Aid and Internal Conflict: Relevance, Prevention, Exacerbation 

   

   by Robert J. Muscat

   

   

   There have been many calls for the World Bank and other international development agencies to
   work for conflict prevention in countries that are at risk of descending into large-scale
   violent internal conflict. Unfortunately, these calls seldom go beyond the hortatory. They
   seldom delve into the specifics: what does development aid actually consist of; how is aid
   relevant to the emergence of violent conflict; where aid has been relevant in the past,
   perhaps even salient, has it actually prevented or exacerbated violent conflict; how can
   activities be deliberately shaped to help ameliorate underlying tensions and divisions, or at
   least ensure they are not exacerbating conflict sources?

   

   Although in recent years the World Bank, UNDP, USAID and other agencies have set up units
   dedicated to addressing conflict prevention and/or post-conflict recovery, and although some
   guidelines have been issued and a few country conflict studies have been undertaken, ^[i]
   conflict prevention has not been systematically integrated into the development planning and
   program frameworks of most if not all of these agencies. This is unfortunate given the fact
   that violent conflict has been one of the major reasons for development failure and
   persistence of poverty, especially in Africa. This chapter will illustrate how development aid
   policy-makers and practitioners can identify relevant options by looking at the nuts and bolts
   of development agency work through a conflict-prevention lens.^[ii]

   

   On the face of it, there are strong arguments for enlisting aid as an instrument for conflict
   prevention. In the periods, often measured in years, during which basic differences and
   grievances are festering and unresolved, but the antagonists have not resorted to violence (or
   to more than low-level violence), the international development agencies are the only
   instruments of the international community that are actively promoting and financing internal
   change, in effect intervening in social and economic processes. These agencies are commonly
   welcomed  for their assistance, although there are exceptions, and relationships with host
   governments have ups and downs.  Donors and recipient governments share a desire for the
   assistance programs to address non-trivial problems. Thus many of these programs may address
   and affect problems that relate to the basic differences and grievances putting a society at
   conflict risk . Through these programs, the aid agencies may (perhaps unwittingly) ameliorate
   or even exacerbate basic differences, or they may miss opportunities to ameliorate through
   sheer inattention to the conflict-relevance of their programs or to the potentialities for
   unintended consequences beyond their programs' immediate objectives.

   

   There are obviously some country situations where development agencies have little or no scope
   for meaningful assistance or for addressing basic societal issues. A regime may view
   everything embodied in the modern development process as inimical to its world-view and its
   fundamental interests (e.g. the Taliban or Burma). The modern development paradigm envisages
   societies and polities that embrace local empowerment, gender equality, responsive and
   transparent governance, expanding trade and intellectual association, independent civil
   society and wide scope for human rights and cultural tolerance. State or non-state actors who
   reject most if not all aspects of this paradigm (e.g. violent religious fundamentalists) are
   not likely to be dissuaded from resort to violence by any activities of the agencies promoting
   such a world-view.  Or a regime may be hostile to international aid "intervention," bent on
   pursuing predatory, divisive and repressive policies that maintain the hegemony of one (say)
   ethnic segment of the population over all others (e.g. Idi Amin in Uganda, or Sudan). There is
   likely to be greater scope for conflict prevention in countries where the state is strong
   rather than weak, and where the state itself is not implicated by being in the hands of one of
   the conflicting parties. Lastly, we do not attempt to address the problems of violent
   challenges to the state from drug barons (as in Colombia) or from warlords (as in
   Afghanistan). Solutions to these conflicts are not likely to hang on programs promulgated by
   the international development agencies.

   

   There are also limits on the capacities of the aid system. Analyses and prescriptions may be
   faulty. There are endemic problems of program coordination and harmonization of objectives
   that frequently constrain aid effectiveness.  It is ironic that typically there is no pressure
   to make conflict prevention a program objective during the years when there is no crisis
   atmosphere, when conflict violence is low (or the conflict-risk probability is judged to be
   low), and when there is time to analyze, harmonize, and reshape programs, while close to
   conflict when the political will to address the causes of conflict may finally emerge, there
   is no time left for development assistance to work on underlying causes

   

