1. Introduction

At the beginning of the meeting Gudrun Kochendörfer-Lucius and Adolf Kloke-Lesch offered the following key questions as a framework for the ensuing discussing:

1. In which way should development cooperation promote economic development to make it become a reason for creating and maintaining peace?

• In the sphere of prevention
• In post-conflict situations

2. How can development cooperation help states curb criminal and war economies?

• In, for example, the raw materials area
• In, for example, the area of illegal financial transfers

3. How can development cooperation, on the one hand, contribute to ensuring the positive and sensitive conduct of both foreign and national companies in zones of conflict yet, on the other hand, contribute to securing positive enterprise involvement, for example, in post-conflict situations, and aid its rapid promotion? 

4. Which experience/example/possibility exists to ensure that those economic advantages linked to major raw materials projects, e.g., for the state budget, are not used in a one-sided way but are utilized broadly and in a manner related to agreed development aims?

5. How much weight should be given to the question of arms expenditure? What experience has been gained in the context of HIPC and PRSP?

6. What consequences does taking decisions on arms exports or export credits have for development policy involvement, both with regard to arms exports themselves and above all generally?

2. Economic Determinants of Violent Conflicts and Development Cooperation Approaches

Paul Collier and Anke Hoeffler presented the results of the World Bank research. Violent conflict is defined as more than 1000 fatalities per year, providing a statistical analysis aimed at identifying the causal variables to explain outbreaks of violent conflict and hence make prognosis possible. This approach was applied retrospectively in the case of Zaire and was able to predict the outbreak of the conflict with a high degree of probability; this would allow contemporaneous options on action for policy and DC (development cooperation) to be developed. Few case studies have yet been evolved but the example of one country, Burundi, was presented.

Collier pointed out that both motive and opportunity are factors playing an important role in violent conflict. Previous research has evinced an obsession with "motives" and "discourse", but now the time has come to concentrate more on the latter of the two factors, conducting research not only into questions relating to illegal sources of income, but also legal economic activity used to finance rebellions (drugs, gold, diamonds, wood, bauxite, etc).

Among the factors promoting conflict, Collier included the management of ethnic dominance (where countries with one dominant group comprising 45 – 90 percent of the population are especially endangered) and dependence on a few, valuable natural resources – a problem not restricted to many poorer countries, but faced equally by ones with more resources at their disposal. The goal to strive for, he continued, is to generate increasing and broadening income opportunities while reducing dependence on one or a few primary goods. 

He went on to mention other influential factors: the global arms trade has eased access for non-state players, resulting in ever more cases of privatised armed rebellion – consequently, stricter regulations and controls are required (e.g., supplies from the Ukraine). The regional arms races place a responsibility primarily on regional organisations, and the question then arises of how DC could strengthen and support them.

The risk of violent conflict breaking out is reduced by greater ethnic and social fragmentation. The importance of the political system is secondary (though the speaker on Burundi took the opposing view).

It is simpler to prevent conflict situations than find a solution for them later, and the moment best suited to external intervention is during the initial phase of emerging conflict. Later on, involvement is far more complex, costly and uncertain. 

The main political consequences to be drawn are the demands for: 

• Clearer global regulation of the primary goods market and
• Improving governmental leadership at the local level, e.g., with greater transparency on revenues from the sale of primary goods and diversifying export goods, with a consequent reduction in one-sided dependency. This is where NGOs like Transparency International und Global Witness also have a role to play. 

Collier put a further emphasis on the role played by diasporas, referring, above all, to conflict-country citizens in OECD countries who are providing financial support for conflict players in their country of origin. Diasporas ought to be included in peace negotiations and integrated into reconstruction and aid measures for the specific country in question; however, one has to take a firm stand against any efforts the diaspora may make in the direction of, for example, financing the provision of arms. 

Although the media frequently presented the Tutsi and Hutu conflict as an ethnic one, the case study of Burundi clearly shows the causes actually lie with a particular elite faction from a specific regional area (Bururi province), which, by ethnisizing its claim to power, succeeded in harnessing other groups to its own interests (as dealt with in Janvier Nkurunziza's contribution). It was pointed out too that sometimes no clear connection between root causes and trigger factors can be established, since no obvious economic factors such as diamonds, oil or similar can be identified. 

