House of Commons - International Development

Select Committee on International Development Minutes of Evidence

Memorandum submitted by Professor Robert Picciotto

As background for the Committee's review of DFID's forthcoming policy statement on security and development, this note provides a bird's eye view of the state of knowledge regarding conflict and poverty; outlines key lessons of experience and identifies major threats to aid effectiveness in fragile states. It suggests that major changes in aid policy will be required to meet emerging challenges at the intersection of security and development.

THE SECURITY-DEVELOPMENT DIVIDE

In order to meet unprecedented threats to global peace and prosperity, development cooperation will have to give more attention to human security than in the past. Greater efforts to meet the Millenium Development Goals will be required and new priorities will have to be adopted to reduce the incidence of intra-state conflict and tackle the threat of international terrorism. Towards these ends, the United Kingdom has a key role to play in bridging policy differences within the donor community as well as between rich and poor countries.

Convergence of security and development strategies will be hard to achieve since, until recently, security and development issues have been framed in isolation from one another. The development discourse has focused on economic management and social development while national security strategies have relied on assessments of geopolitical threats and the design of military responses. Policy coherence will remain elusive as long as defense and aid officials operate at arm's length and with entirely different conceptions of security.

For diplomats and defense specialists, security still aims largely at the protection of the homeland against hostile states. By contrast, for aid donors and voluntary development agencies, human security is defined in terms of access to productive employment, health and education, social safety nets, etc. The end result is that more often than not aid has yet to be combined with other policy instruments in a coherent package and that we know far less than we should about the connections between poverty and conflict.

THE RISKS OF CONVERGENCE

There is considerable unease within the development community about the "securitisation" of aid. Giving short shrift to the legitimate poverty reduction aspirations of developing countries to satisfy the security agendas of rich countries would be an ironic and unacceptable outcome of a rapprochement between security and development. The "politicisation" of aid proved damaging to development effectiveness in the cold war era. Thoughtful policy makers and advocacy groups are wary about a potential replay of this scenario.

In particular, there are serious risks of diversion of resources away from poverty reduction towards the "global war on terror". United States aid to Pakistan jumped almost ten-fold (from $89 million in the year 2000 to $775 million in 2001) and United Kingdom aid has trebled (from $24 million in 2000 to $70 million in 2002). Similarly, Denmark has redeployed $23 million of its aid towards projects in the Middle East and more than twice this amount to Iraq reconstruction. These allocations might otherwise have gone to Africa[1]. On the other hand, multilateral programs were not significantly affected[2] and increased United States, European and Japanese aid to "front line states" of the Middle East and Asia were made possible by relaxing the overall aid budget envelope rather than through diversion of funds from low income countries.

In other words, the main budgetary impact of 9/11 and 3/11 so far has been an increase in special appropriations and supplemental aid budgets[3]. The DAC strictures on the types of aid eligible for Official Development Aid (ODA) status have been adjusted in partial compliance with the wishes of donors who wish to allocate aid funds to programs managed by the military, development training for security forces and security sector reform assistance programs that involve working with military establishments[4]. It would be undesirable to further relax these strictures.

Given the severe budget constraints that all industrial democracies are currently facing, the risk of "expenditure switching" away from the millennium development goals is significant. Already, the reconstruction needs of Afghanistan and Iraq have diverted significant funds away from other programs in middle-income countries where 140 million people live in poverty[5]. Vigilant monitoring of future aid flows is imperative.

Equally, there are concerns about the orientation of aid operations and the balance between economic and military aid. Specifically, the global war on terror has justified increased military aid and arms sales to authoritarian regimes and anti-terrorism has provided a cover for human rights violations ranging from lack of due legal process for suspected terrorists, unfair targeting of minorities and repression of political oppositions.

THE CASE FOR CONVERGENCE

Security and development policies need to converge for a simple reason: the emerging threats to international stability and prosperity demand it. First, intra-state warfare at the periphery has supplanted the ideological confrontation between east and west as the major threat to international stability. Second, the growing interconnectedness of nations and societies has led to a globalisation of violence. Third, a proliferation of frail and failed states is providing safe havens to warlords and terrorists.

