Johanna Mendelson-Forman and Merriam Mashatt

Employment Generation 

and Economic 

Development in 

Stabilization and 

Reconstruction 

Operations

Summary and Recommendations

• It seems logical that improving the lives of those who have suffered from conflict would 

include a program to generate economic well-being in the immediate period after hostilities subside. Yet livelihood creation, the root of potential economic success and security, 

has often become a secondary objective in the transformation from war to peace. 

• An obvious reason for this relegation to a lower priority is that security, humanitarian 

needs, and restoring the rule of law often overtake the economic development priorities 

of any peace-building mission. 

• Even in Iraq, the largest stabilization and reconstruction effort undertaken by the U.S. 

government, restoring livelihoods and getting people back to work remains an unresolved challenge and an unmet agenda. Of the nearly $20 billion of U.S.-appropriated 

funds to reconstruct Iraq, only $805 million was directed toward jump-starting the 

private sector. 

• Although employment generation is not a new subject in “postwar” literature, lessons 

about implementation vary from one country to the next. Current knowledge about 

“golden hour” job creation, which is creating jobs within one year of the cessation of

STABILIZATION AND RECONSTRUCTION SERIES NO. 6 

MARCH 2007

ABOUT THE REPORT

This report is based on a series of consultations under the 

auspices of the Employment Generation and Economic 

Development Working Group, chaired by Greg Huger, president 

of AirliePartners, and Harriet Hentges, former executive vice 

president of the U.S. Institute of Peace. The working group is 

part of the Institute’s Filling the Gaps program, which aims to 

systematically address the causes of failure in specific areas 

within reconstruction and stabilization operations and to 

generate policy options for those in the U.S. government and 

elsewhere who lead and staff such operations. Filling the Gaps 

is directed by Beth Cole under the leadership of Daniel Serwer, 

vice president for Post-Conflict Peace and Stability Operations 

at the Institute. Johanna Mendelson-Forman, Ph.D., wrote this 

report with Merriam Mashatt, director of the Institute’s Center of 

Innovation for Economies and Conflict, in the summer of 2006, 

when Mendelson-Forman was a guest scholar at the Institute. 

She is now a senior associate at the Center for Strategic and 

International Studies and a consultant to the United Nations 

Mission in Haiti. The authors thank Zoë Cooprider for 

her research support.

The views expressed in this report do not necessarily reflect 

those of the United States Institute of Peace, which does not 

advocate specific policy positions.

CONTENTS

Recommendations 2

Introduction: The Golden Hour 3

U.S. Government Strategy 4

The Military and Employment Generation 10

xImpact of CERP 11

Demobilization and Reintegration as xx 

Workforce Multipliers 11

Humanitarian Assistance 12

Refugees and IDPs 12

Women and Youth 13

Enabling Environment for Investment: x

Governance, Rule of Law, Central Banking, x

and Anticorruption Measures 14

Private Sector Development 15

Microfinance in Stabilization Environments and the x

Role of the Informal Sector 16

Diaspora Investments 17

Lessons and Recommendations 17

Stabilization and

U N I T E D S T A T E S I N S T I T U T E O F P E A C E

Reconstruction series

 1200 17th Street NW • Washington, DC 20036 • 202.457.1700 • fax 202.429.6063 • www.usip.org
2

hostilities, is culled more from specific pilot studies than from a coherent overview 

of what tools exist and how they can be applied. 

• This report advances current research by providing such an overview for U.S. government policymakers. It seeks to help the U.S. government work through the lessons 

learned about the processes needed to generate employment. Moreover, it explores 

the U.S. government strategy toward golden hour job creation, the existing civilian 

and military tools, and how these tools can be better incorporated into larger transformation efforts. The report also notes the limitations of U.S. civilian capacity in a 

nonpermissive environment.

Recommendations

The following recommendations apply to cases where the United States is leading the 

reconstruction effort:

• Security will remain an essential component of any program that seeks to create economic opportunities in the wake of conflict. The military, in support of reconstruction 

and humanitarian programs, must be an active partner in any jobs creation program 

during the golden hour.

• As part of a coherent U.S. government plan, civilian and military agency directives 

should make employment generation a priority for resource allocation. An appropriate 

policy that draws on the strengths of the private sector and international agencies 

would illuminate and lead to the implementation of the essential activities during 

the golden hour. 

• An ongoing interagency group, possibly located in the State Department’s Office 

of the Coordinator for Reconstruction and Stabilization (S/CRS), is needed to bring 

together all the relevant U.S. government agencies and resources.

• Planning to link short- and long-term programs should start with an assessment 

of the demographic and economic characteristics of the working-age population in 

former conflict areas. This survey should focus on market demand, skill levels, infrastructure, availability of credit, and entrepreneurial capacity of the population. 

• Plans to revitalize pre-existing industry facilities must include a conflict assessment 

in addition to traditional forms of economic analysis related to efficiency and competitiveness. The ultimate goals of this type of activity should be to both increase 

employment and to reduce conflict in support of the reconciliation process. If not 

carefully executed, well meaning schemes to revitalize economic activity, such as 

state-owned enterprises, could inadvertently empower spoilers and fuel conflict. 

Safeguards must be put in place to ensure that those empowered do not perpetuate 

conflict. These safeguards include real-time oversight, audits, boards of directors, and 

payroll mechanisms designed to benefit employees and limit corruption. 

• Small, grassroots projects engaging the host nation’s indigenous private sector are 

an essential part of reviving the marketplace, creating employment, and promoting 

local trade in the immediate postwar phase. Priority must be given to restoring trade, 

agriculture, and essential services.

• International and local private sector companies should be encouraged to participate 

in the initial planning processes for economic reconstruction. It is important that 

international agencies and U.S. programs recognize the limitations of initial private 

sector entry, except in the form of local or informal entrepreneurs. 

• Every field commander should be provided with a tool kit of what needs to be done to 

allow for a transition or handoff to civilian development agencies that takes security 

into consideration in the planning process.

ABOUT THE INSTITUTE

The United States Institute of Peace is an independent, 

non-partisan institution established and funded by 

Congress. Its goals are to help prevent and resolve 

violent conflicts, promote post-conflict peacebuilding, 

and increase conflict-management tools, capacity, and 

intellectual capital worldwide. The Institute does this by 

empowering others with knowledge, skills, and resources, 

as well as by its direct involvement in conflict zones 

around the globe.

BOARD OF DIRECTORS

J. Robinson West (Chair), Chairman, PFC Energy, 

Washington, D.C. • María Otero (Vice Chair), President, 

ACCION International, Boston, Mass. • Betty F. Bumpers, 

Founder and former President, Peace Links, Washington, 

D.C. • Holly J. Burkhalter, Vice President of Government 

Affairs, International Justice Mission, Washington, D.C. 

• Chester A. Crocker, James R. Schlesinger Professor of 

Strategic Studies, School of Foreign Service, Georgetown 

University, Washington, D.C. • Laurie S. Fulton, Partner, 

Williams and Connolly, Washington, D.C. • Charles 

Horner, Senior Fellow, Hudson Institute, Washington, D.C. 

• Mora L. McLean, President, Africa-America Institute, 

New York, N.Y. • Barbara W. Snelling, former State 

Senator and former Lieutenant Governor, Shelburne, Vt. 

MEMBERS EX OFFICIO

Barry F. Lowenkron, Assistant Secretary of State for 

Democracy, Human Rights, and Labor • Peter W. Rodman,

Assistant Secretary of Defense for International Security 

Affairs • Richard H. Solomon, President, United States 

Institute of Peace (nonvoting) • Frances C. Wilson,

Lieutenant General, U.S. Marine Corps; President, National 

Defense University.
3

• Consideration should be given to expanding existing U.S. programs that support 

private sector involvement in developing countries to also include initiatives focused 

on the golden hour. These U.S. government programs include the U.S. Agency for 

International Development (USAID), the Overseas Private Investment Corporation, 

the Import-Export Bank, the Small Business Administration, and international and 

technical development programs administered by the Commerce Department.

Introduction: The Golden Hour

The Employment Generation and Economic Development Working Group addressed job 

creation during the immediate transitional period when a society is emerging from conflict 

but has not yet achieved stability. The discussion focused on whether a “golden hour,” or 

window of opportunity, existed for employment generation and specifically whether conditions were ripe during this time frame for private sector participation in these transitional 

environments. 

