Documente Academic
Documente Profesional
Documente Cultură
CHAPTER 4
Economic policies for post-conflict
reconstruction and development
In its broad sense, reconstruction refers to economic survival. They may have been
the rebuilding of structures, institutions, and driven by fear of violence into locations and
conditions that prevailed during peacetime. activities that provide only precarious and
Reconstruction also encompasses the possibly unsustainable incomes. Hence,
rehabilitation of basic services like health there is an urgent need to improve living
and education. The key questions facing standards, which can only be achieved by
countries undertaking a post-conflict raising incomes. Second, low income is a
reconstruction program include what to risk factor for violent conflict. Thus,
reconstruct and how to reconstruct. These economic recovery should help reduce the
questions are important because not all risk of reversion to conflict. Third, economic
peacetime conditions are desirable, and outcomes during post-conflict periods are
reconstructing undesirable conditions may far more variable than in other situations.
therefore constitute a recipe for future On average, post-conflict economies grow
conflict. Peacebuilding is a form of more rapidly than normal as they bounce
reconstruction, peace being the object of back from the damage done during conflict,
reconstruction. This Report has already dealt but the range of performance is very wide.
with aspects of reconstruction relating to It is quite possible to sustain growth rates
peace building in Chapter 3. This chapter of 10 percent or more for an entire decade,
focuses on economic policies for recon- as was the case in Mozambique. However,
struction and development. some post-conflict societies do not
Economic policies are vitally important, experience rapid recovery: for example,
not only for progress towards prosperity, Zimbabwes per capita income stagnated
but also for the more fundamental challenge during the 1980s, its post-conflict decade.
of maintaining peace. There are three The variability of post-conflict economic
reasons why economic policy should be outcomes suggests that performance during
accorded priority status. First, the urgent this period is particularly sensitive to policy
need to reduce poverty in post-conflict choices.
environments: prolonged conflict occurs The first section of this chapter outlines
disproportionately in societies that are the distinctive context of economic policy
already poor, and poverty typically deepens after civil conflict. The next section
during conflict. Pitifully low living standards proposes, from a government standpoint, a
are thus a legacy of prolonged conflict. set of policies for economic recovery during
Moreover, during prolonged conflict people the post-conflict decade. The third considers
are driven to adopt desperate strategies for the same issues from the standpoint of
(E) AfricanBank 2008 Ch4 8/4/09 12:53 Page 45
donors; while the fourth broadens the of bottlenecks as the output of some sectors
analysis to other forms of conflict beyond is needed for the expansion of others. The
civil war: international conflicts and most likely bottleneck is the supply of non-
tensions, as well as internal violence that tradable capital goods.
does not scale up to civil war. The legacy of a diminished construction
sector, with few firms and depleted skills,
The distinctive context of slows the pace of recovery. It also gives rise
post-conflict situations to booms in construction prices as sharply
The economic consequences of conflict increased demand meets severely curtailed
include capital flight, poor policy, economic supply. For example, in Liberia the cost of
decline, damaged infrastructure, increased building a school has doubled. These price
military spending, structural changes to booms have two detrimental effects. They
the economy, and shortened time horizon dissipate increased spending in higher costs,
for government and private agents. Post- and they also generate large rents for
conflict economic recovery is fundamentally those who control supply, opening up the
dependent on responses by the private possibility of political corruption.
sector. Capital flight that occurs during There may also be other bottleneck
conflict may continue or be reversed post- goods or services. In construction, cement is
war. Since the stock of assets held abroad is one of the key inputs that become quasi-
often very large relative to the economy, this non-tradable if the country is landlocked.
difference is critical to economic recovery. For example, in Southern Sudan the cost of
Capital flight may continue because the importing cement from the world market is
process of shifting assets abroad during prohibitive and cement has to be brought
the conflict had not been completed, or overland from Uganda, which itself has
because new wealth, generated by high limited supply. Similarly, there may be
profits in the post-conflict environment, is bottlenecks in specialized professions.
