S USTAINING P OST -C ONFLICT
E CONOMIC R ECOVERY :
L ESSONS AND C HALLENGES
BCPR Occasional Paper 1
October 2005
2
Sustaining Post-Conflict Economic Recovery:
Lessons and Challenges1
Précis
The experience of the development community, as detailed in this paper, suggests
that post-conflict recovery is not sustainable unless national actors—governments
and civil society— acquire the lasting means to make the key social and economic
decisions necessary for addressing longer-term challenges. While the international
community might provide guidance on such decisions in the short-run, long-term
engagement must be nationally owned and managed. Experience has also
confirmed that post-conflict transition cannot be segmented neatly into
humanitarian, recovery and reconstruction phases. Rather, all the challenges are
distinct but intermixed, much like the colours of a rainbow. From the very outset,
therefore, international assistance should be provided with a view to building the
capacities of national actors for informed, consensual, participatory, and
accountable decision-making across the whole range of issues.
I.
The Challenges of Sustainable Post-Conflict Economic Recovery
Re-creating a viable economy after prolonged violent conflict remains one of the most
serious challenges of development. Some countries have emerged from such conflict
and succeeded within a few years to re-position themselves within a normal
development trajectory.2
However, a larger number has had great difficulty
jumpstarting the economy. For example, Sierra Leone, a once viable economy, is still
largely dependent on international assistance after the expenditure of nearly 3 billion
dollars in six years of UN peacekeeping. Haiti presents another example. Instability
fuelled in part by a failure to catalyze economic recovery has meant that over the past
ten years the international community has been called in ten times to assist in peacekeeping operations. While a degree of political stability seems to have been achieved in
1
This paper was prepared by UNDP’s Bureau for Crisis Prevention and Recovery, drawing on the
experiences of the UN system in supporting post-conflict recovery over the past two decades. The principal
authors were John Ohiorhenuan (Coordinator) and Chetan Kumar; the team included Eva Busza, Peter
Batchelor, Francesca Cook, Gita Swamy and Jan von der Goltz. Zephirin Diabre, Kalman Mizsei, Hebert
M’cleod, Spyros Demetriou, Sam Barnes, Jamal Benomar, Barbara Barungi, Christina Carlson and Gana
Fofang provided additional inputs and comments on an earlier draft. Kemal Dervis and Kathleen Cravero
provided guidance.
2
A “normal development trajectory” does not mean that all development challenges have been overcome.
Rather, it is a return to so-called “steady state”, where a country has re-established the capability to make
and implement economic decisions and priorities as part of a largely self-sustaining process of economic
governance.
1
Bosnia-Herzegovina, Timor Leste and Kosovo, they have not yet successfully
established themselves as viable self-sustaining economies.
In the immediate aftermath of a violent conflict, a range of international actors rushes
in to help stabilize the situation and address the immediate challenges of relief and
recovery. Useful as this assistance often is, it is widely understood, even if not often
explicitly stated, that external engagement would be limited in duration. Sooner or
later, national actors would have to take on the responsibility for peace building,
recovery and reconstruction.
Countries emerging from violent conflict face extraordinary constraints mobilizing the
resources urgently required for relief, recovery and economic reconstruction. Often
critically short of almost all expertise, newly established authorities have to deal
simultaneously with several major challenges. They must preserve the peace and
safeguard security; resettle internally displaced persons and re-integrate excombatants; rehabilitate essential infrastructure and key public institutions; revive the
public finance regime and assert control over key national assets; generate
employment opportunities and restore private investors’ confidence; and establish
mechanisms for transitional justice and the rule of law.
However, even with several decades of international post-conflict assistance, the
implications of these extraordinary constraints have yet to be fully reflected in the
design of such assistance. First, it bears restating that the post conflict economy is not
simply a “normal” economy that happens to be in great distress. In particular, the
perverseness of signals and incentives that is the legacy of violent conflict indicates a
long transition to “normalcy” and extraordinary creativity in policy design and
sequencing. Second, we now understand that the process of returning to a normal
development situation is one of overlapping stages, like colours in a rainbow, rather
than a series of segmented steps that unfold neatly one after another. Third, despite
wide recognition of the need for an exit strategy based on the gradual transfer of skills
and responsibilities to national partners, such a strategy is rarely deployed.
This paper emphasizes that external assistance in the post-conflict setting requires a
strategic framework that explicitly recognizes that these lessons indicate an integrated
approach from the very beginning. Section II, surveying familiar terrain, identifies some
of the main pathological characteristics of the post-conflict country. Section III
highlights some of the specific policy challenges facing national actors in sustaining
economic recovery. Section IV suggests some ways in which international actors can
support national actors to reconstruct the institutions and processes required to
overcome the pathological legacy of conflict. The concluding section restates the main
message and highlights the particular relevance of development actors.
II.
