productivity, which carried a higher-value, knowledge-based skills. "...The activities of the PSD Branch aim at promoting industrial enterprises that drive the economic growth process and foster entrepreneurship, technological dynamism and associated productivity growth. These, in turn, create skilled jobs, contribute to...achieving gender equality and women empowerment, and support integration into national and global value chains."28
United Nations Office for Project Services (UNOPS)The United Nations Office for Project Services (UNOPS) is unique among UN agencies as a financially independent, client-oriented project-management service provider with a broad mandate to work in every field the UN is active. Its implementation modalities aim to integrate private sector efficiency with public sector accountability and rapid response capacity for emergencies, serving UN agencies and missions, Bretton Woods institutions and host country governments. Most well-known for electoral and census logistic support, infrastructure and engineering projects and job creation programs, it also engages in technical support, environment and development projects among others.29
UNOPS leading role as a business oriented implementation model breaks boundaries but still has limits. As a positive example of innovative public-private partnership and business orientation, corporate players have a business-friendly insider to allay reservations of engaging UN bureaucracy and donors have reassurances of deadline and budget conscious project delivery, even if this role is limited to certain sectors or services (as in procurement or contracts), rather than a capacity for policy dialogue or foreign investment advocacy. 30At the same time, host governments often complain that UNOPS costs often far exceed what those of local contractors would be. While this is true, UNOPS is often faced with highly unreliable capacity variances among local contractors, particularly for large infrastructure projects. Unlike many local contractors in post-conflict settings, UNOPS is able to provide means of quality control oversight, technical and skills training, capital financing and donor reporting. Additionally, UNOPS is able to support both local businesses through subcontracts and government ministries through built-in capacity building project components that hire on government staff in supervisory roles to provide skills training, experience and national ownership of the project.
International Labour Organization (ILO)The International Labour Organization (ILO) aims to engage private sector involvement in the development of global labor standards in compliance with the International Legal Framework. Serving a broad array of economic actors - states, employers and workers - ILO and its partner agencies seek to link the economic causes of conflict related to unemployment. This is why in 2006, the Secretary General extended to the ILO the mandate to focus on job creation and the reintegration of returnees and refugees, war-affected populations and former combatants.31 Its disarmament, demobilization and reintegration (DDR) programs for jobs, livelihood recovery and training integrate peacebuilding principles into practical economic recovery programs.32 Building strategic partnerships with agencies like UNDP on DDR programs in Afghanistan, with UNOPS on emergency employment projects for vulnerable populations in Iraq or UNHCR in its "Technical Cooperation Partnership for the Socio-Economic Reintegration of Refugees, Returnees, and IDPs" to rapidly deploy ILO technical experts in tandem with UNHCR ground operations, are among the tools the ILO has skillfully utilized to mount effective coordinated interventions.33 Guy Standing criticizes the ILO for attempting to play three roles - standard-setter, technical assistance agency, and knowledge generator - but failing to develop the capacity to do so.34 Richard Locke has argued that setting standards when it has no legal mandate to enforce them is one of the major reasons that CSR has grown in importance.35
UN PeacekeepersThe presence of UN peacekeeping missions also impacts post-conflict economies. Large incoming missions demand tremendous assets and personnel, spurring rapid growth of local markets. Skilled and unskilled members of civil society become national staff, gaining salary, skills, training and experience. Procurement of local supplies cause knock-on investments through extended distribution and supply networks. And the presence of international civilian and military staff creates a vibrant market for informal goods and entrepreneurs.36
However, many argue that negative consequences, while perhaps inevitable, must be minimized to the extent possible. Unfair treatment or contract irregularities can agitate national staff who may engage in labor disputes (as did UNMIL daily wage contractors in Monrovia, Liberia in late 2005 who blocked the main entrance to the compound on learning their contracts were summarily terminated without notice), massive foreign investment of cash into local markets can create "parallel economies" whereby rapid commodity inflation makes basic goods no longer affordable for ordinary citizens, or informal market growth could include illegal activities such as sex or drug trades. In the largest UN missions (UNMIL in Liberia, MONUC in DRC, UNAMID in Darfur) these effects are evident in varying degrees.