   The development aid relationship comes in three forms -  policy "dialogue," i.e. advice or
   pressure (conditionality); projects (in agriculture, education, health, infrastructure,
   etc.);  and money (government budget support, or balance of payments support). We use the term
   "development aid" deliberately. That is, we will not examine the non-developmental activities
   some agencies have undertaken in recent years that use aid funds directly to promote
   democratic institutions and processes - elections, political parties, civil society NGOs,
   conflict management fora and media, etc. ^[iii]

   

   Policy Dialogue

   

   Aid agencies (not all, of course) have provided policy advice, or imposed policy-change
   conditions, since the early years of third-world development assistance in the 1950s. The
   policy subjects may range from macroeconomic questions (e.g. monetary policy, foreign exchange
   rate policy), to foreign trade (tariffs, controls), to sectoral issues (agriculture pricing
   policies, electricity pricing), or to institutional issues of economic management and
   governance (e.g. public sector enterprises, government budgeting and auditing).

   

   The traditional concern of this kind of policy dialogue has been efficiency. Overall economic
   growth would be enhanced with better policies, fewer investment distortions, fewer
   interventions into the operation of markets, more rationalized allocation of public sector
   resources, and so on. The evidence showing that economic growth can be enhanced significantly
   through such efficiency gains is powerful.  But a powerful case can also be made for
   substantial gains from taking distributional impact into account, that is, inter-group, or
   so-called horizontal inequalities, and economic grievances such as perceptions of
   discrimination in access to income earning opportunities. To the extent that such inequalities
   or discrimination are contributory  causes leading to resort to violence, failure to address
   and improve the inter-group economic balance can result in enormous economic loss to a
   country's physical and human capital. Thus, it may actually be more efficient to substitute
   distributional for efficiency gains, if such a trade-off is in fact involved in specific
   cases.

   

   Malaysia provides an important example of government deliberate opting for distributional over
   efficiency gains as the core of its development strategy. In 1971, shaken by urban riots (in
   1969) in which Malays protested violently against the long-standing economic prominence and
   wealth of the ethnic Chinese population, the government introduced a comprehensive program of
   what we now style as "affirmative action." The program was announced as designed to increase
   Malay access to higher education, private sector employment of Malay workers, and Malay
   ownership of equity in the modern corporate sector. These policies had quantified and
   time-defined targets, based essentially on the principle of proportionality to ethnic share of
   the population. The policies added greatly to the previous more limited measures that favored
   the hiring of Malays in government employment and that financed land settlement schemes for
   landless Malay rural workers. The policies were promulgated by a ruling alliance of political
   parties representing the three major ethnic groups of the population - Malay, Chinese, and
   Tamils. The program was incremental and administered flexibly, and entailed no expropriation
   of existing wealth.

   

   The affirmative action measures imposed considerable constraints on the operation of the
   domestic markets for land, labor and capital. As an extensive departure from economic
   orthodoxy, the policies were hotly debated inside the World Bank. Economists in staff offices
   of the Bank criticized what they saw as a formula for economic decline. Line officials
   responsible for the Bank's lending to, and relations with, the Malaysian government, supported
   the government's position and continued to extend loans. The upshot over the succeeding years
   has been a record of substantial attainment of the distributional goals, of sustained
   inter-ethnic harmony, and one of the world's fastest developing country growth performances.
   Critical to its success has been the government's willingness to adjust the affirmative action
   requirements, especially when they were seen as a potential drag during periods of
   macroeconomic stress. Also critical to its success has been the willingness of the ethnic
   Chinese community to bear the social and individual costs (such as the costs of overseas
   tertiary education for children unable to gain admission to Malaysian universities due to
   quota exclusion) as the price of overall harmony and economic growth. The Malaysian experience
   is particularly apposite in an era when ethnic divisions have been a principal source of
   internal conflict in so many developing countries.

   

   In sum, adopting horizontal equity as the primary development objective was, in the event, in
   Malaysian circumstances, a very efficient, perhaps growth-maximizing, strategy. One can only
   speculate over the course Malayan dissatisfaction might have taken if the government had not
   pursued and achieved the distributional restructuring. Given the sweeping and unorthodox scope
   of the policy restructuring, responding to a mere four days of urban violence, the government
   and the reigning ethnic leaders evidently viewed the risks to the stability of the society and
   the state as clear and substantial.

