International Peace Academy

Wilton Park

Transforming War Economies: Challenges for Peacemaking and Peacebuilding

Report of the 725th Wilton Park Conference, in association with the International Peace Academy Wiston House, Sussex 27-29 October 2003

Rapporteur: Heiko Nitzschke

DECEMBER 2003 ■ NEW YORK Acknowledgements

The program on Economic Agendas in Civil Wars (EACW) wishes to thank Isobelle Jaques, Jo Childs, Jackie Roberts and the rest of the Wilton Park Conference Center staff for their excellent cooperation in organizing this conference.

The author is grateful to Karen Ballentine and Kaysie Studdard for their extensive comments on an earlier draft of this report. TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

Table of Contents

Executive Summary...... 1

I. Introduction...... 3

II. Economic Dimensions of Civil Wars: Challenges for Peacemaking and Peace Implementation ...... 3 Targeted Sanctions: Achieving Peace by Reducing the Economic Opportunities of Combatants? ...... 4 The Political Economy of Peace Processes: Making Peace Pay? ...... 5 Disarmament, Demobilization, and Reintegration (DDR) ...... 8

III. From War Economies to Peace Economies: Challenges for Peacebuilding and Post-Conflict Recovery ...... 9 Transforming Shadow Economies and Addressing Economic Criminalization ...... 10 Securing Natural Resource Wealth ...... 11

IV. Conclusion: Recommendations for Policy Action ...... 13

Conference Agenda...... 16

Participants ...... 20

Contents

TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

Executive Summary strengthen the mandates and administrative capacities of UN Expert Panels. Policy analysis has produced important insights on the impact that the predatory and illicit exploitation of • Assessing the economic endowments and activities natural resources and the pervasive criminalization of of combatants may help third-party mediators of economic life can have on conflict dynamics. The peace processes to identify potential spoilers. operational challenges of transforming the ‘war Possible strategies for management of spoilers economies’ sustaining those conflicts, however, is still include their cooptation, criminalization or benign an underdeveloped area of policy research and neglect. Alone or in combination, each strategy practice. The International Peace Academy-sponsored involves difficult tradeoffs that may undermine conference at Wilton Park sought to discern as to sustainable peace. Where politically feasible, third- whether and how the legacies of war economies in party mediators should seek to include provisions conflicts such as those in Afghanistan, Sierra Leone, for resource-sharing into peace agreements or and the Democratic Republic of Congo (DRC) create establish benchmarks for responsible resource distinctive challenges for conflict resolution, and to management, that could serve as reference for identify strategic priorities for policy-makers engaged donors and civil society to hold government in peacemaking and peacebuilding. accountable. IFIs should be included in the peace processes, whether formally or informally, to Challenges for Peacemaking and Peace Implementation: ensure coordinated policy action among third Preliminary analysis suggests that the increasingly parties, and to match peace agreements with post- self-financing nature of many contemporary conflicts conflict economic recovery strategies. creates a more difficult environment for conflict resolution, peacemaking and peace implementation. • Disarmament, demobilization and reintegration War economies are sustained by regional and global (DDR) programs face additional challenges where linkages with both licit and illicit actors, each with the possession of arms is not just a function of vested interests in the continuation of conflict and ongoing insecurity but is also an important instability. Both rebel or government combatants who economic asset. In such settings, the UN and the benefited from predation during war may act as World Bank need to make disarmament and reinte- ‘spoilers,’ using force to undermine peace processes. gration parallel and complementary, not sequen- The economic opportunities and rewards available tial, processes. Socio-economic support to former through predation may also influence combatants’ combatants needs to be provided early on in the proclivity to voluntarily disarm and return to a civilian DDR process, taking account also of the different life. incentives of rank-and-file soldiers and middle- level commanders. Importantly, DDR programs • The effectiveness of UN commodity and financial must form an integral part of national post- sanctions as a tool for conflict resolution is conflict development and reconstruction strategies. seriously undermined by widespread ‘sanctions- busting’ by neighboring states, criminal networks Challenges for Peacebuilding and Po s t - C o n f l i c t and corporate actors, and the lack of compliance Recovery: Economic activity during wartime serves a and enforcement by relevant government agencies. variety of functions, which can be usefully distin- To effectively curtail resource flows to belligerents, guished as combat economies, shadow economies, and governments need to follow-up on reports by the civilian coping economies. Often controlled by UN Expert Panels and adopt appropriate national combatants, criminal entrepreneurs, and corrupt legislation to criminalize UN ‘sanctions-busting.’ governments, these economic relationships tend to The UN Security Council should impose, where persist after the formal resolution of active hostilities. applicable, secondary sanctions, ensure member In these settings, a main challenge for peacebuilding state compliance with sanctions resolutions, and efforts is to address the dysfunctional elements of the

Executive Summary 1 TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

shadow economy, while retaining its socially beneficial effective, equitable, and transparent systems of aspects. Where the illegal exploitation or inequitable, resource management by the government, while unaccountable management of natural resources has ensuring benefits for those civilians who are been central to conflict dynamics, improved resource dependent on resource exploitation. Importantly, governance needs to be a central element of this should also include new regulations and peacebuilding and post-conflict reconstruction strate- legislation on corporate engagement in natural gies. resource industries to minimize corruption and impede ‘rogue companies’ from undermining • Shadow economies and economic criminalization fragile peace. Support to civil society organizations need to be addressed through both, ‘sticks and is crucial for holding governments and companies c a r r o t s .’ The former includes improved law accountable. When properly mandated and enforcement and judicial reform, possibly as an equipped, UN peace missions may support the integral part of the mandate of international peace establishment of state control over resource-rich operations. The latter requires incentives for areas and borderlands to impede illegal resource shadow entrepreneurs to join the legal economy, as exploitation and smuggling activities. well as the strengthening of the state’s capacities to provide basic services, security, and employment. Viewing intrastate conflict from a political economy Importantly, donor agencies need to review their perspective affords important insights for our post-conflict macro-economic strategies, not least understanding of conflict and, consequently, for to adequately account for the social functions of improved peacemaking and peacebuilding. Economic shadow economies. Tackling cross-border shadow factors play a different role in different conflicts. Yet, trade requires improved regulatory efforts within the legacies of economic predation, militarized produc- regional organizations or initiatives, comple- tion, and criminalized trade in many of today’s mented with regional economic integration to conflicts highlight the different challenges that conflict eliminate the structural incentives for shadow management faces in these settings. While more trade. research is needed on these issues, a range of policy levers can, when applied in a robust and coordinated • Donor agencies and regional organizations need to effort, raise the odds for successful peacemaking and design and support tools and strategies for more peacebuilding.

2 Executive Summary TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

I. Introduction legacies of war economies and their operational challenges for conflict resolution, and to identify strategic priorities for policy-makers engaged in To date, international policy efforts to address the peacemaking and peacebuilding. economic dimensions of intra-state conflict have largely focused on curtailing resource flows to combat- This report synthesizes the main themes arising from 1 ants through global control regimes. Yet, the creation the panel presentations and ensuing discussions. It of robust regulatory frameworks addressing the global does not necessarily represent a consensus view. traffic of resources that make armed conflict feasible is Presentations and comments made during the confer- a long-term objective. While important for structural ence were not for attribution. conflict prevention, this approach offers comparatively few practical insights for confronting the immediate challenges of transforming war-ravaged countries, in II. Economic Dimensions of Civil particular those where lengthy conflict has distorted Wars: Challenges for Peacemaking political and economic relationships in favor of the entrepreneurs of violence. and Peace Implementation

