Enterprise Resilience Management Blog

Hindsight is Good -- Foresight is Better

It is no secret that the U.S. military and its political masters had little clue what to do in Iraq once it brought down Saddam Hussein's regime. There have been numerous books, blogs and articles written on the subject. Now the Army has published its own assessment of what went wrong ["An Army That Learns," by David Ignatius, Washington Post, 13 July 2008].

"The U.S. Army has done something remarkable in its new history of the disastrous first 18 months of the American occupation of Iraq: It has conducted a rigorous self-critique of how bad decisions were made, so that the Army won't make them again."

It may be remarkable that the Army published a critical report about its performance, but I'm not as sanguine that "the Army won't make [the same bad decisions] again," because not all decisions are the Army's to make. Preceding the war in Iraq there were numerous studies and war games conducted that could have better prepared the Army for occupying Iraq, but all of that material was ignored. While much of the blame for that ignorance falls on the civilian leadership who reportedly ordered military planners not to use it -- purportedly because those materials indicated that the force needed to keep the peace needed to be considerably larger than force needed to win the war -- the fact remains that the lessons weren't applied. There is nothing to prevent future civilian leadership from acting in a similarly foolish way. Nevertheless, Ignatius is impressed that the Army went to trouble of critiquing itself, even if he does admit that the civilians in charge continue to justify their decisions or point fingers elsewhere. He writes:

"Civilian leaders are still mostly engaged in a blame game about Iraq, pointing fingers to explain what went wrong and to justify their own actions. That's certainly the tone of recent memoirs by Douglas Feith, the former undersecretary of defense, and L. Paul Bremer, the onetime head of the Coalition Provisional Authority. These were the people making policy, yet they treat the key mistakes as other people's fault. Feith criticizes Bremer and the CIA, while Bremer chides former defense secretary Donald Rumsfeld and the military for ignoring his advice that the United States didn't have enough troops. The Army can't afford this sort of retroactive self-justification. Its commanders and soldiers are the ones who got stuck with the situation in Iraq and had to make it work as best they could. And this internal history, published last month under the title 'On Point II,' testifies to the Army's strength as a learning organization. (This study covers May 2003 to January 2005. An earlier volume, 'On Point,' chronicled the initial assault on Baghdad.)"

I won't quibble with Ignatius' description of the Army as a "learning organization." Like most military services, it works hard to ensure that its strategies, doctrines, and tactics provide its people with the best chance for success. But because the Army is doctrinally driven, there is a built-in tension between those who are trying to lock doctrine down (so that it can be published, promulgated, and practiced) and those who are trying to change it and make it better. Although this is a creative tension, it nevertheless means that parts of the Army will always be odds. What is refreshing about the Army report is the admission that the Army had spent too little time thinking about what comes after the war is won.

"The study is blunt about how unprepared the Army was for the postwar challenges: "The DOD and the Army lacked a coherent plan to translate the rapid, narrow-front attack [on Baghdad] . . . into strategic success. Soldiers and commanders at nearly every level did not know what was expected of them once Saddam Hussein was deposed and his military forces destroyed.' The situation in spring 2003 'evoked the aphorism, "if you don't know where you are going, any road will get you there."' Why was the Army so unready for the insurgency and chaos that followed the toppling of Hussein? The study rejects the easy (if largely correct) answer that it was the fault of poor civilian leadership and focuses instead on the Army's own shortcomings. The overall commander, Gen. Tommy Franks, 'did not see postwar Iraq as his long-term responsibility,' the study says. 'Franks' message to the DOD and the Joint Chiefs was, "You pay attention to the day after, and I'll pay attention to the day of."' But it turned out that nobody was preparing for the day after. The Army's chief of staff, Gen. Eric Shinseki, argued that more troops would be needed, but the Joint Chiefs supported Franks's under-resourced war plan. The chiefs assumed that a reconstituted Iraqi army would help secure the country after the war, little realizing that Bremer would disband it in May 2003. At that time, the military still was assuming that most American troops would be gone by that September."

Franks philosophical take -- "You pay attention to the day after, and I'll pay attention to the day of" -- is clever (and undoubtedly he had plenty to keep him and his planners busy), but he had to know that there was no force in training that was prepared to rush in and implement the occupation. Even if there were, he would have been in charge of it. Both the military and its civilian leadership deserve to take the hit for not having such a force in training. At the time the Iraq War started, my colleague, Tom Barnett, had already been pushing for a "System Administrator (SysAdmin) Force" whose primary purpose is to secure the peace. Although the report doesn't use that term, it laments the fact that such a force didn't exist.

"The United States had a force for 'regime removal' but not 'regime change,' write the authors, Donald P. Wright and Col. Timothy R. Reese. When the Army began to understand that it faced a well-organized insurgency, 'the transition to a new campaign was not well thought out.' The Army wasn't ready to train Iraqi security forces or to handle the thousands of Iraqi prisoners detained in places such as Abu Ghraib."

I don't believe that Ignatius is praising the Army simply for conducting and publishing a report. His real praise is for the men and women on the ground in Iraq who had to learn on the job and made the necessary adjustments in real time to achieve success (even if the learning curve was slower than necessary to prevent the chaos that ensued).

"The Army learned from its mistakes. Rather than sulking about the Iraq mess, commanders made necessary changes. The Army developed a new doctrine for fighting a counterinsurgency; it learned how to work with Iraqi tribal leaders; it pursued al-Qaeda into every village of Iraq; it experimented with soft power, by working closely with Provincial Reconstruction Teams. 'One could easily state that the U.S. Army essentially reinvented itself during this 18-month period,' the historians write. This study illustrates what's most admirable about the Army. It has maintained a tradition of intellectual rigor and self-criticism. That's nurtured in the Army's unique program of midcareer education. It's not an accident but part of that Army tradition that the current commander in Iraq, Gen. David Patraeus, took a doctorate in international relations at Princeton, or that the former Centcom commander, Gen. John Abizaid, had a stint as commandant of West Point. This tradition is exemplified, too, in the decision of Gen. George Casey, the current chief of staff, to publish this sometimes searing critique of his own service."

Throughout the period that the military personnel on the ground were transforming themselves, Tom was receiving emails from them indicating that they were doing exactly the things that he said SysAdmin forces had to do. They were grateful for his foresight and his insight. Ignatius, who has also praised Tom as strategist, concludes:

"Politicians repeat, ad nauseam, the maxim that 'those who cannot learn from history are doomed to repeat it.' The U.S. Army is that rare institution in American life that is actually putting this precept into practice."

As the title of this post declares, hindsight is good, but foresight is better. There were a lot of people, both in the military and out, who predicted that the kind of activities required to secure the peace were being ignored in military doctrine. They were not surprised by the chaos that following the toppling of Ba'athist regime. That said, I'm glad the Army had the courage to transform. I just wish it would have listened to those who had the foresight to call for it to change before thousands had to die because it was unprepared to win the peace.

Dealing with Failed States

Regular readers of this blog are familiar with Enterra Solutions' Development-in-a-Box™ approach for helping emerging market countries achieve sustainable development. It will come as no surprise, then, that a book review in The Economist entitled "Nation-building for dummies" caught my eye [28 June 2008 print edition]. The book being reviewed was written by Ashraf Ghani and Clare Lockhart [Fixing Failed States: A Framework for Rebuilding a Fractured World (Oxford University Press, 2008)]. The review begins by naming a few countries that could be classified as "failed or failing states," namely, Afghanistan, Iraq and Somalia.

"Although there are many differences between them, these nations also have certain characteristics in common. At any one time, these can include political and economic instability, poverty, civil disorder, terrorism, human trafficking, ethnic conflict, disease and genocide."

The review also provides a quick overview of the authors' expertise about the subject at hand.

"Ashraf Ghani and Clare Lockhart have worked in many of these countries. In 2005 they founded the Institute for State Effectiveness in Washington, DC, to help advise countries that are trying to make the leap from failed to functioning state. Before that, Mr Ghani was finance minister in the first post-Taliban government in Afghanistan."

What intrigued me most about the book and The Economist's review of it was the idea that it presents a "framework" for dealing with failed or failing states. Since Development-in-a-Box also provides a framework for dealing with those states, I was curious if the review would reveal anything new.

"Past efforts at state-building have been dogged, Mr Ghani and Ms Lockhart argue, by a failure to understand what developing countries need in order to be effective in the modern world, particularly with regard to engaging their citizens and connecting to the global network of economic and political power. The outside world has also failed to help struggling governments become effective. Instead, it veers between two unsatisfactory extremes: imposed solutions tinged with a colonial or imperial flavour, and the hands-off neglect of 'interested observers'."

Although I agree completely with that assessment, even if it contains little new about past approaches or the challenges faced by failed states [see Explaining Development-in-a-Box]. The review does explicitly stress a point that my discussions about Development-in-a-Box have only implied.

