The Role of Private Business in Peace and Development

The private sector has a pivotal role as a driver of economic development and an actor which can contribute to peacebuilding in a variety of ways, through its core function of stimulating growth, creating entrepreneurial opportunities, providing jobs, and generating wealth. But the way in which these functions are implemented and the environment in which business operates will determine whether its impacts will be positive in terms of economic opportunity, equality, social justice, the natural environment and governance. These elements together underpin sustained peace by addressing the root causes of the conflict. If economic growth generated by the private sector does not translate into more equitable wealth distribution, job creation and accountability, it will do little to remove the sources of tension and fragility within a society.

Private business is never politically neutral: decisions to produce, invest or create jobs have political and policy implications which can shape the peacebuilding process. Therefore, the first step is to look at the kinds of business that exist in the local context and the nature of their involvement in the conflict before being able to consider how they can support economic development and peacebuilding, and how to avoid potential negative impacts.

Experience shows that war-time adjustment in the private sector has a long-term impact and economic reversals can be deep and protracted. This has consequences for the relationship between private business and economic development in such contexts. These consequences are at the core of the post-war reconstruction programmes supported by international actors.

Private business is affected by conflict in manifold ways; from the loss of assets, capital, skills and infrastructure to the disruption of governance which hinders its potential to contribute to economic growth and development. But of note in contemporary conflicts is the emergence of new actors and rules which affect businesses by creating enduring regulatory instability and unpredictability. Local SMEs, which arguably have the greatest stake in the return to normality and peace, are especially at risk in an environment lacking rules and regulations and where corruption is pervasive and rights compromised.

A particular challenge stems from the emergence of new governance actors (especially non-state armed actors) and new business elites reliant on violence, and their amalgamation through war economy dealings. These new governance/business arrangements often include state actors who are also engaged in the “business of war” – that is, in illegal and criminal activities that proliferate in the war economy. But there are also cases in which the private sector acts as “governor” by becoming a provider of public goods – although this too may entail having to cut deals with armed groups and criminal groups, creating a different platform from which to engage in peacebuilding.

These different facets of the business presence on the ground impact its potential for a positive contribution to economic development, both during conflict and in its aftermath. It is important to bear in mind when speaking about the business sector that it is not a monolithic actor with a unified agenda. The interests, incentives and capabilities of businesses, and hence their courses of action, differ according to factors such as size, legal status, ownership profile, and the broader security and geopolitical framework. This will also be determined by the extent and the manner in which a business is linked to the political and military elite. Paying bribes may be the only option for SMEs to survive during and after the war. Meanwhile for TNCs it may be the way to secure privileged access to business opportunities, as has been the case of cement manufacturer Lafarge, charged with financing terrorism in Syria.

The end of conflict does not mean that the business operating environment has changed. Business often faces many of the same difficulties: weak and corrupt institutions, political instability, the presence of organised crime, inadequate access to finance, infrastructure problems, skills shortages etc. Such security, governance and market conditions influence the propensity to invest in the long term and hence affect the job creation associated with a peace dividend. What all this means is that there are sometimes exaggerated expectations of private business capacity, will and feasibility of action in conflict and post-conflict contexts, including business’s contribution to truth and reconciliation as a way of dealing with historical legacies.

 International assistance/approaches

The international approach in support of private sector development in conflict-affected areas has for a long time relied on universal blueprints with policy reform packages. Such approaches have often encountered political obstruction and failed to achieve expected outcomes. This has to do with the reluctance among donors to commit to approaches better suited to address the unique specificities of societies affected by armed violence and fragility, which would render a different view of the role of the private sector. More recently, there have been indications that such practice is beginning to change.

A key aspect in this respect is the importance of conducting broad and sustained stakeholder consultations to better understand the challenges of private sector development in such contexts, and how private sector growth can most effectively contribute to economic development in a manner that addresses the impact of conflict at the local level. Another key change is the recognition that the private sector is not and cannot be approached as a stand-alone actor. Rather, the notion of “business-based peacebuilding” relies on the model of multi-stakeholder partnerships as a framework for more proactive engagement of the private sector in dealing with issues of development, peace and security.

While the actual processes of the private sector’s involvement in peace-related activities differ across countries and different conflict zones, a common trait has been a tendency to work as much as possible with other societal actors. These include international and local non- governmental organisations, local governments, religious and academic institutions, international donors and multilateral institutions. Experience shows that business is most effective in addressing conflict-related issues when working collaboratively with other actors.

*Published in Partnership with the LSE’s Conflict Research Programme.

Summary by the LSE report editors of the presentation given by Professor Raymond Hinnebusch at the London School of Economics Political Economy and Governance in Syria 2018 conference.