Catalog

	Table of Contents
p. 3 of 10 BACK | NEXT Challenges of rebuilding From postconflict to reconstruction Role of MDBs ADB’s approach and comparative advantage Afghanistan and ADB: a partnership renewed Postconflict rebuilding From postconflict: preconditions for reconstruction Toward reconstruction: financing the transition Towrd development: setting the stage The way forward: lessons from postconflict reconstruction

Rehabilitation and Reconstruction - ADB's Role in Afghanistan and the Region

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Role of MDBs

In the aftermath of World War II, reconstruction, initially of Europe, was facilitated by transferring resources from capital-surplus to capital-deficient countries. The World Bank was founded to facilitate this transfer. With restrictive capital flows and associated high risks, many postconflict countries were unable to attract the capital needed to finance their social and economic development. The four regional development banks were founded on the same principles, given the congruity of needs of postwar Europe and the newly independent countries of Africa, Asia, and later Eastern Europe.

Throughout much of the postwar period, the operations of multilateral development banks² (MDBs) were guided by their founding principle: provide finance for government-led investments in development projects. Over time, their operations evolved to include responding to emerging world challenges such as oil price shocks, natural disasters, and civil conflict.³

MDBs are usually not involved in relief efforts. Their operations are designed to take a longer-term perspective and provide much-needed assistance for capacity building, rehabilitation, reconstruction, and eventually, development.

MDBs play a primarily catalytic role, helping the country rebuild its institutions, formulate policies, and train people needed to maintain peace and establish a sustainable system of government that will enable the economy and the people to prosper.

MDBs as financiers

Initially, MDBs handled postconflict assistance within their general assistance framework for developing member countries (DMCs). Some special funds were available for lending at concessional rates, but none were targeted specifically for war-torn countries. Most funding available specifically for postconflict assistance was provided in grants and each institution allowed only limited amounts to be disbursed for such uses. The practice in four MDBs is shown below; ADB’s role in providing postconflict assistance is included in the discussion on Afghanistan.

African Development Bank: AfDB’s emergency assistance operations are geared primarily toward protecting or rehabilitating AfDB-funded projects, helping resuscitate development activities, and creating the conditions necessary for other donors to intervene in a country. AfDB’s approach to peace building and conflict prevention is to design and finance, in collaboration with other donors, projects that contribute to economic growth and poverty reduction. In postconflict situations, it assists in institutional reforms and capacity building to change systems and structures, which may have contributed to creating economic and social inequities.

Relief and some preparedness operations are financed by grants from the $5 million annual budget for AfDB’s Special Relief Fund. Rehabilitation and reconstruction operations are financed mainly through regular loans, and are subject to normal processing and implementation procedures. Such assistance may not exceed $500,000 for any one operation in a given country.

Inter-American Development Bank: IADB established its special financing mechanism, the Emergency Reconstruction Facility (ERF), to respond to natural and unexpected disasters.⁴ The ERF complements IADB’s Operational Policy for Emergencies arising from natural and human-made disasters. The President of IADB is authorized to expedite, with board consent, up to $100 million for loans that meet emergency eligibility criteria.⁵ The maximum amount of an individual ERF loan approved under this delegation may not exceed $20 million for ordinary capital and $10 million for concessionary financing for preestablished eligible activities. These include help in hastening the restoration of services, financing temporary repairs, and cleaning up in the aftermath of a disaster.

International Monetary Fund: The primary role of IMF in postconflict situations is to help countries restore macroeconomic stability and the basis for sustainable growth. IMF provides technical assistance and policy advice, with financial assistance given once a situation is sufficiently stable for it to be used effectively. In 1995, IMF expanded its policy on emergency assistance to cover postconflict situations.⁶ Its emergency postconflict assistance is provided from its General Resources Account and is thus on nonconcessional terms. Since 1995, eight countries have received this assistance from IMF.⁷

Through its Emergency Postconflict Facility, IMF can provide 25–50% of quota with limited conditionality and front-loading of disbursements in a lump sum.

World Bank: The World Bank also has emergency reconstruction loans (ERLs) for assisting countries experiencing natural or human-made emergencies.⁸ The ERLs typically have no ceiling, use standard International Bank for Reconstruction and Development/International Development Association rates, and, where possible, use blend funding or mobilize bilateral money to subsidize the loan interest rate.

In postconflict situations, the World Bank—in partnership with UN agencies, bilateral donors, and NGOs—contributes to the establishment of a peace process; economic revival and resumption of trade, savings, and domestic and foreign investment; macroeconomic stabilization, and appropriate legal and regulatory frameworks; social safety net building; improvement of governance and civil society activities; rebuilding of physical and social infrastructure and human capital; development of food security; reintegration of displaced populations, and demobilization and reintegration of ex-combatants; demining; community development; and aid coordination.

The World Bank lent more than $6.2 billion to 18 postconflict countries between 1980 and 1998.⁹ To develop policy, cross-country learning, and expertise in specific postconflict skills, it created a Postconflict Unit in July 1997. In August 1997, the World Bank established a new grant facility—the Postconflict Fund—as part of a larger Development Grant Facility to help it respond rapidly to early postconflict reconstruction.

MDBs as long-term partners

From a conceptual and practical point of view, rebuilding social and physical infrastructure requires a long-term perspective. Most postconflict societies, including Afghanistan, are forced to deal with profound change. Principal players have changed; new alliances have been and are being established; people’s attitudes are being altered; prospects for foreign assistance may be improving; and new opportunities may not be far off. Expectations may be high.

MDBs know that a knee-jerk solution has little chance of producing a lasting solution to problems associated with these changes. Postconflict reconstruction must be based on a detailed needs assessment and adequate contextual analysis, and must take into account the policy and institutional framework, regional context, global dimension, environmental and social impact assessments, and psychosocial impact of the conflict.

There is a need for a comprehensive medium- to long-term strategic framework into which rehabilitation and reconstruction activities can fit. But again, creating a successful framework depends on the quality and viability of the economic, financial, social, and environment investments during and after the rehabilitation and reconstruction phases. Some rehabilitation projects—such as those with immediate impacts—can be undertaken provided they will not negatively impinge on the long-term strategy. Other investments should proceed only when all options have been evaluated and the advantage of a particular proposal has been established.

MDBs as catalysts

Postconflict reconstruction is much more than just new roads, bridges, and schools. It is primarily about capacity building, which suffers most during a conflict. It is also about identifying and implementing the right set of policies and institutions to develop free markets, enable individual initiatives to thrive, encourage women to participate equitably in all aspects of society and economy, allow civil society including NGOs to operate freely, enhance trade and commerce, restore internal and external financial linkages, reopen and strengthen regional links, and increase factor mobility. Postconflict reconstruction is largely about building capacity for market-based recovery and sustainable growth. This is where MDBs can and do play a critical catalytic and supportive role.

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