The dark side of globalisation was revealed by 9/11: the very same policies and mechanisms that have promoted the growth of multinational companies and the prosperity of OECD countries have rendered them vulnerable to international terrorism. Global security requires collective action by functional states. The new security challenges cannot be met with policy instruments conceived for the cold war era. Nor can global prosperity be secured by focusing aid on good performing states while neglecting the special needs of fragile states.

The increased role of non-state actors, the emergence of asymmetric warfare and the strategic risks posed by state fragility mean that development has become an instrument of security. Conversely, development priorities must now extend beyond the grand project of global economic integration if only because the spread of intra-state violence associated with state failure hinders the achievement of the millennium development goals.

Just as development requires global security, security is a prerequisite of global development. Based on the High Level Panel on Threats, Challenges and Change delivered to the United Nations Secretary General, it would make sense to launch a participatory process aimed at securing a broad based consensus on millennium security goals that would complement the millennium development goals.

DIVERGENT RISK PERCEPTIONS

This said, peoples in the developing world do not share the risk perceptions that 9/11 has induced in the industrial democracies. To be sure, poor countries have offered "soft targets" to terrorists and borne the brunt of the economic downturns associated terrorist outrages. Hence, they too have a stake in the success of anti-terrorism efforts[6]. But the threat of terrorism pales in comparison with the daily devastation caused by other killers on the loose, ie poverty, disease, environmental degradation and the scourge of the "new wars". These "problems without passports" are largely caused by underdevelopment, poor governance and distorted domestic policies. But insecurity in poor countries has been amplified by the asymmetries of globalisation that are shaped by rich countries' policies.

Hence, the topic of policy coherence for development that this committee has examined in prior sessions forms an integral part of the security-development policy nexus. A global policy environment more supportive of sustainable and equitable development would improve global security. Hence from a security perspective, policy coherence for development (PCD) should remain a major preoccupation of the UK Government and it would be desirable for DFID to monitor the security and development impact of all important policy initiatives across Whitehall, ie those that shape trade, aid, debt reduction, foreign direct investment, migration, intellectual property, international security and the environment.

Theoretically, a single metric (the number of people likely to die as the result of manmade or natural events) could be used to assess progress in PCD. But in public affairs, risks are weighed differently depending on who bears them and the perception of risk matters more than its actuality. Highly visible risks (eg airplane hijackings) instill greater fear than silent and dispersed risks (eg the health risks associated with lack of clean water and sanitation). Risks voluntarily incurred (tobacco smoking, careless driving, unsafe sex) do not elicit the same public outcry for state protection as involuntary risks (eg an earthquake). Most of all, risks that occur "out there" do not matter as much to voters as risks faced "right here".

In other words, risk perceptions vary and they are grounded in values, ideologies and interests. Bridging such differences is easier after a catastrophic event or when ominous dangers loom. Thus, the recent tsunami elicited unprecedented international cooperation and the climate of anxiety generated by 9/11 and the prolonged, costly and divisive aftermaths of the Afghanistan and Iraq wars have generated a pent up public demand for strong international leadership aimed at peace building and economic prosperity.

Unfortunately, the linkages between peace making and economic development are far from direct or obvious. The risks of conflicts are notoriously hard to estimate. As a result, public opinion is vulnerable to manipulation and exaggeration. Complex public emotions underlie the current lack of agreement on terrorism risks—both within countries and among them. In particular, there are deep divisions in perceptions between rich and poor countries but also between Europe and the United States. Such differences lead to divergent perspectives on security strategies and development priorities.

Yet, a new consensus is urgently needed to promote the international cooperation agenda without which global security will not be forged. This is why high quality policy research at the intersection of security and development is urgently needed. Within the United Kingdom, such research would feed into the set up of "state of the art" risk assessment and early warning systems that would serve all HMG departments as recommended by the Countries at Risk of Instability (CRI) Task Force.

MACRO DOCTRINES

Three contrasting "grand theories" about the root causes of intra-state conflict in developing countries have been offered. First, Samuel P Huntington visualises a world where the major sources of conflict are located along the fault lines that divide civilisations. Whereas the conflicts of the past had pitted princes, nation states and most recently ideologies (eg capitalism and communism), the stage is now set for a "clash of civilisations". According to this vision, cultural differences rather than economic forces or political ideas have become the key drivers of world politics. They inflame tensions, nurture grievances and provoke conflict both within and across states.

At the opposite site of the ideological spectrum, the "structuralist" worldview articulated by Mark Duffield conceives of conflict as the ultimate outcome of a policy of exclusion that has consigned large parts of the south to economic isolation. From this perspective, the economic "marginalisation" of vast parts of the developing world reflects the characteristics of a global informational economy that has become less dependent on traditional primary products and more reliant on knowledge, skills and market institutions, ie on assets that are not widely available in the less developed regions.

A thriving system of exchange has liberalised flows of trade, capital and skills among OECD countries while keeping poor countries out of the system. The new global order has been enforced through rules of the game designed and policed by integrated supranational governance networks that emphasise north-north cooperation while imposing on the south a different logic that constrains economic choices through debt burdens, fiscal rigor and conditionality. From this perspective, the new local wars that have come to dominate the global geography of violence are the natural consequence of formal rules that make the criminal economy of illegal trafficking in drugs, weapons and people far more attractive to poor and marginalised countries than legal economic pursuits.

The third doctrine reflects the neo-liberal mainstream. An eloquent exponent of this school is Paul Collier who ascribes the rise of intra-state conflicts to micro-economic factors ("greed"). His model of intra-state conflict describes warlords and terrorists as economic agents rather than as servants of coherent ideologies or champions of well-defined political agendas. They are simply engaged in a business that has de-territorialised and trans-nationalised conflict: it relies on the thriving international arms business; takes advantage of the cross border circulation of people for recruitment and training and uses the new information technologies to connect across national borders.

All three doctrines are sweeping in their generality. However, each contains a grain of truth so that adopting one worldview at the exclusion of the others can lead to mistaken policy conclusions. The Huntington thesis appropriately highlights the role of culture and "identity politics" in triggering and sustaining the "new wars". The Duffield proposition points to dysfunctions in the global economic order that nurture breeding grounds for conflict. Finally, the neo liberal doctrine stresses the wholesome role of sound development policy and good governance as conflict prevention measures.

The policy implications alternatives are significant. The Huntington thesis is a reminder of the crucial role that diplomacy and cultural exchanges play in the ideological competition that pits liberal doctrines against fundamentalism. The Duffield conception evokes the global governance gap and highlights the need to give a human face to globalisation through policy coherence for development initiatives.

Finally, the neo-liberal model is geared to the modification of the incentives framework that face warlords and insurgents. It concentrates on the strengthening of state security agencies and the promotion of legitimate and productive business enterprises as privileged policy remedies to conflict. At the national level, it uses aid as a lever of reform and promotes private enterprise and social development. At the international level, it recommends tighter regulation of financial flows, certification of natural resources exports as in the Kimberley process and military intervention as a last resort[7].

ADDRESSING "ROOT CAUSES"

Recent policy research confirms that security and development are two sides of the same coin. There is a strong and robust statistical correlation between violent conflict and poverty—as well as between violent conflict and poor growth performance. Research establishes that the per capita income of a conflict-affected country is one-third the per capita income enjoyed by a peaceful country. A country with a per capita income of $4,000 per capita is three times less likely to be affected by a new conflict than a country of $1,000 per capita. A country with a -6% growth rate is twice as prone to conflict than a country with a + 6% growth rate. From this perspective, traditional growth oriented prescriptions are antidotes to conflict.

We do not know for sure why these relationships hold or whether and how non-economic factors intervene to explain the poverty-conflict linkage. But policy research has generated substantial knowledge that should be used to inform the engagement of donor countries with fragile states. First and foremost, the evidence that conflict prevention should have top priority is overwhelming. On average the cost of a civil war is $54 billion, or 250% the value of the GDP at the time the conflict starts.

Other studies point to a reverse causality, ie just as wars create poverty, negative income shocks matter to security: it has been estimated that a 5% negative income shock increases civil war risks by 50%. Yet another reason why poverty and conflict are linked is that poor states tend to be weak states that are more vulnerable to takeover and hence more likely to be attacked by neighbors and/or captured by insurgents. Hence, the building of state capacity should have pride of place in country assistance strategies focused on fragile states.

Sound and equitable economic management is important in fragile states since failed economic strategies can lead to conflict. In turn, conflict may weaken the resolve of the state to adopt the demanding measures required for rekindling growth. Broad based development focused on the reduction of group and regional inequities should be the objective since, based on the research of Frances Stewart, we know that rapid increases in horizontal inequalities (ie among regions and groups) are far more likely to induce conflict than inequalities within the same identity group. They may even result from rapid and unbalanced growth within a weak institutional environment that lacks the capacity and the legitimacy to mediate among competing interest groups.

Provision of health services is critical since infectious disease may affect the most productive elements of society and increase its vulnerability to conflict. In turn, conflict may spread the disease and increase poverty. Yet another plausible explanation of why violent conflict erupts more often in poor and stagnant economies focuses on demography. The statistical evidence is compelling. The development process invariably involves a demographic transition when lives lengthen and average family sizes decline. A youth bulge, ie a high share of young adults, characterises the early stages of this transition.

Countries at this stage of the process are nearly 2.5 times more likely to experience a civil war than other countries. In most of these economies, growth is not sufficient to create sufficient employment for the expanding labor force. Young adult males are least likely to find work and most likely to resort to violence in response to their deprivation. Especially where the state is weak and cannot manage social tensions, the combination of low growth and high fertility is a highly combustible mixture especially where urbanisation rates are high.

Environmental factors have also been adduced to explain the prevalence of conflict in poor and stagnant economies. A combination of natural resource depletion and population growth has induced large-scale population movements and increased competition for access to land, water, jobs and social services among identity groups. The pressure on scarce natural resources is likely to increase as climate change produces floods, droughts and heat waves. By 2015, 40% of the projected world population will live in water-stressed countries.

About 1.4 billion people in developing countries live in fragile environments. Disputes over access to land, water and forests among groups with competing needs (farmers, pastoralists, indigenous peoples, etc) have become frequent. Irrigation and transportation projects that increase land values in areas where land ownership rights are tenuous induce displacement of poor farmers by rich farmers and powerful politicians. They may also induce intensification of land use and deprive nomadic communities of traditional grazing rights. Finally, there is statistical evidence to the effect that conflict is more frequent in autocratic, natural resource dependent countries.

In such environments, local elites capture the bulk of revenues thus making domestic taxation redundant and weakening the social contract between the rulers and the ruled. The lack of state resilience encourages corruption and makes civil wars more likely by providing incentives to warlords to capture control of such "lootable resources" as oil, minerals, metals, gemstones, timber and poppy cultivation. Conversely, the need to control the supplies of energy and other natural resources for smooth functioning of the world economy gives rise to geopolitical tensions and alliances between rich countries and authoritarian regimes that end up increasing the risks of instability.

In brief, there is no single explanation about the poverty-conflict linkage. Variable admixtures of poor economic management, weak governance, demographic pressure, environmental stress, natural resource dependence and unequal development patterns appear to underlie state failure and conflict. Past development interventions have not been sufficiently attuned to these risks.

A deliberate reorientation of the development enterprise towards security would reflect hard-won lessons of experience. Consequently, tailor made "conflict sensitive" country strategies are needed to address the most relevant structural obstacles to security and development. Without such strategies, reorientation of security and development policies will not be translated in results on the ground.

Chronic economic volatility, environmental stress and man-made conflicts have had a deleterious impact on human welfare. The poor suffer most from financial crises and the disruption to life and liberty associated with insecurity. Until recently, development assistance agencies have viewed conflict as exogenous events and shied away from identifying the victims of convulsive change among the weak and the poor, except as part of ex-post impact assessments—when they come too late to make a difference.

Under pressure from advocacy groups, the development community has adopted social and environmental safeguards. But these have aimed at the mitigation of social and environmental costs for specific investment projects while support for domestic policy reform and capacity building geared to the protection of local communities and weaker elements of the society have lagged. In particular, progress in mainstreaming gender considerations within development strategies has been slow and the rights of indigenous peoples and minorities have been given short shrift in the design of development programs and policies.

DECONSTRUCTING THE CONFLICT CYCLE

Donor countries' engagement with conflict-affected countries is currently governed by the conflict cycle. It draws precise boundaries between conflict management, reconstruction and development. But in many instances humanitarian aid, post conflict rehabilitation and development finance are needed in parallel to deliver wholesome results. The linear narrative according to which external intervention must conform to a pre-ordained process does not reflect the messy reality of conflict and its aftermath. In practice, the orderly succession of diplomacy, military intervention, conflict management, peace making, reconstruction and finally development (as if one were changing gears on a motor vehicle) is not adapted to the simultaneous need to protect lives, offer hope and trigger dynamics of social change.

The international community has yet to develop effective doctrines of external intervention in twilight struggles that have proven resistant to local solutions but it seems clear that simplistic depictions of the conflict cycle have contributed to the lack of synergy between security and development activities in conflict affected and conflict prone areas. The "conflict cycle" construct does not fit deadly insurgencies that continue to rage well after the conventional battlefield war has been won (Afghanistan, Iraq); to prolonged civil wars fed by illicit use of natural resources, drug trafficking and kidnapping (eg Colombia); to the seemingly endless human suffering, economic deprivation and chaotic violence of collapsed states (Haiti), or to the long drawn out civil wars that pit one ethnic or religious group against another due to age old competition for political supremacy, access to natural resources or sovereignty over ancestral lands (Sudan, Chechnya).

Under the intense pressures of new types of conflict and their aftermaths, a reconsideration of the ways military and civilian instruments are combined in the field is underway. There is a felt need to carry out development activities under fire both to win "hearts and minds" and to facilitate reintegration of former combatants in the early post conflict phase. As a result, the rules of engagement of military and aid personnel are in flux. New ways of protecting individuals involved in post conflict rehabilitation and reconstruction must be found (hundreds of contractors have been killed in Iraq) and the problems associated with the rapid increase in private contracting of security services call for more effective regulatory regimes.

DFID'S POLICIES ON CONFLICT AND DEVELOPMENT

The United Kingdom has been a pioneer in highlighting the linkages between conflict issues and development policy. Thus, Clare Short made a seminal speech at the turn of the century that stressed that aid in conflict prone and conflict affected countries was a high risk, high reward venture. The 2000 White Paper (Eliminating World Poverty: Making Globalization Work for the Poor) related violence to governance issues, identified personal safety as a prerequisite of sustainable livelihood, argued for integrated security and development approaches and stressed that partnership is essential for conflict prevention and management.

Since then, DFID has been a leader in conflict assessment, small arms reduction, post-conflict reconstruction and security sector reform. The Global Conflict Prevention Pool and the Africa Conflict Prevention pool have encouraged interdepartmental cooperation. A common committee structure allocates funds and oversees implementation of projects. Expanded budget envelopes for departmental initiatives and common agreements on the standards to be met to access pool resources have induced sharing of policy analysis both across departments and in the field, especially in Africa where decision making is largely delegated to country offices.

The peace-building framework for Sri Lanka; the joint approaches to peace settlement in DRC and Burundi, conflict resolution in Sudan, Somalia and Uganda; capacity building programs directed to ECOWAS; etc owe much to the conflict prevention pools. Reduction in time lags to meet urgent needs has been a useful byproduct. The pools have encouraged creativity and innovation with special emphasis on reconciliation activities, involvement of NGOs, support to regional organisations and participation of UN agencies. Partnership agreements have helped to leverage the UK contribution.

As may be expected at an early stage of implementation, trilateral cooperation does not always work smoothly. Re-packaging of "legacy" projects to access pool funds has been a problem. The perception that the pools are "pots of additional money" that can be tapped to pursue departmental objectives is not uncommon. There is still no comprehensive programming system for "joined up" country strategies. There are gaps in coverage and the quality of country strategies is mixed. The schemes funded by the pools are small (GBP 6-7 million on average) and up-scaling strategies are weak. The involvement of departments outside the inner circle of the 3 Ds (eg DTI, Home Affairs, etc) seems limited.

Neither is the "project by project" approach of the pools ideally adapted to the chronic and deep problems of conflict prevention and peace making. Systemic change, including the provision of larger administrative budgets to ensure proper country strategy work (without falling into the "paralysis by analysis trap") and to ensure adequate follow up of conflict prevention pool projects would be desirable.

THE IMPERATIVE OF POLICY COHERENCE

Examples of policy incoherence abound. Most weapon-exporting countries provide export credit guarantees for weapons purchases by developing countries, some of which are used for military incursions in neighboring countries (eg Uganda). An Oxfam survey has shown that out of 17 countries surveyed that are parties to the European Union Code of Conduct and/or the OSCE principles, only 10 would consider denying an export credit license on sustainable development grounds; only four have ever denied an arms export license on these grounds and only two (UK and the Netherlands) have a policy of consulting the development department[8].

Police equipment imported to improve domestic security is often used for internal coercion and human rights abuses. In order to protect 250 jobs, the United Kingdom authorised the export of a $40 million military air traffic control system to Tanzania over the objections of DFID and the World Bank. A huge quantity of small arms manufactured by OECD countries, China, Russia, Israel and South Africa flows through a vast network of independent arms dealers, brokers, middlemen and criminal networks[9]. Too many of them end up in the hands of rebels in war torn countries and make local wars bloodier and harder to control.

The growing role of non-state actors contributes to the complexity of the policy coordination challenge. For example, outsourcing of military functions to private companies has accelerated as a means of cutting costs and streamlining defense establishments but it has also complicated civilian oversight of the military. Similarly, humanitarian emergencies trigger the deployment of vast numbers of voluntary organisations that are fiercely independent and resist coordination by official development agencies.

Harmonisation of country typologies would contribute to policy coherence. Country classifications matter because they are used to allocate aid and formulate country strategies. Those currently in use within and among donor countries and aid organisations constitute a jungle of conflicting and overlapping concepts. Developing country officials do not endorse them. Transparency is often lacking. Some classifications equate performance measures with physical conditions and historical legacies (on which country authorities have little or no control). Others conflate security and development outcomes with structural factors and triggering events. Still others (including DFID's) use the subjective concept of difficult partnership without recognising the distinctive accountabilities for outcomes of all development partners.

AID ALLOCATION

Fragile states represent the core of the security and development challenge. They are home to 0.9-1.3 billion people, 14-19% of the world's population. Malnutrition is twice as high in them (one of three people) than in other developing countries. The malarial death rate is 13 times higher and the proportion of people afflicted by HIV/AIDS is four times higher than elsewhere in the developing world.

Fragile states constitute difficult environments for aid but they should not be left out of the development enterprise since they include 28-35% of the absolute poor; 32-46% of the children that do not receive a primary education; 41-51% of the children that die before their fifth birthday; 33-44% of maternal deaths; 34-44% of those living with HIV/AIDS; 27-35% of those deprived of safe drinking water. An improvement in their economic and social prospects is critical to the achievement of the millennium development goals.

Aid to fragile states is a precautionary conflict prevention measure since state failure is contagious and civil wars spread across borders. Yet, the flow of aid to fragile states has been inadequate. Countries classified as "good performers" have received a disproportionate share of total flows while countries classified as difficult partners have turned into "aid orphans". Even in terms of the standard policy measures used to guide aid allocation, it has been estimated that aid to fragile states should be increased by 40%.

This estimate does not take account of the enormous benefits that conflict prevention associated with aid to fragile states could unlock. Yet, according to Chauvet and Collier the opportunity cost of a civil war averages $82 billion if account is taken of spillover effects and growth foregone while Collier and Hoeffler observe that post conflict countries are more vulnerable to conflict as other fragile states and estimate that increased aid to post conflict countries for five years starting five years after its settlement would yield good returns (cost $13 billion; benefits: $32 billion).

The damage caused by five years (1983-88) of civil war in Sri Lanka has been estimated at 20% of the GDP ($1.5 billion)[10]. In Mozambique, production losses have been estimated at $20 billion due to the deaths of some 1.5 million people and the displacement of about half of the population from its customary sources of livelihood[11]. In Rwanda, Bosnia and Lebanon GDP fell to 46%, 27% and 24% of the pre-conflict peaks[12].

Under the banner of selectivity donors have concentrated aid resources on the least problematic countries. This has created an underclass of "aid orphans" that pose special risks to international stability. Volatility in aid flows to fragile states also needs attention. It has been twice as high in fragile states than in other states. Yet, the right kind of aid delivered at the right time can achieve good results even in difficult environments especially if aid is channeled through the private sector and voluntary organisations.

Specifically, 58% of the evaluated projects approved by the World Bank in states classified as fragile during 1998-2002 had satisfactory outcomes. Remarkably, the performance of private sector projects funded by the International Finance Corporation has been as good as in fragile states as elsewhere[13]. Normalised for the class of investment, IFC projects do not perform more poorly in fragile states[14].

In sum, the current aid allocation system short changes fragile states. It urgently needs reconsideration. Defense, diplomacy, foreign direct investment and trade relations are the major instruments of donor countries' engagement with fragile states. But aid plays an essential supporting role. Risk/reward assessments rather than static analysis should underlie aid allocations. Just as in health, prevention is cheaper than the cure[15].

LESSONS OF EXPERIENCE

Aid effectiveness in fragile states would be improved if the lessons of experience were heeded. Evaluation evidence confirms that to do things right in fragile states, things must be done differently. First, defense, diplomacy and other policy instruments should complement aid based on country strategies informed by conflict assessments. Second, to "do no harm", humanitarian and aid agencies must learn to work "in" and "on" conflict instead of "around" conflict.

Third, realism, a holistic and long-term perspective, adequate risk management safeguards, concentration of efforts on a few visible actions, involvement of reform minded local actors and innovative approaches that nurture the civil society and the private sector characterise effective guide donor country engagement in fragile states. Conversely, serious risks of unintended consequences plague aid to fragile states (eg corruption, capture by a dominant group, etc.) .

Special safeguards, sound economic assessment and accurate political analysis can help improve the development impact of aid in difficult environments. But the imperative of local ownership remains a fundamental prerequisite of development effectiveness. Harmonisation and alignment are more important in fragile states than in other states.

While the governments fragile states are not equipped to produce sophisticated poverty reduction strategies, donors should plan their operations around the results of joint needs assessments and coherent action plans. Simple instruments (eg transitional results matrices pioneered by the World Bank) are available to this end. But of even more importance is local "buy in" by reform-oriented interlocutors in fragile states and alignment of aid processes with the public expenditures processes. The domestic private sector and the civil society are critical to domestic ownership.

At the operational level, donor coordination, reduced transaction costs, harmonised and simplified procurement and disbursement procedures are fully relevant to fragile states. So is the need to endow adequate authority to strong and proactive country managers posted "on the ground". While budget support can have perverse effects where countrywide budgeting and programming processes are mismanaged, multi-donor trust fund arrangements provide convenient frameworks for "shadow alignment" with local processes.

Improved development effectiveness also means avoiding the proliferation of small project implementation units. Only large infrastructure projects (or interventions that address governance issues that cannot reasonably be expected to be implemented through local means) should be donor driven. Even for such interventions, alignment with domestic budget processes and broad based engagement with reform minded elements of society should be ensured and adequate social and environmental safeguards implemented. While sound economic management principles remain valid, "big bang" reform packages and conventional macro conditions are not adapted to fragile states when governments are weak and/or unrepresentative. Accordingly, fiscal policy advice, poverty reduction strategy papers and public expenditure reviews should be informed by conflict assessments.

