Theme 6: Key Issues to Doing Business in Conflict Zones

Peace
41

Thank you for your questions, Jacque.

It wasn’t so much difficult to approach the topic as to understand possible solutions. In my experience, countries that have lost generations as a result of violent conflict (leading both to death and “brain drain”) are having to find new ways to compensate. For example, in some of the countries, they are developing their own graduate business schools to train middle managers.

In fact, they are building businesses! Many of the strongest efforts are from small businesses, and people returning. A key challenge lies in the size of the markets. Companies often prefer to go to larger markets.

A consequence of the breakup of the former Yugoslavia is that the countries that exist now are very small. This increases the transaction costs, particularly because of the cumbersome administrative processes internal to most of the countries. It’s much easier to perch outside but close by in Budapest, Prague, etc.

42

In any business, not just tourism, companies are finding that their strongest assets are often the people who live there. There’s an increasing bias against ex-pats… At least in my experience.

43

I agree with the idea that corporations need to work with local partners in “all states of a CSR program.” Targeting the needs of a specific community takes into consideration the fact that different countries have different norms so it would be imprudent to try to impress your own ideas on such countries. Working with local partners is engaging them every step of the way in order to ensure that their basic rights are protected, and they receive the benefits. With that in mind, what is the best way to get the local community involved in the CSR process?

44

My question is also for Tara.
I apologize if this has already been addressed, and if so, I wouldn’t mind being directed to the posting where the conversation took place.
I’m interested in knowing your opinion on what happens in a society after conflict has ended and society starts to close gaps that were created during a war or disaster, etc…let’s say tourism starts helping to rebuild communities, people begin to find jobs, and in finding “new ways to compensate,” as you had explained to Jacque, is there a chance that the community could begin to lose its sense of identity?
Of course, in encouraging tourism in or in the rebuilding of a post-conflict area, it will be branded for how the area WANTS to be perceived.

In the re-branding and restructuring process, are the residents at a risk or a benefit with the possibility of their homeland being taken over by larger businesses and foreigners trying to visit? I understand that a sense of structure is needed in these scenarios and that these businesses and corporations provide that. However, I guess I’m thinking on a more cultural level, and wondering what could be done to preserve the society’s cultural identity while rebuilding and providing a positive structure.
Thanks :slight_smile:

45

This is in response to the last several posts.

When thinking of companies moving into post-conflict and potentially areas that would be a risky investment, I think of neighborhoods in our very own city of DC. We have all heard at some point about areas the city is trying to clean up. In some cases, to do so involves building brand new, sometimes expensive strip malls, restaurants and businesses, and the idea is to drive the “bad” community and crime out, and bring a different crowd in.

We see that a large percentage of the time, this does not work. The crime persists, and if the strategy does work, it takes a substantial amount of time.

Does anyone have any comment on how THIS is different than moving businesses and corporations with strong CSR strategies into areas of post conflict? Is the only difference that the companies are committed to the community? Do we send the tourists and the businesses into these areas and hope for the best? How strong is strong enough for these companies’ CSR strategies to work and make a difference?

Also, I just wanted to say that I think a strong incentive for companies to move into these areas to try and make a difference is driven by the desire not for profit, but for a positive, lasting reputation in the long term, given they are successful in their efforts.
I am really interested to know peoples’ ideas on some of the questions I’ve raised.
Thank you

46

yes, thank you!

47

I agree with this completely. past experiences have caused MNC’s to portray an unethical, and as Professor Fort has iterated before an evil business mentality. You just have to recall companies such as Enron and De Beers, who are/were considered some of the most unethical companies in the world, but who also had a tremendous impact on our lives. MNC’s have so much power, and it is up to them to use that power in the right way. This is my opinion anyway. If companies with this power are able to use CSR to identify with their communities then we really could see an overall improvement in all forms of business. Not just ethical business decisions, but the relationship we hold as a community vs. global business power.

However, how does a company with an existing reputation for low CSR turn it’s image around. Does it just lay with the CEO, or does it have to filter through to every employee? Plus how do you certify that your local partners will also be on board to promote these new ethical behaviors?

48

I agree with the ideas presented in the post, but I beg to wonder how so many MNEs were successful at exploiting developing and conflicted countries for so long. The largest that immediately comes to mind is Nike’s treatment of their offshore shoemakers. It wasn’t until the horrid public relations disaster in the United States did anything actually get done.

