International Network for Economics and Conflict

Very interesting piece on an area that does not garner enough attention from the development institutions!  I agree with the author’s assertion that relief initiatives often inadvertently distort private sector markets.  Because of the immediacy of the initial post-conflict response and more so a lack of a robust strategy for engaging private sector actors in these environs, relief and recovery programs do not take full advantage of private sector actors at their disposal.  This lack of engagement and the promise of free goods and services by relief agencies has a crowding-out effect of the private sector involvement which further disincentivizes the private sector from engaging in the response and, as stated above, longer-term recovery.  In terms of long-term prospects, this approach leaves the people of the country largely where they were before development agencies intervened – searching for a current livelihood with little hope for a brighter future for them and their family.

There is an alternative approach.  With a well developed strategy accompanied by a scaled back regulatory framework that allows for streamlined business registration, relief and development agencies could channel their funds through legitimate private sector actors who are more attuned to local needs which build long-lasting local economies and livelihoods, crowd-in financing by legitimizing the market, and generate tax revenues for continued long-term growth.  In addition, because these funds would be providing seed financing to entrepreneurs as opposed to the outright buying of goods – largely at above local market rates – each dollar spent would have much more impact.

 I fully agree that it is important for development agencies to engage with local actors in post-war areas if they are to be successful. However, "post-war" does not mean there are no violent conflicts that continue, especially at the local level. Therefore, it would behoove the development agencies to become versed and trained in "unarmed civilian protection (UCP)" and to imbed their agency staff into the community, working alongside the local people, not only to develop economic enterprises, but to share in the methods of UCP.

UCP is slowly becomeing an accepted -- and proven -- method of protecting civilians and preventing more violence, while promoting a peaceful way of operating. Places where this has occured are in Sri Lanka, Mindanao Philippines, and South Sudan. One such nonprofit organization that professionally trains "peacekeepers" from throughout the Global South in UCP is the Nonviolent Peaceforce. With the high cost of arming even the "blue helments of the UN Security Council, using UCP is being examined as a viable alternative means of providing for a sustainable peace.

We are working in the DR Congo to rebuild the economy.  We reject the partnership of most non-profits out of hand because they have proven to make things worse with their post-conflict give-away strategies.

Instead, we are creating an L3C (American entity structure) to support the development of local businesses in the Congo through business training, and secondarily, financing of businesses at a level significantly above the common micro-finance loan process.

 100 years of political aid and non-profit aid in Africa has resulted in an Africa that is worse off economically than it was 100 years ago.  The problem will never be solved by non-profits, but by local capitalism, financing of businesses with 5-100 employees and ongoing signficant business training.  These businesses must be co-owned by those providing the loans and only gradually transferred locally as the operators are fully trained, and as they operators commit to help others start businesses.

 The worst thing non-profits can do post-disaster and post-conflict is set up a system of handouts that competes with the establishment or re-establishment of local businesses.  Funnel that money to the local business owners and, much more importantly, train them how to run a business.

500 million people have come out of poverty in China and  India in just the last 20 years alone, and none of it was through the non-profits.  It was all through capitalism at a local, small business level.  Until we get a grasp on this, poverty in Africa will continue to worsen as it has for the last 100 years.

 Terrific piece.  Obviously, entrepreneurs are like everyone else - some good, some not so good; some ethical, some not so ethical.  Doing things from an ecosystem development standpoint that make it easier for entrepreneurs to do business in an ethical and legal way is surely the best way to "direct" the traffic!  

Steven Koltai

"World Peace through Entrepreneurship"

Thank you for the thoughtful comments to the discussion.

With regards to the role of entrepreneurs in service delivery post-conflict, as well as taking time to establish transparently and ensuring best value for money in Public-Private pPartnerships, there is some evidence  PPPs are effective only when the appropriate regulatory and oversight structure and processes have been established by government. Emerging from conflict, governments most often do not have the capacity to manage complex PPPs to ensure delivery. Contracting-out, as an interim step, comes with its own pitfalls; over committment and lack of experience on the part of private agents and the extensive sub-contracting which sometimes takes place - especially in high aid flow areas- can compromise the quality of service delivery (as well as inflate costs). We've seen this in housing and infrastructure reconstruction in a number of states- Haiti and Aceh, Indonesia for example. It would be great to know your perspective on solutions to these issues.

