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Editorial
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What developmental impacts?
Two public relations disasters shook the Shell oil company in 1995: the international uproar over the execution of the critical author and television writer Ken Saro-Wiwa in Nigeria, who had protested against Shell's environmental devastation in the country's oil production region, and the outcry over the company's plan to sink the Brent Spar oil rig in the North Sea. The storm of public protest led to a fundamental rethink by the Shell management with regard to environmental issues and the company's social obligations. Shell redefined its business principles, issued a guide for its managers outlining its stance on corruption, child labour and human rights, and engaged internationally in initiatives on corporate social responsibility (CSR). In Nigeria, Shell now spends US$ 60 million per year on community projects, almost three times as much as in 1995. And it is due to Shell's pressure that the Nigerian Federal government now passes on 13 per cent of its oil revenues to the oil-producing regions in the Niger Delta compared with 3 per cent in the same year.
However, In the Delta itself there is little to show that the 13 per cent rule has to date achieved anything ÉAll of Shell's positive efforts are É undermined by the corruption of the administration, and the tug-of-war over the limited funds that actually reach the local communities in turn foments violence" &nash; this is the finding of Daniel Litvin, whose book, Empires of Profit, an analysis of the behaviour of multinational companies in various countries, has just been published.1) What the book also discloses is that an evaluation found that only 36 per cent of the Shell-financed projects corresponded to local community needs. Commenting on it, a Shell manager conceded: "We are an oil-producing company, we have no experience with development." (S. 336).
So what can companies do to establish a positive relationship with the societies in their working environment, and to meet their social obligations? Have they a social obligation? No, Litvin would say, they are obliged to make a profit, but to do this they must avoid friction with their environment, and that is why they must observe corporate social responsibility &nash; for tactical reasons only. "But the tactic is doomed to failure as long as the political problems such as poverty and powerlessness are not solved." However, says Litvin, Shell has no influence over that; it is the Nigerian government that must change the conditions. That is a half-truth (of course Shell has influence), but it is on a right track. That a company such as Shell establishes hospitals and schools, builds roads, grants scholarships and in general makes an input to the region in which it works certainly makes sense. But it will only have a sustainable developmental impact if the government in whose area the company works observes its social responsibility as well. And that applies both to the activities of private sector companies and official development cooperation: There are no good projects in a bad society. That is why it is so important that development policy has recently discovered that it must contribute to reform of the structures and institutions of the developing countries, and that it is only against this background that single projects can thrive.
Unfortunately, the relationship described here between private sector companies and the country within whose borders they work cannot be generalised. Oil can be extracted only where it is found, and that is why Shell cannot leave Nigeria. Manufacturing businesses can do so. They set up their production plants where they find the best conditions for themselves. If one expects them to deliver developmental side effects one must pay for them. That is what development policy has decided to do with the concept of public-private partnership (PPP). But one thing applies to PPP as in the case described earlier: projects or project components can have an impact on development only if the societal environment is favourable to development. That is why it is important that PPP projects are not simply located in any place where a company is showing interest, but only where they can be linked with a priority area of German development cooperation. That is one of the findings of the evaluation implemented by the German Development Ministry (BMZ). It is an important finding, because there is a risk that with PPP the old bad culture of isolated and therefore ineffective single projects, which the BMZ is now aiming to do away with, will have new life breathed into it.
The evaluation is also extraordinarily critical otherwise, , and one hears that in a first version it was even more so. If the donors are no longer to be in the "driverÕs seat" of development, but the partner countries, then one cannot see why PPP does not provide for the partner countries to have a say in decisions, nor why only companies from Germany or other EU countries are promoted but not those in the partner country. Finally, it is suspected that profit-taking effects account for a great part of the portfolio, although that cannot be verified because reporting is based solely on information from the companies. That is why a true forming of political opinion on PPP is not possible &nash; and not even after this evaluation.
Von Reinold E. Thiel
1) Daniel Litvin: Empires of Profit: Commerce, Conquest and Corporate Responsibility. New York/London, Texere 2003, 312 pp,
$ 27.95/£ 18.99.
(The direct quotes from the book in this editorial are re-translations from the German edition.)
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