The Post-Conflict Economy: Some Stylized Facts
The phrase “post-conflict states” is used here to refer to countries that have recently
emerged from a period of prolonged violent conflict. The result of such violence is,
typically, a seriously compromised economic, social and physical infrastructure. Clearly
the challenges of post-conflict economic recovery are unique to every different country.
2
However, there are certain commonalities that can be found to some degree across the
different categories of post-conflict states. These include: economic regression, the
deterioration of infrastructure, social decay, disintegration of governance mechanisms
and processes, and institutional degradation.
Several types of post-conflict environments may be identified. At one extreme are
countries where the violence was so overwhelming that the state essentially collapsed.
Countries such as Liberia, Bosnia-Herzegovina, Democratic Republic of Congo, Sierra
Leone, and Somalia would seem to belong here. At the other extreme are countries
such as Guatemala, Sri Lanka, and the Former Yugoslav Republic of Macedonia that
have emerged with their political and economic structures largely intact. The stylized
facts presented here might be present only to a limited degree in these countries, and
primarily in areas directly affected by conflict. The challenges may also be resolved
within a relatively short time, depending on resource commitment and political will.
Between these extremes are countries such as Sudan, El Salvador, Mozambique,
Angola, Cote d’Ivoire and Burundi, where violent conflict has affected large portions of
the territory and physical decay is significant, but where the state and its basic
infrastructure have remained essentially intact. There are also countries like Haiti and
Guinea-Bissau, where full-scale organized violent conflict might not have erupted and
hence the state is more or less intact. It is the case, however, that recurrent periods of
violent tension have nevertheless left these countries in a similar situation.
Economic Regression
Almost by definition, conflict involves the diversion of resources from production to
destruction. The conflict’s economic legacy further includes capital flight, destruction of
existing assets and a corresponding reduction in economic production. Furthermore,
the distorted system of asset acquisition and resource use in conflict situations
bequeaths to the post conflict period a pathological system of incentives and a highly
disabling environment for legitimate private sector investment. Capital flight can be
particularly difficult to reverse when hostilities end. Furthermore, markets have been
severely compromised; from village produce exchanges to national commodity and
financial exchanges. Consequently, capital mobilization is an uphill task. Moreover,
whatever is left of entrepreneurial talent tends to become engaged in catering to the
service economy generated by a large international presence (e.g. Cambodia and East
Timor).
With the wholesale destruction of legitimate economic activity, parallel economies
emerge among which are illicit ones that frequently boost the fortunes of the warlords
and provide livelihoods for their constituents. Given the enormous challenges to
reviving legal economies in the aftermath of violent conflict, these parallel economies
constitute a continuing lure. In Afghanistan and Haiti, the drug trade provides a primary
source of income for many individuals and factions. In Guatemala, several years after
the conclusion of the civil war, some disaffected elements of the military have allegedly
become involved in a growing and lucrative drug economy. In the Balkans, despite
intermittent successes in curbing it, a parallel economy continues to flourish centered
on illicit human trafficking and smuggling. Organized criminal groups establish
“controlled” markets based on coercion. Extortion and protection rackets accepted
3
under duress by local populations in the absence of the rule of law divert important
resources away from economic activity.
Even after the ostensible end of conflict, insecurity and violence obstruct the launch of
reconstruction efforts, resumption of basic services (such as electricity, water, and gas)
the re-establishment of government authority and administrative services at the local
level, as well as private and international investment. The need to remain mobile for
security reasons means that most of the population is incapable of long-term planning
and investment, and this creates strong disincentives for the return of the displaced.
High rates of armed violence (whether socially or economically motivated) increase
uncertainty (in terms of both lack of market information and access) and makes trade
and production erratic.
In the immediate post-conflict phase, jump-starting the economy is also greatly
complicated by the simple fact that the state often has no revenue to pay for even such
basic expenditures as salaries. In addition, disagreements over who has legitimacy and
authority among key political stakeholders further exacerbate the situation by
undermining people’s confidence in the state, and encouraging a reluctance to pay the
dues of citizenship. Such contestation has been has been evident at a central level in
Liberia, Sierra Leone, and Haiti. In Afghanistan and the DRC, the struggle is located
more in the context of center-periphery relations where dominant local actors resist
central authority. In other less extreme but potentially equally damaging instances,
consensus on basic governance structures may exist but key actors may not support the
government’s economic programme. In Guatemala, for instance, lack of buy-in from
key actors has thwarted the state’s ability to collect revenues. Without a revenue base,
stimulating economic recovery through public expenditures becomes an impossible
dream.
Infrastructural Deterioration
As a deliberate strategy, opposing combatants destroy strategic infrastructure such as
water, sewage, electricity, telecommunications and transport facilities. Even the
education and health sectors are often not spared and central and commercial banks
are routinely looted. The physical legacy of conflict also includes damaged homes and
communities, and highly compromised natural environments. Sizeable areas of total
devastation can be quite common as was the case in Angola, Southern Sudan,
Mozambique and Afghanistan. Frequently, large areas of land have been rendered
inaccessible by landmines and other unexploded ordnance. The wholesale physical
destruction of key ministries combined with a lack of human capacity leads to a postconflict situation where minimal social and public services are being delivered.
