International Companies and Post-Conflict Reconstruction
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Public Disclosure Authorized Paper No. 22 / February 2005 Public Disclosure Authorized International Companies and Post-Conflict Reconstruction Cross-Sectoral Comparisons Public Disclosure Authorized John Bray Public Disclosure Authorized Summary Findings The role of international companies in post-conflict recover their initial outlay within two or three years. reconstruction is an essential complement to the work Construction and engineering companies will take on of international aid agencies. However, if policy- short-term reconstruction contracts, but will hesitate makers are to secure the maximum benefits from to commit to long-term investment—for example in private investment, they need to understand how utilities—unless there is a stable government and different companies and sectors view opportunity and legal system. Banks will not set up operations unless risk, and take account of their overall impact in post- there are viable banking laws and foreign exchange conflict settings. regulations. Initially, they tend to concentrate on international customers, such as diplomats and aid In development circles, the debate about the role of workers, and may not develop a retail market for business in conflict-affected regions has tended to many years after the end of the conflict. focus on petroleum and mining. This paper begins with a review of the extractive industries, but then Large companies—the truly global players—will broadens the discussion to discuss three other sectors: seize opportunities in post-conflict countries if these mobile phones, construction and commercial banks. are commensurate with their size and capabilities, for It cites examples from Afghanistan, Bosnia and example in Iraq. In smaller economies, large Herzegovina, Iraq, Somalia, Sierra Leone and Timor- international companies are rarely willing to take Leste. high risks for returns that—on the scale of their balance sheets —are likely to be marginal. The most The four sectors vary in the scale of investment that active foreign investors will be niche players with a they need, and the time -frame in which they expect to higher tolerance of risk, or regional companies with make returns. These calculations in turn influence regional development strategies. their attitudes to conflict-affected countries. ‘Junior’ petroleum and mining companies are willing to take Most larger international companies now emphasize on high political and security risks in the hope of corporate social responsibility including charitable making major discoveries before their larger, more programs. However, companies’ most significant risk-averse competitors. However, ‘major’ companies social impact will come from the way that they in the extractive industries normally expect a conduct their core activities and in particular from reasonable prospect of long-term stability before their relationships with local communities and sub- committing to large-scale projects which may last for contractors. Greater awareness of the risk of ‘doing 20-30 years. harm’ has increased interest in the concept of conflict impact assessment as a sub-category of social impact By contrast, mobile phone companies make smaller assessment. International Alert and other NGOS are investments, and start getting a return as soon as the now developing tools to assist with this process. first subscriber makes a call: they may be able to SOCIAL DEVELOPMENT PAPERS Conflict Prevention & Reconstruction Paper No. 22 / February 2005 International Companies and Post-Conflict Reconstruction Cross-Sectoral Comparisons John Bray This Working Papers Series disseminates the findings of work in progress to encourage discussion and exchange of ideas on conflict and development issues. Papers in this series are not formal publications of the World Bank. This paper has not undergone the review accorded to official World Bank publications. The findings, interpretations and conclusions herein are those of the author(s) and do not necessarily reflect the views of the International Bank for Reconstruction and Development/The World Bank and its affiliated organizations, or its Executive Directors, or the governments they represent. The papers carry the names of the authors and should be cited accordingly. The series is edited by the Conflict Prevention and Reconstruction Unit in the Social Development Department of the Environmentally and Socially Sustainable Development Network of the World Bank. To request copies of the paper or for more information on the series, please contact the CPR Unit. Papers are also available on the CPR Unit’s website. For additional copies of this paper, please contact: Conflict Prevention & Reconstruction Social Development Department The World Bank 1818 H Street, NW Washington, DC 20433 Fax: 202-522-3247 Web : http://www.worldbank.org/conflict (see “Publications” in the navigation menu) E-mail: [email protected] Printed on Recycled Paper Table of Contents Acronyms .........................................................................................................................................iii Foreword ..........................................................................................................................................iv Executive Summary............................................................................................................................v INTRODUCTION..............................................................................................................................1 1. RISKS AND OPPORTUNITIES: COMMON THEMES...................................................................2 The Politics of Post-Conflict Reconstruction .....................................................................................2 Investments, Timeframes and Commercial Opportunity.....................................................................3 Security Risks .................................................................................................................................4 Political and Regulator y Risks ..........................................................................................................5 Corruption Hazards .........................................................................................................................6 2. PETROLEUM AND MINING.........................................................................................................7 The Business Case...........................................................................................................................7 Security and Regulatory Risks ..........................................................................................................7 Structure of the Industry ..................................................................................................................8 Making the Right Call .....................................................................................................................8 Oil, Minerals and Conflict................................................................................................................9 Corporate Responsibility and Social Impact....................................................................................10 Implications for Other Industries ....................................................................................................12 3. MOBILE PHONES.......................................................................................................................12 The Business Case.........................................................................................................................13 Regional and Niche Players............................................................................................................13 Security Risks ...............................................................................................................................15 Political and Regulatory Issues.......................................................................................................15 Supply Chain Issues ......................................................................................................................16 Corporate Responsibility and Social Impact....................................................................................16 Case study: Telstra reconnects post-conflict Timor Leste .................................................................18 Case Study: Mobile Phones and State Failure in Somalia .................................................................19 Case Study: Celtel’s Commercial Expansion in Sierra Leone ...........................................................20 4. CONTRUCTION AND ENGINEERING COMPANIES.................................................................22 The Business Case.........................................................................................................................23 Structure of the Industry ................................................................................................................23 Finance and Political Risks ............................................................................................................24 Security Risks ...............................................................................................................................24 Integrity Hazards...........................................................................................................................25