being shifted abroad owing to concerns Paddy Ashdown, the former Commissioner
about further insecurity. Davies (2008a) for Bosnia, wrote that what he really needed
finds that capital flight usually continues to assist the Bosnian recovery was
during the post-conflict period. However, accountants without borders. In Sierra
there are exceptions: Uganda succeeded in Leone there has been a shortage of specialist
attracting substantial human and financial lawyers.
capital repatriation during its first post-
conflict decade. Such repatriation helps Post-conflict economic policies
finance private sector recovery. In many respects, the challenges posed to
Recovery also affects the structure of the economic policies in post-conflict societies
economy. Sectors that contracted during the are similar to those posed by societies that
conflict expand: for example, rural have been at peace, but in which policies
economies see a return to the market. and governance are poor and incomes are
However, this process creates the possibility low. In other respects, however, there are
(E) AfricanBank 2008 Ch4 8/4/09 12:53 Page 46
distinctive differences. Since there is already usual response by governments to the high
an enormous literature on economic reform risk of conflict reversion is to maintain
in peaceful societies, the pertinent issue is military spending at a high level. While this
why policies differ if the society is just is understandable, it reduces the funds
emerging from prolonged conflict. One of available for directly productive public
the reasons is that objectives are markedly spending. In a post-conflict context, public
different in post-conflict settings relative to spending needs are particularly acute, while
peace settings. This section elaborates on revenue sources are particularly modest.
these differences. Consequently, the release of money from
the military budget would be highly
Distinctive objectives valuable. Moreover, since one of the
Post-conflict societies face a heightened risk legacies of conflict is an inflated military
of conflict reversion. Governments will budget, there is an unusually large scope
therefore rightly be concerned, not only with for reduced spending. For example,
economic recovery as an end in itself, but Mozambique undertook deep cuts in its
with adopting economic policies that help military budget at the end of its civil conflict.
reduce the risk of conflict. Of course, Although high military expenditure
governments in all societies wish to minimize reduces funds for productive spending, it
the risk of civil war; however, this objective may be the price for peace, at least in the
should receive a considerably higher priority short term. Notably, if a peace agreement
in post-conflict societies because the risk is calls for the absorption of former rebel
much higher. There is a potential trade-off combatants into the military, large cuts in
between policies that promote growth and military expenditures may threaten the
those that promote peace. For example, fragile peace. Given this caveat, oppor-
policies focused on growth may concentrate tunities for reducing military spending
spending on regions with a higher growth should be seized whenever such cuts do not
potential; however, this may aggravate compromise peace and security.
regional inequality. Where such trade-offs Economic priorities are also likely to be
exist, peace building policies would naturally distinctive in the creation of jobs for young
take priority, as economic growth or recovery men: the higher the proportion of males aged
would be threatened in the absence of peace. 1529, the higher the risk of conflict. This is
However, the objective of risk reduction does unsurprising since this is the group that forms
not always conflict with that of economic the recruitment base for rebel armies. The
recovery. On the contrary, economic extremely high costs of conflict reversion
recovery could help bring risks down in the suggest that it is worth spending public
long term. The premium on risk reduction money to create jobs for this segment of the
does change appropriate economic priorities workforce. Indeed, this may be part of the
in two key respects. rationale for high post-conflict military
One of the distinctive policies is the spending: By maintaining a large army, the
appropriate level of military spending. The government keeps young men contained.