   

   A less happy example, in which external economic policy advice and support exacerbated
   internal divisions, is provided by the case of Pakistan and the civil war in 1971 that ended
   with the secession of the country's east wing, the now independent Bangladesh. Since the
   creation of Pakistan in the partition of 1947, the central government, seated in West
   Pakistan, had pursued a development policy that favored industrialization in the West wing.
   The industrialization and its infrastructure requirements were financed in part through
   resource transfers from the East to the West. The transfers were effected through the use of
   the foreign exchange surplus earned by the East's (mainly jute) exports, and through the
   maintenance of an overvalued exchange rate and a protective system for the country's domestic
   manufactures. The basic rationale was one of efficiency. Scarce resources should be invested
   where they would earn the highest return; opportunities for investment in the East were judged
   to be very limited, with low economic returns, even in agriculture.

   

   For at least a decade before the civil war, the donors were well aware of the depth of
   resentment over these policies on the part of East wing intellectuals and politicians. The
   East's policy agenda called for reversing the growing income gap between the wings, increasing
   public investment in the East, and reversing the direction of net financial transfers. During
   that decade the policies discriminating against the East had been supported by the donors and
   by the economic advisory team that was being financed in part by the World Bank.  By the time
   the government policy makers and donor advisors decided to right the imbalance against the
   East, in mid-1970, it was too late. The election in 1971 would have given central government
   control to the political party that had won the majority of the seats in the more populous
   East, the Awami League.  The West's refusal to accept that outcome (and the jailing of the
   head of the Awami League) triggered the East's secession and the West's unsuccessful effort to
   hold on to the East wing by force.

   

   Fundamental economic grievances were the major contributors to the readiness of the East's
   leadership to opt for secession. Through both sustained financial support and technical policy
   advice, the donors had backed the West wing's strategy of efficiency over distribution, up to
   the 11^th hour. One can credibly speculate that the civil war might have been avoided if the
   policy reversal of 1970 had been undertaken, say, five years earlier. At a minimum, it is
   clear (as later admitted by the then chief of the economic advisory team) that World Bank
   experts and the Bank-financed Harvard advisory team had "collaborated intimately" with their
   Pakistani policy colleagues, and bore a share of the responsibility for the economic policies
   that were prominent among the roots of the conflict. ^[iv]

   

   The Malaysia and Pakistan cases serve as examples of the potential relevance - indeed,
   salience -  of economic policies in conflict-risk situations, and of the possible role of the
   sources of international policy advice and influence, especially the policy leadership role of
   the World Bank. There has been considerable debate over the political effects of the main
   economic paradigms of the 1980s-1990s spearheaded by the World Bank and the IMF: structural
   adjustment, and the transition of former socialist/dirigiste economies to market-based
   systems. The specifics of these paradigms have included policies such as privatization of
   public sector enterprises; shifting from administered to market-based determination of prices;
   harmonization and reduction of tariffs; dismantling of non-tariff trade barriers; government
   budget deficit reductions entailing such measures as tax reforms, enhanced tax collection,
   reduction of consumer subsidies, and elimination of subsidies to loss-making state
   enterprises.  Much attention (and protest, at economic summits and Bank/Fund annual meetings)
   has been devoted to the "vertical" effects of these paradigms, their alleged harmful effects
   on the poor. There has been much less attention to, or analysis of, the horizontal or
   inter-group effects of implementing these paradigms. In the short run, at least, each of the
   individual policies, and the policy packages as a whole, may have significant differential
   effects on the economic activities of different groups (e.g. producers of different crops or
   manufactured products) or different ethno-geographic regions.

   

   If these policies are examined through a conflict lens, policy makers may see a need to adjust
   their composition and timing, or to provide off-sets and transitional cushions. Policies like
   privatization have been especially open to non-transparent implementation, allowing
   politically favored groups to acquire a lion's share of the enterprises and a dominant
   position in an emerging private sector. If a favored group is also an ethnically distinct and
   advantaged group (as was the case for privatization in Mozambique in the 1990s), privatization
   may be a source of socio-political grievance and division, quite apart from its merits as an
   economic reform measure. The selection of commodities for trade liberalization may (even
   inadvertently) put the burden of income loss and adjustment onto individual ethno-geographic
   groups that have traditionally concentrated on the production of the chosen commodities.  One
   analyst has shown how the package of economic policy reforms introduced in Sri Lanka in the
   late 1970s, with IMF and donor support, exacerbated Sinhalese-Tamil hostilities in a complex
   interplay of effects, perceptions, ands government responses.^[v]

   

   We need not elaborate further, policy by policy. The point is simple and obvious, even if it
   remains far from being systematically applied.  The international development institutions and
   their supporting donors should apply a conflict-prevention perspective when analyzing and
   recommending policy reform packages, especially to countries that are at risk to violent
   internal conflict.

