Role Conflict

Paper No. 22 / February 2005

International Companies and Post-Conflict Reconstruction

Cross-Sectoral Comparisons

John Bray

Summary Findings

The role of international companies in post-conflict reconstruction is an essential complement to the work of international aid agencies. However, if policymakers are to secure the maximum benefits from private investment, they need to understand how different companies and sectors view opportunity and risk, and take account of their overall impact in postconflict settings. In development circles, the debate about the role of business in conflict-affected regions has tended to focus on petroleum and mining. This paper begins with a review of the extractive industries, but then broadens the discussion to discuss three other sectors: mobile phones, construction and commercial banks. It cites examples from Afghanistan, Bosnia and Herzegovina, Iraq, Somalia, Sierra Leone and TimorLeste. The four sectors vary in the scale of investment that they need, and the time-frame in which they expect to make returns. These calculations in turn influence their attitudes to conflict-affected countries. ‘Junior’ petroleum and mining companies are willing to take on high political and security risks in the hope of making major discoveries before their larger, more risk-averse competitors. However, ‘major’ companies in the extractive industries normally expect a reasonable prospect of long-term stability before committing to large-scale projects which may last for 20-30 years. By contrast, mobile phone companies make smaller investments, and start getting a return as soon as the first subscriber makes a call: they may be able to recover their initial outlay within two or three years. Construction and engineering companies will take on short-term reconstruction contracts, but will hesitate to commit to long-term investment—for example in utilities—unless there is a stable government and legal system. Banks will not set up operations...