Theme 6: Key Issues to Doing Business in Conflict Zones

In response to Emma’s post, I agree that tourism is an important component of the global economy and that attracting tourists to conflict zones is quite a task. However, the development of tourism and infrastructure in conflict zones makes me think of Ukraine’s current situation. Although Ukraine is not a conflict zone, the country has several similarities to conflict zone areas, including a low GDP, underdeveloped infrastructure, political corruption, and regulatory inefficiency.

The UEFA has recently presented Ukraine with the unique opportunity of hosting the 2012 Euro Cup. The event will span two weeks, utilize cities throughout the country, bring in tourists from all over the world, and help boost the tourism industry in Ukraine. As mentioned earlier, Ukraine has issues with political corruption and regulatory inefficiency, which is why the UEFA has taken the project into their own hands by developing a strategic infrastructure development plan with specific deadlines.

The point that I am trying to make is that through the UEFA’s decision to host the 2012 Euro Cup in Ukraine, the organization is presenting Ukraine with an opportunity to revitalize their economy through tourism. Perhaps it is time for a large-scale event, like the 2012 Euro Cup, to be planned in a conflict zone area such as Sierra Leone. By planning such an event, the country would be able to strategically develop their infrastructure, establish their tourism industry, “clean up” their government through certain mandates, shrink their unemployment rate, and stimulate their economy.

Over the five to ten years it would take to develop such a large-scale project, peace within the region could be reached because of the amount of jobs and wealth which will be brought in.

Joshua, a very interesting post to say the least. It seems that throughout history events such as UEFA, the World Cup, and the Olympics occur in places that although sometimes not the richest countries in the world are still in countries with functioning non corrupt governments. The fact the UEFA is giving Ukraine an opportunity such as this one is a big step looking at the overall picture. Giving a struggling country where corruption is prevalent a chance to attract tourism is a very big step. It not only brings money to these countries, but also gives its people a chance to see that through legitimate business, countries are much more likely to flourish. When the people of these countries understand this, they may begin to put more pressure on their governments to end the corruption. At the end of the day, if enough people living in these countries begin to demand change, then perhaps they will one day get the change they are looking for. I think Ukraine will be a good test to see if an event like UEFA can help a country progress going forward. And who knows, maybe one day events like these can move into conflict zones, giving these countries the money that they need to establish a more legitimate society.

I definitley agree with Adam. Having a safe environment in order to attract new businesses to enter the industry is of great importance. I’m from Bahrain and I have seen the country grow to what it is today. The number of banks in Bahrain for example exceeds every country in the GCC. It has attracted foreign investors to a great extent due to its stable environment and through their mission to develop their image. It has very much changed since 20 years ago as Adam mentioned. And as for Sierra Leone, it will take time. I watched the video and Sierra Leone is beautiful and it shall attract more investors as time passes by, but it will take time in order for investors to trust the countries stability. Also, because the economy is in a downturn, investing in countries such as Sierra Leone would be considered risky.

Hopefully through time it shall change.

My question is for Igor Abramov.

In your video you discuss that the first part of the in-country assessment is to engage all relevant stakeholders in a discussion to assess their needs. I was wondering, how difficult it is to do something like this? I would imagine that many stakeholders benefit from corruption and suppression of one side. It might not be in their best interest to end such practices even if it is for the overall good. How would you go about first introducing opponents to each other in a peaceful manner and then convincing both sides that working together is the optimal solution?

I ask this because I am from Pakistan and the people who live there all know that corruption is prevalent but no one is willing to give up their piece of the pie so the cycle continues. The scope of corruption is as small as getting out of speeding violation to running for political office.

Thank you,

Abbas Zaidi

This is certainly an interesting point, but I think we also need to look at cities that have hosted major events in the past and determine the impact in the long-run. While this would be a research paper in itself, we can take a quick look at cities that have hosted the Olympics over the past few decades. While these destinations might be nice to visit, the build-up and enormous amount of investment in infrastructure for the event has, for the most part, had very little impact on these local economies in the long-run. After the games end, the infrastructure in the majority of these cities is seldom used.

The most recent Summer 2008 games in Beijing is an interesting situation to look at. Hosted by a country that has been criticized for its poor human rights record in the past, China spent a record-setting amount of money to prepare for the Olympics. At the same time, however, the Chinese government was constantly being criticized over their treatment of business owners and forcibly uprooting their people to build the infrastructure. Now, all of that criticism seems to have vanquished. The situation in Tibet is no longer being covered by the mainstream media, yet that conflict continues to this day. Furthermore, China’s economy was already booming due to international demand for cheap labor and goods, and the decision to host the Olympics in Beijing did not cause any major shift in China’s domestic or international policies. While these major events have the potential to bring huge growth to the world’s emerging markets, they have failed to do so time and time again. I hope to see a real effort by the European countries and the UEFA to demand change in Ukraine in 2012, but I remain skeptical since similar efforts have been unsuccessful in the past.