(E) AfricanBank 2008 Ch4 8/4/09 12:53 Page 47
Different types of public spending have very improvements are achieved despite the low
different intensities of employment of young priority accorded to economic policies
males. This implies that the true costs of dif- they do not receive much political attention
ferent types of public spending may diverge in the early post-conflict years. There are
considerably from their monetary costs. strong pressures to divert attention from the
positive sum game of economic reform to
Distinctive policies for economic the zero sum game of distribution of
growth political power among groups. Rwanda is an
This section considers how economic exception to this relative neglect. The post-
growth policies may need to be distinctive. conflict government prioritized economic
reform and has achieved remarkably rapid
The pace of economic policy reform economic growth despite the severe
As noted earlier, one of the legacies of civil handicap of being landlocked and resource-
war is an accumulation of poor economic scarce.
policies that have snatched short-term
benefits at the price of long-term damage. Macroeconomic policy
This implies the need for rapid reform. One of the legacies of prolonged civil war is
Policies in post-conflict countries are a high rate of inflation. Post-conflict
atypically poor, making a strong case for governments face hard choices in
accelerated reform. In addition, the political confronting inflation. One of these choices
costs of reform are expected to be lower is to adopt a contractionary fiscal policy with
than usual for two reasons: First, the vested a combination of additional taxation and
interests that usually block reform are likely reduced spending. However, this policy
to have been weakened by the conflict. stance entails substantial trade-offs. The
Second, with the onset of peace, people social returns on public spending are
expect change: Peace may provide a unique particularly high, implying that inflation
window for coordinated reforms in which reduction by means of reduced public
groups are willing to tolerate some loss of spending is costly. Furthermore, the social
special interests because they are confident cost of additional taxation may also be
that they will benefit from many other atypically high, meaning that reduced
reforms. The success of reform often inflation by means of increased taxation
depends upon such a coordination of would be costly.
expectations. Economic reform is usually Taxation may be particularly costly in
quite rapid in post-conflict contexts. post-conflict situations because during
Whereas the average Country Policy and prolonged conflict most economic activity
Institutional Assessment (CPIA) at the onset would have retreated into informality,
of peace is only 2.41, by the end of the resulting in a smaller tax base. One of the
decade, it is around 3.05, slightly higher than priorities for post-conflict recovery should
the CPIA for the average low-income be the reversal of this process to accelerate
country at peace. However, these the return to a formal economy. Formaliza-
(E) AfricanBank 2008 Ch4 8/4/09 12:53 Page 48
tion has various advantages: It permits Reversing the ight of capital and skills
greater economies of scale; it makes Post-conflict societies are extremely short of
transactions with other firms more readily both human capital and private investment
enforceable; and it facilitates future taxation. because of capital flight. However, their
Thus, even from the narrow perspective of previous flight constitutes an opportunity: at
public revenues, there is a good case for the its best, flight during conflict preserves both
government giving priority to building the skilled people and assets. The challenge is
taxable base of the economy and hence thus to repatriate them.
future revenues , rather than seeking to The repatriation of capital is induced by
maximize revenues in the short term. improvements in domestic economic
Indeed, the economic rationale for building conditions, including a decline in inflation.
future revenues by moderating current However, much more can be done.
taxation is analogous to the case for building Members of the diaspora may be willing to
future seigniorage revenues by moderating return with their skills and their capital,
current inflation. some of which will be flight capital and
The need for tax moderation is some accumulated savings earned abroad.
reinforced by the legacy of a decayed public Returning members of the diaspora are
administration and the rise of private likely to be looking for new business
opportunism. Firms cannot be trusted to opportunities. The post-conflict environ-
report accurate accounts to tax collectors, ment may offer abnormally high profits
and tax collectors cannot be trusted to owing to a less dangerous operating
behave honestly. In combination, these environment and expanded market. In
behaviours produce low-revenue yields addition to business opportunities, the
from taxes and high corruption costs. The diaspora is likely to be concerned about the
problem of poorly motivated tax collectors quality of education and of health services.
is sometimes resolved by explicit revenue Families would have become used to the
targets and by preventing face-to-face standards in their host country and may be
negotiations between individual tax reluctant to return to markedly lower
collectors and firms. However, in the post- standards. Since there is no way in which
conflict context, the accounts of firms educational and health standards across the
cannot often be trusted. In practice, the tax society can rapidly be raised to the required
payments deemed reasonable by collectors levels through public investment alone, it is
are likely to be influenced by the visible necessary to encourage private provision of
prosperity of the firm, but, since investment high quality services.