Recent years have seen the end of conflict or major Recent academic and policy research has produced hostilities in Sierra Leone, Angola, Afghanistan, important new insights on the economic dimensions Liberia, the Democratic Republic of Congo (DRC), and of contemporary civil wars.2 Most importantly, studies Sudan, all conflicts in which violent struggles over have pointed to a subset of civil wars that have natural resource wealth have figured prominently. Yet, become increasingly self-financing, as both rebels and there is still a lack of understanding as to whether and governments, faced with a post-Cold War decline in how the violent and illicit exploitation of natural superpower support, have sought alternative sources resources and the pervasive criminalization of of revenue to sustain their military campaigns. Often economic life during conflict create distinctive centered on the predatory exploitation of lucrative obstacles for designing and mediating peace processes natural resources, such as oil, diamonds, or narcotics, and developing and implementing programs for post- or the capture of trade networks, diaspora remittances, conflict peacebuilding and recovery. and informal economies, the resultant ‘war economies’ have become intricately linked with regional and Against this background, the International Pe a c e global trade and finance networks, both licit and Academy sponsored a conference at Wilton Park on i l l i c i t . “Transforming War Economies: Challenges for Peacemaking and Peacebuilding” on 27-29 October The extent to which these dynamics have qualitatively 2003. The conference expanded on the collaborative distinct legacies for conflict resolution and research efforts of the IPA’s Economic Agendas in Civil peacemaking remains an ongoing question of policy Wars (EACW) program and drew on operational lessons research. Preliminary analysis suggests, however, that learned by practitioners from Afghanistan, Sierra the political economy of armed conflict may, for Leone, and the DRC. By bringing together experts from various reasons, influence the effectiveness of policy academia, the UN system, governments, and civil tools such as targeted sanctions, third-party mediation society, the conference sought to discern the main of peace processes, and programs for demobilization,

1 See also Jake Sherman: Policies and Practices for Regulating Resource Flows to Armed Conflict. IPA Conference Report, 2002; and Philippe Le Billon, Jake Sherman and Marcia Hartwell: Controlling Resource Flows to Civil Wars: A Review and Analysis of Current Policies and Legal Instruments. IPA Background Paper. 2 See Mats Berdal and David M. Malone (eds.): Greed and Grievance: Economic Agendas in Civil Wars, Boulder: Lynne Rienner Publishers, 2000; Karen Ballentine and Jake Sherman (eds.): The Political Economy of Armed Conflict: Beyond Greed and Grievance, Boulder: Lynne Rienner Publishers, 2003.

Introduction 3 Economic Dimensions of Civil Wars: Challenges for Peacemaking and Peace Implementation TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

disarmament, and reintegration (DDR) of former and Afghanistan in Central Asia.6 Neighboring states, combatants. for instance, may benefit economically from conflict, as exemplified by the business networks set up by Combatant self-financing may lead to a mutation in government and military officials from Rwanda, the character and duration of conflict, as economic Uganda, and Zimbabwe in the DRC and by the Liberian considerations, while not the sole or even primary government in Sierra Leone. cause of conflict, become more important to some combatants than political factors. Quite apart from the Targeted Sanctions: Achieving Peace by Reducing petty criminality that typically accompanies warfare, the Economic Opportunities of Combatants? contemporary conflicts have become systemically criminalized, as insurgent groups and rogue regimes In the 1990’s, UN Security Council-imposed targeted engage in illegal economic activities either directly or sanctions, such as those taken against the Union for through links with transnational criminal networks. the Total Independence of Angola (UNITA), Sierra The war economies fuelling conflict also thrive on Leone's Revolutionary United Front (RUF), and the linkages with neighboring states, informal trading Liberian government under Charles Taylor, reflected an networks, regional kin and ethnic groups, arms increased willingness of the UN to utilize sanctions as traffickers and mercenaries, as well as legally operating a mechanism of conflict resolution. By aiming to commercial entities, each of which may have a vested curtail the flow of resources to combatants, they have interest in the prolongation of conflict and instability.3 also represented a direct attempt to end hostilities by Access to lucrative resources and smuggling networks reducing the opportunities for combatant self- may prolong conflict, as weaker parties can avoid financing through the trade in conflict commodities ‘hurting stalemates’ by generating finances necessary such as diamonds and timber. Yet, at best, commodity to continue hostilities. Particularly where armed groups sanctions appear to have had a limited and indirect depend on lootable resources, such as alluvial effect in bringing conflict to an early resolution. diamonds, drugs, or coltan, there is a greater risk that Typically, too, they have involved negative humani- conflict will be lengthened by the consequent fragmen- tarian effects and have reinforced the criminal trade tation and fractionalization of combatant groups, as they seek to curtail. While some of these shortcomings internal discipline and cohesion is undermined.4 are a function of continuing problems with enforce- ment and compliance, others are inherent to sanctions. In particular, continued combatant access to lucrative resources and the proliferation of combatant parties The imposition of targeted sanctions, as well the have been identified as key factors in failed peace increasing willingness of UN Expert Panels to engage implementation, multiplying the number of potential in ‘naming and shaming’ of those circumventing ‘spoilers’ who resort to violence to thwart peace sanctions, has raised awareness of the economic mediation or implementation.5 Peace spoilers may also dimensions of many contemporary conflicts, in partic- be situated beyond the borders of the state, particularly ular the salience of ‘conflict trade.’ Yet, as described in where a civil war is embedded in a wider ‘regional numerous UN Expert Panel reports, the effectiveness of conflict formation,’ such as Sierra Leone in West Africa sanctions continues to be undermined by widespread

3 Neil Cooper and Michael Pugh, with Jonathan Goodhand: War Economies in a Regional Context: The Challenge of Transformation, Boulder: Lynne Rienner Publishers, forthcoming. 4 See Karen Ballentine: “Beyond Greed and Grievance: Reconsidering the Economic Dynamics of Armed Conflict,” in Ballentine and Sherman, op. cit. pp. 259-283. 5 George Downs and Stephen J. Stedman, “Evaluation Issues in Peace Implementation,” in Stephen J. Stedman, Donald Rothchild, and Elizabeth M. Cousens (eds.): Ending Civil Wars: The Implementation of Peace Agreements, Boulder: Lynne Rienner Publishers, 2003, 43-69. 6 Andrea Armstrong and Barnett Rubin: Policy Approaches to Regional Conflict Formations, Center on International Cooperation, 20 November 2002.

4 Economic Dimensions of Civil Wars: Challenges for Peacemaking and Peace Implementation TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

‘sanctions-busting’ by actors located within and means that sanctions-busting continues to be a beyond of conflict zones. Both rebel groups and relatively low-risk, high-profit activity. governments targeted by sanctions continue to procure weapons and trade in conflict resources through The Interlaken, Bonn-Berlin and Stockholm processes transnational criminal and arms trafficking networks on targeted sanctions have generated several useful specialized in the circumvention of regulations. recommendations for improved sanctions enforce- Neighboring states, often with the consent of their ment.7 Even if reasonably well-enforced, however, governments, serve as conduits for the two-way flow sanctions have inherent limits as a mechanism for of conflict goods and weapons. And even legally conflict resolution. First, their effectiveness depends on operating companies may knowingly or unknowingly the reputational concerns of those targeted. Rebel violate sanctions by trading in sanctioned commodi- leaders, for instance, may be relatively less receptive to ties, often through complex and intransparent supply- the threat of international ostracism than sitting chains. government officials. The impact of sanctions may also vary with the character of the insurgent groups they While naming and shaming has, in several cases, led to target. Indeed, sanctions appear to have a greater effect improved compliance with UN-mandated sanctions, on constraining coherent rebel armies facing strong there is some concern that this progress will be short- states, than on ‘rag-tag’ rebel groups, such as the RUF, lived. At stake is their capacity to function as a credible fighting weak and corrupt governments and their deterrent. Neither the Security Council nor UN member incoherent military. Sanctions can influence this states have taken robust action to follow up on the UN balance of forces, but only at the margins. In Angola, Expert Panels’ recommendations. The Security Council the diamond embargoes did increase UNITA’s transac- has thus far imposed secondary commodity sanctions tion costs for procuring weapons. But it is widely only in one case, UN Resolution 1343 on Liberia, for its agreed that the main factor for UNITA’s willingness to role as an export nation for smuggled ‘conflict come to the negotiation table was not the impact of diamonds’ from the RUF rebels. There have also been sanctions but, rather, the prospect of imminent military no legal prosecutions by governments of any defeat at the hands of government forces and – not sanctions-buster, despite accumulating evidence that a least - the death of UNITA’s leader, Jonah Savimbi. This few well-known arms merchants and commodity outcome underscores that sanctions work best where traders have been involved in numerous armed they complement rather than substitute credible conflicts. To some degree, the lack of robust follow- military threat. Far from being neutral and non- through is due to a lack of adequate intelligence and violent, sanctions are thus a highly coercive and documentation required to establish evidentiary trails partisan policy instrument that needs be seen as part of that would stand in national courts. There is also a lack a comprehensive politico-military framework for of clarity as to the standing of UN sanctions-busting ending conflict. under national law and the legal status of economic activities in conflict zones. Yet, even in cases where the The Political Economy of Peace Processes: Making prima facie evidence is clear, there has been a Peace Pay? demonstrated unwillingness on the part of relevant government authorities in the developed world to The post-Cold War period has seen the UN and other undertake prosecutions of their own nationals. This multilateral organizations play a greater role in lack of enforcement, coupled with the missing mediating and supporting peace agreements between administrative and regulatory capacity of states in the warring factions. Ending civil wars through negotia- conflict region for monitoring cross-border trade, tion rather than by outright military victory of one

