IFC's quarterly journal on public-private partnerships W INVESTMENT: Postwar promises INFRASTRUCTURE: Rebuilding seaports SERVICES: Telecom's triumph - ECONOMICS: The cost of conflict INTERVIEW: Former U.S. Ambassador Melanne Verveer RECONSTRUCTION PPPS IFC International Finance Corporation 94 1 F wofld Bank Gmap IN PARTNERSHIP WITH Australia * Austria * Brazil * Canada * Catalonia (Spain) * Flanders (Belgium) * France * Ireland * Italy Japan * Kuwait * Netherlands * Norway * Sweden * Switzerland * United Kingdom * United States * Public-Private Infrastructure Advisory Facility (PPIAF) * Global Partnership for Output-Based Aid (GPOBA) * Private Infrastructure Development Group (PIDG) * African Development Bank * Asian Development Bank * Brazilian Development Bank (BNDES) * Caribbean Development Bank * Central American Bank for Economic Integration * European Investment Bank * European Bank for Reconstruction and Development * Inter-American Development Bank * Infrastructure Consortium for Africa * Islamic Development Bank handshake Issue #9 - April 2013 IFC's quarterly journal on public-private partnerships IFC Advisory Services in Public-Private Partnerships 2121 Pennsylvania Avenue, NW * Washington, D.C. 20433, USA +1 (202) 458 5326/7 * ifc.org/ppp * handshake@ifc.org Editorial Tanya Scobie Oliveira * Alison Buckholtz Art &Design Jeanine Delay * Victoria Adams-Kotsch Disclaimer This journal was commissioned by IFC, a member of the World Bank Group, through its Advisory Services in Public-Private Partnerships department, which helps governments improve access to basic public services through public-private partnerships in infrastructure, health and education. The conclusions and judgments contained in this report should not be attributed to, and do not necessarily represent the views of, IFC or its Board of Directors or the World Bank or its Executive Directors, or the countries they represent. IFC and the World Bank do not guarantee the accuracy of the data in this publication and accept no responsibility for any consequences of their use. Cover photo D Jonathan Ernst/World Bank In countries undergoing reconstruction, "Humanitarian goals are important; relief is important-but it's the economic piece im that matters," as Melanne Verveer, former U.S. Ambassador- at-Large for Global Women's Issues, told Handshake editors. "You've got to start reconstruction by creating the mecha- nisms to have sustainable economic opportunity." But what to fix first? How to avoid "navigating by need," as Oeconomist Paul Collier says, or by idealism? Which regulatory issues demand priority? Are there proven methods to ensure money is spent as its intended? By what process can offers of support be coordinated? Is it possible to avoid the relapse into violence? For countries rebuilding after turmoil, there may always be more questions than answers. This issue of Handshake offers lessons from countries that have successfully coordinated the agendas of early relief, economic recovery and reconstruction, and longer-term development. Experts from international organizations, government, academe, and the World Bank Group talk about the importance of early investment in criti- cal infrastructure and the growing role of public-private part- nerships. Handshake authors and interviewees also consider the practical steps needed to create the right environment for investment and growth, the importance of donor coordina- tion, job training, and education, and the role of women in creating the social contract between a state and its people. We welcome your own answers to the difficult questions posed in the following pages. Write to us at handshake@ifc.org. Laurence Carter, Director Tanya Scobie Oliveira, Editor IFC Advisory Services in Public-Private Partnerships Features Investment Climate Open for business 114 Insuring progress 118 Doing good 6- doing it well 124 A "Hippocratic Oath" for donors? | 28 Economics The cost of conflict 130 TED Talk: Paul Collier's new rules for rebuilding a broken nation |34 Infrastructure Risky businesses 142 Powering up Liberia 148 USAID lends support 152 Small -scale services, large-scale purpose 54 Waiting for water 158 Cooperation amid conflict 160 Full steam ahead 166 Dialing up reconstruction 170 2| IFC.ORG/HANDSHAKE Reintegration A second chance | 76 Public works at work | 77 Putting businesswomen on the map | 78 Education under (re)construction | 80 *# Interviews Francis Cooper: Liberia lights up o Claude KayitenkoreS Meet the mediator u61 Melanne Verveer: Ambassador of opportunity I82 lFC 1 3 Contributors 24 30 Melina Heinrich Anke Hoeffler Francis Cooper Pierre Guislain Gonzalo Araya John D. Crothers is an economist in the Sustainable Develop- is a partner in the international law firm of ment Department of the World Bank, based Gide Loyrette Nouel, specializing in PPPs in Washington, D.C. and project finance. Pierre Bernheim Jeff Demon is an associate in the international law firm of is a Senior PPP Specialist for East Africa Finance Gide Loyrette Nouel, specializing in PPPs and and Private Sector Development, based in Dar project finance. Salaam, and on the Global Expert Team on PPPs Peter Buckland at the World Bank. is an education consultant on education policy Carrie Farley in fragile and conflict affected societies. is a Senior Investment Officer for IFC Advisory Ananda Covindassamy Services in Public-Private Partnerships, based in is Managing Director of Sequoia Energy Dubai, UAL Markets Finance. 41 IFC.ORG/HANDSHAKE Pierre GuislainayPotrPeck is Director of the Investment Climate Depart- is IFC's Senior Manager for Advisory Services in ment of the World Bank Group, and co-leads Latin America and the Caribbean. IFC's Fragile and Conflict Situations program. Meis Manager for Infrastructure Policy at the is Assistant Coordinator of the Donor World Bank. Committee for Enterprise Development, based in Cambridge, U.K. Jane Jamieson FacsCoe is a Senior Water Specialist for IFC Advisory is Chairman of the Board of Directors of the Services in Public-Private Partnerships, based Liberia Electricity Corporation. in Washington, D.C. Andrewis a research officer at the Centre for the Study is an Operations Analyst for IFC Advisory of African Economies and a research fellow at St. Services in Public-Private Partnerships, based Antonys College, University of Oxford. in Dubai, UAE. Ryan T. Ketchumdiretore is a Partner in the Energy and Infrastructure Energy i ret Lk C Oni asin team at Hunton & Williams LLP, based in Burnn London. Marienn Marconne Me i - imnetis Director of Georgetown Universitys George- is a manager at Castalia Strategic Advisors town Institute for Women, Peace and Security, in Washington, D.C. and was the U.S. Ambassador-at-Large for MikeGlobal Women's Issues until early 2013. is President of Mike Mundy Associates, a management consulting firm for senior port executives, based in London. Carmen Niethammer is responsible for Strategy and Knowledge in IFC's Women in Business Program. IFC 15 PERSPE VE In his March 1996 inauguration speech in Beyond the horrors of conflict itself, its lingering Freetown, Sierra Leone, President Ahmad Tejan impact on economic growth is unsurprisingly Kabbah acknowledged the challenge of spurring and overwhelmingly negative. The 2011 World economic growth in a country afflicted by con- Development Report highlights that no conflict- flict: "The tasks ahead are monumental... our affected state has achieved a single Millennium country stands virtually in ruins, with thousands Development Goal, while Paul Collier's analysis slaughtered, soldiers and civilians alike, tens of indicates that states suffering from conflict thousands maimed and mutilated, and hundreds experience a reduction in economic growth of thousands displaced, traumatized, living in of 2 to 3 percent per year of conflict. poverty, diminished in spirit and body, and the In addition, the link between conflict and pov- country's moral, physical, and social infrastruc- erty is growing more pronounced, demonstrating ture destroyed." that poverty is both a symptom and a cause of By Carrie Farley (c Andrew Jones experiece a reuctioni cnmcgot The relationship between con- flict and economic growth is not a one-way street. According to research from Paul Collier and Anke Hoeffler, low-income states at the tenth percentile of per capita income are approxi- mately twice as likely to suffer conflict as those at the fiftieth percentile. In addition, states that have experienced conflict, and its associated economic impacts, are nearly three times more likely to return to conflict within five years than states previously unaffected by conflict. This cyclical relation- ship can trap states in a vicious spiral of economic regression and further conflict. IFC | 7 national fragility. While states that successfully and destroyed infrastructure, and a lack of capi- break the conflict cycle grow quickly, those that tal funding, technology, and skilled management do not are mired in increasingly bleak circum- to turn plans and strategies into power plants stances. In 1990, 20 percent of the global poor and roads. Increasing access and transforming lived in conflict-affected states. By 2011, it rose infrastructure service delivery amid fiscal and to 50 percent. By 2025, the Overseas Develop- capacity constraints can lead states to move ment Institute expects that over 80 percent of beyond traditional public provision of infrastruc- the global poor will live in conflict-affected ture to consider other service delivery models. states. As a result, conflict-affected states have Many developed and developing countries have become a key focus for international donors, leveraged private sector expertise in the provision consuming more than one-third of total develop- of infrastructure services through public-private ment aid. partnerships (PPPs). Appropriately designed Creating economic opportunity after conflict PPPs can help governments in conflict-affected reduces the risk of resurgent conflict and states increase the availability and efficiency promotes state-building. However, selecting of service delivery, and in some cases mobilize and implementing the right policies to enable private capital for infrastructure investment. By economic growth is a task that has eluded most capturing the innovation and efficiency that pri- developed countries for the last several years. vate sector involvement can bring, PPPs can help After months, years, or decades of inter- or intra- overcome the cycle of low investment and low state violence and conflict, creating such condi- productivity that may contribute to resurgent tions is even more challenging-yet it is all the conflict. Most critically, PPPs focus on providing more vital, given the far-reaching repercussions access to basic services (power and water), access of being trapped in the conflict cycle. to markets (transport and logistics), and access to finance (telecommunications), all essential elements in helping post-conflict economies to Conflict-affected states have start moving again. become a k f - Sustainable PPPs, however, require careful struc- national d c turing to delicately balance national develop- ment and infrastructure needs with the ability more to attract and incentivize experienced private development ad. sector partners. Such PPPs recognize the need for flexibility in rapidly changing circumstances and focus on the unique challenges that different THEstates face. One particular PPP model that has THE EEDFORAN IFRAVENION demonstrated replicable success in post-conflict Basic infrastructure services create opportunity environments involves an innovative use of and spur economic development. But conflict- donor funds to develop projects that can be affected states are often hindered by damaged attractive to the private sector, as with Liberiad 81 IFC.ORG/HANDSHAKE quest to restore power to its citizens. By leveraging donor funding to enhance transaction viability in challenging cir- cumstances, PPPs can provide an output-based mechanism for donors to support infra- structure development and the broader state-building process. C a D o f An efficient public sector is a prerequisite for a well- 0 P functioning state. However, developed country experience has shown that the private em lo me t sector is sometimes better positioned to deliver neces- 0 D b sary infrastructure services. In addition, the expertise and innovation that can be gained g a 0 from well-designed private sector participation is perhaps r f even more valuable in a fiscally e b and capacity-constrained post- a t f i s o conflict environment. Working together, the public and private sectors can deliver basic infrastructure services to meet critical public needs, t ( resulting in increased opportu- 0 nities for economic growth. By l 0 b l 0 0 0 assisting conflict-affected states in delivering on their promises, the private sector can play a leading role in helping states d . e u remain on the road to peace. ig Underlin ay osiilit for economic grveowthnis anll it citiza e wsbeing e Orgaiao foconoictn *proviing securlity and juswtie. tcofit tts g m r v e e * Enorgngeooicdvlpmn n /0000 Which post-conflict ByjfeffDelmon "The test of success is not what you do when 0Ee fi a h oe,i olrtsedi you are on top," as U.S. Army General George welofatnug,ndr S. Patton Jr. famously said. "Success is how high -Ee fi ol nettemny n olw you bounce when you hit the bottom." u ol eisfiin sefrtble) In the context of countries that need rebuilding,Buoneivsrscmtoheab,opa- public-private partnerships (PPPs) can lend extraininps-ofctourestlloesnqe oomph to the bounce, boosting post-conflict chlegsFoexme,awanrgutis countries in cases where:arofewekonoenrcdlavgivsts *Government doest have the money, skills, ors p* Een' fitd th oey, eit cnte 10 1 IF.OG/ANSHK wel or fateog,ado *Ivni tcudivsttemny n olw up would beinsufficient seefrtble) But 5 onc ivstoscm otetbe prt ing in post-conflict count isilpssuiu chlene.Fo xmpe lw ndrglain MONEY TALKS WANTED: CRYSTAL BALL WALK FIRST, THEN RUN Investors and lenders assess projects based on Inmscaeitsprdtfothps-oflt the current condition of the country in ques- conrtoaheesbityefeetrngno tion. We all want those investors and lenders to tesr fln-emarneetebde believe in the prospects of the country, to bring i lsi prahst P.Teeaeecp skills and money to add bounce-that is, unlesstin,hwvrTecomiainsntul we are shareholders in the investor or lender reoceonsin,prt,adiprsmy companies, or if they are using our pensions prvdfoegcuenyeeusadpeet or savings to make these investments. In that bsns oesta r ihrlcaieeog case, we want them to be conservative, cautious orisltdeugfomheovnetad investors. Anetmns Ahe Aalofcliaervne The p erfect may b ethetittebnftinh drconf thegoen enemy of the good the long- term may be the enemy of Anteaprahishtr-rmPPrag- the now.Foexml,piaeepriecnbbouh Classic approaches to PPPs result in investors isnastogrpiin,amecmrhniv pricing risk over the 20 to 30 year life of the project. Wishful thinking aside, the current sc P tutrsfcsdo aaiydvl condition of the country is the only real basis for omn,btwtotmc rvt netet such long-term analysis and the price