"It is often said that globalisation makes the traditional nation-state less relevant than it was before. Mr Ghani and Ms Lockhart disagree. Building an effective sovereign state is more crucial than ever, they say. In order to achieve this, developing countries must focus on establishing legitimacy at home and in the wider world at the same time."

That observation is both accurate and important. The nation-state may have less influence in some areas than it did in the past, but it is far from becoming irrelevant. There are activities in which nation-states engage that cannot easily (or ever) be assumed by other organizations. To be successful, states need to assume their place at the table of nations and connect with other countries in a myriad of ways that ensure diplomatic, security, and economic activities work together for the good of the globe. Other organizations may try to influence nations to act in a particular way, but only nation states can work together to bring about global change in a legitimately recognized way.

Ghani and Lockhart recommend a two-pronged framework for development, with one prong focusing on domestic challenges and the other prong focusing on international challenges. First, they address the home front:

"At home, even before democratic processes are put in place, the authors favour extensive consultation, decisions taken from the bottom up and the introduction of autonomous spending powers. A new foreign-backed leader, taking decisions from the top down and often in secret, is far less likely to be seen as legitimate by citizens, or to inspire their loyalty. New programmes should be transparent and accountable. One success the authors cite, in a moment of justified self-congratulation, is the transformation of Afghanistan’s public-finance system under Mr Ghani, who defied gloomy IMF predictions by introducing a new currency within four months, thanks in part to the use of the existing hawala informal banking network."

Even though the authors talk about the importance of "transparent and accountable" programs for domestic development, those characteristics are just as important for programs aimed at attracting foreign direct investment and connecting to the global economy. Although some things, like regulations and legal protections, require a top down approach, I agree that governments gain true legitimacy only when they are perceived as representing the interests of those being governed. The perception of how well those interests are being met is much more important than the type of government in place.

The authors then turn to the framework for addressing international challenges.

"To improve legitimacy abroad, the authors argue for co-operation with international bodies and, above all, for a focus on integrating the domestic economy—and the majority of workers, not just a few elite companies—with the global economy. They point to the success of countries such as Singapore and Ireland in creating effective states and escaping from poverty through pro-market openness. Yet citing such rare examples of effective economic transformation can make the reader gloomier about the chances of doing the same in today’s basket-case countries. The authors could have done more to explain why these countries are plausible models for civil-war-torn states such as Afghanistan and Iraq, especially as they seem sceptical about advocating the greater use of force, which lately seems to be working in Iraq and is necessary in Afghanistan."

I'm not surprised that individuals who have worked closely with humanitarian and development groups would eschew the use of force. Conflict always affects most those least prepared to deal with its consequences -- the very victims of poverty who are the focus of humanitarian and development groups activities. As I have constantly stressed, however, security and development must go hand-in-hand. Regular readers know that I certainly agree with any approach that favors "co-operation with international bodies and ... focus[es] on integrating the domestic economy—and the majority of workers, not just a few elite companies—with the global economy." International bodies help establish the standards that can be used by failed states to earn trust for programs where there is no previous history or tradition of trust. Those standards, regulations, and best practices are essential if the second part of the framework -- connecting to the global economy -- is to be achieved.

The authors then go on to tackle another of my favorite subjects -- leadership (or the lack thereof).

"Lack of leadership is one of the main reasons why attempts at fixing failed states so often fail. Mr Ghani and Ms Lockhart advise those in charge to immerse themselves in the proliferating business-management literature in order to understand the importance of putting in place a strategy, communicating it widely, prioritising what needs to be done and doing these in the most efficient sequence. The books they cite are Alfred Chandler's 'The Visible Hand' and 'Execution' by Larry Bossidy, the no-nonsense former boss of Honeywell, a computer company, and Ram Charan, a management guru; not the usual set-texts of nation-building."

One of the things that differentiates Development-in-a-Box from other approaches is its business-like approach to transforming economies. It begins with taking a holistic and realistic look at a global economy and then developing a long-range plan against which decisions can be made. "No nonsense" is a good way to think about helping failed states. They have neither the resources nor the time to be pampered or coddled. That doesn't mean that those trying to help should be either patronizing or dictatorial -- they just need to be honest and forthright. Dramatically reducing corruption at all levels of government and business is essential to ensuring that the right kind of leadership is in place for sustainable development.

The review goes on to note that the authors also have a problem with "the international aid system, which they say is 'now deeply out of synch with the challenges of the contemporary world'. All too often, they point out, it is an obstacle to change rather than a catalyst." Aid, although important in many areas, is not as important as foreign direct investment for getting an economy up and moving. The bottom line, however, is that all parties interested in seeing a failed or failing state progress must work together in an accepted framework. The review concludes:

"Mr Ghani and Ms Lockhart have produced a useful book. Their chapter on the ten functions of the modern state should be helpful for policymakers everywhere. Yet their dense, academic style represents a missed opportunity, particularly for two authors with so much inside knowledge. Readers would have benefited from more straight storytelling about what happened in Afghanistan and Iraq, and what an America seriously committed to nation-building might have done better."

I find it encouraging to see others supporting a holistic and realistic approach to sustainable development. There are so many seemingly insurmountable challenges associated with such efforts that getting people and programs moving in a common direction is an essential first step.

Colombia Embraces Globalization

If you haven't paid particularly close attention to events in Colombia over the past few years, you might be surprised about the current state of things there. Colombia is probably most famous over the past 50 years as being at the heart of the global cocaine trade and for the infamous Medellin drug cartel headed by Pablo Escobar. That has all changed according to Anthony Faiola ["Sustaining the Medellin Miracle," Washington Post, 11 July 2008]. Faiola writes:

"This labyrinthine metropolis [Medellin] transformed over the course of a decade from a battlefield of drug lords, paramilitaries and leftist guerrillas into one of the safest, most dynamic cities in Latin America. Visionary inner-city renewal projects and a push to take back the lawless hillside slums by force deserve credit, but many here hail an unsung hero in Medellin's urban miracle -- globalization."

Many Americans may think that the most important recent export from Medellin is hunky professional golfer Camilo Villegas, but they would be wrong.

"Exports surged in the 1990s as the United States granted temporary trade preferences to Colombia, allowing many of its products to enter the world's largest market duty-free. They really took off after 2002, when Washington expanded that agreement to include Colombia's all-important textile sector. Humming assembly lines making Ralph Lauren socks and Levi's jeans sprang up across this picturesque Andean valley, creating tens of thousands of jobs and turning Medellin into a model of the curative power of liberalized trade."

Faiola reports that the "curative power of liberalized trade" is not a "cure all" and does not continue to work without effort and constant adaptation. In a previous post [Looking for Jobs that Last], I focused on an article that described the challenges faced by Slovakia, a country that experienced an economic miracle similar that being described by Faiola in Colombia. Slovakia found out that as globalization continues to bring millions out of poverty it also increases global competition and changes the competitive landscape. Colombia, according to Faiola, is now learning that same lesson.

"The renaissance of a city ... is entering a period of uncertainty that illustrates just how fragile such gains can be. The city's export industry has begun to slip backward, officials here say. It happens as Colombia and many developing nations are struggling to maintain their edge in the increasingly competitive world of global trade. Inside the three sprawling factories of Crystal, a major textile maker here, the workforce doubled to 11,000 between 2001 to 2006 as the company's U.S. sales surged. But following several local apparel makers, it has eliminated hundreds of jobs as contracts have dried up over the past 18 months. The weakening dollar, which has shed almost 40 percent of its value against the Colombian peso in two years, has made it even harder to compete with cheaper production costs in China, where officials in Beijing are managing the exchange rate, cushioning the dollar's fall to help Chinese exporters. Since 2005, Colombia's textile and apparel exports to the United States dived 30.8 percent while China's soared by 44.3 percent. Colombia is also up against a resurgent global backlash to free trade -- including in the United States, the country that had spent the past two decades cajoling Latin America to open its markets."

A free trade agreement between the U.S. and Colombia, which would make the current trade preferences permanent while allowing most U.S. products to enter Colombia duty-free, is being held up in Congress (as well as being caught up in presidential politics). Nevertheless, Colombia has not been soured by globalization.

"Colombia remains a vocal proponent of free trade at a time when the loudest voices in the region are against it. In neighboring Venezuela, Colombia's second-largest trading partner, President Hugo Chavez is shifting the country toward socialism, nationalizing industries and barring the doors to free trade. He has signaled Venezuela's intent to pull out of a regional trading bloc that includes Colombia and has sharply reduced quotas on Colombian-made cars. In recent months, that decision has forced Sofasa, a leading automaker in Medellin, to reduce shifts and lay off 600 workers. Companies say doubts about Colombia's future trading relationship with the United States have been a factor in a recent flow of jobs from Medellin into Central America, where a bloc of nations sealed a free trade agreement with the United States in 2006."

