Private Sector Development: Activities

The range of activities conducted by this incredibly diverse range of actors varies substantially in approach and strategy. This section examines the domestic activities of local private sector development including small and medium owned enterprises (SMEs), entrepreneurship and microfinance. The impacts of foreign direct investment (FDI) on local economies and societies launch a discussion on conflict analysis and risk assessment, evaluating the investment climate and strategies for negotiating conflict-sensitive investments. Privatization of essential services is examined, with a focus on the privatization of healthcare, education, security and military services, and infrastructure. A comprehensive discussion of Conflict Sensitive Business Practices (CSBP) and Corporate Social Responsibility (CSR) strategies, measurement issues and principles span domestic and international activities in the private sector, followed by an analysis of community rights and benefits, social investment and revenue sharing.

Finally this section takes a step back for a macro-view of international trade (WTO, Uruguay and Doha trade rounds, Aid for trade agenda and Fair Trade) and strategic frameworks and institutional mechanisms that govern the global arena for private sector investment, with a particular emphasis on sequencing issues. The section concludes with an analysis of Poverty Reduction Strategy Papers (PRSPs) as new frameworks that help countries to define their own development agenda, as well as two global coalitions of multinational corporate actors, the Global Compact and the Corporate Engagement Project as voluntary initiatives make headway in defining new trends and establishing standards for socially responsible business practices.

Small and medium enterprises (SMES)

Post-conflict private sector activities are anchored in the operations of small and medium enterprises (SMEs). Typically in war, supply chains splinter in order to disperse economic activity across space and time and avoid the predation of goods. This splintering requires a much larger number of small traders and venders to process the same (or fewer) goods, rather than a few large trucking companies. Moreover, splintered supply chains shrink effective markets sizes, and thus firms (even if they survive) usually shed workers, becoming smaller.1

Evolving approaches to supporting enterprise development include targeted enterprise-level interventions such as business development services (BDS) and financial services. These services are defined by UNDP and the Committee of Donor Agencies for Small Enterprise Development as working towards enterprise performance improvement and market access to enhance competitiveness. They encompass the range of specific business services from marketing to training and networking as well as operational support and longer-term strategic planning.

International Labor Organization (ILO) guidelines emphasize the essential role of the public sector in supporting SME development. It advocates economic growth strategies through the cautious adoption of context-specific social, fiscal and labor legislation and legal frameworks which protect a host of SME priorities such as property entitlements and contract regulation. The aggregate impact of these policies on exchange and interest rates, taxes and labor markets would ideally create favorable conditions to encourage entrepreneurship, foreign investment and access to the capital, exchange and markets needed to obtain a competitive edge.2

In reality, though, there is growing recognition that post-conflict and developing countries cannot simply adopt market institutions from developed countries without consideration of their integration into local economy and society. Scholar Balakrishnan Rajagopal has stressed, for instance, that faith in adopting off-the-shelf "rule-of-law" institutions in post-conflict contexts is misplaced when an entire society may need very customized policies to heal.3 Similarly for the more generic context of developing countries at large, a number of scholars have recognized that rule-of-law economic institutions that do not find purchase in social norms may not take hold - and that, conversely, some "bad" institutions (e.g., ill-defined property rights) may work to spur investment in specific social contexts.4

Go to Justice and Rule of Law

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The link between entrepreneurship, conflict and development is rooted in the contributions of industrious entrepreneurs and small businesses that comprise a vibrant economy. As Scholars Hirshleifer and Caruso stress, the more a society's resources are dedicated to production, and not predation, the greater the total welfare will be.5 The onset of violence debilitates small business start-ups, undermining or redirecting productive pursuits and absorbing the educational, managerial, financial and human capital instead, in many cases, to support the fighting forces. In the post-conflict environment, economic growth is bolstered by the invested profits, job creation and consumer confidence of innovation-oriented entrepreneurs.6

Though in the post-conflict environment capacity building and provision of capital are necessary for all entrepreneurs, specific support to female entrepreneurs is essential to post-conflict reconstruction. Recent global trends in microenterprise investment have demonstrated the tremendous potential of women in entrepreneurial roles.7 This is particularly true because women often bear the brunt of the financial responsibility of maintaining a family and household when men are recruited into conflict. Economic instability and private sector divestment during and following the cessation of violence marginalizes poorly trained and educated women into the informal economy, potentially exposing them to illegal, exploitative forms of commerce (e.g., prostitution or contraband smuggling) as a means of survival.8 Providing means for alternative livelihoods and opportunities for entrepreneurship promotes the role of women as productive actors of the peacebuilding and recovery process.