of the risk We otcnlc onr ed ag aia will be accordingly high. But does anyone really ivsmns Pscnb ibei ae hr want to lock a post-conflict nation into a 30-yearrenusaebedoavibltypmns PPP project that is priced based on its current (ukpyet o evcsfo-rgaate troublIn most caeitisrpruent) For texapt,cnflic int lsitcpoaces trom PP Theren tatreceve tins heo resource0 co csso s pots an -ipot a provideforeig curec reene anrsn buiesmdl htae ihrlcaieeog or nslatd nouh ro th-oenmn n the domesic econom to0usif ln-rPP invstmnt. Teymayalo fciitae eveue reinncngginshrigstucurs ht-il hl tit hebeeftsi th ieto oftegoen men lae,we th 0onr isn logrsc0 riskyplac to dobsies Ante-prah ssotrtrmPParne metsthtar fcse-o mpovn caa -y Fo0xml,piaeepriecnb ruh intruhmngeetcnrcs,0 enoc domesic uilit caaiy0 hn oc h tlt isi0 trne0osto,a oecmpeesv PP0anb onieed 0eeae aie0o suh PPstucurs ousd n apciy evl opet0u ihu uc rvt netet When apost-cnflictcountr 0ed ag aia inetet,PP0a e ibei ae hr reene 0r bae 0naalbiiypy et foreign currency revenues from natural resource sklsadafcsoefienynduti- exploitation; from the government (backed by aiiy hnohrcmlit ilb asd a guarantee from a donor or IFI); or from a cred-naeyththeNOisqezgouprve itworthy foreign government (that promises to cmeiin pay for the services for a period of time until the country gets back on its feet). After all, wouldn't aid be better spent through PPP structures where the recipient government would beItsipratntogetnldupndfn- assured of service delivery and not just aid spent? toso hti P n hti o,epcal P(NGO)Ps? tv ouesottr rmr aktrsosv NGOs will often agree to provide services to the PPBgmyntb etr nta,cet ea government under a form of PPP I say "a form" anreutoyscendpvieedfnig since NGOs are rarely run like private compa- nies. If they are not run like private companies, sco.Ago xml ol emn-lcrct then they may look for much lower rates of gisfne ycmuiiso ikdt ag return and may provide grant funding. This can of-aessuhsinCmda,wchlos be an attractive option, and in many cases the trfsbsdo oa oto eieyrte NGO has the technical and social skills needed thnaaiolfxert. to deliver services in a post-conflict country- Comntwaescmsaraohr skills that the private sector might not have. go oe,sc stoei azna However, sustainability may be an issue. NGOs, whcemorlcacmunts like development partners, tend to focus on a whnegtaigihprve problem, then move to the next problem when cmaispoiigbrhls constituents' attention shifts (when CNN broad-pu s,adie.Thprfc casts the next big issue). Also, NGOs may not mabetenmyothgod have the skills to enter into a PPP arrangement, adteln-emmyb to understand the obligations, or negotiate the teeeyo h o.I' details. While they may have technical skills, alabuthbone their commercial/financial credentials may be lacking. If an NGO is run commercially, and can namely,h tha thele NGOh ths squezhn outcprivat THAT'S ALL, FOLKS Itsimotntnttogttage0u ndeii tion of hat s PP an wha isntspcal in- 0otcnlc onre.I 0a bemr-efc tive tous shr ter or moemre repnsv PP0trcur0 r0ertanaclsiclngtr PPE 0i a no bebte;isea,cet ea and-re ulator sp c 0n pr vd4 ee4u d n fo sml scl-ouin rvddb h rvt 00e0t0r. A goo 0xmlol bemnieetrct grd4uddb omntiso ikdt ag offtakrs suha nCabda4 hihalw taifsbse0nloa cs4o eivr rte thna aioa0fxd0ae Comntywtr4ceesaeante godmoe,suha toe nTnzna which00 0 0moe loa* omnte whnneoiaigwihprvt comanesprviin boeols pumps,4 an pie.Teefc 12 *IC.RGHADSAK CODE OF CONDUCT Donors aren't the only international players who can help post-conflict countries recover-there's plenty of room for the private sector. Beside providing financing, technology, and skills, businesses can help protect human rights, labor standards, and the environment while reducing corruption through responsible business practices. The United Nations Global Compact, a strategic policy initiative that provides a voluntary code of conduct for businesses, provides a frame- work for supporting socially responsible business practices. A recent meeting on the UN Global Compact, produced in partnership with Principles for Responsible Investment, focused specifically on the challenges of implementing responsible business practices in fragile environments. One of the outcomes was agreement that the private sector will be formally included in the development agenda after 2015, when the Millennium Development Goals expire. This will help business play a more active role in sustainable develop- ment in post-conflict settings, not only in terms of trade or job creation but also in promoting transparency and good governance. A favorable investment climate speedspost-conflict recovery By Pierre Guislain One of the key challenges for governments in because the threat of relapse into conflict creates post-conflict countries is to provide employment a sense of urgency requiring critical economic opportunities to establish stability and lft people decisions. Typically there is also broad consensus out ofpoverty. As the private sector is the key engine in society that "things are broken." ofjob creation, accounting for 90 percent ofall jobs This creates a political environment favorable in the developing world, it is critical for policymak- to change-allowing governments a window ers in these countries to encourage entrepreneurship. of opportunity for implementing important The best way to do this is through a regulatory investment climate reforms. Such reforms-if environment conducive to the growth ofbusinesses accompanied by broader policies that promote and employment creation-an environment that good governance and security-can bring large promotes the rule of law, competition, predictabil- pay-offs in terms of economic growth and stabil- ity, and transparency. ity. hey can encourage businesses to transition The urgent needs and competing priorities of a from the informal to the formal sector, generat- post-conflict period present major challenges to ing additional tax revenues and reducing oppor- governments. But this phase also offers unique tunities for corruption. opportunities for broad, fundamental reform 141I IFC.ORG/HANDSHAKE INVESTMENT CLIMATE Supporting reconstruction of reducing access to finance constraints through infrstruturethe creation of property and collateral registries infrastructure and credit bureaus, restoring commercial justice, The physical destruction of infrastructure is one and improving trade logistics. Because the ways of the most visible effects of conflict. But to of the pre-conflict regime have become obsolete grow, the private sector needs a minimum level and a new framework must be articulated, there of infrastructure. Access to power is the number is potential for a less corrupt and more private one obstacle for firms in most post-conflict sector-friendly regime. countries, according to Enterprise Surveys conducted by the World Bank Group. Without ach ounty t prioritefil beieen reliable sources of energy, along with essential a derme nd tface tradef beteen trade-related infrastructure such as roads and wat is de what is bslutly nes ports, economic growth potential will be stifled. sary.dToxjudge wh iostriti oernments The private sector also fills in the gap by suppling investments and production, rather than attempt basic infrastructure such as power generation to replicate institutions from the past or from capacity or operating a port terminal. To facili- best practice economies. In addition, an early tate this, governments should create a conducive emphasis on simplification of business regula- legal and regulatory framework for private tion has proved effective in post-conflict envi- participation in provision of infrastructure and ronments (characterized by weak government help eliminate constraints to the development capacity) and can help create investor confi- of private service providers. These can play a key dence. Finally, some areas-such as commercial role in the absence of fully functioning states, justice-will inevitably require longer-term, established public utilities, and major private comprehensive reforms, but alternative methods investments. of dispute resolution, such as arbitration or mediation, can play an important role in the Economy-wide investment interim. climate reforms Following a period of conflict, the legal and Doing Business indicators regulatory framework for business operation For many post-conflict states, the Doing Busi- typically becomes outdated, requiring a com- ness (DB) indicators have proven a particularly plete overhaul. The needs range from creating powerful reform tool. The DB indicators provide or improving investment laws, re-establishing a broad overview of business regulations and or improving business registration process, help governments identify reform opportunities, addressing excessive licensing requirements, some of which can be implemented quickly. The and simplifying tax codes and tax collection, to report is updated annually, allowing progress to 1FC 115 be monitored. Successful early reforms can set ment and the private sector. Bringing the issues the stage for longer-term, broader reforms. for discussion in a public forum also increases transparency, limits the potential of back room Enabling investment in key sectors deals that benefit a select few and erode public Governments in post-conflict countries need to priate nvet et. find the right balance between economy-wide and sector-specific reforms. They need to focus on enabling the sectors that tend to attract early investment in post-conflict countries, such as Post-conflict countries often have a poor image telecommunications, construction (including the with investors. It is therefore essential to signal cement industry and business hotels), banking, to them-through business-friendly and trans- and agribusiness. To attract investments in these parent regulation-that the country is open for sectors, the government may need to adopt business. Foreign investors typically value stable conducive sectoral policies, laws, and regulations, policies and clarity of laws and regulations-and and an interim framework may be the best way their consistent implementation-over tax to combine legal security with speed of reform. incentives or special privileges. This was the experience of the telecommunica- Attracting one reputable investor sends a signal tions sector in Afghanistan (see following page). to the broader investor community, increas- ing business confidence and generating further investment, ultimately creating a virtuous cycle of newprivate sector ment and the,prinvestmentandactivity. The presence of new investors ' ~also can enhance confidence deals that bene in regulatory institutions and processes, resulting in greater legitimacy, confidence, and trust. Generating reform ownersrep Business owners are typically best suited to Photo copyrights for page 14 identify what investment climate reforms are (from left to right, top to bottom) most needed. Public-private dialogue helps these Arne Hoeln World Bank voices translate into policies. This dialogue is also Georgina Goodwin/World Bank particularly relevant in post-conflict states, where Joanna Kata-Blackman/IFC Curt CanemarkWorld Bank it can help to rebuild trust between govern- Miso Lisanin/World Bank 161I IFC.ORG/HANDSHAKE POST-CONFLICT PRAGMATISM In 2002, Afghanistan's telecommunications system was fragmented, dilapidated, and small: the five major cities had a mere 57,000 fixed lines, and the fixed line operator was not really functional. Recog- nizing that telecommunications would be critical to rebuilding the country, the government prioritized development of the sector. In 2003, the government approved a Telecommunications and Inter- net Policy, focused on accelerating sector development. It strongly endorsed private sector participation and transparent, market- based competition. Soon afterwards, the government began awarding private sector mobile licenses, without waiting for the adoption of a comprehensive telecommunication sector reform law. IFC and MIGA supported one of the new mobile operators, Areeba Afghanistan (now part of the MTN Group). A Telecommunications Regulatory Board (TRB) was then established within the Ministry of Comm un ications-a pragmatic first step toward more independent hands-off regulation of the sector. The TRB awarded additional licenses to new mobile and local fixed service providers and facili- tated interconnection agreements. It also established regulatory procedures and processes, including stakeholder consultation on all important decisions. These reforms resulted in increased competition in the sector. As of 2012, there were five licensed cellular network operators at the national level and 23 internet service provider licenses-bringing around $1 billion in private investment into the sector since 2006. As a result, the tariffs have fallen by 95 percent since 2002, and around 80 percent of Afghanistan's people now have access to telecommunication services. The sector employs more than 20,000 people. Source: Adaptedftorn 'Transforming telecomns in Afghanist by Bhavna Bhatia and Neeraj Gupta; Gridlines, PPIA and "PPIAF Assistance in Afghanistan," August 2012. Additional context provifed by author Illustration @D Aleksander Velasevic/istockphoto INVESTMENT CLIMATE INSURING By Mary Porter Peschka Political risk insurance is designed to pro- trade transactions as well as longer-term tect investors and lenders against a range investments. In the wake of the global of risks they may encounter including financial crisis and the political events in war civil unrest, political violence, expro- the Middle Fast and North Africa, inves- priation, and other circumstances. Hay- tors are increasingly turning to this risk- ing insurance against these risks makes mitigation instrument. Between 2008 and it possible for more investors to venture 2011, issuance of political risk insurance into markets where the perceptions of by Berne Union members (the leading political risk are elevated and to secure international organization and community funding from commercial banks at better for the export credit and investment insur- rates and for longer tenors. Typically this ance industry) increased 29 percent. insurance is offered for both export credit! 