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A Conflict-Sensitive Approach to Public-Private Partnerships

Final paper

MA on Coexistence and Conflict


Brandeis University, Waltham, MA
Professor Mari Fitzduff

submitted by Torsten Sewing, 15 December, 2008


This paper is dedicated to
my wife Salla and our child Toivo – both of whom went through a lot
of ups and downs
to make this entire course happen.

2
Executive
Summary ...................................................................................................................... 4

Acknowledgements ...................................................................................................................... 5

Abbreviations ................................................................................................................................. 6

Introduction
[What
is
at
stake?]............................................................................................... 7

Statement
of
the
Coexistence
Problem
[Why
conflict
sensitivity?]............................12

Literature
review ........................................................................................................................15

CSR
and
conflict..........................................................................................................................................15

Do
no
Harm
and
Conflict
sensitivity..................................................................................................18

Peace
through
Commerce?....................................................................................................................21

Rationale,
processes,
difficulties
and
legitimacy
of
the
German
PPP‐program..............22

Learning
objective ......................................................................................................................26

Methods
[How
to
proceed?] .....................................................................................................27

Presentation
of
the
evidence...................................................................................................31

(1.) Conflict
sensitivity
for
PPPs
‐
does
it
pay?..............................................................................31

(2.)
How
to
establish
conflict‐sensitive
PPPs ................................................................................35

Conclusion .....................................................................................................................................43

Recommendations ......................................................................................................................45

Bibliography .................................................................................................................................46

Appendix ........................................................................................................................................49


3
Executive Summary

This paper introduces some insights of conflict sensitivity into the private and the pub-
lic sector’s co-operation in developing countries by aligning the private partners’ re-
quirement for managing risks with the public partners’ want for crisis prevention.

Thus, the paper points to the needs and opportunities of the German development pro-
gram for “Public-Private Partnership” (PPP) in conflict-prone zones. It will show that
the economic impact of these partnerships on conflict prevention significantly diverges
from the impact of traditional private sector development. Subsequently, the layout of
partnerships will be discussed towards questions about corporate responsibility, com-
munity involvement, fairness, and human rights.

However, ensuring the sensitivity of the project-design towards a local context on is-
sues of conflict is currently not part of the agenda of PPP. The paper tries to identify the
reasons for this. I shall then discuss the reluctance of the Public-Private Partnership
program towards conflict-sensitive approaches in conflict-prone countries, and put for-
ward a process that could change this.

The paper suggests that this change will improve the management of partnerships
through some of the insights and methods that conflict-sensitive programming pro-
vides. A first draft of a “tool” that aims to raise awareness towards the benefits of con-
flict sensitivity is presented here.

As a start of a participatory action research (PAR), this paper opens the dialogue on this
tool and process within the German Development Corporation.

4
Acknowledgements

Thanks to

my professor Mari Fitzduff for her inspiration and support all along;

Christina Gradl for valuable suggestions on the first draft of this paper;

Ariane Moser for her friendly support during the time at GTZ;

and to the PPP project managers for being available to a lot of questions
from an outsider.

5
Abbreviations

BMZ Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung


C0, C1, C2 Conflict Marker
CDA Collaborative for Development Action
CSR Corporate Social Responsibility
DAC Development Action Committee
DEG Deutsche Entwicklungsgesellschaft
DRC Democratic Republic of Congo
GPPi Global Public Policy Institute
GTE Ghorka Tea Estate
GTZ Gesellschaft für technische Zusammenarbeit
IA International Alert
IBLF International Business Leaders Forum
ISA Independent Service Authorities
KfW Kreditanstalt für Wiederaufbau
LICUS Low-Income Countries Under Stress
MNC Multinational Corporation
NGO Non-Governmental Organisation
ODA Official Development Aid
OECD Organisation for Economic Co-operation and Development
PAR Participatory Action Research
PCR Post-Conflict Reconstruction
PPP Public-Private Partnership
PSD Private Sector Development
SAP Systems, Applications, Products - largest European software firm
WBCSD World Business Council on Sustainable Development
WEED World Economy, Ecology and Development

6
Introduction [What is at stake?]

In 2006/7, a Public-Private Partnership (PPP12) with a German tea-import company was


in the planning stage. In addition to the tea-import company, which was the private
partner, the PPP consisted of the German Development Corporation (GTZ) and a local
party in Nepal. The GTZ/PPP-department, who managed the partnership, benefited
from the experiences of a Private Sector Development (PSD3) program that had started
in 2004.

In Nepal’s violent conflict, during which in the course of 10 years (1996-2006) around
12.000 people lost their lives, a PSD program worked to improve the value chain of
growing, fermenting, transporting and eventually exporting tea from Nepal. The pro-
gram focused on strengthening the capacities of the local exporters. However, export
was frequently disrupted. The insurgency in Nepal was class-based, and the Maoist
insurgents attacked businesses, demanded extortions, organised strikes and blocked
roads. As a result, not only did the value chain suffer, but also the program itself had to
be reassessed.

“Do no Harm” (Anderson: 1999) is an internationally accepted standard that has be-
come a minimum requirement for all organisations operating in regions of (potentially
violent) conflict. Doing no harm means avoiding the negative impacts of an inter-
vention. A set of questions has to be answered. The goal is that the organisation under-
stands the context and how the intervention interacts with this context. The organisation
should also understand what possible actions could be taken to ensure that the interven-
tion minimises any negative impact. In the given context, the core question was: did the

1
Please note that this paper does not focus on the details but just on the general framework of PPP. The
expected changes through a relaunch of the program are not part of the study (apart from a comment, see
footnote 13). This relaunch was not finalised and communicated during the time of research.
2
The terminology of the German PPP is not consistent with the generally established use of the term:
Public-Private Partnerships is a fixed term, used to “contract out” public services. Maybe the PPP-
program should rather be named Public-Private Development Partnerships?
3
PSD is a department in the GTZ. To make the distinction between PSD and PPP visible, it could be said
that the PPP-program implements development programs in a „top-down“ fashion (from companies from
developed countries („North“) to companies and settings in developing countries („South“). PSD focuses
on building economic infrastructure from „bottom-up“ („South to North“) as it aims on facilitating local eco-
nomic infrastructure – which might over time participate in the global economy.

7
PSD program make the right decision in its selection of the beneficiaries of the inter-
vention?

The check carried out by the PSD-staff revealed that those most affected by the conflict
had been the tea producers, who are mostly located in rural areas. Violence was exerted
in these areas in particular, and since the tea-producers depended on a value chain that
was now disrupted, they suffered from the conflict both directly and indirectly. After
identifying this hardship, the PSD program balanced the interests of the exporters and
producers, which meant shifting the focus from the tea exporters to the tea producers.
As a result, the value chain improved, because some demands towards better working
conditions had been fulfilled. (See GTZ, 2008: 36)

In trying to improve the tea value chain, the PPP looked at the interests of both the pro-
ducers and exporters. The PPP’s aim was to improve the position of the farmers
through implementing a “code of conduct” for producing organic tea – and with this, to
increase the competitive position of the tea exporters. However, a “Do no Harm” check
never took place.

Nepal’s business community is controlled by a handful of business houses. “Ethnically,


the major economic players are the Marwaris, people of Indian origin. Their presence is
dominant in all key sectors of industry, trade and services ... In the wider population,
there is resentment against the Marwaris as outsiders” (International Alert, 2006:
410/11)

The publication “Local Business, Local Peace” (2006) lists selected wrongdoings:
workers are denied living wages and benefits; the majority of the workforce is working
without contracts, thus leaving no channel for official complaint; there are also hiring
practices that discriminate against ethnic origin, political background and gender. Omi-
nous security groups are at work, hired by businesses and acting in a manner of a pri-
vate army. These wrongdoings are coupled with large structural inequalities in society.

Businesses could do a lot to change all this: they can address these issues, they can im-
prove community services, build safety nets for workers, develop inclusive hiring prac-

8
tices and mitigate structural inequalities in society. Could the PPP have worked towards
addressing these issues?

Looking back on the partnership negotiations that took place early 2007, there had been
a strong commercial interest for the third party, Ghorka Tea Estate (GTE), to partake in
this PPP: being the local partner, GTE could secure preferential customer relationships
to one of the worldwide leading tea companies for high quality, organically grown tea;
they could profit from the know-how of growing organic tea and could select the far-
mers according to their earlier relationships (yet another reason for carrying out a Do
no Harm assessment), thus strengthening their own supply chain. And, since the co-
operation with the German company, TeeGschwender, would not be exclusive, they
would have the first-mover advantage that could secure them business with other tea
companies focusing on the segment of organic tea.

It is an assumption that any requirements by GTZ regarding work practices within this
PPP would have been met and implemented by GTE. It is an assumption, because these
issues were not discussed. Following these discussions and possible agreements, a
check-up could have been carried out from time to time through unannounced factory
visits by either independent consultants or by the GTZ-personnel present in Nepal.
With this, a PPP classified as working “in conflict” but not “on conflict” could have
contributed to peacebuilding activities – a small investment with a high leverage.

In assessing these lost opportunities, it seems timely to find out why conflict sensitivity
is neglected in the programming of PPPs, and how it could be integrated.

Conflict sensitivity takes account of an organisation’s impact on to a conflict. Under the


caveat that conflict sensitivity would need to be implemented mainly through negotia-
tions and basic desk research as described above, this could nevertheless contribute to
designing PPPs in areas of heightened or acute need for crisis prevention4 - or, as this
paper will refer to them, conflict-prone countries.

According to a German government report (2008: 72), almost one third of PPPs are
located in a conflict-prone setting. Thus, PPPs could be an excellent vehicle with which

4
Country analysis provided by Giga-Research on behalf of the BMZ, see appendix.

9
to prove the need and opportunities of conflict sensitive behaviour on a small scale.
After all, the PPP-program has been developed by the German Ministry for Economic
Cooperation and Development (BMZ) and it is implemented by the German develop-
ment corporation (GTZ) and other implementing agencies5. The public partner offers
vast experience in development, including the knowledge that conflict sensitive prac-
tice is needed in all economic activities in development (GTZ 2008: 14). According to
the action plan ‘Civilian Crisis Prevention, Conflict Resolution and Post-Conflict
Peacebuilding” (2004, §116)), this is a declared goal of the PPP-program, defined by
BMZ.

In practice, however, a conflict sensitive design is not seen as relevant to the framework
of PPPs. This paper will highlight the reasons for this policy. At the same time, the pa-
per also questions the lack of awareness within the GTZ/PPP-department towards the
needs and opportunities that this sensitivity would provide; in November 2008, only
seven PPPs (of a total of over 700 since 1999) implemented by GTZ mention conflict
risks in their ongoing status reports (See appendix for one of them, the PPP described
here). The needs refer to the PPPs’ involvement in a conflict-prone area, and what this
involvement entails. The private partner is often a “new” player in the conflict-prone
area (such as TeeGschwendner), while a third party (such as GTE) is brought in by the
private partner. Most PPPs rely on the activities of this third party.

