8    Policymaking premises for effective economic reconstruction

•    Background to the premises

•    Basic premises

•    Conclusions

Despite the specificity of each particular case, both good and bad lessons from the experience in the post-Cold War period have allowed us to identify the special needs and policy constraints of war-affected countries and to propose a number of premises that national policymakers and foreign interveners must consider before engaging in the economics of conflict resolution and in the economics of peace. The premises presented in this chapter are listed in Table 8.1.

Table  8.1  The economics of peace premises for effective reconstruction and peacebuilding

  Because It requires that
Premise 1 Economic reconstruction is not development as usual

•    The peace (political) objective should prevail over the development (economic) one at all times;

•    Because the political objective should prevail over the economic one, optimal (first-best) economic policies are not attainable nor desirable.

Premise 2 Policymaking following crisis is distinctly different from normal development

•    Emergency policies be adopted without delay;

•    Priority be given to crisis-affected groups;

•    The impact of aid be maximized, avoiding corruption;

•    National policymakers rein in the international community to ensure policy ownership and sustainability.

Premise 3 Economic policies and institutions must be simple, transparent, flexible, sequenced, and realistic

•    Policies and institutions not be too complex as to facilitate inefficiency and corruption and require foreign consultants to operate;

•    Authorities that lack political legitimacy limit themselves to adopting conflict-sensitive and uncontroversial policies;

•    Institutions be built reflecting the country’s financial conditions;

•    Frameworks be built with flexibility to engage in expansionary policies when facing delays in aid.

Premise 4 The private sector must be effectively engaged in the peace process

•    Economic expertise be part of mediators’ teams to analyze the local private sector, how it can best be involved, and what it is willing to provide;

•    The private sector be effectively involved in post-conflict reconstruction.

Premise 5 The impact of aid must be maximized through effective, integrated, sequenced, and noncorrupt practices

•    Large spikes in aid be utilized effectively, minimizing corruption;

•    Aid be channelled through the national budget to support national ownership and build capacity, to be cost effective, and to ensure project sustainability;

•    Humanitarian and reconstruction aid not be conflated and that reconstruction aid be disbursed promptly and invested wisely to avoid aid dependency;

•    Aid be replaced with foreign direct investment and exports as soon as possible.

Premise 6 Peace processes must contemplate a fair use of natural resources

•    Peace agreements contemplate a fair use of natural resources and compensation to losers to ensure that those who benefited from the spoils of war can be lured to support the peace process.

Premise 7 Rapid growth is not enough; growth must be inclusive, dynamic, and sustainable

•    A level playing field be created for the large majority of the population rather than only supporting elites;

•    The economy move from supporting subsistence agriculture and microenterprises to increasing productivity to make growth more dynamic;

•    The environment and biodiversity be respected;

•    Economic activity be made sustainable once aid starts to wither.

Premise 8 Create an appropriate yardstick to measure success

•    Because the peace objective should always prevail over the development one and therefore second-best policies are often needed, success should be measured by the “peacebuilding yardstick,” where policies and projects are judged more qualitatively by whether they contribute to peacebuilding rather than on purely economic criteria.

Background to the premises

As Boutros-Ghali emphasized in 1992, “the foundation stone of [peacebuilding] is and must remain the State.”1 Although national policy ownership is key to policy success and sustainability, it is understandable that foreign interveners will have an important role in the reconstruction and peacebuilding strategy of poor war-torn countries with weak governance and low levels of human development. It is also understandable that given the low savings capacity of these countries, particularly in the early transition, they will rely on economic aid to carry out reconstruction.

The focus of the discussion on whether aid is good or bad is unwarranted for war-torn countries that generally have a low savings capacity, at least in the short run. The issue is how to make aid more effective and dynamic in creating investment (rather than consumption), and more inclusive and fair, by creating employment and better services for the large majority of the population, including the rural population, which is often large in these countries.

The success of economic reconstruction is not only key to peacebuilding efforts; it is sine qua non for security and political stability and national reconciliation. If it fails, the country will become aid dependent, the economy will not be viable and able to provide services and jobs, and peace will be put at risk.

Each country, however, will end up with a different strategy, at the national and local level, depending on factors that are peculiar to their own economies. These include commitments made in peace agreements; the level of war destruction; the economy’s physical resources and human skills; its trade and investment relations with the rest of the world and its connectivity; the level of international support that the country can garner based on geopolitical factors, the availability of natural resources and other assets that can attract foreign investors; and the specific timeframe for reconstruction. Options, of course, will evolve as countries move along the path shown in Diagram 3.1

Some of the premises discussed below are related but have different policy implications.2 Others may depend on the specific stage in which countries find themselves in the war-to-peace transition. But ignoring these premises has often led to misguided policies, misplaced priorities and wasted aid, which have been directly associated with setbacks and even to the collapse of the peace process in many countries.

This, of course, does not mean that all premises should apply to all situations at all times. Common sense is of utmost importance in applying them. The more informed and the better different stakeholders understand the country, its people, its culture, its security, its politics, its economy, and its idiosyncrasies, the more appropriate for the context the strategy for economic reconstruction will be and the longer peace is likely to last.

Failure at effectively addressing the economics of conflict resolution during peace negotiations, as has often been the case in the past, and the economics of peace during the post-conflict phase continue to be major obstacles to peacebuilding. Peace mediators and special/executive representatives of the secretary-general heading multidisciplinary operations in countries transitioning to peace must have the right kind of expertise to ensure that proper consideration is given to the following premises.

Basic premises

Premise 1: Economic reconstruction is not development as usual

For countries undergoing the multidisciplinary war-to-peace transition, the overarching goal of economic reconstruction – or the economics of peace – must be to promote stability and to avoid a relapse into conflict. Thus, in addition to the normal challenge of socioeconomic development, countries must accommodate the extra burden of economic rehabilitation of dilapidated infrastructure and services and the critical challenge of national reconciliation following civil wars.

The later includes complex and often difficult-to-finance activities, such as the delivery of emergency aid to former conflict zones (some of which may be outside government control); the rehabilitation of public goods; the reintegration of former combatants, refugees and internally displaced groups into society and productive activities; the rebuilding of houses and other economic assets destroyed during the conflict, and the clearance of mines.

A peace dividend in terms of better basic services, infrastructure, and improved incomes for the large majority of the population have proven key to the effective and sustained implementation of peace agreements. Peace agreements lacking effective programs to rebuild the economy and create productive and inclusive jobs have proved ill-prepared in allowing countries to stand on their own feet and avoid large aid dependencies.

Governments need to establish well-planned and synchronized programs for disarming, demobilization and reintegration (DDR). Reintegration has largely failed mainly because of the temporary and hence unsustainable nature of many of the employment opportunities, particularly through public infrastructure projects (which are not fiscally sustainable) and jobs with foreign agencies. Reintegration is the longest and one of the most costly and difficult-to-finance programs in peace agreements.

The creation of private sector jobs is essential to the success of reintegration policies, and the record is most unimpressive. Foreign interveners have been largely incapable of supporting war-torn countries to create sustainable jobs in the private sector through the promotion of local entrepreneurship and new startups. Active policies to promote such opportunities through subsidies, credit, training, and technical support are imperative. The provision of subsidies directly to firms for the hiring of crises-affected groups could be promising and must be considered.3

Because peace-related activities have important economic and financial consequences and should be given priority in budget allocations, the peace (political) and development (economic) objectives often clash during the transition to peace. Effective economic policymaking in war-torn countries must focus on ensuring that the peace objective should prevail at all times during the economics of peace phase.

It should be clear to all that, should the country revert to war – which in our sample has happened more than half the time – there will hardly be any chance for development to take root. Recognizing the political constraint to economic policymaking means accepting that optimal and best-practice economic policies are not attainable – or, indeed, even desirable during this phase.

Premise 2: Economic policymaking following crises is distinctly different from normal development

Economic policymaking in countries coming out of crises – following either conflict, natural disasters, or financial collapse – must be fundamentally different from policymaking under normal development for five main reasons (Table 8.2). The differences arise with respect to the horizon over which economic policies can be planned (short-term vs. medium- and long-term); the amount of aid (sharp spikes vs. low and stable flows); the treatment of different groups (preferences vs. equal treatment for all); the establishment of security and the rule of law (foreign vs. domestic forces); and the involvement of the international community in national affairs (intense and intrusive vs. noninterference in national affairs).

Table  8.2  Economic policymaking

In countries in normal development In countries in post-conflict or other crises
Medium- and long-term framework Distortionary emergency programs required
Low and stable foreign assistance Sharp spikes in foreign assistance
Application of the “development principle” Application of the “reconstruction principle”
Government establishes rule of law Foreign troops and police support rule of law
Political involvement of international community considered interference Intensive and often intrusive political involvement

Because the overriding objective of post-crisis situations is to avoid reverting to war or aggravating social tensions, this second premise for effective reconstruction is that economic policymaking should be geared towards:

Adopting emergency policies without delay

While under normal development, economic policies and programs aimed at addressing economic stagnation, backwardness, weak institutions, poor human resources, poverty, foreign indebtedness, and other pathologies of underdevelopment are planned with a medium- and long-term horizon in mind, no such luxury exists following crises.

As countries come out of crisis, emergency policies must be adopted decisively and without delay to deal with homeless populations, hunger, disease, returnees, displaced populations, and demobilizing fighters as well as all other immediate needs created by the crisis.

Emergency policies often serve a short-term humanitarian, political, or security purpose but often distort and have other unintended consequences on long-term development. Such policies may even conflict with some of the other premises for effective reconstruction, as, for example, the need to channel funding through the government budget since this may significantly delay the process to the point that it may be impossible to prevent disaster.

Delays in approving disbursement of funds in the immediate transition to peace and misguided priorities to wait for the country to have higher absorptive capacity – reflecting the development-as-usual approach of multilateral and bilateral development organizations – have often impeded effective reconstruction and led the country back to conflict.

Giving priority to crisis-affected groups

In post-crisis situations, policymakers often need to put aside the guiding “equity” (or development) principle – that is, treating equally all groups with the same needs – in favour of the “peacebuilding” (or political) principle, which justifies giving special treatment to groups most affected by the crisis, even in the presence of others with similar needs.

Thus, for peace to be long lasting, economic reconstruction policies should be targeted toward decreasing the grievances of those groups most affected by the conflict. Going forward, programs should be carefully designed so as to include women, children, and youth that were involved as combatants and were victims of specific violence against them during the conflict and are often neglected in reintegration and in other programs.

Utilizing aid effectively, reining in the international community and ensuring national policy ownership

Due to the large volume of aid, technical assistance, and foreign troops in the post-conflict context, it is inevitable that the political involvement of the international community in the internal affairs of these countries be intense and intrusive.

Under normal development, such level of foreign political involvement would be considered an unacceptable interference with national sovereignty. At the same time, the large physical presence of the international community in the reconstructing country often creates serious economic distortions.

Moreover, due to the large involvement of foreign interveners, national ownership in the post-conflict context, which is key to the successful implementation and sustainability of reconstruction policies, is difficult to achieve. Policies should not be imposed from abroad or even by unrepresentative elites within the government. It is up to national leaders to design policies, set up priorities, and build up broad support for them at the national and local levels. National ownership, national capacity and ingenuity, and national consensus building are essential elements to sustain the peace. At the same time, national leaders need to ensure support of donors to be able to implement their policies. A difficult balance indeed!

Premise 3: Economic policies and institutions must be simple, transparent, flexible, and realistic

Despite their scarce human resources, technical capabilities, and infrastructure, countries in the transition from war must establish as soon as possible a basic framework for macroeconomic policymaking as well as the microeconomic foundations to create an appropriate legal and regulatory framework for investment, production, and trade. In such circumstances, it is unrealistic and certainly counterproductive to create a framework that is too complex and requires expertise and resources that the country does not have and may not expect to have for a long time.

At the same time, countries should avoid policies that may be optimal for countries during normal development, such as the independence of the central bank and other restrictive monetary or fiscal policies, that will limit options for governments to implement and finance key peace-related programs and to gain legitimacy. Within reason, policies directed towards productive investment, including food production to replace imports, in economies with large excess capacity would not need to be inflationary. Governments need the option to do it through their own domestic resources if need arises to avoid relapse.

Since the establishment of clear and stable property rights is a precondition for investment, policymakers need to address this issue head on. The experience of several conflict-affected countries has illustrated how property rights issues can be very different across countries. In some, the issue is “backward looking,” which means that rights have to be established and registries have to be updated, something that requires technical and financial support. In others, the issue is “forward looking” since investors are not sure what will happen when legitimate authorities assume power. Uncertainty about property rights in such cases is normally paramount in discouraging investment.

In the meantime, a weak interim national government, or even more a transitional administration led by the UN or a foreign government, should normally avoid implementing policies such as privatizing natural resources, liberalizing specific sectors, or any other major legal, institutional or regulatory change when doing so may incite political resistance, even in peacetime.

