Nepal’s war-to-peace transition illustrates the complex political and economic causes, as well as legacies, of conflict that significantly shape chances of success, both for economic recovery and peacebuilding. There can be no successful economic recovery to lay the grounds for inclusive growth without peace and security; conversely peace and security critically depend on the support of economic actors, and rapid improvement of the economic conditions for conflict-affected people. However, purely technical approaches to both do not offer sufficient space to explore the political economy of a fragile transition process; and so can inadvertently fuel conflict afresh.
Within this context, effective and functioning partnerships need to be forged between differentactors, including business, government, development agencies and civil society. This reportreviews the potentials and obstacles for such collaboration, drawing on opinions and perceptionsat the district-level, as well as Kathmandu.
Several key lessons emerge from Nepal that can prove instructive for economic recovery policy and programming elsewhere.
Contextualise economic development planning within past and present peace process dynamics. The way socio-economic issues are dealt with during a peace process have a significant impact on“post-conflict” economic recovery. In Nepal, socio-economic issues were at the heart of the conflict.The way they have been addressed during the peace process and transition was determined, not byeconomic rationale alone, but primarily by the ups and downs of a complex political process andongoing power struggles at the centre.
A strong understanding of economic causes, drivers and impacts of conflict is crucial for prioritising interventions in support of equitable recovery and peace. Therefore the political economy ofconflict and attendant power dynamics must inform post-conflict economic recovery analysis andprogramming. In Nepal, some donors’ strategies reflect this, combining both support to the peaceprocess itself, as well as plans to support priority sectors for inclusive growth.
Identify and draw on economic development and peacebuilding synergies. International evidence shows that strongly diversified economies are better equipped to withstand conflict risks than those that rely on a few sectors and are controlled by a few dominant players. This puts Nepal in the high-risk category in terms of its likelihood of returning to conflict. Nurturing small and medium enterprises in support of a diversified economy that is independent of the risks of elite capture is not only an economic development imperative; it can also contribute to peacebuilding.
Building and sustaining constructive relationships should be central to all economic recovery and peacebuilding interventions. A multitude of actors, including political, economic and security actors,have a role to play in the complex, post-agreement phase. Government policy-makers, donors anddevelopment partners, the private sector, workers, and civil society need to work together effectivelyto tackle urgent economic and peacebuilding priorities.
Building bridges within the business community is key. The "business community" is highly diverse, with different needs and priorities. In Nepal, like many post-conflict contexts that have undiversified economies and young democracies, it is often larger business and economic actors that have access to and can influence government policy. While potentially positive, this group does not necessarily represent the wider private sector, particularly if the image of big business is bound up in conflict-related grievances.
A degree of realism is required in expectations of business contributions to economic recovery and peacebuilding. Planners need to be mindful of business perceptions of present and future risk andreflect realism in forecasts when planning for economic recovery and investment. Likewise, whilepolicy debates and plans at the centre reflect the need to reduce horizontal inequalities in Nepal,business operations and investment decisions are not necessarily guided by this perspective.
Support business to recognise their interest and role in promoting social equity and inclusive growth. There is a need to illustrate to businesses why it is in their long-term interest to avoidinsensitive, exclusionary or illicit practices, and help them tackle attendant risks to themselves andtheir operations, including through collaborating with others.
Conflict-sensitivity is a bottom line for peaceful recovery. This requires focused analysis, purposeful design, and explicit steps to reduce conflict risks and identify peacebuilding opportunities in all aspects of economic policy and programming. Donors in Nepal have made great strides in this regard over the past five years. This commitment must be carried over into the post-conflict period and continue throughout a fragile transition period.