The participants, who included U.S. government and military leaders, representatives 

of the nongovernmental community, and representatives of the private sector, explored 

best practices in the area of employment generation. The group also examined how U.S. 

government assets could best be engaged to take advantage of a unique time frame that 

is unlikely to recur in the transformation setting—recognizing, of course, that multiple 

international actors contribute to overall reconstruction in each case. 

The term golden hour, borrowed from the medical literature, represents a crucial 

moment that could mean the difference between life and death for a critically ill patient. 

In the world of postwar transformation, there is also a golden hour when the international 

community and the affected country can act either to lay a foundation for a full recovery 

from conflict or to set the path for a recurrence of fighting. In the area of economic 

development, actions taken during this time frame will determine success or failure in the 

medium to long term. 

Harriet Hentges, cochair of the working group, commented that although there are no 

hard-and-fast rules, experience demonstrates that the golden hour lasts approximately 

one year after the cessation of fighting. During this important window, local stakeholders 

are willing to give peace a chance in spite of the hardships most of them endure in the 

aftermath of conflict. Fellow cochair Greg Huger underscored the importance of assessing 

the capacity of the extant economic flows that could be nurtured to enhance employment 

in the golden hour. He noted that it is “important to work with the indigenous population 

that exists on the ground and not with those you wish were there.” Only the U.S. military 

and USAID currently have this capacity for quick-impact programs. The challenge is to 

enhance and fully integrate the existing capacities of these U.S. government agencies for 

golden hour employment initiatives. 

The first months of postwar actions are often the most important in setting the tone 

for what will ultimately be a long-term process of rebuilding, reconciliation, and peacemaking.1 Since the end of the Cold War, the United States has tried to capitalize on the 

golden hour but has often been unable to assemble the requisite tools, the collaboration, 

and the conditions that will make the most of this crucial period. 

This report explores the state of U.S. government strategy in these situations as it 

relates to managing the human potential for employment generation and private sector engagement. This type of activity takes on many forms, ranging from humanitarian 

assistance programs to more sophisticated private sector missions to generate investment 

and rebuilding. While not a comprehensive guide to this subject, the report discusses a 

range of issues:

• The work of the military in rebuilding 

• The impact of demobilization on the workforce

The term golden hour represents 

a crucial moment that could 

mean the difference between 

life and death for a critically 

ill patient. 
4

• Humanitarian aid for refugees and internally displaced civilians 

• The employment of women and youth 

• The creation of an enabling environment—that is, good governance

• The potential for microfinance and the informal sector to be engines of early 

economic growth 

• The role of the diaspora in generating resources 

• Lessons learned about employment generation programs

U.S. Government Strategy

Employment generation requires the close coordination of U.S. government agencies and 

international actors that have the tools to jump-start job creation, as well as immediate 

plans to put people back to work to ensure that basic reconstruction of infrastructure and 

community rehabilitation take place. The most current thinking in the U.S. government on 

how economic well-being should be integrated and phased in appears in the stabilization 

and reconstruction matrix published by the Office of the Coordinator for Reconstruction 

and Stabilization (S/CRS) (see Table 1). Although the matrix recognizes the time frame 

in which economic life can realistically begin, it does not emphasize the multiple actors 

needed to actually implement such a program (for a select list of agencies with programs 

related to livelihood creation during the golden hour, see Table 2). 

Table 1. Selected Employment Generation Sections of S/CRS Essential Task Matrix

Goal: Respond to immediate needs

Public Sector Investment Initial Response

Public Works Jobs • Design initiatives to provide immediate 

employment, soliciting project ideas from 

local communities

• (I) Create opportunities for young males, 

including food for work

Micro- and Small 

Enterprise Stimulation

• Assess skills deficiencies

Skills Training and 

Counseling

• Assess and determine immediately 

employable labor force for appropriate 

critical and emergency needs

Public Sector Investment • Prioritize public investment needs

• Develop a plan to allocate resources

• Pay civil service arrears

• Determine structure and affordable size of 

civil service to meet ongoing and future 

needs

• Strengthen ethics regulations

Public Sector Institutions • (I) Identify operational capacity, including 

physical structure and security

Financial Sector Initial Response
5

Table 1. Selected Employment Generation Sections of S/CRS Essential Task Matrix

Bank Lending • Provide immediate credit including access 

to micro- and small and medium enterprises 

(SMEs) lending

• Ensure that standard banking practices 

to approve loans are part of early credit 

programs 

Trade Initial Response

Trade Structure • Evaluate tariffs, tax structures, and barriers 

to trade

• Reduce restrictions on imports that hinder 

access to goods for small business and 

investors

Trade Facilitation • Open or maintain line of credit mechanisms 

and trade credits to trade critical goods

• Set trade priorities and explore new trade 

opportunities

• Initiate dialogue between country economic 

team and international actors responsible 

for granting preferential trading status

Market Economy Initial Response

Private Sector 

Development

• Assess the depth of the private sector, 

including weakness of the goods and service 

sector and its distribution channels

• Identify obstacles to private sector 

development (barriers to entry; high import 

taxes; import restrictions; lack of business 

credit; lack of power, telecommunications, 

or transport; nonrepatriation of profits)

• Take immediate steps to remove or counter 

these obstacles where possible

• Jump-start small-scale private sector 

entrepreneurs through grants and loans to 

micro-entrepreneurs and SMEs

Small and Micro-enterprise 

Regime

• Identify constraints to small business 

development and take steps to remove them 

where possible in the short term (lack of 

credit, onerous taxes)

The Department of State and the Department of Defense (DoD) are each implementing new directives that will improve U.S. government management of stabilization and 

reconstruction efforts. The National Security Presidential Directive 44 (NSPD-44), signed 

December 7, 2005, established the S/CRS, an interagency office within the Department of 

Note: (I) refers to infrastructure implication. Adapted from “Post Conflict Reconstruction Essential 

Tasks Matrix,” Office of the Coordinator for Reconstruction and Stabilization, Washington, DC, April 

1, 2005. The matrix also includes medium- and long-term responses not reprinted here. Retrieved 

10/2006 from http://www.state.gov/s/crs/rls/52959.htm.
6

State. NSPD-44 authorizes the State Department to “improve coordination, planning and 

implementation of reconstruction and stabilization assistance” and requires integrated 

efforts to “harness the expertise of other federal departments and agencies.” The DoD 

issued the parallel Directive 3000.05 (November 28, 2005), which attempts to integrate 

military and civilian efforts. Directive 3000.05 commits the DoD to support reconstruction and stabilization activities as core military objectives, alongside the priority given to 

combat operations. This directive aims to create a military “prepared to perform all tasks 

necessary to establish or maintain order when civilians cannot do so.”2

As Lou Hughes, a former General Motors executive who worked in Afghanistan, 

lamented during the working group meetings, “The U.S. has no coherent strategy or vision 

for employment generation. For every transition it starts de novo. To be successful the 

U.S. must first create a livelihood creation package that provides technical support and 

resources to jump-start local projects, while also establishing a realistic partnership with 

private sector players and the international financial community for the medium- and 

long-term development programs.”

There is no one-stop shopping or coordination mechanism for job creation in the 

humanitarian assistance phase of a transformation operation. Through its history of 

community development, USAID has come closest to cobbling together a mechanism to 

support immediate on-the-ground economic recovery. The Office of Transition Initiatives 

(OTI), started in 1994, has demonstrated its flexibility of funding to permit on-the-ground 

support for employment and reconstruction in the golden hour. Unfortunately, the types of 

programs available are limited by the resources committed to civilian agency programs.

What exists today is a variety of agencies and programs that can help in the field. They 

include both military and civilian organizations, as well as nongovernmental organizations 

(NGOs). Additionally, the international community—the United Nations, the international 

financial institutions, and private NGOs—are all part of the complex web of institutions 

that provide assistance on the ground. A coherent strategy must begin with an understanding of each institution’s value added. Tables 2 and 3 provide illustrative lists of agencies that have livelihood and private sector development experience in the golden hour.

Table 2. Agencies with Programs Related to Livelihood Creation during the

 Golden Hour

Agency Relevant Offices Mission Conflict Experience

U.S.