is the most important such sign, this During conflict, sections of the diaspora
behaviour approximates to an investment are likely to have become politicized such
tax. Since governments wish to encourage that a government may well view them with
private investment, this inadvertent effect of suspicion. However, the onset of peace is
the tax effort undermines their post-conflict an opportunity for the government to
recovery agendas. encourage the diaspora into a constructive
(E) AfricanBank 2008 Ch4 8/4/09 12:53 Page 49
role. The diaspora business community is, the feasibility of government construction
after all, by far the most informed investor plans, and to identify and address
group in society. Properly treated, it is likely bottlenecks. Construction requires land,
to be the first skill and capital inflow. It is material inputs, skills, organization, and
also a useful barometer of obstacles to finance. Each of these constitutes a potential
enterprises and so can guide the government bottleneck.
in the myriad of microeconomic and During conflict, urban land rights often
administrative reforms that are likely to be become confused and this can delay post-
needed. The best African example of conflict construction projects. For example,
successfully targeted post-conflict diaspora in both Sierra Leone and Angola there is
policies is Uganda. The exodus of Ugandan chronic traffic congestion resulting from
Asians was successfully reversed by the ability of private households to import
combining an information campaign and the vehicles expanding far more rapidly than
restitution of confiscated property. The legal the governments ability to build roads, the
process by which property was returned was stock of which has deteriorated due to
particularly successful since it combined decades of neglect. One reason for the delay
transparency, speed, and closure. All claims in road building is the difficulty in public
made prior to a set date were swiftly acquisition of the land on which roads need
adjudicated, but claims not lodged by that to be built. Hence, government legal action,
date were not considered. whether through legislation or accelerated
legal processes, may be needed to ensure
Sectoral policies that adequate land is available for con-
Breaking the construction bottlenecks struction projects.
One of the legacies of civil war is a Construction requires material inputs.
diminished construction sector, which is Government planners should aim to break
then overwhelmed by a sharp increase in bottlenecks as swiftly as possible by
demand for its services for post-conflict drawing up a critical path showing the best
reconstruction. The result is a price boom prioritization sequence. Some inputs may be
for construction services, reflecting a steep internationally non-tradable. In this case,
supply curve. some combination of economizing on the
There are several potential bottlenecks use of the input and prioritizing an increase
within the construction sector. Although in its local production will be appropriate.
Botswana does not face a post-conflict Some inputs, whether traded or not, may
situation, it provides a good example of how simply be expensive. In such cases, it is
bottlenecks can be overcome. Faced with important to redesign projects to economize
bottlenecks, which constrained exception- on their use. Even where there is a
ally rapid growth, the government proximate port, the ability to import can
implemented an annual plan specifically become a bottleneck, either because of
for the construction sector. Each year, policy restrictions on imports, procedural
construction firms were called in to discuss restrictions such as customs, or the
(E) AfricanBank 2008 Ch4 8/4/09 12:53 Page 50
containing extractable resources and so can Finally, peace opens up the scope for
sell extraction rights. Favourable terms also prospecting. This is especially important
compensate firms for the hazardous given current high commodity prices.
environment and abnormally high costs of Territories exposed to prolonged civil war
operations. Clear evidence of this is are among the major remaining locations on
provided by a study of the impact of the earth yet to be prospected. However, the
death of Jonas Savimbi on the stock market prospecting phase is not something to be
prices of resource extraction companies rushed. Prior to licensing prospecting, the
operating in Angolan diamonds. The death government should probably invest in a
of Savimbi was unexpected, and so cadastre to reduce uncertainties. In general,
constituted financially significant news; it private companies build in a high expected
clearly marked the end of the prolonged rate of return on uncertain prospects..