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World BankThe World Bank in the past ten years has increased its focus on providing aid for low and middle income countries under stress (LICUS) and suffering from conflict. Institutional restructuring resulted in the creation of the Fragile States team in the Operations Policy and Country Services Vice-Presidency to join its staff from the Conflict Prevention and Reconstruction Unit, formerly located in the Sustainable Development Network. This marriage of two previously separate teams from the Fragile and Conflict-Affected Countries Group links with external partners to align conflict sensitive interventions in various countries of operation. In line with this organizational restructuring, responsibility for the LICUS Trust Fund and Post-Conflict Trust Fund is now centered in the new Unit.37
Internal policy development in the World Bank Group also includes guidelines and benchmarks for global private sector investment and operations in conflict-prone countries and is often used as a prerequisite to receive project finance. These guidelines have gained credibility as useful tools in project implementation.38 The International Finance Corporation, another World Bank division, provides private sector loans, political-risk insurance, international capital mobilization services, and technical business advice to businesses in developing countries, thereby increasing ease of market entry, the rate of job generation, and tax revenues. Thus, its general focus is more microeconomic (to do with the growth of labor and capital markets) rather than macroeconomic (as is its neighbor's, the IMF).39
International Monetary FundThe International Monetary Fund (IMF) has been actively increasing their efforts to involve the private sector in their work, particularly employing their help in alleviating financial crises. According to an IMF fact sheet on the relationship between the organization and the private sector, the organization has stated that, "By involving private creditors and private enterprises in crisis-fighting, the international community aims to limit both moral hazard (the perception that international rescues encourage risky investments) and a "rush for the exits" by private investors during a crisis."40
A conference hosted by the IMF in 2001 focused on the importance of private sector involvement, particularly in relation to international sovereign bond restructuring. Directors of the conference highlighted a general recognition in financial markets that "international sovereign bonds are not immune from debt restructuring, and that, if borrowers face severe liquidity crises, bondholders along with other creditors may need to contribute to the resolution of such crises."41 The conclusions of the forum found that the private sector can play a leading role in debt restructuring, and their involvement in the resolution of financial crises is appropriate "in order to have the burden of crisis resolution shared equitably with the official sector, strengthen market discipline, and, in the process, increase the efficiency of international capital markets and the ability of emerging market borrowers to protect themselves against volatility and contagion."42
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Most often MNCs willing to assume the risks of doing business in post-conflict environments are interested in the extractive industries. Underdeveloped regions with generous natural resource endowments attract significant investment by large MNCs with the capital and financial liquidity to engage in high-risk conflict-prone regions in order to exploit highly lucrative mineral and gas deposits, particularly in the oil, gas and diamond industries.44
Historically, most donors have been reticent to engage with MNCs, but increasingly are being called upon to include these corporations. An array of new partnership arrangements have signaled a more inclusive process based on dialogue and creating common objectives in line with the socio-economic best interests of the host country. For example, Global Witness launched a corporate social responsibility initiative calling on international companies trading in minerals from eastern Democratic Republic of Congo to exercise due diligence in verifying the supply chain is free from transactions that either support warring groups or abuses of human rights, likewise encouraging home governments of those companies to provide oversight.45 By minimizing detrimental consequences while simultaneously expanding on positive contributions to recovering societies, this approach has yielded successful results that are likely to serve as a model for emerging best practices in this sector.46
1. Nick Killick et al., "The Role of Local Business in Peacebuilding," (Berlin: Berghof Research Center for Constructive Conflict Management, February 2005), 6.
2. M.H. MacDonald. Private Sector Development in Reintegration and Reconstruction Programmes. Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ), March 2006, 6.
3. John Ruggie, "Protect, Respect and Remedy: A Framework for Business and Human Rights," Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, Human Rights Council, A/HRC/8/5, 7 April 2008.
4. Judith Tendler, "The Rule of Law, Economic Development, and the Public Sector in Brazil: Lessons for Territorial Development," (paper for a meeting at Inter-American Development Bank, Washington, DC, 29-30 October, 2007).
5. Salo Coslovsky, "Stitching it Together: How Prosecutors Produce Compliance and Promote Economic Growth in Brazil," (Manuscript, MIT, 2009).
6. Switzer and Ward, "Enabling Corporate Investment in Peace."
7. United Nations Department of Economic and Social Affairs, "Issue Paper for the Session on Partnerships and Civil Society: Roles and Capabilities in Conflict Prevention and Peace building," (New York: UNDESA, 15 November 2004).
9. Naoise Mac Sweeney. Private Sector Development in Post-Conflict Countries: A Review of Current Literature and Practice. (Cambridge, UK: The Donor Committee for Enterprise Development, August 2008), 30.
10. Committee on Human Development and Civil Society, "Countries Emerging From Conflict: Lessons on Partnership in Post-Conflict Reconstruction, Rehabilitation, and Reintegration," Second meeting of the Committee on Human Development and Civil Society/UNAIDS Regional Conference, (Addis Adaba, Ethiopia: UNECA, 26-7 May 2003).