My question is if the governments are corrupt and the public is desperate for employment, what is the mode for change besides an explosion of public outrage in the United States?

I just feel like as the world becomes more globalized there is going to be a better chance and higher occurence of exploitive MNEs. Also, with the new 24 hour news cycle that is focusing on more ‘profit’ based news, the chances of a great amount of coverage on the exploitation of non-US workers is diminished.

49

Hi Tara, I have a few questions for you.

First of all do you see the gap between entry level and senior management being filled through either demoting senior management or promoting entry level workers? If it is the latter, are businesses making sure that they promote in a manner that doesn’t fundamentally hurt their business by sending up workers who are not prepared?

Additionally, did many of the individuals whom you ran across feel a disconnect from the rest of the european community? And did they have trouble incorporating more modern business practices?

Thank you,

Abbas Zaidi

50

Thanks, Efe – As to 1.,I think a lot of people were looking at private military companies even before 9/11. E.g., Sandline and Executive Outcomes had done some “interesting” things that raised accountability issues, and Singer’s work began getting noticed even before we were in occupation mode in Iraq. The cost-plus contracts of KBR and the shoot first/ask questions later approach people saw with Blackwater certainly made the issue of control/accountability more prominent. I’m not sure it is their size and/or mandate that creates the problem; the mentality of “just getting it done” allows for cost-plus, no-bid contracts without careful contracting (the kind of contractin that I’m recommending) that includes accountability for wrongful acts. (Analogy: the government “rescues” the banking system by giving it major injections of money without requiring checks on fraud and waste.) If the political will is there (and the contractor is not a crony of high government officials) it would not be difficult to control the PMSCs regardless of size or mandate.

As to 2., you point to a significant problem. But let’s start with the apparent truth that sovereignty is infringed, impaired, or compromised in a lot of situations; but many situations of HI need not involve any infringement of sovereignty. In the Congo, for example, ithe problem is the lack of funds for capable forces to be engaged on the side of the DRC, which IS the legitimate sovereign. In Darfur, by contrast, Sudan is the sovereign, but if genocide is taking place, the involvement of PMSCs would certainly require some legitimating force, perhaps regional in nature. I’m not advocating that you and I start a fund for people who want to end the Janjaweed terror by hiring a reliable PMSC, although such things have been proposed. No, there are many situations - early stages of genoicde being one - where “sovereignty” cannot be held as an absolute bar to humanitarian intervention. The question is what international institution has the broadest credible authority to coordinate an intervention. The “international community” needs to have that discussion. If there is some legitimacy in terms of human need, then whether the lead institution sends “blue helmets,” a mixture of various national military folks, or hires fully accountable PMSCs, public opinion will (I think) look primarily at the objective and whether the operations are carried out in a responsible way. Using mustard gas on the Janjaweed, for example, might be cost-effective but, regardless of who does it, there will be objections.

I’m not trying to change perceptions about companies that are in the business of killing people for a living. There are such companies, but the IPOA folks will tell you that most PMSCs are PSCs (taking out the military part and leaving in the security part). Still, some PMSC employees will have guns, and may use them; but under my suggestions, legitimate authorities would hire PMSCs through a mediating non profit that would take responsibility for the contracting and ensuring that the individual employees would be brought to justice for criminal and civil wrongdoing. If and when this happens in at least one instance, there will be a model to be followed; best case scenario, the operation goes smoothly, but one or two “bad actors” are disciplined, and the resulting application of criminal or civil penalties makes clear that the days of cowboy contractors in Iraq are far behind us. Percpetions would change gradually, in other words, as (you say) after the legal changes are made.

51

Kristen,

You raise an interesting question that regards the difference between businesses moving into less-developed areas of our city, versus countries once previously burdened by conflict. Also, you bring up the current strategy of building up underdeveloped city areas through new development, whose goals are to attract new types of customers, and more businesses.

There are probably many examples of similarities between these two scenarios, but I see one inherent difference.