civil war. While peace was evidently good Renegotiation, the extraction of known
news for Angolan society, it was treated as but previously unexploited deposits, and the
bad news for diamond extraction companies licensing of prospecting, all lead to a trade-
operating in Angola: the stock market prices off between current and future government
of their shares fell significantly in reaction to revenues. Governments have two sources of
the news (DellaVigna and La Ferrara, 2007). revenues from resource extraction: initial
The most plausible explanation for this fall one-off payments for extraction rights and a
is that stockholders recognized that the continuing flow of tax revenues from
bargaining power of the company had been royalties and profits taxes. Clearly, the lower
reduced by the elimination of UNITA as a the future taxes, the more valuable the
possible negotiating partner. As the fall in extraction rights. The temptation for fiscally
quoted stock prices indicates, companies stressed post-conflict governments is to bring
expect that peace will bring renegotiation. revenues forward by committing to low
Hence, a priority for post-conflict economic future taxation, thus maximizing the price
policy is to reach reasonable terms with that companies are willing to pay upfront for
resource extraction companies that are extraction rights. However, this is likely to be
already operating. The potential sums very costly. Political uncertainties are
involved are often very large relative to inherent to the post-conflict situation: For this
other sources of government revenue and so reason, long-term government commitments
this is both urgent and important. to low taxation are treated with suspicion by
Peace also opens up the scope for the companies. Thus, governments sacrifice a lot
commercial extraction of deposits that were of future revenues for each dollar of current
previously known but unviable during war revenue raised by such a strategy. Post-
conditions. The extraction of such resources conflict governments cannot credibly commit
requires the establishment of a tax structure to low long-term tax regimes as such
that ensures profitable extraction, but commitments can be undone by future
captures a substantial proportion of the governments. The better strategy, therefore,
economic rents for the government. is not to attempt to bring revenues forward,
(E) AfricanBank 2008 Ch4 8/4/09 12:53 Page 52
but to instead adopt a tax regime that is impact of their activities on customers,
reasonable from the outset, and, if possible, suppliers, employees, shareholders, com-
is modelled on tax regimes in countries with munities and other stakeholders, as well as
similar geological conditions. on the environment. In this regard, extract-
Revenue management is another ive firms must protect the communities they
important issue, particularly for oil in the operate in from environmental damage as a
light of the current rise in prices. Care must result of their mining activity. They must
be taken to avoid boom and bust cycles. The also minimize disruptions to the lives of
creation of societal trust funds is one option people in the community.
to be considered. Greater fiscal federalism,
where resource rich regions get effective Integrating the rural economy into the
control over resource rents, as in Indonesia market
at present, should be pursued. This would Rural economies tend to retreat into
dampen the tendency for secessionist subsistence during prolonged civil wars.
rebellion in resource-rich regions. Murshed The integration of smallholder agriculture
and Tadjoeddin (2007) find that the recent into the market is thus a potential
Indonesian experiment with fiscal opportunity. Agricultural markets depend
federalism may be conflict-abating as it has on transport and information. Since both of
increased the size of local government, these are jeopardized by violent conflict,
which citizens value more than a distant one of the legacies of war is that markets do
federal government. not work well. This in turn has important
Two ongoing initiatives on corruption corollaries. For example, household food
are worth pursuing. The first, Publish What security is impaired because food markets
You Pay, as advocated by Global Witness, are not sufficiently dense to be reliable;
is meant to work through regulation of while income uncertainty increases because
companies in countries where they are of more volatile prices. On average, incomes
incorporated. Therefore, it is mainly a matter are lower because of high geographic price
of corporate governance in developed dispersion due to low trade. The restoration
countries. The second initiative is the of efficient rural markets is thus a priority.
Extractive Industries Transparency Initiative Private entrepreneurs are likely to make
(EITI), proposed by the UK government as a the needed investments in trucks, but
voluntary code of conduct for participating the government should prioritize the
host countries and companies. complementary investment in rural roads
Finally, extractive firms should be and in information. By their nature,
encouraged to exercise greater corporate agricultural markets need speedy inform-
social responsibility in countries in which ation on the spatial distribution of produce
they operate. This means that extractive and prices. Mobile phones are well-suited to
firms should always consider the interests of this function and so establishing an efficient
society beyond their statutory obligations. and affordable network with effective
They should take responsibility for the coverage in rural areas is a priority.