In future, what is needed is (a) breaking with the past, moving on from a policy where the other ethnic group is "collectively blamed", (b) promoting democracy in a way directed at transcending politics as a zero sum game, and (c) promoting the economy as an alternative sector. In this way, increased economic activity and an income independent of the state could break the extensive monopoly enjoyed by the state as employer, leading alternative political groups to be formed and possibly, in the final analysis, generating the creation of a pluralist democracy. 

3. Private Sector: Present and Potential Roles During Emerging Conflicts and in Conflict Management

The private sector can encourage conflict or help prevent it. From the various contributions it became apparent that the range of initiatives already existing make it increasingly feasible to speak of a corporate citizenship of companies.

However, to be able to offer meaningful statements and recommendations, the topic as such has to be removed from the general level of the economy and broken down into different sectors, by, for example, differentiating between national and international companies in the North and the South, or the textile and pharmaceutical industry. Generally speaking, one needs to take into account the manifold effects of international business activity on the local situation (as Christian von Haldenwang pointed out), since these alter the local resource base in the vicinity, importing certain products and knowledge into a country while exporting other goods and changing the local business constellation.

Particular attention was paid to the war economy – the way it is created and spreads, and how it can be countered. The following elements have their part in creating a framework of conditions for a war economy: increasing dissolution of the state with the consequent lifting of its control function; supplies of surplus weapons; an own-policy on arms trade by the armed forces; privatised transport market and second-hand sales, facilitating cheap arms sales for private conflict parties. These belong to it just as much as accelerated modes of international communication under globalisation, off-shore banking links, and, last but not least, the roles of financial intermediaries und brokers (Paes, BICC).

The example of conflict diamonds

Since the "conflict diamonds" are regarded as playing a central role in financing wars in Angola, Sierra Leone and DR Congo, this issue was addressed repeatedly during the conference. A Dutch representative of the diamond industry emphasised that there needed to be a differentiated approach since one could not identify the entire diamond sector with the conflict diamond problem. As part of the Kimberly Process, started 18 months ago, negotiations are currently underway to introduce the issuing of certificates stating the origin of the diamonds in an attempt to prevent any of warring parties accessing diamond production. There are a total of 2000 traders participating in these negotiations, which involve specialists being sent to Africa to work precisely on these issues.

Although at the end of November 2001, after 14 months of negotiations, 32 countries signed a settlement agreement on diamonds which included certification, even on the day it was signed numerous voices from different sides were calling for even stricter controls. (Financial Times, 30.11.2001).

Strategies for ending conflicts over resources

In his contribution, Wolf-Christian Paes, representing the Bonn International Center for Conversion (BICC), presented the following approaches: sanctions (which however may have only a limited effect, e.g., Angola); financial sanctions; consumer boycotts; "naming and shaming" of governments; codes of conduct; and measures to limit access of warring parties to weapons, whereby one should also mention that UN peacekeeping troops may have been involved in arms trading too (the ECOMOG in West Africa were cited as an example). A series of initiatives designed to improve controls governing small arms, particularly at the (sub) regional level, were also mentioned. 

The role of the private sector

Antje Gerstein, representative of the Confederation of German Employers’ Associations (BDA), posed the question of what the World Bank had already done and what they could offer to encourage companies to increase their business activities in conflict countries. She not only referred to various discussion forums in Germany, such as the BMZ Working Party on Codes of Conduct and the German Foreign Office's Working Party on Human Rights and Industry, but also the textile sector dialogue and the "Freedom and Responsibility " initiative under the auspices of the German business sector.

The business community frequently feels itself to be unjustifiably exposed to criticism when politics does not make progress – or fails - in its attempts to restrict violent conflicts. The political and industrial spheres simply have to pursue different tasks – "business is business". The request arose from this discussion to clarify the roles of business and states in conflict countries more precisely. An NGO representative emphasized that ever more businesses understood they had to reckon with negative repercussions if, at the beginning, they did not counter problematic business practices or unintended policy consequences.