Go to Economic Recovery: Employment and Empowerment

Go to Empowerment of Under-represented Groups: Women and Gender

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Since the success of Nobel-prize winning Muhammad Yunnus' microfinance model for providing microcredit to the poor in Bangladesh, microfinance has gained popularity as an instrument for sustainable poverty reduction; however, providing microfinance in post-conflict contexts is extremely challenging. Despite generally consistent positive trends in microcredit as an effective tool for grassroots sustainable local development, some point to disappointing results in post conflict countries where delinquency rates and outreach limitations are unusually high (though it should be noted that evaluations fail to capture the exact causes for poor results).9 Possible factors limiting the success of microcredit schemes may include relatively inaccessible markets, high-risk business environments, incapacity of micro-lenders to provide clients with effective business strategy advice, and the tendency for post-conflict economies to suffer from high inflation, which translates into high interest rates on microcredit and increases the possibility of default with non-concessionary loans.

However, when MFIs find high repayment rates combined with promising new market entrants, the potential benefits of microfinance to post-conflict economic reconstruction are innumerable. A multiplier effect occurs when usual reconstruction aid funds transform into viable investments with clear return potential, amplifying their impact to reach more people and disbursing those gains more broadly through reinvestment into the economy. For example, new home construction may spur additional business start-ups and further introduce new capital into local markets.10 Although the use and sequencing of microfinance as an effective tool for early economic recovery post-conflict, certain conditions may improve its potential such as institutional readiness with long time horizons and a commitment to servicing large segments of the working poor.11

The most likely potential microfinance clients in these contexts would be local residents who remained during fighting as well as those returning after cessations, as they have local equity and stake, as well as aligned incentives for local business creation. Alternatively, refugees and internally displaced persons are riskier borrowers; MFIs may or may not deem them creditworthy depending on whether state legislation and local service providers recognize them as legally entitled to participate in commerce. However, MFIs are very likely to exclude former combatants and demobilized soldiers as clients, as these tend to be the highest risk clients.12

Successful post-conflict microfinance strategies require innovation and flexibility to meet the demands of entrepreneurs operating in such challenging environments. The dynamic relationship between a small business and its environment in the context of volatile and dynamic national contexts of change means that adaptable initiatives as well as those which strive towards generating trust-based relationships, often prove more successful. "Programs may offer lower interest rates or grace periods in the initial stages and ratchet up as normalcy returns; they often de-emphasize savings for security, inflationary, or legislative reasons,"13 in an attempt to boost entrepreneurial investment. Initially, donor involvement may be needed to strengthen local capacity and subsidize concessionary interest rates that businesses need to get started, but they can also create a counterproductive dependency on this assistance.14

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Assessing investment climates

In light of the growing evidence linking large capital inflows and violence in conflict-prone countries, there are increased calls for comprehensive conflict assessments, political risk analyses as well as social and ecological impact assessments.15

Various approaches have emerged in attempts to develop early warning frameworks for conflicts. Some researchers focus on quantitative and trend analysis based on extensive databases of previous conflicts while other focus more on qualitative analysis based on a selection of particular case studies. Peter Brecke, a scholar who works with global modeling at the Georgia Institute of Technology, argues: "Rather than going directly for an operational risk assessment model, more effort should be placed on modeling and data work to support the development of better theory to explain the outbreak of different types of violent conflict."16

Implementing these approaches relies on recognizing a good investment climate. "A good investment climate provides opportunities and incentives for firms-from microenterprises to multinationals-to invest productively, create jobs, and expand. To determine the specific fundamentals of the investment climate, some apply the four policy sectors accordingly: "physical security, macroeconomic stability, contract enforcement and property rights, and finance and infrastructure." But these alone just provide the rough sketch of a market framework. Conflict analysis can help to suggest what other factors may contribute to FDI's role in fueling conflict, including: the strength, legitimacy and qualitative function of institutions, the governance environment, the broader political economy, the capacity of government at all levels to implement policies and the social capital or "trust in society" that exists in the affected country.17

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Many states emerging from conflict struggle to resume sufficient institutional or regulatory capacity in the short term to manage essential public services. In these cases where the state cannot or chooses not to exercise maximum responsibility for provision of these services, (e.g., water, electricity, transportation and infrastructure) or when the revenue incentives for selling off state-owned enterprises are especially compelling, it may open these to private corporations to own and/or manage, following trends of many developed countries.18 These transformations can be problematic, creating new challenges for the state, but they may also present new opportunities for returning stability and economic growth at a critical time for the country's recovery. Privatization of the military and security sectors, a source of growing research and attention will not be addressed here.

Go to Security and Public Order

Go Democracy and Governance: Public Administration, Local Governance and Participation

Social Services

Particularly in peacebuilding contexts, governments may have low capacity to provide for the right to health and education and may lack the ability to reform the systems.Poor institutional capacity, rulers with weak political power even if intent exists, and corruption may all serve as impediments to institutional reform. Post-conflict reform policies, arduously spelled out in new frameworks, may often have trouble converting into real action.19

In some fragile states, educational and healthcare services are supported by international donors and contracted to non-governmental organizations (NGOs), but often remain a lesser priority than other sectors, such as the water sector. Newer trends have shifted donor investment to the state to subcontract these services and control these investment flows, in order to regain the capacity, credibility and experience in vital service provision. However, this practice raises other concerns with strained capacity as well as vulnerability to manipulation of gains by political elites.

Go to Economic Recovery: Private Sector: Key Debates and Implementation Challenges: Balancing private and public provision of essential services


Donors often fund companies to build infrastructure to encourage the investment and job creation needed to kick-start economic recovery. Collier stresses that "[t]he most evident infrastructure needs are power, ports, and roads. Without reliable power the formal sector cannot develop."20 Bilateral or multilateral aid (e.g., aid from USAID or the World Bank respectively) is most likely to fund expensive major projects in the early recovery period while the capacity of state agencies to develop later projects grows. Private companies that manage or maintain, rather than construct, these projects assume the risk for longer-term returns and thus may be wary of investing until stability can better predict their profit margins.21

In very poorly developed countries or those emerging from particularly long and brutal conflicts that significantly weakened or destroyed the infrastructure construction and maintenance sectors, private companies play a critical role in filling this service gap. When the UN mission in Timor-Leste was established in 1999, nearly 85% of the country's infrastructure had been decimated.22 Similarly when the United Nations Mission in Liberia (UNMIL) began its high-profile mission to restore peace to post-war Liberia, most public services had ceased years before - electricity, potable running water, roads and ports grinded to a halt when government turned its attention to fighting rebels and the private logging and mining companies that maintained much local infrastructure, pulled out due to the fighting. While multinational engineering or construction companies can be critical to post-conflict recovery due to local capacity constraints, John Bray also notes that a critical aspect to the reconstruction effort must be to rebuild the capacity of local construction, electricity and plumbing industries. This period can be used to transfer skills to the local contractors who will hopefully take over in future.23

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Public private partnerships (PPP)

Although the rhetoric supporting Public Private Partnerships (PPP) in development is becoming more common, there is little consensus on a definition or standard practices for PPPs. The OECD definition summarizes PPP as: "Arrangements whereby the private sector provides infrastructure assets and services that traditionally have been provided by government, such as hospitals, schools, prisons, roads, bridges, tunnels, railways, and water and sanitation plants."24 Not all may agree on the specific points of this term but many describe it as basically a risk transfer from private actors to the state in order to incentivize investment in what is still perceived as a volatile environment.25 Oftentimes, for instance, governments will have to guarantee a certain baseline rate of return on investment, while it may also define a ceiling rate of return above which the government is the sole beneficiary. This reassures firms while incentivizing government to "get it right".

The World Bank Business Partners for Development sees PPPs as tri-sector partnerships defined either as voluntary collaborations that generally advocate for intelligent and strategic resource allocation across public, private and civic sectors, or as management tools to more efficiently coordinate the contributions, and leverage the core competencies, of multiple partners toward sustainable development goals.26 The United Nations has also recently developed a similar concept of PPPs, envisioning their role as a bridge between civil society, government and business partners toward common objectives, creating partnerships under key thematic areas: "advocacy, developing norms and standards, sharing and coordinating resources and expertise and harnessing markets for development."27

Effective PPPs leverage the strengths of businesses, governments, and civil society to respond to challenges in post-conflict contexts in ways that are mutually beneficial to the interests of all actors involved. PPPs offer broad gains in fostering working partnerships linking corporate, state and non-state interests, and further links the resources and disperse the risk of their respective core competencies. This "added value" substantially increases the worth of these pooled resources.28 Particularly in conflict settings, this new source of resources and cooperation stimulates trust-based relationships among various groups, while also demonstrating the positive impacts of collective action over unilateral agendas.29

However, PPPs are prone to failure as a result of their own over-ambition, or can be limited by the complexity of their relationships or the problems they aim to solve.30 Moreover, public sector actors will typically have longer time horizons on the investments they make than their private sector counterparts. PPPs can be structured in such a way as to leverage private investment in the short term via "tranches" for projects that may require more patience.