(E) AfricanBank 2008 Ch4 8/4/09 12:53 Page 53
The design of service delivery post-conflict Africa, where the civil service
A particularly urgent legacy of conflict is the has collapsed and opportunistic behaviour
deterioration in the provision of basic social is rife, the conventional model of state
services such as education and health care. service delivery is particularly inappropriate.
The restoration of these services cannot be Similarly, the conventional donor post-
postponed because both are time-specific: if conflict approach of attempting to rebuild
children miss schooling, then this cannot state systems that have already compre-
readily be offset by subsequent education; hensively failed is a denial of reality. The
similarly, if the sick miss treatment. economic theory of corruption explains why
However, states often lose the financing once a civil service has been compre-
needed to pay for such services as well as hensively corrupted, incremental attempts at
the organizational capacity to deliver these reform prove hugely difficult. Essentially,
services efficiently. Tracking surveys of behaviour is locked into a pattern by the
social spending in Africa reveal some pressure of expectations. Once there is an
particularly high rates of leakage in post- expectation that civil servants will be
conflict settings. Both the urgency of needs corrupt, they have a much weaker incentive
and expectations of change in post-conflict to be honest. This makes both honesty and
situations make it an appropriate moment corruption locally stable equilibria. Hence,
to think afresh about the institutional within an honest system small perturbations
architecture of service delivery. Indeed, the into corruption can be quickly eliminated;
chance to rethink the provision of basic conversely, in a corrupt system small
services makes the post-conflict situation an perturbations into honesty tend not to
important opportunity for improvement. Just persist. Thus, faced with the task of
as the invention of mobile phones has reforming a system that has collapsed into
enabled governments that were unable to comprehensive corruption, it is more
provide adequate landline-based telecom- effective to create new institutions that are
munications to leapfrog to a superior tech- not so burdened with expectations of how
nology, so does the post-conflict situation employees will behave. As long as new
open up the possibility of institutional institutions are well designed to include
leapfrogging in service provision. powerful incentives against corruption,
The conventional institutional archi- realistic expectations of how staff will
tecture of service delivery in Africa is behave in them will break from the
modelled on that of Europe in the 1950s: deadweight of past expectations.
government ministries combine the A sensible starting point in redesigning
functions of policy planning, resource service delivery is to separate the three
allocation, and retail delivery of services functions of policy planning, resource
with the aspiration to a monopoly of allocation, and retail delivery of services.
provision. Since the 1950s, Europe has Policy planning is necessarily a political
rethought its mode of provision and has function that is appropriate for government
gradually moved away from this model. In ministries: this is the level at which the
(E) AfricanBank 2008 Ch4 8/4/09 12:53 Page 54
expressed political will of citizens must have workers who are self-motivated to work
effective power. for the organization. Economic theory
At the other end of the delivery chain proposes, reasonably enough, that because
the retail delivery of social services through potential workers differ in their beliefs and
schools and clinics there is a strong case interests, it is helpful to offer them a range
for allowing as many separate organizations of organizations with different philosophies.
as possible to manage the provision of these People can then choose to apply for a job in
services. Normal market-based competition is organizations that most strongly motivate
not desirable in social provision because it them. For example, some teachers may want
would require providers to get their revenues to teach handicapped children, others may
from users. It was the realization that want to teach children who share their
provision of basic social services was not religion, and so forth. A diversity of inde-
well-suited to the market that led to public pendently managed delivery organizations
provision. However, it is now possible to enables this matching of motivations to
design institutions in such a way that they are organizations (Besley and Ghatak, 2003).
either free or heavily subsidized to end-users, One of the implications is that diversity in
without provision being restricted to the mode of supply is likely to be a long-
government-owned organizations. The key term feature of an efficient system.
