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Do transnational businesses aggravate conflict? Can they be regulated?

Date
Time (GMT +00) 13:00 14:15

Speakers:
Philippe Le Billon
, ODI
Gavin Hayman, Global Witness
Chair:
Zeinab Badawi

Philippe le Billon (a) described the different ways in which transnational businesses might become involved in conflict, (b) presented a balance sheet of positive and negative effects, and (c) made the case for regulation. Businesses were of many different kinds, ranging from arms suppliers and traders in illicit goods, to well-known TNCs involved in natural resource exploitation. Some had a high profile, some did not; some respected the rules, others did not. Various classifications were offered. Businesses could be lethal, interventionist, criminal, opportunistic or adaptive. The balance sheet was not always negative. It was true that transnatinal businesses could exacerbate inequalities, sustain misgovernance, abuse human rights, support belligerents and impede peace processes. However, it was also true that they were capable of providing jobs and economic services, bearing witness and restraining abuses, assisting in negotiations, and generating the 'peace dividend'. It was hard, however, for businesses to be neutral. More often than not, they were complicit in conflict, directly or indirectly. An example of the problem was given by quoting an Elf (oil) official in Angola in 1998: 'The conflict does not matter so much for our activities, except if the whole country was in blood and flames, including Luanda. Even then … the price of petrol bothers us much more than the political situation'.Regulation was needed, and was complementary with voluntary codes. The latter could promote positive engagement, but the latter were needed to achieve a reduction in negative engagement. Ideas might include: (a) the criminalisation of sanction-busting; (b) the development of the UN's investigative capacity on sanctions and war economies and (c) the strengthening of trade regimes (e.g. for diamonds).Gavin Hayman also made a presentation. He described a 'paradox of plenty' where resources not only fail to bring development - but may hinder it, by encouraging conflict. He remarked on the special role played by the natural resource sector (diamonds, timber, oil) in conflict - often the only source of revenue available to less developed states. Natural resource flows are easily manipulated as there is low 'transparency' of the resource allocation process and extraction is often in frontier areas. Further, natural resources businesses cannot divest from conflict areas and increasingly extract from countries where civil society and transparency are proportionately weaker. Gavin Hayman cited research findings that good natural resource endowments were associated with a 22.5% higher likelihood of civil war in any five year period. The situation varied, however, by type of commodity: different situations needed different solutions.Three cases illustrated this point: diamonds in Sierra Leone, timber in Cambodia, and oil in Angola. In each of these cases, natural resources had fuelled conflict, with the active collaboration of transnational business networks. In the first case, diamond revenues had financed the RUF. The main response had been trade regulation through the Kimberley Process. In the second case, forest exploitation had financed the Khmer Rouge. The key response had been to control this as an aspect of conditionality tied to aid flows after the end of the war. In the third case, too, the natural resource had financed the war, with high levels of complicity both by transnationals and national groups. Responses in this sector included voluntary disclosure by oil companies of royalties paid to government, with a larger role also for Northern financial regulators. A number of points were raised in the discussion:
    1. Some doubt was expressed that the availability of natural resource wealth necessarily led to conflict. There was no perfect correlation between weak states and those based on natural resources and commodities. There were cases of resource rich countries that had not fallen into civil war (e.g. Botswana, which was rich in diamonds). Perhaps weak governance was a stronger explanatory factor?
    2. Nevertheless, the argument for intervention in the cases cited was strong. What would have been useful was more guidance on the tool-box, both during conflict and when it ended. Did the speakers really have practical tools that could be used? There was some debate about this. Philippe le Billon presented a method of managing budgets in recovery periods that could certainly provide less opportunity for money to be diverted. Gavin Hayman thought there was definite scope for more aggressive action on trade regulation and disclosure, for example using the OECD Anti-Bribery Convention.

Description

During this event, the issue has been raised and discussed of the different ways in which transnational businesses might become involved in conflict,  presented a balance sheet of positive and negative effects, and made the case for regulation.