Chuck- I do agree with your comments re 'hand outs'- I guess you are taking about cash-for-work and similar schemes which can be problematic. At the same time, there are many non-profits who use a market-based approach to supporting recovery and growth. Also, there are a host of constraints to economic recovery, which I believe, can't be addressed through the market in recovering states: poor health, education deficits, lack of business and vocational skills, breakdown in societal relations, pychosocial trauma, etc. which all impact on the ability of individuals to contribute to economic recovery.   

Steven- I couldnt agree more with your comment- development of the entire ecosystem is crucial. I look forward to hearing more from you on this!

I enjoyed the article.  I’ve only recently begun looking at entrepreneurship as a method of peacekeeping and statebuilding.  With that said, I do have a question on the cultivation of entrepreneurial support in post-conflict areas.  My region of focus is post-conflict Eastern Europe and Eurasia.  A major problem is international organizations and local organizations have realized only in recent years the importance of economic development as a peacekeeping and statebuilding tool.  Organizations can’t just fund projects.  The UN Mission in Kosovo (UNMIK) faced a problem with financial dependence after the UNMIK started up after violence erupted in the late 1990s.  When 9/11 occurred, funding shifted to crisis areas such as Afghanistan and Iraq.  Funding for projects didn’t exist anymore because organizations went on to the newest conflict area, regardless of whether the organization was aiding economic development or civil society programs.  When the funds ran dry, there was no structure for the organizations to sustain themselves.  How do these organizations and governments begin the process of creating an ecosystem that allows for entrepreneurial growth and development? 

Lauril: Thanks for the interesting perspective on the blog. I think yours is an important point. Insecurities continue in many parts of a state – even after the end of violent conflict- and often the government is not able to provide security and services to these areas. As we’ve seen in many states, Illegal groups take advantage of these security vacuums, and their operations oftentimes provide economic opportunities for communities (or coerce them into being involved). This is especially powerful when it is coupled with providing order and security in areas where the state is not present, and results in a serious threat to the legitimacy and capacity of government. There are some very strong examples, though, particularly from Latin America, of communities organizing themselves to resist coercion and cooptation into illicit activities, and in the absence of security provided by the state, have found methods- largely nonviolent- to protect themselves and maintain order in their communities.     

Alex- the way in which funding and implementation of programs is, as you point out, an important issue- across the range of program objectives, as well as that of fostering entrepreneurship.

Despite generally poor outcomes to date, donors have recently recognized peacebuilding- and particularly statebuilding- as long-term endeavors. The World Bank (as is evident in the WDR 2011), UN and other INCAF members have explicitly recognized the need for longer-term engagement in rebuilding states post-conflict and in breaking cycles of fragility, and for these countries to receive adequate, long-term and predictable levels of funding. 

Supporting the development of the entire entrepreneurial ecosystem- schools and academic institutions government agencies, private sector, investors etc., is a complex undertaking and one which can’t be made to fit neatly into single, stand-alone projects of 3-4 years (or sometimes shorter), and should be sequenced appropriately. 

Most development agencies do employ different programing frameworks at different times- in humanitarian assistance, early recovery, transitional governance periods etc. International agencies have slowly been getting better at ensuring coordination between these phases (UN integrated missions as you pointed out is one way of working towards this) and in improved coordination between different development areas rather than taking ‘siloed’ approaches. The United Nations Development Assistance Framework (UNDAF), for example, is one way in which UN agencies, funds and programmes in a single country can coordinate their development assistance, as well as align behind government priorities.

However, a focus on fostering entrepreneurship seems to fall fairly low on the list of donor peacebuilding and statebuilding priorities. Understandably, reintegration, security sector reform, rule of law and access to justice are often the focus of post-conflict programming, but, I believe they miss the relationship between these objectives and that of fostering entrepreneurship and inclusive growth. There needs to be more emphasis on empirical research, mainstreaming support for entrepreneurship, and ‘upstream’ work on policy advice if donor-supported actions are to be sustainable and impact the broader ecosystem.