The question that remains, however, is who should be responsible for overseeing sustainable change in these emerging markets? Is it the responsibility of international governing bodies or of private business to demand this change, and how can we ensure that everyone is “playing by the rules.”

I think that we should look beyond economic benefits to hosting a major sporting event and should focus more on how there is a significant increase in unity a country feels when hosting such a worldwide affair. Being given the honor of inviting other countries for the Olympics or World Cup reinforces a sense of pride one has for their country, which, in my view, can do more for a struggling country when it comes to demanding change from its government than just putting more money into corrupt hands.

Brandom – thank you for following up with excellent questions.

  1. Notwithstanding how well a company is doing financially or how large and powerful it is, business is always dependent on government for cetain things, such as good and open regulatory framework; independent judiaciary; and many other services government’s even weak one supply that enable business to functions. Hence, business has great incentive to work in cooperation with the government to ensure that government provides open, transparent and hopefully corruption free business climate. In doing so, business must also show benefits derived to the government in pursuing these goals.

  2. Developing trust between government and business is difficult and takes time. In my experience in more than 25 countries, I have follwoed the follwoing practice: (1) Provide a forum in which both have an opportunity to exchange opinions, which often tend to be very heated; (2) Find common issues and goals both can agree on; (3) Emphasize the need to move forward and build on common goals and issues. Focus on specific areas where you can make progress and achieve conrete goals within a short time period, and then build on them slowly and step by step.

  3. Foreign aid in my opinion is a double edged. Many countries have informed me that foreign aid largely contributes to corruption. This is largely because foreign aid is often poorly managed and also focuses on its own priorities rather than focusing on domestic needs. Nevertheless, foreign aid can be very constructive in helping establish the framework for having good and positive dialogue between business and government.

These points are discussed in much greater detail in my paper.

The point which you are making is certainly valid. However, do you think that there would have been a different outcome in China if the Olympic Committee put more emphasis on human rights? For example, if the OC gave China an ultimatum in making progressive steps to clean up their human rights record or not hosting the Olympics?

Although these hypothetical question may not be relevant for a country like China, which is becoming a global player due to a variety of reasons, if smaller countries were given such an offer, I believe they would take it. Could you imagine if Sierra Leone was given the chance to host the Summer Olympics? I believe that if the OC enforced proper mandates and took social issues into account, the country would be changed forever.

The key in my opinion to any relationship is how well organizations are able to listen to their customers and stakeholders. Some companies are better at listening and engaging than others. If companies are able to demonstrate that (1) they have a CSR strategy; (2) this strategy is flexible; and (3) that they are interested in pursuing this strategy in partnership with their stakeholders, this would be a very good start. Of course this is difficult to do, especially when companies are faced with diverse stakeholders who can be dogmatic, inflexible, and tend to focus on their specific interests. These are difficult issues, but I beleive part of trustbuilding process. I see it as a PROCESS.

The process of assessing needs can be difficult and lengthy process, especially in countries with history of periodic wars and ethnic problems. It takes time to bring people in such conflict zones together. In one country it took us almost one year to accomplish this goals, and yet it became one of our best partnerships. The lesson I learned from this was, just because it is difficult and contentious it does not mean taht people can not come together.

In terms of bringing stakeholders together, please take a look at my response to Brandon. This approach has worked for me in many countries, and I do not see why Pakistan would be an exception. Often people tend to be too ambitious in their goals and fail to identify small and tangible goals on which diverse stakeholders can agree on. However, most skilled moderators or professionals can help find common interest even among the most diverse stakeholders. Then the challenge becomes gaining commitment from them to work together towards same goals. This is where foreign aid can be helpful.

Please let me know if I did not fully respond to your question.

I have a couple of questions for Tara.

I was wondering if you found it difficult to approach this topic with such a large gap of individuals in the middle manager spectrum you spoke about?

Do you believe they will be able to build businesses in the areas where there was conflict? Or is there a strong stigma around building in such an area?

Thank you,

I just wanted to point out that in Britain there are now laws that require publicly held companies to report not just financial liabilities but environmental and political ones. Presumably this would include reporting on their operations in conflict affected areas. It is not quite the detailed reporting on specific decisions that you are looking for, but it could be provide the first steps towards better information.

Along the same lines, initiatives such as the Extractive Industries Transparency Initiative (EITI) and some of the work by Transparency International and the Publish What you Pay Coalition may provide more information about companies that operate in weakly governed territories.


