State Secretary Vidar Helgesen
FAFO International Expert Consultations, Oslo
4 November 2003

Economies of Conflict

Ladies and gentlemen,

In its foreign and development policy, Norway is paying increasing attention to the causes and consequences of conflict. When we seek to assist in preventing, managing and resolving conflicts we do that in order to protect human lives. But our efforts are also based on a determination to fight poverty and support economic growth and peaceful development. In March last year we hosted a conference in New York on the political economies of armed conflict together with the International Peace Academy. This was done during our Presidency of the Security Council, because we wanted to highlight what we saw as one of the main challenges to achieving peace.

Since the conference, new advances have been made in terms of both research and policy. Therefore, these follow-up expert consultations on the economies of conflict are timely – and I would like to express my gratitude to FAFO for organising this event. The expert consultations will have a bearing on four inter-related Norwegian policy aims:

• First, we want to explore the practical implications for concrete conflict resolution where Norway has a role as facilitator, as in Sri Lanka, or where we are supporting a peace process, as in Sudan.
• Second, we want to promote development by identifying effective strategies to support peace efforts. Sustainable development requires durable peace and security, and cannot be achieved in the absence of the rule of law or political and economic equity.
• Third, we want to help strengthen the conflict prevention capacities of the UN, including programmes to fight corruption and promote good governance. We want to enhance the normative function of the UN as well as its operational role by forging partnerships with the OECD, the World Bank, civil society and the private sector.
• Fourth, we want to facilitate a deeper partnership with Norwegian extractive industries operating in developing countries and conflict zones around the world. We want to assist in developing multilateral and voluntary frameworks for standards, guidelines and legislation.

Any armed conflict causes terrible human suffering. Conflict leads to refugee flows, trafficking in arms and people, and a rise in crime and the level of violence in society. Natural resources like diamonds, oil, minerals and timber give opportunists a chance to make profits. Often, government leaders and opposing rebel leaders have a mutual interest in prolonging armed conflict.

And even if the parties agree to end the fighting, regaining the initiative from the economic entrepreneurs of conflict is a difficult undertaking. A war economy can continue to distort an economy long after the signing of a peace agreement. Indeed, it can derail the whole peace process.

War economies and those whose livelihood depends on them must therefore be dealt with by the international community and multilateral institutions as an integral part of the overall transformation of a society from war to peace.

From Norway’s own experience of conflict resolution, we have learnt that it is crucial that the population experiences the economic dividends of peace as soon as possible after conflict has ended.

But economic assistance can never replace political solutions to conflicts sparked by grievances that are political in nature. Indeed, we have seen that it can even cement the very structures of the war economy that we aim to change.

The danger therefore continues to be that as long as there is an opportunity, factions that are officially committed to a peace process will go on funding their insurgency agenda by illicit means, and this will seriously hamper efforts to pacify, reunite and reconcile the population after conflict.

In many developing countries in conflict or post-conflict situations, the extractions of natural resources is a major source of state revenue. Extractive industries generate considerable foreign investments. In countries lacking transparency and accountability, such revenues facilitate corruption and misappropriation by state officials.

Yet it is our policy to encourage multinational extractive industries to become established in such countries. No doubt, the political risks and economic challenges for business can be considerable.

Not all legitimate businesses would take up this challenge, and those who do invariably risk getting caught up in practices that are illegal or unethical. Yet, by operating on the right side of the law and upholding acceptable ethical standards, they will contribute to good governance and promote transparency, anti-corruption and accountability. Expecting, encouraging and enforcing such behaviour should be our strategy.

All too often the legacy of civil war is another war. Post-conflict zones such as Afghanistan, Angola, the Balkans, Sierra Leone, Liberia and the Democratic Republic of the Congo fully demonstrate the difficulties of transforming war economies. Despite the progress that has been made, each of these countries has obtained only a precarious peace. Take Afghanistan, where the dynamics of the war economy still prevail. The lack of security and governmental authority outside Kabul is a major problem. Security is at the centre of the international effort to support Afghanistan, because it is vital for development.

But the relationship is two-way. Development is essential to sustain security for people. As an example, Afghan farmers need an alternative livelihood to that provided by growing poppies. To assist in this long-term endeavour, Norway has decided to upgrade Afghanistan to a partner country in our development co-operation. This is because we realise that if we do not manage to support Afghanistan in turning into a peace economy, the undertaking we have started may never succeed.

Much the same case could probably be made for Iraq. Over the years a parochial and criminalised economy has developed. Transformation of this particular kind of economy will depend on judicial capacity building and the democratisation of political institutions.

Terrorism also feeds on conflict commodities and compounds the problem of conflict economies. Terrorist networks exploit weak states and use the infrastructure of international organised crime. It is relatively clear that al Qaeda was deeply involved in trading in rough diamonds up through the 1990s. They began by operating out of Kenya and Tanzania and then moved their activities to Sierra Leone and Liberia.

We must eliminate the opportunities for warlords and terrorists to use diamonds and other conflict commodities to buy guns and launder money. We need to explore the security and development nexus further. And we must work with business and civil society to promote accountability, transparency and other integral elements of good governance.

The international community can, if it acts with sufficient determination, do more to prevent war, massacres, ethnic cleansing, rape and destruction. Successful implementation of preventive measures can provide the breathing space a society needs to achieve peaceful and decent self-government. In many cases conflicts can be managed before they turn violent, provided that the international community develops and employs preventive policies. In identifying such policies, events like these expert consultations are important, and I look forward to learning from your deliberations.

Thank you.