Go to Economic Recovery: Private Sector Development: Key Debates and Implementation Challenges: Challenges to PPPs

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Conflict sensitive business practices (CSBP) and corporate social responsibility (CSR)

Corporate social responsibility (CSR) and conflict sensitive business practices (CSBP) are increasingly viewed as components of each other - depending from which "discourse" the relationship is being viewed. CSR in the conflict and peacebuilding contexts is often used interchangeably with conflict sensitive business practices, while conflict sensitivity has been called "an emerging theme in the broader CSR agenda."31

The sudden popularity of CSR as a modern business tool comprises a new bridge to peacebuilding goals. While CSR traditionally focuses on the environment, humanitarian aid, and community development, "a growing number of corporations and business groups are turning their CSR policies toward improving stability in conflict-laden areas of the world."32 Adoption of voluntary guidelines is still a relatively new concept, but early examples highlight positive benefits including reputation effects to companies that doubly serve human security aims.33 Policy makers believe that CSR poses a logical starting point for longer term, and definitively more ambitious, peacebuilding goals. Demonstrating by example intolerance for entrenched corruption or nepotism, for example, companies hold great sway in shaping a business environment that also builds good governance. It also reshapes public perception of their role as suspected collaborators in past grievances into trusted partners working toward a better future for the country.34

Despite the growing interest in CSBP and CSR, a single comprehensive code or set of "metaguidelines" has yet to occur and scholar Richard Locke casts serious doubts on the effectiveness of CSR as currently practiced. Locke asserts that in developing countries with weak states, (1) pedagogic enforcement is more effective in encouraging compliance than regulatory deterrence, (2) industry associations are effective in promoting standards by way of membership fee hikes for those not in compliance, and (3) the state must minimally guarantee the right of free association in order to reap the benefits of industry associations. He cites Cambodia as a post-conflict country that has grown into a poster-child of how the state can facilitate CSR in this way.35

Switzer and Ward offer the following recommendations for "public action" in promoting CSR in post-conflict situations. They advocate more research into opportunities for businesses to play a leadership role in peacebuilding as well as on non-extractive industry sectors. Per their recommendations, broader stakeholder involvement in creating consensus on norms should link to a network of Southern researchers and civil society groups from conflict-affected countries. In formulating sound corporate responsibility strategies, firms are advised to analyze their operational impacts on local communities. The value of such analysis would lend insight into how best to reengineer corporate policy on business and social investments as well as public policy position. To encourage broader use, states may choose to advocate export credit agencies (ECAs) and other lenders to assess the viability for access to finance in conflict areas.36 Another approach may be to educate senior management as to the opportunities and challenges specific to conflict environments.37

Principles of Corporate Engagement in Conflict Prevention and Peacebuilding

Principle 1: Strategic Commitment
Provide CEO and board level leadership on corporate responsibility issues. Establish policies, guidelines and operating standards that make explicit mention of these issues, including human rights, corruption and where appropriate, conflict and security arrangements. Develop internal management systems, compliance and incentive structures to embed policies into the company's daily activities. Invest in awareness raising and skills development programs for employees and business partners to increase their understanding and capacity to address the company's socio-economic and environmental impacts. Recruit or contract specialized expertise where necessary.

Principle 2: Risk and Impact Analysis
Assess the conflict-related risks and impacts of the company's core business and social investment activities on a systematic and comprehensive basis. This requires an understanding of: the nature of the conflict (its causes, stage and location); the role and relationships of other actors; and the characteristics and constraints faced by the company itself. From this basis of analysis it is possible to build performance indicators, targets and strategies for action.

Principles 3: Dialogue and Consultation
Identify and engage with key stakeholder groups on a regular and consultative basis. Take into account different capacities and power structures and the need to facilitate genuine participation and two-way dialogue.

Principle 4: Partnership and Collective Action
Develop mutually beneficial and transparent partnerships with other companies, civil society organizations and government bodies to address sensitive political and public policy issues and to invest in practical projects. Collective action can address activities such as: advocacy for good governance and anti-corruption measures; negotiating peace; developing voluntary codes of corporate conduct; supporting an open and free media; and creating innovative public-private financing mechanisms for health, education, civil institution building and infrastructure development.

Principle 5: Evaluation and Accountability
Identify key performance indicators for assessing the company's social, economic and environmental impacts and relationships. Carry out ongoing measurement and monitoring of these. Aim for independent verification and public reporting of these measures. Assess and account for processes as well as inputs, outputs and impacts. Benchmark results against internal and external guidelines and best practices.

