Private sector

Building peace

For lasting peace to be possible, people need to be given a perspective after violent conflicts. The private sector plays an important role, particularly in conflict-affected environments.

[ By Stefanie Bauer ]

Poverty and violence reinforce each other: poverty increases the probability of violence, while violent conflicts lead to poverty. A strong private sector can prevent tensions arising from economic deprivation. Donor countries hence promote market structures and private sector engagement in countries at risk of such disputes.

Germany, for example, supports traditional silk production in Northern Afghanistan. This strengthens cultural identity, while also addressing poverty. In the Chahar Dara district in Afghanistan, German Technical Cooperation (GTZ) supports a factory which produces tomato paste, thereby helping to improve live­lihood opportunities and diversify the local economy. In Mazar and Imam Sahib in the North of the country, the GTZ helps establishing markets where mainly women are doing business. Economic development not only combats poverty but stabilises conflict regions at other levels too.

In addition to violations of basic rights and human rights, economic injustice is frequently the cause of conflicts. This is equally true of uneven resource distribution, lack of economic participation and empowerment, or unsatisfied basic needs among sections of the population. Promoting socially just and environmentally sustainable business development and supporting small and medium-sized local enterprises can reduce social tensions.

In Bangladesh, unbalanced economic development and social inequality are among the structural causes of conflict, which also impairs the competitiveness of the clothing industry. If social standards were introduced and basic rights such as the right to work, economic empowerment and fair working conditions were ensured, these kinds of disputes could be reduced.

Tension due to economic injustice

Over time the socio-economic gap in soci­ety will also be reduced if the economy is strengthened, markets become more diversified and efficient, competition is fairer and people have better working conditions. Independence from trade with raw ma­terials can also reduce major causes of conflict in a country (resource curse).

A healthy economy generates income and employment and thus smoothes the way back into civilian life. In countries such as Sierra Leone or Angola, in particular young men and ex-combatants need income generating opportunities for there to be long-lasting peace. Vocational education and training matter very much.

Conflicts destroy not only the physical infrastructure of a country but also social relationships, cohesion and trust – the foundations for entrepreneurial activity. The rebuilding of economic relationships hence strengthens this social fabric.

Business associations and enterprises often engage in reconstruction activities – partly motivated by business interests, as conflicts increase the costs of doing business, but often also motivated by moral conviction and the objective to be responsible business agents. Columbian employers have recognised their role in the peace process: They employ former guerrilla fighters and, by doing so, help to restore trust within the communities. Other ex­amples for socially responsible business behaviour include the “National Business Initiative for Peace” (NBI) and “Business Talks for Change” established by business associations in Nepal.

In some places, regional trade may also be a driver of peace and stability. Afghanistan, for example, would benefit from closer economic relations with its neighbours. On the border to Uzbekistan reduced tariffs already contribute to in­vol­ving local people in the stabilisation process by increasing cross-border trade.

Functioning institutions are a prerequisite for reconstruction and long-term peace. However, during conflicts, organisations such as banks or service providers can usually only act to a limited extent. At the same time successful entrepreneurship depends on their capital and services. The conflict in Nepal, for example, had a huge impact on the state’s regional banks. Under pressure from the Maoists, they had to withdraw to the main cities. People living in the countryside were left with almost no access to financial services. Microfinance institutions, credit cooperatives and informal savings groups therefore became more important and also opened up to lower castes or the landless poor.

Justice and reconciliation

For peace to come about, justice and trust have to be re-established in a society. In addition to truth commissions, criminal courts and reparation payments, economic, social and cultural basic rights must be guaranteed (“transitional justice”). Excluding entire segments of the population from economic activity could be one of the injustices, causing a dispute. In the private sector of Nepal, for example, the corporate sector is still made up of a small elite, continuing to profit from the conflict logic and violating basic rights, while the majority is hampered in its entrepreneurial activities. Businesses differ from one another in this context: some want legal certainty and participate actively in reconciliation processes, while others obstruct the process. In order to rebuild economic structures, all conflict parties, including the sections of the population that were marginalised during the conflict regime, need to be involved in the reconciliation process. By establishing a multi-ethnic reconciliation committee within the chamber of commerce, companies in Sri Lanka are trying to strengthen the dialogue between the parties and therefore exert an influence on the business and investment climate. In Nepal, the private sector is included via dialogue forums, public relations activities and campaigns.

Do no harm

A flourishing economy can strengthen the peace and reconciliation process – but it may fuel conflicts too. One challenge for the promotion of the private sector in the affected regions is to not unintentionally support or finance a conflict party, or trigger new tensions. There is the danger that institutions of business promotion or commerce and industry – such as associations or chambers – become weak due to infighting over resources, power or status. Strengthening market structures creates competitive situations that can be particularly explosive at the local level.

So-called “do no harm” approaches take into account that development assistance always has an influence on conflicts. If, through economic development, donors can prevent new tensions from flaring up, private sector promotion will make a crucial contribution to peace.
Economic development then
– reduces conflict – even a slight improvement in living standards can transform propensity to violence into constructive energy,
– eliminates causes of conflict by reducing the unequal distribution of resources and guaranteeing basic economic rights,
– reduces social tensions,
– restores the trust that has been lost,
– facilitates the population’s return to civilian life by providing work,
– promotes the development of pluralistic structures and reconciliation, by including people in decision-making processes,
– can stabilise international relations through international trade.

Development cooperation can support such dynamics by means of integrated approaches, combining the perspectives of peacekeeping, private sector development and transitional justice.

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