7 See Targeted Financial Sanctions: A Manual for Design and Implementation, The Watson Institute, 2001; Michael Brzoska (ed.): Design and Implementation of Arms Embargoes and Travel and Aviation Related Sanctions, Bonn International Center for Conversion, 2001; Peter Wallensteen, Carina Staibano, and Mikael Eriksson (eds.): Making Targeted Sanctions Effective: Guidelines for the Implementation of UN Policy Options, Uppsala University, 2003.

Economic Dimensions of Civil Wars: Challenges for 5 Peacemaking and Peace Implementation TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

side, however, poses challenges for peacemaking and political advantage. Furthermore, continued access to peace implementation, as former rebel groups or resources through illegal diamond mining allowed both separatist movements need to be included in peace Sankoh and Savimbi to consolidate their military processes. Where economic dimensions feature strength during the peace negotiations. In Burma, by strongly in conflict dynamics, third-party mediators contrast, the economic inducements offered to face the important challenges of managing potential insurgents operated alongside the government’s spoilers and designing peace agreements that reflect continued and credible threat of resumed counter- the political economy of the conflicts that they seek to insurgency, a factor that was missing in Sierra Leone end. and Angola. For cooptation to be effective, then, economic carrots need to be reinforced by credible Revenues generated from the production and trade in coercive sticks. Importantly, cooptation through a lucrative resources not only provide a means of share in the spoils of peace also rewards those most continued fighting. They also become the reward responsible for violence, thereby establishing peace at against which those combatants who have profited the expense of justice. At best, this can lead to negative from predation during war weigh the potential benefits peace, a condition in which the risk of renewed conflict of peace. Those engaged in conflict mediation and the remains high. design of peace agreements, thus, need to anticipate potential peace spoilers. While making a priori Criminalization as a strategy to manage spoilers, by judgments is often difficult, assessing the economic contrast, has the potential of holding to account the endowments and activities of combatants may be as entrepreneurs of violent economies. This can include important in identifying potential spoilers as taking indictments from international criminal tribunals, such stock of their military and political power. Doing so, as those against Foday Sankoh and Charles Taylor, or however, does not ease the problem of how best to the listing of insurgent groups as terrorists, as in the manage spoilers in particular cases. In practice, there is case of the guerrilla and paramilitary forces in no ‘one size fits all’ approach, as combatant incentives Colombia. Often, these legal prohibitions have been for committing to peace are often mixed and shifting. accompanied by parallel efforts to interdict resource Cooptation, criminalization, and benign neglect are and financial flows to targeted armed groups. Yet, for three main options for managing spoiler problems. criminalization to be effective, it requires a consider- Whether alone or in combination, each strategy able outside commitment of financial and policing involves difficult tradeoffs. resources. Too often, this commitment is not forthcoming, and this strategy is seldom pursued in a The cooptation of potential spoilers through economic coherent and sustained manner. In Afghanistan, the and political carrots was attempted with RUF leader resumed ban on poppy cultivation – urged by donors Foday Sankoh in Sierra Leone and Jonah Savimbi in often more concerned with stopping drug flows to their Angola, where the political offices granted to them in countries than with depriving opposition warlords of the respective peace agreements would have allowed revenues – has proceeded in the absence of any them some continued, if circumscribed, control over meaningful enforcement capacity. The predictable mineral wealth. Similarly, the military regime in Burma result was a rise in poppy prices, increased incentives granted ethnic insurgent groups tacit license to for cultivation, and a reinforcement of the criminal continue their wartime business ventures in exchange activities the ban sought to curtail. Criminalization for informal cease-fires, which proved to be remark- may also add considerable political complexity to ably robust despite the absence of a formal or compre- diplomatic efforts to secure peace, particularly where hensive peace accord.8 Yet, in the former cases, coopta- those targeted as criminals are still critical interlocu- tion efforts failed, in large part due to misplaced tors in peace negotiations. Charles Taylor’s indictment, assumptions on the part of mediators that economic just as African mediators were seeking his commitment benefits were more important to the parties than to ending the Liberian conflict, merely served to

8 Jake Sherman: “Burma: Lessons from the Cease-Fires,” in Ballentine and Sherman, op. cit. pp. 225-255.

6 Economic Dimensions of Civil Wars: Challenges for Peacemaking and Peace Implementation TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

strengthen his resistance, which was overcome only by ment mismanagement and rent-seeking can undermine more robust military and diplomatic intervention. legitimacy and create socio-economic grievances. With few exceptions, however, the tendency of peace Seldom a considered policy, benign neglect tends to be processes to date has been to neglect these economic the default option for managing spoilers, both because dimensions of conflict. Instead, they are relegated to of a lack of political will among parties to address the the secondary stage of post-conflict reconstruction, economic corruption from which spoilers have where they are treated as a largely technical or benefited, and because of lack of external or internal humanitarian matter rather than as an integral part of economic and military leverage against increasingly successful peacemaking. One important exception is well-endowed belligerents. Indeed, the very availability the current peace process in the Sudan, which incorpo- of lucrative economic endowments to combatants is a rates agreements for the sharing of oil wealth substantial impediment to third-party influence in alongside power-sharing between the North and the securing their commitment to peace, particularly where South. peace missions are severely under-resourced. The DRC peace process is a case in point. Despite accumulated Greater operational emphasis needs to be directed evidence of the critical role played by illicit and violent towards reducing the economic opportunities for peace exploitation of natural resources in that conflict, spoiling through complementary programs of resource- neither the restoration of good governance over sharing, economic governance, and livelihood creation. natural resources, nor the restoration of property Addressing contentious economic issues may risk rights, nor the pursuit of economic justice was a overburdening and even derailing progress on negoti- priority issue for negotiation. Quite obviously, the ating peace. Some have justified the absence of a parties to the peace process had no interest in comprehensive agreement on resource exploitation in relinquishing their ill-gotten gains, nor did the interna- the DRC peace process on these grounds. Yet, greater tional community have the political will to press them policy recognition of the prevailing political economy to do so. The consequences of this neglect may in fact of a conflict has the potential for securing more be quite malign, as the scramble for control of the comprehensive peace agreements and reducing the risk DRC’s resource wealth continues and issue of legiti- that economic competition will lead to renewed mate property rights remains unaddressed.9 Similarly, conflict. Where politically feasible, third-party in Afghanistan, the enlistment of predatory warlords in mediators should therefore explore ways to ensure that the war against the Taliban now poses serious these economic issues are addressed by incorporating problems to the Karzai government’s attempts to formal economic agreements into peace accords. Such curtail the warlords’ often substantive sources of agreements could include provisions for more equitable income from drug trade and smuggling as part of its resource-sharing and the restoration of legally externally-supported state-building efforts. protected property rights, as well as third-party monitoring and verification of responsible resource Political power-sharing and the restoration of security management and restitution packages, backed by remain critical to the cessation of hostilities. Yet, targeted donor commitments. Doing so would have the economic struggles figure strongly in many separatist advantage of establishing common and transparent and non-separatist conflicts. In separatist conflicts, rules of the game and promoting clear expectations that such as in Nigeria, Bougainville, and the Sudan, the property rights and economic justice will be respected. inequitable sharing of resource-rents by exclusionary In the longer term, designing economically sensitive governments may spark or fuel grievances of local peace agreements would also establish benchmarks for groups who may turn violent. In non-separatist post-conflict governance that could serve as a reference conflicts, access to resources may provide both the point for multilateral and bilateral donors and civil motive and means for armed rebellion, while govern- society to hold government accountable.