18 1IFC.ORG/HANDSHAKE Political risk insurance can play a particularly this type arises, those investors can and should important role in economies recovering from take recourse in the local courts. conflict. Governments in these countries are But acts of political violence (and resulting ioss often vulnerable to political risks, and because of income) should fall in a different category it takes time for the judicial system to rebuild covered by insurance. In fact, since political itself, it may be perceived to too dependent on iteftmy b pecid totodpeneto violence is often such an urgent concern of local the government and subject to political influ- investors in the reconstruction period, this could ence. These and other factors may convince an be critical for them-and to those financing investor that there is an enhanced risk, or that these investments. breaches of contract will not be adjudicated in favor of the investor. Private sector providers of political risk and export credit insurance typi- cally limit their exposure in such environments, since their mandate is to maximize their profits and minimize their losses. However, public providers-including the U.S. Overseas Private Investment Corporation, France's COFACE, and China's Sinosure, as well as multilateral organizations such as MIGA, have a develop- mental mandate placing them in a better posi- tion to offer longer-term protection. tionto ffe loger-ermproecton.Other constraints also make it difficult or impos- sible to cover existing investments. While the THE CASE FOR EXPANDING logic against covering existing investments is the C OVE RAG E lack of development benefit from such coverage However,(since the investment has already taken place), constraints in mobilizing rves fce there is a strong argument for the other side. In consraits n mbilzin invstmnt n cunties pre-conflict situations in particular, there is a that need it most. There are several reasons for serious risk of disinvestment, as investors become this. First, the rules and eligibility requirements increasingly nervous. Such disinvestment may for coverage eliminate one of the most important add fuel to the fire by increasing unemployment target groups: local investors. MIGA and other and harming the country's fiscal base, among public and private providers generally only cover other destabilizing effects. The presence of cross-border investments and loans. For incon- political risk insurance coverage might assuage vertibility, expropriation, and breach of contract, local investors cannot step outside the bounds of their own country to protect themselves from contribute to economic stability. actions of their own government; if an event of the potential benefits of expanding political risk insurance are illustrated on thefollowing pages. 1FC 119 COTE DIVORE (M GA) After a prolonged civil crisis, economic activity in C6te d'Ivoire is on the upswing and inves- cvrg sfrteeut netradalo h tors are returning to help the country address poetspiaesco edr swl sFO its vast reconstruction needs. As evidence of this tedvlpetfnneisiuino h eh renewed but cautious interest, MIGA's exposure erad.heAicnDvlpntBkisloa in the country has risen from $1.8 million in lne otepoet 2011 to $706 million in 2013. hcosrcinotebidesahghpoiy The Henri Konan Bedib Toll Bridge adifatutr r ne eeesri n One of the investments being covered by MIGA cmltd h e rdewl infcnl is the construction and operation of a toll bridge rdc rvltms mrv vrl oiiy over Abidjan's Ebri6 Lagoon. This plannedanaleitchoctrfccngso. e public-private partnership had been shelved for poetwl lopoieipratdmnta over 10 years, but construction is now under- way, backed by equity sponsors and private and i h onr.Tepoet a ae fia public lenders. MIGA is providing $145 million TasotDa fteYa 02b rjc ce is a th for th equity investor and allaofnth th dveopen nnc isttuiNeoftheNeh lender to theopoject Th*cnsrctonofte-rig i-ahihprort for th goen et0sA ijnseitn rde and* * if astutr ar ne svr-tri n unabe t mange he cty' groingtrafic.Onc copeed h nwbidewllsgifcnl re uc trve ti e,i poeovrl0oiiy and aleit choi trfi cogsin Sh project will also prvd imoran deosa tion effects- fo ute rvt sco ntaie in 5 - th conr.Tepoet wa5 ae fia Trnsot ea f h Yar212byPojc icoeagisthrikoftasfe reticin Finnc magazine . 00 A - -0 Expansion of the Azito Therrnalapoiaey40mgwtshlevidn Power Plant22,0tosoCO2eisosprya.U n C6te d'Ivoire's power sector is also seeking to rebuild as demand for electricity is growing at an lretidpnetpwrgnrtr nSb estimated eight percent annually. IFC andSarnAfi. MIGA are helping to mobilize private finance ThIFMGAclaotinwsfiiaedb for the expansion of the Azito Thermal Power absns eeomn atesi ewe h Plant, which will generate 50 percent more power without using any additional gas.prvdn$15mlinfrtsonacu,ad The Azito project will increase installed capacity mblzn h aac rmfv uoendvl by 10 percent with no upfront cost to the gov- ernment, and using combined cycle technology adteWs fia eeomn ak will result in annual savings of $60 million. This MIAiprvdnbeahocntctoero groundbreaking transaction in a country under- theqiynvsoadladpnorGobe. gomng reconstruction was recognized in 2012 as African Power Deal of the Year by Project Finance magazine. The project involves converting the existing simple-cycle Azito Plant to combined- 22,00tnso C2eisinspr er.Uo compltion theeain facilit wiit becom one ofth two.-IF an a d MIA is prvdn brac ofcnrctcvrt cycle inrasn tota caaitro 90t AFGHANISTAN (MIGA) After decades of armed conflict, Afghanistan's com- munications network was barely functioning. The country had no internet access. In fact, the state of the country's communications infrastructure was so poor that it hindered the government's ability to coordinate its own operations. MTN Afghanistan In fiscal year 2007, MIGA issued a guarantee of $74.5 mil- lion to MTN Group of South Africa. This covered its equity investment in MTN Afghanistan (MTNA), a provider of telecommunication services including mobile and internet. An additional $2 million "first loss" provision was insured under MIGAs Afghanistan Investment Guarantee Facility, designed to encourage foreign investment into the country. In 2011, MIGA issued additional coverage for MTNA's expansion, bringing the agency's gross exposure to $155 million. MTNA has contributed to the development of the telecommuni- cations sector in Afghanistan and continues to do so by expanding its coverage and product offerings. Afghanistan's mobile network has increased by seven-fold in the past five years, from two million mobile subscribers in 2006 to around 13.7 million in 2010, with a penetration rate of 47 per 100 inhabitants. MTNA is playing an important role in expanding coverage in remote areas of the country, with the number of subscribers expected to grow to over 18 million by 2014-despite facing daily security threats from insurgent forces, as well as a highly uncertain policy environment. 22 IFC.ORG/HANDSHAKE HAITI (OPIC) Wheat and wheat-derived products have long been diet staples in Haiti, particularly among the country's low-income families. Les Moulins d'Halti -In 20 10, a massive earthquake destroyed a key flour mill and animal feed facility, Les Moulins d'Haiti (LMH), which pro- duced as much as 95 percent of the flour consumed there. Rebuilding the mill required not only substantial invest- ment but also a way to mitigate the risk of doing business in one of the poorest and most unstable countries in the Western Hemisphere. OPIC provided political risk insurance to Seaboard Overseas Limited, a U.S. com- %pany working on the mill's rebuilding, operation, and maintenance through a joint venture with Continental 9 Grain Co., Unibank, a commercial bank in Haiti; 2 and the Government of Haiti. The insurance covered damage to assets or business income loss resulting ..............from political violence. Reconstruction of the facility-including a flour mill, offices, warehouse, storage silos, machine shops, and an electricity generating plant-began in February of 20 10 and was completed in December 2011. Along with increased produc- tion capacity and more modern equipment, the facility was rebuilt to handle greater seismic activity. Rebuilding Les Moulins d'Haiti has created 150 local jobs and increased the supply and distribution of flour through- out Haiti. f IFC 123 INVESTMENT CLIMATE DOIN GOOD orng it well The donor community can play a critical role in the transition to longer-term stabil- ity and development after conflict-start- ing shortly after the conflict has ended. And although the role of the private sector in achieving peace and development has historically been ignored, the good news is that the private sector has now become a priority for many donors. 241 IFC.ORG/HANDSHAKE Many factors impact the likely success ofdonor support to post-conflict private sector development (PSD). The Donor Committee for Enterprise Development (DCED), which works with donor staff experts, and field practitioners to tease out joint lessons, prin- ciples, and guidance based on real-world experience, shares here the elements common to most successfulprojects: DESIGN PROGRAMS FOR PEACE- BUILDING IMPACT Contrary to the belief that donor programs involving the private sector only impact economic development, we now see that such interventions can be valuable across all aspects of peace-building. This has rarely been recognized, although the opposite-that donor programs should at the minimum "do no harm"-is better documented. Designing programs that achieve these broad-reaching impacts requires a deep understanding of the conflict and needs to be coupled with careful monitoring of program impacts. DONOR CHALLENGES IN RECONSTRUCTION * Identifying specific entry points for economic recovery when everything needs fixing; * Delivering a tangible and rapid peace dividend for the jobless without distorting incentives for long-term investment; and * Coordinating efforts with many, often unfamiliar stakeholders-including the military, relief agencies, and multinationals. IFC 25 PRIORITIZE SUPPORT AND RECOGNIZE TRADE-OFFS Prioritization of donor support is critical, as is avoiding the temptation of trying to do too much, too quickly, and overestimating the ability to deliver change. This prioritization is tricky, as it depends entirely on the context. Applying Growth Diag- nostics is a good starting point to help donors organize information and identify effective approaches. Since constraints to growth are likely to be present in all contexts, political economy and conflict analysis-combined with wide stakeholder consultation-can help identify the most pressmng issues that can realistically be addressed. Starting on multiple simultaneous tracks has proven effective. This includes measures to produce quick wins, but also efforts to lay critical foundations for medium to longer term development. It also implies a combination of macro-economic and regulatory reforms on the one hand, and more direct interventions on the other. Focusing reforms at the right level can help too. Where no legitimate or functional cen- tral government is in place, reforms may at first be more effectively delivered at the local or regional level. A constant task for donors is to find a sound balance between short- and long-term strategies, peace-building, and economic development goals. The implica- tions each may have for the other need to be explicitly considered when programming. ADAPT TO FAST-CHANGING ENVIRONMENTS Programming approaches in post-conflict countries need to be flexible, to allow time to react to changing situations and to reallocate resources when new opportunities arise or conflict dynamics deteriorate. Donors should also be prepared for key actors in the government to change, and build reform efforts around mul- tiple stakeholders and key individuals in society with staying power. These can include business leaders, private sector representatives, and ofhcial in government ministries. 261 IFC.ORG/HANDSHAKE COORDINATE WITH OTHER DONORS Thbis is a recurring theme, perhaps because donor coordination in post-conflict countries faces many obstacles. More than elsewhere, donors in post-conflict countries are under pressure to spend sub- stantial amounts of money in a short time, which can be a disincentive for coordination and pooling resources with others. Yet the risks of a fragmented and incoherent approach remain high. An obvious entry point for coordination is in the research and gathering of up-to-date information, which is difficult for any organization to successfully accomplish on its own. Multi-donor trust funds can be a practical mechanism in this case. Coordinating policy advice to the central government on business environ- ment reform is more difficult, but very important. Business environment reform efforts may not only improve the conditions for doing business, but also contribute to improved state capacity and perceived legitimacy. In several countries, donors set up a country group on PSD as a regulat forum to share information or formulate common positions. CREATE ALLIANCES WITH UNFAMILIAR STAKEHOLDERS Achieving positive results in post-conflict countries depends on collaboration with other actors, some of which may be beyond the traditional "comfort zone" of donor organizations. This may involve working closely with humanitarian groups to ensure market- integrated relief, or relying on international military forces for logistical support and security, especially to reach remote areas. Working with multinational companies on governance issues or as partners in developing value chains can be equally important. For example, Heineken is developing local maize and sorghum supply chains in Rwanda and Sierra Leone, with co-funding from the Dutch Ministry of Foreign Affairs. Keeping an open mind and following a pragmatic approach to such collaborations can help donors navigate more successfully through the challenges of post-conflict programming. IFC 27 Photo @ Jushua Kruger Donors are usually generous in post-conflict situ- Economic Co-Operation and Development ations, providing advice, expertise, and funds to (OECD) recognized in its 2010 report, Do No help fragile countries get back on their feet. The Harm: International Supportfor Statebuilding. idea is to move beyond economic development, Policy reforms and aid can undermine the state's rebuilding the entire state ecosystem, including ability to fulfill its basic functions: provide institutions, civil society, and core government security and rule of law, raise revenue through functions. In recent years, well-meaning benefac- taxation, manage economic development, and tors have reached out to countries as diverse as provide public services. For example: Bolivia, Sierra Leone, Afghanistan, and Nepal Aid delivered outside state budgets can after-or even during-disruptive conflicts. prevent governments from developing public But abundant resources are not enough. financial management skills, including Sometimes, good intentions generate harmful budgeting, planning, accountability, and side effects. This is a risk the Organisation for coordination. 