Agency for 

International 

Development

OTI programs; 

Office of U.S. 

Foreign Disaster 

Assistance 

(OFDA) programs

OTI: Works with 

civilians in fragile 

states; quick-impact 

projects (2–3 years)

OFDA: Works 

with civilians 

in postdisaster 

environments;

provides 

humanitarian 

assistance 

Grants through 

contractors and 

NGOs

Department of 

State

Bureau for 

Population, 

Refugees, and 

Migration

Supports U.S. 

and international 

organizations 

that minister to 

humanitarian crises 

and natural disasters

Global coverage, 

but works through 

administration of 

grants 

USAID has come closest 

to cobbling together a 

mechanism to support 

immediate on-the-ground 

economic recovery.
7

Table 2. Agencies with Programs Related to Livelihood Creation during the

 Golden Hour

Department of 

Defense

Commander’s 

Emergency 

Response 

Program (CERP)

Quick-impact 

projects and smallscale infrastructure

Direct cash 

payments to 

civilians in Iraq and 

Afghanistan. Similar 

programs around the 

globe.

Department of 

Labor

Veterans’ 

Employment and 

Training Service 

Works on 

reintegration 

programs for former 

military. Expertise 

with veterans’ 

programs

Grants through 

contractors 

and national 

governments

World Bank 

Group 

(includes the 

International 

Financial 

Corporation)

Conflict 

Prevention and 

Reconstruction 

(The PostConflict Fund), 

Infrastructure,

Low Income 

Countries Under 

Stress

Restoration of lives 

and livelihoods 

in postwar 

environment; smallscale job creation 

programs;

microfinance 

projects

Direct to United 

Nations, national 

governments, or 

local NGOs

United Nations 

Development 

Program

Bureau for Crisis 

Prevention and 

Recovery

Works with civilians 

to prevent armed 

conflicts, reduce the 

risk of disasters, 

and promote early 

recovery after crises 

Grants to NGOs and 

UN field missions 

in all stabilization 

countries

United 

Nations High 

Commissioner 

for Refugees

Quick Impact 

Projects 

Works with 

reintegration of 

returnees and 

displaced persons 

through small-scale, 

low-cost projects 

(often including 

income-generating 

and microcredit 

schemes)

Works with local 

organizations 

and self-funded 

programs wherever 

there are refugees

United Nations 

Children’s Fund

Emergency funds 

for child soldiers

Works to return 

child soldiers to 

civilian life; includes 

education and 

training programs

Experience is 

global, with special 

emphasis in war 

zones

International 

Labour

Organization

InFocus

Programme 

on Crisis 

Response and 

Reconstruction

Technical assistance 

to promote 

mainstreaming of 

decent work through 

capacity building

Grants to local 

NGOs and UN field 

missions
8

Table 3. Agencies with Programs to Support Private Enterprise

Agency Relevant Offices Mission Conflict

Experience

USAID Bureau for 

Economic Growth, 

Agriculture, and 

Trade 

Supports microenterprise 

development; fosters 

favorable business 

environments

Grants through 

contractors, 

NGOs, or local 

governments

Department 

of State 

(temporary 

organizations)

Afghanistan 

Reconstruction 

Group (ARG); 

Iraq Reconstruction 

Management Office 

(IRMO)

ARG: high-ranking 

former U.S. private 

sector executives 

and government 

employees to serve in 

the U.S. embassy in 

Kabul

IRMO: absorbed 

Coalition Provisional 

Authority senior 

advisors to Iraqi 

ministries

ARG: Afghanistan

IRMO: Iraq

Department of 

Defense

(temporary 

organization)

Project and 

Contracting Office

Reconstruction 

contracts to local 

private sector firms

Iraq

Export-Import

Bank

Promotes and 

subsidizes U.S. 

exports

Overseas

Private

Investment 

Corporation

Provides political risk 

insurance for U.S. 

investors

Limited conflict 

experience. Some 

work in Iraq during “golden hour”

Department of 

the Treasury

Office of Technical 

Assistance

Small office to 

provide advice 

in the following: 

budget, tax, banking, 

monetary policy, and 

enforcement

Works in many 

conflict settings.

Center for 

International 

Private

Enterprise (an 

institute of 

the National 

Endowment for 

Democracy)

Private sector in 

policy advocacy and 

institutional reform, 

improving governance, 

and building understanding of marketbased democratic 

systems.

Global coverage 

focused on 

developing 

countries. Some 

work in conflict 

settings.
9

Table 3. Agencies with Programs to Support Private Enterprise

U.S. Trade and 

Development 

Agency 

Technical assistance, 

investment analysis, 

training, orientation 

visits, and business 

workshops that 

support the 

development of a 

modern infrastructure 

and a fair and open 

trading environment.

Global coverage focused on 

developing and 

middle-income 

countries. Some 

work in conflict 

settings.

Department of 

Commerce

Foreign Commercial 

Service and 

Iraq/Afghanistan 

Reconstruction 

Task Force; and 

Reconstruction 

and Stabilization 

Division

Supports private 

investment in 

postwar societies 

through information 

dissemination, 

business counseling, 

trade shows, etc. 

Global coverage. 

Some work in 

conflict settings 

(Iraq and 

Afghanistan).

U.S. Trade 

Representative

Assistant U.S. Trade 

Representative 

for Trade Capacity 

Building

Negotiates trade 

agreements 

and supports 

congressionally 

mandated trade 

preferences to support 

export development in 

developing countries.

Global coverage 

focused on 

developing and 

middle-income 

countries. 

Currently no 

specific programs 

for stabilization. 

Department of 

Agriculture

Foreign Agricultural 

Service

Collects information 

on foreign agricultural 

sector and provides 

technical assistance 

to U.S. investors who 

seek overseas markets

Some experience 

in postwar 

environments 

with support of 

imports; Food 

for Peace, PL480 to use U.S. 

commodities for 

sale in developing 

and postwar 

countries to 

generate revenue; 

provides technical 

assistance in Iraq 

and Afghanistan 

on promoting 

local agriculture.
10

Table 3. Agencies with Programs to Support Private Enterprise

World Bank Private Sector 

Development, 

Poverty Reduction, 

Social Development 

Division, 

Microfinance

Multiple initiatives. 

Works with local 

companies to support 

development; 

also International 

Finance Corporation 

helps make loans 

in medium-term 

postwar environments. 

Conducts “needs 

assessments” and 

supports donor 

participation in the 

form of “Compacts” 

Global coverage

UN

Development 

Program

Global Compact; 

Regional Bureaus

Provides technical 

support for 

“responsible” private 

investment in postwar 

environments

Work on 

extractive 

industries, codes 

of conducts for 

conflict zones. 

Training with 

private sector

The Military and Employment Generation 

In recent years, with the growing engagement of U.S. armed forces in nation building, 

there has been renewed interest in livelihood creation activities at the field level as a 

means to help provide security for soldiers deployed in unstable postwar environments. 

The presence of military forces whose initial mission has been to secure the peace, however, does not necessarily guarantee that the enabling environment for economic development exists. At best, military programs provide the means to prevent hostilities from 

flaring and to protect forces on the ground by giving potential spoilers some resources. 

None of the military’s programs is meant to be a long-term sustainable solution to job 

creation.

The fact that the military has become a central player in the first phase of employment 

creation is important as we examine the tools available to U.S. policymakers interested 

in stabilizing economic life. Even though the U.S. military has been a reluctant player in 

these activities, it has been able to implement on-the-ground work programs precisely 

because it has been given greater flexibility of resources, together with a mission requiring its troops to manage the potential security threats posed by groups of unemployed 

young men. The Commander’s Emergency Reconstruction Program (CERP), used in Iraq 

and Afghanistan, provides a good example of both the benefits and the limits of such 

programs in generating sustainable work in fragile political environments (see the CERP 

box).

Lt. Gen. David Petraeus, U.S. Army, who participated in the working group, underscored 

the chief shortcoming of CERP this way: “We wanted to hand the ball off to somebody. We 

were looking in the backfield for anyone. We welcomed NGOs, agencies, brought them into 

our compounds, gave them assistance, communications, food, water. ...The challenge was 

expensive security for NGOs, civilian agencies, USAID and subcontractors. So it was sheer 

lack of standing organizations with this important capacity.”