It is almost unimaginable that the United States, a country that led the free world in its struggle to preserve democracy and free markets during the Cold War, is now expressing doubts about the benefits of the market economy. With a potentially new ideological battle brewing in South America, it may be time for the U.S. to remember the dark days of the Cold War when our relationships with Latin America included supporting tyrants with large sums of money and weapons. Chavez's policies are already starting to lose their attraction in Venezuela. He has even publicly called on FARC revolutionaries fighting the Colombian government (a group he has supported both vocally and monetarily) to reconsider its fight. Helping Colombia demonstrate the value of globalization and free markets could ensure that ideological conflicts in Latin America are minimized in the future. Such an outcome is surely in America's best interests. With economic conditions in the U.S. sliding in the wrong direction, however, it may be difficult to see the light at the end of the tunnel. Faiola provides a little history lesson on how Colombia got to where it is.

"On the eastern outskirts of Medellin, the emerald foothills of the Andes give way to acres of blinding color. Expansive greenhouses filled with blooming purple pompons, yellow chrysanthemums and white lilies carpet the dark earth. This is how Colombia's export revolution began -- with flowers. In 1991, with Medellin's ghettos convulsing in cocaine wars and leftist guerrillas infiltrating the city, the U.S. government extended a lifeline to Colombia and other Andean countries plagued by drug violence. It granted them renewable 'trade preferences,' providing local manufacturers the right to sell their wares in the United States without paying tariffs. It gave Colombian flower exporters the competitive edge they needed to dominate the U.S. market. Today, Colombian flowers make up roughly 90 percent of all those sold in the United States. Here, it created jobs -- jobs that some analysts argue are the kind that U.S. workers should be willing to give up in the era of globalization. These labor intensive and minimum wage jobs in the United States are often filled by undocumented immigrants, but in this region, they provide a lifeline for rural people. Many of the U.S. companies in California and Texas that once grew flowers adapted and evolved into suppliers and distributors of flowers grown here, where a single stem can be planted, irrigated, trimmed, cut and packaged for about $1."

As I noted in the post about Slovakia, countries that want to benefit from globalization must reconcile themselves to the reality that it fragments supply chains and sends jobs in all directions. U.S. floral companies that transformed themselves from being growers into suppliers and distributors understood the process and prospered as a result. In almost every sector, companies that will survive globalization are those that understand how to get in front of the money associated with supply chains. As those supply chains evolve, so must companies.

The jobs created in Medellin provided people a way out of poverty as well as a stake in the future. Cooperating with the government the people were able to regain control of their city. At one time, Medellin's streets seemed to flow with blood. Now they are safer and quieter than the streets of Washington, D.C. The transformation required both security and development. Faiola continues:

"A combination of factors produced that change. President Alvaro Uribe, Medellin's native son, came to power in 2002, shifting from Andres Pastrana's policy of dialogue to one of force. The Colombian military and local police stormed the most violent barrios of Medellin in armored vehicles and helicopters. In other neighborhoods, calm came as the drug gang headed by the notorious paramilitary leader Diego Fernando Murillo finally overpowered its rivals. Murillo was extradited to the United States with 12 other paramilitary chiefs in May. Around the same time, Sergio Fajardo, a mathematician with Bee Gees hair, became Medellin's mayor and launched his own campaign to renew the city. He rolled out social programs while building schools, police stations and 'library parks' celebrated for their architecture. Two cable cars systems were constructed, linking some of Medellin's toughest and most isolated slums with the city's expanding metro system. If those efforts became the bricks of Medellin's house of change, globalization was the mortar that helped keep them together, officials say."

I have long argued that security and development must go hand-in-hand for progress to be made. Medellin provides an excellent case study about how that can be done. The next challenge for Medellin and other successful emerging market regions is how to hold on to the gains they have made.

"Some of those gains [in Medellin] are slipping away. Over the past two years, Ralph Lauren closed a regional office in Medellin and one major jeans factory shut its doors, dismissing 2,500 workers. Crystal has shed 1,000 jobs -- or 10 percent of its workforce. Other textile makers have been forced to do the same, with the industry losing an estimated 10,000 jobs in total. As in many developing countries with manufacturing-based export industries, one huge problem is China. Colombia's average textile wage of $1.42 an hour is about double similar wages in China. Many here argue that the United States and Europe must pressure China more to revalue its currency, something Beijing has resisted. They are also pressing for a formal free trade agreement with the United States. An agreement would make permanent the duty-free access for most Colombian exports to the United States , while also granting U.S. products reciprocal status in Colombia t for the first time. The current preference agreement is subject to regular reviews and renewals by Congress. A vote in March approved those preferences through December, when a new vote will be required to extend them. The uncertainty, officials here say, is costing jobs and money. ... Although strongly backed by the Bush administration, an a free-trade pact with Colombia -- as well as other pending agreements with South Korea and Panama -- have been blocked by Democrats. Some are calling for a review of all future free trade agreements to assess their impact on U.S. workers."

Hopefully, cooler and wiser heads will prevail in Washington. America's best interests rely on a world that is both stable and growing economically. Colombian leaders have become true believers in free markets and keeping them in the fold is important both economically and for security reasons.

Oil Fuels Kurdistan Economic Boom

With oil prices adversely affecting almost every economic sector, many people are calling for more exploration, more drilling, and more production. All of the so-called "easy oil," has been found -- with the possible exception of Kurdistan region of Iraq ["Wildcatters Plunge Into North Iraq," by Neil King, Jr., Wall Street Journal, 9 July 2008]. King writes:

"The Canadians are squeezing oil from sand. The Brazilians want to nurse it up through miles of seawater, sandstone and salt. But here in the far north of Iraq, oil is literally bubbling to the surface. Oil executives lament that the age of 'easy oil' is over. It isn't over here. For companies that have stumbled into this corner of Iraq known as Kurdistan, it's an era that has just begun."

While the high price of oil may have downside for most of the global economy, it has a huge upside for a developing region like Kurdistan. The Kurdistan Regional Government (KRG) has big plans for the region and big ideas normally require big bucks to implement. Oil should provide that money. King continues:

"Iraq is well known as one of the planet's last great oil repositories, with more than 115 billion barrels of reserves, by most estimates. The surprise is how much oil -- and easily accessible oil -- there appears to be in Iraq's Kurdish region, a rugged, Switzerland-size area that has seen centuries of conflict but essentially no oil exploration, until now. One of the world's most prolific oil fields, the Kirkuk field, sprawls for more than 70 miles just to the southwest of the Kurdish region's border. After 74 years in production, it still churns out over 400,000 barrels a day. Dozens of similar geological structures extend far to the north in Kurdistan, undrilled and almost entirely unexamined."

The Kurdistan oil "frontier" has generated a frenzy among oil companies of all sizes. King sums up the activity this way:

"Kurdistan is now among the world's last playgrounds for the old-fashioned oil explorers known as wildcatters. More than 20 companies from around the world are prospecting here, making this one of the liveliest exploration zones in the oil-rich Middle East, particularly for risk-taking small fry like DNO. The hubbub is in sharp contrast to the rest of Iraq, where an exploratory well hasn't been drilled in 15 years, thanks to neglect throughout the Iran-Iraq war, the period of international sanctions and then the war that began in 2003. Major oil companies have entered talks with Baghdad over ways to boost output in the huge fields in Iraq's south. But the Iraqi government remains loath to grant outsiders the right to explore for new oil or to share in the profits. The freewheeling Kurdish area has no such compunctions. The Kurds have enjoyed near-complete autonomy within Iraq since the early 1990s, and now have their own regional government, complete with a Parliament and a prime minister. The 2005 Iraqi Constitution recognized that autonomy, and gave the Kurds a degree of control over their own resources that they were quick to exploit."

The Wall Street Journal asserts that although the KRG has agreed to be part of a general oil revenue sharing agreement with the central Iraqi government, it feels that Baghdad has moved too slowly in passing acceptable legislation. It, therefore, has moved out on its own to negotiate oil deals with foreign companies. Not everyone is happy about that.

"By early 2007, the Kurds had awarded contracts to three exploration ventures. When negotiations over a national Iraqi oil law broke down in acrimony last summer, the Kurds decided to move ahead with their own oil legislation. Some two dozen other exploration deals were signed under the Kurdish law -- causing Iraqi officials in Baghdad to regard them as invalid. Companies signing deals under the Kurds' law have since been barred by Baghdad from doing business in the rest of Iraq, where the biggest of the country's oil fields lie. That threat is keeping the major oil companies out of Kurdistan, despite their ardor for new terrain to drill. Meanwhile, until Iraqis can agree on a national oil law, the companies drilling in Kurdistan have no way to export oil they unearth."

With the world hungry for more oil, most analysts believe that moving the oil out of Kurdistan and into the market won't be an insurmountable problem. The most likely route for such oil will be through a Turkish pipeline. Such an arrangement would benefit both the KRG and the Turkish government. There are already strong economic ties between Turkey and the Kurdistan Autonomous Region, despite tensions over Kurdish rebels hiding in hills of northern Iraq. Despite the uncertainties about the future of the Kurdistan oil industry, KRG officials see mostly an upside.

