There are two principal insights from the analysis:

- The pattern of WBG financial interventions appears to support anecdotal observations that PSD interventions have tended to only occur in a second round of reforms, several years after initial stabilization has occurred. In Rwanda, Timor Leste and Sierra Leone, PSD or PSD-relevant interventions were relatively few in number in the first three years following conflict. In subsequent years, PSD became increasingly mainstreamed in Bank activities, with well over 20 percent of projects having some connection to or support for PSD in the period of 7–9 years after conflict. In the case of Sierra Leone, nearly half of WBG financial operations occurring seven years or more after the end of the conflict can be classified as having a PSD-supportive element.

- It also suggests that in the more recent post-conflict cases—namely Afghanistan and Haiti—lessons have been learned. In both of these cases, the PSD agenda has been relatively more prominent from the outset of resumed Bank operations.

There are a number of reasons for the lack of integration of the PSD agenda into the broader postconflict reconstruction agenda.<sup>41</sup> First, some PSD issues—such as land reform - can be politically difficult in a post-conflict environment. As noted above, the deterioration in governance during conflict creates rent-seeking vested interests. PSD reforms can threaten these rent-seeking systems, which are consequently stiffly resisted. Second, PSD policy can require re-thinking the role of the state in the economy, which can be seen as a secondary priority to re-establishing the machinery of government in a post-conflict situation. Third, the development partner community is fragmented, with some agencies lacking either a mandate or expertise to promote PSD in the post-conflict period.<sup>42</sup>

# **Box 6. Reform in Rwanda: the benefits of prioritizing PSD**

Post-conflict policies in Rwanda helped to bring about macroeconomic stability within 3 years—an important achievement. However, economic growth performance in the post-conflict period was mixed: the informal sector (including the agricultural sector and services) recovered relatively rapidly, but growth in formal sector activity (agribusiness, domestic trade and manufacturing) was relatively weak. As a result, real growth rates in the 1994–2000 period were modest, averaging around 3–4 percent per year.

Rwanda’s second generation of post-conflict reforms was PSD-oriented and supported by development partners. The new policy framework, instituted progressively since 2001, is friendlier towards both domestic and foreign investors. Reforms have included revising the entire legal framework to make it more investment-oriented. The tax code was revised and rationalized, eliminating discretion and fundamental land reform was undertaken, including the creation of a titling system. Formal sector economic activity has grown at 6–7% in real terms during 2003 and 2004. Other indicators have also shown an uptick in private sector activity: for example, domestic business registrations have increased at a rate of 10 percent per year in the 2001–04 period. _Source_ : Stern (2005).

> 41 Stern 2005.

> 42 For example, DDR programs for ex-combatants are often run by UN agencies that are not necessarily mandated to assess the impact of their programs on labor markets and private sector job creation.

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