Social Decay
The collapse of social cohesion and trust is one of the most pernicious legacies of
conflict. The brain drain that violence occasions often creates large holes in the social
fabric. But more important, conflict leads to the erosion of social capital and gives rise
to high levels of personal and social insecurity. The social pathology of conflict is
immediately manifest worldwide in the large numbers of returning refugees, internally
4
displaced persons and demobilized combatants. UNHCR estimates that there were 9.2
million refugees, 5.6 million internally displaced, and 1.5 million returnees at the
beginning of 2005. Afghanistan alone received almost one million returnees from Iran
and Pakistan in 2004. Large numbers of demobilized combatants have created for
Liberia and Sierra Leone a serious problem of chronically unemployed or
“unemployable” youth with few basic skills other than those of violence. The easy
availability of weapons and the continuing influence of warlords and former
combatants increase criminality, often attracting the unemployed youth, and
worsening the security environment.
Conflict further destroys the bonds of trust and social exchange as well as the
community-level networks of social and economic exchange that have developed over
decades or centuries. This breakdown of trust constrains the reconstitution of
commerce and economic activity. Indeed there have been instances (such as in Rwanda
and Cambodia) of conflict transforming social capital into a virulently malevolent force
with extreme exclusionary characteristics. In such situations short- to medium-term
post-conflict “transitional recovery” assistance provided by the international
community does not easily yield sustained positive outcomes. In Bosnia-Herzegovina,
for instance, the so-called Republika Srpska remains isolated from the rest of the
country by a cordon sanitaire of fear and suspicion, and has not been able to benefit
significantly from the economic activity generated through international largesse. On
the other hand, we should recognize that the breakdown of traditional networks and
alliances often opens up possibilities for generating new positive exchanges in the post
conflict era.
Disintegration of Institutions and Governance Processes
Already weak pre-conflict matrices of authority, accountability and transparency are
frequently further eroded by conflict and replaced by a culture of impunity and
corruption. The period immediately preceding a conflict frequently gives rise to the
most destructive dynamics: as national cohesion and consensus break down and
tensions increase, public officials begin to ignore the governance norms and structures
which previously provided, at least to some degree, the “rules of the game” necessary
for the effective functioning of the institutions of the state. They focus instead on their
personal or parochial interests. Their ability to do so is facilitated by the degeneration
of social control that expands incentives for opportunism and corruption.
Unfortunately, this behavioural switch tends to be enduring, with serious implications
for the legitimacy of the state. Social and political actors, seeing such pervasive
corruption and parochial favoritism, further lose trust in the ability of the state to
deliver just policies. The consequent increase in transaction costs becomes one of the
biggest obstacles to sustained recovery as in Sierra Leone, according to some
observers.
The collapse or de-legitimization of governance structures contributes directly to
widespread institutional breakdown—both a precipitating cause of conflict and one of
its most onerous outcomes. The depreciation of social capital already carries serious
economic consequences by weakening the voice and exit mechanisms that facilitate
5
market homeostasis. Conflict further severely damages property rights, compromises
regulatory institutions, undermines economic policy and social insurance systems, and
weakens dispute resolution mechanisms. In particular, it erodes the underlying system
of rule of law, which is essential for resolving economic disputes. An almost generic
feature of post-conflict situations, even in the medium-term, is the absence of a reliable
judiciary that resolves disputes in a prompt and transparent manner. While the causes
may vary from country to country, practically no post-conflict situation seems to have
found the means to ensure a sustainable revival of the judicial system, or to protect it
from political intrusion and corruption. In many instances, the situation is complicated
by fundamental differences among the concerned actors on the roles and functions of
the judiciary, as well as on the basic precepts of a legal code.
Taken together, these pathologies paint a picture of an economy with a most severe
case of fragmented and incomplete markets and imperfect information, with all the
challenges that these imply. Indeed, the post-conflict economy is frequently a very
large number of mini-economies with limited interaction. This structural deficiency plus
pervasive informational asymmetries result in extremely high transaction costs and
perverse economic outcomes. For instance, technically sound micro-credit schemes
may wither in the absence of trust or local level social insurance. At the national level,
even the most rudimentary macro-economic regime might not be implemented if
consensus on the policy formulation process is lacking among key actors, or if the
legitimacy of the decision-making authority is questioned. Similarly, sustained reform
will not be possible if large swaths of the economy are dominated by illicit parallel
economies, or in the absence of an agreed legal framework wherein economic disputes
can be adjudicated.
In short, one cannot perceive the post-conflict economy as easily amenable to
management via the conventional policy levers: the market signaling mechanisms
simply do not work. Similarly, it lacks the effective centralizing authority that makes
the idea of pubic expenditure programming meaningful. These pathologies mean that
even the best-planned and executed international assistance often does not yield
sustainable results. It must be stressed too that these economic pathologies are
mirrored in the social and political domains.