"Kurdish officials look at the flurry of oil contracts they're signing as a two-pronged insurance policy. By cutting deals with companies from countries as diverse as Australia, Britain, France, India, Russia, South Korea, Turkey and the U.S., the Kurds say they hope to win international political support in case things go awry with Baghdad. And in case Iraq were to break up, the Kurds would have their own abundant revenue stream. 'Has this been deliberate? It certainly has,' says a beaming Mr. Hawrami, the Kurdish natural-resources minister, who has crafted the bulk of the contracts awarded so far. 'We want a balance. We want friends on all sides.' Some good-sized companies have planted their flags here, including Austria's OMV AG, Hungary's MOL Group and India's Reliance Industries Ltd. But they are far outnumbered by lesser-known ones that see Kurdistan as a once-in-a-generation opportunity. WesternZagros Resources Ltd., for example, is a Canadian company that has never drilled for oil. It now has the rights to a 2,000-acre patch about 60 miles southeast of the famed Kirkuk field. Then there's Genel Enerji AS and Addax Petroleum Inc. Together, the Turkish and Swiss-Canadian concerns have sunk six wells in their Taqtaq field and are ready to pump more than 50,000 barrels a day. Estimated extractable oil in their field, the companies say: at least 550 million barrels."

As I have noted in numerous past posts, the future of Kurdistan region of Iraq looks bright and the prospect of billions of dollars in oil revenue only highlights exactly how bright. King discusses the building activity in Erbil, where my company, Enterra Solutions, maintains an office.

"Rumblings of a coming oil boom have triggered pell-mell construction in Erbil, the capital of the Kurdish region, a city that local officials tout as the next Dubai. It has a new airport. Cranes hover over the frame of a high-rise hotel being built for Kempinski, the German luxury hotelier. A United Arab Emirates company, Damac Properties, is planning a $4.5 billion retail and golf community on the outskirts."

KRG officials have a plan. They want the economy to develop deliberately and broadly. They want to balance their economic portfolio so that they are not solely dependent on oil revenue in the long run. In other words, they want to build a diversified economy with their people operating Ministries and commercial ventures in an internationally competitive way. That is why the government contracted with Enterra Solutions to operate the Kurdistan Business Center and other strategic engagements that assist in developing the Kurdistan region’s economy and capacity. The Kurdistan Business center offers a full range of services to businesses wanting to invest in the Kurdish region's future. The Center provides a single point of contact for investors and businesses desiring to operate in the autonomous Kurdistan region. Through a number of connected activities, the Business Center promotes economic development and foreign direct investment in the Kurdistan region. The establishment of the Kurdistan Business Center is an integral part of Enterra Solutions’ Development-in-a-Box™ offering to assist economic and social development in post-conflict and developing regions.

The Kurdistan Business Center marks a new era for business and economic development in Kurdistan. It identifies international companies, facilitates and expedites investment and joint-venture transactions in the Kurdistan Region, especially agreements in support of a number of strategic critical infrastructure projects identified by the KRG. In addition, the Center’s Erbil-based staff provides marketing, technical expertise and ombudsman services aimed at attracting investment activities in the region.

Some of the wildcatters in the Kurdistan region have already struck oil and the KRG expects that it will have arrangements in place to start exporting oil by the end of next year (perhaps as much as a quarter of a million barrels a day). Blessed with natural resources, a governmental leadership structure that is evolutionary and visionary, a stable security environment, and developing rule of law, I'm confident that region's economy will become successful and diverse.

Kristof Pleads for Books, not Bombs

New York Times' columnist Nicholas Kristof spends a lot of his time traveling to locations never seen by most globe-trotting tourists. Such ventures, however, provide him with a world view that can only come through such experiences. I am working with the U.S. Chamber of Commerce and U.S. Department of Commerce to introduce U.S. business people to opportunities in Iraq, especially opportunities in the Kurdistan region where the environment is sufficiently stable to permit economic growth. A group of such business people were recently brought to Iraq to see conditions there for themselves. Sometimes that is the only way to really appreciate a situation. One of Kristof's latest ventures took him to countries surrounding Iraq and into areas where Iraqi refugees have fled over the course of the conflict there. He now fears that we are creating a new intractable security situation that will rival the Israeli-Palestinian situation ["Books, Not Bombs," 26 June 2008]. He writes:

"The dirty little secret of the Iraq war isn't in Baghdad or Basra. Rather, it's found in the squalid brothels of Damascus and the poorest neighborhoods of East Amman. Some two million Iraqis have fled their homeland and are now sheltering in run-down neighborhoods in surrounding countries. These are the new Palestinians, the 21st-century Arab diaspora that threatens the region’s stability. Many youngsters are getting no education, and some girls are pushed into prostitution, particularly in Damascus. Impoverished, angry, disenfranchised, unwanted, these Iraqis are a combustible new Middle Eastern element that no one wants to address or even think about."

Kristof is right to be concerned. As Bradd C. Hayes and Jeffrey I. Sands wrote in their book Doing Windows: Non-Traditional Military Responses to Complex Emergencies:

"[Refugees from conflict] become economic liabilities, have increased health risks, and form the core of politically discontent groups. Therefore, getting them out of refugee camps is one of the international community's highest priorities."

Policymakers (in the U.S. and elsewhere) apparently have not read the book because Kristof reports that Iraqi refugees have been all but forgotten. He believes the U.S. in particular owes it to these people to set things right.

"American hawks prefer to address the region's security challenges by devoting billions of dollars to permanent American military bases. A simpler way to fight extremism would be to pay school fees for refugee children to ensure that they at least get an education and don’t become forever marginalized and underemployed. We broke Iraq, and we have a moral responsibility to those whose lives have been shattered by our actions. Helping them is also in our national interest, for we'll regret our myopia if we allow young Iraqi refugees to grow up uneducated and unemployable, festering in their societies."

Kristof writes about the enormity of the challenge and why nobody wants to discuss it:

"Iraqi refugees don't get help in part because this is a problem that almost everybody wants to hide. Syria and Jordan worry that if the refugees get assistance, then they will stay indefinitely. The U.S. doesn't want to talk about a crisis created by our war, and Iraq's Shiite leaders don't much care about Sunnis or Christians displaced by Shiite militias. 'It's among the largest humanitarian crises in the world today,' said Michael Kocher, a refugee expert at the International Rescue Committee, which recently published a report on the crisis. 'It's getting very little attention from the Security Council on down, which we feel is scandalous and also bad strategy.' It's easy to blame the surrounding countries, such as Jordan and Syria, for not being more hospitable to Iraqis. But those countries have, however grudgingly, tolerated the influx despite the burden and political risk. Iraqi refugees are hard to count but may now amount to 8 percent of Jordan's population of six million. The average Jordanian family, which opposed the war in the first place, is now bearing a cost that may be as much as $1,000 per year for providing for the refugees."

Keeping the Iraqis in refugee camps in perpetuity is both bad policy and morally indefensible. What we need is a change of perspective -- a different way of looking at the challenge. Jonathan Moore has argued that the "reintegration into society of millions of repatriated refugees, returned displaced [persons], and demobilized soldiers presents an opportunity for wholesale progress in recovery and renewal" [The UN and Complex Emergencies: Rehabilitation in Third World Transitions (Geneva: UN Research Institute for Social Development, 1996)]. Looking at Iraqi repatriation as an opportunity rather than a problem may help garner support for Kristof's course of action. Kristof concludes:

"We have already seen, in the case of Palestinians, how a refugee diaspora can destabilize a region for decades. If Jordan were to collapse in part from such pressures, that would be a catastrophe — and the best way to prevent that isn't to give it Blackhawk helicopters, but help with school fees and school construction. If we let the Iraqi refugee crisis drag on — and especially if we allow young refugees to miss an education so that they will never have a future — then we are sentencing ourselves to endure their wrath for decades to come. Educating Iraqis may not be as glamorous as bombing them, but it will do far more good."

Kristof is being too sarcastic when he writes that "educating Iraqis" is not "as glamorous as bombing them." I have met far too many military people who are genuinely excited about helping the Iraqi people get back on their feet. These military people appreciate far more than their political masters the importance of programs that bring stability and prosperity to people's lives. There is far more satisfaction in helping people than in killing enemies -- although both may be necessary.

Iraq will probably not be the last intervention undertaken by the international community. When the next one comes around, they should not ignore the lessons that were re-learned during the Iraq War. Andrew Natsios has identified three operational principles that militaries should observe that would help mitigate future refugee crises ["Eleven Iron Laws for Responding to Complex Humanitarian Emergencies," speech given to participants in Exercise Agile Lion, U.S. European Command, 27 June 1995].

