Should the private-sector lead post-conflict redevelopment?

May 17, 2017

 

One of the most common issues of any post-conflict country is the Government's lack of money. Usually during conflict, there is reduced economic activity, with large funds spent on the war machine, and high % borrowing to further fuel the conflict. This means that directly after war, the country is usually at its most debt laden and low cash reserves state. The Government is therefore probably in its most hard-up position to be able to spend on any schemes aimed at rebuilding the country economically, socially and infrastructurally.

 

In this position, Governments usually take loans from regional development banks to fund such programs, provided they abide by strict policy reforms usually directed at correcting human rights failures during the conflict and that remain unchallenged, or to improve state budget affairs through serious Governance reforms amongst other changes. This however is a longer term and more arduous application process given that the victors of war were usually those who committed the greatest atrocities in the final stages in order to secure victory, and so the expected wave of nationalism that clouds rational thinking post-conflict makes successfully winning these funds from institutional banks all the more difficult and less likely.

 

An alternative source of capital, and usually the most popular, are loans taken from allies who had supported the victor's war effort, and may subsequently hold a geo-political interest in the country. These countries are usually the first responders to cash-calls, and these countries know they hold the bargaining power given their pivotal role at the close of war as well as now dominant position in negotiations. This is a reality the post-conflict country must face, because economic stimulus of any form is required in order to prevent the country falling back into discontent and therefore at risk of conflict again.

 

It is here where the private-sector finds itself an unknown powerful proposition. Not bound by treaties, strict funding requirements and applications, quicker decision making processes, and flexibility across sectors, the private sector has the ability at this stage of the post-conflict redevelopment process to build market-share in ways and speeds not possible in developed stable economies, and least not at all possible in governmental backed enterprises. The private sector can do what it does best, and find the entrepreneurial opportunity to make significant money in a context where there is significant need. This is not manipulation or taking advantage of the social context - these businesses must succeed for the private-sector to make their efforts worthwhile - the upfront investment of time, money, network building, market understanding and so on cannot be underestimated. This can take years, and sometimes this could mean missing the boat on opportunities, so the process is not an easy or simple one. However, if given the right incentives, the right flexibility, and right support, the private sector could flourish where Government backed initiatives would inevitably take longer to realise.

 

In Sri Lanka, we have seen this happen, with one of the best examples being the Internally Displaced People's (IDPs) housing projects. It has been 8 years since the end of the war, however there are still thousands of families without suitable housing to come close to what life people had before the war. Many programs have been talked about, and foreign governments have pledged support, however this process has taken too long for the families themselves. It is in these contexts where private sector should have the incentives and opportunities to fill the gap because this is where there is the greatest needs for the people. It is in the country's best interest to mobilise and get those societies, that had been cut off from the island, working and living again, because this would mean more tax revenues, happier societies, and therefore a reduced risk of future conflict. The Government isn't to blame - they have no money, and many of the government officials wouldn't have wanted to engage in another war-like effort of rehousing hundreds of thousands of people when they would have wished to take a break and enjoy peace. But there are many private-entities who would have the capacity to fill these gaps, and they should be encouraged to do so.

 

Around the island, this scenario plays out for varying schemes. In Colombo, we are seeing it on a different scale and context - in the condominium developments, which has been a major attractor of FDI, bringing new employment opportunities and much needed revenues to the Government. Whilst these are not social ventures, and make the developer handsome profits, these at least are an example of economic activity leveraging the economic and political climate, that is doing something for national redevelopment. We need development at this end of the spectrum as well as on the side of housing for IDPs, and I believe wholeheartedly that only the Private-Sector can achieve this at the pace and scale needed for a country like Sri Lanka to move from where it is now, to a standard where all people are developing economically and personally.

 

 

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