This study argues that insights gained through conflict sensitivity can be seen as oppor-
tunities in managing the risks of companies. The awareness of a potential conflict will
guide the actions by companies going into communities in which they do business.
Once these actions are guided by conflict-sensitivity and thus the principles of “Do no
Harm”, they can maximise the positive impact on the community. At the same time,
these actions can become a tangible opportunity to the company.

However, conflict sensitivity has not been a regular element in the PPP-program. The
paper will try to understand the reasons for the lack of conflict sensitivity in GTZ/PPP.
Further, it will ask whether GTZ could introduce elements of it and still arrive at some

5
Other implementing agencies include KfW, DEG, Sequa – they have a mostly similar set-up of imple-
mentation, differences of which are not in the focus of this paper.

10
benefits that conflict sensitivity proper offers. In its reasoning, the study firstly dis-
cusses if GTZ should drive conflict sensitivity forward within its PPP-program, sec-
ondly what impact this would have on the business practice of PPPs, and finally how
the risks in the PPP-delivery can be managed through conflict sensitivity.

11
Statement of the Coexistence Problem [Why conflict sensitivity?]

Along with globalisation shifting the roles of business and society, co-operative models
between public and private sector have gained in importance – including in how to deal
with fragile states. Three arguments towards the implementation of conflict sensitivity
into PPPs are salient: it could be a comprehensive way to facilitate and further stabilise
a PPP; it could be an exercise in building trust; and finally, it could integrate PPPs more
closely into the overall crisis preventive policies the public sector demands.

Founded as a state-owned company under private law in 1975, GTZ is not entrepreneu-
rially driven and works on a public-benefit basis with the BMZ as its major client. All
surpluses are channelled back into its own international cooperation projects for sus-
tainable development. In 2007, the overall project budget of GTZ exceeded !1 billion
for the first time. The company employs some 12,000 staff in more than 120 countries
in Africa, Asia, Latin America, and the Eastern European countries in transition as well
as the New Independent States (NIS).

The GTZ/PPP-department is an attempt to use more than 30 years of development ex-


pertise in an entrepreneurial fashion. Here, “we embrace the companies’ capabilities to
introduce them into topics of development cooperation”, says Jörg Hartmann, executive
director of the PPP-department (22. August 2008). As a constituting element, PPPs
offer a business-enabling environment, targeting issues such as corruption, health or
environmental concerns. Indeed, these issues can often be dealt with more successfully
in a partnership than through activities by either the public or the private sector alone.

The former Secretary General of the United Nations, Kofi Annan, referred to the need
to overcome the limits of international governance through partnership with the private
sector when he stated that

peace and prosperity cannot be achieved without partnerships involving Gov-


ernments, international organisations, the business community and civil society.
In today’s world, we depend on each other. (Annan, 31.01.1998).

And, referring explicitly to (post-)conflict situations, Christoph Zürcher remarks:

Consequently, I depart from the notion that statehood is provided solely by the

12
state. Instead, I suggest that we think of statehood as a product that is produced
by the state in association with other actors. There are examples abundant when
states outsource – intentionally or not – the provision of basic functions to ex-
ternal actors. It is sufficient to think of who provides security in Afghanistan or
Tajikistan, domestic authority in Kosovo or Bosnia, or public services in
Mozambique or Burundi.

There are also international institutions and organizations in place to assume


these functions – think of the UN transitional administration, the international
forces in Afghanistan, or of the World Bank’s suggestion to set up so called
ISAs (Independent Service Authorities) in low-income countries under stress
(LICUS). ISAs would provide basic services, being independent from gov-
ernment and acting like wholesale contractors with multiple channels for retail
provision. In essence, ISA is the outsourcing of basic state services to a private,
donor-funded organization. (Zürcher, 2007: 14)

Of course, the PPPs that are the focus of this paper are smaller in volume and impact
than the ones described by Zürcher. However, the functions are comparable: the private
and the public partner work together to identify opportunities for the “provision of
basic functions” that improve development. In this, development corporations such as
GTZ help the private partner to identify underserved markets. And, since GTZ has
identified conflict sensitivity as a minimum standard for economic interventions (PSD),
it can be argued that the role of GTZ in partnerships with the private sector could in-
clude elements of conflict sensitivity – with the agreed aim from both sides to stabilise
a PPP.

A major task of the dialogue between the public and the private partner is to under-
stand differences and commonalities, with the goal of aligning or even synthesising
interests. The insights of conflict sensitivity might then be a facilitator for creating
common ground – something that has not yet been discussed within the German PPP-
program. Agreeing on the common ground of a partnership can stabilise a PPP. More-
over, it can lead to building trust.

The lack of appreciation for conflict sensitivity within the PPPs relates to the overall
coexistence problem dealt with in this paper: how can the private partner be guided to
the needs and opportunities of conflict sensitivity? And, what is the role of third party
companies that are already located in conflict-prone countries? How can both partners’

13
behaviour and track record be checked for conflict sensitivity with the (limited) re-
sources available in the GTZ/PPP-department?

Of course, conflict transformation is not a primary objective of PPPs or for that matter
of economic development programs in general. However, a GTZ/FIAS Practitioners’
note (2008: 7) states that “applying a purely technical approach to economic develop-
ment brings with it the risk of failure”. To avoid this or to minimise the risk, a process
can be designed from the onset. The private partner is helped by the public partner to
look at potential risks and opportunities – by discussing these in regards to the new
business operation before it is operational. The public partner gains information on the
basic conflict sensitivity of the partnership. This paper argues that such a process can
transform the private partner’s activities within a PPP towards raising awareness for a
conflict-sensitive practice. This could, in turn, feed back and partly close the gap that is
a major challenge for the PPP-program itself: how to mediate interests between the
public and the private sector.

According to “Conflict prevention – the Untapped Potential by the Business Sector” by


Andreas Wenger and Daniel Möckli (2003: 85 ff), cooperative approaches between
corporations and the public sector are the best option to successfully tap into the crisis
prevention potential of business. In the same vein, PPPs would provide opportunities to
integrate conflict sensitivity – as long as all partners agree that this reduces the risks of
an operation. However, it can be an arduous process to introduce conflict sensitivity –
and it might be far too expensive for GTZ/PPPs with their restricted budgets and lim-
ited frameworks. On the other hand, IA (2004: Chapter 2, point 2.) states that “some
[conflict] analysis, no matter how imperfect, is better than no [conflict] analysis at all”.
Similarly, it could be argued that “some conflict sensitivity, now matter how imperfect,
is better than no conflict sensitivity at all”. Moreover, the result of the process would
not carry regulatory requirements but would be left with the business – as it is agreed
between that partners that the process will not be implemented, if the advantages are
not perceived by both. Thus, the purpose of this paper is to introduce some insights of
conflict sensitivity into the management of risks within a PPP – and to offer both part-
ners a “tool” to do so.

14
Literature review

Introducing the concept of conflict sensitivity into the corporate environment is in line
with the increased societal responsibility companies perceive through the impact of
globalisation. New partnerships between governments and businesses account for this
changing role. This is acknowledged by the German government’s action plan for crisis
prevention – as well as through the upsurge of CSR or Corporate Social Responsibility.

CSR and conflict


CSR is anything but stringently defined. ‘Making good business sense’6, a publication
by the World Business Council on Sustainable Development (WBCSD) provides inter-
esting examples of different societal needs factoring into the definition of CSR: Ghana
formulates a business case for CSR by stating that it "is about capacity building for
sustainable livelihoods. It respects cultural differences and finds the business oppor-
tunities in building the skills of employees, the community and the government", while
in the Philippines “CSR is about giving back to society”. Both reflect upon the tradi-
tional differences of CSR in the USA and Europe: whereas the former goes back to
“the giving back” instigated by the corporate citizenship of a company, the latter inte-
grates social responsibility into the wealth creation process. To the WBCSD, "CSR is
the continuing commitment by business to behave ethically and contribute to economic
development while improving the quality of life of the workforce and their families as
well as of the local community and society at large". In taking this up, the European
Commission decided to explicitly stress the voluntary nature of corporate responsi-
bility: “CSR is a concept whereby companies integrate social and environmental con-
cerns in their business operations and in their interaction with their stakeholders on a
voluntary basis”7. The commission’s definition has not been accepted without strong
opposition. One of the more prominent examples is a resolution by the European Par-
liament in 2007 to revise the voluntary nature towards a more regulative one in regards
to introducing international social and environmental standards8.

6
www.wbcsd.org/web/publications/csr2000.pdf
7
EU green paper on CSR, 2001, available at http://ec.europa.eu/employment_social/soc-
dial/csr/index.htm
8
see e.g. http://www.cleanclothes.org/publications/07-03-15.htm for a summary.

15
However, in looking at the role of business in crisis prevention, the case can easily be
made that CSR is about how companies manage their business processes to produce a
positive impact on society. This can include a call for regulation, for instance in cases
where good governance is needed to build reliable business operations. Still, businesses
frequently do not adhere to the regulatory standards established in developed countries.
It is this “governance gap” that is heading the heated debate on “business and human
rights”.

Excursus: Differences in CSR – home states and host states.

In the developed world, CSR is seen as companies’ voluntary exercise delivering


more than is required – more often than not in the interest of public relations and
with the aim of increasing the companies’ brand value. In the developing world,
CSR has an entirely different function: it can establish a framework for business,
and it is often a major proponent in establishing compliance9. A publication by
the Peace Research Institute Frankfurt points to the fact that corporations

seem to be increasingly drawn into playing public roles to compensate for


governance gaps and governance failures at global and national levels’ ....
But given that private corporations pursue private purposes, the question is:
under what circumstances and to what extent, if at all, can they be expected
to provide regulatory governance functions in the public interest? (Wolf et
al., 2005, quoted from Schuppert, 2008).

Virginia Haufler has a more appreciative opinion on the role of business:

When companies establish their own rules and standards in socio-political


areas, these can complement or supplement government regulation, espe-
cially in countries with weak capacity to regulate. International standard
setting fills in the gaps where national regulatory systems conflict or remain
silent. Where governments do not govern, the private sector does – often in
response to the demands of public interest groups who find themselves un-
able effectively, political leaders may see private governance as a valuable
tool to achieve public ends. (Haufler, 2001: 29, italics by TS)

In any case, the definition of CSR must take into account different contexts.
Otherwise, there is a danger of misunderstandings such as the belief that the
9
This again touches the question of legitimacy posed by Brühl et al. (2001), as the business executives in
charge are of course not being elected and moreover have little understanding of a country’s problems
looked through the lens of their business activities.