"First, avoid military actions that will encourage population movements and the subsequent creation of displaced camps;

"second, work with humanitarian relief organizations to develop a mix of incentives so people will not leave their home villages in the first place, and

"third, if camps are already formed, work with humanitarian relief groups -- as the military did so successfully in Kurdistan -- to return people voluntarily and as soon as practicable to their homes."

In Iraq, we are way beyond the "soon as practicable" timeframe, but it is not too late to address this challenge in a positive way. Returning Iraqis will need homes and jobs. Refugees should be given jobs helping to build the homes and other supporting infrastructure. Children need to get into school and off the streets. Hope needs to replace despair. This is best done by giving people a stake in Iraq's future. Living in camps outside the country gives them neither hope nor a stake in the future.

Creating a Sustainable Future

Nearly two decades ago, MIT professor Peter Senge wrote a best-selling business book that introduced the notion of "learning organizations." [The Fifth Discipline, New York: Doubleday, 1990]. "As he describes it, a learning organization is one in which 'people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together.' Such organizations tend to be more flexible, adaptive, and productive—critical qualities in a time of rapid change." ["Peter Senge's Necessary Revolution," BusinessWeek online, 11 June 2008]  Almost every entrepreneur wants to create a company whose environment fosters innovation, its employees are self-motivated, and everyone understands and works toward a common goal. It's not as easy as it sounds, but it is critical for success. Senge has now directed his attention and intellect toward broader collaborative enterprises and has published the results in his new book The Necessary Revolution: How Individuals and Organizations Are Working Together to Create a Sustainable World (New York: Doubleday, 2008). According to the BusinessWeek article:

"Senge and his co-authors grapple with the daunting environmental problems we face, and highlight innovative steps taken by individuals and corporations, often in partnership with global organizations such as Oxfam, toward a more sustainable world."

The article, which is primarily excerpts from an interview with Senge, introduces Senge's reflections by noting how his first book relates to the second.

"It may seem surprising that an expert in management and organizational change is focusing on sustainability, but there is a strong connection to Senge's work. In his earlier book, he laid out an approach to management that combines systems thinking, collaboration, and team learning. ... In The Necessary Revolution, Senge applies the same thinking to a system bigger and more complex than the organization: global society. The book is a call to arms, an argument to business leaders that they must rethink their approach to the environment or, as one executive told Senge, 'we won't have businesses worth being in in 20 years.' But the authors don't linger on the problems, focusing instead on the stories and insights of successful innovators, on creative solutions, and on practical approaches to meeting these challenges."

As noted above, the bulk of the article consists of excerpts of an interview with Senge conducted by Jessie Scanlon in Senge's office. The interview was focused on "the critical role that business will play in the coming revolution, the visionary leaders at companies such as Nike and Costco, and the future of the corporation." The first question was why he titled the book The Necessary Revolution. Senge replied:

"I don't really like the word 'necessary' because it makes it seem we have no choice. On the one hand, we don't. There's only so much water in the world. There's only so much topsoil. There's only one atmosphere, so there's only so much CO2 that can be stuffed into the atmosphere. But real change occurs when people make choices. We're not going to get out of the predicament that we're in by a lot of teeny incremental things. It's going to take bold ideas. The word 'revolution' was meant to be in the spirit of the Industrial Revolution. Not a political revolution because this absolutely has to be a nonpartisan issue. The future doesn't belong to one party or another."

I have been arguing for some time that in order for industrial age organizations to transform into information age globally integrated enterprises they are going to have to shed industrial age thinking and structures. Senge similarly argues that the many industrial age beliefs are going to have to be abandoned. He explains:

"One industrial age belief is that GDP or GNP is a measure of progress. I don't care if you're the President of China or the U.S., if your country doesn't grow, you're in trouble. But we all know that beyond a certain level of material need, further material acquisition doesn't make people happier. So you have a society predicated on the idea that you have to keep growing materially, and yet nobody actually believes it."

Scanlon also asked Senge if he had discovered any patterns about the kinds of people that are leading the charge in the "necessary revolution." He indicated he had.

"The first is obvious: People have to be passionate. These are innovators in a fundamental sense, and innovators innovate because there is something that they are passionate about. Second, they all in different ways were able to step back and see a bigger picture. This is a huge challenge for people in companies, because so many companies are dominated by short-term perspective and because lots of people in key positions simply aren't very good or don't care very much about the bigger picture. Watch how the decisions are made. Are they thinking of the value of the company 10 years after they retire, or are they thinking about the value of their stock options this year? The other two things we focused on are the ability to connect with lots of people and collaborate across boundaries—you could call it high levels of relational intelligence. The final element that we saw again and again is a shift [in strategy] away from 'we've got to stop doing x, y, or z' and all the negativism that tends to pervade these issues."

For those familiar with studies about innovation, all of this should sound familiar. Most innovators are motivated by ideas more than profits. Seeing their ideas implemented is what keeps their fires stoked -- sometimes to the point of personal exhaustion. Senge's point about seeing the big picture is also well known. Every good book on innovation or change management stresses the importance of vision and how to communicate that vision to others so that it permeates the entire organization. Sometimes that process is called alignment. Next Senge talks about connectivity and collaboration -- generating what Frans Johansson calls the "Medici Effect." Finally, he talks about attitude. Entrepreneurs and innovators are, by nature, optimistic people. It is that sense of optimism that attracts both capital and people to their causes. A company filled with skeptical or negative people will never find a vision large enough to position it properly for the future.

Scanlon asked Senge how else companies must change beyond being able to practice what Peter Schwartz calls "the art of the long view"? He responded:

"You go to any MBA program, and you will be taught the theory of the firm, that the purpose of the firm is the maximization of return on invested capital. I always thought this was a kind of lunacy. A well-managed business will have a high return on invested capital. But that's a consequence. It's not a way to manage a business. I remember a great quote of Peter Drucker. He said: 'Profit for a company is like oxygen for a person. If you don't have enough of it, you're out of the game. But if you think your life is about breathing, you're really missing something.' The purpose [of an enterprise] is never making money. And I think a lot of the best innovators inside big companies, the reason they succeed is that they really understand the theory of their business."

Although that sounds a bit confusing -- i.e., understanding the differences between "economic theory of the firm" with the "theory of business" -- Senge provides an example of what he means.

"Costco is about long-term, reliable, quality supply. It's the key to the business. When the woman who got the Food Lab work embedded in Costco first started talking about the predicament of farmers, people were a little suspicious. They thought the predicament of farmers is a big problem in the world. That's why there are charities, and that's why we give money to charities. They couldn't see the connection to their business until she got them to see that they wouldn't have long-term quality supply if farming communities were destroyed. So she connected the issue to the theory of their business—but not the economic theory of the firm. Well-managed businesses could not possibly have gotten where they are believing this [economic theory of the firm] nonsense."

The excerpted interview concludes with responses to three quick questions: Where are we in the revolution? What role can governments play? and, Are businesses inherently more global?

"[In answer to the first question,] we're pretty much in the beginning. I can certainly say that from the 10 years since we organized this network, the people who joined were small bands of radicals in their companies, even if they were senior. But in virtually all of those companies, those people aren't radicals anymore. There are wild cards obviously: major economic decline. Innovation requires resources to invest, and you can see many companies pulling back and going into an intense protective mode in a major extended period of financial distress. [As for the second question concerning governments,] if you are realistic about how our present society works, the economic clout—and a lot of the political clout, frankly—is in the business sector. And it's the locus of innovation. But you've got to build these networks. I think Paul Hawken's recent book, Blessed Unrest: How the Largest Movement in the World Came into Being and Why No One Saw It Coming (Viking Press, 2007) was on the money. The growth of the civil society is historic, and in some ways it's a response to the inability of government to deal with these kind of issues. Governments, especially democratic ones, are short-term and nationalistic. These problems are long-term and global. [Finally, in response to the question about the global nature of businesses,] yes, they're global, and because they're global they've begun to build partnerships across their value chains. But I don't think business is sufficient. We're going to see a lot of partnerships, as companies partner with global organizations like the World Wildlife Fund and Oxfam and, eventually, with governments."

In other posts, I've referred to some of the points Senge made -- particularly the importance of connectivity. Be it connectivity within a globally integrated enterprise or between communities of practice (Senge's last point). Almost every economist will tell you that national economic policies don't carry the same weight they used to because so much of the economy is interconnected globally. Still, governments must play a role in helping develop solutions to global challenges. Trying to isolate one's nation from such problems only exacerbates the situation and demonstrates a lack of leadership unworthy of the trust placed in governments by their citizens. Senge's point, I believe, is that the connected citizenry of the world are not going to allow the inaction of governments to stop their attempts to address growing challenges. The fact that they feel empowered to do something is one of the characteristics of the information age.

