Partnerships in post-conflict environments

After a war or a disaster, we naturally think of the victims and survivors. But think, too, of those who have to put all the pieces back together again. Their task is immense, and the lives and well-being of thousands or millions depends on getting it right.
 
I saw such a process first-hand in Aceh, Indonesia, a region that suffered the unfortunate circumstances of being both a post-conflict and post-disaster region. A three-decade war had already taken 15,000 lives and left the province economically isolated when an earthquake and tsunami struck in December 2004. Entire communities were washed away. Infrastructure—roads, bridges, ports and more—lay in ruins. Schools, hospitals and government offices that remained were unable to function. Huge swaths of coastline, as well as the provincial capital, were covered in debris. Worst of all, over 200,000 were dead or missing, and survivors were left homeless and without food or water.
 
How do you begin to recover from such a catastrophe? Where do you even start?

Unfortunately, these questions come up often, mostly in post-conflict contexts where localized hotspots to full-scale wars have disrupted lives and economies all over the world. There is no shortage of examples: Iraq, Afghanistan, the devastating brutal civil war in Syria. The last 25 years have seen war in the Balkans, the former Soviet Union, Mali and throughout Africa, the Middle East, and Asia.
 
The answer to rebuilding infrastructure lies in partnerships  that include not only the government and international agencies, but also the private sector.

Conflict and Poverty

Once the immediate needs of the population have been met comes the need to focus on rebuilding damaged infrastructure and economic development. This is especially important in post-conflict settings. The World Bank explains that “extreme poverty will be concentrated” in areas affected by fragility, conflict and violence (FCS)” and about 17% of the world’s poor live in FCS countries—a percentage expected to rise to 46% by 2030. An article on reconstruction PPPs in Handshake (issue #9), IFC’s online PPP journal, says that “poverty is both a symptom and a cause of conflict” and that post-conflict countries can become trapped in “a vicious spiral of economic regression and further conflict.”
 
This relationship was recognized by the Indonesian government in post-disaster Aceh. Consequently, its reconstruction strategy included rebuilding infrastructure, economic development and the restoration of livelihoods. But Indonesia had an advantage many post-conflict countries do not—its national government and institutions were physically unaffected by the disaster, which meant it had the capacity and resources to respond decisively.

Partnerships Matter

Regardless of the severity of a conflict or disaster, governments working in partnership with international players stand a much better chance of developing and executing sound reconstruction strategies. International donors are an important part of this—they place a high priority on post-conflict and fragile states. Indonesia, for example, received nearly $7 billion for reconstruction after the tsunami. In Liberia, USAID’s support was critical for restoring electricity after the conflict. But they’re not the only players.
 
Paul Collier, the Director of the Centre for the Study of African Economies at Oxford University and an advisor to the IMF and World Bank, provides a solid description of what needs to be done in his TED Talk. He says security and economic prosperity are key factors in rebuilding post-conflict societies, and are achieved through providing jobs, improving basic services such as health, and through clean, transparent government. This is easier said than done, as governments in post-conflict situations are typically overwhelmed—they do not have the people, the skills, management experience or technical skills to rebuild infrastructure, health and education systems.
 
And these are areas where the private sector—and PPPs in particular—can play a very important role. But how can a post-conflict government attract reliable investors?

Creating a Good Investment Climate

The private sector is much more likely to make long-term investments in a stable environment. Therefore, to attract outside investors, governments in post-conflict countries need to create a positive investment climate emphasizing opportunity by improving regulations, tackling corruption and showing willingness to share risks. In Afghanistan, a country not known for stability, this approach helped kick off the telecommunications sector. As of 2012, five mobile phone operators (one government-owned) and 23 internet service providers were licensed, with about $1 billion invested by private companies.
 
Another way to provide greater comfort to investors in post-conflict markets is through political risk insurance. This provides protection in cases of political instability, war, social unrest, and other risks that are more common in fragile states. In the Ivory Coast, coverage through MIGA made it possible for a PPP to finance construction of a critical toll bridge after a decade of delays; in Haiti, coverage by OPIC is restoring food security by making investments in a flour mill that produced almost all the country’s flour.

What the Private Sector Can Bring to Post-Conflict States

A well-designed PPP can attract reliable, experienced investors for reconstruction projects  and share risks among all stakeholders, including government and donors. Investment funds and expertise come with the package. But there are other benefits that should not be overlooked.
 
Transparency. Perceptions of corruption can undermine stability. PPPs bring in the private sector through transparent bidding processes and reduce opportunities for corruption. 
 
Speed. PPPs add capacity in-country on all fronts, from financing to planning to resolution of regulatory barriers. This leads to faster results. The quicker the public sees government delivering public services, the greater its credibility.
 
Jobs. Reconstruction, by definition, involves a lot of building—roads, bridges, ports, water, sanitation, waste management and more. This provides opportunities for work, and as Paul Collier points out in his TED Talk, work keeps angry young men occupied and reduces the chances of conflict reoccurring.
 
Good management. Once health and education services are back online they need to be properly operated and maintained. Seasoned private sector companies have a good track record of effectively managing the provision of services.
 
Learn more about the role of the private sector in rebuilding post-conflict (and post-disaster) economies in Handshake: Reconstruction PPPs (issue #9).