4.1. The Value Chain Approach in Conflict-Affected Contexts
|While disasters are unlike conflicts, there are lessons and commonalities that transfer. To learn about the role of markets in building resilience to crises, click here.
With 80 percent of the world’s 20 poorest countries having suffered a major war in the past 15 years, most relief and development practitioners and donors will find themselves working in a conflict-affected context at some point. The value chain approach has been successful at reducing poverty through economic growth in a wide variety of contexts, including those affected by conflict. This wiki presents learning from practitioners and academics about how to apply the value chain approach in such a context.
The term "conflict" can be used to refer to a wide range of phenomena—some of which are positive and necessary for social change, and some of which have caused countless deaths and have torn apart countries. The conflict-affected contexts discussed here generally fall into two categories:
- Conflict: open warfare between groups, no assumption of security, limited mobility (e.g., regions of Iraq and Afghanistan)
- Post-conflict: recognized form of government (even if considered weak), existing peace process, no open warfare, a minimum level of personal security and mobility, residual social, economic and political effects from conflict (e.g., Liberia, CAR, Serbia, regions of Nepal)
Why is Economic Development Important in a Conflict-Affected Context?
While development professionals have long recognized a connection between conflict and poverty, there is now mounting empirical evidence of this relationship. An oft-quoted study suggests that from 1949 to 2002, countries which emerged from conflict had a 40 percent risk of a return to violence within a decade. Robust post-conflict economic growth reduced the risk of a return to violence to 26.9 percent. In his recent book, Paul Collier showed that nearly 73 percent of the population in the 58 poorest countries in the world have experienced a civil war in recent years. Other studies show that countries free of internal violence are “characterized by a per capita income that is more than five times higher than in countries in which wars broke out" and the “mean per capita GDP in countries affected by civil war at any point from 1960-1999 is less than half that of countries with no civil war experience. There is also some evidence to suggest that poverty is a better predictor of recruitment into rebellions than grievance because it more effectively increases people’s susceptibility to manipulation by the powerful. Although there may still disagreement over the particular nature of the relationship between economic development and conflict, there is a general consensus around the critical importance of supporting economic recovery early and vigorously in the wake of conflict.
However, it should be noted there is little evidence that economic development activities can directly drive peace. Programs are piloting various approaches to mitigating conflict and promoting peace through market development programs: bringing together warring groups for trade; targeting conflict instigators such as ex-combatants  for job training; or seeking to promote alternative economic activities to coca or opium production or deforestation from logging or charcoal-making. While some of these initiatives may not be based on strong demand and might never be competitive or sustainable, the short to medium-term conflict mitigation outcomes can be compelling, and they are worth considering in certain circumstances.
In the past, donors and practitioners considered economic programming to be a second phase activity, one that should follow earlier relief and recovery initiatives. However, this linear relief → recovery → economic development continuum often resulted in aid dependency, market distortions, false incentives for business investment, a lack of investments in market institutions and minimal or no capacity-building for market actors. Increasingly, there is recognition that economic development activities should start in the earliest days of a response and in tandem with humanitarian interventions to meet basic human needs and promote peace. Further, current thinking is increasingly holistic, as reflected in the UN cluster system, which includes the Early Recovery Cluster initiative, and the introduction and use of tools like the Emergency Market Mapping and Analysis Toolkit (EMMA).
Why the Value Chain Approach?
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Because of its success in development contexts, many practitioners are beginning to adapt the value chain approach to conflict and post-conflict contexts, and lessons are emerging concerning when and how the approach can be applied in specific situations. The value chain approach considers the whole system in which value chain actors operate—including the services and rules that affect it. This systemic orientation encourages project designers and implementers to continuously consider the following factors which are essential to effective post-conflict reconstruction and economic development:
- Market opportunities must drive the program, and market forces should be harnessed to reinforce positive coping mechanisms. This may include protecting productive assets or meeting newly created market needs that can support relief efforts and encourage economic recovery.
- The business enabling environment (BEE) includes the norms and customs, laws, regulations, policies and infrastructure that facilitate or hinder the movement of products and services along a value chain. Much of the BEE may be unfavorable, weak or in flux in conflict-affected contexts.