III.
Toward Sustainable Economic Recovery: Challenges Facing the Post-Conflict
Leadership
In pursuit of sustained economic recovery, newly established authorities must perform
at least seven categories of functions as follows: create a secure environment for
economic recovery; establish a coherent macroeconomic framework; institute an
oversight system; diversify public investment; reconstitute social and human capital;
foster decentralization, and establish rule of law.
Creating a Secure Environment for Economic Recovery
A core prerequisite for economic recovery is the establishment of a safe and secure
environment. While limited economic activity can exist in dangerous and unstable
environments, full-fledged economic development requires that people can move
around safely, are not forced to waste time and energy on ensuring their own personal
6
safety, and have a degree of confidence in their ability to predict future economic
developments. The latter is essential if they want to make business decisions based on
estimates of risk and relatively reliable projections of economic and market trends.
Thus the leadership must focus on “securing” development, through, in the short term,
measures aimed at breaking the dynamics of violence (for instance through the
disarmament and economic reintegration of armed groups and/or community policing
arrangements), and in the long-term, strengthening justice and security, as well as
implementing social and economic programmes targeting ‘high-risk’ groups or
potential conflict triggers.
Establishing a Macroeconomic Policy Regime
No less than in a “normal” economy, a post-conflict state faces the key policy question
of how to ensure macro-economic stability, generate employment and restore growth.
It must therfore seek to immediately (re)establish systems for the management of
public finance as well as monetary and exchange rate policy. The authorities must
identify quick-yielding revenue measures and priority expenditures aimed at restoring
basic infrastructure and services and jumpstarting the economy. They must re-establish
a currency and create a system to manage money and credit, taking into account public
and private sector financing needs. They must decide on a trade policy regime geared
to restoring exports quickly.
The post conflict reality imposes some very hard trade-offs. The need to control
inflation and debt may dictate austerity measures, which may run counter to social
policy priorities and popular expectations of a peace dividend. Further, too tight a
budget can lead to deflation and unemployment, especially while private investment is
still hesitant. Similarly, quick success in providing basic services is necessary to sharply
differentiate war and peace, and create opportunities that encourage people to
participate actively in the reconstruction process. On the other hand, scarce recovery
and reconstruction funds may be more effective when used for export recovery, as this
rebuilds the foreign exchange balance and makes more imported productive inputs
available. Also, there are important trade-offs between the rapid resumption of public
services, and cost recovery and sustainability. Quick results matter psychologically.
However, it may be easier to institute and get people to accept the idea of cost
recovery immediately after conflict than after a period of free services. Similarly, the
new fiscal system must seek to avoid waste and gross inequities.
Finally, in prioritizing public expenditures it would require special effort to avoid the
easy option of simply replacing what was lost. Equally important, the authorities must
avoid capitulating to the demands of the most influential groups. Otherwise, postconflict transformation would almost certainly reproduce pre-conflict inequalities and
exclusion. Post-conflict macroeconomic policy must, therefore, seek also to address
medium- to long-term structural adjustment and equity issues from the very beginning.
These trade-offs require strategic decisions from concerned international actors as well
as emerging national authorities. For instance, the traditional prescriptions for macroeconomic stability that emphasize fiscal austerity and anti-inflationary measures might
not be applicable. Unless there is an abundance of resources from international
assistance, domestic revenues and remittances, it may be necessary to embark on
some deficit financing in order to meet immediate and critical socio-economic needs.
7
Considerable creativity may be called for in financing short-term budgetary and trade
deficits and still avoiding longer-term liabilities. In addition to such obvious assistance
as debt forgiveness, large grants and cheap loans from international partners, discipline
and political will are needed to push for the necessary shifts from, for instance, military
expenditure to health. Clearly too, it is essential to establish mechanisms for the
effective and transparent utilization of proceeds from natural wealth such as oil and
diamonds.
Instituting an Oversight Framework for the Economy
Rigorous oversight of the management of public finances and national resources and
the establishment of robust systems of public control and oversight of the economy are
necessary prerequisites for post-conflict economic recovery. These help to reduce the
risk of imprudent or corrupt decisions. Thus, for example, financial intermediation
needs supervision to avoid bad lending practices. Where large portfolios of nonperforming credit are accumulated, costly public bailouts often follow. Similarly,
governments need to guard against the risk of monopolies emerging, particularly
because conflict may have reduced the ability of citizens to organize as a possible
countervailing force. Strong public control of revenues from natural resources is
particularly critical especially where there is significant dependence on them. Some
have argued that the most effective public control in these situations is to generate
broad citizen participation in the management of these resources.