16
introduction of social standards is voluntary. The report by the UN-General
Secretary’s Special Envoy on Human Rights (2008), John Ruggie, points to these
“governance gaps” and suggests that a process of ‘due diligence’ be introduced in
corporations. To carry out this process, he recommends the consideration of

three sets of factors. The first is the country contexts in which their business
activities take place, to highlight any specific human rights challenges they
may pose. The second is what human rights impacts their own activities
may have within that context - for example, in their capacity as producers,
service providers, employers, and neighbours. The third is whether they
might contribute to abuse through the relationships connected to their ac-
tivities, such as with business partners, suppliers, State agencies, and other
non-State actors. (Ruggie 2008: §57).

With this, Ruggie paraphrases the three steps towards conflict sensitivity outlined be-
low: understanding of the context, understanding of the interaction between the inter-
vention and the context, and acting upon the understanding of this interaction (see p.
19). Thus, the due diligence process of corporate activities is guided by the demand for
conflict sensitivity – providing the environment in which public-private partnerships
and CSR is rooted.

As a result of applying the suggested due diligence, the business behaviour changes.
Ideally, the business progresses from being a mere part of society to acknowledging its
impact on society. In situations of (potentially violent) conflict, this progression equals
the awareness towards conflict sensitivity. And, it leads to an “enlightened” CSR that is
enabled to use a company’s impact strategically.

In order to understand the role of conflict sensitivity within the CSR-policies of com-
panies, it is helpful to look at the concept of the ‘sphere of influence’.

The term is used in the United Nations Global Compact first two principles:
"(b)usinesses should support and respect the protection of internationally proclaimed
human rights within their sphere of influence; and make sure that they are not complicit
in human rights abuses."10 Moreover, with the increasing importance of corporations in

10
http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html

17
the global economy, it can be argued that their challenge extends into guarding human
rights, too. It is this guardianship that can be perceived not only as CSR but also as a
hedging strategy in managing risks. This strategy is enabled through the best and most
important asset of business: its ability to adapt to different contexts.

Thus, companies operating in conflict-prone countries benefit from management sys-


tems that are able to deal with this context. Paraphrasing Ruggie, these management
systems boil down to one central question: How can the interaction between company
investments and (potentially violent) conflict be understood and addressed to the ben-
efit of business and host societies? This question ties together the three steps for con-
flict sensitivity (see p. 19), and the needs of businesses. Moreover, it includes the rela-
tionship of a company to its ‘sphere of influence’: when a company interacts in a
situation of (potentially violent) conflict, it must support and respect human rights.

Do no Harm and Conflict sensitivity


In 2001, the Forum of Early Warning and Early Response (FEWER), International
Alert (IA) and Saferworld launched a program called “Conflict sensitive approaches to
development, humanitarian assistance and peace building: tools for peace and conflict
impact assessment”. The program coined the term conflict sensitivity by extending the
work of Mary Anderson’s “Do no Harm”. While Anderson had focused on the impact
of humanitarian organisations in conflict scenarios, the extended definition according to
de la Haye, Moyroud referred to

the need for organisations ... to be sensitive to the (conflict) environments in


which they operate, in order to reduce the negative impacts of their activities –
and to increase their positive impacts – on the situation and its dynamics. In this
sense, conflict sensitive approaches to development … need to be adopted in
situations of violent conflict, as well as of unstable peace” (de la Haye, Moyroud
2003: 2).

In addition to this, conflict sensitive approaches are comprehensive and integrated


throughout the whole management cycle of a project. They are not limited to interven-
tions specifically working on conflict (Goodhand: 2001) and they require innovative
thinking beyond defined objectives and immediate results.

18
In 2004, IA delivered a further structural clarification in their publication “Conflict-
sensitive approaches to development, humanitarian assistance and peace building”,
listing the three steps towards conflict sensitivity: it needs an understanding of the
context, understanding of the interaction between the intervention and the context, and
acting upon the understanding of this interaction (IA 2004: chapter 2, page 1). From
this angle, Do no Harm is not an approach nor a description of what is at stake or what
should be achieved. Instead, it is a process to achieve conflict sensitive programming.

For the purposes of this study, clarification is needed, as “Do no Harm is all over the
place in the CSR-community, but this Do no Harm is quite different from how we
understand it” (E-mail to the author from Luc Zandvliet of the Collaborative for Devel-
opment Action). When discussing the concept of “Do no Harm” in the GTZ/PPP-
department, I frequently encountered the term understood as action slightly beyond
compliance in regards to all general matters a company is involved in. “Do no harm is
not enough”, I repeatedly heard from the PPP project managers, “as companies them-
selves claim Doing well by Doing Good as their corporate responsibility”. So, even
though corporations might not “walk the talk”, see e.g. Grayson/Hodges (2004), of cor-
porate responsibility, business will often insist on being beyond “Do no harm” – with-
out referring to conflict sensitivity.

‘Do no Harm’ is a tool that is based on the perception that

international assistance can make conflict worse in two ways: it can feed inter-
group tensions and weaken intergroup connections … Conversely, aid can help
war to end by lessening intergroup tensions and strengthening intergroup con-
nections. (Anderson: 69)

To analyse tensions and connections, Anderson postulates that all societies are charac-
terised by “dividers” – elements, people, organisations – that divide people into sub-
groups. Equally, there are elements, people and organisations that connect people
within society’s subgroups. General questions on motivation, location, timing, re-
sources, beneficiaries (and people not benefiting), staff and delivery mechanisms pro-
vide a framework that analyses the mandate of the intervention. The answers that the
framework produces are able to identify dividers and connectors. The entire process is

19
not a one-time one-off exercise: rather, it should be carried out regularly and, if neces-
sary, redesigned.

Subsequently, while Zandvliet, CDA and other conflict resolution practitioners per-
ceive the character of Do no Harm as a process and as an analytical framework, the
“CSR-community” sees it as a content issue.

The behaviour of the private sector in situations of conflict is within the remit of the
policy framework of the German government. The BMZ, however, paints an even lar-
ger picture of how to deal with conflict-prone countries. To them, crisis prevention is
seen as the risk management process of the German government: as the development
corporations’ work is accountable to the general public (since it is being funded
through taxpayers’ money), the risks must be managed in a transparent and accountable
way. The guidelines to do so are the “Strategic action plan on crisis prevention” (BMZ:
2004) and the “Sector strategy for crisis prevention, conflict transformation and peace-
building in German development cooperation” (BMZ: 2005). The latter introduces
early warning indicators that qualify development cooperations’ conflict sensitivity in
conflict-prone countries. The visibility of this is provided by the “C” marker, which is
used to identify the conflict sensitive design of all state development cooperation activi-
ties. According to BMZ, these markers are in line with other signifiers of the Organisa-
tion for Economic Co-operation and Development (OECD): “C 2” stands for measures
that are primarily peace building, crisis-preventive or conflict-transformative, “C1”
sees these goals as secondary objectives and “C0” refers to measures that pursue other
objectives but must be conflict-sensitive in design due to the conflict-prone context
they operate in. (GTZ 2008: 16)

There are less than five GTZ/PPP projects that focus on crisis prevention (and thus ful-
fil the C2 or C1 marker). The vast majority of PPPs in conflict-prone areas falls into the
category C0 marker. Still, the German government recognises the opportunities of a
conflict-sensitive PPP in their action plan on civil crisis prevention (2004): “The Ger-
man government … will promote conflict sensitivity through the program of PPP”
(paragraph 116, translation by the author)”. Thus, it seems appropriate to ask if the ar-

20
gument for conflict sensitivity alone (and thus C0) can classify business operations as
contributing to peace.

Peace through Commerce?


The debate on “Peace through Commerce” emerged in 2001 from a line of business
ethics thinkers in US-American law and business schools, just months after Jane Nel-
son’s seminal work “Business of Peace” (2000). Since Nelson gathered input from the
Prince of Wales International Business Leader Forum (IBLF, an MNC-membership
organisation) and the Council on Foreign Relations, her focus was clearly on the behav-
iour of MNCs and their opportunities for peacebuilding. Tim Fort and Cindy Schipani
from Michigan University took a broader approach in their essay on the role of business
in facilitating peace (2001). To them, business11 is a “dormant value” in the sense of
DeSoto’s definition of capital, that “requires a process for fixing an asset’s economic
potential into a form that can … initiate additional productivity” (DeSoto: 35) – and
peace. Adding to this, Fort/Schipani took up Amartya Sen’s “Development as Free-
dom” (1999) thesis that not only the market but also other economic, social, and politi-
cal freedoms should be valued in business activities: the authors see values enhanced
through all business that combats “the marginalization of the poor, reducing the threat
of violent reaction”(Fort/Schipani: 16).

Both the increase of productivity (deSoto) and values (Sen) through business activities
show why conflict-sensitive C0 business operations can contribute to conflict preven-
tion: they combat marginalisation and foster business. The amended design of these C0
business activities would give even “small scale operations” such as the PPPs by BMZ
leverage far beyond their own operations, influencing local or national markets and
values.

However, while crisis prevention is the general demand by the public and civil sector
towards conflict sensitive behaviour of companies, it is the responsible behaviour of
companies that can integrate existing business activities into crisis prevention. Using
the skills and experiences of companies, a partnership for development can greatly gain

11
somewhat imprecisely refering de Soto’s definition of „capital“. Thanks to Christina Gradl for this com-
ment.

21
in competence and focus – for the public as well as the private sector partner. Those
skills are addressed, when GTZ introduces PPPs into its work practices.

Rationale, processes, difficulties and legitimacy of the German PPP-program


PPP-projects are planned, financed and implemented in cooperation between the public
and the private sector. The development actor and the company identify a number of
joint interests – including infrastructure needs and a reliable political and economical
environment. Both partners benefit from this cooperation: the companies benefit from
contacts, local experience and a worldwide network of GTZ-experts; GTZ and the de-
velopment countries benefit from the technical expertise and “ownership” that only a
private partner can bring. Often, but not always, a partner already present in the devel-
oping country is tied into the partnership. These third parties might then want to extend
their operations in connection with their European business partner.

Originally, the interest in PPPs within development cooperation springs from the
shrinking resources of Official Development Aid (ODA). In a supplement to its 1997
guidelines on conflict, peace, and development, the Development Assistance Commit-
tee (DAC) of the OECD, accounted for this by inserting a short chapter on business and
economic peacebuilding (2001: 69-71).

A major motivator for PPPs is the innovative character of the partnerships. The nature
of this partnership work – business meets development – is such that the work could
rarely have been implemented by one partner alone. Examples of this are social and
environmental standards, jointly agreed by organisations either along the value chain or
within a sector. Other examples include health provisioning beyond securing corporate
human capital. This provisioning also integrates communities through cooperation with
local businesses, councils and social workers. A further example is the optimisation of
value chains for fair distribution and better profits for farmers through a relocation of
production facilities12.

In 2007, 354 new PPP-projects were initiated - other implementing agencies for PPP
are Deutsche Entwicklungsgesellschaft DEG, Kreditanstalt für Wiederaufbau KfW, and

12
These and many other innovations show that the „new PPP“ (to be launched in 2009) should not only
be “business-driven”, leading to „cherrypicking“.

