The customs administration deserves particular attention if trade is to serve as a catalyst for growth, for widespread corruption and excessive administrative burden discourage formal trade. In addition, the state needs to tackle large-scale smuggling that often flourishes during conflicts. This is particularly challenging as illegal traders, who accumulated huge profits during hostilities, are likely to resist any attempt to reintegrate into the formal sector. This is, however, necessary both to restore control over trade flows and to raise fiscal revenues through customs duties. The state must provide the right incentives to encourage foreign and domestic investment in productive activities.
Conflicts offer considerable opportunities for profit out of illegal trade and rent situations.
A fundamental question is whether it is sound to let investors who made profit out of illegal, mafia-type activities, take the lead in rebuilding the economy after the conflict, as they are likely to perpetuate their former practices and behaviour. Once hostilities are over, capital owners are usually reluctant to invest in sectors where it is mostly needed, that is in productive, fixed assets such as agricultural infrastructure. Private capital tends to flow rather into quick-yielding, mobile assets like transportation. Increased government expenditure is thus necessary in a first phase to restore production infrastructure in vital economic sectors. These sectors vary from country to country, but agriculture is often pointed out as a top priority.