11. Killick et al., "The Role of Local Business in Peacebuilding."
12. Killick et al., "The Role of Local Business in Peacebuilding."
13.Committee on Human Development and Civil Society, "Countries Emerging from Conflict: Lessons on Partnership in Post-conflict Reconstruction, Rehabilitation and Reintegration," (Addis Adaba, Ethiopia: UNECA, 26-7 May 2003).
14. Naoise Mac Sweeney. Private Sector Development in Post-Conflict Countries: A Review of Current Literature and Practice. (Cambridge, UK: The Donor Committee for Enterprise Development, August 2008), 31.
15. Switzer and Ward, Enabling Corporate Investment in Peace., ,
16. Transparency International, "Enhancing standards in the private sector," 2008,
17. Switzer and Ward, Enabling Corporate Investment in Peace, .
18. Mac Sweeney. Private Sector Development in Post-Conflict Countries, 19.
19. Mac Sweeney. Private Sector Development in Post-Conflict Countries, 31.
20. International Alert, "Conflict sensitivity for multinational companies", 2008.
21. Jason Switzer and Halina Ward, Enabling Corporate Investment in Peace: An Assessment of Voluntary Initiatives Addressing Business and Violent Conflict, and a Framework for Policy Decision-making, International Institute for Sustainable Development and International Institute for Environmental Development (2004), 32.
22.International Institute for Sustainable Development. "Sustainable Markets and Responsible Trade (SMART),"IISD.
23. Report of the Secretary General, A/50/60 - S/1995/1, "Position Paper of the Secretary-General on the Occasion of the Fiftieth Anniversary of the United Nations" Supplement to an Agenda for Peace, January 1995.
24. Surya Deva, "Global Compact: A Critique of the UN's 'Public-private' partnership for promoting Corporate Citizenship,"
25. Jan Martin Witte and Wolfgang Reinicke, "Business UNusual: Facilitating United Nations Reform Through Partnerships," Global Public Policy Institute, 2005.
26. UNDP, "Fast Facts: UNDP and the Private Sector," May 2008,.
27. United Nations Industrial Development Organization, "About UNIDO," UNIDO.
28. United Nations Industrial Development Organization, "Private Sector Development Branch Overview," UNIDO.
29. Claudia Sye, "United Natons Office for Project Servces (UNOPS) and the Deutsche Gesellschaft Fur Technische Zusammenarbeit (GTZ) - What do they contribute to development Cooperation?" (Hamburg: University of Hamburg, Disseration, March 2006).
30. Allan Gerson, "Peace-building: The Private Sector's Role," The American Journal of International Law, Vol 95 No. 102 (2001): 102-119.
31. ILO, "International Programme on Crisis Response and Reconstruction."
32. ILO, "ILO places centrality of employment in post-conflict reconstruction," (Tokyo, 28 January 2008).
33. ILO, "ILO Crisis Response and Reconstruction Programme," (2004).
34. Guy Standing, "The ILO: An Agency for Globalization?" Development and Change 39 no. 3 (2008).
35. Richard Locke, "Note on Corporate Citizenship in a Global Economy," MIT Department of Political Science.
36. Naoise Mac Sweeney. Private Sector Development in Post-Conflict Countries: A Review of Current Literature and Practice. (Cambridge, UK: The Donor Committee for Enterprise Development, August 2008), 37-38.
37. World Bank, "Fragile and Conflict-Affected Countries," 2008.
38. Jason Switzer and Halina Ward, Enabling Corporate Investment in Peace: An Assessment of Voluntary Initiatives Addressing Business and Violent Conflict, and a Framework for Policy Decision-making, International Institute for Sustainable Development and International Institute for Environmental Development (2004), 15.
39. Allan Gerson, "Peace-building: The Private Sector's Role," The American Journal of International Law, Vol 95 No. 102 (2001): 102-119.
40. The International Monetary Fund (IMF), "Factsheet: The IMF and the Private Sector," IMF, 2001.
41. International Monetary Fund, "Involving the Private Sector in the Resolution of Financial Crises - Restructuring International Sovereign Bonds" IMF, January 2001.
42. The International Monetary Fund (IMF), "Factsheet: The IMF and the Private Sector,"
43. ILO, "Private sector social initiatives," 2008.
44. Naoise Mac Sweeney. Private Sector Development in Post-Conflict Countries: A Reeview of Current Literature and Practice. (Cambridge, UK: The Donor Committee for Enterprise Development, August 2008), 32.
45. Covalence Ethical Quotation System, "Recommendations on due diligence for buyers and companies trading in minerals from eastern DRC and for their home countries".
46. Naoise Mac Sweeney. Private Sector Development in Post-Conflict Countries: A Review of Current Literature and Practice. (Cambridge, UK: The Donor Committee for Enterprise Development, August 2008), 32.