Commander’s Emergency Response 

Program (CERP)

In transitional environments where a 

society is emerging from conflict but 

has not yet achieved stability, the 

implementation of immediate-impact 

projects at the grassroots level is critical. The goals of this type of project 

are to engage the local population, 

address humanitarian needs, and boost 

employment. Delays caused by complex contracting regulations severely 

hinder the ability of leaders in-theater 

to implement rapid impact projects. In 

Iraq and Afghanistan, CERP addresses 

this problem through simplified contracting procedures that permit military commanders to respond rapidly to 

the pressing needs they encounter 

daily in the field. It is important to 

note that although CERP is a relatively 

new program, precedent for military 

participation in in-theater reconstruction activities spans decades.3

CERP originated in Iraq and was 

at first funded exclusively with seized 

Iraqi assets, oil sales proceeds, and 

donor nation contributions. By late 

2003, appropriated U.S. dollars began 

to flow to CERP, and the program was 

extended to Afghanistan. As of October 

2006, a total of $1.98 billion has been 

directed toward CERP efforts in Iraq.4

The program has funded a wide 

range of activities including small (and 

a few large) infrastructure restorations, weapons buyback initiatives, and 

condolence payments. The program’s 

activities as of September 2005 are 

listed in Figure 1 (note: The category 

“Other Reconstruction Projects” was 

primarily for condolence payments to 

Iraqis.).
11

Impact of CERP

According to State Department and DoD audit reports, CERP is widely viewed as a success. 

Iraqis immediately felt the impact of CERP projects: the program employed thousands 

in Baghdad to clean streets, alleys, buildings, and public spaces. CERP projects also 

employed Iraqis to install hundreds of generators and air conditioners, as well as to repair 

jails and police stations in and around Baghdad. In other parts of the country, CERP projects accomplished water and sewerage repairs that provided clean water and improved 

health for local Iraqis. 

CERP projects tended to be executed rapidly. For example, in the first eighteen weeks 

of the program, almost 1,800 CERP projects completed the repair of bridges, roads, and 

schools, among other things. Northern Iraq was the site of a notable CERP initiative. In 

the fall of 2003, the 101st Airborne Division partnered with the local population to complete more than 3,600 projects, valued at $28 million. The projects included the refurbishment of more than 400 schools, employing thousands of Iraqis in the process.5

The international organization (IO) and NGO community have a different view of CERP. 

A recent Institute report on the Provisional Reconstruction Teams (PRTs) in Afghanistan 

notes that many IOs and NGOs have been critical of CERP funding.6 The report states that 

while the PRTs had a reconstruction mandate, they often did not coordinate the work with 

local stakeholders, and that some of the projects that were completed, such as schools or 

other buildings, were done without any notion of sustainability. In addition, the humanitarian and international NGOs whose mission was to work with local actors clashed with 

the PRTs’ notion of reconstruction, as they were concerned with the potential for confusion among local stakeholders between civilian and military aid.7

Demobilization and Reintegration as Workforce Multipliers

As we have learned the hard way in so many countries, failure to provide former fighters with alternative livelihoods condemns them and the country to a return to violence. 

Reintegration is neither simple nor inexpensive, but it can mean the difference between 

war and peace. Young men, who comprise the bulk of fighters, need extensive assistance 

in education, training, and support to put them back to work. 

Failure to provide former fighters 

with alternative livelihoods condemns 

them and the country to a return 

to violence.

Source: Special Inspector General for Iraq Reconstruction

TYPES OF CERP PROJECTS (AS OF SEPTEMBER 1, 2005)
12

The U.S. government does not have just one source for demobilization programs. 

USAID has managed many of the more recent ones, having finally overcome the issue of 

disarmament and support for former soldiers. More recently, the U.S Department of Labor 

has entered this arena, relying on its work with U.S. war veterans to see whether lessons 

garnered in this country could benefit veterans in other war-torn countries. Finally, the 

DoD has experience in retooling soldiers from the former Soviet states, but it has less 

experience in managing the fate of the average field soldiers beyond disarming them. 

Usually, demobilization and reintegration programs are indicated in peace accords and 

are part of security sector reform. Some former soldiers return to security work through 

programs that use them in police forces or in reformed militaries. The best outcome, 

however, is to integrate those fighters into civilian employment. But in war-torn societies 

where employment opportunities are limited, security work is sometimes the only option. 

In Guatemala after the peace accords of 1996, many of the fighters wanted to return to 

rural communities. The peace commission was able to secure former coffee lands from the 

government, hoping that many of these fighters would form cooperatives and thus have 

a marketable crop for a global economy. Right after this decision was made and the lands 

were to be donated to fighters, the world coffee price skyrocketed. Private donors took 

back the lands originally scheduled for grants to the demobilized, and the project folded. 

This example underscores the difficulties of immediate work-producing programs, even 

when made with the best intentions. 

Humanitarian Assistance

In many cases, humanitarian organizations are the first to implement livelihood creation 

initiatives during the golden hour. These efforts are often managed in a disaster-assistance 

or postwar setting. Jobs that include the repair and cleanup of streets and other types 

of small-scale projects are the core of these programs, many of which focus on women, 

who are often their families’ sole breadwinners. Humanitarian aid programs related to job 

creation tend to be quick impact and short term in nature. The challenge for policymakers 

is to integrate planning with these initiatives to ensure effective transition to civilian 

agencies. In the United States, the main civilian providers of these emergency programs 

include USAID’s Office of Disaster Assistance and OTI, as well as the Department of State’s 

Bureau for Population, Refugees, and Migration. At an international level, the family of 

UN agencies—ranging from the UN High Commissioner for Refugees to the UN Children’s 

Fund to the Office of Humanitarian Coordination—all focus on this type of activity. 

Although humanitarian aid is essential during the golden hour, it is important to distinguish between projects meant to be quick impact, but not enduring, and projects that 

will lead to lasting employment. Too often, the short-, medium-, and long-term needs are 

lumped together in ways that do not provide a strategic approach to this important part 

of economic recovery. There are vast differences among quick-impact projects, vocational 

rehabilitation, microfinance programs, and long-term job creation. Likewise, many different types of approaches are needed to generate employment for specific constituencies, 

such as refugees and internally displaced persons (IDPs), women, young men, and former 

soldiers. 

Refugees and IDPs

Today, seven out of ten refugees are located in developing countries, and assistance 

for them is inadequate and provided erratically.8 Since the end of the Cold War, internal 

conflicts have produced a growing population of refugees and IDPs who require the attention of the international community. Resettling refugees and IDPs starts in the golden 

Today, seven out of ten refugees are 

located in developing countries, and 

assistance for them is inadequate 

and provided erratically.

Usually, demobilization and reintegration programs are indicated 

in peace accords and are part of 

security sector reform.
13

hour and requires both immediate humanitarian assistance and durable solutions to the 

economic issues that these people face. It is not merely the process of returning people 

to their homes that matters; the returns must convey an understanding that the repatriation will endure. 

The sustainability of plans for returning refugees and the internally displaced is often 

difficult to assess, but unless programs are developed that address the needs up front, 

IDPs can create additional problems for a region’s security and development. The U.S. 

government’s programs for IDPs are managed through OFDA, which provides grants to 

international and local nongovernmental assistance groups. These grant programs recognize the need for initiatives that start in the golden hour, have a long horizon, and 

can remain sustainable for a number of years. Similarly, the UN High Commissioner for 

Refugees has devised programs that look for durable solutions through development aid 

directed at refugee-populated areas. 

Women and Youth

In the immediate post-conflict period, women and their offspring remain the primary 

victims of war. Supporting women’s livelihoods also improves the children’s survival and 

has a multiplier effort in the community. Nonetheless, it has taken the international community a long time to recognize and incorporate programming in the economic arena that 

would benefit women in the immediate postwar environment. To date, no specific interagency policy addresses a comprehensive strategy for supporting women in the aftermath 

of conflict. This is a missed opportunity in the golden hour. Women are not only a catalyst 

for peace but also a resource in economic planning for stabilization and reconstruction. 

