Prosperity and the provision of livelihoods as a basis for security and stability

During the British intervention in Libya in 2011, some 58 meetings of the National Security Council were convened back in Whitehall. In that forum there were significant disagreements between ministers and military officers about our strategy for Libya – or, in the view of the Chief of the Defence Staff, the complete lack of any government strategy as a context in which to conduct military operations. At one stage the Prime Minister opined: “You do the fighting and I’ll do the talking.” But that did not address the question of who would do the thinking.

In the context of achieving stability in conflict-afflicted states, that lack of thinking by Western donor governments is particularly apparent with regard to laying the foundations for prosperity at an early stage.

To suggest that more be done is not to underestimate the challenges. A collapsing economy made worse by a lack of security – and a depreciating currency and corruption – are typical. And then there are the specific problems. In Libya, for example, conflicting policies by foreign governments complicate matters. Issues with the National Oil Corporation and underinvestment in the oil sector, money tied up in the Libyan Investment Authority and the Central Bank that is inaccessible due to contested legitimacy create additional challenges. And there is a reducing appetite by some of those foreign companies that invested huge sums in infrastructure projects between 2011 and 2014 to do more – until some of these issues are resolved.

In the meantime and outside the security sector, the activities supported by Western governments and the UN in conflict-afflicted states are generally concentrated on the following: the provision of aid and services; support to host governments to help them consolidate state authority and administration; and, education and other assistance to counter violence and extremist ideology.

So, given this context, what would be the advantages of donor governments working specifically towards engendering prosperity and creating livelihoods, and how could this be done – notwithstanding the challenges? First, the advantages:

  • Livelihoods: the creation of livelihoods – lifting more people out of poverty, thus making them less vulnerable to pressure to support or join the extremists – or impelled to make money by other unlawful means. Countries such as Libya and Somalia are full of examples. In Libya many of those who have been dependent on livelihoods connected with the border have switched to trafficking in arms and illegal migration. In Somalia piracy has been a particular problem; piracy has been reduced not by the creation of alternative livelihoods but by improvements in how ships defend themselves. The obvious alternatives are connected with the fishing industry. But Somalis fish for only what their communities can eat that day, because there has been little investment in on-shore processing, refrigeration and transport. If done this would have the advantage not only of creating livelihoods but also of fulfilling protein needs more widely amongst a chronically undernourished population. This is an area where foreign governments could help more, perhaps in part-payment for fishing licences. In Libya the total effect of smaller projects will not match the benefits that the revitalization of the oil economy will one day bring. But such big projects have some disadvantages. They are not so conducive to local entrepreneurial spirit, they can lead to a rentier dependency[1], they do not have universal benefit and they will take time to develop – given the massive political and security obstacles. Therefore foreign governments should be helping to enable smaller and more entrepreneurial initiatives wherever the opportunities can be created or found.
  • Demobilization, disarmament and reintegration (DDR): the provision of the means to help reintegration into civil society is a key ingredient in the DDR process. Those who carry guns and terrorize others typically have four choices:
    • To continue to do what they do – until they achieve victory or are killed (the option favoured by Al-Shabaab extremists and Da’esh);
    • To hand in their weapons and throw themselves on the scrapheap of the unemployed;
    • To join government security forces if they meet the criteria and are permitted to do so; or,
    • To train to take up another employment.

Provision of the ways and means to new and benign employment provides an incentive to leave the unofficial militias and the terrorist groups. This could be deployed in negotiations with a variety of factions – indeed, we suggested this as an ingredient in talks with Syrian armed groups in 2016. In Libya, where mass employment by the state no longer exists, the creation of sustainable alternatives is the only long-term hope for many. Conversely, a lack of alternative occupations proves the adage that ‘the devil gives work to idle hands’ and can impel those with guns to break a painfully and patiently nurtured ceasefire in a heartbeat. In effect, disarmament needs incentives and it only happens at the end of the process, not half-way through – the acronym should really be DRD rather than DDR. The men with guns will hang onto them until they no longer feel there is a need to protect their communities and to keep them as their personal insurance policies.

On DDR there are some caveats. For its success there does need to be a functioning government that wants to do DDR, an agreement by the armed groups to embark on the process, sufficient security for them to take that agreement forward and avoiding favouring one group over another. Given that it will take at least a year to put in place the funding and the planning for alternative livelihoods and vocational training, these efforts must happen in parallel to attempts to get political agreement. If not, there will be a dangerous time-lag once political agreement is reached. Again, the lesson is to work on the practical foundations now so that DDR can be initiated more quickly as soon as the time is right.

  • Security Sector Reform (SSR): reducing the size of the government’s forces as part of SSR, through incentivizing those whose services are no longer required in the country’s security forces to return to civilian life, in a more sustainable way than simply providing money for pensions.
  • Trade opportunities: for foreign companies, ensuring that such initiatives benefit local economies and don’t deplete them.
  • Guarantee of stability: in the longer term, prosperity and livelihoods provide the best guarantee that a conflict-afflicted state will not slip back into instability. Too many people then have too much to lose to allow the threat of instability to materialize. Northern Ireland today provides an example; the British government demonstrated successful resolve over a relatively long period of time to create a more dynamic economy. The vast majority of people don’t want to lose the advantages of that.

So why don’t donor governments work directly on helping to engender prosperity and to create livelihoods – or, where they do at a national level, why don’t they work more at the local or municipal level, where there is in some cases more stability and capacity?

  • There is often a belief that donor governments should concentrate first on achieving security and stability – and that only when these are to a certain extent achieved is it appropriate to focus on prosperity. This is based on a notion of doing things in sequence rather than concurrently. It ignores the fact that it takes time to plan, find the funding and to start the activities required for prosperity – perhaps two years as a minimum.
  • A drive for prosperity requires a longer-term approach – something to which Western governments are generally not keen to commit (contrast the Turkish government whose considerable investment in Somalia indicates that it takes a much longer view on the returns, compared to other donor governments[2]).
  • There is a concern that it would cost a lot more money.
  • There is a lack of real commercial experience amongst government servants and amongst policy-makers in bodies such as the UN.
  • A view exists that it is sufficient to help create the conditions for commercial activity, and that the responsibility then lies with commercial companies to take the plunge – perhaps with a bit of help from UKTI if they are British companies.

How then might Western and other donor governments change their direction of travel and adopt an approach specifically orientated to laying the foundations for prosperity – in essence to give the process a ‘kick start’? They might, for example:

  • Include those with commercial and economic experience in all government policy meetings concerned with strategy for conflict-afflicted states. Ensure that the triple goals of security-stability-prosperity are pursued concurrently and that the relevant work-streams are not held in separate silos but rather that they are interconnected.
  • Fund researchers to identify in each region the potential and sustainable employment sectors. In the case of Libya, certain NGOs have largely completed this work at no extra cost to governments– not that our policy-makers are necessarily aware of that work having been done. Some of this work has been very detailed and has included calculations of the numbers of employees that can be absorbed sector by sector in each region – and this has been matched with calculations of the numbers of militia men in given areas who might be encouraged and trained to fill those jobs. This is an excellent foundation for the next stage, which is to:
  • Work with the host government and in partnership with local ‘captains’ of industry and agriculture and other sectors to establish vocational training programmes. These will provide potential employees with the skills for each sector and sub-sector. Where security allows, these training centres should be established locally to where the work will be provided. In Libya an opportunity was lost when plans were made in 2016 by the Italian military, supported by allies, to provide military training for Libyans. There was an aspiration to establish a training base for this purpose in the Mitiga airport compound. I recommended to no avail that this should include civilian courses. This would have been presentationally as well as practically valuable. There is useful generic training that can be done too, in order to make trainees more employable. For example, the British Council has been providing English Language Training and entrepreneurial skills training for Libyans – but for some reason not for Somalis, despite a preference by many to learn English rather than, say, Turkish – compare the Turkish government’s impressive initiative in training thousands of Somalis in language and other skills.
  • Help arrange or sponsor ‘incubator’ projects in Britain and other places where skills that already exist in commercial companies can be broadened and deepened. These incubator projects can be hosted by universities, technical colleges or even remotely. The Libya Programme for Reintegration and Development (LPRD) has helped organize many such incubator projects for Libyans at all levels in business from CEO downwards in, for example, in Jordan and Turkey over the last few years.
  • Encourage commercial companies in donor countries to mentor local CEOs and other key personnel from companies in similar sectors to their own. Where security allows, this could be done as an exchange between donor countries and conflict-afflicted states. If not, then visas would need to be provided to enable – for example – British companies to host business personnel from conflict-afflicted states in Britain. As with incubator projects, the objective is to equip the visitors, perhaps over a period of some weeks or months (depending on the sector) with the insights to enable them on their return home to expand their businesses and take on more employees. I would recommend that donor governments subsidize their commercial companies to do this. If that is not going to happen then CEOs in the hosting countries will need to take a long view about the return on their investment if they are to pay the costs themselves.
  • Encourage remittances – through regulated channels. Migrant remittances are hugely important to many conflict-afflicted countries – reportedly 40% in Somalia, 20% in Liberia, for example. The authorities need to encourage transfers through formal, regulated channels (for example, banks, Western Union) rather than carrying cash across borders and Hawala. This is important for several reasons: AML/CFT compliance, retention of foreign exchange by the banking system, better macroeconomic data. Also receipt of regular income from foreign remitters can establish credit worthiness and make the granting of small loans (for example for small businesses) less risky.
  • Encourage diaspora members to invest and those with appropriate skills to return to their countries of origin. Many conflict-afflicted countries have diaspora populations with valuable entrepreneurial skills and who are well disposed towards their home country – Britain is a case in point. Everything should be done to encourage them to return to or invest in their countries of origin. There are many good examples of successful diaspora policies, for example for the Balkans and Haiti. Persuading relevant governments to afford such people favourable tax treatment is an example of an incentive.
  • Work at regional and municipal level and with local businesses. Do this to expand capacity in areas that are not constrained by the central government’s inability to get things done. And in places such as Somalia, work in areas that are vulnerable to take over by extremists, rather than concentrating on so-called ‘liberated’ areas. Do this to provide alternatives for local people in order to reduce their vulnerability to recruitment by Al-Shabaab.

Who else can help? Policy-makers in foreign governments need to increase their understanding of the part that banks can play. The British Arab Commercial Bank[3] is an example of a bank that can invest in programmes to generate local employment. And local private banks are particularly valuable, though at first sight they might appear to be constrained. They have good liquidity in the early stages of a crisis but as the situation continues to deteriorate they will reduce their risk appetite and have concerns about the security of their own cash. Those who want to borrow from the banks can find it difficult to get access to title deeds as collateral and it can be physically dangerous to visit banks. Once states become further afflicted by conflict, individuals’ and businesses’ access to finance becomes even more constrained as central banks impose restrictions lest there be a run on the banks. This, coupled with the overall security situation, reduces national production, leading to a fall in exports, less foreign currency and so to fewer imports. That is disastrous for countries – such as Libya – that are heavily reliant on imports. A vicious circle results. Lines of credit are available for strategically important items such as food but not for most other requirements.

This massive cash crisis for businesses and for individuals can be mitigated by two things: firstly, investments by banks in technology to reduce reliance on cash, and secondly on pairing with multilaterals in order to provide lines of credit. The Aman Bank of Libya is an example of a bank that has invested in technology to enable customers to use mobile apps and cards to pay employees, transfer money and buy food and fuel[4]. And where businesses lack the collateral to secure a loan, banks can partner with multilaterals such as the African Development Bank, the International Finance Corporation and other organs of the World Bank, the European Investment Bank and the European Bank for Reconstruction and Development. These partnerships spread the risk of lending and provide lines of credit in the form of direct equity funding or co-funding as well as specialized ventures such as Islamic micro-finance[5]. The unparalleled client networks of the local banks are thus combined with multilateral finance and can galvanize the economy at grass roots level. Policy meetings in donor government capitals would do well to include people with an understanding of these mechanisms and what they can bring in terms of local commercial benefits and prosperity. The power of banks has not been harnessed as it might be in conflict-afflicted countries.[6]

What about advertising such services? This is less of a problem for big infrastructural projects that will in any case attract investors once the situation begins to make them viable. As for smaller ventures, private banks can advertise their services both locally and nationally, as they do in developed countries. Banks can make it clear that they are prepared to lend to commercial entities that present workable plans to expand their businesses and take on more employees. Furthermore banks can help businesses to put those plans together in the first place. Indeed, they will likely be able to communicate rather more effectively and credibly than their own governments can on their behalf.

A final note on communications, from a British perspective: the FCO’s “key messages”, as it calls them, are relevant here. I managed to get them changed in 2016. The British government’s policy priorities for Libya had been advertised as countering Da’esh and countering illegal migration. Ministers probably anticipated that these priorities would elicit murmurs of approval from the British public. The vehicles included social media. But social media does not discriminate between audiences and Libyans therefore perceived these messages as proof that our interests in their country were purely selfish. Therefore the relevant FCO department agreed that a key message should be added, that British government priorities included prosperity for Libya. However, messages that do not reflect reality bring discredit on other messages from the same source that may be perfectly true. It is therefore as much in British as in recipient governments’ interests to think more deeply about how commercial activities can be encouraged and harnessed in the service of long-term peace and stability.

In short, employment and international assistance to create it are absolutely key. Don’t await trickle-down benefits from increased oil production and other high level initiatives that, in any case, tend to create a rentier economy and fail to inspire entrepreneurial initiative. Rather, start with, or at least include, local level initiatives, given the challenges at national or federal level and with big infrastructural projects in a time of crisis. Once the situation stabilizes, then the large infrastructural projects – if viable – will attract international investors in any case. In the meantime efforts should therefore be as much focused at grass roots level as elsewhere. Devolve to local municipalities, work with the regions, avoid centralization, help small and medium enterprises and create “oven ready” projects where current conditions prevent actual implementation.

[1] Raising a substantial proportion of national income from the sale of its resources to foreign interests without significant contribution to society and its intellectual or entrepreneurial capital.

[2] A Turkish government servant in Somalia told me that his government’s aim there is simply to double per capita annual income over time – that will achieve long term peace and stability and will in due course provide a return on the considerable Turkish investment in the country.

[3] The Libyan government is a major shareholder in the British Arab Commercial Bank (BACB).

[4] There is great creativity in conflict-afflicted states in using technology, especially for mobile money, thus bypassing the banking system.  Kenya’s mPesa (started by Safaricom, a subsidiary of Vodafone – 60% of GDP is said to go through it) is the prime example – and, in Somalia, EVC. So, authorities should facilitate MNOs to establish – and should licence and have enabling legislation for – 3G or 4G – and encourage competition. In many fragile states there will be few surviving banks and many people will distrust them, whereas almost everyone has access to a mobile phone.

[5] Micro finance institutions (MFIs) can be NGOs or for profit businesses and the best of them have a good record of lending small amounts of money to help people set up or expand small businesses.

[6] That said, ‘derisking’ can be a big problem in the case of fragile states not amenable to regulatory oversight. Why should a leading bank continue to have correspondent banking relationships, of marginal profitability, with a bank that it fears may have poor AML/CFT compliance? Big fines imposed on Western banks have made their ilk very risk averse. In those countries where the banking system is rudimentary, no British or US bank would seek a correspondent relationship. This makes international trade very difficult. This makes the multilaterals even more important.