Diversifying Public Investment
Sustainable recovery will not happen unless the private sector can flourish. However,
the public sector has a strong legitimate case in venturing (at least initially) into some
“unorthodox” areas. First, significant public investment in rebuilding the social and
physical infrastructure is known to have a “crowding-in” effect on private funds – by
raising rates of return and through signaling effects. In addition, there may be a case for
active state involvement in the small credit market. While it may be preferable,
ultimately, to rely on private actors to provide credit to small businesses and small
landholders, the private sector is unlikely to support small business credit, and the
rebuilding of infrastructure, in the immediate post-conflict period. Accordingly, the
public sector may have to directly provide these commodities, and/or provide
extraordinary incentives.
It is also important that public investment in the agricultural sector is not neglected
because of its crucial role in restoring livelihoods and jump-starting exports. Activities
which are vital to rehabilitating agriculture include re-claiming and de-mining land; resettling and re-training workers; repairing processing and transport equipment; reestablishing trade ties; providing access to credit; and managing foreign exchange
properly.
The diversification imperative also generates an opportunity to give more access to
women and marginalized groups. On both demographic and equity grounds, the active
participation of women in economic recovery must be nurtured. During conflict,
women's contributions to economic production and livelihoods tend to increase and
become more “visible”. However, post conflict, their work often reverts to being
socially invisible, despite their essential contributions to the economy. Given that the
8
active male population has been greatly reduced, not nurturing women’s economic role
is an unaffordable economic inefficiency.
Reconstituting Social and Human Capital
An essential prerequisite for economic recovery is the existence of a dynamic
entrepreneurial class that can lead the development process. Unfortunately, conflict
often causes a severe brain drain as highly qualified professionals flee their homes and
seek haven in other countries. In order to reverse the exodus and restore the human
capital deficit, governments must provide a secure environment for the return of
refugees, IDPs and émigrés. A particular challenge is to overcome the resistance of
their "home" communities to such return. Often, those who have remained behind
during the conflict have objected to the return of people who have spent all or part of
the war years abroad, especially when these people return with packages of
international assistance.
Moreover, steps must be taken to develop and rebuild leadership and management
capacities throughout state structures. In the immediate aftermath of a conflict,
reconstituting the state often begins, justifiably, with rebuilding, and reforming the
police and the military, with a view to establishing discipline and civilian control.
However, equal attention must be given to rebuilding a civil service and public
administration that is able to resist corruption and political intrusion, and is able to
facilitate key decisions without catering to parochial interests. Frequently the state
looks to the military to fill this gap. While this may be a necessary short-term measure,
it is not sustainable over the medium to long term. Instead, priority should be given to
building a strong civilian developmental administration that can effectively regulate the
private sector while generating the confidence necessary to attract investment and
foster economic growth. Providing technical training to a new cadre of professionals is
thus a pressing need that is often delayed or even overlooked. As a consequence, vital
state capabilities are not restored.
Fostering Decentralization
A key issue in many post-conflict situations remains the extent to which the powers of
the central government should be de-centralized in order to counter the inequities and
structural imbalances that might have precipitated conflict in the first place. The
rationale here is that the dispersal of key government functions to the provincial or
local level allows for meaningful participation by a larger number of actors. It further
reduces the stakes for a contest over centralized power. Another possible argument is
that it may be easier to agree on the consensual management of resources and
economic activities at the local and community level. Certainly, Somalia offers an
extreme example of this. With the dispersion of national authority, local leaders have
successfully developed their own mechanisms for providing basic services and security
and generating significant levels of trade and economic activity.
Lasting and successful decentralization can only be achieved as part of a longer-term
effort to build consensus on and reform the system of governance. However, mediumterm international efforts to support decentralized economic management in countries
as diverse as Sierra Leone, Somalia, and Guatemala suggest that a focus on the local
9
level does yield results in terms of sustainability of micro-enterprise, the provision of
basic services, and the creation of safety nets for community members. In the mediumterm, when the ability of the national government to build its tax base and expand
public services remains low, local governments are better able to collect contributions
from community members—who see direct results for their money—in order to provide
for basic services. However, local officials need to be supported in acquiring the
systems and skills to deliver basic services in an inclusive and participatory manner,
especially where such delivery was centralized prior to the conflict.
Establishing the Rule of Law
One particularly important sector of the state where capacities must be rebuilt is the
justice sector. In the immediate post-conflict period, establishing the rule of law can
assist in reducing inter-societal tensions by providing mechanisms through which
perceived and real injustices can be addressed.3 Transitional courts and truth and
reconciliation commissions are some of the mechanisms that have been effectively
used in countries like Sierra Leone and South Africa to assist in the post-war settling of
accounts.
While transitional justice measures are an important first step, in many post-conflict
situations they are not sufficient. Wholesale legal reform is often necessary to
(re)establish the rule of law. This includes the creation of a functioning judiciary, and
the establishment of a variety of mechanisms for adjudicating disputes. Experience has
shown that some of the most successful reform processes have been based on
developing legal frameworks that are a hybrid of western and traditional law.
A functioning rule of law system is essential for the creation of a viable economy.
Investors are reluctant to go where commerce is not regulated by transparent and
predictable rules and undergirded by effective law enforcement. Reasonable security is
of strategic concern not only to large companies and investors, but also to the small
holders. They are unlikely to fully engage in productive activities if they fear that their
rights to land and resources cannot be safeguarded against predatory behavior.