Including women can ensure that resources are disbursed to those most in need.9

Even in normal development environments, youth (defined as between the ages of 

fifteen and twenty-four) are more likely than older people to be unemployed. Reasons 

vary, but the general lack of job-specific education, training, and marketable skills contributes to this condition. Rural employment is often easier to secure in countries where 

the agricultural sector is still operating. 

The general principle of youth programs is that preventative intervention is the preferred route. But absent that opportunity, the best results occur when training is integrated with remedial education. Bringing youth leaders into broader economic development 

strategies and creating youth organizations that empower young people are considered 

the best ways to ensure that they can be part of the rebuilding process.10

In postwar environments, the challenge of integrating youth into employment 

generation programs becomes even more complex. Often young men—and sometimes 

women—who were recruited into military services during the conflict are engaged in the 

security sector. This group will frequently lack education or any job skills except firing a 

gun. But unless the needs of this group are met, the potential for destabilizing a fragile 

peace exists. No specific U.S. government programs target this vulnerable group, although 

attempts have been made to address this population in many postwar programs, from 

Sierra Leone to Afghanistan (girls’ education) to Haiti.

Most youth employment programs try to integrate education and training with actual 

job creation. If educational attempts work to improve the quality of the labor supply, 

the integration of training and other types of incentives also helps move youth into a 

more sustainable program for medium- and long-term job creation. But given the overall 

demand from all civilians for work in a transformational environment, the policy challenge 

is to ensure that the needs of youth are given prominence, because they represent the 

next generation of citizens. 

Different types of programs have been tried to achieve this goal during the golden 

hour, from community training centers to promote vocational skills to vouchers that give 

No specific interagency policy 

addresses a comprehensive 

strategy for supporting women 

in the aftermath of conflict.

Often young men who were 

recruited into military services during the conflict are 

engaged in the security sector.
14

families money to keep their children—especially young women—in schools. In some 

places, a Ministry of Trade and Industry will work with private sector investors to promote 

small-scale enterprise development. Less successful is using microfinance systems to provide working capital for small businesses. 

Enabling Environment for Investment: Governance, Rule of Law, 

Central Banking, and Anticorruption Measures

Since job creation is really a subtext of an operating economy, which assumes a capable 

state, it is unlikely that such a condition will prevail immediately after conflict. In the 

golden hour, the ability to advance the political space for economic well-being is determined by the security environment on the ground and by the presence of armed forces 

whose role is to ensure that the terms of a peace are implemented and enforced and 

that violations of agreements are limited. Such basic economic tasks as the ability to 

enforce contracts, to provide banking services, to establish credit, and to operate in ways 

that support public confidence form the enabling environment for development. Laying 

the foundation for good governance is also central to creating jobs and generating 

employment. 

Predictable, impartial, and transparent governing systems are essential for the establishment of strong economic foundations in any society. Judicial systems are required 

that can uphold a contract, protect property rights, and guarantee commercial interests 

a process for producing reliable and enforceable results. No country can be part of the 

international economic community without such a system. Often, the economic aspects 

of legal reform are treated as secondary to the immediate need to provide justice to victims of war. The two areas, however, are equally important to create the foundation for 

economic and social rebuilding. 

USAID Community Action Programs (CAPs) have a history of success in challenging 

postwar environments, and flagship programs have mobilized communities in Lebanon, 

Serbia and Montenegro, and Central Asia’s Ferghana Valley. These programs encourage 

stabilization by focusing on the way local communities contribute to the reconstruction 

process. USAID gives local stakeholders a voice in the rebuilding process, thereby advancing the foundation for governance. USAID also provides small grants that can give citizens 

resources to get on with their lives. Such programming has most recently been applied to 

in Iraq with some degree of success (see box on Kirkuk).

The Iraq CAP works at the grassroots level throughout every governorate to foster citizen involvement in meeting local development needs. Coordinating with Iraqi communities, CAP assists local groups to identify needs and to implement responsive projects. CAP 

helps mitigate violence, providing citizens with an opportunity to participate in decision 

making and local development initiatives that affect their everyday lives. CAP directly 

engages Iraqis in reconstructing their own communities, while building a nationwide 

grassroots constituency for democracy. Since June 2003, CAP has created more than 1,303 

Community Action Groups (CAGs), trained 17,281 CAG members, and assisted them to—

• build or repair 830 schools

• repair 337 roads

• complete 325 water resource projects

• launch 298 health-related initiatives

• improve 292 electric utility centers11

Many U.S. government agencies are needed at the outset of reconstruction to help 

different parts of a recovering economy move forward. Table 3 provides an overview 

of the different types of programs that, working together, can help advance economic 

recovery and thus generate new jobs. The process of ensuring the stability of institutions,

Local Governance and Its Role 

in Economic Development: 

The Experience in Kirkuk

One recent story of how local governance programs can help promote economic stability comes from Iraq. The 

USAID program—which was started in 

the spring of 2003, after the war, and 

was managed by RTI International—

combined the strengthening of local 

governance entities with employment 

creation. Underscoring the importance 

of giving citizens a stake in their government, the program worked in seventeen of the eighteen governorates 

of Iraq to demonstrate how providing 

the means to regulate a local government, including creating the means to 

receive resources from central government ministries, could help improve 

the climate for economic development. 

Aaron Williams, vice president of 

RTI, discussed how a model program, 

tested in one area of Iraq, could 

potentially be applied in other parts 

of this highly divided nation. A 2003 

initiative in Kirkuk, in the province 

of Ta’min, aimed at building a strong 

economy in one of the major oil-producing regions of the country. Ethnically diverse, it was seen as a pilot for 

improving democratic governance in an 

economically depressed region, where 

unemployment was a major source 

of social instability. Working through 

the provincial governing councils, the 

project supported increased citizen 

participation through stakeholder 

involvement in decision making. These 

local councils gave Iraqis the space 

for political discussions geared toward 

addressing major issues in the postwar 

period. They also provided a bridge

(continued on next page)
15

the ability to overcome corruption, and the engagement of a country’s leadership with 

global markets, however, is not an immediate outcome of any transformation program. 

Nevertheless, it is not unreasonable to consider that in the course of promoting good 

governance and creating the institutions that allow a government to operate, a permissive 

job creation environment becomes part of the larger state of socioeconomic well-being 

necessary to help move a country forward.

Plans to revitalize pre-existing facilities in order to provide jobs or spur the economy 

must include conflict assessments in addition to traditional forms of economic analysis 

related to efficiency and competitiveness. The ultimate goals of this type of activity 

should be to both increase employment and to reduce conflict in support of the reconciliation process. If not carefully executed, well meaning schemes to revitalize economic 

activity, such as state-owned enterprises, could inadvertently empower spoilers and fuel 

conflict. Safeguards must be put in place to ensure that those empowered do not perpetuate conflict. These safeguards include real-time oversight, audits, boards of directors, and 

payroll mechanisms designed to benefit employees and limit corruption. 

A recent World Bank study on the private sector in Somalia offers some examples of 

how a clan-based society without a national government has managed to continue its 

economic life. The study suggests that basic systems of finance and some infrastructure 

services can function. The study does not advocate for leaving states ungoverned, but 

rather offers lessons for interim governments or weak states that are still in need of 

financial services, infrastructure assistance, and other types of commercial activities. 

Rudimentary legal systems and simple means of banking allow Somalis to receive funds 

from the diaspora, to purchase goods on the open market, and to have a currency that is 

legal tender. Those systems even provide a means to export agricultural products from the 

region.12

Private Sector Development 

The private sector embodies a large group of actors, ranging from local business operators 

to regional suppliers to multinational investors. Economic development arises not from 

foreign assistance alone, but primarily from foreign direct investment. This is both a blessing and a curse in countries undergoing a transformation from war to peace. If a war-torn 

country is fortunate enough to have natural resources, then there is greater potential for 

extractive industries and ancillary types of businesses to continue operation or to take 

root. But many postwar societies have scant natural resources to offer investors. 

Local businesses can ramp up during the golden hour if there is a need for the type 

of work they do. The degree of destruction, the availability of a trained population, the 

openness of the supply chain, and the demand for their services or product often determine the ability of local entrepreneurs to work in a postwar setting. Construction and food 

workers often take on critical roles in the aftermath of conflict. Individuals with specific 

skills—medical, legal, linguistic, technical—are often sought in the reconstruction period 

to fill the needs of international assistance programs. This is important for the golden 

hour in that it puts resources back into the community. 