Goals aimed towards building up undeveloped city areas, as you mentioned, attempt to attract new customers and to “drive the ‘bad’ community and crime out.” In practical terms, this means attracting new “types” of customers and people to the area, and pushing out undesired ones. Whereas simply attracting new customers to a city area may improve that local economy, this strategy is not a viable option in post-conflict burdened nations. Instead, bringing commerce and business to these areas more often involves incorporating the local workforce and attracting local customers. Of course industries such as tourism pull travelers from nations abroad, but they still require local workers to run operations. The basic underlying difference between these scenarios is that while one strategy seeks new customers and commerce, the other works with the current status of the local community and aims to develop it using the local workforce and resources.

52

Igor, would you consider that Foreign aid might be seen as a necessary evil to these countries? While it might raise corruption and bring in unwanted visitors, for the most part these countries don’t have the resources and tools to help their own cause. If it were that easy, I think we’d see most countries reject foreign aid since they would know that they could survive on their own. While these countries might be reluctant to accept foreign aid and are disappointed with the results of the mismanaged aid, I would be surprised if most of the countries you spoke to didn’t regret the decision to accept help.

53

I agree that Mexico’s economy and tourism industry will rebound but it will not be without hard work and dedication. As demonstrated by Canada during the SARS outbreak, it is very feasible to help build back a country’s image by ensuring that the problem will be prevented in the future and that the government is doing all it can to help deal with the current crisis.

In regards to the war on drug violence in Mexico I feel as though it will not take as much work to build up tourist’s confidence to return to the country. When the crisis was first broadcasted on the news, it caused a slight fear of travel. However, this fear was not nearly as great as the one brought about by swine flu, in my opinion due to travelers greater perceived fear of this disease having a direct effect on them as opposed to the ongoing drug wars.

54

I think the best way to approach this would be for organizations that have a strong attachment to the region, say in terms of an organization that needs to utilize the regions resources, to move in before solving some of the inherent problems. This gives them strong incentive to protect not only their company on foreign soil, but to work to develop a long lasting peaceful community. This is off course highly risky given the fact that there could be hostility from locals. However, I feel this gives the company the most incentive to work towards establishing peaceful relations, while at the same time, pushes the local community’s economy with jobs.

But, do you think there are other ways that organizations would be incentivized to quickly establish peaceful relations that benefits both sides in terms of profit as well as CSR?

55

I think that a company with low CSR could turn its image around by doing what is suggested, working with local communities. By responding to these communities’ wants and needs, their efforts will be best received and most effective. Additionally, by implementing action that will ultimately help these areas, citizens will inevitable reposition their judgments of these MNCs. Of course, this will take time. I believe that its essential for the MNCs to establish a trust worthy and enduring relationship with these communities. It will take time to regain an element of respect, but with time and continuous efforts it is possible.

I would suggest in addition to these higher level initiatives, the MNCs should institute company wide programs/charities that work to help such areas. This will help to produce a cultural change. Additionally, PR and marketing would need to accompany to fully initiate a change of brand image. In my opinion, a company image can be transformed, it however requires cooperation from local partners, employees, and upper management.

56

I think that this is a very interesting issue. When a multinational company comes into a conflict or post-conflict zone, who is to say what their motives are? Are they there to increase their reputation or to truly help the local community? I thought your is discussion in the paper, Building Peace in Fragile States begins to tackle this issue. I really enjoyed the discussion of how to deal with obstacles to the peace building process such as corruption and weak law mechanisms. These relate directly to problems when considering how focused the CSR efforts of multinational companies are toward the needs of the local community. A multinational company, as you mentioned, can sometimes be worth more than the entire value of a conflict country. If that is the case, these companies have unlimited influence opportunities in these zones, but little regulation to ensure their influence is being properly utilized.

The partnership that you discuss at length in the paper is an interesting way to limit the amount of problems associated with corruption and the MNC not focusing on local needs and the corruption possibilities. In the US, there is a similar partnership that is currently being developed to help rebuild the financial system. This is called the Public-Private Investment Program (PPIP) and is utilizing both private investors’ capital and the government’s stability to rebuild the amount of capital in the financial system. This is exactly the type of partnership you described in your paper. Do you think that this will be as successful as the examples you have seen in the past? Will the problems of corruption and misuse of funds go away if there is a partnership established or is there still more work to be done? Finally, in many countries that are currently in conflict have corrupt governments or public sectors, how do you think this partnership will address these problems?