28 1IFC.ORG/HANDSHAKE INVESTMENT CLIMATE * Donors can undermine "shadow public political settlement or receive approval from sectors," especially where vulnerable gov- local elites, as could happen when an ethnic ernments have little experience delivering minority group is left out. In such cases, services. This denies governments the chance donors may need to consider alternative to build critical service delivery capacity power sharing arrangements. themselves. Donors need a deep understanding of the * Generously-funded development programs interaction between NGOs and civil soci- can create a local "brain drain," making it ety before engaging with them. Failing to harder for governments to hire and keep top understand this can exacerbate tensions in talent. state-society relationships and interfere with * Failing to grasp the impact developmental political processes. policies have on local political dynamics can Donors can positively contribute to state- undermine "buy in" by powerful elites. building when their actions support per- Theceptions of state legitimacy-for example, donors understand the tradeoffs between deliver- post-cnf setin. ing aid and causing unintentional harm to the statebuilding process. While circumstances vary Restoring livelihoods and creating employ- by country and program, the OECD's findings pp p p can be used in designing effective post-conflict post-conflict settings, many of whom live in aid programs. extreme poverty. Donor programs that con- Fortribute to livelihood protection can support For exmple:state legitimacy, but can cause harm if they * Big-picture strategic objectives may not reduce employment in the informal economy. always align with local statebuilding goals. Understanding local conditions, including For example, donor country policies to the politics, Culture, and history, is important promote regional economic integration, limit for designing and executing effective pro- global warming, or promote human rights grams in post-conflict areas. Donors will need may have implications when applied locally more workers on the ground than they would in a post-conflict setting. Donors should rec- in other development programs. ognize and consider these potential conflicts when designing their programs. Adapted from Conflict and Fragiliy: Do No Harm: Interna- * Support for electoral processes can be tional Supportfor Statebuiling, OECD 2010. harmful if they do not lead to an inclusive 1FC 1 29 Anke Hoeffler is a research officer at the Centrejfor the Study ofN Aftican Economies and a research fellow at St. Antony's College, University of Oxford. Her research interests are in the area of political economy, focusing on the economics ofconflict and the relationship, between democratization and development. Here, she talks to Handshake about how economists calculate the price of war, and why the ')eace dividend" is critical to recovery. The cost iconflict Photo 0D Rick Bajornas/UN Photo ECONOMICS What does it mean when economists speak of the "cost of conflict"? For economists the costs of conflict are not restricted to the fatalities of armed conflict. Costs include deaths and disabilities due to the conse- quences of war, and the economic losses to the country experiencing civil war, their neighbors, and the rest of the world. One of the most recent efforts to quantify the costs was undertaken by the Copenhagen Consensus Project and estimated the cost of the average civil war to be in the region of $203 billion. Economists arrive at a figure like this by using a counterfactual approach that compares the path the economy takes during and after the conflict, with the likely path the economy would have taken in the absence of conflict. * Economic costs are estimated by summing the cost to the war economy (the country in conflict), the spill-over cost affecting neighboring economies, and the legacy effect of war, using the actual average value of income, the average length of civil wars, the average number of neighboring countries, and an assumed discount rate of 5 percent. * Health costs are estimated by the impact of war using the concept of Disability-Adjusted Life Years (DALYs)-one DALY can be thought of as one lost year of healthy life. The average civil war is estimated to cost half a million DALYs per year. DALYs are then priced and discounted to derive an estimate in U.S. dollars. VOL-___ * Global costs, which include refugees, drug fact, recurring civil wars are the dominant form trafficking, and terrorism, are very difficult to of armed conflict in the world today. Economic estimate. This can be "guesstimated" to be of characteristics also determine conflict risk, with the same magnitude as the total cost to the income levels and growth robustly correlated war country and its neighbors. with conflict onset. This means that strong Admittedly, these estimations are imprecise. economic recovery is crucial to avoid a cycle of However, they do provide us with a guide to war and underdevelopment. measure the cost effectiveness of interventions. All three rounds of the Copenhagen Consensus How long does recovery Projects suggest that conflict prevention and usually take? intervention strategies are very cost effective and that focusing international efforts on these strat- Countries experience higher than average rowth egies is hugely beneficial for development-not g g g only in the war affected country and its neigh- the "peace dividend." Post-conflict economies bors, but also for the global economy. grow by about 1.6 percent per annum less than peaceful states, but once the war ends their economic growth rate increases by about 1 per- Scent. Given that the average civil war lasts about Sseven years, this general pattern means that it takes 22 years on average for these economies to recover-that is, to revert back to pre-war income levels. What is the most common barrier to rebuilding? How can outside What factors can predict a organizations help? economcrrecoerykelcruciadtoofvidoafccleto Acountry'sikelit Economies cannot rebuild after war with ongo- Forty percent of civil war countries revert back ing lower-level violence. The message is simple: to war within a decade, showing the critical there is no peace dividend unless the country is importance of postwar economic recovery. In at peace. Governments should therefore concen- trate their efforts on ending all violence. 32 1 IFC.ORG/HANDSHAKE t TED IDEASWOR4TH-SPREADING Long conflict can wreck a country, leaving behind poverty and chaos. But what' the right way to help war-torn countries rebuild? In his widely circulated 2009 TED Talk, Paul Collier explains the problems with current post-conflict aid plans, and suggests two fresh, complemen- tary approaches, summarized here for Handshake readers. Paul Collier is Professor ofEconom- ics and Director of the Centre for the Study ofAfrican Economies at Oxford University. He researches the causes and consequences ofcivil war, the effects of aid, and the problems ofdemocracy in low-income societies rich in natural resources. 341 IFC.ORG/HANDSHAKE ECONOMICS THE CONVENTIONAL APPROACH 0 So that's the con- ventional approach. I think that denis, a poile We see that there is no quick fixT, certainly no brough INt quick security fix. e w p u WATCH THE TED TALK Paul collier's new rules for rebuilding a broken nation. IFC 1 35 RECOGNIZE THE INTERDEPENDENCE Once interdependence is OF THREE KEY ACTORS recognized, what follows is an expectation of mutual commitments. THE SECURITY COUNCIL Peacekeeping is a cost-effective approach that increases secu- rity, if the commitment is for at a least a decade. THE DONORS Post-conflict aid is key, but WAv economic recovery is inevitably Security, investment/aid, and slow. Again, a decade-long reform work together to commitment will ensure produce economic recovery- better results. peacekeepers' most promising exit strategy. * Photo D Albert Gonzilez Farran/UNAMID THE POST-CONFLICT GOVERNMENT An inclusive approach to policy and economic reform is the only path forward. 36 IFC.ORG/HANDSHAKE **** FOCUS ON THREE CRITICAL NEEDS JOBS Young men need work-fast. The con- struction sector, which typically suffers during conflict, is the best place to start to generate jobs. An inflated civil service is unsustainable. IMPROVEMENT OF BASIC SOCIAL SERVICES Independent service authorities will split the functions of a monopoly line ministry into three pieces: * Planning/policy function. * Delivery of services on the ground. * Public agency that channels money to service providers. This approach allocates money coher- ently, making NGOs accountable as they compete for resources. Services will be "co-branded" by the post- conflict government. Gradually it will shift from a politics of plunder CLEAN GOVERNMENT "Clean" governments track how funds ' are allocated, providing money to the hope.budget alongside significant scrutiny. IFC 137 LEGALEASE -Tiaha l - - - - - &moCents legal lessons from post-conflict PPPs By John D. Crothers &Pierre Bernheir Public-private partnerships (PPPs) are an Atral pnosadfnnilisiuin essential component of the overall economic reurwclsutrdpojtsihscreah effort required to provide necessary infrastruc- flw-onesaryesytfidDspeth ture to post-conflict countries. However, donor osals oee,tesceso otcnlc aid usually precedes any consideration of PPPs, PPdensongvrmtofialpuiga and even when it's time for PPPs to make an pirt ntepoet otlkl osced entrance, these partnerships are not always isedo hs eddtems.Oc fiil adapted to the infrastructure construction or hv salse ucsfltakrcr,mr rehabilitation ~ ~~ obtaces hoevr,teuces ofa post-conflict cutis hlegn Pscnb rpsdt h akt 38 | IFC.ORG/HANDSHAKE Our work on pioneering PPPs in post-conflict inthhsorofhecuryadhepges countries such as Bosnia and Herzegovina, acopihdsnet oflt.Tswllep Timor-Leste, Kosovo, Rwanda, Sierra Leone, covytthpraescorameralti and the Solomon Islands has reinforced this es- p son, among many others. Despite the uniquenessdeitdbmanramei. of each situation, success can hinge on just a few key factors. Here are the tips we convey at the start of discussions:Inentoahtlswrte BUILD A GOOD HOTELfisinrsuc reb lto Surprisingly, a good quality business hotel is the reoa dinEs rn uop first key infrastructure need for a country recov- ering from conflict-because, like the airport, a hotel of international standing serves as visitors' gateway to the country. The hotel is a straight- forward infrastructure and business model, an easy win because international consultants and foreign investors require a place to stay, meet, W IHLWO A S and work. The structure itself is also one of the first positive signs to the world of the state Oeo h is ak ftelglcnutn of economic development of the country. The assigtegvrmn nlucigaPPi primacy of this step has been proven over and toassthlelfrmwkancmpibiy over: International hotels were the first infra- structure built or renovated in Eastern Europe in rr eckeigatoiyhsbe oenn the early 1990s after the fall of the Berlin Wall. Sierra Leone's first post-conflict project was also ise t w eilto,a nKsv n a hotel.- s REASSURE INVESTORS ta rfe t""o htagvrmn a Post-conflict countries usually benefit from an benstlihdsoudwrvrtothodla additional effort in marketing the country as orwifrnelastbeptnpac?Th recovering or fully recovered. This could be donepectinhateollwrpestsarvou in te inormaionemorndumbyhghliht conviey tod uth prvae seplcrs ls a eraitoi revngoaed.i atrnErp inth e 9r fal fth-BrinWal WHIC LA RA S On*ftefis ak o h ealcnutn asitngtegoenet0nlunhn0aPPi to assess th lglfaeokancoptbly wihth rooedPPprjct0he tmo ray eceepigauhriy a be0gvrnn the coutry fo a tranitiona peidi0myhv isudisow eiltin si0Ksv n Tio 0Lse -an qusin folw"hc la*d e-ppy" Iste ewlw esgedt be teporar lietepaeepn auhrt thtdatdi? Nw htagvrmn a benetalsed0hul ereettoteol0a or wat0rneast beptinpae?0 h pecpinta0teodlwrpesnsapeiu in te iforatin mmorndu by ighigh- rgim an mut berepace isals a actr i moin forward IFCA|S3 TOO MANY ADVISORS MAKES FOR BAD LAW teei ocerlgltte h P otatwl Another challenge of the legal frameworkcopnaeteriteaterfrlllim may arise when a post-conflict country has rltdt wesi fln.Csoayrgt enacted too many laws with too many advisors ofidgnupelevrthrladmyls financed by various donor funds and countries. bepoctdyanwlndawhihmgte In theory-and in a stable country-laws are apial.Acrann hi plcblt o proposed by the government and approved after no)adthprcueshyetilfrarjc, debate by the parliament. The civil servants i e lmn falgldedlgnepirt drafting the laws are products of the legal culture srcuigaPP of their country, whether it is common law or civil law. The result is compatible with the legal GO EN NTCU ERA S system even if the law might not meet interna- tional best practice in some respects. By contrast, A AKCPCT a post-conflict country often receives grants to Adiosadpvtenetrsnps-cflt upgrade its laws and regulations through the cutisas ufrfo ako xeine assistance of legal advisors who will come from intuioacuteprsInomcss,fmr other countries and even different legal systems. cilsevnsmyhelftheourydig They may produce a PPP law or land regime law tecnlc;i tes eti tncgop that does not fit with other laws, or mesh with myb ail iqaiidt oki h e the country's legal principles. amnsrto.Tenwcvlsrat ih o LAND IS USUALLY A MAJOR PROBLEM is n onr oln u t is Pswl Conflicts are often linked to land. But if the land cnlc onre ihanwamnsrto,i' registry burned to the ground during the con- flict, how is ownership evaluated for an eventualcoslatdvinthgvemntntefrt PPP? Assessing and mitigating this risk will be PPwilne ofcrintslanngpid critical. The international legal advisor working we lnigtepoet with the government will investigate this matter there ist nca clear legale title Theor PPP cotrchwl likely 0 - reur thtgvrmn aeters0n copesaeth pivt pate0oalcam related-0 toonesi ofln.Csoayrgt ofndgeou peopl ovrterladmyas bepotce b00ewlndlwwhc igtb aplcbl.Acrtiig0hi ppiailt0o not) an th5rceue thyenalfo roet isakyeemn falga u iienepirt Atutrn A PPE GO EN EN O NTRAT MAY0LCK CAACIT Advisors an0rvt inetosi ps-flc countries0 0 alosffrfo a lac ofexerene insittioalcontepats In so ecss, r e benefi fro th suevso0n xeineo the 0 0 prviu emlye.Rgrleso hpcf ic, nyconty*olin ou it-is PPswl nee tmeto djstan bul0aait.I ot coflctcont0e wit a e d iitrto,i' crca t0e aiethstme0h itratoa cosltn avsigth ovrmetonte is ...... P, V boom- BE PREPARED FOR CAPACITY BUILDING IN LOCAL COUNSEL The international legal consultant may experi-X ence some difficulties with local lawyers-who, like the new civil servants, may lack the experi- ence necessary for PPP or large commercial contracts generally. Because local lawyers will not have had the opportunity to analyze and apply the new laws being put in place, which will change often as the project moves forward, both international and local lawyers will have to-dw be prepared to learn as they go. This may require the drafting of sector-specific or project-specific laws to allow the project to proceed smoothly. RESULTS MAY VARY It is a special challenge to work on pioneering PPPs in post-conflict countries. To succeed, projects require adaptability, innovation, and perseverance from all parties. On our list of proj- ects in post-conflict countries, one has failed, one has succeeded, one has been "on hold" for almost two years, and two are just starting out. Given the trauma these countries have experienced in the past, however, advisors and investors can take special pride in trying to make these projects work, especially if they ultimately triumph. P t 0Ddpl ..W-0- A1) Private participation in infrastructure (PPI) patterns in the "riskiest" of countries- those that are emerging from conflict-show that affected nations typically require six or seven years to attract significant levels or forms of investments in infrastruc- ture from the day that the conflict is officially resolved. The first infrastructure investments to arrive in conflict-affected countries are in sectors where commercial risk is relatively low, primarily in mobile telephony. Private investments in sectors where assets are harder to secure-such as water