22
Sequa. These bring the total number of PPPs realised or launched since 1999 to almost
3,000, with an overall funding volume of over !16.4 billion. A sectoral overview (1999
– 2007) of PPP measures by the number of projects gives an impression of the width of
the program (please note that C1, C2-marker PPPs are included in “other”, accounting
for overall 6 projects since 1999)

These projects focus on long-term effects in e.g. establishing health provisioning for a
region in which the business is active. The projects may build on the core business ac-
tivities (such as importing high-quality tea from Nepal13) but they also offer educational
opportunities (such as tea-farmers adapting to a code of conduct for organic tea14), not
only available to suppliers of the company but also – as in the example presented in the
introductions – to a large number of farmers dealing with various tea exporters (see
“status report” in appendix). Typically, they extend the existing relationships the Euro-
pean company has with companies in the developing or emerging country.

With the positive contributions towards development in mind, GTZ “does not intend to
make things complicated for partner companies” (Hartmann, 22 August 2008). This
also applies to projects in all the partner countries of German development cooperation
that require conflict sensitive programming – and these are all countries with a “height-

13
such as the PPP described in the introduction
14
dito

23
ened or acute need for crisis prevention” as listed in the so-called “BMZ-matrix” (see
appendix, countries listed in the yellow and red part of the table).

Organisational and operational, the PPP-program sits between two approaches towards
conflict sensitivity: on the one hand, crisis prevention focuses primarily on the com-
panies’ capacities for preventing conflict, with the public sector being the driver of an
involvement. On the other hand, the private sector actor looks at the opportunities and
risks within a conflict-prone environment. Thus, while crisis prevention can be the
main reason for establishing corporate activities within the C1 or C2 marker according
to the sector strategy paper (2005: 32), companies will engage in conflict-prone count-
ries because of an existing business proposition (C0). However, according to Hartmann,
“most of the private partners in PPP are not even aware that the country in which they
do or want to do business is within this classification” (22 August 2008).

***

This brief paper can only mention the criticism within the civil society on the concept
of PPP: whereas the BMZ had established this approach to development cooperation in
1999, even today a majority of German NGOs15 are critical of introducing the private
sector into development cooperation. One string of arguments questions the legitimacy
of private actors in development (e.g. Brühl et al: 2001). A German NGO, World, Ec-
onomy, Ecology and Development (WEED) accuses the development corporations that
decades of taxpayers’ funded development cooperation experience would be “sold-out”
for little money to help companies’ business development activities. Moreover, accord-
ing to WEED’s Uwe Höring (2003), the overall impact for developing countries would
be very limited as investments happen mostly in emerging economies.

Adding the awareness on conflict sensitivity to the rationale of PPPs, the popularity of
the program itself within the NGO-community might increase. Following-up on the
connection between poverty – one of the prime areas of activity for the majority of
NGOs – and the cross-sector topic of conflict, it can be argued that to heighten the

15
Klaus Körting, director with VENRO, the German association of NGO, estimates that „around 60% of
our member organisations are critical towards PPP as defined by BMZ“.

24
awareness of conflict sensitivity within PPPs provide better acceptance by the civil
society in “home states”. Adding to this, the GTZ’s facilitation of dialogue on the
ground enable it to identify the prompt enhancement or readjustment of PPPs in situa-
tion of crisis16.

Finally, the nature of the partnership between a public and a private sector partner
points to the need for developing a tool to facilitate a common ground for a business
case that includes aspects of conflict sensitivity. I will discuss this common ground
later in the paper in “Presenting the evidence”.

It seems plausible to assume that all stakeholders in a PPP in a conflict-prone country


could benefit from the common ground. And, it is when those stakeholders perceive the
risks and opportunities tied to conflict sensitivity that the tool presented in this paper
will be successful.

16
Quick needs assessment and adequate product and service delivery might be key in alleviating situa-
tions of escalating conflict

25
Learning objective

My objective was to understand how conflict sensitivity could be included in business


operations and to see how this inclusion would inform the overall debate on the role of
business in society.

In selecting my research topic, I came across the German Government’s goal to “pro-
mote conflict sensitivity through the program of PPP” (Aktionsplan Krisenprävention,
§116, translation by the author)”. I was already familiar with the PPP-program of GTZ
through my work as journalist and consultant in the field of CSR. And, in my studies at
Brandeis, I had learned about the concept of conflict sensitivity.

I decided to assess the program to understand the opportunities PPPs could offer in re-
gards to activities in conflict-prone countries. Thus, I tried to find out to which extent
the practice and insights of conflict-sensitive programming could inform the PPPs initi-
ated by GTZ.

During the research, my understanding of the situation changed: I needed to account for
the problems the project managers had – their workload, the high overhead cost in-
cluded in every PPP, the high rate of companies that are not willing to continue with
negotiations due to “bureaucratic” behaviour of GTZ.

However, my objective remained. I readjusted the task towards developing a tool that
would be easy enough to be applied and that would still carry some insights of a con-
flict sensitive behaviour within the management of risks for PPPs in conflict-prone
countries.

26
Methods [How to proceed?]

This paper describes the process and results of a three-month field project I conducted
at the GTZ-headquarter in Eschborn, Germany. The process started with desk research
on PPP-projects in general and with a selection of projects in countries classified as
being in a heightened or acute need for crisis prevention (Nepal, Bosnia-Herzegovina)
according to the BMZ-matrix (see appendix). I also researched the role of CSR at GTZ.
Facilitating dialogues between civil society, business, and public sector is one of the
major tasks of GTZ. These multi-Stakeholder Dialogues are a valuable concept in mo-
tivating private partners towards PPP. And, they might open opportunities for joint
strategies in conflict prevention.

Public-Private-Partnerships was the topic of an article I co-wrote with a PPP-consultant


and a former project manager of the GTZ/PPP-department in September 2008 for the
annual publication of the German Sustainability Council (Hildebrandt/Rieth/Sewing:
46-58). We looked at the layout of PPPs and its potential for development cooperation
as it is perceived by GTZ: in introducing the private sector into development, GTZ ac-
knowledges the benefits the business community can bring to development; in turn, the
business community increasingly perceives the experience of GTZ as enabling a busi-
ness environment.

Following this, I arranged a conference panel17. The participants included the Head of
BMZ responsible for the PPP-program, a Senior Executive of the global IT-company
SAP, a Senior Member of the NGO Germanwatch and an Associate Director of the
research organisation Global Public Policy Institute (GPPi). Sunil Geness, Head of
Corporate Affairs SAP South Africa, presented the ‘Responsible Business Initiative’.
This PPP between SAP, the GTZ and the IBLF gains support from MNC present in
South Africa in extending their activities into the Democratic Republic of Congo
(DRC). To create a business-enabling environment, the PPP aims to introduce CSR-
practices to local businesses – using corporate citizenship and responsible behaviour as
a means to conduct business in a way to reduce tensions. This is an ambitious project in

17
see: Presentation of the Evidence – Panel held at CSR-conference 2008, Humboldt-University, Berlin;
Title: The Role of CR in Implementing Strategies of Development Cooperation, see: http://system.cr08-
berlin.de/index.php5?action=panelinfo&id=76&mode=time

27
a challenging environment, but according to Sunil the local business community seems
to “buy-in” and perceive the opportunities of Corporate Citizenship and CSR. And, it
shows the lever that a “small” PPP (the majority of PPPs are capped at an overall invest
of 400k Euro) can have.

Prior to the panel, an “action learning group” I facilitated for the PPP-staff provided
input to the research topic. This allowed for a broad overview of the pressing questions
in regards to the current and potential role of a conflict sensitive programming. The
group was an opportunity to identify the constraints of the program managers, to ask
how they steered their projects and why they had not yet considered introducing aspects
of conflict sensitivity. Other questions included the general need for assessments, how
projects are monitored, if monitoring includes procedures of how to manage risks, if
any early termination of a project had occurred connected to conflict, and if they would
feel comfortable in taking on the task of introducing aspects of conflict sensitivity into
PPPs.

This was followed by interviews with experts from the unit of private sector develop-
ment (PSD), who deal specifically with post-conflict reconstruction issues. I also dis-
cussed the research topic with a member of the department for crisis prevention, with
GTZ-employees representing the UN Global Compact (GTZ is its German focal point),
and of course in one-to-one interviews with a number of project managers at the
GTZ/PPP-department. The expert interviews and interviews of a few company manag-
ers18 responsible for operations in conflict-prone countries provided input for develop-
ing the rationale for this paper. Moreover, there is a body of research within GTZ on
different angles of what seems to be an ongoing field of debate: crisis prevention in
business.

This process can be seen as the beginning of a participative action research (PAR)19.
Document analysis, expert interviews, a (very rudimentary) focus group and an expert
workshop during a public conference delivered the first round of research data to start
this process.

18
The paper would have benefited from further interviews, but these were difficult to schedule and to
conduct.
19
an excellent introduction into PAR: http://www.scu.edu.au/schools/gcm/ar/ari/p-ywadsworth98.html

28
It is within the decisions of the GTZ/PPP department to take up this research process, to
co-research, change, re-research – in other words, to see the necessity to start and run
an open process of ‘learning by doing’. The discussion and further development of this
data and their connected assumptions could then be an opportunity to implement a risk
management tool that is informed by conflict sensitivity.

Introducing conflict sensitivity into a corporate context through a tool that manages
risks may be nothing new20. However, doing this within the context of PPPs can open
new insights. As we have seen, PPPs offer opportunities that are different from those of
PSD as well as those of MNC activities. It is the partnership construction that produces
answers to the challenging questions about fairness, power and responsibility. Adding
to this, the debate on the responsibilities of a corporation is still ongoing, and the an-
swers provided are still not agreed upon: Friedman’s dictum that ‘the social respon-
sibility of a company is to increase its profits’ (1970) still stands against Freeman’s
claim (1984) that companies need to be accountable to all their stakeholders. This paper
tries to find an answer to this discussion as far as activities of PPPs in conflict-prone
countries are concerned.

20
According to a senior manager of the „sector project innovative approaches of PSD“

29
A goal of the ongoing research could be to establish a platform for a common ground
between the partners of a PPP. The platform would seek solutions to the question of
how to operate in situations that demand conflict-sensitive behaviour. The feasibility of
this should be discussed by GTZ/PPP project managers. The gap between the German
government’s stipulation and the PPP-realities show that the PPP-program could ben-
efit from a joint platform.

30
Presentation of the evidence

In the following, I will first describe some of the usages of conflict sensitivity and its
benefits. As the second part of the evidence, I will propose a tool to raise awareness for
conflict sensitivity in the German PPP-program.