IV
Implications for International Assistance
In the short run, and in the absence of the relevant capabilities on the part of the state,
international actors perform many of the functions enumerated under Section III.
However, the relative abundance of external resources carries a risk of eliciting
dependency that must be resolutely resisted. An international “exit strategy,” or a
return to normalcy, is therefore dependent on a transfer of effective decision making to
national actors, and on ensuring effective coordination among the external players
towards this objective. This transfer requires the re-building of the consensus building,
policy formulation, and economic management capabilities of the state, taking into
3
At a recent workshop on post-conflict state-building cosponsored by UNDP and the World Bank (New
York September, 2005), reformers who had played key roles in various transition stressed that deferring
decisions on establishing the rule of law had negative repercussions on development and state-building in
the medium to long term.
10
account the fact that the institutions that performed these functions in the pre-conflict
situation were probably weak and contested. Indeed, perhaps the highest service that
international assistance can provide to a post conflict country is to help reconstitute
such capabilities as quickly as possible, and certainly once it seems that hostilities are
likely to end.4 Several concrete steps can be taken in this regard:
Supporting National Dialogue Processes: Irrespective of the genesis of a conflict, an
immediate post-conflict task is creating the space for, and facilitating national
dialogue.5 The challenge is to build consensus on the parameters of a new system of
governance,6 essential for ensuring both stability and economic recovery, either
through a new constitution or through a broader agreement than an initial pact or a
truce among the warring parties. Such a process can take many forms, both modern
and traditional. South Africa’s national constitutional dialogue and the Afghan
constitutional loya jirga that led to the first elected government in decades are good
examples.
Letting National Actors Lead, Even in the Short Term: While a “national constituting
process” is being facilitated, national actors should play a central role and lead where
feasible, even the short-to-medium-term “needs assessments” that lead to donor
pledging conferences. Such leadership strengthens their abilities for making key
economic decisions. In a positive step forward, interim transitional authorities have led,
despite large gaps in relevant capacities, such assessments in Afghanistan, Haiti, and
Liberia. However, as transitional authorities do not necessarily represent a national
consensus, some support may be needed to secure the participation of all relevant
domestic actors [civil society, private sector, even (especially) former warring parties] in
these assessment exercises. It is particularly important that, in their eagerness to push
transition processes forward, external partners do not simply consult and make deals
with a small (technocratic or political) elite. Such a move is likely to significantly
disempower other important actors like parliament, civic groups, and the business
community.
Supporting “Process” Skills: The reality of drawn out violence is that the protagonists
acquire a tendency to address issues in an aggressive, exclusionary, and authoritarian
manner. It would be unrealistic to expect them to abandon these tendencies as soon as
the conflict is declared formally over. Accordingly, former antagonists have to learn
4
See, for instance, “Reconstructing Governance and Public Administration for Peaceful Sustainable
Development” UN, Department of Economic and Social Affairs, New York, 2004. A good example of an
effective capacity-building program was a CIDA sponsored training program to develop a cadre of
accountants, economists and engineers who could fill important posts in post-apartheid South Africa.
5
The Center for Strategic and International Studies (CSIS) in Washington DC has used the term “national
constituting processes” to describe post-conflict efforts to build multi-stakeholder consensus. See CSIS
white paper “Meeting the Challenges of Governance and Participation in Post-Conflict Settings,” August
2002. Also see, Orr, Robert, "Governing When Chaos Rules: Enhancing Governance and Participation," The
Washington Quarterly - Volume 25, Number 4, Autumn 2002, pp. 139-152
6
OECD’s DAC Guidelines on “Helping Prevent Violent Conflict” (OECD, Paris 2001) lay emphasis on the
strengthening pf peace processes, including through the building of partnerships between donors, the
state, and civil society actors.
11
new process skills: negotiation, mediation, reaching consensus. The success of South
Africa’s Mont Fleurs scenario exercise in the early 1990s and the recent efforts among
participants in the Burundi peace process to reacquire skills of constructive
engagement provide pointers towards addressing this gap. Institutions such as national
networks of mediators and mediation commissions, often used for economic dispute
resolution in more developed societies, could play a role in assisting protagonists in
resolving contentious issues in a constructive manner.
Supporting an “Infrastructure for Peace”: The erosion of skills for constructive mutual
engagement also applies to society at large. Given residual tensions, post-conflict
countries require, at all levels, an infrastructure of mechanisms, systems and processes
for the resolution of day-to-day disputes before violent conflict re-emerges. Recurring
violence or violent disputes can prevent the reconstitution of social capital vital for
sustained economic recovery. However, appropriately equipped, religious and civic
leaders, local authorities, and traditional leaders can all play constructive roles in
creating an environment for the peaceful settlement of disputes. Indeed in some
settings, traditional methods of resolving conflict may be the optimal approach. This
environment will also make it easier for national leaders to build consensus on a new
system for decision-making and governance.