Research into the timing of private sector foreign investments has been under way 

for many years. The World Bank group in particular has made some important economic 

findings concerning the types of investments that are best able to thrive in potentially 

unstable environments. A recent study on when the international private sector enters a 

transformational environment found that foreign investment usually occurs after the first 

year or two, when it becomes apparent that the security risks have diminished.13 The only 

exceptions to this pattern are when an extractive industry has already been in-country 

or when infrastructure rebuilding is started with major government-funded construction 

contracts. This was the case in Afghanistan and Iraq, which then led to the use of private 

between the central government ministries in Baghdad and the local governing 

structures. Creating community organizations strengthened collaboration 

and planning of programs that would 

generate employment, resulting in the 

creation of 12,000 jobs and providing 

local Kirkuk contractors with a means 

of bringing local employees into the 

development of the Dalad Air Base.

The lessons accrued from this experience reinforce our understanding of 

the impact that good governance has 

on economic development, especially if 

done through the lens of local government. By allowing local communities to 

identify and address needs, new jobs 

as well as local economies were created that welcomed local entrepreneurs. 

This project emerged as a potential 

template against which to test local 

programs in other parts of Iraq. Finally, 

the experience in governance suggests 

that working outside a national capital 

can provide an important chance for 

early sucesses. In Kirkuk, investing in a 

large infrastructure project—something 

that did not happen in Baghdad in the 

early months after the Coalition was 

installed—reinforced security, put people back to work, and allowed the community to share hope for the future.

Local Governance and Its Role 

in Economic Development: 

The Experience in Kirkuk

Continued
16

sector subcontractors who, in turn, hired thousands of local workers (see box on Iraqi 

direct and subcontracting activity). 

The types of industries most likely to be the initial investors in a country emerging 

from war, in addition to those related to natural resources, are the telecom/cell-phone 

industry; the construction/infrastructure business (which includes water, electricity, and 

roads); and the commercial banking sector, which is needed to help jump-start investment 

in any economy. 

The World Bank research notes that firms that invest in high-risk environments tend to 

be smaller corporations that are less risk averse and do not fear potential damage to their 

international branding (multinationals are reluctant to risk their reputations).

U.S. government experience in this area is limited because it lacks the coordination 

needed to bring this diverse sector to the table. In spite of a variety of instruments for 

support of investment—from risk insurance from the Overseas Private Investment Corporation to tax incentives through legislative acts (export financing and country-specific 

provisions in trade bills such as the African Growth and Opportunity Act)—these tools 

are not readily accessible to those interested in these types of ventures. A working group 

participant who had spent his career in a Fortune 100 company stated the problem best 

when he noted that the U.S. government has the resources, “but we have been slow 

to march. The military’s job is to get things back in order again. The embassy people’s 

traditional role is to observe and report, not to be active agents of change, so we can’t 

expect them to do that either. USAID has the legal mandate to develop countries, but 

they’ve been systematically starved of resources in the last ten to fifteen years. Congress 

would rather they not do it, and gets other companies to do it. The USAID charter needs 

to change so they have more in-house experts, technical confidence to tell if a guy is 

building a road/power system correctly.... It will be very difficult to build a functioning, 

free-market economy without the people who have actually done that work. Business is 

like running a hot dog stand. It’s not rocket science, but you need experience.” 

Microfinance in Stabilization Environments and the Role of the 

Informal Sector

A study on the ways microfinance mechanisms can be effective in stabilization 

environments included field research in postwar Angola, Cambodia, Mozambique, and 

Rwanda. The study revealed that microfinance can have an important impact on coping 

with already high poverty levels if such mechanisms are widespread and used on a large 

scale. But it is also clear that while NGOs have tried to call early financial intervention 

microfinance, they were actually making grants rather than expecting repayment.15 What 

has been done is informal microfinance, starting in refugee camps and continuing when 

refugees are returned to their home areas. The objectives of these informal systems vary, 

from profit maximization by some career moneylenders to social-oriented objectives by 

village groups or other organizations. What distinguishes microfinance in emergency settings is that lenders often take more risks. But it is also true that microfinance develops 

very rapidly, even during a conflict. The system is based on trust of the borrower, and the 

type of finance is informal.

The street is often a good indicator of whether commerce has started. The presence 

of an informal market is often the first signal of a return of economic life. In the developing world, the informal sector provides the main form of employment for most of the 

workforce.16 As Peruvian economist Hernando deSoto notes, “The informal economy is the 

people’s spontaneous and creative response to the state’s incapacity to satisfy the basic 

needs of the impoverished masses.”17

In this period when the state is fragile, “this new business class is a very valuable 

resource: it is the human capital essential for economic takeoff. It has meant survival for 

Contracting with Local Host 

Nation Firms

The Army Corps of Engineers’ Gulf Region 

Division and Project and Contracting 

Office made contracting with local Iraqi 

firms a priority. With regard to subcontracting, the reconstruction contracts 

built in incentives for prime contractors 

in Iraq to subcontract with local Iraqi 

businesses. Approximately 1,170 Iraqi 

companies received subcontracts totaling more than $766 million. Fifteen 

Iraqi women-owned businesses received 

almost $17 million in subcontracts. Also 

over 500,000 Iraqi men and women 

were trained in managerial, technical and 

“unskilled” tasks.14

As local Iraqi private sector capacity to carry out reconstruction projects 

grew, the Army’s Joint Contracting Command strategy evolved into an approach 

that provided more rebuilding contractual 

opportunities directly to Iraqi firms. As 

of September 2006, more than 70 percent of the Army Corps of Engineers Gulf 

Region Division—Project and Contracting 

Office (GRD-PCO) Iraq Relief and Reconstruction Fund projects were directly 

contracted, mostly with Iraqi firms. The 

actual funding of direct contracts represented approximately 40 to 50 percent 

of the construction budget. The value of 

contracts and subcontracts going to Iraq 

private sector firms is estimated at more 

than $2.5 billion. 

Although Iraqi reconstruction contracting activity generated employment, it was not enough to alleviate the 

unemployment problem. A more robust 

assistance program integrated with the 

contracting opportunities was needed, 

including increased levels of microcredit, 

entrepreneurial programs, and the development of business centers and vocational training centers. Security issues and 

limited resources rendered initial USAID 

contracts encompassing these types of 

programs only marginally successful.
17

those who had nothing and has served as a safety valve for societal tensions. It has given 

mobility and productive flexibility to the wave of migrants, and is in fact doing what the 

state could never have done: bring large numbers of outsiders into the country’s money 

economy. . . . The overwhelming majority of the population has one goal in common, to 

overcome poverty and succeed.”18 

Individuals who are not part of the regular economy are still important actors in that 

they operate in the open market and are vital to the continued growth of the country. 

But they are not really stakeholders in the country’s future since they are not taxpayers, 

nor do they reap any of the benefits of government in the form of pensions or some type 

of social safety net. Moreover, some stakeholders in the informal sector can actually be 

spoilers—such as the narcotics traffickers in Afghanistan—who have an incentive to 

destabilize the legitimate government. The challenge for reconstruction is to turn this 

important part of the developing economy into a group that sees its future in the stability 

and growth of the government.

Diaspora Investments

Diasporas contribute to the economic reconstruction of their homelands by working with 

relatives, national governments, and their own chambers of commerce to attract capital 

to many former war zones. Afghanistan is a prime example of a country that has benefited 

from its citizens living abroad and investing in SMEs in spite of the conflict. Because 

the diasporas’ purchase and investment motivations can differ from those of buyers and 

investors outside the community, it is important to recognize that they are a particular 

variation on the general principle that private investment usually arrives late in war-torn 

states. Ashraf Ghani, Afghanistan’s former finance minister, noted that “the key to reviving the collapsed manufacturing and commercial sectors” was created by the diaspora. For 

example, a $25 million Coca-Cola plant was built by an Afghan living in Dubai. Of thirteen 

commercial banks, two were funded by members of the Afghan diaspora.19

These groups, which are most likely to initiate investment, also need additional 

regulatory support, especially when it comes to remittances. Currently, despite numerous 

suggestions, the United States has no specific coordinated regulatory mechanisms for 

monitoring remittances. These funds can play an essential role in support of families who 

need immediate assistance to get them through the worst of any crisis. 