Jane Nelson, "The Business of Peace: The Private Sector as a Partner in Conflict Prevention and Resolution," (International Alert, Council on Economic Priorities and The Prince of Wales Business Leaders Forum, 2000),

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Revenue sharing

Revenue sharing is a key strategy for increasing community benefits and decreasing the risk of community-business conflict. The UN Global Compact prioritizes revenue sharing and has published information on revenue sharing regimes on their website, as well as a policy paper on conflict prevention and revenue sharing regimes.38 Among the benefits of this arrangement, revenue sharing may in fact help address the underlying causes of conflict39 if it responsibly includes "the equitable distribution of resources at the national, regional and local levels, encompasses a variety of social, economic and political objectives, including: the compensation for resettlement or loss of land; and strategic economic and social investment to meet the needs of future generations."40

Poor governments may push such arrangements as a business-friendly alternative to punitive enforcement techniques, in cases where a corporate actor is defying environmental or labor laws to the detriment of local communities.41 Moreover, weak post-conflict governments may also benefit from revenue sharing arrangements with local communities when community corporate monitoring services are instrumental to providing the government with tax or royalty revenue. Giving communities a stake in the resources exploited by private sector operations - for instance, a share of derivative royalties extending into the future - can incentivize local citizens to monitor compliance for the state. This model has worked well in forest management conflict prone states of India.42

Revenue sharing is a tool used by companies to ostensibly promote stability. Its function is to "define a system for the allocation of social investments by companies and for the payments of taxes and royalties from the company to the host government. It includes equitable distribution of resources, compensation for resettlement or loss of land and strategic economic and social investment."43 Defined in three distinct categories, it can be: 1) "stabilization funds" generate income to real-time needs of early economic recovery;2) planned future use of those funds determine funds collection and saving;or 3) funds directed to sustainable economic recovery projects in the construction or support of essential public services or social needs, such as infrastructure or schools. 44

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International Trade

Trade liberalization has been lauded by neoclassical economists as a channel for economic growth-led poverty reduction and an escape from the conflict and poverty "trap." Trade-Related Development Assistance, and later "Aid for trade", emerged from the World Trade Organization meetings (or "Rounds") and became a popular tool for international donors to encourage economic growth in the private sector of developing countries while building their capacity to participate in global trade.

The World Trade Organization (WTO)-led multilateral negotiations on trade have focused attention on the costs and benefits of developing countries to participate in global trade as well as the role of trade liberalization in development. The basic principle behind initiatives emerging from the rounds is a belief that low-income nations will continue to be marginalized without the tools, capital and know-how to be competitive in global markets. In the earliest post-conflict period, donor-led interventions are believed to be necessary to kick-start private sector development and to provide the inputs and incentives needed to engage the economic participation of the poor.

Trade-Related Development Assistance (TRDA) first emerged in the late 1990s to guide separate bilateral assistance programs, partly though the creation of the Integrated Framework (IF) in 1997 and the Joint Integrated Technical Assistance Programme (JITAP) in 1998. It marked a sea change for developing countries in garnering a higher level of participation to represent their concerns and priorities in international trade. Access to global markets and unfair or exclusionary policies ranked high in this round, as the limits of liberalization efforts were articulated as a key issue. Trade related assistance and capacity development became popular in 2001, as an "innovation" of the Uruguay Round (1986-1994), which capitalized on the history of donor-led private sector aid programs dating from the 1960s and the notorious structural adjustment in the 1980s and 1990s.45 It is also described as a "complement" to the later Doha Development Agenda, the current WTO trade round begun in 2001 with a focus on lowering trade barriers.

Separately, a WTO task force created an Aid for Trade (A4T) agenda as a distinct evolution from Doha in 2006. Launched in December 2005 at the WTO's ministerial conference in Hong Kong, China, Aid for Trade is defined as "aid for developing countries to build supply-side capacity and trade-related infrastructure to expand trade." It was not meant to replace, but rather reinforce the achievements of the WTO's Doha Round, by lending a more balanced view of the link between trade and development.46

Evolving partly out of lessons from the failures of structural adjustment policies in the 1980s and 90s, A4T aims to go beyond social and economic recovery support to encourage in a targeted manner the growth of local and state markets to engage in trading in the global economy. Although the private sector has generally been left out of A4T discussion, the A4T agenda inherently requires the involvement of the private sector. According to the Overseas Development Institute, ODI, Britain's leading independent think tank on international development and humanitarian issues, "It is unclear how the private sector has been involved in the A4T processes. They did not contribute significantly to the Task Force, but the private sector is ultimately responsible for trading and should therefore be a major recipient. Its role in A4T planning and implementation should be clarified."47