Senge's book, which is co-authored by Bryan Smith, Nina Kruschwitz, Joe Laur, and Sara Schley, is divided into seven parts: Endings, New Beginnings; The Future is Now; Getting Started; Seeing Systems; Collaborating Across Boundaries; From Problem Solving to Creating; and, The Future. Within those sections are intriguing sub-section titles like: New Thinking, New Choices; Never Doubt What One Person and a Small of Co-Conspirators Can Do; Risks and Opportunities: The Business Rationale for Sustainability; The Tragedy and Opportunity of the Commons; The Imperative to Collaborate; Innovation Inspired by Living Systems; and The Future of Us. The book should be a good read and I wouldn't be a bit surprised if it doesn't inspire a post or two in the future.

IBM and Global Voluntary Service

A New York Times article a couple of months ago detailed an innovative IBM program that sends some of its most promising employees overseas to provide pro bono services in developing countries ["Volunteering Abroad to Climb at I.B.M.," by Claudia H. Deutsch, 26 March 2008]. Deutsch writes:

"In July, a team of 8 to 10 I.B.M. employees will travel to Ghana to help tiny businesses make their operations more professional. Another team will help entrepreneurs seek microloans in Turkey, while yet another will create training programs on information technology in Vietnam. The projects, which were devised by I.B.M.'s citizenship group and are being coordinated through nonprofit organizations, have all the trappings of corporate philanthropy. But that is not why they were created, or how they are being used. 'This is a management development exercise for high-potential people at I.B.M.,' said Randy MacDonald, senior vice president for human resources."

Although IBM certainly must be credited for its altruism, IBM also understands the program can be good for the company's bottom line -- eventually.

"I.B.M.’s program, which it calls the Corporate Service Corps, stands out on several counts. It uses the volunteer ethos to bring together employees who might otherwise never meet, even as it gives I.B.M. a high profile in countries where it does not yet have a significant presence. 'I.B.M. doesn't have a big footprint in a lot of these places,' said Kevin B. Thompson, the senior program manager in corporate citizenship who is running the Service Corps project. 'And their experiences will be a lot more useful than research that says, say, that the Internet has a 12.7 percent penetration rate.' Management experts say I.B.M. is onto something."

Management gurus interviewed by Deutsch claim the return on investment for this kind of skills development program is quite high.

"'As a development tool, this is a four-for-one,' said Allan R. Cohen, dean of the Olin Graduate School at Babson College, near Boston. 'It's stretching to work in another culture, to work in a nonprofit where the measurement of accomplishment isn't clear, to take a sabbatical from your everyday routine and to learn to accomplish things when you can’t just bark orders.' Indeed, Paul Ingram, a management professor at the Columbia Business School, is planning a similar program for this fall, in which executives attending the school's Senior Executive Program will work with nonprofit groups in New York. Because 80 percent of the students are not from the United States, the New York location is outside their comfort zone. 'The fact that you are an excellent programmer or salesman, or can lead a project in your own area and culture, doesn't mean you can be a great leader outside of your technical or cultural expertise,' he said."

One of the things that the article doesn't state, but that is implied, is that the talent level and skills of the people running the non-governmental organization programs is high enough that even IBM's best and brightest can learn something from them. People don't go to work for NGOs to get rich. They receive personal rewards in other ways; although they certainly deserve to make a decent living by helping others. Unfortunately, they often fail to receive the recognition and thanks they deserve. Back to the IBM program.

"[IBM] views the Service Corps as a way to learn how well employees work with strangers, in strange lands, on unfamiliar projects. And it plans to use that knowledge to customize further development programs for the participants. Clearly, the Service Corps concept sits well with the I.B.M. employees. More than 5,500 of them, from more than 50 countries, applied for the program. I.B.M. narrowed the pool to those who had been designated as fast-trackers, who had familiarity with volunteerism and who submitted the best short essays on how participation would help them develop as leaders. The applications of those that passed that first cut were sent to the heads of I.B.M.'s eight geographic regions, who chose which of their employees to send. The final list comprises 100 people from 33 countries, who will form 12 teams that will be deployed to projects in Romania, Turkey, Vietnam, the Philippines, Ghana and Tanzania. I.B.M. said it would select another 100 before the end of the year and have a total of 600 participants over the next three years. The first projects will not begin until July, but the team members are expected to immediately begin studying the countries they will visit and their cultures. They will also begin interacting with one another, possibly through a virtual venue, similar to Second Life, that I.B.M. will set up. Each team will have electronic 'facilitators,' executives who are well versed in the countries they will visit and the types of businesses they will be advising. After their four-week trips, the participants will go through two months of intensive debriefing to discuss what they learned about leadership — and about the countries they visited."

To support a program like this, a company needs the kind of resources that an IBM has available. Smaller companies could not afford either the expense of the program or to lose the services of valuable employees for an extended period of time. Nevertheless, IBM deserves credit for supporting the program. Other companies with sufficient resources would do well to watch how the program unfolds.

The End of Intervention?

In a recent post, I focused on a column by Roger Cohen [Turning the World Upside Down]. In that post, I quoted Cohen on the subject of international security. He wrote about the future security landscape: "Less obvious is how the United States, which underwrites global security at vast expense, begins to share this burden, so that the new multi-polarity of wealth is reflected in a multipolarity of security commitments." I noted that a "tour d'horizon of countries into which wealth is flowing, however, doesn't exactly inspire one with confidence that they are willing or prepared to assume the responsibilities of keeping the global order moving forward. As the torch of influence passes to a new group, the old elite must help tutor the new elite about their global obligations."  Former Secretary of State Madeleine Albright argues in an op-ed piece that the failure of the international community to forcibly intervene to save lives in Myanmar following the deadly cyclone that slammed into its shores sounds a death knell for intervention ["The End of Intervention," New York Times, 11 June 2008].

"The Burmese government's criminally neglectful response to last month's cyclone, and the world's response to that response, illustrate three grim realities today: totalitarian governments are alive and well; their neighbors are reluctant to pressure them to change; and the notion of national sovereignty as sacred is gaining ground, helped in no small part by the disastrous results of the American invasion of Iraq. Indeed, many of the world's necessary interventions in the decade before the invasion — in places like Haiti and the Balkans — would seem impossible in today’s climate."

In "today's climate," I would probably agree with Albright. The Americans are bogged down in Iraq and Afghanistan and simply are incapable of taking on a new intervention and, as I noted above, the rest of the world is simply ill-prepared to act without the U.S. Nevertheless, I'm not so sure that I agree that we should write the eulogy for all future interventions just quite yet. The world is in a time of transition and, until the new order is fully established and newly influential countries become comfortable with the roles they must assume, it remains too early to make declarative statements about the future. Albright continues making her case:

"The first and most obvious reality is the survival of totalitarian government in an age of global communications and democratic progress. Myanmar’s military junta employs the same set of tools used by the likes of Stalin to crush dissent and monitor the lives of citizens. The needs of the victims of Cyclone Nargis mean nothing to a regime focused solely on preserving its own authority. Second is the unwillingness of Myanmar's neighbors to use their collective leverage on behalf of change. A decade ago, when Myanmar was allowed to join the Association of Southeast Asian Nations, I was assured by leaders in the region that they would push the junta to open its economy and move in the direction of democracy. With a few honorable exceptions, this hasn't happened. A third reality is that the concept of national sovereignty as an inviolable and overriding principle of global law is once again gaining ground. Many diplomats and foreign policy experts had hoped that the fall of the Berlin Wall would lead to the creation of an integrated world system free from spheres of influence, in which the wounds created by colonial and cold war empires would heal. In such a world, the international community would recognize a responsibility to override sovereignty in emergency situations — to prevent ethnic cleansing or genocide, arrest war criminals, restore democracy or provide disaster relief when national governments were either unable or unwilling to do so."

Undoubtedly the optimism that followed the collapse of the Soviet bloc has faded. The pin that burst that bubble occurred on 11 September 2001. The spirit of cooperation ended as people were asked to take sides in situations where doing so would have created difficult internal problems for some countries. Intervention, however, should be a tool of last resort. Albright touched on the subject of leverage and lamented that not all countries had used the leverage they have to help populations in distress. New York Times' op-ed columnist Thomas Friedman wrote a piece that emphasized the importance of using leverage when you have it ["It's All About Leverage," 1 June 2008]. Friedman writes:

"The Bush team negotiated with Libya to give up its nuclear program, even after Libya had accepted responsibility for blowing up Americans on Pan Am Flight 103. Those negotiations succeeded ... because, at the time, shortly after the invasion of Iraq, Mr. Bush had leverage. Iraq had yet to fall apart."

Friedman wrote his column in response to the uproar created by Barack Obama's declaration that he would talk to America's foes as well as his subsequent "clarifications" on that subject. Friedman continues:

"Mr. Obama would do himself a big favor by shifting his focus from the list of enemy leaders he would talk with to the list of things he would do as president to generate more leverage for America, so no matter who we have to talk with the advantage will be on our side of the table. That's what matters. ... As I have argued before: When you have leverage, talk. When you don't have leverage, get some. Then talk."