Preliminary questions resulting from the research include: if conflict sensitivity within
a PPP was viable, what would be needed in establishing this sensitivity? And, if the
private sector partner’s managing of risks through a tool (for raising awareness towards
conflict sensitivity) enhanced the role of PPPs in crisis prevention, how could it
strengthen the public sector that is part of a PPP.

(1.) Conflict sensitivity for PPPs - does it pay?


In situations that demand crisis prevention, all companies gain from security measures.
They hedge their risks through knowledge of the local setting – and they act in ways
that enable them to do business.

MNCs, divesting from a conflict-ridden area, have to accept an enormous loss of capi-
tal. Corporate infrastructure that was needed to do business (mines, oil refineries, har-
bours etc.) has to be given up mostly without compensation. Thus, some MNCs manage
their risks, establish stakeholder-dialogues and community investment programs, hire
consultants, anthropologists or an NGO to provide short-term and long-term risk as-
sessments and aim for conflict sensitivity in their operations, with the guiding focus of
security for operations and workforce.

PPP-operations, as defined by the BMZ-PPP-program’s development partnerships, are


generally much more flexible in their approach. Their investment is low, their business
depends on the existing infrastructure, local partners, locally produced goods and local
employees – in short: it mostly is local business, with the precondition or aim to be
rooted in community structures. Thus, to PPPs it is not only security that counts21.
Risks are as varied as their business operations – and they could be as relevant to the
companies as their individual CSR-policies. With growing awareness of the opportuni-

21
Of course, other issues do count for MNCs, too, and their risk assessments are more complex than the
ones that can be done for SME. But for the sake of investment (and thus their shareholders), security still
remains the major.

31
ties that CSR provides for a company’s marketing, business development, communica-
tion and so forth, companies increasingly seize local opportunities of “making a differ-
ence”. And, they are likely to do so in new markets and through new forms of co-
operation, too: the success of the PPP-program is a strong indicator of this.

In connecting with local businesses (as with third parties in PPPs), companies from
developed countries bring support, knowledge, incentives, entrepreneurship and capital
into the developing country. Thus, understanding the context as well as the interaction
between the business operations and the context form the basic principles of doing
business in the community. This would increase the likelihood that diversity and fair-
ness prevails.

Moreover, as the Corporate Engagement Project by the Collaborative for Development


Action (CDA, the NGO led by Mary Anderson) puts it in “Getting it Right!“ (forth-
coming)

conflict is usually predictable. People around the world have similar needs and
expectations and they become disappointed over similar issues. Local communi-
ties across the world react in similar ways when they perceive that a company
does not respect them or benefit their lives. Because local community happiness
is a company’s best buffer from conflict, whether because the community pro-
tects company assets from rebel attack or because the community finds it advan-
tageous to work with rather than against a company, it is always important to
keep close to and aware of community reactions to company operations. (p. 54)

Although this has been formulated with large operations in mind, the focus on com-
munity impact is shared by PPP.

An argument that I often heard during the interviews with PPP project managers re-
ferred to the “do-ability” of such mechanisms – especially since the mechanisms would
need constant or at least regular monitoring, evaluation and, if necessary, redesign. It
was felt that “it is inappropriate to deliver a proper mechanism towards community-
sensitivity for business operations with an overall invest of a few hundred thousand
Euro” (A GTZ/PPP-project manager, 16.10.2008). However, it must be asked if the
scale of investment decides? Is it related to the scale of a potential conflict involved?

32
Many examples, such as the conflict in Ambon/Moluccas22, show that the factors trig-
gering a proximate or structural conflict are indeed not related to the investment made.

PPPs can build local partnerships to prevent crisis. Partners (trade chambers, business
associations, supplier etc.) can provide information towards short- to mid-term moni-
toring done along the business operations. Already, companies must provide regular
status reports. Indicators for risk management (as they are described further below)
could be added. It is assumed, that the local GTZ-personnel’s long established contacts
to NGOs, local and regional governments could be approached with relevant issues and
questions 23.

Finally, here is an argument inherent in the nature of PPP: successful partnerships re-
quire that companies as well as development objectives profit from them. Since 1999,
there has been a remarkable upsurge in responsible business practices as well as in the
number of PPPs facilitated. It would, therefore, seem appropriate for GTZ to meet this
upsurge with a change in its supporting role, to balance the increased corporate en-
gagements. And what would be better for this than focusing on the one “make it or
break it” (Luc Zandvliet of CDA in a phone conversation with the author) issue that
mostly determines the success of a business operation in developing countries: is there
a risk of conflict and what is the need for my company to act upon this?

The “action learning group” (23.9.2008) showed the reservations of the project manag-
ers towards introducing any conflict-related elements into the negotiation process of the
PPP. They could not see the benefit and warned against the overhead costs. Moreover,
they felt that they could not responsibly carry out the job. One project manager formu-
lated “it is not our task, to consult on conflict sensitivity. We simply cannot perform
this task. And we will certainly not be able to carry any responsibility in this context”.
Moreover, “we always have options to cancel a contract, so if a situation arises that we
cannot control (such as an unforeseeable conflict) we will find a way out.” Another
point refers to how the overall responsibilities are distributed: From 1999 until now, it
was the companies that had to approach the GTZ. The project planning was done

22
http://news.bbc.co.uk/2/hi/asia-pacific/3657101.stm - see video on this page „It only takes one small
spark...“
23
According to a GTZ-field worker in Uganda

33
through the project managers, but the responsibility for the implementation is with the
companies.

It turned out that to the PPP project managers any implementation of conflict sensitivity
is seen as a “cost to business”, and not as a need to avoid the negative impact of busi-
ness operations on conflict and vice versa. The impact of conflict-sensitive pro-
gramming on large-scale MNC operations is recognised (Nelson: 2000), but the ac-
tions, opportunities and risks of “small-scale” PPPs are not. The business rationale of
PPPs demands that the majority of them, whenever they are set in conflict-prone count-
ries will be “working in conflict” (C0). However, it is not mainstreamed within GTZ
that these PPPs can already be crisis-preventive. Instead, it seems that the “business
case for conflict sensitivity” can indeed be argued for by approaching companies on
how to manage risks – and even more so, by including the risk assessment of a co-
operation with the local partner.

All in all, the above indicates that PPP can play a role in promoting economic devel-
opment and have a local leverage in doing so. PPPs are certainly not appropriate during
the conflict itself, but they can play a supporting role in conflict prevention and post-
conflict reconstruction (GTZ: 2007). And, because these settings differ in their com-
plexity from ‘normal’ development environments, they need to take into account the
conflict environment. Otherwise, they might fail or become harmful themselves.

Within GTZ, there are a number of approaches towards the use of conflict sensitivity in
a business context.

• The post-conflict reconstruction (PCR) unit within PSD aims to raise awareness
towards conflict sensitivity. It focuses on economic recovery as one of the most
important fields to contribute to peacebuilding. Building support for peace ac-
tivities often depends on income and employment opportunities. The aim of
creating a market economy that is social and ecological enables a large potential
to reduce tensions. Thus, PSD offers opportunities to address root causes of vio-
lent conflict. In my interviews, the members of the department indicated that
they would like to go further by showing that their work could and should ex-
tend Do no Harm. For instance, they pointed to actively de-escalating projects.

34
However, since GTZ is only starting to focus on this, there are not enough ex-
amples available yet.

• The crisis prevention department perceives themselves as open towards an inte-


gration of business into crisis prevention, but lacks capacity to do so. And in-
deed, there seems to be little if any communication between the GTZ/PPP-
department and the crisis prevention unit. Although I was frequently told that a
person (albeit always a different one) would be accountable to facilitate this
contact from crisis prevention department’s side, I never met these persons nor
received any qualitative input on their role. I did meet with one member of the
team, though, who very much supported the aim of this study.

• As outlined, the GTZ/PPP-department largely ignores the opportunities that a


CSR-approach towards conflict sensitivity offers.

The last point is surprising, since the development of CSR-policies and a convincing
CSR “business case” is at the heart of the PPP-program itself.

With the GTZ/PPP-department dealing with conflict sensitivity in an ad hoc way, this
paper tries to introduce aspects of conflict sensitivity through the private partners’
CSR-activities. Could an improvement of risk management strategies by the main cor-
porate partner in the PPP provide more information?

(2.) How to establish conflict-sensitive PPPs


This part of the evidence shows the costs and benefits for business in conflict-prone
regions (Box 1). I then suggest that this can be emphasised through a simple “tool”,
which constructs a basic but functional “conflict sensitivity awareness”.

A caveat: this paper formulates the needs and opportunities of raising awareness on
conflict sensitivity for projects in planning stage only.

As mentioned earlier, the two ways of integrating the private sector into conflict sensi-
tivity should be combined: crisis prevention gives a view of all sectors in conflict, theo-
retically encompassing but often excluding the private sector. Elements of CSR, how-

35
ever, are the motivating factor of corporate contribution towards preventing a (violent)
conflict.

This paper argues that there is a feasible and inexpensive way of improving the under-
standing and actions of companies towards conflict sensitivity. This will be reached
through changing the workflow of PPP-planning without considerably increasing the
workload of GTZ/PPP project managers.

The management of social and environmental risks is an essential part of CSR. The
company is an integral part of the structure in which it does business – its actions and
values have an impact on its environment. The responsibility for this is guided by
values of the “home state”24, while the “host state” might be in a critical phase with
turmoil approaching. The divergence of the home values and the host reality needs to
be managed25. Relevant questions of this management are: how can decisions that
negatively impact the situation be avoided or at least reduced? What information is
needed to “Do no Harm”? How can functions within a given situation be analysed to
provide security to the operations? The introduction of CSR provides an overview to-
wards immediate, and yet benchmarkable actions. In the long run, these actions enable
the development of standards for reporting – and for measuring impacts.

Costs Risks Benefits

Higher payments to state/private security Security Profit from strengthening government to


firms; staff time spent on security manage- establish good governance e.g. through
ment integrated hiring practices
Insurance, loss of coverage, specialist train- Operational Extend and profit from local knowledge
ing for staff, reduced mobility and higher Risks and better information on local stakehold-
transport costs ers
Destruction of property or infrastructure Material Source material from within the country;
improve supply chain
Disruption of production, delays on import Opportunity Increase production through better local
acceptance; again: improve supply chain
Increased cost of raising capital Capital Improved access to finance in home
countries improved through compliance
and CSR-performance (e.g. Equator prin-
ciples)
Kidnapping, killing and injury; stress; re- Personnel Investment in co-education, larger pool of
cruitment difficulties; higher wages to offset

24
´ for a comprehensive definition of these terms see Ruggie (2008), available at http://www.business-
humanrights.org/Documents/RuggieHRC2008
25
See also the excursus on CSR in this paper, p. 16 f.