Thank you for your wonderful research,
Lily Goldstein

57

As an addendum to your answer to question 1, I would like to stress the importance of the Montreux Document when dealing with PMSC accountability issues. The problem with holding PMSCs accountable for unjust acts, regardless of their size, is the protective barrier created by acts such as the “states secrets privilege”. This makes it possible for PMSCs to slip through legislative loopholes if the crime is too closely connected with “top-secret government operations”. The irony behind this is nearly any operation can stand on these grounds if the government is the sole contractor of the PMSC. The Montreux Document as it stands today, is simply a list of recommended protocol governments and PMSCs alike should follow and seems to have very little mandate attached to it. If this Document were given more international backing and enforcement, I believe it could act as a powerful tool in keeping PMSCs accountable for their actions.

58

I also have a few questions for Don’s video.

When you mentioned that there is little regulatory oversight or international law directed toward these private military groups, my initial reaction was shock. These groups have the same, if not better, expertise than some of the strongest national military forces throughout the world. Many of the skills militaries have developed throughout the years are what they are able to hold on to and rely on in times of need, and is something the public should not, or may not, be able to provide for themselves. What was your initial reaction when you heard how little regulation there is toward these private militaries?

In addition, you continued on in your discussion of numerous humanitarian problems throughout the world. You specifically mentioned the Congo region and how it has received virtually no media attention in the United States. I, for one, have not heard much about the issues in the Congo, but have heard about the conflicts in a few zones throughout the world that for one reason or another are more prominent on prime-time news. Since there are hundreds of humanitarian problems arising constantly throughout the world and each developed countries’ budget can only be stretched so far, do you think that by increasing regulation of these private militaries may prevent their involvement in these humanitarian war zones? Does the cost of not having these private military groups to be the eyes and ears of conflict zones when developed countries cannot outweigh the benefit of increasing regulations over these groups?

Thank you for your time,
Lily Goldstein

59

My questions are for Tara.

One of the things you mentioned in your video were three major findings you discovered in your trip to Europe. The second finding is the one I am going to focus on for the first part of my question. Having an alignment of value, as we learned in a previous class of ours, is one of the key drivers of having a successful “change” organization, one that is open and able to change with time. This can be directly related to a liberalization economy, which is changing over time and reacting to the post-conflict environment. Since the people have a major divider between their values of the past and values of the future, what do you think is the most important starting point in order to realign these values? I know that this is a heavy-handed question, but whose job would you say it is to ensure the alignment of values? As we have learned in this class, not having the right direction can cause things to be in constant disarray, so what values are most important to have in a post-conflict area in order to avoid this?

Secondly, the gap in the generations is a problem I found interesting, but not surprising, and I can see that many other participants feel the same way I do. Although I have never considered it through my own lens, your recognition of a missing chunk of society is imperative to understanding the proper journey out of post-conflict areas. What wisdom can you impart on us in terms of how to solve the problem of a widening gap so that a country can begin its rebuilding process? The sadness of death and fear of conflict arising again is something that probably does not leave the minds o the citizens in this area very quickly, so what are some important steps to ensure the gap is filled in and people are able to recover and move on?

I know my questions are not short or easy to answer, so feel free to take a stab at one or just a couple of them. I am just interested in knowing your opinion for when it comes to taking the crucial first steps toward rebuilding and what your trip taught you about that.

Thank you for your time!
Lily Goldstein

60

Shane, you make a very good point about making sure that everyone is “playing by the rules”. It should be the job of these Olympic oversight committees to insure that the possible locations can sustain the immense toll that Olympics takes on a city. Joshua makes a great point as well, it would be great if they would offer an ultimatum to these countries with poor human rights records, but the real issue is, how are these countries even getting to host the Olympics in the first place? Are these Olympic committees just closing their eyes to the fact that these countries are doing things that could show the host countries in a bad light?

The sports world is one that has a great opportunity to impact many different countries. Sports are in all countries big and small, and the Olympics is just one (mind you very large scale) way we can set an example for the rest of the world. Even countries like Iraq, Iran, China and others that we have had our troubles with have their own sports teams and everyone from the lower to the upper class follows sports. We, and other nations need to use sports as way to reach out and set an example for our political and business counterparts.