Codes of conduct

Karl-Hermann Blickle, representative of the German Business Ethics Network, presented their work on formulating and disseminating codes of conduct. The BDA representative commented on her support for voluntary codes but pointed out that she did believe in new binding rules.

There were a variety of responses to the question of whether it suffices to have voluntary internal monitoring of the implementation of codes in companies or whether specialist and civil society involvement is needed, e.g., by NGOs such as Transparency International or Global Witness; a majority of contributions tended to support the latter solution.

The international organisations

A number of initiatives by international organisations dealing with issue of "Business in Conflict" have been taken. A range of suggestions on this topic have been presented in the conclusions of the recent G8 meeting in Rome.(1)  In contrast, the latest EU statement on conflict prevention (11.04.2001) only deals with business as a peripheral issue. It was reported that the UN is working on binding guidelines for contributions from multinational corporations on handling conflict. 

The OECD is interested in global "corporate players" and their role in local conflicts, raising such questions as how companies can contribute to a reduction and transformation of conflicts. Initially, they need to be aware of the context in which they are active, and the extent to which they unwittingly reinforce already existing inter-group conflicts and might then be increasingly drawn into them (who is given the contracts, who covers company security, and who is the 'loser' in investment terms?). It is important to carry out a comprehensive stakeholder analysis in order to understand the individual interests better and be able to take account of them.

The OECD has adopted the "Principles of Corporate Governance" (1999) and the "Guidelines for Multinational Enterprises" (revised in 2000). The question was then raised by NGO representatives of whether the OECD Guidelines for Multinational Enterprises have been widely accepted or applied, and if so, what results have been obtained. This information, though, is not yet available. A further question addressed the issue of coherence between the various codes of conduct, since most of them are established by companies themselves.

In its new publication "Helping Prevent Violent Conflict" (2001), the OECD talks of increasing acceptance for the principle of corporate social responsibility and the "triple bottom line": profitability, social and environmental responsibility.(2)  The main demands placed by the OECD on industry include: 

• Taking a sufficiently long-term perspective in order to support sustainable development; 
• Using their good political relations not only to guarantee the immediate conditions of investment but also to prevent violent conflict, and 
• Encouraging dialogue forums in the investment country between the state, civil society groups and industry on the basis of shared principles of cooperation.

NGOs

On the part of the NGOs there are a number of initiatives working together with companies, such as the Corporate Engagement Project run by the Co-operation for Development Action (Cambridge, Mass.) and the "Business and Conflict" project initiated by International Alert (London). The well-known love-hate relationship between the two sides naturally plays a role here too; in other words, it influences the chances for NGOs and business to come together and work constructively with each other.

The Corporate Engagement Project emphasized that it seeks to help corporate management by planning a risk analysis (in the sense of risk assessment) using a model not only recognising operational pitfalls but dangers to their reputation when conflict elements are not identified early enough and dealt with. In a country in the pre-conflict stage, the question also arises of who can best coordinate the efforts aimed at conflict prevention so as to ensure the most coherent range of approaches possible.

In her project report "Multisectoral Initiatives in Zones of Conflict: Conflict Prevention in Azerbaijan", Damian Lilly from International Alert presents the following the following triangular analysis model:

Conflict causes stage location	Company type of industry size history ownership collective action spheres of influence
Actors Role Power Capacity Relationship

The main steps in a cooperation process towards conflict prevention are considered to be: strategic commitment, analysis dialogue and consultation, partnership and collective action and evaluation and accountability, expanded to include sustainability.(3)

4. Development Cooperation: Specific Points of Departure and Open Questions

A study conducted by the German Development Institute (DIE) came to the conclusion that DC can be considered to have only a relatively minor effect on conflict situations. (Klingebiel et al. 1999).(4) Frequently, conflicts are excluded from DC in the guise of merely a disturbing marginal phenomena and hence neither included in planning nor monitoring; in this way, unintended negative effects of DC projects are generally not even noticed. Later, of course, conflicts become all too apparent as an environmental factor, very often in an extremely destructive way. DC players are often unaware of their options for action in a conflict situation; in cases of open conflict, DC can only exercise a very limited influence. It is possible to record the results of intended project measures and unintended effects on the conflict and vice versa by using the Conflict Impact Assessment instrument throughout the entire project cycle; in this way, the results and effects can be taken into account in the project steering and responded to.