In the book Leveraging for Success in United Nations Peace Operations, Jean Krasno, Donald Daniel, and Bradd Hayes conclude:

"Instruments of leverage appear to range along a continuum, albeit overlapping at times, from hard leverage like the use of or threat to use military force at one of the spectrum, to soft leverage, exemplified by intangible qualities such as trust at the other."

They go on to list some of the instruments of leverage, which include: military force, economic and financial tools, nonfinancial constraints or sanctions, the power of information, legal leverage, the internalization of international norms, the use of local groups and international NGOs, moral authority, impartiality, prestige, social pressure and personal contacts, and exposure and accountability. Rarely are all those tools applied in a single situation. Albright concluded her op-ed piece by writing:

"The global conscience is not asleep, but after the turbulence of recent years, it is profoundly confused. Some governments will oppose any exceptions to the principle of sovereignty because they fear criticism of their own policies. Others will defend the sanctity of sovereignty unless and until they again have confidence in the judgment of those proposing exceptions. At the heart of the debate is the question of what the international system is. Is it just a collection of legal nuts and bolts cobbled together by governments to protect governments? Or is it a living framework of rules intended to make the world a more humane place?"

As I have written previously, the world needs leaders blessed with both wisdom and resolve. Such leaders would undoubtedly understand the importance of leverage and how to use it. It is too soon to raise our hands in submission and give up trying to make the world a more secure place. Security is essential to development and development is essential to helping bring billions out of the grip of poverty.

Doing Business in Iraq

The news yesterday that over 50 innocent people were killed in a suicide attack in Baghdad reminds us all how dangerous a place Iraq remains. Yet there is also good news. The Economist reports that Iraqis "are still suffering monstrously, but Iraq is doing far than it was only a few months ago." ["Iraq starts to fix itself," 14 June 2008 print edition]. To back its claim, the magazine reports:

"Only a few months ago, Iraq was in the grip not only of a fierce anti-American insurgency but also of a dense tangle of sectarian wars, which America seemed powerless to stop. Those who thought it was just making matters worse by staying on could point to the bloody facts on the ground as evidence. But now it is time to look again. Each of those overlapping conflicts has lately begun to peter out. ... The conflict between Shias and Shias has died down too." 

Considering yesterday's attacks, the magazine also prophetically noted, "Needless to say, these conflicts could resume." In a companion article in the same issue, The Economist reports, "By all the main measures—military, political and economic—Iraq is now improving, from a dire base. But that does not yet mean it is headed for peace and prosperity." ["Is it turning the corner"] It reports:

"The violence, albeit still ferocious in parts of the country, has subsided dramatically. ... Politics is also beginning to stutter towards something approaching normality, with signs of an accommodation between the three main communities—Shia Arabs, Sunni Arabs and Kurds—and the prospect of a series of vital laws, on such matters as sharing the revenue from oil, being passed, though they are still subject to endless last-minute hiccups. ... The economy has begun to grow fast too, though its ripples have yet to be felt across the country. The soaring price of oil, along with a mild improvement in production to just above its pre-war peak, mean that the government has more cash to spend than it is has had since the first Gulf war of 1991."

Although Shia cleric Muqtada al-Sadr remains a wild card on the political front and the Iraqi central government is balking at some of the terms the Bush administration would like included in a security agreement, things appear generally to be moving in the right direction. This improved climate has encouraged some foreign companies to make some tentative investments in Iraq's emerging economy. Surprisingly, U.S. companies are lagging other international companies in these investments ["Foreign Firms Investing in Iraq," by Jim Michaels, USA Today, 17 June 2008]. Michaels reports:

"European and Asian companies are beating their American rivals into Iraq now that security has improved the investment climate, Iraq and U.S. officials say. 'It's starting to turn … and the people who are getting in on the ground floor are not American,' said Paul Brinkley, the Pentagon official who is leading U.S. efforts to help Iraq rebuild its economy. 'It's ironic.' Foreign companies, including U.S. investors, have committed to deals worth about $500 million so far this year and Brinkley expects at least $1 billion in foreign investment by the end of the year. So far, Romanian consortium and a Lebanese company have signed revenue-sharing deals with Iraqi state-owned cement factories. Each group will invest about $150 million. China has also aggressively pursued the Iraqi market, selling machinery to the government and electronic products to consumers."

As frequent readers of this blog know, my company Enterra Solutions is one of the U.S. companies that is trying to help rebuild the Iraqi economy. Some of the most active companies in Iraq are Turkish. Of course they enjoy the advantage of being Iraqi neighbors, but they are also risk takers with a belief that Iraq's future remains hopeful. Michaels report agrees:

"Iraqi Foreign Minister Hoshiyar Zebari, in Washington on an official visit, said ... that larger U.S. firms were waiting for more security before entering the market. Zebari noted that Turkish and Russian companies were already active in Iraq. 'They take risks,' he told USA TODAY in an interview. 'No pain, no gain.'"

I'm working with the U.S. Chamber of Commerce to help attract other U.S. businesses to Iraq, but the going has been slow so far.

"Many of the companies active in Iraq now are from countries, including France, Russia and Turkey, that did not send combat troops to back the U.S.-led invasion. Some U.S. and Iraqi officials say American companies risk losing an early opportunity to establish long-term strategic ties with Iraq."

Although it is natural for Iraq to establish economic relationships with countries nearer to its borders than the U.S., in the information age distance isn't the challenge that it used to be. There are lots of "first mover" opportunities in Iraq at the moment, but they won't last long.

"American companies may also be reluctant to invest in Iraq because the war has generated so much controversy at home, Brinkley said. The private investments that come from the USA are generally individual or institutional investors — not American corporations, Brinkley said. U.S. investors, for example, are part of a $120 million deal to build a hotel in the heavily fortified Green Zone, where U.S. and Iraqi government offices are located. Americans lead other nations in the number of exports to Iraq, but other nations have ramped up trade. China doubled the number of exports to Iraq this year. China is now Iraq's third-largest trade partner behind the USA and Turkey, according to Global Trade Information Services, a firm that tracks trade statistics."

Most of the work in which I have been involved has been in northern Iraq, where security and economics conditions are much better than in the south. But as The Economist reports, sky-high oil prices could help Iraq's economy turn the corner.

"If, with the government's growing political and military authority, Mr Maliki could get the economy moving, then the much-uttered phrase 'turning the corner' may be apt. Iraq's windfall from higher oil prices is grand. America's State Department reckons that, if prices stay put, Iraq this year should earn more than $70 billion, though this year's budget projected $35.5 billion based on $57 a barrel at a production rate of 1.7m barrels a day. The latest production figure is 2.53m, a shade higher than its pre-war peak. So far the cash has yet to be turned into decent public services. People in Baghdad say that they have only a few hours of state-provided electricity a day; the Americans admit that the Baghdad average is seven hours. A vaunted advance is in telephony: there are now 12m cellular phones, against a handful before the war, and 261,000 Iraqis subscribe to the internet, against almost none before the war. Yet the biggest obstacle to economic progress is the lack of qualified people and civil servants to make use of the cash pouring in. The ministries spent barely half of their capital budgets last year, while provincial governments used up less than a third, according to an American government watchdog. Thanks partly to the 'de-Baathification' decree of the early American administration which chased out the senior ranks of Saddam's old bureaucracy, the state virtually ceased to function. But what is left of the old civil service may be starting to operate better again. Professor Toby Dodge, a British expert who has been sceptical of many of the American administration's past policies in Iraq, says that 'the state is beginning to re-cohere'."

One of the underlying drivers of Enterra Solutions’ Development-in-a-Box™ approach is building the indigenous capacity of local institutions and people. Most post-conflict or failed states have little or no capacity for governance, international commerce, communications, transportation, healthcare, sanitation, power generation, and so on and so on. Therefore, hearing that "the state is beginning to re-cohere" is good news. As The Economist notes, however, good news doesn't mean that all is well.

"There is a long way to go. Much of the middle class has fled; many of its members have been killed. According to the UN's High Commissioner for Refugees, some 2.8m Iraqis are still displaced within the country; another 2.2m-plus have gone abroad, out of an original population of 27m or so. The official unemployment rate is 25-40%; in reality, it may be a lot higher. Businessmen and investors have yet to come back. ... Meanwhile, the Kurds in the north are quietly consolidating their autonomy and peacefully making progress on all fronts, hoping that Iraq's Arabs will fully accept that federalism is the way to go. But they are angry that a promised referendum to determine whether the oil-rich province of Kirkuk should become part of their region is again sure to be delayed. In their hearts, most Kurds still hanker after full independence, even if many know in their heads that it is not practicable. Iraq's future is still full of pitfalls. The sectarian chasms remain deep, the wounds of strife raw. But for the first time since the insurgency against the Americans took off, the tide, which may quickly ebb, is flowing in the direction of the new order."

There is no doubt that Iraq remains a frontier economy country. Frontiers, however, hold opportunities as well as risks. Clearly, I believe the opportunities in Iraq outweigh the risks.