These initiatives, jointly also known as "trade development", aims to open doors for enterprises to engage in trade, support local business structures and to create favorable domestic business climates. These are now widely employed mandates that are used by "virtually all national donor agencies" and the major multilaterals institutions, "World Bank, the IMF, UNCTAD, FAO, OECD, UNIDO, UNDP, and the WTO itself."48

However, donor countries are finding it difficult to balance their requirements to encourage trade-related measures (e.g., investment, competition policy, procurement and trade facilitation) with developing countries' requests for increases in trade-related assistance. In turn, many low-income countries grapple with implementation of these trade measures (which can open them to potential external shocks) and already high rates of poverty at home. Combined, these can contribute to instability and conflict. A more generous and flexible approach to trade development policies may go a long way in stewarding this delicate transition process more effectively.49

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Strategic frameworks and institutional mechanisms

There are a number of different benchmarks and institutional mechanisms for monitoring, promoting and coordinating private sector development in peacebuilding. A selection of those mechanisms is presented here.

Poverty reduction strategy papers (PRSPs)

Originating at a 1999 meeting of the G-7 countries, in connection with the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative, the Poverty Reduction Strategy Paper (PRSP) seeks to reduce poverty and has become the framework for development assistance in post-conflict and developing countries. PRSPs are meant to rest on five core principles - country-driven, results oriented, comprehensive, partnership-oriented, and based on a long-term perspective. At the same time, they are controversial, in particular around the degree to which they are indeed country-owned, and with respect to their poverty reducing potential. Go to Economic Recovery: Economic Recovery Strategies

In principle, and by the very nature of PRSP's focus on economic development, the private sector has been ensured a key role in the entire life-cycle from formulation to implementation. Findings however, illustrate mixed levels of private sector involvement. One study found that where consultation was vigorous, they were valued for their role in spurring the kind of economic growth critical for long-term poverty reduction. However in case studies where they were marginalized from the process, they were sometimes held as government agents, carrying out the will of states rather than supporting local growth.50 Despite the commitment to ensuring broad-based and participatory processes, in a review of PRSPs in Africa, former UN Special Rapporteur on Structural Adjustment and Debt, Fantu Cheru found that in reality, the private sector has, by and large, been excluded in many. With the exception of Mozambique and Uganda, the private sector has not been deeply involved with PRSP consultations, nor have governments designed explicit strategies for improving their participation.51

Cheru found that there were several commonalities in policy choices, including a focus on private sector development. Specifically, particular attention was paid to creating an environment within which the private sector can expand and become dynamic through the promotion of both domestic and foreign investment. According to this common view, what is entailed is removing the constraints on private sector competitiveness, such as infrastructure constraints, and commercial justice reform with respect to enforcing contracts, etc."52 A common challenge highlighted lies in the lack of skilled personnel in both the public and private sectors in the post-conflict environment, which makes independent, nationally-owned poverty reduction strategies difficult to design and implement.53 Other studies have emphasized the lack of attention to conflict sensitivity and peacebuilding in PRSPs.

The United Nations Global Compact

The United Nations launched the Global Compact in July 2000 to incite corporations around the world to voluntary commit to a set of ten principles in corporate social responsibility. As the largest corporate citizenship initiativeof its kind globally, to date over 3,000 corporations from 116 countries have signed on as participants.54 The tenprinciples are based on respect for human rights, labor (upholding collective bargaining, elimination of forced and child labor and discrimination in the workplace), the environment55 (in the use of clean technologies, exercising environmental responsibility and supporting precautionary problem-solving) and fighting corruption (including extortion and bribery).56

The key activities supported by the Global Compact aim to provide opportunities for firms to engage and learn in new ways to guide operations responsibly, using existing local networks, practically-oriented tools and guidelines, and regional or international forums for exchange with colleague companies with whom mutually beneficial partnerships may be developed. As part of its membership, each firm must produce an update called the Communication on Progress that outlines the scope of its activities.57

Beyond these immediate aims, the Global Compact has created a model for business "sphere of influence" along its value chain. By cleverly mapping concentric circles of stakeholders along the chain (e.g., staff, suppliers, markets, community and state), the influence of newly adopted principles could transmit to a growing sphere of actors.58

OECD Guidelines for Multinational Enterprises

The Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises sets forth voluntary standards (i.e. non-binding) and recommendations for multinational corporations (MNCs) "in all the major areas of business ethics, including employment and industrial relations, human rights, environment, information disclosure, combating bribery, consumer interests, science and technology, competition and taxation."59 All 30 OECD countries (and 11 non-member countries) agreed to support and promote the Guidelines to companies operating within their boundaries. National Contact Points (NCP), handle enquiries and implement the Guidelines at the national level. The Guidelines are part of a package, including the 1976 Declaration on International Investment and Multinational Enterprises, and are overseen by the Investment Committee.60