36
risk; cost of management time spent pro- human capital, workforce diversity
tecting staff
Consumer campaign, risk-rating, share Reputation In host State: first-mover advantage,
price, competitive loss social licence to operate, both relevant for
other host States
In home State: differentiation, market
advantage (certification, image etc.)
Expensive and damaging law suits Litigation Understand conflict issues through work-
ing with human rights groups
Indirect
risks
Loss of life, health, intellectual and physical Human Providing sustainable livelihood
capacity
Weakening of social capital Social Connecting across the divides
Damage to financial and physical infra- Economic Rebuilding infrastructure, gaining market
structure, loss of markets access
Pollution, resource déplétion Environment Using stakeholder input to understand
environmental impact
Weakening of institutions, rule of law, Political Improving governance, property rights
governance
(Box 1 –- The “cost” side issues of this table are taken from the graph “Cost of Conflict to Companies” by
International Alert, 2004b)

The impact of corporate behaviour on above could be guided along assessing both
“ends of the spectrum” from delineating a median that is guided by the status at the
time of assessment, as success is always relative to the changing environment26.

The other beneficiaries of a “relatively” successful business practice are of course the
communities in which the business operates: conflict or latent conflict undermines the
development of the communities, including decades of development aid, and it is a
threat to livelihood, security and prosperity.

***

So while the public and civic sectors approach a latent violent conflict through the need
for crisis prevention, companies approach conflict through CSR-related policies. The
conflict itself generates different answers: whereas the public and civic sector will for-
mulate a need towards Human Rights, the private sector will mostly be concerned with

26
In a further PAR-cycle, the leading (or median) indicators would have a high priority in discussion. E.g. it
is hard to identify the median, as it would tend to be a „do nothing“ state – it might therefore be better to
decide for a „compromised“ leading indicator, with „support by community“ and „no support by community“
on each sides of the spectrum. (Thanks to Luc Zandvliet from CDA for pointing this out, see p. 173 of the
forthcoming publication “Getting it right”)

37
issues that hedge the risks and protect their investment. In working towards common
ground, in discussing the details of a co-operation agreement within a PPP, there is an
unprecedented opportunity to introduce conflict-relevant issues in a flexible, adaptable
way – and to turn them into a business case.

This common ground could be provided through the insights of conflict-sensitive ques-
tions, leading to a set of jointly agreed answers. This tool, too, grows into a trust-
building exercise. Once trust is an objective, the “connecting” functions may open a
business case: between the public and private partners, as well as between the PPP and
the community. This puts the suggested process at the core of what both the public and
the private partner aim for: a long-term, growing business operation guided by princi-
ples of sustainability regarding social and environmental standards.

In a conflict-prone environment, the most important aspect to agree on is how to deal


with situations of violent conflict before they emerge – and how to avoid having a
negative impact on the environment. With security and material issues pressing, it is
naïve to believe that an engagement would be worthwhile due to short-term profit rea-
sons alone. The involvement of a company promises to be successful only when the
involvement is combined with a strong case of understanding its impact. A tool dealing
with the long-term issues of engagement could give companies a rationale why they
should engage, how they could tap into and extend community resources, and how this
could hedge their risks. Such a tool might enable businesses in a conflict-prone envi-
ronment to be more profitable. As a result, the business case would be more successful
than the activities in an environment that does not appreciate the business’s operations
due to the fact that the business does not appreciate its environment27.

The tool would be a flexible approach towards a set of questions related mostly to hu-
man rights. The questions could be posed to company managers in charge of negotiat-
ing the details of a PPP with GTZ. In preparation to the meeting, the GTZ project man-
ager would have to determine the questions and adjust them to the project context as far
as possible given the information already provided. In addition, the local partner within

27
This argument is made by Transparency International in regards the cost of corruption and the ignor-
ance of companies regarding the potential economic benefits in avoiding corruption

38
the PPP brings experiences to the table that would need to be verified and analysed in
regards to how they relate to crisis prevention.

For business ventures classified as C0, PSD suggests a reduced ”Do no Harm” assess-
ment28 of the context. The PPP-tool follows this and asks:

Where do we work? (What is the community impact of the PPP?)


What do we do? (What do we provide? Who profits from it? Do we export/import?)
With whom do we work? (Who are our suppliers? What are their issues?)
How do we act? (Who are our stakeholders? What is our impact on them?)

The PPP-tool follows up with some more concrete questions, such as:
• What are the operational options you see that might have a positive impact on
relationships among groups and that promote social and political stability?
• How can you develop a better perspective on operational decisions – with the
aim of minimising a negative and maximising a positive impact on conflict?
• How can operational tools be developed that lower the costs of security, insur-
ance and reputational damage to your company?
• How can other players such as humanitarian organisations be integrated into
decision-making of your company?

By now, these questions open different perspectives (or strings of thought) towards the
tool. These perspectives will need to be extended and deepened by adding questions –
through looking at each PPP-proposal, at least at the beginning of the learning process
involved with the tool29. Examples of questions relating to various perspectives (taken
from a variety of existing tools30):

Community impact
Do you have a thorough knowledge on how your business is being perceived by the
community in which you operate?

28
cf. PSD in (post-)conflict situations, p. 19
29
Within the „new PPP“, this will need to be done for every single request.
30
Doing business in divided societies (Northern Ireland), Danish Human Rights and Business Project,
GTZ/PSD in (Post-) Conflict Situations

39
Will you consult with the local community on business operations that directly affect
their ownership?
Do you ensure that local know-how is protected by standards established by your home
state, if you use this know-how?
Do you have emergency procedures to prevent and address industrial accidents affect-
ing the surrounding community?
Do you have mechanisms to deal with grievances of the local community?
Do you ensure that a balance appropriate to different sides of the community is repre-
sented in your workforce?
Are your security guards trained to intervene with minimal force only?

Workplace
Do you consider how latent or acute conflict could affect performance?
Do you provide a living wage that enables your employees to meet the needs of them-
selves and their dependents?
Do you take all measures necessary to avoid from benefitting from forced labour?
Do you have neutral mechanisms for grievances of your employees?
Do you recognise the freedom association right of your employees?
Do you ensure that compensation and all employment-related decisions are based on
objective criteria (“fair employment”)?
Do you provide a work environment that is culturally respectful?
Do you provide education programs to your worker regardless of their cultural, ethnic,
or religious heritage?
Do you comply with minimum age standards?

Suppliers
Do you source the majority of your products needed for production from within the
country?
Are cultural, ethical, religious, political, and socio-economic issues relevant for your
local sourcing – and do you try to balance them across divides?
Do you have visible non-discriminatory supplier practices?

Customers
For Import: Has your company
• assessed whether sectarianism is an issue to your customers?
• established non-discriminatory practices visible to your customers?

40
• effective ways of monitoring its practices?

For Export:
Do you offer products that are certified (SA8000, organic, fair trade etc.)?

Capital
Do you report on your host country policies in your home countries within the require-
ments of a creditable framework (Principles of Responsible Investment, Global Report-
ing Initiative, Equator Principles)?

Litigation

Do you engage in dialogue with civil society in home and host states to help identify
wrongdoings?

As much as the tool is a work-in-progress, so are the mechanisms for decision-making.


However, the groundwork for this is already visible:

In furthering the approach and collating experiences, it was argued by the German gov-
ernment that PPP can deliver aspects of a civilian conflict management31, and create
consensus among public, private and civic sectors of society. For this to be the case,
there are a number of preconditions that must be fulfilled in a conflict sensitive frame-
work. They include perceiving the management of risks and opportunities of com-
munity-sensitive behaviour (proximate causes) or attitude (triggering causes), accord-
ing to Galtung: 74.

In the context of risks, rewards and penalties it must be noted that only substantial in-
centives drive corporations into these partnerships – not brand or reputational issues,
nor the aim of “doing good” when facing (potentially violent) conflict (Witte: 2).

However, the negative impacts a company’s action might have on conflict often equal
the negative impact on the balance sheet of a PPP’s success – which might provide en-

31
„Zivile Konfliktbearbeitung“ describes the non-militarian, non-violent conflict, mainly addressing struc-
tural roots of violence, i.e. non-military sources of conflict such as poverty, hunger, and underdevelop-
ment.

41
ough incentive for the company to consider conflict sensitive practices32. Once a com-
pany that is already active in the community has been identified as a conflict trigger, it
might be too late for the (capacity-restricted) conflict-sensitive measures of a PPP to
have a positive impact. That would mean stopping the partnership before it has started.
Yet, if there are doubts that a company has not complied with the demands of conflict
sensitivity, this behaviour can be rectified by clear demands during the negotiation pro-
cess, and subsequently, the PPP can still take place.

The function of the tool is threefold: it extends the basic risk management approach to
the need for a conflict-sensitive measure; it does so by developing a joint understanding
of conflict sensitivity (that carries all through the partnership); and it increases the trust-
building within the partnership. All in all, it promotes the role of CSR within the com-
panies’ risk management as well as the importance and appeal of public-private part-
nerships.

32
This neglects the opportunities that „war economies“ bring to companies – this paper deliberately does
not deal with these.

42
Conclusion

The paper has shown that conflict sensitivity for projects in conflict-prone countries
will enhance the attractiveness of PPPs. The insights provided by conflict sensitivity
can contribute to peacebuilding and benefit from it. A process or “tool” that introduces
these insights into the risk management of companies sheds light on the present and
future challenges of business activities. And, the focus on the local presence of these
partnerships is an opportunity – it offers high leverage from a small investment.

PPPs already work towards a business-enabling environment, targeting issues such as


corruption, health or environmental concerns. Often, these can be dealt with more suc-
cessfully in a partnership than through isolated activities by either the public or the pri-
vate sector. This paper argues that a similar logic applies to conflict-sensitive pro-
gramming: it could be a facilitator for creating partnership or common ground between
the company and the community. This, in turn, would be in line with the innovative
character of the program. The common ground created would use and extend the facili-
tation of dialogue by GTZ, and feed corporate experiences back into the private sector
development of the locality. Equally, the common ground would strengthen the com-
munications (or public relations) messages of the PPP-program – the aim of which is to
create a convincing “business case” for CSR; and finally, the common ground would be
one of the prerequisites for another major goal not only of the program but of GTZ and
BMZ altogether: to have business operations guided by principles of sustainability in
regards to social and environmental standards.

Companies perceive the requirement for conflict sensitivity as a stick or as a carrot.


That is, the required actions might reveal established misunderstandings, bias or lack of
knowledge on the local level; or they might show the public sector partner that the
partnership is grounded in local experience.

To the public sector partner BMZ, a documented process of conflict sensitivity hedges
existing risks through offering a body of knowledge, and simultaneously increases the
attractiveness of the PPP-program. Moreover, demonstrating awareness of conflict
sensitivity through a tangible “tool” can be used for marketing the innovative character
of PPPs in zones of heightened or acute need for crisis prevention. Thus, it can be ar-

43
gued that a tool that raises awareness of conflict sensitivity with private partners in-
creases and enhances the capabilities of “PPP in conflict-prone settings”. With the
German government responding to the increasing need towards internationally de-
manded activities in conflict prevention, PPP can partake in this need in providing in-
novative projects with future scalability.

