Economic Impact of Peacekeeping

Michael Carnahan

Sponsors

Background

• United Nations peacekeeping missions spend around $5b per year

• They are often criticised for distorting the local economy

• Nearly everyone has an opinion– But nobody has done any analysis

Purpose of Project

• Fill this gap in understanding

• Provide information – to inform choices

• Identify win-win recommendations

• Allow informed trade-offs to be made

Research Approach

• Obtain information from UN HQ

• Field visits to eight active missions

• Follow the trail of the money– How much actually lands– How much actually stays

• Assess broader economic impacts

• Make recommendations

Limits of the approach

• Only looked at UN peacekeeping missions– Not the broader ‘development community’

• So only a part of the impact was covered– Need to start somewhere in a

comprehensive manner– As first major actor UN sets precedents

Basic Conclusions

• Restoration of peace is the key

• Spending by missions and staff provides an economic boost

• Inflation is not as bad as perceived

• Labor market effects and other negatives

• Room to improve local impact

0

200

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600

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1200

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1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Burundi

DRC

Côte d'Ivoire

Haiti

Sierra Leone

Liberia

Kosovo

Figure 1.1: GDP per capita, Noting Year of Effective Deployment of Peace Operations

-10

-5

0

5

10

15

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25

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35

2000 2001 2002 2003 2004 2005

Burundi

Kosovo

Liberia

Côte d'Ivoire

Haiti

Sierra Leone

Timor-Leste

Figure 2.1: Inflation Rates During United Nations Mission Tenure

Fiscal Impact

• Assessed budget – Less external spending– Less funds not spent– Less spending leaked into imports– Equals local spending

• Multiplier effect

Fiscal Impact – data

• UN budget reports– Supporting material (procurement, staffing)– MSA survey

• Bank/Fund reports/data• Government data• Commissioned research

– Spending surveys– Housing and business surveys

UNMIK UNTAET UNAMSIL UNMIL ONUCI

Kosovo Timor Sierra Leone Liberia Cote-d’Ivoire

2001-02 2001-02 2001-02 2004-05 2004-05

Total Spending 360,248 527,585 617,646 722,634 378,473

External Impact 262,842 501,284 602,804 693,992 351,037

external spending 164,057 424,547 549,313 598,353 306,232

allowances not spent 63,828 37,871 18,411 34,063 11,806

spending on imports 34,957 38,866 35,080 61,575 32,999

Local Impact 97,406 26,301 14,843 28,642 27,436

Local Percentage 27.0% 5.0% 2.4% 4.0% 7.2%

ONUB MONUC MINUSTAH UNTAC

Burundi DRC Haiti Cambodia

2004-05 2004-05 2004-05 1992-93

Total Spending 329,714 954,766 379,047 1,142,980

External Impact 299,561 884,032 346,941 1,080,146

external spending 235,445 696,257 257,226 853,432

allowances not spent 8,036 44,984 15,132 71,944

spending on imports 56,080 142,790 74,582 154,769

Local Impact 30,153 70,734 32,106 62,834

Local Percentage 9.1% 7.4% 8.5% 5.5%

Table 2.1: Total, External, and Estimated Local Expenditure ($US ‘000)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

UNAMSIL UNMIL UNTAET UNTAC ONUCI MONUC MINUSTAH ONUB UNMIK

external impact

unspent allowances

imports

local impact

Figure 2.2: Mission Expenditures by Category, Sorted by Percentage Local Impact

0%

2%

4%

6%

8%

10%

12%

ONUCI MINUSTAH MONUC UNAMSIL UNTAC UNMIK ONUB UNMIL UNTAET

Figure 2.3: Estimated Local Impact as a Share of GDP

0%

10%

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30%

40%

50%

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100%

MONUC UNAMSIL MINUSTAH UNMIL ONUB ONUCI UNMIK UNTAC UNTAET

procurement

national staff

allowances

Figure 2.4: Breakdown of Local Impact

Allowance Spending

• Accounts for about half of the local impact– About half is not spent

• Spending categories– housing (50%);– food/restaurants (25%)

• Provided incomes and employment

• Triggered localised price rises

• Some ‘boom/bust’, but need to look over longer horizon

Mission Procurement

• Balance between mission and HQ procurement

• About 20% stayed in the local economy, the rest on imported goods

• Supported the construction and contracting industries– Brought these out of the informal sector

• Easiest way to increase local impact is to increase mission procurement

National Staff

• Role and impact of national staff provoked the strongest responses

• Benefits include– Cost savings vs international staff– Direct injection of cash into the economy– National staff get training– Increases mission legitimacy?

National Staff

• Significant problems– Higher pay draws people from the civil

service and private sector– Skilled staff take unskilled UN jobs– Mission wages drag up private and public

sector wages– Mission wages are the focal point for other

actors

Longer term

• Longer term implication of wages policies not well studied

• Creation of a ‘development sector’– Entrepreneurs and most talented people work for

development agencies– So the economy does not grow– So more aid is needed for longer– Dynamic effects – eg changes in tertiary sector

Managing labour market impacts

• More use of outsourcing– Currently used but could be increased

• Revise wage setting procedures– Principles established 60 years ago when

the UN was a small employer in well developed labour markets

– Not appropriate for a large (or largest) employer in poorly developed markets

Unintended Impacts

• Revenue collection

• Expectations for working environment and living standards

• Broader economic impact of policy decisions

• Planning horizons

• Distributional impact

Recommendations

• Mandate and structure (GA/SC)

• Labour market (ICSC/GA)

• Outsourcing (5th Committee/GA)

• Administrative changes (Secretariat)

• Donor programs (donors)

• Implementation (Secretariat)