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FIRM Behaviorin FRAGILE STATES FIRM BEHAVIOR in FRAGILE STATES The Cases Of Somaliland, South Sudan, and Eastern Democratic Republic of Congo Victor Odundo Owuor FIRM BEHAVIOR in FRAGILE STATES The Cases Of Somaliland, South Sudan, and Eastern Democratic Republic of Congo Victor Odundo Owuor February 2017 www.oefresearch.org http://dx.doi.org/10.18289/OEF.2017.013 Cover Images: Avenue du Commerce, Kinshasha; photo by Kevin Perry, Flickr. Holding a mobile phone; photo by Erik Hersman, Flickr. Employees of KEEPS waste management in Somaliland; photo by Jean-Pierre Larroque, One Earth Future. AUTHOR’S ACKNOWLEDGMENTS As the author of this report I would be remiss in not recognizing the significant contribution of several people in the compilation of this document. The report has been greatly enriched by the internal and external reviewers’ suggestions and recommendations for ways to improve the early iterations of the manuscript. Special mention goes to Mike Eldon of The DEPOT, and Victor Rateng of Twaweza East Africa, as well as my colleagues within the OEF Research program. Deep gratitude is also expressed for the contacts who gave me access to interviewees and provided useful background knowledge in the three jurisdictions. Singular recognition is given to Victor Gatonye Kariuki of Savannah Trading and Emmanuel Odhiambo of Songa Ogoda Associates for multiple South Sudan contacts; Muse Awale, Abdikarim Gole and Shuraako country staff; and Sibo Mihure and Mathews Okomo for assistance in eastern DRC. Design and layout is by Andrea Kuenker and Timothy Schommer, One Earth Future. © 2017 One Earth Future Foundation Firm Behavior in Fragile States | i TABLE OF CONTENTS EXECUTIVE SUMMARY ............................................................................................................................ 1 CHAPTER 1: INTRODUCTION AND PROJECT OBJECTIVE ....................................................... 2 Introduction ...........................................................................................................................................................2 Project Objective ...................................................................................................................................................3 CHAPTER 2: RESEARCH CONTEXT ..................................................................................................... 5 Overview of Somaliland ........................................................................................................................................5 Overview of South Sudan ......................................................................................................................................7 Overview of the Democratic Republic of Congo ....................................................................................................9 CHAPTER 3: METHODOLOGY ....................................................................................................................12 Methods ................................................................................................................................................................12 Limitations .............................................................................................................................................................13 CHAPTER 4: RESULTS AND DISCUSSION OF INTERVIEWS .........................................................14 Somaliland .............................................................................................................................................................14 South Sudan ..........................................................................................................................................................17 Eastern Democratic Republic of Congo .................................................................................................................20 Comparisons Across the Three Jurisdictions .........................................................................................................23 CHAPTER 5: IMPLICATIONS OF FIRM BEHAVIOR ............................................................................26 International Business ...........................................................................................................................................26 Central Governments ............................................................................................................................................28 International Development Agencies ....................................................................................................................30 CHAPTER 6: CONCLUDING THOUGHTS ...............................................................................................33 REFERENCES........................................................................................................................................................34 APPENDICES APPENDIX A: BUSINESS IN SOMALILAND ...........................................................................................I APPENDIX B: BUSINESS IN SOUTH SUDAN .........................................................................................XXII APPENDIX C: BUSINESS IN DRC ................................................................................................................XI APPENDICES REFERENCES ..........................................................................................................................XLV Firm Behavior in Fragile States | 1 EXECUTIVE SUMMARY provide some clarity on emerging issues in this field. The nature and form of business institutions as accepted in the Fragile states continue to garner international attention. The Western world largely does not exist in the eastern DRC, the urgent need to address problems and dangers arising from Somali peninsula, or South Sudan. state fragility is driven by a concern for two main imperatives. First, there is global pressure to alleviate the suffering of The case study therefore seeks to answer two primary people living in fragile states—the overwhelming majority of questions: What strategies do companies use to conduct whom remain exceedingly poor and subject to unbearably business in the eastern DRC, Somaliland, and South Sudan? unequal and poor service delivery. Second, fragile states, And what are the implications of firm behavior in these three by acts of commission, transmit external shocks such as jurisdictions? The specific study findings about how firms have terrorism, maritime piracy, human trafficking, and other dark structured themselves and how they negotiate challenges in network activity to the rest of the world. Therefore, the need the prevailing environments in these jurisdictions are captured to overcome state fragility cannot be ignored, especially by by seven broad strategies: international development agencies, central governments in fragile states, and international businesses interested in • the use of family savings and internally generated funds enterprise with these jurisdictions. One way in which state for firm growth; fragility can be addressed is through understanding how the • where and how foreign workers are deployed; business sector conducts its activities in fragile states. • the role of local partners; This paper, based on field research, documents which features • the place of religion; of the institution of business work and how they operate in • the choice of products and services on offer; regard to business strategy, contract enforcement, and other • how payments are received and handled; and aspects of firms’ behavior. The study was conducted in three fragile jurisdictions: the eastern Democratic Republic of • dealing with state agencies. Congo (DRC), an arena of long-simmering conflict; Somaliland, nominally part of a federation coming out of three decades of The findings, analyses, and implications of this study should almost continuous conflict; and South Sudan, a new country be useful to international businesses and multi-lateral that at the time of writing is still struggling with protracted organizations planning to be engaged in or currently in such an civil war. While there is considerable literature, especially by arena, and to regional governments interested in overcoming the World Bank, on “The Ease of Doing Business” as well as state fragility. “Enterprise Surveys” for territories including the mentioned jurisdictions, the literature on the behavior of firms in fragile and conflict-affected states remains scanty. This paper will A child holds bullets after clashes. UN Photo/Albert Gonzalez Farran 2 | Firm Behavior in Fragile States CHAPTER 1: INTRODUCTION AND in the economic institution of the marketplace, or the arena where business conducts its activities. The economic institution PROJECT OBJECTIVE of the marketplace encourages and regulates production and distribution of goods and services. Policymakers and Introduction foreign investors recognize that market-oriented reforms and privatization can go a long way towards helping fragile Fragile states have attracted considerable global attention states move towards meaningful engagement with the global 1 in recent years, and not without cause; many problems and community.7 The conventional view is that these reforms dangers arising from state fragility continue to dog the global typically only work in these fragile economies if they are community. Most failed states are poor, and subject their supported by well-established governance
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