Finally, development effectiveness in fragile states means doing different things. Experience suggests that policy coherence for the development of fragile states requires consistency in strategy design that combines short-term rehabilitation, security sector reform and other security oriented actions (eg interdiction of illegal trafficking in arms, drugs and people) together with long-term development assistance focused on sound economic management, improved governance, productive urban and rural employment, economic diversification and regional development within a single package.

Conversely, these new operational emphases are best promoted through a combination of diplomatic, defense and development instruments. Effective "joined up" action also encompasses non-state actors and draws on domestic energies and local talent. Policy coherence for development helps aid effectiveness.

Not enough aid professionals are trained to operate effectively in conflict prone, conflict affected and post-conflict countries. Therefore, capacity building is needed not only in poor countries but also in donor agencies to equip staff with the skills and analytical instruments they need to assess regional and ethnic imbalances and political dynamics. Multidisciplinary approaches should become standard practice.

REGIONAL CO -OPERATION

Any strategy that seeks only a peripheral involvement by local, regional and multilateral actors stands little chance of success. Given massive information asymmetries and the complexities of conflict-prone societies, home grown ideas grounded in experience are far more relevant to peace building and economic rehabilitation than the simplistic models that frequently motivate donors. Local and regional actors possess superior knowledge of the operating environment and have deep insights into the root causes of conflict. They are far better able to identify critical pressure points and sustainable development solutions.

Already, the agendas of regional organisations envisage an integration of security and development functions while recent international initiatives have tended to focus on one or the other. In Africa (with the exception of the OAU and the Front Line States) and South East Asia, regional organisations were founded largely for reasons of economic integration. The realisation that regional integration could not occur without regional security and stability led to the inclusion of a security agenda within their organisational mandates, thus facilitating the integration of security and development concerns.

In Africa, this has been most notable in ECOWAS, which evolved a new Treaty and also adopted the Mechanism for Conflict Prevention, Management, Resolution and Peacekeeping in addition to its goals of economic integration. The armed conflicts in Liberia, Sierra Leone, Guinea Bissau, and Côte d'Ivoire in the last decade have induced ECOWAS to give special attention to security issues.

Similarly, the OAU/AU was initially founded to pursue a political agenda and the integration of NEPAD as a programme of the African Union, operating along the new Peace and Security Council is likely to facilitate the adoption of a holistic agenda on security and development for Africa. These trends suggest that regional peace and prosperity would be well served if international support would emphasise the systematic integration of both agendas and allow regional organisations the "policy space" to set their own priorities.

IMPLICATIONS FOR SECURITY AND DEVELOPMENT POLICY

The following themes emerge as worthy of consideration in the Committee's review of DFID's new security and development policy:

Coherence

— Promote and monitor policy coherence for development across Whitehall, with emphasis on fragile states and arms trade regulation.

— Ensure that aid intended for poverty reduction is not diverted to meet geopolitical aims, eg for the "global war on terror".

— Contribute to the design and operation of "whole of government" risk assessment and early warning systems in countries at risk of instability.

— Take steps to integrate aid with diplomacy, defense, trade, foreign investment and migration policy in country assistance strategies.

Reorientation

— Reorient country assistance strategies for fragile states to emphasise conflict prevention and address the root causes of conflict highlighted by policy research.

— Reconsider the sequencing of humanitarian, post conflict and development operations to ensure synergy.

— Promote safeguard and transparency policies aimed at environmentally and socially responsible investments in infrastructure and natural resource development.

— Experiment with new rules of engagement in insecure environments to achieve better results.

Harmonisation

— Improve aid coordination, harmonisation and alignment in fragile states.

— Promote harmonisation of state fragility criteria under the aegis of the Development Assistance Committee of the OECD.

— Reform aid allocation policies to ensure that fragile states get an adequate share of financial and technical assistance and to eliminate the "aid orphan" syndrome.

— Give priority to regional organisations in peace making and peacekeeping.

March 2005