9 See Karen Ballentine and Michael Nest (eds.): The Democratic Republic of Congo: The Economic Dimensions of War and Peace, Boulder: Lynne Rienner Publishers, forthcoming.

Economic Dimensions of Civil Wars: Challenges for 7 Peacemaking and Peace Implementation TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

Disarmament, Demobilization, and Reintegration mercenaries, such as in the West African conflicts, as (DDR) well as the entrenched business interests of neighboring armies, such as by Ugandan and Rwandan The disarmament, demobilization, and reintegration officers in the Kivu provinces of the DRC. (DDR) of former combatants have become a standard tool of UN missions and external donors operating in The particular emphasis of DDR programs should countries emerging from conflict, as physical security reflect not only combatants’ security concerns but also is commonly held to be an essential precondition for the wider political economy of war and peace. Where peace implementation. While current practice reflects combatants’ livelihoods have become dependent on growing awareness that the provision of economic violent predation, the proclivity of rank-and-file opportunities is integral to the effort of demobilizing soldiers to disarm depends on the expected opportuni- and disarming former combatants, there has been little ties of socio-economic reintegration, most importantly concerted academic and policy focus on the specific access to land or other employment and income challenges for DDR in conflict settings beset by violent opportunities. In Afghanistan, for example, there have economic struggles over natural resource wealth and been numerous instances of voluntary demobilization systematic predation. For some observers, the mixed of underpaid soldiers who ‘melt away’ from their units success of past DDR efforts have raised the question as and return to their former rural livelihoods. By to whether dedicated DDR programs should be contrast, where conflict has destroyed pre-conflict undertaken at all. While DDR programs have a strong livelihoods, such in eastern DRC, where vast swathes of symbolic value as a confidence and trust-building fertile land have been ruined by coltan exploitation measure, they are very costly, often drawing scarce and where conflict has led to a consolidation of large- donor resources away from development programs that scale landholdings, effective disarmament and demobi- may even have bigger impact on peace outcomes than lization will depend on the provision of new forms of DDR itself. Yet, taking into account the self-financing civilian economic opportunity. DDR programs also nature of many contemporary conflicts may help those need to better identify and target the different developing and implementing DDR programs in these economic interests of fighters of different ranks. The settings to develop strategies that offer meaningful incentives offered to rank-and file fighters to disarm incentives for combatants to comply. and return to civilian life may be insufficient to persuade middle-ranking, local commanders, who are As the recent experiences of Afghanistan, the DRC, and not only the critical agents of mobilization, but also Sierra Leone suggest, the continuing availability of often control access to lucrative resources and have lucrative resources and entrenched economic predation well-established informal taxation regimes that depend pose additional challenges to an already difficult upon the continued threat or use of violence. In the process. Importantly, where fighters are remunerated case of Afghanistan, these middle-ranking, local through pillage of lucrative natural resources or commanders remain critical assets to regional civilian predation, the possession of arms is not just a warlords. function of ongoing insecurity but is also an economic asset. For some fighters, the economic opportunities Against this background, the standard donor practice and rewards available through violent predation might of treating disarmament and demobilization as prior to exceed those expected to be available after conflict, reintegration and rehabilitation, rather than as parallel thus influencing a combatant's decision whether to and mutually reinforcing processes, needs to be voluntarily disarm and return to a civilian life. DDR revised. Establishing security is crucial for peace may also be hampered by the lack of discipline and implementation and post-conflict recovery. Yet, the fractionalization of combatant groups, which makes it concept of post-conflict security should be broadened more difficult for leaders to convince rank-and-file beyond the immediate ‘security dilemma’ faced by soldiers to disarm and demobilize. Other complicating former combatants. Security encompasses both factors are the involvement of large numbers of physical and economic security, the latter being a

8 Economic Dimensions of Civil Wars: Challenges for Peacemaking and Peace Implementation TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

function of development and poverty reduction. Thus, combatants. The shadow economy encompasses the only by ensuring expanded and meaningful economic broad range of economic activities that fall outside opportunities of former combatants alongside their state-regulated frameworks. These informal economic demobilization and disarmament, will DDR programs relationships, such as the illicit mining and smuggling succeed in undercutting the temptations for continued of diamonds in Sierra Leone, are often already participation in the war economy. Rather than taking widespread before the outbreak of conflict. Shadow away the guns, then, the priority for DDR should be on economies also thrive in borderlands, typically areas taking away the incentives to make use of them. that are politically and economically the most margin- alized, which lack effective policing by central govern- Not only does this require more targeted humanitarian ments. Once conflict has erupted, shadow economies and development aid programs early on in the DDR are easily captured by combatants either directly or in process, it also requires considering a range of employ- close cooperation with criminal entrepreneurs. Shadow ment and income-generating activities for former economies, thus, often become the basis for combat combatants that go beyond the standard ‘DDR- economies, while also providing income for criminal packages’ offered by the international community. The elites and mafia structures, such as in Kosovo and current DDR program in Afghanistan, for instance, Bosnia-Herzegovina. Yet, with the breakdown of the directs the majority of ex-combatants to take the ‘rural formal economy, shadow economies become important option,’ despite the fact that the agricultural sector is sources of civilian incomes. In conflict situations, not large enough to absorb the considerable numbers where traditional livelihoods are destroyed, civilian of former combatants. Yet, different employment sector dependence upon shadow economic networks and opportunities in the non-agricultural sector have thus activities is even more critical. These coping economies far not been sufficiently factored into DDR planning. can encompass economic activities centered on Importantly, this shows that DDR should not be lootable resources such as coca and poppy in Colombia pursued as a ‘quick-fix’ strategy and needs to be and Afghanistan, alluvial diamonds in Sierra Leone, integrated into a larger, long-term framework of post- coltan in the DRC, as well as smuggling and contra- conflict peacebuilding and economic reconstruction. band in the Balkans. III. From War Economies to Pea c e While the 1990’s witnessed the creation of complex peace operations, in which traditional security priorities Economies: Challenges for Pea c e - were complemented by efforts to establish governance building and Post-Conflict Recover y and rule of law, operational strategies to address the economic dimensions of peacemaking and peace implementation have lagged behind, often with dire Economic life does not cease to exist during armed and lasting consequences for stability and recovery.11 conflict. Rather, it adapts and takes on new forms. Im p o r t a n t l y , peacebuilding efforts need to distinguish Often referred to by the shorthand term, ‘war between those actors who engage in armed conflict for economies,’ economic life in wartime in fact serves profit and power, and those who are forced to partici- different functions for different groups, functions that pate in war economies to sustain their civilian liveli- may be usefully understood by distinguishing between hoods and who may suffer as much from indiscriminate combat, shadow, and coping economies.10 The combat predation as from ill-conceived efforts to end it. A e c o n o m y is based on economic interactions that functional distinction of economic activities may help directly sustain actual combat, including arms identifying specific actors, their incentives, and their smuggling, the exploitation of natural resources, and vulnerabilities. Yet, weeding out the dysfunctional control over other income-generating activities by elements of the shadow economy that may benefit the

10 Jonathan Goodhand: “Afghanistan in Central Asia,” in Cooper and Pugh, op.cit. pp. 45-89, 60. 11 Susan Woodward: “Economic Priorities for Successful Peace Implementation,” in Stedman, Rothchild, and Cousens, op. cit. pp.183- 214.

From War Economies to Peace Economies: Challenges for 9 Peacebuilding and Post-Conflict Recovery TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

enemies of peace and justice, while retaining its socially these capacities are weak, outside cooperation on law beneficial aspects, is complicated by the fact that enforcement and mutual legal assistance, as well as economic activities make use of the same or overlap- direct policing operations by UN peace missions, may ping trade and financial networks. provide necessary support.1 3 The Organization for Security and Cooperation in Europe (OSCE), for Transforming Shadow Economies and Addressing example, established an organized crime unit in Economic Criminalization Kosovo to deal with the criminal economic activities that sustained the militants and to curtail their ability Where shadow economies are based on illegal natural to divert guns and money to support hostilities in resource exploitation, and where smuggling and Southern Serbia and Northern Macedonia. Where contraband trade have become implicated in the politically feasible, the most egregious crimes, political economy of conflict, economic criminality including those of economic nature, should be tends to be systemic and well-integrated into regional prosecuted domestically or, where applicable, by and global criminal networks. Once entrenched, international courts. Recently, both the International criminality can seriously undermine peacebuilding and Criminal Court for the Former Yugoslavia (ICTY) and post-conflict recovery. Those who have generated the Sierra Leone Special Court issued indictments for, economic benefit during conflict, not least from inter alia, participation in ‘joint criminal enterprises,’ sanctions regimes, such as the mafia structures in while the Porter Commission in Uganda, despite its Kosovo and Bosnia, seek to consolidate their power in flaws, led to the purge of high-ranking Ugandan fragile post-conflict situation by expanding control military officials engaged in illegal resource exploita- over the local economy and political processes. tion in Eastern DRC.

Quite clearly, the more widespread is the informal Economic criminality is difficult to root out, not only economy, the fewer are the tax revenues that accrue to because criminal networks are highly adaptive, but the state. This undermines the ability of states also because of the vital economic and social functions emerging from war to finance the provision of basic that they have often come to serve. For this reason, goods and services, most importantly security, to increased policy attention needs to be paid to creating u n d e r t a ke needed reconstruction projects, and to incentives and alternative income-generating activities establish viable institutions of governance. While post- for entrepreneurs and other beneficiaries of the shadow conflict foreign aid may bridge this finance gap, it does economy to ‘turn legal’ and join the formal economy. not provide a sustainable basis for state finance. This requires attention to the full range of reasons that Importantly, the failure of the state to provide basic individuals continue to participate in shadow activities. services, with their de facto provision by criminal or In Afghanistan, for example, farmers continue to grow shadow networks, undermines the creation of the poppy not only because it is a lucrative crop, but also ‘social contract’ necessary for stable and accountable because the poppy trade has generated a complex governance. system of patron-client relations and an elaborate, if highly extortive, system of credit. For many poor For peacebuilding efforts to address these twin farmers and sharecroppers, poppy cultivation is often challenges, policy action requires both ‘carrots and the only way to access credits needed to secure their sticks.’ A primary task is to take the violence out of the livelihoods and to pay accumulated debts to local economy by strengthening law enforcement and the warlords. Policy efforts to reduce poppy cultivation judicial sector in post-conflict countries to address the thus need to address the socio-economic structures that systemic criminality of shadow economies. Where characterize the ‘poppy cultivation environment.’

12 Sarah Collinson et al.: Power, Livelihoods, and Conflict: Case Studies in Political Economy Analysis for Humanitarian Action. HPG Report 13. Overseas Development Institute, 2003. 13 Transnational Crime and Corruption Center: Transnational Crime and Peacekeeping: Comparative Perspectives. Conference Report, Cantigny in Wheaton, Illinois, 6-7 September 2001.

10 From War Economies to Peace Economies: Challenges for Peacebuilding and Post-Conflict Recovery TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

Simple eradication or crop-substitution programs are they exist, regional or sub-regional organizations, such fruitless unless the problem of the coercive credit as the Economic Community of West African States system controlled by strongmen is addressed. (ECOWAS), can play an important role in addressing shadow trade and criminality. Despite its shortcomings Transforming shadow economies also requires a and unclear mandate vis-à-vis the African Union (AU), regional approach, as they are often integrated in the New Partnership for African Development (NEPAD) traditional trade routes, cross-border smuggling, and is a promising initiative that could develop are reinforced by cross-border social and kinship ties. mechanisms to collectively address the problem of This makes borderlands, often endowed with natural shadow trade and promote the responsible manage- resources, the center of illegal activities. Yet, state- ment of natural resources. This would require coordi- centric regulatory efforts risk generating cross-border nation with the AU’s CSSDCA, which has explicitly displacement effects, simply moving the undesired linked the need for improved natural resource manage- activities - and their conflict-potential - to neighboring ment with conflict prevention and sustainable develop- countries. Drug eradication efforts in Colombia and ment. Afghanistan, for example, have encouraged increased cultivation in Bolivia and Pakistan. Similarly, the Securing Natural Resource Wealth sanctions imposed against Liberia in 2001 perversely encouraged a reverse smuggling flow of illegally The high risk of violent conflict that has been attrib- exploited diamonds back into Sierra Leone, in order to uted to natural resource dependence in a given country then export them ‘legally’ under the government- is not a direct relationship, but one that is mediated by established diamond certification scheme. critical governance failures. Systemic corruption and economic mismanagement, patrimonial rule, and the Strengthening border security as part of peacebuilding e xclusionary ‘shadow state’ often associated with efforts is necessary, yet largely insufficient to resource abundance may fuel political and economic effectively address shadow trade, especially in grievances by undermining the state’s legitimacy and countries with long and inaccessible borders and weak by weakening its capacity to perform core functions, capacities for border policing and customs control. A such as the provision of security, the management of more promising strategy would be to complement public resources, and the equitable and efficient border control with policies that address the structural provision of basic goods and services. The state’s factors that encourage cross-border shadow trade. In failure to manage natural resource exploitation the case of drug cultivation, this may include effectively and equitably strongly influences the addressing the cross-border environment through opportunity for and feasibility of rebellion – and thus bilateral cooperation on poverty eradication, alterna- also the re-emergence of violence in post-conflict tive livelihood development, and socio-economic situations - as it affects the relative strength of the integration of neighboring communities in border state being challenged. The improved governance of areas. Similarly, efforts to address regional shadow natural resources, thus, needs to be made a central trade and smuggling should support cooperation element of statebuilding efforts within a comprehen- within regional and sub-regional organizations to sive peacebuilding strategy. eliminate differentials in prices, tariffs, and quota systems that raise the profitability of, and thus create Rebuilding the capacity of domestic institution and the incentives for, cross-border conflict trade. promoting good governance of natural resource wealth after years, if not decades, of war, mismanagement and Regional economic integration could also help to systemic corruption is a long-term task, but it is a create regional markets for legitimate and mutually critical one. Importantly, peacebuilding needs to beneficial economic relations between neighboring address the predatory culture of state institutions, a countries, thus strengthening the ‘buy-in’ of influential product of colonial rule and post-independence leader- neighbor states to regional stability and peace. Where ship, that promotes rent-seeking rather than socially