power distribution, or roads- are slower to appear or simply never materialize. By Gozl Araa n Jordn * *n INFRASTRUCTURE Recent World Bank research confirms the causal relationship between sovereign risk and levels of investment in public-private partnerships (PPPs) in infrastructure for developing countries. Understanding that link is vital because it raises the stakes for investment success or failure above the level of the PPP itself The message is that for governments to benefit from competitive participation of the private sector and the resulting efficiencies, all hands must be on the wheel. This includes not just utilities and line agencies, but ministries of finance, economy, and planning as well as legislators-all the way up to the office of the president. Decisions on national debt restructuring, rules governing repatria- tion of capital, or expropriation practices, which previously may have seemed removed from the considerations of market interest in a single investment opportunity, are in fact good predictors of the levels of investment. By contrast, sovereign risk ratings are not a powerful predictor for overall levels of Foreign Direct Investment. In other words, investors in industries like oil and gas, minerals, or forestry will find returns commensurate with the challenges associated with investments in high risk countries. Infrastructure investors-in both greenfield and in existing assets-are much more sensitive to sovereign risk. In short, country risk ratings-which aggregate several politi- cal, economic, credit and financial conditions, and behaviors at the sovereign level-can be used to explain a significant part of the differences among countries trying to attract investment in infrastructure. CONFLICT IS THE CRITERIA Embedded within country risk are multiple traits that are affected by political and economic stability. For this reason, few invest- ments can be considered higher risk than those that require long- term periods of return and that go into conflict-affected countries. IFC 43 As the graph below illustrates, conflict-affected mobile telephony sub-sector. The countries that countries are poorer than other developing need the most typically get the least. countries, have smaller economies, and attract How long, then, does it take for investments in less private participation in infrastructure, both the form of private infrastructure commitments in absolute terms and as a share of their popula- to return to conflict-affected countries? What tion. Not surprisingly, levels are lower still in sectors are more likely to attract private part- those countries characterized as having weak ners or investors and to close transactions? By or non-functioning governments. Whereas a zeroing out end-dates of conflicts for a set of 31 developing country that has not suffered from countries that have suffered from conflict over recent conflict will attract, on average, $22 of the the last 20 years, we can establish a fixed point PPI per capita, conflict-affected countries with from which to consider investment trends. That functioning governments will attract about $14 is, "Year 0 (Zero)" is the year at which a conflict per capita of PPI, and governments with non- is considered to have terminated in a country functioning governments will attract about $9 so that conflicts which ended 15 years apart can per capita-most of which is coming from the be put on the same timeline. By creating this normalized timeline, we can see that investments GDP and PPI per capita in developing countries, conflict-affected countries, and conflict-affected countries with weak or non-fimctioning governments (1990-20 10). 1852 $2 IN Non-conflict countries zern o Conflict c ni tcountries the lat 2 Weak, non- functioning governments Average GDP per capita (us$) PPI per capita (US$ per person) 44 IFC.ORG/HANDSHAKE trickle in over the first five years and then begin elasticity of demand sufficiently high for mobile to increase after year five, finding their peak at operators to accept higher levels of country risk. the seventh year. Mobile investors have been active in countries like Somalia during a time when there is little SECTOR MATTERS government structure, for example, and in Iraq just a matter of weeks after the country was last When the data are viewed by sector, however, the invaded. story becomes more intriguing. In the first four Other sectors with larger investment require- years, with only a few exceptions, only telecom investments have found their way into countries that have just emerged from conflict. These are almost entirely from mobile licenses and toll roads, electricity, and water utilities-have related investments. This single sector concentra- lra ies. ithonl ew excetn tion may be because the cost recovery period pria e o ntos seto rs no e for mobile investments is extremely low, the c t t r ix s technology sufficiently diffused, and the pricefor Number of private infrastructure investments and PPPs in post-conflict countries, with sector breakdown PPI Projects o0 2 TOTAL - - - - - - - - - - - - - - - - - - - - mTelecom s-eTransport 1 V-V 1 a.5OA toOlFEnergy 4 Water S2 16 16- 1& 16 1 6 TOTAL -------------------- C3 V, 6 jF ii4TOTAL U ne 4 te With only a few eTOTAL 5 V-V f-I -jF4.7TOTAL ~6 V' ' ' ' ' V j j j3TojF13OTL 7 961-j O 9F JF jF 94 46 *iwii iA k o.4i 17ToTAL 8 9F 9 F 99 9F 9F 4 1&~ii. 11 TOTAL 9 16- V-j j F i 6TOTAL 1FC I45 By focusing on a sector that has longer-term cost off-take agreements typical of power generation, recovery periods, it is easier to see the effects of water, and wastewater treatment plants can cover conflict on investment. In energy, among the 31 for a larger part of sovereign risk. In addition, countries studied, there is only one case of a pri- the assets can be physically protected and secured vate investment in the first five years post-con- more easily than distribution networks. Out of flict. Disaggregating the sub-sectors of energy, it 28 total energy projects in these 31 countries, is clear that more than half of the investments 19-or two-thirds of the total-are in electric- are in power generation. In these cases, off-take ity generation. Only one electricity distribution agreements for power purchasing can minimize investment was made in the first six years from exposure to commercial risk-as can other credit the time the conflict ended. The only gas distri- enhancements, including political risk insurance. bution investment came eight years after conflict This is consistent with regressions run on the ended. effects of country risk to greenfield projects versus concessions. Greenfield investments have RISK/RESULTS a much wider range of reaction to sovereign risk For conflict-affected countries, data on num- than investments in existing assets. This sug- bers of PPI transactions successfully carried out gests that guarantees, credit enhancements, and within nine years of a conflict ending illustrates how difficult it is for these countries to attract private infrastructure invest- Number of private energy projects in post-conflict ments. Very few investments took countries by sub-sector place in the first five years after conflict ended, and nearly all of those invest- PPI Projects ments were in the telecommunications 0 0 TOTAL ---------------------------------------- - sector-primarily in mobile telephony. -4 Electricity distribution Energy investments took six or seven 1 0 TOmAL years to mobilize and came primarily 2 0 TOTAL Electricity generation ra Gas distribution 3 1 TOTAL ments that are often characterized by 0 uI Electricity transmission ~ ~'~EecriitOrasmsso sovereign-backed off-take payments, dollar denominated transfers, and an 5 4 1 TOTAL 8 TOTALasset footprint that is much easier to protect from attack than a distribution 7 - k 6 b b L 6 TOTAL network. 8 4 46 6 A 7 TOTAL Graph sources: PPI Database, World Development 9 1e 5 TOTAL Indicators, and authors' calulations. For the full article please con tact handshake@ifc.org 462c IFC.ORG/HANDSHAKE M I A s; i p p * ~ r - ae w, w w w w n INFRASTRUCTURE After 14 years ofconflict, Liberia was a shattered 128 megawatts (MW), about half of which was country Over 200,000 people had been killed. provided by the Mount Coffee Hydropower Professionals had fled, taking their technical and plant, and served 30,000 customers. managerial skills with them. Infiastructure was But during and after the war, Liberias entire devastated, leaving the country with limited access electricity system, including Mount Coffee, was to power, water, and transportation. Businesses col- destroyed and looted. All metal in the plant, lapsed along with the economy, pushing the major- including the turbines and the wiring in the elec- ity ofLiberians into deep poverty. Reconstruction trical distribution network, was stolen and sold would be long and difficult; restoration of electricity for scrap. Restoring power-a critical factor in would be a key part of the process. rebuilding homes, businesses, schools, the health system, communications, and other public The end of Liberia's brutal civil war in 2003 services-would be a key element in rebuilding brought peace, but it didn't turn the lights the country after the war. back on-at least not right away. The country's President Ellen Johnson Sirleaf, elected in 2006, electricity sector had been completely destroyed made restoration of electricity a priority. Under during the 14-year conflict. Before the war, the the Emergency Power Program, the Liberia electrical system had a generating capacity of Electricity Corporation (LEG) was reestablished sP . ower - thecontybfterteiar Photo C Travis Lupick in 2007. Limited power was restored in the capital, Monrovia, using 2 MW diesel generators. Results were mod- est but symbolically important: a row of lights lit up a street in Monrovia, and 450 commercial customers were connected to the fledgling system. The long process of rebuilding the country's power infrastructure had begun. But without technical and managerial capacity, the process of rebuilding was too slow. To address this, the govern- ment decided to turn over management ofLEC to a private sector firm with substantial experience in the sector. IFC advised the Liberian government, LEC, and a donor, the Norwegian govern- ment, in the design and execution of a five-year management contract to oper- ate LEC. After an open tender process, the contract was awarded to Manitoba Hydro International (MHI), a Cana- dian power company, in April 2010. PRIVATE SECTOR MANAGE- MENT DEL/VERS RESULTS Under MHI's management, LEC began rebuilding the electrical distribution system in Monrovia, with impressive results. Between 2010 and the end of 2012, the LEC: * Added over 12,000 new connections, reaching an estimated 50,000 people;ir M D * Increase revenue by 160 percent; at a rate reflecting costs as if the project were * Decreased losses by 21 percent; commercially financed, and channeling the " Moe tan dubld pek lad;corresponding amount to a trust account. These *funds will be used to finance plant O&M, debt * Improved fuel efficiency by 33 percent. service, and future investments in the sector. This pricing structure also maintains a cost reflective Although capacity was low, at only 20 MW, it tariff and avoids creating market distortions was sufficient to begin rebuilding the overall and roadblocks to future private investment in power infrastructure and lay the groundwork for new generation. The revised contract includes gradual expansion. new targets-i5,000 additional connections, improvements in collection rates, better opera- THE NEXT PHASE tional efficiency, and a reduction in losses. It However, power generation relied on expensive Monrovia diesel generators. Electricity tariffs are over $0.50 per kilowatt hour, among the highest in the world and too expensive for most Liberians. EXPECTED RESULTS And low generating capacity meant there wasn't Power capacity in Liberia is expected to enough power to support the needs of busi- nesses, hospitals, schools, and ordinary people. quadrupl toroer 80 MW. C eneydo More capacity at affordable prices would be which are costly and more harmful to the necessary to keep the post-conflict reconstruc- environment. tion process on track. tionprocss o trak. 0At least 48,000 new connections will be cre- Reconstructing the Mount Coffee hydropower ated, providing an additional 250,000 people plant was a logical next step. This would add in Monrovia with electricity. up to 78 MW of power capacity during the wet season and increase the number of new electrical connections. To do this, the Liberian govern- from 25 to 12 percent, while collection rates ment and its partners envisioned the creation are expected to climb at least 97 percent. of a project implementation unit (PIU) within 0 Up to $30 million annually is expected to LEC to manage the reconstruction of Mount be available for re-investment and expansion Coffee. It also would require modification to the of the electricity system. These funds will be management contract with MHI. managed under a transparent governance Most important of these was a tariff structure system. and governance framework for the revenue gen- erated by Mount Coffee. This will be achieved by pricing the power provided by Mount Coffee 50 1 IFC.ORG/HANDSHAKE from the USAID video W a h e t "Starting From Zero: Rebuilding Liberia's Electricity Sector" ... .. .. .. .. ... .. .. .. .. .. Post-conflict challenges in Liberia's power sector1 svya g a l v alid T The p4lyearcnv war left the country in darkness. 