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Peace Dividends

Author: David L. Phillips, Executive Director, The Elie Wiesel Foundation for Humanity
October 2004


Financiers refer to them as “emerging markets.” Unfortunately, developing countries may fail to emerge as participants in the global economy, and instead turn into a haven for terrorists. Al-Qaeda found refuge in Afghanistan under the Taliban. Other al-Qaeda cells have materialized in territories that lie beyond a government’s control, such as the Pankisi Gorge in the Republic of Georgia and Mindanao in the Philippines.

A climate conducive to economic success can help ward off terrorists. Multinational corporations operating in Iraq are learning that it is not sufficient to build schools, hospitals, factories and infrastructure. To maximize the positive effect, reconstruction projects must employ Iraqis and source their supplies locally.

These concepts are not new. They fall under the umbrella of Corporate Social Responsibility (CSR), which is shorthand for a proactive involvement in conflict prevention that incorporates human rights, health and safety, transparency and the environment into business planning. Today, many businesses are moving beyond volunteering and are actually implementing CSR principles. These measures help tempter the charges that commercial enterprises exacerbate conflict by serving their shareholders at the expense of local stakeholders.

In many conflict-prone countries, the polity resents multinational corporations for aligning with a country’s often-corrupt elite and exploiting locals. Occasionally, public outcry prompts legal action. In 1996, Unocal became the target of a lawsuit brought by families and sympathetic shareholders on behalf of 15 Myanmar villagers. The lawsuit accused the company of complicity in murder, rape and forced labor at the hands of Myanmar’s military junta during the construction of a natural gas pipeline in the 1990s. Although a U.S. district court ruled in favor of Unocal in January, the case is no on appeal.

Insurgents and separatist groups in volatile nations such as Angola, Colombia and Sierra Leone have targeted foreign corporations, kidnapping employees, extorting funds and bombing offices and factories. Businesses are finding that instead of fighting or fleeing, the best response is often to adopt governance policies broadening the definition of corporate social responsibility. Notable examples exist. John Hume, the British Social Democrat who won the 1998 Nobel Peace Prize, heralds a clothing manufacturer in Derry that employs equal numbers of Catholics and Protestants as a model of peaceful coexistence. In West Papua in eastern Indonesia, BP is succeeding in its efforts to implement a security strategy involving ethnic Papuans at its natural gas project. A separatist movement there could become a catalyst for uprisings in a country that is already politically and economically volatile. To mollify local opposition to its presence, the oil giant is reinvesting profits in community health care, education and micro-enterpise programs.

These projects help make the community a stakeholder in the enterprise’s success. Newmont Mining has set up local councils in Peru to identify community needs and develop strategies. Freeport-McMoRan has constructed schools and hospitals near its mining site in Indonesia thorough a community development foundation, capitalized by 1 percent of revenues from its gold and copper mines.

Rather than passively observing problems, businesses can serve as focal point for problem-solving. They can react more quickly to discord by serving as mediating institutions. Long-term, diplomatic stabilization and development strategies are valuable, but they unusually do not address crises as they spring up. Traditional power structures are too slow to respond when violence is spiraling out of control.

Despite the progressive trend toward CSR exhibited by forward-thinking multinationals, I find that it is more in the corporate nature to attempt to avoid local conflicts. This happened in Aceh, where the Government of Indonesia and the Free Aceh Movement butted heads. ExxonMobil demurred form getting involved, and was eventually forced to suspend operations when negotiations broke down between the two sides. Companies that behind their walls miss opportunities to help mediate differences before they escalate into deadly conflict.

David L. Phillips is a senior fellow and deputy director of the Center for Preventive Action at the Council on Foreign Relations.