I am interested to learn and see if many of these very high profile conflict zones will be able to entice businesses and tourism to set-up subsidiaries in their lands. It seems that there are so many inherent community based problems that have led to these conflicts and many of them still have yet to be solved. I think that, as most have been saying, businesses moving into these terror and war ridden lands would be a way to ease the problems, but it is necessary for these countries to deal with, or at least begin to deal with, the current social and community problems that have caused these problems before this can happen.

My question is do you think that it is wise for organizations to move into these zones before they have even begun to scratch the surface of identifying and working on solving some of their inherent problems? Is it possible that businesses moving into these lands when the countries are not yet hospitable would be counterproductive?

Emma Werlin

I agree. Tourism cannot change the negative cycle of an areas condition. It can be part of the solution but there must be many other factors involved. Government backed programs to make an area safer as well as possible military action need to help secure the lands before tourisms can be effective.
Those who are the first movers and adventurists will not follow American advisories for traveling. However in order for tourism to be effective it has to draw more than the niche market of explorists. Therefore it (tourism) alone can only do so much.

I completely agree. Safety is definitely one of, if not the, first requirement a company would demand when moving into a new area. If there is no protection from the local government, there is no accountability and transparency. There has to be order and law within the area in question or else a new business has nothing to back its products/services up.
And another point is that safety isn’t just military might or firepower. A large military doesn’t mean the area will be safe. A stable government, financial system, and laws add to creating a more conducive environment for new businesses.

This is an interesting article from the BBC that I came across the other day, possibly the ultimate in high profile conflict zone tourism:

I think it is great to see Iraq attempting to reestablish its tourism industry, although clearly that effort is off to a slow start. I definately expect to see more of this in the coming months, as critical commercial air service continues to return to Baghdad from London and other european hubs. Of course this is a fairly niche market, consisting of those people who like thrills when they travel. Clearly the travel companies have faith in the state of the country and its people. This company featured in the article even did the tour without the cover of armed guards, seeing as the requirements for their use were too stringent. I expect to see the private security business flourish in these types of areas as more and more people decided to take the plunge and visit.

Obviously one very current example of this problem is the Swine Flu outbreak and its affect on Mexico’s tourism industry, and its economy as a whole. Travel advisories are in place in the US, Canada and other countries advising against any travel to Mexico, which obviously is a serious problem for the country.,0,1879982.story

The flu outbreak has caused a devaluation of the peso, and a slump in the Mexican stock market. During a crisis such as this it is very difficult to stem the negative effects that travel advisories have on a country. I anticipate that once the outbreak resolves, the industry will recover quite well and people will return to Mexico.

I have two questions regarding Don Mayer’s article.

1- As it is also mentioned in the article, the use of private armies has a long history but caught attention after their operations in Iraq. Can it be due to their increased size and mandate in Iraq? In other words, does it get more difficult to control these PMSCs when they reach a considerable size and have an extensive mandate?

2- My other question would be about the perceptions of these ‘peaceful warriors’. I highly appreciate the suggestions in the article to make PMSCs accountable in laws terms. However, humanitarian intervention is a sensitive issue in its nature. Sometimes HI operations are seen as an infringement to sovereignty of the local state. When carried out with the help of PMSCs, I believe, public opinion will raise their opposition voices.

Is there a research/a plan/a framework about how the perception can be changed from mercenaries to peaceful warriors? Or do we expect this change in perception to come naturally after the legal changes are made?

Thank you for your important contribution to this week’s dialogue. Yes, this is a serious problem affecting tourism to Mexico - and the Mexican economy generally. In this instance, I would suggest that the Travel Advisory is justified to prevent the spread of the Swine Flu.

I agree with you - that once the outbreak is resolved, the industry will recover as demonstrated on numerous occasions that tourism is a resilient industry. Of equal significance at this time in Mexico - is the drug war violence that has been in the news these past several months.

William and Brandon,
Many thanks to each of you for your important contribution to this discussion. There is indeed growing recognition for the need of public - private sector partnerships not only to stimulate economic development in areas that have experienced conflict - and but generally in meeting the difficult challenges of the 21st Century. There is a need in these situations for comprehensive planning and setting of priorities - with the federal government of the country - donor agencies such a UNDP, US AID and others - working together in restoring the nation’s infrastrastructure and working towards a favoable investment climate that will attract international investors. The benefit of establishing tourism as a priority - is that the same infrastructure necessary for touirsm - e.g. transporatation to and within the country, as mentioned by William - hotels, financial institutions including ATM’s - communication systems - are the same things necessary for business generally - and therefore to attract investments. Working on improving the nation’s image is not only important for tourism - but for business as well.