Rwanda's Women

As I noted in my last post [Moving Forward in Rwanda], the women of Rwanda have emerged a potent economic force over the past decade as Rwanda tries to emerge from the grasp of internecine warfare and poverty. Anthony Faiola, writing in the Washington Post, details how women are making an impact ["Women Rise in Rwanda's Economic Revival," 16 May 2008]. He writes:

"Sun-kissed plantations ring this village [Maraba, Rwanda], renowned in recent years for growing the rich arabica beans brewed and served in some of the world's finest coffee houses. But the secret to success here has had far less to do with the idyllic climate and volcanic soil than with a group of people who have emerged as Maraba's -- and Rwanda's -- most potent economic force: women."

Faiola notes that the violence that ripped the country apart in 1994 played a crucial role in the emergence of women.

"In the 14 years since the genocide, when 800,000 people died during three months of violence, this country has become perhaps the world's leading example of how empowering women can fundamentally transform post-conflict economies and fight the cycle of poverty. That is particularly clear here in Maraba, a southern village where a host of women -- largely relegated to backbreaking field work in the days before the genocide -- found unwanted opportunity in the fertile lands they would inherit from slaughtered husbands, fathers and brothers."

Like most traditional societies, Rwanda's economy has been primarily male dominated and driven. With so many of the men gone, women had to step in but few had the training or experience to do so effectively. Fortunately, they received help from outside organizations. A little help was all they needed.

"As both female and male survivors sought to rebuild coffee plantations with financial and technical assistance from international organizations, Maraba's women, most trying their hands at the business of farming for the first time, were by far the faster students. They showed more willingness than men, officials here said, to embrace new techniques aimed at improving quality and profit. Now, Maraba's female farmers are outdoing their male counterparts in both, numbering about half of all farmers in the village's coffee cooperative but producing 90 percent of its finest quality beans for export. The march of female entrepreneurialism, playing out here and across Rwanda in industries from agribusiness to tourism, has proved to be a windfall for efforts to rebuild the nation and fight poverty. Women more than men invest profits in the family, renovate homes, improve nutrition, increase savings rates and spend on children's education, officials here said."

These are exactly the derivative benefits that spurred Muhammad Yunus to loan money primarily to impoverished women when he started his Grameen Bank. Women are not only better financial risks they are more likely to invest for the future (be it in their businesses or in their families).

"It speaks to a seismic shift in gender economics in Rwanda's post-genocide society, one that is altering the way younger generations of males view their mothers and sisters while offering a powerful lesson for other developing nations struggling to rebuild from the ashes of conflict. 'Rwanda's economy has risen up from the genocide and prospered greatly on the backs of our women,' said Agnes Matilda Kalibata, minister of state in charge of agriculture. 'Bringing women out of the home and fields has been essential to our rebuilding. In that process, Rwanda has changed forever. ... We are becoming a nation that understands that there are huge financial benefits to equality.' ... The road to female prosperity runs through a path of male shame."

Faiola reports that the scenarios that played themselves out in Bangladesh for Yunus are repeating themselves in Rwanda for other microlenders. He provides the example of Jeanine Mukandayisenga.

"The 29-year-old wife of a disabled army officer and mother of two took out a $50 microloan in 2005 with a plan to support her family. Her pitch: Few people in her neighborhood owned cellphones -- so she would buy one and charge a few cents per call. She paid back the loan within a year. Last year, she took out a $400 loan to open a graining mill for cassava flour. Her businesses are earning the family a relatively princely sum of $650 a month. Officials at Vision Finance, the microloan arm of World Vision International that launched a program in 2005 in this town of 40,000, said that while women make up the majority of borrowers, four out of five defaulters are men."

Women in Rwanda have demonstrated uncommon wisdom in how they invest their money. Faiola reports, however, that they are not alone. Women throughout much of the developing world appear to be better at making investment decisions. He also makes reference to Yunus' experiences.

"Perhaps it should come as no surprise that women have been key in reconstructing Rwanda. In the effort to finance the reduction of poverty in the developing world, many leading experts said that women simply make better investments. The evidence has been building for years. In 1990, a major study on poverty in Brazil published in the Journal of Human Resources showed that the effect of money managed by women in poor households was 20 times more likely to be spent on improving conditions in the home than money managed by men. In Bangladesh, the Grameen Bank founded by 2006 Nobel Peace Prize winner Muhammad Yunus has focused its poverty-busting microloans on women, with success rates far higher for female than for male borrowers. Microloan programs in Africa, Asia and Latin America have shown similar results. In India's great economic transformation of the past 15 years, states that have the highest percentage of women in the labor force have grown the fastest as well as had the largest reductions in poverty, according to the World Bank.

It would seem that in frontier economies, the frontier should be run by women! That is not often easy because the laws are stacked in favor of men and against women. Before women could play a major role in helping Rwanda recover, Rwanda's legal system had to be reformed to provide women with protections they had not previously enjoyed.

"By 1999, reforms were passed enabling women to inherit property -- something that would prove vitally important to female farmers. At the same time, woman began rising to higher ranks of political power. Today women hold about 48 percent of the seats in Rwanda's parliament, the highest percentage in the world. They also account for 36 percent of President Paul Kagame's cabinet, holding the top jobs in the ministries of commerce, agriculture, infrastructure, foreign affairs and information. Success in economics mirrored the rise of women in politics. Today, 41 percent of Rwandan businesses are owned by women -- compared for instance with 18 percent in Congo. Rwanda has the second-highest ratio of female entrepreneurs in Africa, behind Ghana with 44 percent, according to the World Bank. At the same time, Rwanda has engineered a surprisingly fast economic recovery. After falling into devastation in 1994, with many farms and businesses abandoned, damaged or destroyed, Rwanda's economy has since tripled in size and has grown at an average rate of 6 percent since 2004. Though the population is balancing out -- women edge men by a rate of 52 to 48 -- women make up 55 percent of the workforce, according to Commerce Minister Monique Nsanzabaganwa. ... By Western standards, women still have a long way to go in Rwanda. Many of the women in [Rwanda] who have husbands are culturally expected to ask their permission before engaging in any form of business. But some of these women who have inherited land from genocide victims have been able to use income from farming or renting that land to gain a measure of financial independence."

The real tragedy is that it took a tragedy for Rwandan men to appreciate the contribution that women can make to the economy. It is a lesson that needs to be learned in most societies, but especially in those that place less emphasis on educating females than males. No developing country can expect to emerge from poverty's grasp through the efforts of only half of its human capital.

Moving Forward in Rwanda

I have written two posts over the past couple of years about Rwanda -- specifically about that country's attempts to get connected to the rest of the world [Wiring Rwanda to the World and Update on Wiring Rwanda to the World]. In the first post, I wrote: "In the panoply of nations, Rwanda stands out as one nation which has suffered through a number of calamities including civil war and genocide. Characterized by a treacherous, if beautiful, terrain, Rwanda is one of the most disconnected nations on earth. In fact, by most measures, Rwanda is an underdeveloped, if not failing, state." That post was about Greg Wyler, a 36-year-old American tech entrepreneur who had big dreams about connecting Rwanda to the rest of the world. His dream started when he met the chief-of-staff for Rwanda’s president, Paul Kagame, at a wedding and the chief-of-staff invited him to visit his country. Wyler accepted the invitation and once in Rwanda met with Kagame. President Kagame, knowing that Wyler had made his fortune in the tech sector, asked him for his opinion about a $50-million project to bring Internet service to Rwandan schools via satellite. Wyler's advice: Don't do it. Satellite service is costly, slow, and unreliable. Kagame scuttled the satellite plan and urged to Wyler to take on the project of wiring the schools with fiber. Wyler accepted. Unfortunately, as I noted in my second post, things have not gone well.

Rwandan officials complain that Wyler's company, Terracom, quickly refocused on the more lucrative cellphone market once it learned how difficult being an Internet service provider proved to be. Wyler actually stepped down as chief executive of Terracom in November 2006. Wyler indicated that he had underestimated the technical challenges of connecting Rwanda to the rest of the world. Even though he persuaded President Kagame to abandon his satellite plan, Wyler, in the end, admitted that the only way to do it is to buy bandwidth capacity on satellites. Unfortunately, there are not enough satellites to meet demand and the service remains costly. I review those posts because they set the stage for a recent op-ed column by David Ignatius ["A Past at Rest in Rwanda," Washington Post, 29 May 2008]. Ignatius doesn't discuss Rwanda's ambition to connect to the Internet; rather, he talks about how President Kagame has managed to maintain security and move Rwanda beyond thinking about its brutal recent history.

"It happened just 14 years ago -- the slaughter of roughly a million people here in only 100 days. 'More people had been killed more quickly than in any other mass killing in recorded history,' writes Martin Meredith in his book 'The Fate of Africa.' And yet today there are few visible traces of the genocide that began in April 1994. It's not that Rwandans have forgotten, but that they seem to have willed themselves to l