Search the Internet          Tips  Sites: Finance, Investment

Economic reconstruction for peace

Haseeb A Drabu

The results of the MORI International survey conducted in Jammu and Kashmir, which reveal that 93 per cent of the sample population think that economic development will help bring peace, have suddenly sparked a debate on the role of economic development in reducing conflict in Kashmir.

Without getting into the validity of the MORI survey, there is no denying the need to pay serious attention to the economic reconstruction of Jammu and Kashmir. Apart from the 13 years of debilitating conflict, destruction, and deprivation which have wrecked the economic system, the systemic imbalances caused by 50 years of economic mismanagement need to be redressed.

The critical importance of a political mandate for reconstruction stemming from a resolution of the conflict hardly needs to be underscored. Ideally, a political resolution sanctioned internationally has to be achieved before organised economic and reconstruction assistance can be initiated. But with the political aspects of the problem seemingly intractable, the second-best option could be to try and proceed with reconstruction in a manner that is acceptable to all.

For, a vibrant and healthy Jammu and Kashmir economy is conducive to all forms of political superstructures - be it independence, autonomy or a full accession to India.

The initiatives taken by the present governments - the Centre and the state - are characterised by this great temptation to "do whatever it takes" to get results in the short run.

A typical example is the excessive government recruitment, particularly on terms and conditions that provide a high degree of "permanence"; or the series of ad hoc and often competing special economic packages and funding processes.

These cannot be the solutions. Indeed, the financing and funding by the government of India have become part of the problem rather than part of the solution. The aim of seeking "quick wins" and visible results, at the expense of a well-laid-out post-conflict reconstruction process, only complicates matters.

A reconstruction of the J&K economy needs to be designed in a manner that supports the transition from conflict to peace through the rebuilding of the economic framework. Reconstruction here does not refer only to the reconstruction of "physical infrastructure", nor does it necessarily signify a rebuilding of the socioeconomic framework that existed before the onset of conflict.

The conflict in Kashmir has transformed the society, and a return to the past may neither be possible nor desirable. This is especially so since the inequities and fragility of the economy and the weak governance structure in Kashmir played a significant role in creating the conditions for conflict. What is needed, therefore, is the reconstruction of the enabling conditions for a functioning peacetime economy.

The loss of human capital, destruction of physical assets, disruptions of trade networks and relations and devastations are a major part of the problem. But from an economic point of view, it is the decimation of institutional capacity that is the biggest damage. The state now has a virtually non-existent economic administrative capacity.

In view of this, there is need for a reconstruction agency or other similar institutional arrangement for the reconstruction programme. There should be meaningful "sunset" provisions to ensure that the reconstruction agency does not end up competing with and detracting from the regular machinery of government as the latter gets its legitimacy over time.

The funding and finances for this agency - seen as a financial mechanism which needs to be guided by J&K's reconstruction strategy and priorities - should be broad in scope. Contributions to the reconstruction fund should be untied and not earmarked for individual programmes or activities.

However, spending out of the trust fund should be in accordance with reconstruction priorities agreed upon, and specified broad programme categories.

There may be a need to establish clear criteria for international support, which have the government's concurrence and which are then adhered to as a prerequisite for funding. There is no harm in seeking assistance from international agencies like the UN agencies or multilateral development banks.

The World Bank, for instance, has a Post-Conflict Fund, a part of their Development Grant Facility. Similarly, the International Monetary Fund also has worked out lending policies for post-conflict periods. All these sources can be tapped by the agency and channelled through an umbrella trust fund.

This will be far more effective and meaningful than contributions for reconstruction going directly into the myriad specific reconstruction programmes and activities.

There are a number of advantages of this approach. First, it will not be constrained by the existing rigid Centre-state financial rules and relations. Second, it will not excessively tax the state government's limited capacity for reconstruction activity. Third, it will enhance the coherence and accountability in the use of central (and multilateral) assistance to the state.

Fourth, this mechanism will be more convenient for NGOs and other agencies to participate in and make it broad-based. And fifth, it will be a vehicle for promoting consensus among political parties and ensuring that the reconstruction/development needs of different regions and groups are meaningfully addressed.

Powered by

ALSO READ:
The Rediff Budget Special
The Rediff-Business Standard Special
Money