Linking reconciliation and economic recovery: The psychological wounds of war can
prevent groups and communities from working together to build the economic
capacities for lasting recovery. While special courts and tribunals target the leaders
responsible for egregious war crimes and rights violations, these instruments do not
address the challenges facing communities that have to receive former combatants and
returnees who might have been responsible for some of their wounds, or the problems
that workers from different groups and communities might encounter when brought
together as colleagues in new ministries and institutions. One innovative approach to
address these challenges involves “area-based development programmes,” such as
those implemented in El Salvador (PRODERE), Crimea, Serbia and Montenegro, where
community-led reconciliation efforts were integrated with recovery.
Acquiring the Skills for Designing and Implementing Economic Policy: Competency in
economic policy design, management, and implementation is also crucial. In Sierra
Leone, the absence of skilled economists made it difficult for the national leaders to
develop a poverty reduction strategy that met the challenging criteria established by
the World Bank and International Monetary Fund. A more positive example can be
found in Afghanistan. There, the “donor coordination office” created under the
leadership of the transitional authorities, and staffed by qualified international and
national professionals (including from the Diaspora because of the specific
circumstances of Afghanistan) and led by a national, established implementation
benchmarks for short-term assistance and fostered the acquisition of the required
capabilities by other departments. It also harmonized guidelines for the submission of
requests, and reporting on implementation, among donors. As a start in other postconflict countries, such an entity could constitute the core of an autonomous, national
policy planning and implementation capacity once the international presence is drawn
down.
12
Substituting international decision making, or giving international officials vetoes over
domestic economic decisions, does not constitute a sustainable recovery strategy.
What is required is a trained cadre of professionals who are either enticed back from the
Diaspora or who are locally recruited and suitably trained. The critical functions they
will perform range from the drafting of new legislation to the provision of independent
oversight for public contracts and procurement. The “capacity building funds” utilized
to address this competency gap in Georgia and Serbia and Montenegro constitute one
innovative approach, and provide a pointer towards similar approaches in other
countries.
Re-establishing legitimate authority over natural resources: Lasting economic recovery
requires the establishment of effective control over natural resources by peacetime
authorities. Sanctions against illicit traffickers in precious commodities, and
certification instruments such as the Kimberly process, are an important first step in
establishing this control. However, the vital factor is the degree to which the new
authorities are considered legitimate by different groups and, therefore, trusted to
utilize natural wealth in the national interest. In Afghanistan, for instance, the current
government, which has been established through a process considered legitimate by
most Afghan groups, has had measured success in asserting its control over the
country’s territory and resources. In Sierra Leone, on the other hand, the government
now receives the bulk of the revenue generated from diamond mining. However, there
is some disaffection due to the lack of an agreed-upon system for apportioning this
revenue among different groups. There is also deep mistrust, due to endemic
corruption, of the ability of the national authorities to serve as the guardian of this
wealth. DRC also faces a similar challenge. The recent support provided to Sao Tome
and Principe to establish a system for apportioning oil wealth on the basis of consensus
and dialogue provides pointers towards similar support in other countries.
These are the kinds of support that will ensure sustainable recovery. They allow the
post-conflict country to acquire the capabilities critical for sound economic
management and oversight. They ensure lasting recovery by nurturing a legitimate,
participatory, and adaptive system for governance and economic decision-making.
However, as indicated in Section II, the level of support will depend on how much of the
basic institutions and decision-making processes survived the conflict.
Senior officials who have led national post conflict recovery and reconstruction efforts
often criticize international assistance for a lack of efficiency and effectiveness, and for
the pursuit of objectives that sometimes run contrary to national interests and
requirements. They claim that assistance is often not provided in true partnership with
national actors and that international actors impose conditionalities that are at odds
with national economic and social priorities. They also see accountability as running
upwards to capitals and headquarters rather than downwards to national actors and
their constituencies. Moreover, the delivery of assistance often entails high overhead
and transactions costs. It imposes a heavy burden on fragile administrations with a
bewildering array of reporting requirements. Quite often too, the services they provide
either do not reflect local realities and solutions, or duplicate existing services. In
addition, the many different types of international assistance are rarely planned within
or aligned with a broader long-term strategy for progressive building national
13
capabilities. If international assistance is to effectively support countries emerging from
conflict, the type and quality of support provided and the corresponding delivery
mechanisms require significant improvement. 7
V.
Conclusion
The fundamental challenge for sustainable post-conflict recovery remains that of
leadership. In the short-term, international actors often take the lead in providing both
relief and recovery assistance. While this might be necessary, it is critical that national
actors take the long-term lead in pulling together a system for political and economic
governance. To this end they must acquire the capabilities for making key decisions on
economic reform and the allocation of resources. It is particularly critical that national
actors acquire this capability by the time the international role is drawn down. Some of
the requirements of external assistance that have been identified, include support for
“national constituting processes”; building an “infrastructure for peace” at the national
and local levels; supporting key stakeholders in acquiring the relevant process skills;
building capacities for economic management and the delivery of basic services;
building the capacity of communities to sustain local economic initiatives, and
providing for alternative adjudication of disputes while judicial reform is undertaken.