If such interim authority decides to go ahead with privatization anyway, it should evaluate carefully the cost of disposing of national assets at a large discount. Because investors are reluctant to invest in assets for which property rights might change once a legitimate government takes over, they will require an exorbitant discount in the price of the assets to incur such a risk.4

Premise 4: The private sector must be effectively engaged in the peace process

During peacemaking, an expert on the economics of conflict resolution in the mediator’s team will need to analyze carefully the private sector in the specific country to determine what the sector could bring to the negotiations, design, and post-conflict implementation of the peace agreement. It is clear that, despite not being a party to the agreement, the private sector will be critical to its implementation.

Because the spirit and the letter of peace agreements will either facilitate or impede their implementation, mediators will not be able to design effective and implementable agreements without understanding what type of economy and programs the parties want, and the government and the private sector are willing to support and finance in the post-conflict phase. All three stakeholders must take ownership of the reconstruction process for it to succeed. This is why a mediator’s team needs proper economic expertise.

Financing for post-conflict reconstruction and creating sustainable employment are critical issues in this respect that need to be properly addressed. While there is generally uncertainty during peace negotiations about availability of foreign assistance, projections need to be made. Even in countries with strong private sectors that contribute handsomely to government coffers and can create necessary employment, tensions usually arise since economic and peace objectives often compete for limited resources. The situation of countries with weak private sectors is even more challenging.

Many of these countries are rich in natural resources and hence have great potential to attract foreign investment for export in areas such as agriculture, mining, and energy. But exploitation of such resources is often resisted by local communities and other groups. Thus, innovative ways to promote and attract investors while ensuring a fair gain for local communities in particular and for the domestic economy in general is key to avoid future conflicts.

Because in many countries certain investors in the private sector have benefited greatly during the war from the illegal exploitation of natural resources, drugs, or sanctions, those investors often act as spoilers. In poor countries farmers may also become spoilers if drug eradication and interdiction programs take away their means of subsistence.5

Moving out as quickly as possible from the underground war economy, which is known to undermine peace, governance, and the rule of law, may require policies which are resisted by the international financial institutions but are used by industrial countries. Such policies may include tax incentives, subsidies, and other price-support mechanisms for improved irrigation, production, and infrastructure development.

Peace mediators can also consider support from the private sector in donor countries. In this regard they could look for support from foundations and other philanthropic organizations that are interested or are already operating in specific war-torn countries. Mediators could also look for support from specialized companies in specific sectors. For example, peace processes can normally benefit from specialized advice on how to bring cleaner and cheaper electricity to cities and rural areas.

Mediators and donors must stay away from decisions on specific sectors that can create suspicions in war-torn countries or that may hint at foreigners’ effort to disempower them by giving contracts to foreign contractors and taking over their assets through early efforts at privatization.

Premise 5: The impact of aid must be maximized through effective, integrated, sequenced, and noncorrupt practices

Large spikes in aid are difficult to utilize and manage effectively

Countries coming out of big crises attract large amounts of foreign aid as media attention focuses on the plight of drowned or starving children, raped women, homeless populations, physical destruction, and other such tragedies (Table 6.1). By contrast, aid during normal development fluctuates much less and remains at much lower levels (generally between 1 and 10 percent of GNI). Media frenzies following crises are ephemeral, and with few exceptions aid flows soon ebb back to the lower and more stable levels that characterize normal development.

The large and short-lived spikes in aid, the improvised way in which they are channelled, the low absorptive capacity and the weak institutions of the countries put special pressure on both governments and donors to utilize aid more effectively and to avoid corruption at the time of the transition to peace.

Aid must be channelled through the central government budget

In countries coming out of war or chaos, aid has not only proved to be ineffective but also expensive. By channelling a large part of their aid through their own projects – based on their own agendas and priorities, and utilizing their own contractors and inputs – donors have clearly led to a fragmented and costly strategy in which governments have little ownership. Such strategy has led to unsustainable projects and facilitated corruption.6

For reconstruction aid to be effective and cost-efficient it has to be largely channelled through the government budget. Only this would allow for a well-integrated strategy based on national priorities. Officials rely on the budget for providing services and infrastructure without which they would be unable to acquire legitimacy. Channelling aid through the budget would make it possible to build capacity in the civil service. Unless the authorities know how much money enters the country, policymaking decisions will be distorted. Although this should be the general premise, there are emergency situations where there might be no time to go through the normal process. This is why policy and institutional flexibility are so much desired in war-torn countries.

Humanitarian and reconstruction aid must not be conflated

Aid must move quickly from short-term humanitarian purposes – to save lives, feed, and shelter those giving up war – to reconstruction activities aimed at creating investment, productivity growth, food security, and the sustainable employment that will enable those giving up arms to live dignified lives. Weaning countries off humanitarian aid as soon as feasible is necessary to avoid distortions and aid dependencies, a key but much forgotten lesson from the Marshall Plan.