design feature is for governments to enter Resource allocation, the third critical
into contracts with organizations that directly function, occurs between the functions of
provide the service. policy planning and that of retail service
The most obvious reason for allowing delivery to users: public money has to be
many separate organizations to provide channelled to retail providers to meet all or
basic services is that some will inevitably be part of their costs. Where the civil service
better than others. This diversity allows has become inefficient, this function is
funding to be gradually directed towards best placed with a separate public, but
more effective providers. A related but independent, institution, somewhat akin to
distinct reason is that the very fact that there an independent central bank or an
are multiple providers allows yardstick independent revenue authority. By analogy,
competition. That is, the realization by this may be termed an independent service
providers that future funding depends on authority (ISA). Ministries would set the
their performance relative to other providers policy objectives that such an implementing
stimulates the incentives provided by a agency would be required to follow, but
market. A further, more sophisticated, would not have direct operational authority
reason for encouraging diversity is the scope on the allocation of public money. This
it provides for better motivating workers. separation of the policy function from the
Motivation is critical in the delivery of social spending function not only slims down the
services because detailed performance by functions of the ministries to a manageable
individual workers is difficult to monitor. It core, but reduces the moral hazard of
is therefore much more efficient to attract conflating policy setting with spending.
(E) AfricanBank 2008 Ch4 8/4/09 12:53 Page 55
case both for prioritizing improved mechan- Another issue is that aid is never
isms for public spending such as independ- apolitical. Aid strengthens the government
ent service authorities, and for phasing and implicitly weakens the opposition, and
exceptional aid inflows more evenly over this may fuel conflict. This constitutes one of
the decade rather than bunching them all in the arguments for pushing for clear peace
the first few years. The need for policy commitment mechanisms such as signing
reform and the deterioration in the profes- peace accords that include specific power-
sional civil service suggests that technical sharing arrangements as part of aid
assistance is particularly valuable during the conditionality.
post-conflict period.
The allocation of aid is also problematic. Beyond post-civil conflict
Over the past decade, aid allocation has The core of this chapter has considered the
gradually become more closely linked to post-conflict context; however, there are
attained levels of government performance. related contexts of actual and potential
Since post-conflict governments inherit very violence that warrant further discussion.
poor policy performance, an exception has Africa has not had many international
to be made for them. But the question is wars, but it has not completely escaped
how long this exception should last. them. As a result, in parts of Africa, most
Potentially, aid to post-conflict governments notably the Horn of Africa and Central
may have two distinct elements, one that is Africa, neighbouring governments are
unconditional and one that reflects attained highly suspicious of each other. This creates
performance. Over the course of the post- two economic problems: arms races and
conflict period, the balance between these interruptions to trade routes.
two elements may change. At the beginning, Neighbourhood arms races occur
large aid inflows would be warranted purely around the world. In effect, an increase in
on the basis of need and opportunity. military spending by one country forces
However, over time, aid allocation would neighbouring countries to increase their
gradually depend more heavily on attained military spending simply to preserve their
performance. This would enhance the initial level of security. Hence, military
incentive for governments to adopt reforms. spending is a neighbourhood public bad.
Finally, the classic problems of temporary Like other public bads, it needs to be
aid booms Dutch disease, construction curtailed through coordinated action. A
booms, public expenditure commitments neighbourhood might agree on a target rate
that are difficult to reverse, temporary trade of reduction that each government should
liberalizations that are gamed by importers implement. President Arias of Costa Rica is
are all likely to arise. However, these may currently leading an initiative in Central
be fully offset by the core underlying America to de-escalate arms spending in a
rationale for aid in these contexts: that the coordinated fashion. Africa, with its
economy has an acute but temporary need multiplicity of small states, each with several
for additional resources. neighbours, is the other region of the world
(E) AfricanBank 2008 Ch4 8/4/09 12:53 Page 58
in which such an initiative would be highly side-effects was the prolonged closure of
appropriate. To be credible, any commit- Ugandas trade route to the coast. It is a
ments to reduced military spending must be further example of the damage that might at
supervised by an agreed but independent least have been curtailed had the Kenyan
verification process. . In Africa, the African government pre-committed itself to an
Development Bank is well-suited to such a agreement whose breach would have
role. The problem of high neighbourhood triggered substantial compensation to
military spending is particularly acute if Uganda. While the need to provide
neighbours have actually had a war. Once a compensation would not have deflected the
country has been involved in an inter- course of the political disturbances, it would
national war, its level of military spending probably have induced the government of
remains high for decades. In effect, Kenya to place more priority on keeping the
governments appear to be taking the view transport route open, clearly something
once bitten, twice shy. Since the typical within its military power. A second example
international war is brief, an unfortunate is the violence in the Delta region of Nigeria.
