Business interests large and small are exploring ways they can promote peace and economic progress in the developing world for the greater good … and their own.
Chevron Corp. cultivates suppliers in Angola. A Haitian entrepreneur replaces earthquake-devastated housing with more reliable steel framing, and trains 200 franchisees in the process.
The two projects, outlined in a panel discussion at the U.S. Institute of Peace (USIP) on Dec. 7, represent a surging trend that ultimately may dispel the notion that business can’t or shouldn’t be involved in fostering and sustaining peace. Corporate executives and entrepreneurs are getting involved, governments are providing support and nonprofit groups and academic experts are studying an idea that was scoffed at just a decade ago, said Timothy Fort, executive director of the Institute for Corporate Responsibility at George Washington University.
“People thought we were crazy -- or failed contestants for the Miss Universe contest, talking about business and world peace and things like that,” Fort said.
Views are changing rapidly. In 2010, Raymond Gilpin, director of USIP’s Center for Sustainable Economies, convened a high-level task force with Fort’s Institute to examine ways the business sector could contribute to stability and economic progress in countries emerging from conflict or authoritarian rule. The findings and subsequent reports formed the basis of the Dec. 7 event, attended by an audience of corporate, government and civil society specialists spurring private-sector involvement in places such as the Palestinian Territories and Pakistan.
“Sometimes we say there’s a prima facia case for business and peace, when you think about it conceptually,” Gilpin told the audience. “But then what do you do? What are the actions that might be taken.”
The private sector accounts for more than three-quarters of capital flowing into the developing world, but economic development and stability, including job creation, traditionally have been seen as the purview of a country’s government or of foreign aid donors. Business often creates jobs, supports small- and medium-sized enterprises, rebuilds infrastructure and stabilizes communities. But its actions also can exacerbate problems without proper oversight, USIP researchers have found. Developing countries beset by conflict are particularly vulnerable to the scourges of corruption and the destruction of war.
Chevron tried to do things differently in Angola, said panelist Mamadou Beye, the company’s manager of International Governmental Affairs. The company viewed responsibility as going beyond philanthropy to making the concept part of its core business, he told the USIP audience. The California-based oil giant aimed to help spur recovery after a 2002 peace agreement ended 27 years of armed conflict that left more than 1 million dead, 4 million displaced and widespread destruction of the country’s infrastructure.
Angola is governed by a regime led by President Jose Eduardo dos Santos, who’s been in office since 1979. The first legislative elections since 1992 were held in 2008. As of earlier this year, Chevron was Angola’s largest foreign oil-industry employer and 86 percent of the workforce is Angolan, according to the company’s web site. The Angola Partnership Initiative was organized to promote “peace, improved health and better educational opportunities,” the company says.
Chevron worked with the Angolan government to gather other foreign oil producers and the state-owned energy company, Sonangol EP, along with foreign aid providers and local non-profit groups to speed humanitarian aid, Beye explained. The group then helped establish programs to wean the population from aid by reviving the agricultural sector, one of Angola’s strengths before the war. They set up a micro-finance bank to provide capital for entrepreneurs and re-established the country’s agrarian school for training, Beye said.
The project was “way outside of our area of operation, to see how we can reintegrate ex-combatants, refugees and internally displaced people,” Beye said. “The whole concept was always how can we quickly move away from aid to sustainability … and also help consolidate peace at the same time.”
The oil companies went on to invest millions of dollars in a program to identify business opportunities within their operations for Angolan entrepreneurs, then find the local businesses that might qualify and help them win contracts.
“Last year alone, out of $2.5 billion that just Chevron spent in Angola, $900 million was spent on Angolan companies,” Beye said. This year, Angolan entrepreneurs were brought to an oil and gas conference in Houston so they could find new business partners. “We are doing it and we are measuring it,” Beye said.
