engaging fragile states - Woodrow Wilson International Center for ...

“
To create lasting employment
and sustain the peace, the ultimate
objective is to transition to a jobgenerating
private sector.”
Sarah Cliffe
the private sector begins to revive, the economy picks up, and the environment
becomes more stable, it is time to cease those activities.
The main elements of a transition to private sector activity need to be: a) to
rebuild the infrastructure necessary for larger enterprises and trade to operate, and
b) to support small or medium enterprises. A basic step is to analyze bottlenecks
and remove them. Basic infrastructure often has been destroyed or most of it has
been neglected for a long time. Landmines may have been laid in the roads, and
the fear of hitting them keeps the roads from being used. In Mozambique, after
2500 kilometers had been de-mined, only 38 mines were actually found. But for
commerce to pick up again, people needed to have confidence that they could
travel safely. In Afghanistan, one of the tunnels to the north was a major bottleneck
for getting supplies into Kabul, so it was repaired very quickly. Road, port
and similar rehabilitation programs can also create jobs that contribute to more
genuine private sector activities in the longer term.
Infrastructure reconstruction may also be crucial to lowering prices. High
prices or price rises are often caused by bottlenecks in supply that are caused by
broken infrastructure like the port or main roads affecting trade flows across borders.
In the Democratic Republic of the Congo, the road to the coast needed to
be repaired because it was extremely expensive to get goods into Kinshasa without
an operating coast road. Higher prices can cause tensions, while lower prices can
provide a stimulus and are easily recognized by the population, thus adding legitimacy
to the peace process.
For an economic rebound to take place, it is also essential to restore the financial
sector to full functioning, from the central bank through the large commercial
banks. Typically, small and medium enterprises have lost a huge amount of
plant and working capital during the conflict. The banking sector and the collateral
for credit generally will not work smoothly. Unless you take action to get lines
of credit to businesses, they will probably be prevented from participating in the
early reconstruction. Fortunately, where there is very low capital in relation to other
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