implication is that most of the costs of Oyefusi (2008) surveyed more than a
such wars occur after they are over, due thousand young men in the Delta region to
to the elevated level of military spend- determine why many of them had joined
ing. Hence, negotiated mutual reductions violent gangs. Oyefusi found that there was
in military spending following inter- no relationship between the social facilities
national wars or periods of heightened of a district and the propensity of young
tension within a neighbourhood can be men to join violent gangs. Rather, the main
valuable. driver was the presence of oil wells. The
The other disturbing consequence of evidence was consistent with the violence
international conflict is the closure of trade having transmuted from its origins in
routes. The clearest such case at present is political protest into extortion rackets
the diversion of Ethiopian trade away from against oil companies. As with other forms
the least cost route to the coast, which of violent crime, the best policy response
would be through Eritrea. Given the large may be some combination of employment
number of landlocked countries in Africa, it opportunities targeted at young uneducated
would be valuable if the regions political males, and intensive policing.
institutions could negotiate agreements,
supported by credible penalties, enabling Conclusion
guaranteed access to the coast for Rapid post-conflict economic recovery is
landlocked countries. both valuable and feasible. However,
Finally, some types of internal political recovery often depends on three distinct
violence are below the scale of civil war but actors: The post-conflict government, whose
nonetheless have important economic task is to reform economic policies that are
consequences. One example is the recent likely initially to be dysfunctional. Donors,
political disturbance in Kenya. One of the whose role is to provide both exceptionally
(E) AfricanBank 2008 Ch4 8/4/09 12:53 Page 59
large financial inflows, despite initially poor often in fire-fighting mode, and coordination
policies, and technical assistance to help is weak. There is thus a case for a template,
governments implement reform. Finally, in or compact that, while not legally binding,
appropriate cases, the Security Council and would set out the expected roles of each actor
the African Union, provide peacekeepers. over the course of the decade. Governments
Each of these roles requires about a decade would commit to economic reform, donors
rather than just the first few years of would commit to large inflows of finance and
peace: there is usually no quick solution to technical assistance sustained over the
conflict, and full economic recovery may decade, and peacekeepers would commit to
take more than a decade. the provision of long-term security
The roles of these three actors are perhaps as the UK did for Sierra Leone
interdependent. Without rapid economic evolving into an over-the-horizon commit-
reform, aid is less effective and unlikely to ment after the first few years. The purpose of
be sustained throughout the decade. such a compact would be to recognize the
Without the combination of reform and aid, interdependence between actors and the
risks of conflict reversion may not fall long-term nature of the recovery process.
sufficiently to provide a credible exit What are the implications for the African
strategy for peacekeeping where it is Development Bank? The Bank has four
undertaken. Without peacekeeping, the different roles, each of which needs to be
risks of conflict reversion may be so high distinctive in the post-conflict setting:
that they will discourage the return of the advice, capacity building, finance and
diaspora and deter private investment. advocacy. This has motivated the Bank to
The need for a long-term perspective on design new instruments for intervention in
recovery and the interdependence of fragile states, most of which are post-conflict
decisions pose a challenge: In the early years countries. These initiatives are discussed in
of a typical post-conflict situation, actors are the next chapter.