The Corporate Engagement Project (CEP)

The Corporate Engagement Project (CEP) is another initiative that specifically aims to offer practical management strategies for firms intending to establish and maintain strong community relationships to foster more dynamic operational engagement. By using simple but effective methodologies to create direct dialogue with local communities, civil society groups and organizations, local leaders and others, CEP compiles the impacts, perceptions and risks of corporate operations in context, outlining contingency and mitigation strategies as a result. A distinctive co-funding arrangement by donors testify to its value not only as a valuable source of corporate value but also as an effective approach to local civil society engagement.61

The CEP focus is on how the manner in which guidelines and policies are implemented can create or exacerbate tensions, or contribute to peace. Through on-site observations and interviews with stakeholders such as local communities, opposition groups, NGOs, government officials, religious groups and others, positive or negative impacts that the day-to-day corporate practices have on the lives, and on the perceptions, of local stakeholders are traced.

1. Topher L. McDougal, "Survival Strategies of Production Firms in Civil War: The Case of Liberia," (conference paper, London School of Economics, 2008).
2. International Labor Organization (ILO), "Job Creation in Small and Medium-Sized Enterprises Recommendation," (Geneva, 1998), R. 189.
3. Balakrishnan Rajagopal, "Invoking the Rule of Law in Post-Conflict Rebuilding: A Critical Examination," William and Mary Law Review 49 (2008): 1345-1374.
4. See, e.g., Haggard, Stephen, Andrew MacIntyre, and Lydia Tiede, "The Rule of Law and Economic Development," American Political Science Review 11 (2008): 205-234, and Annette Kim, Learning to be Capitalists: Entrepreneurs in Vietnam's Transition Economy (Oxford: Oxford University Press, 2008).
5. Hirshleifer, Jack, "The Paradox of Power," Economics and Politics 3 (1991): 177-200, and Caruso, Raul, "Butter, Guns and Ice-Cream: Policy Implications of Theoretical Conflict Economics," MIT International Review (2009).
6. "The promotion of sustainable enterprises," International Labour Conference, 96th Session, (Geneva: ILO, 2007), 4.
7. Piet Goovaerts, et al., "Demand Driven Approaches to Livelihood Support in Post-war Contexts: A Joint ILO-World Bank Study," paper no. 29, (The World Bank and International Labour Office, October 2005), 4-5.
8. Carment Niethammer, Mark Blackden, and Henriette Von Kaltenborn-Stachau, "Creating Opportunities for Women Entrepreneurs in Conflict-Affected Countries," (New York: International Finance Corporation, April 2008), 1.
9. Alison Williams, "Post Conflict Microfinance Research Summary," 2002.
10. USAID, "Microfinance Following Conflict: Technical Brief, No.1" Microenterprise Best Practices, 2000.
11. Marlyn S. Manalo, "Microfinance Institutions' Response in Conflict Environments," World Bank Africa Region Working Paper, No. 54, June 2003, p. 6.
12. Karen Doyle, "Microfinance in the Wake of Conflict: Challenges and Opportunities," (Washington DC: USAID, the SEEP Network, July 1998), p. 14.
13. Karen Doyle, "Microfinance in the Wake of Conflict: Challenges and Opportunities," (Washington DC: USAID, the SEEP Network, July 1998), p. 50.
14. Geetha Nagarajan, "Microfinance in Post-Conflict Countries: What Makes it Tick?" Epargne Sans Frontiere, Vol. 59-60, (July-October 2000).
15. Jane Nelson, "Business of Peace: The private sector as a partner in conflict prevention and resolution," (England: The Prince of Wales Business Leaders Forum, International Alert, Council on Economic Priorities, 2000), 123.
16. Peter Brecke, "Risk Assessment Models and Early Warning Systems," (Arbietsgruppe: Internationale Politik, March 200), 14.
17. Rob Mills and Qimiao Fan, "The Investment Climate in Post-conflict Situations" (Washington, D.C.: The International Bank for Reconstruction and Development, The World Bank, 2006).
18. DTI, "Liberalisation and Globalisation: Maximising the Benefits of International Trade and Investment." DTI Economic Papers No. 10 (2004), 27.
19. HLF on Health MDGs. "Health Service Delivery in Post-Conflict States." (Paris: High Level Forum on Health MDGs, 14-15 November 2005), 12,
20. Collier, "Post-Conflict Recovery."
