Strategies of Multinational Corporations in Conflict Areas
War is "in" these days. In the last decade, the dampening blanket of the Cold Warbas has been pulled away, bringing oxygen to hotbeds of conflict around the globe. Multilateral organizations such as the World Bank, often criticized for excluding political issues from their mandates, have established departments to promote effective prevention, management, and resolution of armed conflict. Development-assistance organizations like the US Agency for International Development (USAID) are focusing policy reform on the particular challenges of war-torn societies. International non-governmental organizations (NGOs), which previously focused on environmental or labor issues, have discovered peace-building as a new arena for advocacy and assistance.
Multinational corporations (MNCs) are "in" too. MNCs also loom large in the consciousness of opinion-makers around the globe; critics and supporters alike ascribe a great deal of power to MNCs to transform society, particularly in developing economies.
Policymakers and advocates in the United States and Europe have begun to conflate questions about MNCs and about the increase in armed conflict worldwide. MNCs are at once being called to task for exacerbating armed conflicts and being called upon to participate in their prevention and resolution. Yet policymakers and advocates generally understand little about the way corporate managers approach the issue of armed conflict in their operational decisions.
Between October and December 1999, Political & Economic Link Consulting (PELC) conducted an analysis of armed conflict and the decision-making processes of multinational corporations. As part of the analysis, the firm interviewed 25 managers overseeing MNC operations in regions of armed conflict around the globe, including Algeria, Angola, Azerbaijan, Colombia, Congo, Georgia, Kazakhstan, Indonesia, Northern Ireland, and Sri Lanka. The surveyed firms operate in a wide range of industries, including natural resources (oil, gas, minerals), infrastructure (water, power, telecommunications), manufacturing (garments, flour, information technology, fluid controls, medical devices), services (banking, insurance, financial services), and retailing (consumer foods). The results of the interviews were enhanced by the views of a dozen experts in related topics such as political-risk insurance, sovereign-debt rating, and international investment promotion.
What determines whether a MNC will operate in a country affected by conflict? Though generalizing about the corporate sector as an undifferentiated whole is perilous, certain variables in armed conflict are routinely viewed by corporate mangers in the manner described below.
Geographic Impact of Conflict
The perceived geographic reach of a conflict is by far the most important factor in determining whether a MNC will operate in a conflict-affected country. In Algeria, armed conflict has mostly been limited to the coastal area north of the Atlas mountains. The majority of MNC operations are in the southern and southwestern parts of the country, separated from the area of conflict by a large and sparsely inhabited area. As one executive put it, "our confidence comes from the desert."
In other countries, executives say they are willing to maintain operations in urban centers when armed conflict is limited to the countryside. At the height of conflict in Colombia, a US investment firm purchased controlling interest in a Colombian supermarket chain whose outlets are primarily within the capital, Bogota. Similarly, MNCs operating in Colombo, Sri Lanka indicate that their urban location affords them a sense of security they would not feel in the more war-ridden rural areas. Moreover, MNCs may do business in counties where the geographic impact of fighting is large (nearly 40 percent of Colombia is in rebel hands) so long as conflict is contained and relatively stable. …