Another key lesson from the Marshall Plan – also included as the third item in Boutros-Ghali’s dictum for effective reconstruction and peacebuilding (Chapter 1) – is that humanitarian assistance should go hand in hand with investment and capacity building to avoid long-term dependence.

Donor-imposed policies to liberalize trade have led to cuts in tariffs on rice and other staple products. This, together with food aid and other types of assistance that change relative prices, discourage local production and work. At the time of the 2010 earthquake, President Clinton reckoned that the liberalization policies he championed in Haiti were good for his farmers in Arkansas but destroyed Haiti’s rice production and made them import dependent. Such misguided policies have deterred food security and have led to floods of imports in countries like Liberia, Afghanistan, and Haiti that they can ill afford and have to be financed by donors. In addition to food, the provision of health and education should also be put on a sustainable basis as soon as possible.

A pertinent question becomes, what kind of aid will be most effective in creating productive capacity and local capabilities? Only reconstruction (or economic) aid targeting investment opportunities that use local capabilities, land, and natural resources can increase productive capacity. Its economic impact, however, will depend on how productively the aid is invested, whether the investment is sustainable, and the impact it has on the labour market, on income distribution, on the exchange rate, on reactivating production and trade, and on protecting the environment. Since in many war-torn countries, 75 to 85 percent of the population depends highly on the rural sector, reconstruction aid should initially target support for farmers and micro and small enterprises as well as basic infrastructure and services.7

Disbursement of reconstruction aid should not be delayed, as is often the practice, waiting for the country to have the right conditions in terms of political leadership, governance, institutions, and human capacity. In the meantime, humanitarian assistance continues to be disbursed, which leads to increasing dependency. At the same time, reconstruction aid should not be allocated to projects that are not likely to survive or be sustainable, as often happens with large infrastructure projects in insecure areas that are sabotaged.

The differential impact between humanitarian and reconstruction aid has become blurred in the present context, with the same agencies, NGOs or military forces often providing both of them and with the two often under the same command in UN and US-led operations.

Aid should be replaced with foreign direct investment and exports as soon as possible

To avoid the aid dependency that afflicts many war-torn countries, national leaders should ensure that flows of foreign exchange resulting from aid should be replaced with those resulting from foreign direct investment and exports. This is easier said than done in war-torn countries, where uncertainty and insecurity are high, property rights are questioned, the business climate is unfriendly to investors, and investment opportunities may not be promising, particularly in countries that are not rich in natural resources.

For these reasons, debate should take place on how to create potentially win-win projects, putting the rural communities, foreign investors, the government, and donors to work together in projects from which all expect to gain. Chapter 9 posits the need to think outside the box to address such overwhelming challenges. Reconstruction zones are recommended as a way to attract foreign direct investment to challenging places while promoting more effective use of aid and domestic resources, all while adopting conflict-sensitive economic policies that will support peacebuilding efforts.

Premise 6: Peace processes must contemplate a fair use of natural resources, including land, mining, water, and forests

Peace agreements that do not contemplate a fair use of natural resources and compensation to losers will make the post conflict transition particularly difficult. Compensation is necessary to ensure that those who benefited from the spoils of war and become “losers” from the peace agreement can be lured away from the illicit and profitable economics of war. Collaboration with the peace process will only take place if losers are given a stake in the political and economic process of the country going forward.

Premise 7: A peacebuilding yardstick must be created to measure success

Given that the peace (political) objective should always prevail over the development (economic) one and that optimal economic policies are not always attainable or desirable in the war-to-peace transition, a different yardstick must be used to measure success.

Success should not be measured in terms of the number of jobs created, the percentage of people taken out of poverty, or by indicators of economic growth and inflation, as it is under normal development. Success should be measured with the “peacebuilding yardstick,” where policies and projects are judged more qualitatively by whether they contribute to peace and reconciliation rather than on purely economic criteria.

As an example, we can use the arms-for-land program in El Salvador. If judged with a conventional yardstick (e.g., yield per acre, debt repayment, etc.), this program would not get high marks. But the yardstick should be whether the program contributed to maintaining the cease-fire and to promoting national reconciliation, and whether it allowed beneficiaries to find productive employment that would permit them to make a decent living without resorting to arms. Using the “peacebuilding yardstick,” this program was a resounding success (although it proved unsustainable for the reasons discussed in Chapter 7).