- Transportation, mobility and security present a number of challenges for program designers, implementers and other value chain actors operating in conflict environments, such as:
- Increased product prices due to higher fuel and freight costs
- Higher risks of product damage from longer travel times, bad roads and rough handling
- Limited safe movement of people (including program staff) and products due to ongoing security issues
- Long delays at borders caused by poor policies, regulations, weak or corrupt border management practices and/or security concerns
- Business relationships and trust are often destroyed during conflicts. Encouraging value chain actors to share their experiences helps practitioners understand their roles and motivations, and this can go a long way toward rebuilding trust, mutual understanding and support for a common goal.
- Support services—financial (credit, leasing), cross-cutting (business, legal) and sector specific (veterinary, irrigation)—are essential for businesses that want to upgrade their operations and become more competitive. In environments affected by conflict, support services are often under-developed. Practitioners should try to understand the needs of value chain participants to facilitate the development of linkages to and relationships with service providers.
- Information and communication technologies (ICT) can play a key role in developing and increasing the competitiveness of value chains in conflict and post-conflict situations where information can change quickly, traditional communications channels are often destroyed and security concerns impede travel.
For more information on these issues and for examples of how selected projects have dealt with them, see Essential Issues to Consider.
Challenges in Applying the Value Chain Approach in Conflict-Affected Contexts
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Conflict-affected environments entail a number of constraints to economic development in general and to the application of the value chain approach in particular. These may include disrupted transport, destroyed or inaccessible infrastructure, security concerns, a rapidly changing policy environment, shifting power relationships, short time horizons and a lack of trust between actors throughout the chain. (For more on these common constraints, click here.) It is critically important to adapt the value chain approach to each specific conflict environment throughout the project cycle.
- Value chain selection: Cross-cutting themes—reducing conflict-drivers, engaging marginalized groups, addressing critical needs, creating jobs, restoring basic services and supporting food security—are as important as the potential to be competitive and to address demand and ensure sustainability.
- Conflict analysis of the history, players, causes and dynamics of the conflict, is crucial when selecting and intervening in value chains in conflict contexts.
- Conflict-sensitive approaches during implementation help practitioners remain aware of how their efforts to promote the economy can interact with the dynamics of a conflict.
- Monitoring and evaluation: From choosing indicators to the level of sensitivity in collecting data, conflict-affected contexts present special challenges for monitoring and evaluations.
For more information and examples of the ways programs are addressing these important challenges, see Applying a Conflict Lens throughout the Project Cycle.
Emerging Good Practice
It is critically important to adapt the value chain approach to each specific conflict situation. This means that program designers and implementers need to use different criteria when selecting value chains. They should acknowledge that subsidies may be necessary to launch the value chain and be willing to consider the conflict drivers when engaging lead firms. While we are still very much in the learning phase, ongoing field research is identifying practical lessons that designers and implementers can adapt for the conflict contexts in which they are working. A recent USAID paper synthesizes the lessons drawn from fourteen in-depth conflict case studies of programs using the value chain framework to design and/or implement activities at various points along the conflict/post-conflict continuum. This and other research have identified a set of essential issues to consider that can contribute significantly to positive economic results. Several of these elements are consistent across contexts, and programs that applied them showed greater economic results in terms of employment and rising incomes.
Even with their visible successes, the case study programs remain vulnerable and face considerable risks, such as disruptions after public funds are withdrawn, significant changes in their markets or setbacks in maintaining quality or consistency of their products and services. Part of the task of the project teams was to ensure that market information and incentives flowed through the value chain as part of normal business so the chain could continue to grow and prosper without direct donor or other financial support. The following is a set of practical lessons for adapting the value chain approach when working in conflict-affected contexts.
- Build on the foundations of earlier reconstruction and recovery efforts.
- Start with multiple opportunities to identify a growing market segment.
- Value chain work takes longer to show results in conflict-affected environments.
- Use a progressive or stepped approach to generate early momentum while staying on a path toward long-term goals.
- Integrate value chain development with larger, multi-sector efforts carefully.
- Focus on building horizontal and vertical linkages and on establishing trust.
- Develop collaborative relationships with government agencies.
- Identify private sector actors willing to invest in upgrading the value chain.
- Ensure that market information and incentives flow through the value chain as part of normal business.
- Acknowledge that subsidies may be needed initially—and use them wisely.
- Accept and adjust to the level of analysis possible.
For more information and examples of the ways programs are adapting the value chain approach to conflict situations, see Recommendations for Adapting the Value Chain Approach to Conflict-Affected Contexts.