4 44~ damp wass breahed Thear thermazin plnsweeasolf distribution network including thehe subsatinsswer poErgn seorvtsco Rebuldin th porteducur theh LE'sreontrcton electorcoityet inspie futher pryogrucess. Rebilingth inratrutue wthpriat Theerifirdtoreiepsarttowardccesvqualfiedgrofes electric tyt waecreuinsd tedetfurtshradpmaintai credibilitngithecustfrrstructulleaswwit localaan sectortcommitments wasrthenkeyutoisuccess In post-conflict situations, resources and For the long-term development of Liberia's expertise provided by the international donor power sector, USAID supported the Liberia community can contribute to the rebuilding of Energy Assistance Program (LEAP). It devel- communities, national and rural infrastructure, oped a National Energy Policy and intro- and economies. In Liberia, the United States duced pre-paid metering, which increased Agency for International Development (USAID) collections, improved LEG'S cash flow, and helped President Ellen Johnson Sirleaf deliver on led to more responsible use of electricity. her promise to turn the lights back on through a LEAP also ensures that renewable and clean number of complementary initiatives addressing energy plays a part in national energy policy. short-term needs and long-term development: The Liberia Energy Sector Support Program * The Emergency Power Program re-established is developing two hydro and two biomass the Liberia Electricity Corporation (LEC) generating facilities over a four-year period. and installed 2 megawatts (MW) of generat- This $19 million program will reach the rural ing capacity in Monrovia, enough to power population, much of which has never had some street lights and buildings. This modest electricity before. effort was the first visible sign of progress on Many challenges remain before Liberia's energy rebuilding the power sector after the war. sector can fully support commercial and resi- * USAID financed the construction of a diesel dential power needs. Even today, fewer than 10 generation plant on Bushrod Island. In less percent of the population has access to power. than one year, it added 10 MW of power But USAID's efforts, in partnership with the generating capacity, doubled the number Liberian government and other donors, have of customers, and spurred development of furthered progress and momentum that is the electrical transmission system, making contributing to the development of the overall increased power generation possibles system and Liberia's economic development. -nryAssac rga LA) tdvl 4 ~44 4 44~ ~ 4 4 44~ 4 4 4 4 ~ 4 4 4 44 14 4 ~ 4 4 4~ 4 4 4 4 4 4 4 4 ~ 4 ~ 4 4 4 "44 * s * 1 4 4 4 ~4 4~ 4 4~ ~ ~ 4~ 4 444~ 4 4~ ~ 4 4 4~ 4 4 44~~ ~ 4 44 4 444 4~ 4~ 4~ 4 4 4 4 4 * -m * is * 5 ~4 4 ~4 4 44 4~ 44 4 4 44~4~~ 4 4 44 ~4 4 44 ~444 ~4 4 4 ~444 4 4 4 IFC 153 4< ~ INFRASTRUCTURE LARGE- SNIALL-SCGALE SCALE SERVICESSC L PURPOSE 541 IFC.ORG/HANDSHAKE Small-scale private service providers (SPSPs) that up to a quarter of the urban population have long played a quiet but important role in Latin America and nearly half of urban in the provision of water and electricity. They dwellers in Africa rely on SPSPs for at least vary in scope, scale, and the types of constraints a portion of their water supply. They often they face. For governments seeking to learn compensate for-or supplement-the limited more about how SPSPs can serve their citizens, financial and human resources of the public consider these points: sector. SPSPs are signicant service providers in many countries, particularly in periurban, 8 ecn falpiaesco ne n rural, and remote regions, and may be the nwtrsvieadthponilfr only viable operators i ome Cotexts.gl SPSPs are estimated to reach as much as half The local private sector has the population in some countries, particularly demonstrated its ability and interest in the in post-conflict situations and other cases of development and management of water sup- weak or failed states. Overall, it is estimated plies even in remote or difficult locations that inLainAercaan ealyhafofura Souce Kriui,MuamiShwrtz Jrdn.200. mal-Sal Pivae eric povideon of ter eupply.trct Thevie ofe financia an$um nrso re.o2h2p bi Nesector. 85ntso peren ofl$piae.eto0nesmn inndors we f iske signis catAh,oa riaesco a develpmen anIa ae etLfwtrsp $0 ,76.0 S uc.Kaik ,M k m;Sh at,J ra .2 0 .S alS aePrivate Sevc$0.32so W tr u pyad lcrct : ei wo ncdne, twrksue rcn n prtigCaatrsis hWrdBn,Wsigo,D $0.17C 1058 are unattractive to formal providers. Despite unclear legal or operational status and sub- optimal financing arrangements (primarily from the informal market) these providers With growing recognition of their role have made significant investments in water in water supply and electricity services, SPSPs supply and electricity systems. Establishing are evolving from owner-operators of isolated a clear policy and a supportive regulatory systems to developer-operators of formally framework for SPSPs could free up scarce recognized systems in small towns or multi- public financing for less attractive segments of village areas (such as Paraguay and Uganda). the market and reduce costs, thereby improv- While SPSPs' prior experience in the informal ing prices for consumers. sector may not adequately prepare them for *formal bidding processes, experiences in sev- scaeral countries demonstrate that with the right Ofsupport and consortium-building, SPSPs can An analysis of the comparative costs become an important channel for the devel of small piped private networks shows that opment of local private sector capacity for the per unit cost of water delivery can be as water supply and electricity service. little as 10 percent of the cost of purchasing water from vendors. That is, where public utilities fail, small piped systems prove an economical solution-particularly when considering that they do not generally require the types of ongoing subsidies provided by governments to public utilities. g pre s These are often the most costly clients to serve for large investors, _L_World the last to receive connections, and the targets Bank Group experience working with SPSPs of controversial universal service obliga- in countries like Paraguay has allowed for the tions imposed upon private investors and expansion of SPSPs into areas where sourcing concessionaires. risks would otherwise have prevented their investments. Public transfers for borehole This article is based on a series ofpapers and articles byjordan drilling and output-based subsidies for con- Schwartz, Mukami Kariuki, Franz Drees-Gross, Alex Baka- necting the poor have been key. p ian and Michael Schur. 561I IFC.ORG/HANDSHAKE inHat is curetl $.2 per galo, akn accss o cea drnkig wte unffrdbl 2 i Il l t 12 l4 2,2l ' l iI l2 l l >l [*> l l 1 1 t 1 2 l 2 ÍÍ 2 2 2I 11 ll 22, 2, t - ic 1 , 1t l l 2s 2tl iD e l i m o 1 td lünn thn22 ½utanak n''2l I ll n u te i m na 2i in2 tÍ ' i il i 1 L 2l'eft '2 4. ì 2 2ll lill 2'p l 2i l 2\ fü LL' '.l Ilt i lill I Photo2 ' 2 ©2NCE, and Getting off the plane for the first time in Juba, South Sudan, I was amazed at the number of water trucks. There were dozens of them on every street, delivering water everywhere: from the private water tanks at wealthy houses, to trucks refilling large blue plastic drums by the side of the road for on-selling to the poorer resi- dents of the city. These blue plastic drums are a lifeline to 90 percent of the population that does not receive water from the public water com- pany. Only 3,000 households have that privilege. As this fledgling country establishes itself after a devastating conflict, the vast majority of Jubas people must find their own ways to access water. Some resort to hand dug wells or private bore- holes. Others purchase water from water vendors with tankers or from bicycle-drawn drums. And although there are formal public-water system filling points where tanker drivers can purchase water for reselling, the supply is erratic and the wait is long, so tanker drivers often resort to selling untreated water straight from the Nile. For this water of dubious quality, customers pay from $8 to $12 per cubic meter-almost 10 times what I pay at home in Washington, D.C. A MARKET LIKE ANY OTHER Post-conflict countries feature at the bottom of every human development indicator, and as I saw in Juba, access to water in South Sudan is no exception. Similarly, in Afghanistan, the Democratic Republic of Congo, Somalia, and Papua New Guinea, more than 50 percent of INFRASTRUCTURE the country's population does not have access to investments, but also consider how to harness clean drinking water. In many of these countries, and regulate the markets that have emerged and where the governments are struggling to provide that will continue to be significant players. What services for their populations, the types of water ultimately matters is moving toward providing markets in South Sudan have sprung up to meet good quality water at a reasonable price. this most basic need. Water is a market opportu- There is precedent for this "bottom-up" nity like any another. approach. Many countries that have transitioned When we talk about PPPs or private participa- out of post-conflict have formalized the role of tion in the provision of water services, as with the private sector in service delivery. In Rwanda, many other public services, we are usually talk- for example, nearly 40 percent of rural water ing about bringing in varying degrees of private schemes are managed by small firms or idi- participation to improve the performance and viduals. In Cambodia, the government licenses sustainability of traditionally public services. operators to take over the construction and Even in the rural and small towns of countries running of small water schemes. like Uganda or Benin, where management is del- egated to small scale operators, these often rely A FRESH APPROACH on significant donor or government financing of the initial capital investment to keep tariffs Private water vendors are often portrayed as within an affordable range. opportunists who exploit the most basic of As in South Sudan and other post-conflict coun- often thes vndrsoe e tig t mak tries, however, the reality is very different. In en meee veryone ele On t sae these nations, the governments and donor invest- e xaple I m e n who had iet ment combined is a drop in the ocean compared a ficantamount m n convertingsa to the needs of the population. Governments a at ank an iporting often lack the capacity to regulate or maintain uand. H was ken ifertit him any level of service, so the private sector sees an from He te kers loinfr siml opportunity and responds accordingly. The level tht of service and quality of water is often poor, and g kits that could help him prove to custom- prices high-but the fact remains that they are there and are likely to remain the main providers When thinking about water sector develop- of water to people in the immediate future. ment in post-conflict countries, the role of the Therefore,private sector is no less relevant than in more delivery in these post-conflict environments must be different. The role of government and different approach to harness the already vibrant deveopmnt artersshoud nt oly ocu on water markets to provide good quality water at development partners should not only focus on anforblpic.r the traditional development model of large new -1FC 159 am,conflIi ct By Ryan T Ketchum with contributions from Marie Marconnet 6'rAnanda Covindlassamy It's not impossible for nations in conflict to put aside their differences to coordinate the delivery of natural resources, but it's unusual. For the Democratic Republic of Congo, Rwanda, and Burundi, cooperation is transforming the shared Ruzizi River into a valuable source of hydropower for three peoples. It sounds too good to be true: three countries management of the river and the catchment area with a history of conflict, finding creative ways that supplies it with water, and is in the process to split resources from a shared river that can of establishing an independent international deliver much-needed hydropower to the citizens regulatory authority that will regulate the use of of all three nations. There are no loopholes and this shared resource. no secret ways for one nation to gain the advan- For the Democratic Republic of Congo (DRC), tage, even when it comes to taxes. Rwanda, and Burundi, this sort of creative The umbrella organization that is promoting cooperation amid conflict makes reconstruction the project has sponsored a treaty governing the possible. Energie des Grands Lacs (EGL), the 60 1 IFC.ORG/HANDSHAKE INFRASTRUCTURE international organization that operates under the auspices of the Economic Community of the Great Lakes Countries (CEPGL), has promoted this reconstruction since the late 1970s, first with the development of the Ruzizi II hydroelec- tric project, and now by promoting the Ruzizi III hydroelectric project, which will be developed Claude Kayitenkore is Director at as a public-private partnership. Energie des Grands Lacs (EGL). He Those behind the Ruzizi initiative point to four oversees negotiations among officials of important reasons this post-conflict project has the DRC, Rwanda, and Burundifor flourished: the mounting need for power and Ruzizi III Here, he discusses how the for replacing high-cost gas-oil based generation group has overcome political tensions with lower cost sources; the precedent set by past to produce a workable agreement. initiatives; the cross-border coordination; and the tariff tailored specifically for the needs of the parties involved. , the THE NEED FOR LOW-COST CAPACITY The power systems of Burundi, the eastern DRC, and Rwanda are mainly based on gas-oil fired units. The cost of gas-oil based generation is especially high in the Great Lakes region due to huge transport costs from Kenyan and Tanza- nian ports. Most of the alternative economical hydro sites are small and Ruzizi III is the larg- est and lowest cost option in the region, along with methane gas extracted from Lake Kivu for the generation of base load electricity. Increas- ing demand for electricity has been fueled by economic growth and ambitious electricity access programs financed by donors. As a result, the region is facing a rapidly increasing shortage of capacity and energy. PRECEDENTS PAVE THE WAY by management and financial challenges since The Ruzizi III dam will be the third in a series fomRuzizi nota ption Donorscand of four projects on the Ruzizi River. The experi- gornments want a fully c or and ences of the first two initiatives provide the clues to the success of Ruzizi III. The Ruzizi independent structure protected from interfer- Rive foms he brde beweentheDRCand ence by any of the three governments, assuring River forms the border between the DRC and ta hyaealeul Rwanda. The south-flowing river connects Lake Kivu with Lake Tanganyika. The 29.8 megawatts EGL has been working steadily to promote the (MW) Ruzizi I plant, owned and operated by third project. In June 2012, EGL launched a SNEL, the parastatal electricity utility of the request for proposals for the selection of a private DRC, is located 3 kilometers downstream of the investor to develop Ruzizi III on a Build-Oper- outlet from Lake Kivu and was commissioned ate-Transfer basis. In September, EGL declared in 1959. The 43.8 MW Ruzizi II plant is owned the consortium of Sithe Global and Industrial and operated by SINELAC, a multi-national Promotion Services (Kenya) as the preferred organization established by a treaty among bidder for the project (the same consortium Burundi, the DRC, and Rwanda, and was com- that developed the 250 MW, US$900 million missioned in 1989. SINELAC has been besieged Bujagali Hydroelectric Dam on the River Nile in Uganda). Hydopoer n AricHyrgoven ets wandtedfuly ch omercalan en byoan of utibe th dreenmentassuin In late Decemer of 2012, he Gethatlhery. are all8 equal. racontdo Assembly ~ ~~ EG has teUieNaindelrd 1.%ogbelerigiteay topromote.the 2014-2024 ~ ~~ tir ph eaeo utial nry E roec Ind JunhAer012, EGL lancd a forallan lanchd heustinbleEnegy requestiv ofo roposfte electironpofe aspivt forAll(SEALL Intiaivejoitlywit th binetr develop Riz In fi ono ah Bui-pr -ae D B - ns er bas See EL ad ol tsh e General c n g on ofpithe lo aential tP 1 b p lv w acces0roo eris (enas the p to eecticiy an tht 26blliopeplein ider Ruz t1hyroct r (h s ame ontim 0ethatpin develoe te 20 MW US$ million mssoe r 1989. n SIEaCd haibeenbeseed eeghtieesroraieteojc Inl la Decembof oer lvn ihu cest ie of202 the GeneralAsebyrsouin foericlliv SE4A rIitiatiejitywt.h Ai DevelopmeAN tAK I reoltonheGnea Aseml noted 0 tht13 ilo pepl liv wihu access- toelctict an tha 2. bilo peoplein deveopin contie rel on traditinalbio massore fo 0okn an heatingneeds. 