Economic Research Forum (ERF)

Getting reconstruction right and wrong: lessons from Iraq

646
Bitter experiences in the last two decades have made the international community hesitant to engage in robust reconstruction activities. This Brookings column asks how the process of reconstruction can be managed effectively, and what lessons – positive and negative – can be drawn from the experience with Iraq.

In a nutshell

Actions taken by the international community in the process of reconstruction need to reinforce national success through national institutions.

International actors need to adopt a flexible approach to dealing with the uncertain, fluid and complex nature of reconstruction, even when facing increased security risks.

Problems related to accountability have a major impact on reconstruction outcomes.

Bitter experiences of reconstruction in the last two decades have made the international community hesitant to engage in robust reconstruction activities. Iraq’s reconstruction after the US-led invasion in 2003 contributed significantly to this reluctance.

Between 2003 and 2014, more than $220 billion were spent on rebuilding the country. Despite the huge amount of money spent and extensive projects and programmes implemented, the international community and the Iraqi people view the effort critically. This perception makes the international community focus mainly on humanitarian relief and much less on engagement that requires medium- to long-term commitment.

At the same time, the human suffering and lasting displacement produced by the turmoil in the Middle East demonstrate that the cost of inaction can be great. Humanitarian relief alone does not address the root causes of the conflict and violence. The success or failure of reconstruction can have a significant impact on the peace and stability of the broader global community.

So how can we manage the process effectively? What lessons – positive and negative – can we draw from the Iraq reconstruction experience? The recently published report, ‘The Reconstruction of Iraq after 2003 – Learning from its Successes and Failures‘ identifies several key lessons:

First, actions taken by the international community need to reinforce national success through national institutions. The drive for early results does not justify bypassing national institutions; donors should work through them. A US audit report states that donor-funded physical infrastructure put in place since 2003 was already breaking down by 2005 since Iraqi institutions were not fully engaged, and the roles of institutions in operating and maintaining infrastructure were not sufficiently considered.

Also, international actors need to avoid weakening national institutions and the related social capital through their interventions. In Iraq, policies such as de-Baathfication, dissolution of the Iraqi military and establishment of the Governing Council based on ethno-sectarian divisions have had a lasting negative impact on institutions and societies. Imposing external solutions invites counterproductive reactions from local counterparts.

To be sure, this approach to reconstruction that emphasises national institutions entails serious challenges. A big challenge for reconstruction actors is in finding legitimate partners to work with, as we are witnessing in parts of the Middle East and North Africa (MENA) – such as Syria and Yemen today – while trying to identify national needs in an intensely divided political environment.

Second, international actors need to adopt a flexible approach to deal with the uncertain, fluid, and complex nature of reconstruction, even when facing increased security risks.

Effective implementation depends in large part on the ability to adapt to constantly changing conditions, a difficult task that most donors and international organisations struggled with in Iraq. It is true that maintaining a presence within a country under volatile security conditions increases the risks for concerned staff, but it also provides better opportunities to interact with counterparts and enhance the effectiveness of assistance. Retaining a presence in less volatile parts of Iraq might have allowed for more flexible responses.

The international community needs to devise a new mechanism for coordinating the response to security and development challenges. The dire security situation is usually the biggest hurdle for reconstruction activities and private sector development in a fragile environment. At the same time, security risks can only be fully neutralised by addressing the root causes of violence and extremism through a development approach that contributes to providing economic opportunities, especially among young people.

The 2017 Arab Youth Survey raised possible links between unemployment and the potential for radicalisation. Young Arabs perceived unemployment and extremism as the biggest problems holding back the MENA region. Security and development are inextricably entwined. But there have been historical difficulties in connecting security and development actors in reconstruction, and Iraq was no exception. Developing and strengthening partnerships between the security and development spheres is of paramount importance.

Third, problems related to accountability have a major impact on reconstruction outcomes. For example, dual accountability, the tendency for donors and international organisations to be accountable first to their domestic constituencies and only second to those of recipient states – can make delivering results on the ground difficult. In Iraq, superiors back in donor capitals often overlooked or dismissed the good intentions of international staff in the field.

Furthermore, local accountability can be undermined when reconstruction financing comes from resources unconnected to the local population. The majority of the Iraqi reconstruction budget was funded by oil revenues and donor funding – neither of which held a direct connection to the population at large. In turn, this gave Iraqis little incentive to scrutinise reconstruction spending consistently. External actors, along with national actors, should try harder to leverage reconstruction funds to strengthen the accountability of national institutions toward their citizens.

One proposal to enhance accountability and therefore the effectiveness of reconstruction funding is to revisit the mechanism for distributing oil resources. Shanta Devarajan and colleagues argue that by transferring a portion of natural resource-related government revenues uniformly and universally as direct payments to the population, and taxing the population, some countries could increase both private consumption and the provision of public goods and thereby reduce poverty and enhance social welfare.