From War Economies to Peace Economies: Challenges for 11 Peacebuilding and Post-Conflict Recovery TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

beneficial economic activity. In countries such as Community Development Fund and the Kono Peace Sierra Leone and the DRC, this requires the outright Diamonds Alliance not only provide benefits to the transformation of governance structures, rather than government by expanding the scope of licensed their mere reconstruction. Importantly, where the mining and raising official diamond exports, but also military and police were part of the ‘industrial organi- ensures regular incomes to artisanal miners and their zation’ of the predatory state structure, donor- communities. supported security sector reform (SSR) can play a crucial role in transforming the security apparatus’ role Effective national resource management also requires from economic predation to civilian protection. an adequate regulatory framework for private sector operations in the extractive industries and commodity Where the illicit exploitation of natural resources has trade to ensure that private investment in post-conflict been central to conflict dynamics, the early restoration settings serves the public interest. Clear and enforce- of responsible resource management should be a able regulation is necessary not only to provide legiti- priority. Here, international donors can assist post- mate companies with a secure business environment, conflict countries to design transparent accounting but also to hinder ‘rogue companies’ from exploiting practices and to develop schemes for equitable and fragile post-conflict situations for pecuniary benefit. In socially beneficial sharing of resource revenues. the absence of such regulation, extractive companies in International agencies may also play an important role the DRC, for instance, continue to sign contracts in acting as independent monitors to ensure compli- outside of governmental control with strongmen that ance through externally-monitored natural resource claim to be the legal bearers of concession rights. funds or escrow accounts for income generated from the exploitation of non-lootable resources, such as oil, The creation of transparent economic and equitable gas, or mining. If properly administered, these could economic governance highlights the important role of protect the large inflows of revenues from rent-seekers civil society in post-conflict peacebuilding and and provide a degree of financial transparency. To recovery. In the long-term, the success of resource date, natural resource management initiatives of this management systems will depend on the emergence of sort have been conceived and implemented as a means a strong civil society that is able to hold governments of preventing conflict rather than assisting countries to account. In the short and medium term, civil society recover from war. This is the case with the Chad- organizations will need external support in developing Cameroon Pipeline Project’s fiscal management and relevant capacities, particularly in collecting informa- social revenue-sharing components, and the UK- tion on illegal resource exploitation and government sponsored Extractive Industries Transparency Initiative corruption and mobilizing public awareness. Support (EITI), which seeks to promote fiscal transparency for civil society can also be indirect. The UN Expert among corporations and host governments engaged in Panel report on the illicit exploitation of natural extractive industry operations. There is no reason these resources in the DRC, for example, helped Congolese mechanisms cannot be adapted to the needs of post- civil society and church groups raise these issues conflict recovery. Indeed, as donor leverage is often during the peace negotiations. A potential forum for greater in these settings, the potential for securing assisting the new government to fulfill its commitment effective resource governance is strong. In Sierra to improved economic governance is the International Leone, for instance, support by the UN and multiple Support Committee (CIAT), created to advise on the donors has made a priority of restoring order to the transition program established in the December 17, diamond industry. Programs such as the Diamond Area 2002 power-sharing agreement.

12 From War Economies to Peace Economies: Challenges for Peacebuilding and Post-Conflict Recovery TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

IV. Conclusion: Recommendations natural resource management as part of their structural conflict prevention and post-conflict for Policy Action peacebuilding strategies. This includes capacity- building for public administrations, particularly in Not all conflicts feature strong economic dimensions. the areas of financial oversight, budgeting, Those that do, however, pose different and at times accounting, and public expenditure review, as an greater challenges for conflict management. More integral part of the wider governance reforms. Just research is needed on the political economy of as efforts to prevent and resolve conflict need to be peacemaking and peacebuilding in order to inform and made more ‘development sensitive,’ so, too, does improve policy action. Still, research to date suggests development policy need to be consciously several policy mechanisms and strategies that govern- ‘conflict sensitive.’ ments, aid agencies, regional organizations, interna- tional financial organizations (IFIs), and the UN system • Governments need to increase political and may undertake to deal more effectively with the economic support to regional organizations or economic legacies of war, and to increase the odds for initiatives that have the potential to address the successful peacemaking and peacebuilding: regional dimensions of conflict and peacebuilding, such as in the form of the G8’s Africa Action Plan. Governments and Bilateral Aid Agencies This includes, where feasible, technical assistance and capacity building for border monitoring and • Given the crucial role that licit and illicit interme- customs control, as well as targeted support for diaries based in the developed world play in more coordinated trade and economic policies to sustaining war economies, their governments are address the structural factors of conflict trade. obliged to act and to end the impunity for criminals and sanctions-busters. This includes Sub-regional Organizations and Initiatives robust follow-up on reports by the UN Sanctions Panels, including: the adoption of appropriate • Regional or sub-regional organizations should set national legislation to criminalize UN sanctions- their own standards on government accountability busting and, where feasible, conflict trade; a and transparency, as well as corporate conduct, to commitment to enforce legislation against their complement national and international standards. own nationals, including corporate actors; and The establishment of an Africa-wide standard for better cooperation in the fields of international law corporate conduct in extractive industries, for enforcement and mutual legal assistance. example, was discussed during the AU-NEPAD consultations on peace and security.14 Critically, • Governments need to put pressure on their home policy efforts by member states and donor govern- companies to adhere to codes of conduct and ments, as well as advocacy by civil society need to global industry regulations dealing with corporate focus on the establishment of monitoring and behavior in conflict zones, or vis-à-vis human enforcement mechanisms, such as the peer review rights, to minimize potential conflict-promoting mechanism entailed in the NEPAD initiative, to activities and contribute to post-conflict recovery. ensure adherence to the standards set. Policy levers can be both positive and negative, such as preferred access to insurance and procure- • Regional standard-setting might usefully be ment contracts, or, conversely, ‘black listing’ or complemented with renewed regional cooperation even the threat of law suits. on trade issues identified as conflict-promoting. Where they exist, regional and sub-regional • Bilateral donor agencies need to focus more organizations should be encouraged to develop attention on effective, equitable, and transparent their capacity to promote regional cooperation on

14 African Union: Report of the AU-NEPAD Consultations on Peace and Security, Addis Ababa, 17-18 February 2002.

Conclusion: Recommendations for Policy Action 13 TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

issues of economic governance, complementary and patronage. Importantly, IFIs need to and effective regulation of natural resources, understand the beneficial social functions that commerce and trade, and increased cooperation on shadow economies fulfill. Reconstruction strategies border security to remove structural incentives for and models based on formal economies alone may smuggling and conflict trade. risk failing to address the shadow entrepreneurs while hurting those who have come dependent on International Financial Institutions (IFIs) the shadow and coping economies in conflict and post-conflict settings. • While limited in terms of leverage for conflict resolution, the World Bank, the International • IFI loan agreements and technical aid in post- Monetary Fund (IMF), and regional development conflict settings needs to include requirements for banks are influential to peacebuilding through the effective legal and administrative regulation for provision of aid and, most importantly, through corporate engagement in natural resource the conditionality attached to it. IFIs need to industries. The World Bank's private sector arm, strengthen peace processes with targeted support the International Financial Corporation (IFC), can and ‘peace conditionality,’ for example, by making play a crucial role in designing extractive industry post conflict aid disbursements conditional upon codes and developing mining policies that help the achievement of benchmarks set in peace minimize the risk of corruption and corporate agreements. Importantly, IFIs should be included in malfeasance, by, for instance, integrating peace negotiations, whether formally or transparency provisions for corporations and host informally, to ensure coordinated policy action governments. Importantly, IFIs should support among donors and the UN, and to match the provisions for revenue-sharing schemes that content of peace agreements with post-conflict redress horizontal inequalities, and mitigate or economic recovery strategies. compensate for the socio-economic and environ- mental externalities that affect local communities. • The Word Bank as a lead agency for DDR programs needs to revise its DDR models to adequately The UN System reflect the wider political economy of conflict. This includes improved generation of post-conflict •To effectively curtail resource flows to belligerents, socio-economic data on issues such as land tenure, UN targeted sanctions need to be supported by a employment sectors, and industry revitalization, to commitment to effective enforcement. The Security adequately devise reintegration programs. Council should routinely include the provision of I m p o r t a n t l y, DDR programs need to form an technical assistance and financial compensation to integral part of national post-conflict development front-line states in the design of sanctions strategies. This will require improved coordination mandates and impose, where applicable, secondary both within the World Bank itself, as well as sanctions against governments aiding the circum- between the World Bank and different ministries in vention of sanctions regimes. The Security Council post-conflict governments. must also redouble its efforts to ensure member states’ compliance with sanctions resolutions, • IFIs need to review their neo-liberal development particularly by pressing them to follow up on strategies and policies to adequately reflect the findings from UN Expert Panel reports, and to take particular needs challenges of transforming war- legal action against nationals involved in torn societies in settings with widespread and sanctions-busting. systemic economic predation. Early privatization and demands for a ‘minimal-state’ may well be • The Security Council needs to strengthen the counter-productive by holding back important capacity of UN Expert Panels, which have proven funds needed to establish strong states and create to be innovative and effective policy mechanisms employment, and may foster even more corruption for sanctions monitoring, the generation of intelli-

