Private Sector Development

Last Updated: June 25, 2009

This section raises some key considerations in understanding the ways in which the private sector influences war and peace, and vice versa. It takes as a fundamental premise that a post-conflict economy is not a tabula rasa,as Lau Schulpen and Peter Gibbon have claimed that the international community, including bilateral donors, often views it.1 Rather, a post-conflict economy is a dynamic ecosystem consisting of actors, organizations, and institutions (formal and informal), some of which have adapted to survive under particular circumstances of heightened predation, others of which are introduced in the postwar period from outside and inevitably change the existing dynamics.2

Accordingly, one of this section's aims is to highlight considerations of state, private sector, civil society, and international actors that may promote (or upset) a synergy between economic growth and the social and political development required to build lasting peace. For instance, strategies for conflict sensitive business practices must take into account the various ways they might affect and be affected by these post-conflict dynamics, drawing on examples of both successes and failures as a means of determining lessons learned and best practices of use to practitioners and policy makers involved in this sector.

However, these issues are not clear cut and scholarly disagreement exists about the role of the post-conflict government in regulating the private sector. Some scholars assert the private sector can provide economic opportunities through industrial growth, infrastructure investment or employment opportunities. Others argue for a more controlled and gradual approach to private sector investment following the more immediate priority of state institution building in order to effectively govern and regulate. Outside this division, a range of scholars advocate for pushing both agendas at once, with more specific debates on the sequencing and prioritization.

To lay the foundation for understanding this issues and debate, this section begins first with an overview of conceptual issues in peacebuilding relating to private sector actors and activities in general and at the national and international levels. It presents a range of perspectives, examining the 'downstream' issues from the perspective of local actors as well as encompassing a broader 'upstream' view from a policy making perspective. It intends to give the reader an understanding of the range of private sector issues involved in peacebuilding, in the hopes that this will naturally strengthen integration, sequencing and prioritization. More broadly, it makes reference to the economic factors that drive conflict and influence the role and behavior of the private sector in the period during or after conflict.

The section then turns to a discussion of the capabilities of different actors, to promote or diminish violent conflict and peacebuilding and the range of activities in which they engage to this end. An exposition of the impacts of foreign direct investment (FDI) on local economies ties into a discussion of evaluating the investment climate and strategies for encouraging conflict-sensitive business investments. The privatization of essential services is also explored, focusing in particular on healthcare, education, and infrastructure. A discussion of Conflict Sensitive Business Practices (CSBP) and Corporate Social Responsibility (CSR) strategies is followed by an analysis of community rights and benefits, social investment and revenue sharing.

Debates and implementation challenges discussed here are by no means comprehensive; rather they highlight new directions in research and emerging best practices by identifying current gaps and opportunities. Even "outsiders" with perceived limitations to engage private actors or encourage governments, can help create enabling conditions and incentives to incite real progress. Strategies such as entrepreneurship, microfinance, local private sector investment and public private partnerships offer avenues for civic engagement to transition from informal sector activity to licit commerce and early private sector growth, while strategic frameworks and institutional mechanisms promoted by international actors and financial institutions can guide states toward good governance, sustainable growth and stability.

1. Lau Schulpen and Peter Gibbon, "Private Sector Development: Policies, Practices and Problems," (Copenhagen: Centre for International Development, August 27, 2001).
2. Gilles Carbonnier, "Conflict, Postwar Rebuilding and the Economy: A Critical Review of the Literature," WSP Occasional Paper No. 2. Geneva: Interpeace, March 1998.

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