This argument might also be made for donor funding. The total financial commitment for the reconstruction of Iraq amounted to somewhere between $7,000 to $9,000 per capita. As much of the spending is thought to have been ineffective in improving the lives of Iraqis, they may have been better off with a transfer of this amount to each citizen.

Today, following the end of major fighting against the Islamic State of Iraq and the Levant (ISIL), the Iraqi government and the international community are facing yet another challenge of reconstruction. To improve the outcome in Iraq and possibly in Syria, Yemen and Libya in the future, international actors need to understand the weight of their responsibility and take the actions necessary to learn from past mistakes. Reconstruction in uncertain, fluid and complex situations requires flexibility and creativity in both thought and response.

This column was originally published by Brookings in October 2019. Read the original article.

 

 

 

 

 

 

 

 

 

 

Most read

Trust in Lebanon’s public institutions: a challenge for the new leadership

Lebanon’s new leadership confronts daunting economic challenges amid geopolitical tensions across the wider region. As this column explains, understanding what has happened over the past decade to citizens’ trust in key public institutions – parliament, the government and the armed forces – will be a crucial part of the policy response.

Qatarisation: playing the long game on workforce nationalisation

As national populations across the Gulf have grown and hydrocarbon reserves declined, most Gulf countries have sought to move to a more sustainable economic model underpinned by raising the share of citizens in the productive private sector. But, as this column explains, Qatar differs from its neighbours in several important ways that could render aggressive workforce nationalization policies counterproductive. In terms of such policies, the country should chart its own path.

Small businesses in the Great Lockdown: lessons for crisis management

Understanding big economic shocks like Covid-19 and how firms respond to them is crucial for mitigating their negative effects and accelerating the post-crisis recovery. This column reports evidence on how small and medium-sized enterprises in Tunisia’s formal business sector adapted to the pandemic and the lockdown – and draws policy lessons for when the next crisis hits.

Economic consequences of the 2003 Bam earthquake in Iran

Over the decades, Iran has faced numerous devastating natural disasters, including the deadly 2003 Bam earthquake. This column reports evidence on the unexpected economic boost in Bam County and its neighbours after the disaster – the result of a variety of factors, including national and international aid, political mobilisation and the region’s cultural significance. Using data on the intensity of night-time lights in a geographical area, the research reveals how disaster recovery may lead to a surprising economic rebound.

Qatar’s pursuit of government excellence: promises and pitfalls

As Qatar seeks to make the transition from a hydrocarbon-based economy to a diversified, knowledge-based economy, ‘government excellence’ has been identified as a key strategic objective. This column reports what government effectiveness means in terms of delivery of public services, digitalisation of services, and control of corruption – and outlines the progress made to date on these development priorities and what the country needs to do to meet its targets.

The impact of climate change and resource scarcity on conflict in MENA

The interrelationships between climate change, food production, economic instability and violent conflict have become increasingly relevant in recent decades, with climate-induced economic shocks intensifying social and political tensions, particularly in resource-constrained regions like MENA. This column reports new evidence on the impact of climate change on economic and food production outcomes – and how economic stability, agricultural productivity and shared water resources affect conflict. While international aid, economic growth and food security reduce the likelihood of conflict, resource scarcity and shared water basins contribute to high risks of conflict.

A Macroeconomic Accounting of Unemployment in Jordan:  Unemployment is mainly an issue for adults and men

Since unemployment rates in Jordan are higher among young people and women than other groups, unemployment is commonly characterised as a youth and gender issue. However, the majority of the country’s unemployed are adults and men. This suggests that unemployment is primarily a macroeconomic issue challenge for the entire labour market. The appropriate response therefore is coordinated fiscal, monetary, structural and institutional policies, while more targeted measures can still benefit specific groups.

The green energy transition: employment pathways for MENA

The potential employment impacts of green and renewable energy in the Middle East and North Africa are multifaceted and promising. As this column explains, embracing renewable energy technologies presents an opportunity for the region to diversify its economy, mitigate the possible negative impacts of digitalisation on existing jobs, reduce its carbon footprint and create significant levels of employment across a variety of sectors. Green energy is not just an environmental imperative but an economic necessity.

Tunisia’s energy transition: the key role of small businesses

Micro, small and medium-sized enterprises (MSMEs) play a critical role in Tunisia’s economy, contributing significantly to GDP and employment. As this column explains, they are also essential for advancing the country’s ambitions to make a successful transition from reliance on fossil fuels to more widespread use of renewable energy sources. A fair distribution of the transition’s benefits across all regions and communities will secure a future where MSMEs thrive as leaders in a prosperous, inclusive and sustainable Tunisia.

Global value chains, wages and skills in MENA countries

The involvement of firms in production across different countries or regions via global value chains (GVCs) can make a significant contribution to economic development, including improved labour market outcomes. This column highlights the gains from GVC participation in terms of employment quality in Egypt, Jordan and Tunisia. Given the high unemployment, sticky wages and wide skill divides that are common in the MENA region, encouraging firms to participate in GVCs is a valuable channel for raising living standards.