Conflict prevention research too points out that DC itself is far from making the issue of conflict prevention a part of its ongoing mainstream debate (Mehler, EU Conflict Prevention Network). The organisations themselves still suffer from a pronounced lack of awareness of the conflict promoting aspects originating in their own conduct.

To begin with, the point of departure for DC has to be supporting existing players at the local level, who can not be replaced (ownership). On the macro-level, the question then arises of how DC can purposefully contribute to working against the dissolution of states (state in the sense of a halfway objective, country-wide institution); approaches to this include promoting good governance, constitutional states, human rights etc., whereby good governance is admittedly difficult to achieve under the conditions existing in failing states and for this reason places higher demands on the analysis capacities and creativity in DC project selection. 

A second area is represented by economic policy in crisis states: In this case, elements of an economic policy have to be found which increase the likelihood of being able to reach peaceful solutions – a policy which could be developed jointly with business, NGOs and international financial institutions such as the World Bank and regional development banks. One particular problem is then how to regulate the primary goods market to ensure that violent organisations find it considerably more difficult to obtain and reroute profits from it for their own activities.

The main area of emphasis in post-conflict countries was placed particularly on establishing and promoting a small enterprises base. However, in order to ensure that DC actually arrives at those locations where it is needed, awareness of delivery mechanisms is crucial; in this area, NGOs could play a positive role, and there should also be a fundamental readiness to try out non-traditional and experimental delivery methods.

It was further asked how DC can motivate the private sector to establish "structural stability" (OECD) and how involvement in DC and business could mutually reinforce one another (as a synergy effect). There needs to be further research to establish what incentives DC might be able to provide to gain the commitment of business in post-conflict societies. However, at the same time, priority support needs to be given to the local private sector to ensure it has better chances of surviving; this prevents a war economy from occupying the space within the vacuum otherwise left and functions as an early preventative measure in stopping a war economy taking over (Gahungu on Burundi). This requires incorporating aspects of conflict prevention in the Public Private Partnership - something which still needs to be done. 

Basically, DC has to be careful to counter the dangers of a fixed-income economy arising both from a primary goods economy and the flow of DC funds. Admittedly, the problem lies precisely in the feature typically shared by states in a crisis situation: normal controls do not function sufficiently well (the problem of corruption).

All in all, as Bernd Hoffmann, GTZ head of department, observed there has not yet been any general concept developed for state DC to work together with the private sector in the area of conflict prevention. The approaches required would need to be differentiated depending on the respective state of economic development in a particular country, e.g., support for small and medium-sized enterprises.

In her closing remarks, Gudrun Kochendörfer-Lucius referred to the central importance of primary goods exports in financing conflict players and suggested conducting research into whether the agreement on diamond certification might become a model applicable in other areas as well. She further proposed that more thought might be given to ways to stem corruption and increase transparency in DC support.

5. Proposals for the planned International Policy Dialogue „Public Bads – Economic Dimension of Conflict“ (Summer 2002)

Experience with economic factors in zones of conflict; best practices; promoting proactive conduct

• How can foreign and national enterprises be induced to be proactive in dealing with conflict situations? 
• What are the chances and limits respectively in the emerging conflict phase, in open conflicts and in post-conflict situations? 
• What are the special "windows of opportunity" for Public Private Partnership (PPP)? (Currently, with the PPP framework, the BMZ is working with more than 500 enterprises and has been able to mobilize more than DM 1.43 bn of DC funds.)
• What options for action does business have in zones of conflict from its point of view 
• "Do not harm", more local participation in investment, conflict impact assessment for companies, etc. ?
• Business best practices in the area of crisis prevention?
• What role can be played by NGOs and what experience has been gained so far? Comparing the activities of the Corporate Engagement Project of the Co-operation for Development Action (Cambridge, Mass.), London-based International Alert ("Business and Conflict" project) and Business Partner for Development.