Lessons and Recommendations 

U.S. Strategy and Coordination

Lesson—Focal Point: Postwar economic development is a process, and coordination 

of U.S. government agency and international donor initiatives will require a focal point 

that can provide immediate support in the golden hour. The focal point will also provide 

a means of including the private sector in planning for the country’s medium- and longterm needs.

Recommendation: Understanding the capacity of different agencies with different 

tools to support job creation is a first step, but an ongoing interagency group, possibly 

located in S/CRS, will be needed to bring together all the relevant agencies and resources. 

This group will also need a liaison function with international organizations, bilateral 

donors, and the international financial groups that will invest in the short, medium, and 

long terms.

Lesson—U.S. Plan: The U.S. government does not have a coherent strategy for 

employment and livelihood creation in transition and stabilization environments, nor does 

Currently, the United States 

has no specific coordinated 

regulatory mechanisms for 

monitoring remittances.
18

it make employment creation a priority, with the exception of its role in demobilization 

and reintegration programs. While the S/CRS matrix is an excellent place to start, there 

is really no effective coordination of U.S. government resources to address golden hour 

opportunities. 

Recommendation: New directives to civilian and military agencies should agree to 

make employment generation a priority of resource allocation. Interagency plans for 

employment generation should be immediately executed during the golden hour. Tables 2 

and 3 should be refined and expanded by an interagency working group specifically dedicated to employment generation. As a start, USAID needs to have a rapid response team 

for employment creation that includes representatives of the private sector and members 

of the respective diaspora groups. Such a team will assess what can be done in the short, 

medium, and long terms.

Lesson—The Legal–Regulatory Environment: Although some U.S. government support for dealing with commercial law exists (the Department of Commerce’s Commercial 

Law Development Program and USAID), there are no programs specifically geared to dealing with the immediate aftermath of conflict. 

Recommendation: The U.S government must help create and implement a legal/regulatory framework in the host nation for the initial period after a conflict. This framework 

should be part of a larger tool kit for economic development in transformation and stabilization efforts.

Lesson—Transition from Military to Civilians: The U.S. military can provide important on-the-ground support for quick-impact job creation. But these programs are not 

intended to become solutions to employment needs; rather, they support the security 

and stabilization mission. To be effective, they must be sequenced with the work of 

international civilian agencies and with the private sector to allow for handoff of employees, functions, and support. The military’s role is filling the gap, not developing the 

economy.

Recommendation: Flexibility and access to resources have been the hallmarks of the 

military’s action-oriented approach to job creation. Civilian agencies must be engaged 

from the outset in these military programs so they can be available on the ground to 

make a transition from the military to a civilian job corps. Failure to create a regular 

handoff mechanism creates huge security risks for the development community. Legislative authority that permits civilian agencies to work with the military in implementation 

of job programs needs to be supported. 

Recommendation: Provide every field commander with a tool kit of what needs to be 

done, and allow for a transition or handoff to civilian development agencies that takes 

security into consideration in the planning process.

Lesson—Decentralize: Community-based programs that allow residents to participate 

in the rebuilding process are the most successful forms of immediate job creation programs because they are decentralized and engage local stakeholders from the start. These 

types of rebuilding projects are usually not expensive in terms of international assistance, 

but they are very useful in building trust, healing communal differences, and bringing 

different groups together for a common goal.

Recommendation: These types of programs can be started even while some parts of 

the country are still insecure. But using these programs will require cooperation among 

various agencies and an “off-the-shelf” product that gives adequate resources and control 

to a local organization (an NGO) that can help ensure that the programs will be implemented quickly, with a high degree of transparency.

Military

Lesson—Reconstruction: Large-scale construction programs involving state-of-theart facilities are not effective during the golden hour. The length of time needed to 
19

contract, conduct consultations with the host nation, and design these types of facilities 

extends beyond the immediate post-conflict phase. 

Recommendation: Small, grassroots projects using host-nation-appropriate technology should be implemented immediately. Even these types of programs will require 

advanced planning for the types of projects that make sense for each country, as well as 

oversight of how the funds are spent. If a competent host nation construction-type ministry exists, the United States should provide grants directly to this ministry to contract 

with local companies—such as the grant agreement between the United States and the 

Iraqi Ministry of Housing and Construction. If foreign contractors are used, they should 

begin immediately to hire local workers and subcontractors on a wide range of projects, 

not only to create jobs but also to provide some evidence of progress in the rebuilding 

process. 

Lesson—Inadequate Short-Term Planning: In Iraq, most U.S.-appropriated funding 

was used for design-build infrastructure projects, security forces training, and equipment 

procurement. The contracting strategy generally did not focus on supporting smaller projects at the local level that could provide immediate improvements in basic services. 

Recommendation: Future efforts should plan for immediate impact grassroots projects 

from the very start. Congress should legislatively institutionalize programs such as CERP 

for easy implementation in future contingency operations. CERP and similar initiatives in 

Iraq proved the value of relatively small, rapidly executable projects that meet immediate 

local needs and thereby enhance relations with local communities. 

Lesson—Linking Short-Term to Long-Term: Similar to USAID’s short-term job creation programs, the benefits of CERP with regard to long-term job creation are not clear.

Recommendation: Strategic planning is needed to link short-term emergency programs to long-term host nation and private sector employment-generating initiatives. 

This planning should start with an assessment of the demographic and economic characteristics of the working-age population in former conflict areas. This assessment should 

focus on skill levels, infrastructure, availability of credit, and entrepreneurial capacity of 

the population. 

Humanitarian

Lesson—Integration: Humanitarian agencies (government and nongovernment), 

along with the U.S. military, are the front line of job creation organizations in the wake 

of war. They buy time for the development of longer-term programs. These organizations 

will need support from groups engaged in economic development projects so that their 

initial investments in people and projects are integrated into the broader development 

mandate.

Recommendation: Short-term livelihood creation should be considered a parallel 

program to larger job creation efforts. Such efforts should not be subject to cutoff dates; 

they should be flexible so they can be expanded and used in different sectors of a country. 

Because the time needed for the private sector to develop projects after conflict may vary, 

flexible programs that allow the continuation of assistance will be essential to sustain 

economic life. As for other short-term programs, a transition “tool kit” is needed to ensure 

appropriate handoff to longer-term civilian agencies. 

Private Sector

Lesson—Private Sector: Private sector involvement in postwar environments depends 

on the nature of the on-the-ground security capacity of the host nation population and 

the level of infrastructure destruction. Extractive industries, construction, telecommunications, and banking interests are the most common types of private investments in highrisk countries, and the average time for entry is after the first year or two of peace. 

Recommendation: International companies should be encouraged to participate in 

initial planning processes for economic reconstruction. It is also important that interna-
20

tional agencies and U.S. programs recognize the limitations of initial private sector entry, 

except in the form of local or informal entrepreneurs. Consideration should be given to 

expanding existing U.S. programs that support private sector involvement in developing 

countries to also include initiatives focused on the golden hour. These U.S. government 

programs include USAID, the Overseas Private Investment Corporation, the Import-Export 

Bank, the Small Business Administration, and international and technical development 

programs administered by the Commerce Department. 

Lesson—Women: Women are often the most needy and least cared for in postwar 

societies. Assistance to women is essential, and they should be the first group to be 

included in programs that will help them put food on their tables, care for their children, 

and restart lives that have been disrupted by war. At present, there is no U.S. government 

strategy for assisting women during the golden hour.

Recommendation: An interagency working group on women, together with representatives of the international community, should create a package of programs that can be 

used in the days immediately following a conflict. These programs should address the 

specific needs of women in conflict zones. Knowledge exists on what types of programs 

are best suited to urban versus rural environments; what is needed is a means to act on 

these situations. USAID should have a specific set of programs to be placed in the field 

immediately, with decentralized funding and the capacity to continue for at least two 

years.

Lesson—Diasporas: Diasporas contribute to the economic reconstruction of their 

homelands by working with relatives, national governments, and their own chambers of 

commerce to attract capital to many former war zones. 