62 l a bllioRGHnofShose lvn ihucest The proposed technical solution for Ruzizi III envisions a run-of-river project comprising: * a diversion dam, * a 7 kilometer headrace tunnel, * penstock and surge chamber, * surface powerhouse, * three Francis type turbine-generator units, * a 220 kilovolts switchyard, and * a 10 kilometer transmission line to a substa- tion located at Kamanyola in the DRC. The design also includes a small generating unit at the dam site to produce energy from the eco- logical flow that will be released to the bypassed reach of the river between the dam and power station. The Proposed Technical Solution has a total installed capacity of 147 MW, with each turbine designed for a maximum flow rate of 50m3/s, giving a total plant discharge of 150 m3/s (not including the small unit at the dam site). Given the hydrology of the river, it is anticipated that the nominal mean annual energy production will equal approximately 710 gigawatts per hour, which equates to a capacity factor of approxi- mately 56 percent. CROSS-BORDER COORDINATION The need for cross-border coordination has derailed many projects that are economically attractive. Typically, the political issue of distrib- uting power among three nations is trickier than the technical solutions proposed. In this case, the cross-border coordination facilitated by EGL IFC 63 has been key. EGL has been successful at bring- plant is available, and it allocates day-to-day ing the three countries together by developing hydrological risk to the offtakers. This "all for practical solutions, and sidestepping the more one and one for all" concept allows the nations sensitive political issues by emphasizing values to share equally in the benefits as well as the such as transparency, competence, and socio- risks. economic benefits. For Ruzizi III, EGL has arranged for the project's COMMON CAUSE, COMMON POWER capacity to be purchased by the parastatal utili- The countries will enter into a Common Power ties of Burundi, the DRC, and Rwanda. Each Purchase Terms Agreement before firm pricing off-taker will purchase on commercial terms, is known because the tariff will be set using a so- with a full payment security package, one-third called regulation by contract method. This will of the capacity of the project under a Common effectively enable the project to be constructed Power Purchase Terms Agreement, and separate using a form of regulation that is similar to the Power Purchase Agreements. return on rate base form of regulation widely used in the U.S., Europe, and other well devel- oped markets. Such expost regulation is feasible The political question of in those markets given the long history of their regulators successfully balancing the interests distributing power among of investors and ratepayers. It is unlikely that three nations is trickier a system of expost regulatory review would be than the technical solutions feasible in countries that are in an earlier stage of development, including in most of Sub-Saharan proposed. Africa. To overcome this problem and allow for a system of regulation that entails many of the benefits Tarifs re bingstruturd wih copertio in of return on rate base regulation, the regulation Tariffs are being structured with cooperation in b otatmto eie h ehdlg mind as well. Off-takers will pay for the capacity that w eto eis the finalrf made available by the project company. Capacity will be adjusted hourly from actual to nominal an agreement that is subject to international hydraulic conditions to determine an hourly arbitration. This agreement is entered into before availability payment, which will later be con-leads to verted to a monthly availability payment. a balanced sharing of risks on construction cost vertd t a ontly vailbilty aymnt.between the investor and the future off-takers. This structure achieves two objectives: it incen- tivizes the project company to ensure that the 641I IFC.ORG/HANDSHAKE MOVING DOWNSTREAM Multi-lateral development finance institutions (DFIs) have expressed an interest in providing or have already provided significant fund- ing for the Ruzizi III project. Interested private lenders will be encouraged to participate by the protection offered by a possible (under discussion) partial credit guarantee from the World Bank. The sponsors are expected to request political risk insurance on equity from MIGA. EGL recently selected a pre- ferred bidder for the project-a consortium made up of Sithe Global and Industrial Promo- tion Services (Kenya) and the project agreements are under i negotiation. l o o and R n The successful development of Ruzizi III will integrate . the region's disparate power a o r e b N L systems into a single intercon- t h i nected system with scale and diversification. It will dramati- cally lower the cost of electric- . ity in East Africa, making b rnt access for all a dream that has a chance of coming true.. At the end of World War II, Allied bombing raids killed over 55,000 people and inflicted extensive damage to the port of Hamburg. Getting the port working again was an SECURITY absolute priority for nationalI absolute ~ ~ ~ proiyfrntoa* Reinstate the port perimeter or at reconstruction, and even today least a working port zone, with the process undertaken in Hamburg serves as a model for other countries. The following 9 Secure the whole port area. steps can guide the efficient restoration and function of war-damaged ports. 661 IFC.ORG/HANDSHAKE *IlkPhoto ©Neven Milinkovidistockphoto .4 0 *G * D o a corettea ofaxec por th p o a ( personelithr matcerars can reorehtealeosrcint command,. includingtprt adrmsaion,i nactvit,ion,ldn xotadiprrdn and opetios. t fpepe MANAGEMENT " Deploy a core team of experienced port personnel with a clear chain of command, including port administration, navigation, and operations. * Establish a comprehensive plan to open the port. * Plan the transition from interim measures to normal operations. * Position the port to complement the country's recovery program. * Establish a working party with key port users, interfacing between the port man- NAVIGATION agers and port users to ensure the recon- struction's approach meets users' needs. a P o sae marine * Establish good communication systems mines and wrecks. with port users, the agencies responsible 9 Remove sunken vessels for interfacing road and rail infrastruc- a ture, and other parties that are a regular feature of port life. Put navigational aids in place. IFC 167 LANDSIDE ACCESS * Work with the agencies respon- sible for reinstating interfacing landside infrastructure, such as road and rail operators. CARGO HANDLING * Survey the whole port area to identify areas that may be brought back into service as soon as possible. * Consider interim berthing measures if the main berthing infrastructure is severely damaged-for example, float- ing pontoons equipped with cranes for cargo discharge and loading. * Establish temporary "ro-ro ramp" systems (the ideal cargo mode to get things quickly moving again). * Use off-the-shelf IT systems to support the management and operation of port/terminal facilities. * For faster roll-out, deploy heavy duty mobile cranes as an alternative to fixed cranes for diverse cargo types, and mobile pneumatic un-loaders for free-flowing, dry bulk commodities. 68 IFC.ORG/HANDSHAKE WAREHOUSING * Use quick erection storage buildings or other temporary structures to deliver warehouse capacity. Photo (DPim Stouiten recon tr Limited physical infrastruc- ture needs, relatively low investment cost, and the huge potential for growth make telecom an attractive sector for early entry investors. INFRASTRUCTURE Although governmental services and basic infra- reorigtenvsmtalstmedtly structure are often absent in nations undergoing I eeoigcutiswt ahsceis h reconstruction, cell phones tend to become a bsns oe otwdl sdb eeo part of daily life, even providing critical services copneisr-adcrs,wchavnool such as banking and tele-medicine. By allowing people to stay connected to each other as well Agaitn oai,adteDmcai as take advantage of these critical services, the Rpbi fCno hr h vrg oie telecommunications industry demonstrates how petriogowhaewsIIIprcn the private sector can help alleviate rather than bewn201ad06,recmligex - exacerbate conflict. Investment in the field has yielded positive results for all parties, promoting I at h ideEs ie aldmbl peace-building, reconstruction, and developmenttephninAgasants"otmrsiv while turning a profit. eooi ucs"srn od o onr Several factors make the telecommunications dseaet eul t nrsrcue industry uniquely suited for its role in societies Teeape ntefloigpgsfo experiencing deep changes. These companies Agaitn rq n h etBn n aa are able to start initiatives during a conflict, for adi etr sdvrea giutr,bnig example, and do not have to wait until stability adpltc-ihih asta h eeo and peace have been fully achieved. In contrast idsr a aea meit mato to other industries, mobile phone companies teeooyadsca arco otcnlc make smaller investments, and start getting a eniomts return as soon as the first subscriber makes a call, according to a World Bank report. The initial Frm7eoeothPiveScornFagladCnfc- investment is usually quite low compared toAflceSas,Jy20,uptdAri201 othecvein theusinvestment almostie immediately.tar ip - -n0ow0 In d c cashssocitiehs,the - - 04 4 0 bu44s oelmste b te- betwee 201an 00 ar coplin* xm economi succes -srn wodIo onr depraetorbul isinrstutue Th exmpe on 4h folwnpgsfo 40hnsa, rq n teWs0an n aa an ins ct r asd v rea gi ut r ,b n i g 4n pltishihlgt as ha hetle0 indutrycan avean imedate mpat o th eoom-ndscilfari f-ot-oflc env0on0nts -0o0heRl f h rvaeScori rgieadCofit 0flitd*tae0 ul041,0patd pil201 oterinusris ad omane ar 4bl0o tr In Iraq, where the movement of people and goods is compli- cated and heavily restricted, access to reliable, high quality voice and data services is key for economic activity and for personal and family safety. Zain Iraq, the leading mobile telephony company in Iraq, with 51 percent market share and 10.3 million subscribers, is investing in: EXPANDED ACCESS While Iraq's total poverty rate is approximately 22 percent, poverty is considerably higher in many southern and western governorates as well as in rural areas. Zain Iraq will focus its growth on some of Iraq's poorest governorates, including Al-Anbar, Diala, and Salahuddin. EXTENDED DEVELOPMENT The majority of private capital that has entered into A Iraq in recent years has gone to Iraqi Kurdistan. Zain Iraq's existing operations are located outside of Kurdis- tan, where investment funds are most needed. JOB CREATION As of December 2009, Zain Iraq employed 1,355 staff. Indirect employment is sig- nificantly higher through distribution networks, security, and network construction. SERVICE DELIVERY Zain Iraq is pioneering the delivery of services, such as banking, using the country's mobile platform. 72 IFC.ORG/HANDSHAKE WEST BANK AND GAZA In the West Bank and Gaza there is a severe shortage of capital, and large projects are challenging given the territory's borders and the small size of most active governing bodies. However, growth and integration are critical factors in the economy's reconstruction. Through an agreement with the Palestinian Authority's Ministry of Telecommunications and Information Technology, Wataniya, the mobile phone network, will lead an effort to accelerate market growth while improving the current low tele-density and increas- ing competition within the sector. Wataniya will be required to provide coverage to 100 percent of cities and 97 percent of the population by year three; an IPO is required within six months of roll out. IFC 73 I0 J Sources: Global System for Mobile Communications Association Pew Research Center. 74 1 WFC.ORG/HANDSHAKE 040 BANKING ON Re-strting the economy is a daunting challenge in post- conflict countries, but the introduction of mobile banking in these environments has placed money-and reform-on Ihe 2()07 launch of M-PAISA, Afghanistan's first mobile I money transfer system, provides financial services for people 7 who cannot access a bank. Because transactions carry no cost, they ultimately stimulate nationwide economic activity. Capa- hilitics include microfinance institutions' loan disbursement and repayments, as well as salary disbursements and airtime distribution. The system now has 1.6 million subscribers who withdraw and pay money through rail outlets that are able to provide banking services withbout brick-and-mnortar banks in place. The system also includes inter- active voice recognition, presenting new opportunities for the extensive population of Afghanis who are illiterate. Police in Wardak province, Afghanistan were used to earning a salary of 1,500 afghanis per month; however, once the police started picking up their salaries from M-PAISA, they started receiving 3,500 afghanis. The policemen subsequently discovered that they had not once received their true salary and in fact didn't even know what it was. just as important, the technology also assures their safety and ability to physically deposit the money. In the early days, the police were followed when they went to pick up their paycheck, but now, because A' '40 W there are cash points throughout the country, they can travel to more remote loca- tions where they can't be followed. M-PAISA is modeled on a similar and successful program in Kenya, M-PESA. M-PESA was launched in 2007 by Safaricom of Kenya, and by 2009 the program had 7 million users. Originally, male, urban migrants sending money home to their rural families used the service most, but now it is used for sending tuition and even paying taxes. In total, around 130 billion Kenya shillings ($1.7 billion) is transferred, and around 150 million Kenyan shilling ($1.96 million) is transferred daily. M -Fromn 7he Role of'the Private Sector in Fragile and Conflict-Afflicted States, July 2010, updated April 2011. din opportunities for all in a post-Conlc environment In many parts of the world, losing a job means more than losing income. Unemployment can sever economic and social ties, breed mistrust, and damage people's sense of com- munity and hope for the future. Young people in particular may turn to gangs or other violent groups to compensate for the lack of ties in economic and social life. These effects are magnified in societies undergoing reconstruction because the lack of Jobs among dislocated populations, including migrants, refugees, and displaced persons, can be particularly disorienting. It can influence status and identity, especially for migrants who had better or more prestigious jobs in their places of origin. The social effects of unemployment among dislocated populations may be especially isolating for people lack- ingJfamily or other ties in their new communities. It can have implications for psycho- logical well-being, as well as the ability to participate in civil society. Even migrants who find work may be vulnerable if their jobs do not provide adequate channels to integrate within the new society or if the migrants lack voice or information about their rights. Following are two innovative back-to-work projects that succeeded in post-conflict states. Photo @DIDH1 4 - A REINTEGRATION