Instruments and approaches to influencing corporate activities

This area is in need of further detailed research and options for action need to be developed. What comparative experience has been gathered on the following issues:

• International law; to what extent are legally binding rules necessary and what can be held against them?
• UN Global Compact; Expectations and Reality(5), what bearing do they have on conflict prevention?
• Codes of conduct from the level of economic sectors down to single companies, expectations and reality; shared elements?
• OECD guidelines for TNCs: how far are they increasing reflected in codes of conduct and how is their observance checked?
• Export credits; there is also an ongoing debate on coordinating export credits politically (WEED, church work, for example, on Hermes credits)
• To what extent can PPP incorporate elements of conflict prevention, as in conflict impact assessment, monitoring activities from the angle of defusing or reducing conflict?

On the relationship between development and economic policy

• Given the concern to ensure policy coherence, how can DC play a greater role in the awarding of export credits?
• Concepts for an economic and development policy for conflict containment in pre-conflict situations or in the interest of conflict prevention in post-conflict countries?
• Since drugs play a decisive role in illegal financing – with drug-generated money making up around 50 percent of money laundered (between US$ 600 and 1300 bn(6)) – it seems reasonable to shed more light on the role of the drug economy.

The role played by DC in regional approaches

• How can conflicts be prevented from jumping to neighbouring countries, or the risk of this substantially reduced, and in this sense neighbouring countries "donate" shared political and development policy responsibility?
• How can cross-border cooperation be promoted in the common interest (sub-/regional aspects, e.g., planned for DC projects in various states in the Caucasus) 
• In view of regional arms races, demands are placed above all on regional organisations: how can DC reinforce and help them, supporting disarmament and arms control agreements, police small-arms checks, supporting NGOs and other players trying to achieve transparency in state actions?

DC: Approaches and instruments in conflict prevention:

• Analysis of relevant economic factors to gain an instrument for dealing with conflict and conflict prognosis (further development of the World Bank research, combined with, e.g., case studies) 
• Primary goods: What experience has been gained in the efforts made to provide certification: diamonds as the model for other sectors? (Other experience with mineral oil, wood, bauxite, etc.?)
• Pre- and post-conflict societies: what experience has been gathered with an agenda on anti-corruption, including the prevention of money laundering?
• What are the main factors to prevent a war economy from becoming established and which specific contributions can the DC make in this sphere?
• What is the role of employment support and how can connections be established to formal economic sectors?
• In which direction should DC promote economic development so that this becomes a main cause of peace? 
• Which role do the various networks on crisis prevention play and how can DC make better use of them, as for example in the case of ideas for and planning of projects/programmes, for monitoring and assessment (World Bank research programme, the EU's CPN, the OECD's CPDC, and others)?
• Which interesting generalisable experience has been gained with the new DC programmes – in particular regions, lessons learnt?
• Particularly in view of the broad spectrum of German DC players: what are the specific roles for state DC, policy foundations, churches and other aid agencies?

Notes

1. Conclusions of the meeting of G8 Foreign Ministers' Meeting, G8 Roma Initiatives on Conflict Prevention, July 18-19, Rome, Point 2 on Corporate Citizenship and Conflict Prevention.
2. Cf. here OECD, The DAC Guidelines. Helping Prevent Violent Conflict, Paris 2001, pp. 69-71.
3. International Alert, Multisectoral Initiatives in Zones of Conflict: Conflict Prevention in Azerbaijan, London 2001, p. 7.
4. Cf. Klingebiel, Stephan, Wirkungen der Entwicklungszusammenarbeit in Konfliktsituationen. Querschnittsbericht zu Evaluierungen der deutschen Entwicklungszusammenarbeit in sechs Ländern, Berlin: Deutsches Institut für Entwicklungspolitik, 1999.
5. The DGB and amnesty international are convening a larger conference on this topic in March 2002.
6. Hans Martin Schmid, Summary of Discussions of the International Policy Dialogue on Financial Sector Reform in Response to Gobalization held in Berlin on November 1 and 2, 2001, p. 6.

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