Recommendation: The United States should have a coordinated regulatory mechanism for monitoring remittances. 

Notes

1. See International Peace Academy, The Political Economy of War and Peace. Seminar Report (New York:

International Peace Academy, May 2002). This report provides an overview of the challenges of designing and 

implementing economic reconstruction, and discusses potential obstacles to rebuilding. 

2. Special Inspector General for Iraq Reconstruction, January 2006 Report to Congress, p. 166–167.

3. According to America’s Role in Nation Building from Germany to Iraq, the post–World War II occupations 

of Germany and Japan were America’s first experiences with the use of military force in the aftermath of a 

conflict to underpin rapid and fundamental societal transformation. Both were comprehensive efforts that 

aimed to engineer major social, political, and economic reconstruction. “Since the end of the Cold War, the 

United States has felt free to intervene not simply to police cease-fires or restore the status quo but to try to 

bring about the more fundamental transformation of war-torn societies” (Dobbins, James, Keith Crane, Seth G. 

Jones, John G. McGinn, Andrew Rathmell, Rollie Lal, Brett Steele, Rachel M. Swanger, Richard Teltschik, Anga 

Timilsina. America’s Role in Nation-Building from Germany to Iraq (Santa Monica, CA: RAND, 2003), p. xiv).

4. Special Inspector General for Iraq Reconstruction, Annual Report to Congress, January 2006.

5. Lieutenant Colonel Mark Martins, “No Small Change of Soldiering: The Commander’s Emergency Response 

Program (CERP) in Iraq and Afghanistan,” The Army Lawyer, February 2004, Issue 369, pp. 1–20.

6. Provincial Reconstruction Teams: Military Relations with International Organizations and Nongovernmental 

Organization in Afghanistan, United States Institute of Peace Special Report 147 (Washington, DC: United 

States Institute of Peace, September 2005).

7. See Robert N. Perito, The U.S. Experience with Provisional Reconstruction Teams in Afghanistan: Lessons 

Identified, United States Institute of Peace Special Report No. 12 (Washington, DC: United States Institute of 

Peace, October 2005). 

8. Gil Loescher and James Milner, Protracted Refugee Situations: Domestic and International Security Implications, Adelphi Paper 375 (London: International Institute for Strategic Studies, July 2005) pp.74–75.

9. Camille Pampell Conaway, The Role of Women in Stabilization and Reconstruction, United States Institute 

of Peace Stabilization and Reconstruction Series, No. 3 (Washington, DC: United States Institute of Peace, 

August 2006).

10. World Bank, World Development Report, 2007, Development and the Next Generation, retrieved February 

5, 2007, from http://www.worldbank.org/wdr2007.

11. See www.usaid.gov/iraq/accomplishments/cap.html.

12. World Bank, Private Sector Development, Note no. 280 (Washington, DC: World Bank, November 

2004).
21

13. See John Bray, International Companies and Post-Conflict Reconstruction: Cross-Sectoral Comparisons.

The World Bank Social Development Papers. Paper No. 22 (Washington, DC: World Bank, February 2005).

14. A Report on Iraq Reconstruction, Department of the Army, Office of the Assistant Secretary of the Army, 

Acquisition, Logistics and Technology (ASA(ALT)), September 29, 2006.

15. See Tasmin Wilson, Microfinance During and After Armed Conflict: Lessons from Angola, Cambodia, 

Mozambique, and Rwanda. (Durham, UK: The Springfield Centre for Business in Development, March 2002).

16. Bosnia’s Arizona Market has been touted as an example of an informal sector being allowed to generate 

post-conflict economic and social recovery. The market, which grew up around a NATO checkpoint, received 

U.S. military and NATO support in the form of law enforcement around the marketplace and the provision of a 

secure trading environment. The intervention enabled a marketplace to emerge despite the devastation in and 

around Brcko, a critical boarder town called a “black hole” during the conflict. Today, it is a vibrant city of 

80,000 Serbs, Muslims, and Croats. While it is true that a protected, multi-ethnic market did flourish, critics are 

quick to point out that it has evolved into a hotbed of black-market activity, including drug and sex trades. See 

Bruce Scott and William Nash, “Brcko and the Arizona Market,” Harvard Business School & Council on Foreign 

Relations (2005), retrieved from http://www.nextbillion.net/multimedia/2005/12/08/brcko-and-the-arizonamarket; Chris Hedges, “Bosnians Burying Their Differences, With Money,” New York Times, October 17, 1996 

Retrieved on October 6, 2006, from http://www.nytimes.com/specials/bosnia/context/1017yugo-bosnia-market.html; Aljazeera.net, “Brcko —a rare Bosnian success story,” November 17, 2005, retrieved March 20, 2007 

from http://english.aljazeera.net/English/Archive/Archive?ArchiveID=16328.

17. For an in-depth study of this subject, see Hernando de Soto, The Other Path: The Invisible Revolution 

in the Third World. (New York, Harper & Row: 1989)

18. de Soto, The Other Path, p. 244.

19. See Liesel Riddle and Valentin Marano, Homeland Export and Investment Promotion Programs for 

Diaspora: The Case of Afghanistan, unpublished manuscript from June 16, 2006, conference on Diasporas and 

Development, George Washington University, Washington, D.C.
Notes
Notes
Of Related Interest

This report is part of a series of special reports that have been issued by the United States 

Institute of Peace’s Filling the Gaps series of working groups. The special reports address 

the causes of failure in specific areas in reconstruction and stabilization as well as generate policy options. The other reports in the series are

• Measuring Progress in Stabilization and Reconstruction, Craig Cohen

• Transitional Governance: From Bullets to Ballots, Beth Cole DeGrasse and Christina 

Caan

• Filling the Gaps: Managing Natural Resource Wealth, Jill Shankleman

• The Role of Women in Stabilization and Reconstruction, Camille Pampell Conaway

• The Urge to Remember: The Role of Memorials in Social Reconstruction and Transitional 

Justice, Judy Barsalou and Victoria Baxter

Please visit www.usip.org to download this and related reports.

Related Resources

• Beasley, Kenneth W. Job Creation in Postconflict Societies. USAID Issue Paper No. 9, 

April 2006. Washington, DC: USAID.

• Bray, John. Multinational Companies and Postwar Reconstruction: Cross-Sectoral Comparisons. The World Bank Social Development Papers. Paper No. 22. Washington, DC: 

World Bank, February 2005.

• Forman, Johanna Mendelson. “Achieving Socioeconomic Well-Being in Postconflict 

Settings.” The Washington Quarterly, vol. 25, no. 4 (2002), pp. 125–138.

• International Alert. Conflict-Sensitive Business Practice: Engineering Contractors and 

Their Clients. London: International Alert, September 2006. 

• Loescher, Gil, and James Milner. Protracted Refugee Situations: Domestic and International Security Implications. Adelphi Paper 375. London: International Institute for 

Strategic Studies, July 2005, pp.74–75.

• Orr, Robert C., ed. Winning the Peace: An American Strategy for Postwar Reconstruction.

Washington, DC: Center for Strategic and International Studies, 2004.

• Schwartz, Jordan, Shelly Hahn, and Ian Bannon. The Private Sector’s Role in Postwar 

Countries: Patterns and Policies. Social Development Papers, Conflict Prevention and 

Reconstruction, Paper 16. Washington, DC: World Bank. August 2004.

• USAID. Livelihoods & Conflict: A Toolkit for Intervention. Washington, DC: USAID, 

2005.

• Weiss-Fagen, Patricia, with Micah N. Bump. Remittances in Conflict and Crises: How 

Remittances Sustain Livelihood in War, Crises and Transitions to Peace. International 

Peace Academy Policy Paper. New York: International Peace Academy, February 2006. 

• Woodward, Susan. Economic Priorities for Peace Implementation. International Peace 

Academy Policy Paper on Peace Implementation. New York: International Peace Academy, October 2002.

• World Bank. Reducing Poverty, Sustaining Growth: Scaling Up Poverty Reduction. A 

Global Learning Process and Conference in Shanghai, May 25–27, 2004.

United States 

Institute of Peace

1200 17th Street NW

Washington, DC 20036

www.usip.org

An online edition of this report can be 

found at our website (www.usip.org), 

together with additional information 

on the subject.