2012 saw a somewhat unprecedented level of Western diplomatic engagement in Myanmar / Burma. Accompanying this has been a surge of commercial interest in the opportunities apparent in the country's re-opening.
2013 then began with Google's chairman announcing plans to visit a far more diplomatically isolated country, North Korea (despite the US state department's discomfort).
2013 is also the year that I hope will finally see publication of a chapter I co-wrote, albeit on aid not investment, for a book on Principled Engagment in 'Pariah' States (Kinley and Pedersen, eds.).*
The Google-North Korea visit was not necessarily undertaken in a corporate 'pre-entry' capacity, but raises interesting questions not just about diplomatic strategies for engaging with isolated regimes, but for the role of corporate country entry or outreach in such 're-opening' processes or attempts -- whether by state diplomatic design or independent initiative.**
In the continent I cover, Western business activity in a number of countries is constrained by, among other things, the real or perceived reputational or regulatory risks of seeking to enter where US or other sanctions apply in some form or another.
Sudan, Zimbabwe, Eritrea and Madagascar all (I think that's all) to some extent can be categorised as sanctioned and subject to varying degrees of Western diplomatic isolation. The late apartheid era in South Africa, or business activity in Rhodesia after 1965 are obvious African examples of controversial corporate engagement continuing. If, as some think, this year brings the prospect of transformative political change in Zimbabwe, the question could arise inside firm X or Y of whether a more proactive country engagement strategy ought to have been undertaken or planned in anticipation of a more relaxed or less controversial and complex environment for business.
Reach out or hold back?
Such situations raise peculiar issues for firms and for policymakers, ones where private initiative and public interest overlap closely.
Corporate strategies in such situations must balance potential 'first mover' advantage with the potential to miscalculate the extent of transformative change, leading to serious commercial losses or sustained pro-democracy activist campaigning (the latter on the basis that the engagement with a 'reforming' regime lacks a sufficiently principled basis). Moreover, if the firm's move is considerably out of sync with its home state there is also the possibility of limited home country diplomatic support in navigating complex local politics in the receiving country.
Firms like Google whose products or services so directly involve questions of political values and human rights such as freedom of expression have a clear commercial and reputational imperative to develop a clear, consistent and communicable 'foreign policy', for example in situations where more repressive governments seek to very narrowly constrain the company's operations. Such strategic issues are not limited to 'pariah' states, but the extra public attention and diplomatic sensitivities involved in such settings raise the stakes.
This blog post cops out now -- I don't purport to offer a 'solution'.
At the level of state diplomacy, my own instinct tends to lie with principled engagement, given how counter-productive (and damaging to the ordinary citizen) isolation can be. The UN's 2011 'Ruggie' guidelines on business and human rights, among other things, give increasing normative guidance to firms in terms of what the 'principles' might be in 'principled engagement' by corporates in politically isolated states:
* In some situations, a US company (say) that is far more comfortable with country (re)-entry than the US State Department could have a role in contributing to political 'normalisation', and so lead the way...
* ... Yet diplomacy is an art, and there will remain many situations where firms would be well advised to follow their government's lead even if this feels excessively cautious and appears to handicap them relative to competitors from other states.
It will depend on the situation, and the company's exposure in particular to reputational risk: the private sector inhabits a public world. In high-profile 'pariah' country entries, it can quickly become a very publicised world indeed.
Happy 2013!
Jo
Related previous posts include those on 'corporate foreign policy' (here) and on 'business and nationalism: foreign policy attribution' (here).
Here is a link to a paper related to the 'Principled Engagement' project / book.
If you're interested, Jabin's blog (China in India) is here.
* The idea that Zimbabwe, for instance, is a 'pariah' state is one that I find somewhat problematic, not least because such mindsets / categories obscure avenues for principled engagement; it is debateable whether targetted Western sanctions there are having their intended effects, while I am told there are many in Washington who see US sanctions on Sudan as obsolete and retarding a whole generation's development.
** There's a lot to be said about avoiding seeing such settings as vacuums free of transnational business activity or penetration and simply lying waiting for 'entry'. Also, 're-entry' overlooks that many Western banks and firms have never left a place like Zimbabwe throughout its 'isolation', and there's by no means any particular principled reason why they should have done so.
