Challenges Faced by Developing Economies in Post-Conflict Zones

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Addressing the economic, social, and security challenges in developing economies post-conflict, including issues such as aid effectiveness, resource dependency, governance, and civil wars. The importance of foreign investment, multilateral cooperation, and possible solutions to foster economic growth and stability in marginalized regions.

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Zimbabwe 2010 THE CHALLENGES FACING DEVELOPING ECONOMIES

Those who the system has missed Paul Collier calls them the bottom billion Obvious economic and social problems But what of security? Maghreb Somalia Others Marginalised, disenfranchised Need to address these Post conflict resolution, capacity building, empowerment etc

Some of the issues The Conflict Trap the true and lasting cost of war Civil Wars the disruption to economic efficiency can be very long lasting Resource dependent economies Autocracies Development status of neighbouring economies Bad governance How do failing states turn around? With whom and how do the bottom billion trade?

Food for thought? Foreign Direct Investment Multi-national Corporations Population movements ethnic divisions and tensions Will the richer countries continue to give aid? If not, what will happen? Will richer countries intervene to stop conflict? Let s think about possible solutions

Is Aid the answer? Post recession who will reach UN target of .6% of GDP? How will the systems of recipient cope and how much reaches the intended target/ Aid fatigue amongst some of the most generous of givers Allocative problems as nations balance their fiscal books PIIGS within EU and Euro zone The interdependence and integration of global trade Is it all good news ?

Post Conflict Zones some facts The causes and justification of those who begin conflict 1000 combat dead is an agreed definition of a civil war risk is highest where incomes are lowest The more the economy grows the lower the risk of civil conflict The faster the rate of growth falling the greater the increase of conflict The dependence on resources mainly for export this increases the chance of conflict Manipulation of incoming funds, including those from diaspora

Post Conflict problems Civil war tends to reduce economic growth by 2.3% p.a. So, the average war, which lasts approximately 7 years reduces economic potential by over 15% The migration movements and increase in post conflict disease has a profound affect on society often heightened by ethnic differences Political legacy trust, talent, structures It may take one or even two generations to re-build the economy

The natural resource trap Already noted it is not necessarily the advantage countries think it will be Rent driven corruption political elite 30% of the bottom billion live in resource rich countries Dutch disease Volatility of externally determined market prices Elasticity of demand for exports and imports Democracy, patronage and simple temptation It is thought to cost half a million US dollars to run for Nigerian Senate! Is the only way through this an autocracy?

Your neighbours do count! Just think about Switzerland/Austria v Burkina Faso or Zambia landlocked Efficiency of infrastructure, cost disadvantages, route times, delivery schedules all cause economic problems You do best when you serve and use the markets adjacent to yours around 30% of Africa s population live in landlocked countries Intra-regional trade reduce trade barriers, regional trade blocks the land locked must seek the lowest external tariffs Improve coastal access Mozambique? Look to technology e-commerce/e-marketing Encourage remittances, transparency ( encourages aid flows), build feeder roads and develop policies aimed at inclusive economy

Governance a difficult choice Causes? Bangladesh export processing zones take immediate management out of politicians hands and give to experts, may be some will be expatriates NEPAD and other ways on auditing that has international respect Tobin Tax, develop systems of assistance perhaps more based on technical expertise and less on money more radical = end aid after a 5 year period of notice Turnaround seems to be more achievable the more educated and fast rising your population and perhaps surprisingly if you have just emerged from a period of civil conflict the agencies do arrive in force! UK government has now re-appraised its overseas funding to build peace though justice, access and opportunity. The cost of one failing state is put at $100 billion for its and its immediate neighbours but Iraq has already cost over $500 billion and it s not yet a done deal! Failure to develop exit strategies and these should contain audit visits

Developing market competence Look at South Korea moved quickly to market levels of cost efficiencies, processed goods considerable advantages once this is reached not immediate riches for all but an improvement Tax receipts begin to increase government can play a more important role in people s lives and they in turn become more interested in what politicians stand for. Ideologies not ethnicity look for alternative sources of capital e.g. China, Diaspora, regional development banks and the people themselves. How to reward risk and so build the capital base that supports an industrial drive Restore and protect property rights

Developing competence Keep money in the country Make leakage difficult Encourage saving More accessible banking system Try to reduce migration of the youngest and best Look at schemes to promote low level, localised business schemes, develop talents of women, introduce money management into schools Look to rewarding risk

Breaking the vicious circle Build post conflict partnerships Security BUT small domestic army and short stay international force But what of pre-conflict prevention low income, slow growth, primary products, low capacity all are obvious and all are a potent mixture + very long serving governments Transparency in resource transactions Kimberley Process it s been inaction on all our behalf's that has led to the current situation global business needs regulating, else it deals with crooks Addressing land locked states aid(yes), but does aid cause coups? Reduce transport costs, build infrastructure at local as well as national levels. Make trade fairer with such organisations as European Union.

Breaking the vicious circle (2) It will need brave people to stand up against vested interests Transparency, accountability etc are familiar mantras less money and more technical assistance, less military aid, ploughs not guns, make NGO s leaner and focused on long-term social development NOT fancy pictures in brochures and web sites debt relief is essential, vested interest groups have to be confronted Public opinion Blair knew this. Look at Kossovo and Sierra Leone BUT he got it wrong with Iraq. How does the developed world perceive the problems of the poorest people on earth?

Breaking the vicious circle (3) Make the UN the official body in delivering peace enlarge P5 to include India, Brazil and one large African countries plus others. Look ay Haiti who was actually in charge in the days after the earthquake? Too many egos, too few critical decisions. Encourage local/neighbour dialogue, mutual problem solving, joint operations see the region and its success as being beneficial to all

What else can we do? Aid has to be channelled where it is actually needed too many photo opportunities Have a pre-pared military intervention could be continent based that Africa controls Africa Charters that have teeth extractive industries transparency post conflict funds linked to actual progress to an open, dual system of politics, encourage regional associations as happens in parts of Latin America. Build the need for interdependence/ bilateral co-operation and mutual beneficiaries Work for fairer trade rich country protectionism, Asian markets and their growing power, make trade policy more transparent(WTO).

What else can we do? Co-ordinating strategy too many government departments in developed economies involved in aid decisions, look at MDC s great idea but who is co-ordinating their implementation agency empire building and power struggles not just aid what of security, trade and standards? When you provide public goods you will get free riders but that is a risk you have to accept Focus are the efforts spread too thin what abut my career don t just present shopping lists to donors make certain the priorities are right

What else can we do? Poverty is not romantic it has a smell of its own We came through the Cold War, eased Eastern Europe into the EU, we can build fair free market structures, the left sees aid as the panacea of success the right sees it as giving lazy/corrupt people money what s the mid course? Do electorates get the politicians they deserve? The political business cycle 4 years in US. One billion people are stuck in a time vacuum and the risks associated with this are too big too ignore

What else can we do? It is a struggle of moral extremes and the cost of losing is high We have the talent, the resources but does the so- called developed world have the political will? The World Bank is beginning to listen BUT what will we do and what do we want to see? Let s debate some ideas.