An additional problem in measuring success in the conventional way relates to the scarcity of and distortions with the data, which make empirical research, particularly econometric work, difficult given the unreliability of the data itself (and the few times series observations available). In some countries such as Iraq, for example, there was no data from international organizations because of UN sanctions. In Kosovo and East Timor, data on output and other variables were lacking because both were provinces of sovereign governments and macroeconomic and foreign trade data are compiled at the national level. In both cases comparisons of economic performance before and after the conflict were difficult.

Large movements of people and capital also hinder such comparisons. For example, the food situation, housing, services, and other indicators may worsen in some areas during reconstruction in the presence of large numbers of returnees, who were refugees in neighbouring countries or internally displaced during the conflict. Moreover, the behaviour of certain variables can become highly anomalous, complicating economic analysis.

One of the issues that came to the secretary-general’s attention in the early 1990s was the fact that Somalia, a country that had no government, no monetary authority, and a failed economy, saw its domestic currency appreciate. This puzzled many UN officials in the country, who failed to realize that it reflected the inability of the country to print domestic currency amid plentiful inflows of international aid. Despite the collapse in government, Somalis had a preference for their national currency, which resulted in significant appreciation of the domestic currency.8 To analyze data issues and anomalies that will affect reconstruction programs is another reason why adequate economic expertise is necessary for effective peacemaking and peacebuilding.

Premise 8: Peacebuilding requires the application of the T. E. Lawrence dictum

Last but not least, both national authorities and their foreign interveners must apply the T. E. Lawrence dictum that it is better “to let them do it” than it is to “do it better for them” and apply it to all peacemaking and peacebuilding activities. Thus, foreign interveners should let national negotiators, local leaders, and communities determine what their economic needs and priorities are, and the government should let the insurgents determine their preferred venue for reintegration. Unless the participants are empowered and take ownership, programs will not be sustainable, resources will go to waste, and peace will not endure. Foreign interveners, of course, should be there to support whatever needs locals have as they strive for peace, stability, and prosperity.

Conclusions

For the peacebuilding record to improve, these premises must be carefully analyzed before national authorities and foreign interveners embark on new peace processes. Each circumstance is unique and therefore all premises will not apply, or will apply differently, to different circumstances. Policymakers and their supporters will be well served, however, by trying to figure out how these premises – compiled from good and bad experiences and best practices from peacebuilding efforts over the world during the last quarter of a century – could affect or fit their own circumstances.

Some of the premises are related but have different policy implications. Others may depend on the specific stage in which countries find themselves in the war-to-peace transition. But ignoring these premises has often led to misguided policies, misplaced priorities and wasted aid, all of which have been directly associated with setbacks and even to the collapse of the peace process in many countries.

For countries to be able to break out of the vicious circle of violence, insecurity, corruption, unemployment, drug trafficking, and aid dependency in which many find themselves requires revising in fundamental ways what they are doing now. These premises provide a good start for modifying strategies so that peacebuilding efforts can have a more than even chance of success.

Notes

1    Boutros-Ghali, An Agenda for Peace, para. 17.

2    Some of these premises were first raised in del Castillo, Rebuilding War-Torn States.

3    For some proposals, see Graciana del Castillo and Edmund Phelps, “The Road to Post-War Recovery,” Project Syndicate, 9 July 2007.

4    The experience of the Democratic Republic of Congo in this regard is relevant. Investments in diamond mines and others were made at very advantageous terms for the investors who took the risk.

5    For an analysis of this issue, see Nico Schrijver, Development Without Destruction (Bloomington: Indiana University Press, 2010), 159–188.

6    This has been as much of a problem in Afghanistan and Iraq as it was in Haiti and Liberia. As the US Government Accountability Office and the special inspectors general for Afghanistan and Iraq have well documented, corruption, waste and other inefficiencies are not by any means restricted to local officials or institutions. By contrast, money channelled through the trust funds through which donors finance the government’s core operating budget are administered under best international transparency and accountability practices.

7    Many development institutions, including the UNDP, other UN agencies, the World Bank, the regional development banks, and the bilateral development agencies such as USAID can play a critical role as catalysts and coordinators of reconstruction aid. The World Bank and the UNDP also organize donors’ meetings, including consultative group meetings and roundtables where donors pledge funds for reconstruction. Even at these donors’ meetings, funding for humanitarian and reconstruction purposes are often conflated.

8    See del Castillo, Rebuilding War-Torn States, 44–45.