14 Conclusion: Recommendations for Policy Action TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

gence, and for raising awareness of sanctions- Great Lakes Region should focus more attention busting. To ensure the Panels’ independence and on the economic dimensions of these regional avoid political constraints, as well as to improve conflict formations. intelligence capacities, the work of the ad-hoc Panels should be complemented by an expanded • The mandates of UN peace operations should be administrative facility. Better information-sharing tailored to address the political economy of between panels needs to be ensured, through, inter specific conflict settings. The UN Security Council alia, a centralized information storage. should consider non-traditional issues of peacekeeping and peacebuilding, such as the early • The UN and its member states need to overcome deployment of civilian police, as well as criminal their hesitation to integrate economic dimensions and other law enforcement agencies to address in peace negotiations. Where politically feasible, widespread criminalization in post-conflict peace accords should include provisions for settings. Also, UN peace keepers should be wealth-sharing or other resource management mandated to report evidence of sanctions busting issues in order to address the structural causes of where it occurs. inequality and grievances and set benchmarks for responsible post-conflict governance. • The regional dimensions of war economies also highlight the inadequacy UN peace operations • Mediating and designing durable peace whose center of gravity typically remains in agreements also requires taking the regional national capitals. When adequately staffed and political economy of the conflict into account. The funded, peacekeeping forces should be employed UN needs to pursue this through cooperation with to establish state control over resource-rich areas formal regional organizations and within and borderlands to impede illegal exploitation and informal, ad hoc arrangements. The already smuggling activities. Examples for this are established West Africa office of the UN, as well as UNAMSIL’s present operations in Sierra Leone’s the efforts by the Special Representative on the Kono diamond district.15

15 Eighteenth Report of the Secretary General on the United Nations Mission in Sierra Leone, 23. June 2003, UN Doc. S/2003/663.

Conclusion: Recommendations for Policy Action 15 TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

Transforming War Economies: Challenges for Peacemaking and Peacebuilding

725th WILTON PARK CONFERENCE in association with the International Peace Academy (IPA), New York

27-29 October 2003 Conference Agenda

Monday, 27 October

15:00-15:15 Introduction to the Conference

Isobelle Jaques, Associate Director, Wilton Park David M. Malone, President, International Peace Academy, New York

15:15-16:45 Economic Agendas in Armed Conflict: How do Economic Factors Contribute to the Origins, Duration, and Character of Intra-State Conflict?

Chair: David M. Malone, President, International Peace Academy, New York

Andrew Mack, Director, Centre for Human Security, Liu Centre for the Study of Global Issues, University of British Columbia, Vancouver

17:30-19:00 Transforming War Economies: What are the Issues and Challenges?

Chair: Mr. Anders Jägerskog, Deputy Secretary, Expert Group on Development Issues, Ministry for Foreign Affairs, Stockholm

What are the main legacies of war economies and the challenges posed for post-conflict transformation? Tony Addison, Deputy Director, World Institute for Development Economics Research (WIDER), Helsinki

What are the operational challenges for transforming war economies? Nigel Fisher, Executive Director, United Nations Office for Project Services (UNOPS), New York

16 Conference Agenda TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

Tuesday, 28 October

09:00-10:30 Challenges for Peacemaking I - Sanctions Predation: Does Reducing Combatant Access to Resources Facilitate Peacemaking?

Chair: Don Hubert, Deputy Director, Peacebuilding and Human Security, Department of Foreign Affairs and International Trade, Ottawa

What is the impact of UN-targeted sanctions in curtailing commodity flows to combatants/war zones? Christian Dietrich, Associated Researcher, International Peace Information Service, Antwerp

What is the impact of UN-targeted sanctions on insurgent behaviour? Jeffrey Herbst, Professor of Politics and International Affairs and Chair of the Department of Politics, Princeton University, Princeton

11:00-12:30 Challenges for Peacemaking II - Deterring Economic Spoilers: What can mediation efforts do to incorporate economic incentives in peace processes?

Chair: Lansana Kouyate, Special Representative, Organisation internationale de la francophonie, Abidjan

Lucrative resources, economic spoilers, and peacemaking strategies: Cooptation, criminaliza- tion or benign neglect? Karen Ballentine, Senior Associate, International Peace Academy, New York

What are the challenges of addressing economic agendas of conflict parties through peace processes in the Democratic Republic of Congo? François Grignon, Project Director, Central Africa, International Crisis Group, Nairobi

15:00-16:45 Confronting the Legacies of War Economies I: How do the Specific Legacies of War Economies Affect the Process of Disarmament, Demobilisation, and Reintegration (DDR)?

Chair: Margaret Carey, Principal Officer, Africa Division, Department of Peacekeeping Operations, United Nations, New York

What are the economic challenges of DDR in Africa? Joanna Spear, Director, United States Foreign Policy Institute, The Elliott School of International Affairs, George Washington University, Washington DC

The political economy of DDR: Challenges in Afghanistan Vikram Parekh, Senior Analyst, South Asia, International Conflict Group, Islamabad

Conference Agenda 17 TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

17:15-19:00 Confronting the Legacies of War Economies II: How to Promote Alternative Livelihoods for Civilians?

Chair: Michael Small, Department of Foreign Affairs and International Trade, Ottawa

What framework in Afghanistan for creating alternative livelihoods? Jonathan Goodhand, Lecturer, Department of Development Studies, School of Oriental and African Studies, London

Tackling the challenges of the opium economy David Mansfield, Head of Research and Analysis, Drugs and International Crime Department, Foreign and Commonwealth Office, London

What are the challenges for the Democratic Republic of Congo? Aloys Tegera, Researcher, Pole Institute, Goma

Wednesday, 29 October

09:00-10:30 Confronting the Regional Dimensions of War Economies: How can Regional Initiatives Assist Transformation?

Chair: Adonia Ayebare, Ambassador of Uganda to the Republic of Rwanda, Kigali

What are the regional dimensions of war economies and what are their implications for peacebuilding? Neil Cooper, Principal Lecturer, Department of International Relations, Plymouth University, Plymouth

The New Partnership for African Development (NEPAD): Can regional cooperation assist good governance and sustainable peace? Peter Mwangi Kagwanja, AU-NEPAD Program, Saferafrica, Pretoria

11:00-12:30 Improving Governance over Natural Resource Assets: How to Combat Shadow Trade and the ‘Resource Curse’?

Chair: Mohammed Swarrey Deen, Minister of State, Ministry of Natural Resources, Freetown

Natural resources and conflict management: What are the key challenges and potential responses? Leiv Lunde, Senior Research Associate, Centre for Economic Analyses (ECON), Oslo

What role for civil society in restoring good governance over natural resource exploitation in the Democratic Republic of Congo? Floribert Kayembe Shamba, Senior Lecturer, College of Education, Kinshasa

18 Conference Agenda TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

15:00-16:45 Parallel Working Groups on Economic Aspects of Peacemaking: Post-Conflict Reconstruction: What are the Policy Lessons of Recent Experience?

Afghanistan Facilitator: Michael Pugh, Reader, Department of Politics and International Relations, Plymouth University, Plymouth

Sierra Leone Facilitator: Kwesi Aning, Senior Researcher, African Security Dialogue and Research, Accra

Democratic Republic of Congo Facilitator: Ciru Mwaura, Independent Consultant, London

17:15-19:00 What are the Strategic Priorities for the International Community in Peacemaking and Transforming War Economies?