Investing in local businesses by drawing on them as suppliers and training them is “one of the most important things to sustain development,” said Steven Koltai, founder and chief executive officer of Koltai and Co. LLC and a former senior adviser for entrepreneurship to Secretary of State Hillary Clinton. There’s an enormous need in some of the largest emerging markets in the world, such as Egypt, Indonesia and Turkey, for business incubators and accelerators, Koltai told the audience at USIP. These countries may have only a few such institutions compared with more than 1,500 in the U.S. that are part of just one association.
None of the necessary elements are all that controversial, Fort said. “Make a profit, follow the law and a good corporate environment so that people are producing quality products – that’s not that wild a stuff,” he said. “But if businesses are promoting those and practicing those more mindfully, I think it will have a tremendous positive impact.”
In Nigeria, Beye said, “We recognized years of mistakes in the approach that companies” were taking. In trying to change that, the U.S. Foreign Corrupt Practices Act, which prohibits American companies and their subsidiaries from paying bribes in the course of business overseas, turned out to be an effective tool. Beye said he carried a translated copy of the Act with him and started meetings with Nigerian officials by outlining those principles. The catch is that investors from other countries may not always follow the same rules, creating an uneven playing field.
In Haiti, entrepreneurship held one of the keys to recovery from the January 2010 earthquake that killed more than 200,000 people and displaced an estimated 2 million. Entrepreneur Mathias Pierre introduced a technology to his fragile country intended to bring safe and affordable housing to replace weak concrete structures that had been reduced to rubble, said Teddy Roux, an associate at Entrepreneurial Solutions Partners in Washington D.C. and an expert on private-sector development in fragile economies.
The consulting group helped Pierre gain financing and create a network of 200 franchisees, Roux said at USIP. The first class of male and female entrepreneurs for the Kaytek franchise graduated two months ago from a year-long course in business skills and new technology.
“So he didn’t only create employment,” Roux said. “He created a network of micro-entrepreneurs who are now equipped, as we talk, to pursue opportunities and create jobs in their own right.”
The Clinton Bush Haiti Fund announced in August 2011 that it awarded $1.08 million in grants for the project.
In getting business involved in sustaining peace, democratic institutions are needed as a release valve for negotiating differing interests , said Julia Roig, a specialist in good governance and conflict resolution who was a member of the USIP task force. “We can’t be working on economic prosperity and development if we don’t understand the root causes of a conflict in the first place,” said Roig, who is president of Partners for Democratic Change in Washington, D.C.
Overcoming corruption goes beyond ending bribery to opening what typically was a closed system that catered only to the society’s elites, Roig said. Employment can be a leveler, Koltai said.
“I believe that the single most important ingredient in political stability, whether you are in Michigan or whether you are in Morocco, is jobs,” Koltai said. “And the single biggest creator of jobs is entrepreneurship. In some cases, it is virtually the only creator of jobs.”
The trend of harnessing entrepreneurial ambitions to sustain peace is spreading rapidly, the experts said. In Pakistan, “a little bit could go a long way because they do have so much of the raw material,” Koltai said.
Malaysia, Rwanda and Chile are examples of fragile or post-conflict countries that successfully used entrepreneurship for economic development. A common factor was supportive political leadership, he said. In Israel’s effort to combat economic stagnation in the 1970s and `80s, economic development was almost entirely government-driven, but with a venture-capital program that has made the country the premier example of venture financing now, he said. Even in the U.S., the military budget contributes significantly to the economy and to technological development.
Multiple sectors – governments, business and civil society – need to be involved, Fort said. “Otherwise you really end up spinning your wheels.”
Part of the drive to corporate action on this front has been spurred by the Internet, Fort said.
“The Internet can capture a corporate indiscretion and have it on YouTube in five seconds,” he said. ”There is an accountability mechanism that exists now that didn’t exist 10 to 15 years ago. And I think that is one way to get corporations’ attention that what they do and how they’re perceived at what they do does indeed make a difference to the bottom line in a way that just didn’t exist two decades ago.”
Some argue that companies have a responsibility to act because it’s the right thing to do, while others say it’s simply good for business, Forrer said.
“I guess we really don’t have to decide as long as the engagement is there and the actions are being taken,” Forrer said. “That’s what really counts.”