Further Research and Next Steps
This section follows the value chain project cycle. While there are a number of excellent tools and techniques available to help practitioners use the value chain approach effectively in conflict-affected situations, many think there should be more a more focused effort to promote training and use of these tools. The following provides thoughts, suggestions and recommendations for additional research, diagnostic tools, approaches and mechanisms that could help make the work of donors, project designers and practitioners in conflict-affected contexts more efficient and effective. These are further explained on the Suggestions for Further Research and Tools page.
Value Chain Selection
- A basic assessment tool that helps practitioners to identify still-functioning local and regional markets and to better coordinate their relief and development activities
- Mechanisms that provide appropriate and sufficient scope for economic issues early in conflict and post-conflict responses
- A diagnostic tool requiring minimal time and resources that combines value chain analysis and conflict assessment data would introduce key value chain development concepts to relief practitioners
- A tool to quickly identify and assess major enabling environment issues that impact economic recovery in post-conflict environments
- A tool or approach for assessing horizontally and vertically linked relationships and the value that is added to products would help implementers understand information flows, available services and power dynamics
- A conflict assessment tool that incorporates conflict drivers and fault lines into the value chain map
- Identification and incorporation of microenterprise and industry competitiveness indicators into post-conflict needs assessments
- A simple, generic tool that captures critical information on specific markets
- An easy-to-use tool that field-based practitioners can use both to assess the structure and competitiveness of a value chain, and to identify competitors and industry trends
Design and Implementation
- Innovative approaches and tools for building the capacity of implementing agency staff and partners.
- Mechanisms that facilitate the ongoing exchange of experience and information.
- Pilot initiatives to spur innovation, further test and elaborate on current recommendations and investigate unresolved challenges
- A white paper to help donors adapt their emergency assistance and private sector development policies and guidelines
- Research on the issues central to subsidies and sustainability
- Tools for adapting products, methodologies or approaches to address gender issues in conflict environments
- Research to help MFIs adapt their services to address the added burdens that conflict creates for women
- Empirical research and measurable indicators that contribute to a better understanding of how microfinance impacts economic recovery in conflict settings
Monitoring and Evaluation
- Tools that identify and measure changes in the types and quality of value chain relationships affected by conflict, particularly the level of trust
- Guidelines for assessing and continuously monitoring the enabling environment in conflict environments
- More standardized approaches to value chain assessment, project monitoring and impact evaluation
- Research into ways programs can balance multiple social objectives and also realize economic returns
- ↑ Global Conflict Trends (2005), graphs on the global patterns of war since the 1950s
- ↑ http://www.usaid.gov/our_work/cross-cutting_programs/conflict/publications/docs/CMM_ConflAssessFrmwrk_May_05.pdf USAID Conflict Assessment Framework, April 2005
- ↑ Collier, Hoeffler and Soderbom. 2007. Post-Conflict Risks. Centre for the Study of Post-Conflict Economies, Department of Economics, University of Oxford.
- ↑ Collier, The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It, 17, 27
- ↑ Collier, Hoeffler, and Rohner, “Beyond greed and grievance,” 2006, pp. 19-20.
- ↑ Sambanis, Nicholas. “Using Case Studies to Expand the Theory of Civil War”, Perspectives on Politics, Vol. 2, No. 2, June 2004, pp. 259-279
- ↑ Macartan Humphreys and Jeremy M. Weinstein, "Who Fights? The Determinants of Participation in Civil War" American Journal of Political Science 52, no. 2 (2008).
- ↑ Socio-Economic Reintegration of ex-combatants: Understanding and addressing key challenges, Reintegration Briefing Paper 1.2, 2009, International Alert
- ↑ Lewarne and Snelbecker, Economic governance in war-torn economies: Lessons learned from the Marshall Plan to the reconstruction of Iraq – Long report, prepared for the USAID Bureau for Policy and Program Coordination, Washington, DC: USAID.
- ↑ USAID, A Guide to Economic Growth in Post-Conflict Countries
- ↑ http://unmit.unmissions.org/Default.aspx?tabid=760
- ↑ Early Recovery Cluster
- ↑ Emergency Market Mapping and Analysis Toolkit
- ↑ Parker, Joan. A Synthesis of Practical Lessons from Value Chain Projects in Conflict-Affected Environments