Chair: David M. Malone, President, International Peace Academy, New York

Susan Woodward, Professor, City University of New York (CUNY), New York

Mukesh Kapila, United Nations Resident and Humanitarian Coordinator for Sudan, Khartoum

Conference Agenda 19 TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

Participants Dr. Neil Cooper Plymouth University Dr. Tony Addison World Institute for Development Economics Research Ms. Katherine Croake (WIDER) US Agency for International Development (USAID)

Dr. Kwesi Aning Ms. Corene Crossin African Security Dialogue and Research Global Witness

Major General Henry Kanyidoho Mr. Edward Dallas Conflict Management Consultant Foreign and Commonwealth Office, UK

H.E. Mr. Adonia Ayebare Mr. Mohamed Swarray Deen Embassy of Uganda to the Republic of Rwanda Ministry of Natural Resources, Sierra Leone

Ms. Karen Ballentine Dr. Christian Dietrich International Peace Academy International Peace Information Service (IPIS) Ms. Isabelle Balot Dr. Marion Eeckhout UN Office of the Resident/Humanitarian Co-ordinator Ministry of Foreign Affairs, Netherlands for Sudan

Ms. Helen Barber Ambassador Hassan Gadkarim Foreign and Commonwealth Office, UK Ministry of International Cooperation, Sudan

Dr. Robert Bartlett Jr. Dr. François Grignon United States Army International Crisis Group

Mr. Sunil Bastian Dr. Jeffrey Herbst International Centre for Ethnic Studies Princeton University

Mr. Hans Beck Dr. Don Hubert Department for International Development (DfID), UK Department of Foreign Affairs and International Trade (DFAIT), Canada Mr. Fedor Broek Ministry of Defense, Netherlands Mr. Anders Jägerskog Ministry of Foreign Affairs, Sweden Dr. Gilles Carbonnier International Committee of the Red Cross Ms. Isobelle Jaques Wilton Park Ms. Margaret Carey United Nations Department of Peacekeeping Mr. Muhiddin Kabirov Operations (DPKO) Islamic Revival Party, Tajikistan

Ms. Francesca Cook Dr. Peter M. Kagwanja Development Assistance Committee (DAC), OECD SaferAfrica

20 Participants TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

Dr. Mukesh Kapila Mr. Javier Niño-Pérez UN Resident and Humanitarian Coordinator for Sudan European Commission

Dr. Saman Kelegama Mr. Heiko Nitzschke Institute of Policy Studies of Sri Lanka International Peace Academy

Ms. Diana Klein Mr. Gérald Pachoud International Alert Federal Department of Foreign Affairs, Switzerland Dr. Rein Koelstra Ms. Nicola Palmer Ministry of Foreign Affairs, Netherlands Berghof Foundation for Conflict Studies Mr. Lansana Kouyate Special Representative of the Secretary General of Mr. Vikram Parekh La Francophonie to Côte d’Ivoire International Crisis Group

Ms. Nathalie Kröner Ms. Natalie Pauwels Ministry of Foreign Affairs, Netherlands Free University of Brussels

Ms. Elisabeth Kvitashvili Dr. Roman Poeschke United Stated Agency for International Development German Agency for Technical Cooperation (GTZ) (USAID) Dr. João Porto Mr. Ole Lindeman Institute for Security Studies, Pretoria Ministry of Foreign Affairs, Norway Dr. Michael Pugh Mr. Leiv Lunde University of Plymouth ECON Analysis Mr. Christian Ruge Dr. Andrew Mack Fafo Institute for Applied International Studies Liu Center for the Study of Global Issues, University of British Columbia Mr. Kazuhiko Sakamoto Japan International Cooperation Agency (JICA) David M. Malone International Peace Academy H.E. Mr. Negassi Sengal Mr. David Mansfield Embassy of the State of Eritrea to the Foreign and Commonwealth Office, UK United Kingdom

Dr. Benoit Massuyeau Mr. Kayembe Shamba Agence Française de Développement College of Education, Kinshasa

Ms. Ciru Mwaura Mr. Michael Small Independent Consultant Weatherhead Center, Harvard University

Mr. João Luís Ngimbi Mr. Malcolm Smart Ministry of Finance, Angola Department for International Development (DfID), UK

Participants 21 TRANSFORMING WAR ECONOMIES: CHALLENGES FOR PEACEMAKING AND PEACEBUILDING

Mr. Roland Smith CMG Mr. Salil J. Tripathi St. Ethelburga’s Centre for Reconciliation and Peace Amnesty International

Ms. Kaysie Studdard Dr. Necla Tschirgi International Peace Academy International Peace Academy

Mr. Jeffrey Swedberg Mr. Elon D. Weinstein United States Agency for International Development Department of State, USA (USAID) Dr. Susan Woodward Mr. Aloys Tegera The Graduate Center, City University of New York Pole Institute, Goma

22 Participants About the EACW Program

Senior Associate: Karen Ballentine [email protected] Senior Program Officer: Heiko Nitzschke [email protected] Program Officer: Kaysie Studdard [email protected] Duration: September 2000-December 2003

Initiated in September 2000, the EACW program follows from a conference held in London in 1999, which produced the seminal volume, Greed and Grievance: Economic Agendas in Civil Wars, Mats Berdal and David M. Malone (eds.) (Lynne Rienner, 2000). The program addresses the critical issue of how the economic agendas of armed factions sustain violent conflict and inhibit durable peace, while also assessing the role of globalization in creating new opportunities for combat- ants to finance their military operations. This hitherto under-developed field of research holds particular promise of policy relevance for those international and national actors seeking more effective strategies for both conflict prevention and conflict termination.

Beginning with an overall commitment to durable conflict resolution, the broad aims of the program are:

• to improve understanding of the political economy of civil wars through a focused analysis of the economic behaviors of competing factions, their followers, and external economic actors in conflict zones; • to examine how globalization shapes the economic interests of belligerents as well as creates new opportunities for competing factions to pursue their economic agendas through trade, investment and migration ties, both legal and illegal, to neighboring states and to more distant, industrialized economies; and • to evaluate the effectiveness of existing and emerging policy responses used by external actors, including govern- ments, international organizations, private sector actors, and NGOs, to shift the economic agendas of belligerents from war towards peace and to promote greater economic accountability in conflict zones.

Policy research and development proceed along two tracks: four expert working groups (Advisory Group, Working Group on Economic Behavior of Actors in Conflict Zones, Private Sector Working Group, and Policies and Practices Working Group) and commissioned research. EACW publications (all at Lynne Rienner Publishers) include: The Political Economy of Armed Conflict: Beyond Greed and Grievance, Karen Ballentine and Jake Sherman (eds.) 2003; War Economies in a Regional Context: The Challenge of Transformation, Michael Pugh and Neil Cooper, with Jonathan Goodhand, forthcoming; and The Democratic Republic of Congo: Economic Dimensions of War and Peace, Karen Ballentine and Michael Nest (eds.) forthcoming. A volume of analytic studies assessing policy responses to the economic dimensions of armed conflict will be published in Spring 2004. Other products include periodic meeting reports, policy briefs and background papers, which are available electronically on our website.

Policy development also involves on-going consultations with international experts and practitioners, academic confer- ences, and workshops and briefings that bring together relevant UN actors, governments, private sector actors, and NGOs. As part of a continuous outreach effort, the program has engaged in several partnerships, including with the Fafo Institute of Applied Social Science (Oslo); the Institute for Security Studies (Pretoria); the Woodrow Wilson International Center for Scholars (Washington, DC); the International Institute for Strategic Studies (London) and the World Bank’s Development Research Group (Washington, DC). We have also built a virtual network of experts and policy practitioners through sponsor- ship of an electronic list-serve, [email protected].

Acknowledgements: The EACW program enjoys the generous support of a number of donor states and private foundations, including: the Canadian Department of Foreign Affairs and International Trade (DFAIT), the Canadian International Development Agency (CIDA), the Department for International Development (DFID) of the United Kingdom, the International Development Research Centre (IDRC) of Canada, The Government of Norway, the Government of Switzerland, the Government of Sweden, the Rockefeller Foundation, and the United Nations Foundation.

More information on program events and all of the program reports are available on the program website at http://www.ipacademy.org International Peace Academy 777 United Nations Plaza New York, NY 10017-3521 Tel: (212) 687-4300 Fax: (212) 983-8246 www.ipacademy.org