Taken together, these measures will amount to significant capacity for national actors
wherein they can make their own decisions on critical national issues.
Currently, the design of international support for peace building usually does not target
the building of such capacities. In peacekeeping operations, the focus is generally on
humanitarian and short-term recovery activities for the duration of the operation.
Issues of capacity are addressed in an ad hoc manner once the draw down of the
international presence approaches. Because it takes time, the task of building such
capacities should commence in the immediate aftermath of a conflict, alongside the
provision of short-term humanitarian and recovery support. In addition to providing the
basis for longer-term recovery, this capacity building can also have a positive shortterm political effect. By enabling the key actors to begin to engage each other on a
more constructive and pragmatic basis, they may actually provide greater longevity to
accords and cease-fire arrangements, which might otherwise unravel because of
continuing fears and mistrust.
The key message of this paper is that development assistance must be more
systematically integrated from the earliest stage of post conflict support. For instance:

Humanitarian actors provide short-term relief to individuals and
communities, including returning refugees and IDPs. Using the window of
this assistance, development actors such as the UN Development Group
(UNDG) can begin to work with communities to build their capacities to
sustain in the longer-term the economic activities generated through this
short-term support. For instance, communities can be supported to more
7
There was remarkable convergence around these views among participants at the state-building
workshop
14
effectively use existing resources, and to engage different groups in
cooperative entrepreneurship. As a result, they may become better able to
integrate returning former combatants, refugees, and IDPs in a
sustainable manner.

International peacekeeping operations as well as special purpose
coalitions can establish security in the short-run through the disarmament
and demobilization of former combatants, reviving and reforming the
logistical and operational capacities of the security sector, and
establishing civilian oversight of this sector. Concurrently, development
actors can begin to assist with the development of a comprehensive
framework for rule of law, first by supporting alternative means to
adjudication, and then helping to build a capable judiciary once consensus
has been obtained among key actors on the parameters of a system for
governance.

Multilateral development banks (MDBs) and international financial
institutions (IFIs) may assist transitional authorities to revive public
finances as well as institutions for economic management. Working with
these institutions, development actors such as UNDP can assist
transitional authorities in the preparation of Post-Conflict Needs
Assessments (PCNAs). They can bring real value to these processes by
supporting national actors to acquire the capacities to deliberate on, and
participate in the preparation and implementation of these strategies. In
fact, the UN Development Group, in collaboration with the World Bank,
has developed participatory methodologies for “interim needs
assessments” that support national actors in identifying critical recovery
needs during the transitional period.

Political support for peace building in the short run often involves
mediation to obtain a break in the fighting, as well as follow-on mediation
to ensure longevity for the cease-fire or accord. It also includes support for
the constitution of transitional authorities, and for post-conflict elections
heralding the formation of a government. Alongside this political
engagement, development actors can assist the emergence of a viable
longer-term framework for governance by providing technical support for
“national constituting processes”, and by helping national and local actors
develop an “infrastructure for peace” wherein disputes can be resolved
peacefully before they erupt into violence.

Human rights support in the immediate post-conflict period often involves
systematic monitoring to ensure that parties to the conflict avoid human
rights violations, and assistance for “truth and reconciliation” processes as
public catharsis to help a country move beyond the agony of prolonged
violence. Concurrently, development actors can help ensure the full and
lasting impact of a reconciliation process on the ground by assisting
national and local actors in acquiring the “process” skills for constructive
engagement. Specifically, they can help these actors, especially civic
15
associations, traditional leaders, and women’s groups, acquire the skills
and tools through which consensus can be built around divisive issues, and
ways found for working together on common priorities despite the
schisms generated by violent conflict.

Bilateral actors and donors, especially members of “friends’ groups”, bring
critical resources, from support for security sector reform to humanitarian
financial assistance, to bear on a post-conflict situation. Development
actors can help ensure that this assistance goes beyond a “donorrecipient” relationship to one of partnership based on common interests.
While the commitment of a lead donor is critical, the multilateral
component is indispensable. It brings with it the neutrality and trust that
the most sensitive tasks require. Peace-building strategies should
therefore involve the full participation of development actors from the
very start of international engagement.
While the emphasis of international support may vary over time, there are no distinct or
discrete phases to post-conflict transitions. Rather, in each case a country and its
people have to undertake several Herculean tasks concurrently in the face of
extraordinary constraints. Humanitarian, livelihoods, human rights, and governance
issues must be addressed simultaneously, even as the country struggles to lay the
foundation for a well functioning economy. Emphasis must, therefore, be placed, from
the beginning on building the national capacities to initiate and sustain economic
recovery. Development actors, and particularly UNDP, have a critical support role in
this endeavour.
16