9.9 Trade-offs

9.9.1 Economic efficiency vs. political stability.614 Because S&R missions are not development as usual, political considerations will typically trump economic ones. This means that the best approach may not be the most optimal or efficient from an economic perspective. It follows that the success of economic programming should be measured not purely by its economic criteria as it would be in a normal development scenario, but whether it supports peace and reconciliation.

9.9.2 Sophistication vs. simplicity in the income tax system. In the emergency phases, there will likely be weak capacity for administering tax policies. Rather than trying to create a sophisticated income tax system for the entire population, it may be wise to install an interim regime for simpler taxes, like excise or sales taxes, which are easier to raise.615

9.9.3 Creating donor trust funds vs. strengthening the host nation budget process. Many international actors prefer to manage their assistance funds, but doing so can create a bifurcation between host nation and donor-funded budget systems. Once accountability structures are functioning with adequate safeguards, spending should be integrated into a comprehensive state public investment program and capital budget to strengthen the government capacity and ensure host nation input in the budgetary process.616

9.9.4 Macroeconomic reforms vs. political stability.617 While there may be an urge to quickly stabilize the economy, doing so too aggressively can have negative impacts on political stability. Cutting subsidies to public sector enterprises with bloated work forces, for example, can create a pool of unemployed and disgruntled recruits for groups seeking to disrupt the peace process. All economic stability measures must be accompanied by a careful assessment of the political situation in the country.618 Ultimately, the solution is a matter of the degree to which macroeconomic stability is imposed.

9.9.5 Employment opportunities for ex-combatants vs. women and minorities. In war-torn economies, employment opportunities will be scarce. Prioritizing jobs for ex-combatants may mitigate violence, but it can also seem unjust to others who may be more qualified, particularly those who may have been systematically discriminated against before or during the conflict. This is a difficult trade-off, but the imperatives of maintaining a fragile peace may require prioritizing ex-combatants, at least in the near term.619

9.9.6 Public vs. private sector in public utility services. Having politicians manage local utilities may help build internal management and governance capacity. But doing so also risks preserving corrupt, pre-conflict arrangements that jeopardize quality service and perpetuate discriminatory practices. The private sector, on the other hand, would likely be more effective in reestablishing services and customer relationships. A careful balance must be struck between these two approaches. Some utilities may benefit from a hybrid public-private relationship, where a private concession is issued to operate a facility.620

9.9.7 Meeting urgent needs for jobs vs. focusing on sustainable employment. In the emergency phases, there is often an urgent need to put people to work. Doing so often involves jobsthat may produce tangible results quickly, but do not necessarily develop sustainable incomes or livelihoods. Balancing these two imperatives has proven to be a critical challenge.

9.10 Gaps and Challenges

9.10.1 Political-economic nexus. Connections between those in power and ill-gotten wealth often develop during conflict and continue in its aftermath. This nexus can be detrimental to the legitimacy of the government and can undermine sustainable peace and development by diverting vital resources from the people. An integrated political-economic security strategy is an essential mechanism for dealing with this nexus.

9.10.2 Monitoring diaspora remittances. During violent conflict, diaspora remittances serve both positive and negative purposes, making them difficult to address. While they may constitute a major source of livelihood for many, remittances are also used to fuel conflict. Tracking the money is difficult because they often flow into the country through informal channels. Keeping remittances from fueling conflict is an unmet challenge.

9.10.3 Managing the informal sector without hurting ordinary citizens. Managing the informal economy is very difficult because its composition is often very diverse after lengthy periods of violent conflict. While it can include destabilizing criminal elements such as drug or human trafficking, the informal sector tends to comprise most of the economic activity that ordinary people resorted to as a means of survival in a war-torn economy.

9.10.4 Microfinance and effective intermediation. Loans are often readily available for large government reconstruction projects, while micro-entrepreneurs and small businesses find it difficult to access capital to finance smaller grassroots-level projects. Providing credit to these individuals and businesses is a challenge that can yield tremendous peacebuilding and social fabric-building effects in war-torn countries.

9.10.5 Addressing economic factors in the peace agreement. Peace negotiations typically focus on security and justice issues, while leaving out economic dimensions of conflict. Peace agreements are pivotal moments and should include provisions that establish clear benchmarks for sharing and managing resources, especially if there is a criminalized political economy where corruption or exploitation determines access to political power. When designed well, peace agreements can serve as a foundational roadmap for transforming conflict and providing a foundation for state building.

9.10.6 Public finance management. Transparent and accountable management of public resources is a problem that consistently plagues societies emerging from conflict. Corrupt financial management practices are a common feature in these governments and deprive the state of resources that are badly needed to fund major economic and social development projects. More attention must be paid to establishing proper means for oversight of finance management.