This marketing is increased by a forthcoming “new” PPP-program, in which Requests


for Proposals are issued by GTZ. With this, the implementing agency could move from
the back seat to the steering wheel – given an opportunity amongst other issues, to press
for conflict-sensitive programming. It will be seen if this opportunity is used in due
course and after further discussions within the PPP-department.

44
Recommendations

1. What is needed is a clear commitment from the BMZ towards establishing corporate-
community relationships (common ground) through conflict sensitivity – building upon
the commitment that already is in place within declared “crisis preventive PPP” (§116
of the action crisis plan).33 However, this commitment must be based on the rationale
that conflict sensitivity reduces the risk, increases sustainability and pays back in terms
of business and taxpayers’ investment. Thus, it should not be compulsory, but left in
the remit of both partners: it is only when it is seen as a real asset to both parties that
the partnership and the resulting common ground will be taken seriously. This is what
the suggested tool aims at.

2. Some success factors of a PPP directly contribute to overcoming a conflict-prone


setting without specifically carrying a C1 or C2-marker. An example: a German waste
management company engages in Bosnia-Herzegovina to help rebuild the infrastructure
for tourism to enable a better environment for business. Their rationale is to get infor-
mation on a market they plan to open for their business operations. However, in im-
proving the touristic infrastructure they improve the cooperation across the divides.
These PPPs should be identified as exemplary approaches towards conflict prevention.

3. The relationship between the responsibility and the impact of corporations on crisis
prevention shows that different roads could be viable to convince three different casts
of businessmen: sceptics, who see business and its role in crisis prevention as a mis-
match, could be approached with the prospect of their leadership in social responsi-
bility; nay-sayers, such as Friedman (1983) could be convinced by the impact of risk
management on the business case; jaded businessmen might be convinced by the pro-
cess of integrating CSR into conflict prevention. However, evaluating the opportunities
for conflict sensitivity in PPPs does not depend on the existing crisis scenarios, but on
the opportunity of integrating corporate and communities. Relating low costs to promis-
ing opportunities provides a case for engagement that depends on internal buy-in of the
PPP-department. Such support could be achieved through the proposed PAR.
33
Apart from the rationale developed in this paper, this would hedge the risks for the current Government:
The action plan demands annual reporting to the Bundestag – something that has been omitted due to
missing result since 2005. Every political party present in the Bundestag is allowed to ask for the reasons
and to point at the issues not delivered.

45
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48
Appendix

Conflict Matrix

Example PPP-Project – see also Introduction (p. 7 – 11)

1. Data Sheet PPP-Facility: yes


Project title: Organic Production of High Quality Tea in Rural Areas of Nepal

Address and Description of Partner Company and its Economic Activities in the Part-
ner Country
TeeGschwendner, Heidestraße 26, 53340 Meckenheim,
Gorkha Tea Estate Pvt. Ltd. (Pashupatinagar, Illam, Nepal), GPO Box 2200, Kathmandu

Size of the Com- < 50 Mio Umsatz

49
pany
Founded in 1978, TeeGschwendner is the biggest tea retailer in Germany with a mar-
ket share of about 25 % of the specialized tea trade. It sells in the segment of “best
quality” tea, which is the top 0.5 % of the world’s tea production. TeeGschwendner has
more than 120 franchise shops in Germany some more in neighbouring countries as
well as shops in Brazil, Saudi Arabia and USA (2007). TeeGschwendner has about 90
employees and in 2006 had a turnover of approximately 18 million Euros. The com-
pany is family-owned and holds close relationships to tea producers all around the
world.

Short Description of the Project


The objectives of the project are: Selected tea farmers and processors in the tea supply chain in Eastern
Nepal produce and sell high quality tea complying with international standards for organic tea production
and have an improved access to services related to the cultivation, processing and marketing of organic
tea. To achieve these objectives, trainings on organic tea production and tea processing will be developed
and implemented for the smallholder farmers of Gorkha Tea Estate (GTE). Furthermore TeeGschwendner
and GTE will develop a market oriented Code of Conduct (CoC) to enhance marketing of Nepalese Or-
ganic Tea. The CoC will be based on an existing CoC “Taste of the Himalayas” for marketing which is
directed towards an international audience. The new CoC will connect to this code but will focus more on
the tea farmers and entrepreneurs and provide them with the knowledge to comply with the Marketing
CoC. Additionally, GTE and the farmer groups will be provided with advice on quality management and
preparation for organic certification. The project’s learnings will be disseminated through workshops with
key representatives from ministries, associations and other stakeholder groups conducted by the GTZ
Nepal. Members of 130 smallholder farmer groups and two major orthodox tea associations are the direct
target group of the project. It is expected that by the end of the PPP, some 900 farmers will have pro-
duced and sold certified organic tea to TeeGschwendner and other interested buyers. There will be an
improved access to services relating to organic production for at least these 900 farmers.

Country and Project Characteristics

Country: Nepal Special Project Type:


Level of Income: LDC DC-Promotion Area: Landwirtschaft
Region: Asien Environmental Rele- ja
vance:
MDGs: 1,7 Poverty Relevance: SHA

2. DESCRIPTION OF THE PROJECT

2.1 Background from the development politics’ point of view


Nepal has a relatively young tea growing history. Its tea is not as well-known as India’s
Darjeeling tea and Assam tea, which have been produced and traded for more than
150 years. However, the relatively newer bushes in and around the eastern hills of
Nepal, as well as favourable soils and climate allow for high quality production. There-
fore, Nepal especially attracts those traders that require high standards when it comes
to quality criteria, sustainably produced and organically certified teas. Especially or-
ganic tea is sought after by international traders as the demand has been rising signifi-
cantly over the last years and cannot be fully satisfied by the existing production. The
deteriorating quality of Darjeeling tea and increasing worldwide demand for high
quality tea gives the young tea gardens of Nepal a competitive advantage and with
that, an opportunity to expand its tea cultivation for markets outside the country.
But Nepalese tea exporters are fairly new on the international tea market and are lack-
ing the necessary knowledge in cultivation and processing of organic and high quality
tea. Since the EU has tightened the legislation on pesticides the requirements for
knowledge on and compliance with organic tea production have been extended even
further. Still in Nepal especially the smallholder farmers are sometimes using exces-

50
sive pesticides. This has resulted in cancelling of consignments by international retail-
ers in the past. More over, to meet the traders’ quality requirements plucking and fer-
menting techniques need to be improved, as well as hygiene standards, handling and
packaging methods at the processing stage. Additionally, when compared for example
to Darjeeling tea, there is still less demand for Nepal tea due to the lack of brand iden-
tity and marketing campaigns in potential consumer countries. Thus, international mar-
ket linkages are still weak.
More over, most of Nepalese tea farmers only provide a limited variety of teas, which
makes competitiveness very much dependent on a narrow scope of products. At pres-
ent, tea grown in the hills of Eastern Nepal is mainly a kind of black tea. The methods
for producing green tea, white tea or oolong tea are different and not widely known.
The political conflict, which Nepal has been facing in recent years, with Maoist rebels
controlling especially rural areas, has additionally hampered any kind of economic ac-
tivities in the country. As the conflict is basically a social one, it will be crucial for the
success of the peace process, initiated in May 2006, to support poor rural areas in the
creation of income. The Nepalese tea sector provides employment for about 30,000
people, especially women, working at 6,000 smallholder farms. In East Nepal, the key
region for tea production in Nepal (bordering with Darjeeling), there are eleven Tea
companies, where another 600 workers are employed. Tea is produced for exportation
and mostly goes to Europe.

2.2 Short description of the project


The objectives of the project are: Selected tea farmers and processors in the tea sup-
ply chain in Eastern Nepal produce high quality tea complying with international stand-
ards for organic tea production and have an improved access to services related to the
cultivation, processing, and marketing of organic tea.
Outputs provided by the project:
The project activities will be centred on a newly built tea factory of the Nepalese com-
pany Gorkha Tea Estate (GTE) in the region of Ilam (East Nepal, bordering with Dar-
jeeling). The direct target groups are 130 smallholder tea farmer groups who will have
their tea processed at GTE. At institutional level, key sector organisations will be in-
volved in the project, e. g. “Himalayan Orthodox Tea Producers’ Association” and “the
Himalayan Orthodox Tea Producers’ Cooperative” (HIMCOOP), as well as a number
of farmer cooperatives.
GTE and the farmers will be provided technical support related to cultivation and pro-
cessing of tea, and will be supported in implementing a quality management system
along the supply chain that will lead to organic certification for those farmers who have
proved to be in a more advanced state of development with regard to organic produc-
tion. Each farm will start the change process according to their specific situation and
will be supported in continuous upgrading. Over time, the production of all target far-
mer groups will be continuously shifted towards organic certification. In order to reach
the above mentioned objectives, GTE, farmers and their organisations will be provided
support as follows:
Needs assessment:
Soils analyses will be conducted at the beginning of the project within the territory of
130 smallholder farmer groups, in order to determine the level of advancement of each
farm in respect to sustainable or even organic production. In addition to the soil survey
further analysis will be conducted at processing level with regard to the organic certifi-
cation of the tea factory. Experts on organic farming will hold a needs assessment at
GTE and advice for training needs to reach organic certification according to their find-
ings.
Preparation and implementation of ToT and a training programme:

51
GTE will establish a demonstration field for organic tea production. It serves for re-
search aiming at product diversification as well as as a training facility. Different new
tea varieties will be tested on their potential to grow in the region. For the cultivation
part in the supply chain, the tea advisors will develop training concepts and training
material on sustainable and organic tea production as well as production of new types
of tea.
According to the findings of the organic tea expert training material will be developed
and printed. It will among others comprise a training manual in local language for the
cultivation part of the value chain (“Organic Orthodox Tea Production”) as well as for
processing at GTE’s tea factory. In a train-the-trainer programme selected representa-
tives of the smallholder groups and workers at tea the factories will be prepared for
teaching and advising on organic farming methods in cooperation with HIMCOOP.
These schooled trainers will then train the members of the 130 farmer groups in or-
ganic tea production. They will be the “speakers” and advisors for organic certification
also in the long term. They will advise the farmers for compliance with the criteria of
organic certification even after the project has ended.
In the training programme the farmers will learn essential methods for organic tea
farming and harvesting. This is tipping and plucking of tea, use of organic fertilizers
(cow dung, compost) and organic pest management (without pesticides), pruning and
skiffing, planting and methods of composting. In addition, production methods for new
tea types will be included in the training (broken tea, fanning). Quality control will be
another focus of the trainings. For the processing level, training modules will refer to
fermenting, proper handling of equipment, hygiene standards, handling and packaging.
The experts will support Gorkha Tea Estate to develop a quality management system
according to the needs of organic tea production.
Introduction of organic fertilizer:
To allow organic certification, a special module to substitute fertilizer by cow dung and
compost will be elaborated. In a previous project, GTE with the support of Rabo Bank
Foundation has started to provide cows to the 130 smallholder groups also targeted in
this PPP project. These activities will be inspected by an expert to analyze training
needs for the use of the cow dung towards organic production, which will then be inte-
grated in the training modules. Furthermore, biogas facilities will be installed at the
fields of the 130 farmer groups. In the facilities the cow dung will be processed to
biogas to provide smallholder families with power supply for their daily necessities. The
remainder from the biogas will be used as a fertilizer. In the area of the tea gardens,
milk production is the main source of income for poor families, including the targeted
smallholders. Therefore, cow dung is available in a sufficient volume for processing
into biogas and use as fertilizer. Additionally, compost is essential to substitute artificial
fertilizer. Facilities and training will be provided according to the identified needs.
Organic and fair trade certification:
In addition, GTE and selected farmers who were considered at a more advanced state
of preparedness will be supported in preparing for organic tea certification and in
undergoing certification against standards of organic tea production. It is to be deter-
mined which certification is to be achieved by the farmers. Within the project’s scope it
is intended to prepare the farmers for certification and make them ready for any or-
ganic certification required by their buyers. It is intended that the first farmers and GTE
will be certified within the scope of the project. Furthermore, based on the necessary
changes initiated for organic certification, a “Fair Trade” certification of the involved
farmers and GTE will be executed in the course of the project. Necessary advice will
be given to farmers and their representative organisations about the benefits and the
functioning of the fair trade label.