21. John Bray. International Companies and Post-Conflict Reconstruction: Cross-Sectoral Comparisons, Washington, DC: Social Development Papers, Paper No. 22 (2005), 4.
22. Ibid.
23. Ibid.
24. International Monetary Fund, "Glossary of Statistical Terms: Public-Private Partnerships," in Manual on Fiscal Transparency, (Washington DC: IMF, 2007).
25. Ibid.
26. "Business Partners for Development: Tri-sector Results and Recommendations: 1998-2001," (Washington DC: World Bank, 2002), 7.
27. Jan Martin Witte and Wolfgang Reinicke, "Business Unusual: Facilitating United Nations Reform through Partnerships," United Nations Global Compact Office, 2005.
28. "Business Partners for Development: Tri-sector Results and Recommendations: 1998-2001," (Washington DC: World Bank, 2002).
29.Jane Nelson, "Business of Peace," 33.
30. Jane Nelson and Simon Zadek, "Partnership Alchemy: New Social Partnerships in Europe," (Copenhagen: The Copenhagen Centre, 2006) p. 18.
31. Switzer and Ward, "Enabling Corporate Investment in Peace."
32. Lawton, "Corporate Social Responsibility and Peacebuilding."
33. Switzer and Ward, "Enabling Corporate Investment in Peace."
34. Killick et al., "The Role of Local Business in Peacebuilding."
35. Richard Locke, "Opportunities in Building More Sustainable Supply Chains," (presentation at the Sloan School of Management, MIT, Cambridge, MA, 19 September 2008).
36. Jason Switzer, "Security Link: The Private Sector," News Briefing, International Institute for Sustainable Development, 2005.
37. Switzer and Ward, "Enabling Corporate Investment in Peace."
38. United Nations Global Compact, "Revenue-Sharing Regimes" United Nations Global Compact Policy Series.
39. Ibid.
40. Juliette Bennett, "Conflict Prevention and Revenue-Sharing Regimes" (prepared for the United Nations Global Compact Policy Dialogue: Business in Zones of Conflict, May 2002), 1.
41. Salo Coslovsky, "Stitching it Together: How Prosecutors Produce Compliance and Promote Economic Growth in Brazil," (Manuscript, MIT, 2009).
42. Joshi, Anuradha, "Progressive Bureaucracy: An Oxymoron? The Case of Joint Forest Management in India," (network paper 24a, Overseas Development Institute, London, UK, 1999).
43. United Nations Global Compact, "Revenue-Sharing Regimes."
44. Bennett, "Conflict Prevention and Revenue-Sharing Regimes," 2.
45. Michael Friis Jensen, "Human Development Report 2005: Capacity Building for Pro-Poor Trade: Learning from the Limitations in Current Models," (Denmark: Danish Institute for International Studies, 22 December 2004), 2.
46. ADB/Philippine Government/WTO, "Mobilizing Aid for Trade: Focus Asia and the Pacific", (Conference Proceedings by Asian Development Bank, The Philippine Government and the World Trade Organization, Manila, Philippines, 19-20 September 2007), 134.
47. Overseas Development Institute, "Aid for Trade: One Year On," 5.
48. Jensen, "Human Development Report 2005," 1.
49. International Alert, "Addressing the economic dimensions of peacebuilding through trade and support to private enterprise" (Conflict Prevention Partnership, September 2006), 6.
50. James W. Fox et al., "Poverty Reduction Strategy Papers: Review of Private Sector Participation," (Washington, D.C.: United States Agency for International Development, Development Information Services, October 31, 2003).
51. Fantu Cheru, "Building and Supporting PRSPs in Africa: What Has Worked Well So Far? What Needs Changing?" Third World Quarterly, Volume 27, Number 2, 2006: 366.
52. Cheru, "Building and Supporting PRSPs in Africa."
53. Ibid, 367.
54. United Nations Global Compact Office (UNGCO), "UN Global Compact Annual Review: 2007 Leaders Summit," June 2007.
55. Dale Lawton, "Corporate Social Responsibility and Peacebuilding: A Case for Action in Israel and the Palestinian Territories," (white paper, Rockland, Maine: Institute for Global Ethics), 2.
56. Lawton, "Corporate Social Responsibility and Peacebuilding."
57. United Nations Global Compact Office (UNGCO), "UN Global Compact Annual Review: 2007 Leaders Summit," June 2007.
58. John Ruggie, "Clarifying the Concepts of 'Sphere of influence' and 'Complicity:' 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/8/16, May 15, 2008, 4.
59. Organisation for Economic Co-operation and Development, "OECD Guidelines for Multinational Enterprises," OECD.
60. Ibid.
61. Collaborative Learning Projects, "Corporate Engagement Project," 2008.

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