Final Report Peace and Development Democratization, Poverty Reduction and Risk Mitigation in Fragile and Post-Conflict States Philip Oxhorn, Principle Investigator Institute for the Study of International Development, McGill University 20101 1 The study was made possible by generous grants for the International Development Research Centre and the World Bank. Table of Contents Introduction ..................................................................................................................................... 3 Philip Oxhorn Part 1: Case Studies Case Study: Bosnia and Herzegovina ........................................................................................... 10 Merima Zupcevic and Fikret Causevic The Colombian Case: Peacemaking and Power Sharing, The National Front (1958–1974) and New Constitution (1991–2002) Experiences ................................................................................ 51 Francisco Gutiérrez Sanín and Juan Carlos Guataquí Case Study: Lebanon .................................................................................................................... 78 Samer Frangie and Nisreen Salti Mozambique Peace and Post Conflict Development: Managing Political and Macroeconomic Risks during the Transition ......................................................................................................... 102 Calton Cadeado and Roberto Tibana Democratization, Poverty Reduction, and Risk Mitigation in Fragile and Post-Conflict States: A Case Study of Post Genocide Rwanda ........................................................................................ 133 Herman Musahara and Euthalie Nyirabega Political and Economic Policy Priorities in Supporting Post-Conflict Peace and Development in Sri Lanka ..................................................................................................................................... 163 Deshal de Mel and Shakya Lahiru Pathmalal Sudan: Multiple Transitions 2005-2011, Analyzing the Dynamics of Post-Conflict Impasse ... 191 Ibrahim Ahmed Elbadawi and Atta El-Battahani Part 2: Thematic Studies Exchange Rate Regimes for Post-Conflict Recovery ................................................................. 225 Ibrahim Elbadawi and Raimundo Soto Foreign assistance and the political economy of post-conflict countries ................................... 263 Philip Keefer Powersharing and Conflict in Competition for Resources ......................................................... 277 Michael McBride, Gary Milante and Stergios Skaperdas Clientelism or Empowerment? The Dilemma of State Decentralization for Securing Peace and Development ............................................................................................................................... 297 Philip Oxhorn 1 Producing Peace in Post-Conflict Countries ............................................................................... 311 Jean-Paul Azam Appendix Appendix 1: Case Study Guidelines ........................................................................................... 325 2 Introduction Philip Oxhorn For much of the early postwar era, Western development aid policymakers assumed that “all good things came together,” allowing them to focus policy on one dimension such as economic growth with the expectation that other goals, including political stability and democracy, would also be achieved as a direct consequence (Huntington 1968; Packenham 1973). While the increasing political and economic instability of the 1960s and 1970s exposed the naiveté of this assumption, beginning in the 1990s in the aftermath of the Cold War, Western donors have effectively adopted a similar approach when addressing the new challenges posed by fragile and post-conflict states. Understandably, donor countries have focused on the imperative of ending conflict and maintaining peace, assuming (or at least hoping) that the short term arrangements required to stop the violence would ultimately lead to both economic development and democracy. This study takes as its starting point a simple question: do policies designed to ensure peace necessarily lead to later advances in development and democratization? Although this question is relatively straightforward, trying to find meaningful answers was much more challenging. First, we1 felt it was important to include in our research team researchers from both the developed countries of the North and the developing South. This is a necessary corrective to the inevitable biases of Northern perspectives on fragile and post-conflict states, and a principal secondary goal of the project was to develop a more effective North-South dialogue for developing better theories. At the same time, we also hoped to encourage greater South-South dialogues through discussion of the various cases by the seven case-study teams. Second, we felt that only a genuinely multidisciplinary approach could begin to untangle the complexity of each case. To achieve this, two researchers, an economist and either a political scientist or sociologist, were commissioned in each country included in the study. Finally, we wanted to include a range of countries in the study. To that end, we conceptualized the selection of seven countries in this way: 1) Relatively Stable Power sharing Arrangement with Positive Economic Outcomes: Bosnia and Mozambique fall into this category. 2) Prolonged Lack of Stable Power sharing with Negative Economic Outcomes: Sri Lanka2 and Sudan. 3) Indeterminate Power sharing Arrangements: The remaining three cases are distinguished by the fact that they lack stable power arrangements, with different consequences. Rwanda stands out because it has realized considerable economic success despite the lack of any power sharing arrangement between the two dominant ethnic groups. In contrast, Colombia stands out because it enjoys the dubious distinction of having both the longest civil war in Latin America and one of the longest periods of uninterrupted political democracy in the region in terms of regular elections. Recent events suggest that the civil war is now in its last phases and may be entering a phase in 1 The project began with two principal investigators: Philip Oxhorn from McGill University and Ibrahim Elbadawi of the World Bank. Dr. Elbadawi left the Bank early in the project and was replaced by Gary Milante, although he remained on the project’s advisory committee. That committee also included Aristide Nononsi from McGill University and Samir Makdisi from American University of Beirut. 2 Sri Lanka’s conflict ended with the military defeat of the Tamil guerrillas mid-way through the project. 3 which new power sharing arrangements will be forged. Lebanon may be backsliding in terms of power sharing as recent political instability (including a short term military incursion by Israel) may have undermined the relatively successful power sharing arrangements that brought an end to a prolonged period of civil war. Partly as a consequence of these still indeterminate power-sharing arrangements, all three cases have experienced less than positive economic outcomes. To help guide the study, five thematic papers were commissioned by the World Bank and are included in the second part of this volume. Drafts of these papers were presented in the initial project workshop, held at McGill University in November 2008. In part based on these thematic papers, detailed case study guidelines were prepared by the advisory committee (see Appendix 1). More specifically, the authors of the case studies were asked to address three specific sets of questions: 1) Power sharing for Peacebuilding and Development: It is vital to the peace and prosperity of states that their monopoly on violence is ensured, but this raises the danger that the power of “strong” states will be abused. To better understand these potentially countervailing effects, the study will center on how peace agreements, intervention strategies, demobilization strategies, and arrangements for post-conflict justice contribute to securing the peace and economic development. What are the trade-offs in peace and development associated with peace agreements that increase fiscal decentralization and political federalism? How can reforms of the military and security apparatus contribute to poverty reduction and when does it reduce the risk of new or resurgent conflict? What security sector reforms are possible in the post-conflict environment and are there hard limits to the extent of these reforms? In essence, does security always trump development? 2) Participatory Governance and Service Provision: The available literature suggests that some form of participatory system is a prerequisite for a sustained peace; however, it is not clear that an ensuing democratic or participatory system has any advantage in the provision of public goods. Similarly, some literature suggests that while more participatory systems in socially fractionalized societies with strong identity politics may confer the legitimacy necessary for peace, such systems might sacrifice accountability if they create new opportunities for patronage and clientelism. Finally, while there is good evidence that suggests established democracies are better able to provide voice to the aggrieved, reducing the likelihood of civil conflict and securing civil peace, democratization is not a panacea against civil conflict, particularly if post-conflict elections may simply move the risk of conflict to a future date. This suggests a possible trade-off: