Analysis
March 2009
Economics and Peacemaking: Lessons from Bosnia and Herzegovina
Thirteen years have passed since the signing of the Dayton Peace Accords, ending a murderous and economically crippling war in the former Yugoslavia. The ceasefire arrangement established a complicated and fragmented state structure in Bosnia and Herzegovina (BiH), with two separate entities, to keep the warring factions apart. Billions of dollars poured into Bosnia and Herzegovina and a Stabilisation and Association Process began to bring BiH and other Western Balkan States into the European Union.
But despite the enormous amount of aid, the Bosnian economy remains precariously weak, if not in crisis. Many believe that the promotion of free market economy reforms weakened the state and its economy to such an extent that it aggravated ethnic tensions across BiH, pushing it closer to a new round of conflict.
In this paper we analyse the lessons that can be learned in post-conflict Bosnia and Herzegovina. In particular, we examine the efficacy of the international recovery programme, the consequences of a weak investment and trade strategy and the hurdles posed by a fragmented and ethnically divided state.
The overarching economic lesson from Bosnia and Herzegovina is that the structure of the political settlement controls the nature of the post-conflict economy. So it is of the utmost importance that any political solution is structured in a way that encourages optimal economic development. A strong post-conflict economy is essential for keeping the peace. Or put negatively, economic disparities and poor financial prospects endanger a fragile peace accord.
December 2008
Palestinian Exports: Best Practice
Global markets are changing daily and companies across the world need to adapt to new realities. As the downturn intensifies, weaker business will fail. Palestinian companies face extraordinary hurdles in competing in international markets. But the economic turmoil is an opportunity for local companies to focus on their internal weaknesses so that they are export ready when the markets revive. There are three areas where Palestinian companies could improve in order to reach their full export potential: planning, R&D and marketing. These are the findings of a survey carried out by The Portland Trust, in partnership with the Palestinian Federation of Industries (PFI) and the Palestine Trade Center (Paltrade).
Based on a tool developed by Dr Amjed Ghanim, we analysed the export viability of leading export companies across the West Bank. Among the companies assessed, a few were exceptional. They had a very strong management structure, excellent financial planning and progressive product development and promotion. On the other side of the spectrum, there were a number of very weak companies who were crippled by poor management, development and production. Most of the companies in the survey had similar results with the same problem areas. We have called these companies - a “typical Palestinian company”. The typical company could be improved upon greatly if more emphasis was placed on planning, product development, packaging and promotion.
The Palestinian business environment is particularly affected by the political uncertainties. Movement and access is very limited and a dependency on trading with Israel has deterred many exporters from seeking other markets. Unpredictable export patterns do not induce local companies to raise their game.
Despite 2006 figures from the Palestinian Central Bureau of Statistics (PCBS) that 89% of total Palestinian exports are to Israel, there is a growing realisation among exporters that Israel is disengaging (both politically and economically) from the Palestinian private sector. There have been structural changes in the Israeli market as incomes rise, product costs increase and Israel moves towards higher value products and services. Additionally, Israel has opened its markets to low cost imports as costs for Palestinian products rise because of expensive transportation and security issues. All this is making it difficult for Palestinian enterprises to compete. The Palestinian private sector needs to shift from producing unfinished products and goods for sub-contractors in Israel to delivering final products for international markets. The Portland Trust believes that if Palestinian companies tackle their apparent weaknesses outlined in the paper, they will be transformed into successful export entities, opening new markets for them. We cannot ignore the political situation and the obstacles in trading abroad. But neither should these obstacles prevent Palestinian exporters from realising their export potential.
May 2007
Economics and Peacemaking: Lessons from Northern Ireland
“Economics in Peacemaking: Lessons from Northern Ireland” investigates the importance of economic factors in the peace process that culminates next week with the launch of joint Government in Northern Ireland by the Democratic Unionist Party and Sinn Féin.
The four main economic lessons in the report are:
- Economic disparity was a principal aggravating factor in touching off and sustaining violence. Together with a series of legislative changes, improved economic conditions helped reduce the gap between Catholic and Protestant unemployment rates from as high as 14% in 1985 to about 3.5% in 2004;
- Public sector financial support by the British government underpinned the economy through the most difficult periods of the Troubles, although a side effect of subsidies was to reduce productivity;
- Private sector growth supported by substantial foreign direct investment, from the US in particular, was a key driver of increased employment and improved living standards. Business organisations became a key lobby for peace;
- International mediation began around economic issues. Senator George Mitchell, who eventually chaired the talks that led to the 1998 Agreement, first went to Northern Ireland as a special economic adviser. Economic discussions became a platform for political settlement. Read More
September 2005
Financing Palestinian SMEs, Palestine Economic Policy Research Institute (MAS)
This document was prepared by the Palestine Economic Policy Research Institute (MAS) at the request of The Portland Trust. It examines the needs and supply of Small and Medium-sized Enterprises (SMEs) for credit, and how they would be affected by a loan guarantee scheme which reduced the onerous collateral requirements currently restricting their growth. The analysis examines both the demand for, and expected supply of, credit over the short and medium term. [...]
The financing needs of Palestinian SMEs over the short and medium term are substantial: SMEs estimate that their immediate financing needs amount to $647.2 million over the next year. $571m of the immediate financing needs would be in the form of individual credit extensions worth $10,000- $500,000. Based on current economic conditions, SMEs estimate their credit needs over the next five years to be $996m. 95% of the amount required would be in the form of loans over $10,000, amounting to $950m. If closures are eased and the political and economic prospects improve, demand could be substantially higher. Read more
December 2004
Beyond Conflict: The economic impact of peace on Palestinians and Israelis
[..] the Portland Trust has responded to a suggestion from the British Government to assess the role which the Palestinian private sector can play in generating growth, sustainable employment and higher living standards. The suggestion arose out of a growing belief that the economic dimension of the conflict deserves as much attention as the political one, since economics play an important role in driving or reducing instability.
This report [...] quantifies a substantial peace dividend and concludes that the Palestinian private sector is capable of playing a major role in creating employment, and achieving a very significant improvement in Palestinian living standards. To do so, it would require relatively small amounts of capital. Read more