ublic works at Northern Uganda Sri Lanka's Northern Province Two decades of insurgency, instability, and In Sri Lanka, a cash-for-work program initially conflict led to high rates of poverty in north- established to resettle 100,000 returnees fol- ern Uganda. By 2005, a measure of peace and lowing internal conflict actually assisted more stability had returned to the region, allowing for than 250,000 returnees and quickly evolved into the demobilization and reintegration of former one of the largest sources of employment in the combatants and other war-affected populations. Northern Province. In 2006, the government launched the Youth Participants noted that in many cases the pro- Opportunities Program to stimulate income gen- gram meetings were the first community-level eration and employment growth among young gathering that they had attended after having adults ages 16 to 35. The program provided arrived from camps for internally displaced cash grants for vocational training and business populations. By many accounts, community materials to groups of participants with suc- meetings, shared meals, team work, and the cessful grant proposals. Groups had an average involvement of elders and children as indirect of 22 members, and most expressed interest in beneficiaries of the program promoted a sense of tailoring, carpentry, metal works, mechanics, or belonging among the newly resettled families. hairdressing. Thirty-six-year-old Sachchithananthan Subod- An evaluation two years after the intervention hini, from the Northern Province, said that she found increased investments in skills, participa- was "very happy. As a result of cash for work, the tion in skilled work, greater incomes, and higher I savings.lyto her life journey since being displaced in 1995, attend community meetings and 9 percent more she said that the program "had helped to bring likely to be community mobilizers. Participants the community together.. [T] he village seemed also reported receiving more social support from abandoned but the shramadana [volunteer work] their family and the community. Furthermore, helped to get the community back to its original men who received grants reported a 31 percent decline in aggressive behavior relative to the control group. This finding is consistent with Sources: Blattman, Fiala, and Martinez 2011 (Northern theories that link aggression to stress levels, low Uganda); Andrews and Kryeziu 2012jor the World Develop- social standing, and perceived injustice. ment Report 2013 (Sri Lanka). 1FC 1 77 REINTEGRATION Photo D4 BUSINESSWOMEN) IA Destruction, displacement, and loss of lives rrlaeso oet h iy rt ev and livelihoods affect men and women capanlokfrenmioprtiis alike. But conflict often leaves women . to carry the double burden of economic inomtnadwtherypnstofml and familial responsibility in the absencean ifom ljb et rk aecuilsep of men who are imprisoned, disabled, or . dead. While society reconstructs itself, thesefolwnlessfrmoctisudgig women must make life-altering economic reosucinanbapld nmyaes decisions-.~ ~ ~ ~ ~ ~rra arivs,t sl ses o tyi ftea or movhe o e ctaortonav hesuces ffeal etrprneus s ssntalfrpstcolcampscand okc forbiiectonomd ic al opprtnitie cial instituions must talelsewhere.stProvidingndwornen wwith access tofnceWonwhca no ongr rly nseadernigsromthemalhin fomationd aund wihaenryi points toforma makeend met benaginininfrmamiro nd-inforan jobivinews. re Mcruinalnsep Bankof Aghaista (FBA) emostraed o ard cil and etoomi inclusion the micr-incme lans hen t deelopd afolplwing rdclsns for soieis undergoing prodct argeed he icresingnumerow enstlbrctoncbe a plifte cfin t any ares no loner relye on seayerigfomtemaleheadof household duroring harden taisisipmst oftenBA as th inres in fml-ae houehods Acodigt rcnsttcs16 percent ofFB' borrowers are women, many of them war widows. 78 1 IFC.ORG/HANDSHAKE FROM LIBERIA FROM IRAQ An early gender-focused baseline survey can help government formalize women participation in national reconstruc- tion efforts. In 2007, the World Bank Group surveyed the mnoigi aeevrnet barriers to enterprise formalization in Liberia. The surveythtacmotehehlens confirmed that women business owners are more likely thanofhsclaes,I206Irq their male counterparts to own informal enterprises and that this was due in part to the unequal treatment of men and are opoiewmnwt women during business registration. Following the survey, the government recognized the need to address this inequal- rcntuto,wihldt ity and identified business associations to disseminate - information about formalization as a first step. : ml-n-eimetrrss FROM THE DEMOCRATIC REPUBLIC seuiycsswr loae OF CONGO (DRC)betandsflinA m , Post-conflict legal reform initiatives may facilitate changes : odn ncnucinwt h to existing gender-discriminatory legislation. In the DRC, IaiItrainlCabro discriminatory provisions in the Family Code require married women to obtain marital authorization to go tothJodnFrmfrBses court in a civil case, to buy and sell property, or to enteranPrfsialWm. into commercial obligations such as starting a business; banks generally also require co-signature or approval from: husbands if women are to obtain loans. A Microfinance* Law passed two years ago retains the need for spousal permission for married women to take out a microfinance: loan. These are among the steepest obstacles women face in seeking access to finance. A new draft Family Code, which: could remove these constraints, is expected to go before : dpefo Cetig0)prui the National Assembly for approval later this year. Other tefvW7etternusi potential reforms in the pipeline are a draft Labor Code that : mrLso yMrkBake,Cr could remove provisions related to restricted working hours mnNehmnr n eret o fo wmeh ataommodtacehcalene reconstructio, w h le t agrowth- of woenowe small*-an-eiu nerrss To5 prvd enrpeerhp maagmettrinnIsfey addiiona trnpr5n seuiycsswraloae so haSte5raq5wme cul be5trained sael inA mn Jodn in cojncin ih h Irai Iteratona-Chmbe o ComreadIdsr*n theJoranForm fr usies andSProessiona-Women AdptdSom"Ceain5Opotui tie - Wone Enrerenur i CoflctAfete outre,"n-F Smartessonby Mrk-Blckden Car Ae Neha mr,ad-erite-o -oSomn R-itnbor-Stahau S - S - IFC 79 , I 7 'd _4ducation under (re)cOnstruction Schools and education systems are invariably debili- - Financial resources to scale up programs tated by conflict. They are left weakened, damaged, that work and ensure these reach the service and underresourced at precisely the time when com- delivery level. munities, governments, and international agencies - A relentless focus on results. need them to help rebuild and transform themselves and the societies they serve. This twin mandate of reform and reconstruction offers both significant otca auhid c ivi admintrine opportunities and enormous challenges to societies weene, comproised, oiepeiened; emerging from conflict. Research and experience where ii it s indisr deepdi demonstrates that certain approaches, such as those an recmiiruwih the poitc fioppoi- below,resources are constrained and unpredictable. Post-conflict reconstruction of the education Yet each of these constraints also contains pos- sector faces challenges that are complicated by an sibilities. Most notably, new political authorities added sense of urgency following the debilitat- are more likely to seek education reform to ing aftereffects of war. Four factors are critical to distance themselves from the previous regime, the success of rebuilding the education sector in particularly where international aid provides postconflict societies: additional incentives. * Sound policies and committed leadership at the country level. Capitalizing on reform efforts * Adequate operational capacity at all levels, Civil society often focuses on education as a key including capacity of communities to partici- strategy around which it can coalesce for reform, pate effectively, with the right incentives, and the publicity around the end of conflict 80 1IFC.ORG/HANDSHAKE REINTEGRATION often attracts an injection of resources that can help to kickstart this reform. However, when the demands on an education system outstrip its capacity to deliver, the question of priorities looms large. In facing challenges on all fronts, where does one begin? Here are the most important starting points: * Focus on the basics to get the system functioning so that the return of children and youth to school can be seen as an early "peace dividend" that will help to shore up support for continued security. * Acknowledge the importance of symbolism in education and ensure some bold symbolic actions (such as purging textbooks). This signals that, while much about the system remains unchanged, reform has started. * Build recognition that reform of education is an incremental, ongoing process that takes decades and must be led from within the country as consensus develops on society's wider development vision. * Focus from the beginning on building capacity for reform, which includes supporting the participation of communities, local authorities, and other stakeholders. Mr IFC 81 The Hon. Melanne Verveer was the U.S. Ambassador-at-Large for Global Women's Issues until early 2013, coordinating foreign policy issues and activities relating to the politica4 economic, and social advancement Of women around the world. Prior to that, Verveer served as chair and co-CEO of Vital Voices Global Partnership. Verveer previ- ously served in the Clinton administration as Assistant to the President and also advised then-First Lady Hillary Rodham Clinton on women's rights, democracy, and peacebuilding initiatives. Verveer is now the director of Georgetown Uiversit y's new Georgetown Institute for Women, Peace and Security, which examines the impact ofwomen's participation in resolving conflict, mitigating state fail- ure and humanitarian disasters, and shaping major political transitions. Here, she talks to Handshake about women's role in post- conflict settings. AMBASSADOR OF Photo @D Phil Humnnicky/Georgetown University INTERVIEW What are the issues that matter to people whose countries are transitioning out of,conflict? I remember traveling to Bosnia with Hillary Clinton when she was First Lady, at a time the conflict there was still far from being resolved. What stayed with me was her comment that "This place will not work if they don't meet the dire economic needs of the people." It's the economic piece that matters. Iat's not "humanitarian." Humanitarian goals are important; relief is important. But you've got to start reconstruction by creating the mechanisms to have sustainable economic opportunity. What rehe -i-ences in barrier o vo e eeurs in developing sthe barriers in post- ic co ries The degree of obstacle is heightened signifi- cantly in post-conflict countries. We know that the usual, documented obstacles have to do with capital, markets, the capacity of training and mentoring, networks- the opportunities to engage. Often there are also discriminatory laws shutting out women. What is a problem in the developed country is magnified in a post-conflict setting. 1A1V Bo C e IFC 83 flic coutrie 9 sIt's been nowhere near where it should be. The issues articulated by women entrepreneurs Security Council Resolution 1325 has hardly are rarely on the agenda in post-conflict nations. record of ho many o a bee engge It's an afterthought. But women-owned small- and-medium enterprises must be a part of the in peace processes. If there is a process going solution in order to prevent recidivism-because on where citizens are writing a constitution, there will be recurring conflict if you don't developing government, creating laws for how address this issue. When I look at the peace the society can succeed, then they must take agreements that have been made and how manmust break down after the first five years, I see that required- r eomic stb lit nd o r this is a common thread that's missing in this Ifqthee economic s are n facor it . configuration. The more you're involved, the more you see it. peace agreement, it's bound to be inadequate. A good example is the process of ending the civil war in Angola. Negotiators were all male, ve Y AICeSSand their talks on de-mining were all focused on to f . ae mking. dffel c.roads-not forests, not fields, not wells, which is where the women and children were, where the It was especially clear when I was traveling activity of daily life took place, and where there with Secretary Clinton during her time as First is potential for future economic opportunity. Lady-we went to the Former Soviet Union Without the perspective of women as part of the when the massive political transformation was peace process, the outcome will be shortchanged occurring. We can see the same dynamic now in dramatically. the Arab Spring countries. Had it not been for microcredit in the FSU, providing an income to female doctors and teachers who weren't being paid and had to find alternative sources-along with women entrepreneurs who were able to start businesses to keep their families afloat- they all told us they would have been in even The private sector is about profitability and the worse shape. So, there is a clear and obvious role companies involved can also be extraordinary for the private sector and our challenge is to get partners in terms of the social value. I want to the private sector engaged in ways that it can see explore this more for women in post-conflict the opportunity for itself, nations, and figure out how to make this work. 841I IFC.ORG/HANDSHAKE To the extent that these new private initiatives succeed-like the women's economic empowerment initiatives of Wal-Mart, Coca Cola, Marriott, or technology companies working to close the gap-we all succeed. We need these synergies. At the State Department, Secretary Clinton was a huge champion of public-private partnerships. Because as she said, no one of us has all of the competencies required; we each have different competencies. No one of us has all the resources, but we can tap resources, leverage skills, and work together. this role? . sdo-a It's imperative for us to contribute to data, research, and scholarship on women, peace, and security that shows that countries can transition to stability because of economic empowerment and financial tools for women. The only thing that you can sell is proof. * IFC 85 FAST FACTS 25% 30% of the world of people in conflict is affected by countries live on $1 violent conflict. per day. The annual global cost of conflict is estimated at $100,000,000,000 The average cost per civil 30 war is roughly equal to 30 YEARS years of a country's GDP. Numbers of refu- gees and internally displaced people have tripled in the last 30 years. By 2025, 82% of the global poor will live in fragile states. Sources: Global Poverty Project, Overseas Development Institute, and the World Bank. 861 IFC.ORG/HANDSHAKE CCPeace hath her victories No less renowned than war.) -John M ilton, "To the Lord General Cromwel" May 1652 IFC 187 Subscribe: ix fc.org/handshake Connect with us: f fa ceboo k. com/ifci nf rastru ctu re twitter. co m/if cadvi sory CH International Finance Corporation April 201 3 IN' a World Bank Group