52
Improvement of marketing and international market linkages:
A further training aspect of the project will be the marketing of the tea. Critical issues
within the distribution ranging from product diversification to selection of European
buyers will be highlighted as well as product diversification including new types of tea
such as green, oolong, brick, etc.. Members of the associations and entrepreneurs will
be trained in understanding the need for important issues such as market diversifica-
tion and ideas about the importance of understanding market behaviour, taste, and the
needs of the consumers. A group of representatives of the smallholder groups will be
trained on organic tea production and product diversification particularly for capacity
building.
As a main marketing tool TeeGschwendner in cooperation with GTE will develop a
market oriented Code of Conduct (CoC). The CoC will be based on an existing CoC
for “Taste of the Himalayas” and will focus on organic tea. The existing CoC is directed
towards an international audience and focuses on marketing and branding. The
planned CoC will be much more practice oriented, directed at the farmers and tea en-
trepreneurs and seeks to enable them to comply with the existing CoC.
To further disseminate the project’s learnings GTZ Nepal will conduct workshops with
key representatives from ministries, associations and other stakeholder groups in co-
operation with the project partners.
Use of the project’s outputs:
The farmers as well as workers at GTE will apply the knowledge they gained in the
trainings to produce organic tea as well as new types of tea.
The producers’ organisations, especially HIMCOOP, will establish internal consulting
capacities in the area of organic tea farming which they will provide to their members
as multipliers. They will integrate the training modules into their portfolio of services
and will therefore be capable of providing advice to farmers who will follow suit in the
certification process at a later stage. Selected representatives of the smallholder
groups and workers at the tea factories, supported by HIMCOOP and other sector or-
ganisations, will advise the farmers for compliance with the criteria of organic certifi-
cation even after the PPP project has ended.
Both, GTE and sector organizations will use the findings of the research on varieties
and the advice of the marketing experts to amplify their range of products for better
product outreach and to sell more tea. In order to eliminate pesticides from the produc-
tion process, the farmers will learn to use the cow dung and compost to produce fer-
tilizer that complies with the standards for organic tea production. As a side effect, the
farmers will use the energy generated by the biogas facilities as power supply for their
daily necessities, like cooking etc..
2.3. Relevance of the PPP-Cooperation for the private Partner and others In-
volved (without DC)
Selling at the top-level market segment of quality teas, TeeGschwendner commits to a
careful and comprehensive quality control with strict testing of all products in its own
laboratories plus third party quality-analyses. Its sourcing strategy is based on long-
term and direct relations with tea suppliers.
Because of its potential for high quality tea production, TeeGschwendner is interested
in purchasing greater quantities from Nepal. From a marketing point of view, the com-
pany can benefit from new and still rare Nepalese teas in its product range. Doing this,
TeeGschwendner is especially looking for tea which can reach an organic and fair
trade certification because, like many other tea traders, TeeGschwendner is unable to

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satisfy the current demand for organic and fair trade tea among its customers. Fur-
thermore, TeeGschwendner has a long-term interest that soils in newer tea growing
areas like Nepal will not be spoilt by pesticides as it has happened in the past to other
tea growing areas where a recuperation of soils will be nearly impossible in the mid-
term. Therefore, the company is willing to invest in improving capacities among Nepa-
lese tea producers.
GTZ’s experts in Nepal have good contacts, networks and knowledge in the Nepalese
tea sector, especially when it comes to dealing with smallholder farmers in training,
organisation and monitoring of change processes, which TeeGschwendner itself can-
not provide in the necessary scope. From a development policies’ perspective,
TeeGschwendner is an ideal partner to connect the Nepalese value chain of high
quality tea to the international market and with that generate income in conflict prone
and poor areas of the country. This is why both partners are joining forces in this PPP
project.
TeeGschwendner commits to purchase tea from GTE/the farmers in the target region
after the tea has been certified organic. More over, TeeGschwendner is willing to pro-
vide contacts to other international buyers, especially for the qualities of broken tea or
fanning, which are not bought by direct competitors. Therefore, sustainability of the
PPP initiative is ensured. The sustainability is further supported by the cooperation
with the membership associations who will be supplied with the knowledge to produce
and market organic tea and will further disseminate the knowledge throughout time.

2.4 PPP-Program related measures and activities undertaken up to now


Since 1998 the bilateral project Nepalese-German Integrated Economic Promotion -
Private Sector Promotion (PSP, P.N. 2003.2461.6) has been working to promote the
competitiveness of small and medium enterprises (SME) in Nepal. The program is
active within several sectors of the Nepalese economy including the tea sector.
GTZ/PSP has been working closely with stakeholders to conduct activities in the areas
of branding, quality and access to finance. This has paved the way to make this PPP
happen. PSP provides support for the PPP measure with expertise on the Nepalese
tea sector.
There will be a close cooperation with GTZ Nepal and PSP within the PPP measure.
Still, it is not feasible to integrate the present PPP measure into the TC project. PSP
duration finalizes in December 2007. Up to date it cannot be assured that there will be
a second phase of the program. Due to the PPP planning process and the alignment
of the project steps to the tea cycle it is not recommendable to wait until the future of
the PSP program is decided upon.
In a former project GTE with the support of the Rabo Bank Foundation34 started to
provide smallholder families from the groups targeted in this project with cows for their
daily dairy needs. Within this project the use of cow dung as a fertilizer and for biogas
processing was analyzed. The experience of this project will be used in the PPP pro-
ject. The use of cow dung for the biogas facilities will be an important and interesting
broadening of the project with the Rabo Bank Foundation.

2.5 Impacts and Effects of the Project on development politics


Direct impact:

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The farmers as well as GTE will have better knowledge on organic tea production and
processing and will thus produce higher quality tea. They will furthermore have access
to the international market and be able to sell their high quality tea to international tea
buyers.
The farmers will work under improved working and hygiene conditions, which will not
only result in quality improvement of the product but will also, contribute to farmers´
health.
The provision of smallholder groups with biogas facilities will supply those with power
for their daily necessities and for the tea production. At the same time, they will pro-
duce organic fertilizer for tea cultivation, which will be available.
Through the marketing training the tea producers have a better understanding of the
requirements of European buyers. They have knowledge about producing a wider pro-
duct range (like green tea, oolong tea, white tea, etc.) and produce market acceptable
tea from the start.
The project will particularly support a south-south-exchange of knowledge as tea ex-
perts will come from Darjeeling and South India to Nepal. The appointment of Indian
tea experts and the exposure trips to Darjeeling and South India will contribute to this
exchange.
The tea farmers in the target region increasingly comply with international standards
for organic tea production. Those who will have certified their production against the
standard for organic and fair trade production and sell the lot of certified tea directly to
TeeGschwendner will increase their income. The improved quality control system will
ensure an improved traceability of the tea along the certified supply chain for organic
farming. Due to the better training capabilities and services of the producer associa-
tions in the areas of organic tea production, tea farmers in the target region have an
improved access to services relating to the cultivation, processing and marketing of
organic tea.
Indirect impact:
As more and more farmers and processors in the region will comply with the interna-
tional standards for organic tea, they will increasingly sell their certified tea to interna-
tional buyers. As a consequence, tea farmers and the entrepreneurs will yield higher
employment opportunities and higher income resulting from the value addition that will
be generated across the value chain. As more and more producers and processors will
venture into producing organic tea, other supply chains in the region will be certified.
The example may also be replicated in other regions, as a consequence of which the
competitiveness of the Nepalese value chain for organic tea is increased and thus ad-
ditional income created for poor farmers in rural areas.
Selling the fertiliser generated by the biogas facilities might give those poor families
who have been provided with biogas facilities further new income opportunities. The
use of biological fertilizers will more over help to reduce environmental pollution.
The responsible use of fertilizers and organic production will prevent soil conservation
and assure soil quality in the tea farms in the long term.
Highly aggregated development benefit:
As the PPP measure will indirectly result in an improved income situation for a larger
number of poor tea farmers in rural areas, the project will indirectly contribute to MDG
1 (poverty reduction). By promoting organic tea production and especially enhancing
reduction of pesticides the PPP measure also directly relates to MDG 7 (ensure envi-
ronmental sustainability).

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Through the creation of income in the conflict-sensitive value chain of tea, the project
will have a stabilizing effect on the peace process in Nepal and thus contribute to con-
flict prevention.

2.6. Risks and Challenges


The tea industry may face threats through the continuation of improper use of pesti-
cides by some farmer groups. However, the educational vision of the project will be to
minimize such activities by proper dissemination and assurance of buying of organic
(pesticide free) products by TeeGschwendner. The sector organizations, especially
HIMCOOP, are playing an important role to sustain the process of pesticide free pro-
duction. They will be strongly engaged in the project and also the cooperation agree-
ment of the PPP. GTZ will continuously lobby for their firm engagement in the con-
tinuation of the work, pointing out the benefits, which will already be visible within the
course of the PPP project.
Although the past ten years saw gross political instability, which produced an environ-
ment that was not favorable to doing business, there have also been other opportuni-
ties and developments in the industry during this time. In general every project exe-
cuted in rural areas stands at risks if tension increases again. Due to the peace
agreement signed in May 2006 this risk is significantly lower than in recent years. The
PPP measure seeks to contribute to further stabilization of the peace process in gen-
eral. Nonetheless, it cannot directly influence the further development on a political
level.

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