   

   Development Projects         

   

   When a conflict-prevention lens is applied to project selection, content, or location, options
   may be perceived that might not appear at all, if project planning has to take account of the
   standard considerations only of technical and economic efficiency, and environmental and
   gender impact. A few examples of how some projects have been conflict-relevant will
   demonstrate the point and provide concrete illustrations of prevention, missed opportunities,
   and exacerbation. This will be followed by a brief listing of some typical development project
   areas and how such relevance might be taken into account.

   

   Regional Aid Location. The northeastern third of Thailand was long seen by its inhabitants as
   culturally distinct from the dominant central plain and Bangkok Thai. Their shared Buddhism,
   loyalty to the monarchy, and language, were historic ties that appeared to hold the country
   together as a viable and relatively homogeneous nation. Nevertheless, differences of dialect,
   customs, and government attention and investment,  underlay northeastern resentment and
   occasional expressions of disaffection. Beginning in the 1950s, the Communist Party of
   Thailand (CPT) tried to build an insurgent base in the region by exploiting these differences
   and dissatisfactions, and by carrying out violent actions against the government's officials
   and presence. As in many developing countries that have experienced violent conflicts, it was
   the concentration of the disaffected in a defined ethno-geographic region that provided the
   potentiality for political mobilization and manipulation.

   

   The donors (the World Bank and USAID were the two largest at the time) responded with a
   location strategy of siting many of their projects in the Northeast. The US objective was made
   explicit in the annual budget requests documentation for the Congress. The rationale for aid
   to Thailand was conflict prevention: the "hearts and minds" of the rural Thai had to be made
   impervious to the CPT appeal. The disaffection in the Northeast had to be countered with
   programs demonstrating that the region was being included, even favored, in the country's
   development process. Inclusion required the government and donors to let distribution trump
   efficiency. The Northeast's location was relatively remote and its soil and water resources
   poor. It was recognized that investments in agriculture (industry was almost totally
   infeasible, mineral resources insignificant) would yield much lower returns than elsewhere in
   the country. Nevertheless, the donors financed economically marginal irrigation projects and
   made extensive investments in the region's transport and other infrastructure, and in the
   expansion of the public health and education systems.

   

   One small public administration project is of particular interest for our perspective.
   Generations of civil servants and local government administrators had long viewed the
   Northeast as the least desirable place to live and work. The region and its inhabitants were
   considered backward, schools were poor, and electricity was available for a few hours a day at
   best in the provincial seats. A posting to the Northeast did not enhance one's career in the
   civil service. The ministries in Bangkok were known to send their weakest personnel to the
   region. One of the key government policy changes in the face of the CPT threat was to reverse
   these practices. As Bangkok began posting some its most capable administrators to Northeast
   provinces, an in-service training institute was set up at USAID's suggestion, and with USAID
   financial and technical assistance, to raise the skill levels of  Northeast officials and to
   imbue them with new, positive, attitudes regarding their relations with ordinary citizens.
   Service and responsiveness was to replace arrogance and indifference. Although a modest effort
   in relation to the totality of aid to Thailand, and to the Northeast, the institute helped
   correct one of the critical sources of popular discontent in the region.

   

   The full and complex story of Thailand's success in recapturing the loyalty of areas that had
   responded sympathetically to the CPT insurgency cannot be recounted here. While the aid-funded
   development and governance projects were not the only significant factors, they played an
   important role, even catalytic in some respects, in defanging the insurgency and denying it
   the popular support that would have been essential for its growth into a wider conflict
   threatening the stability of the state. Again, one can only speculate on the "what-if." But
   given the wars and insurgencies raging in Southeast Asia at the time, a credible case can be
   made that a much deeper challenge to the integrity of the Thai state would have eventuated if
   the prevention measures we have described had not been undertaken.

   Location figures importantly in many kinds of projects and policy problems that donors may be
   involved in, especially in agriculture. Some examples: inter-communal land seizure; irrigation
   system design; internal migration programs; development of property rights systems; rural
   credit access; agricultural commodity promotion, protection, or liberalization; rural road
   construction; provision of agriculture extension services; location of agricultural
   universities; environmental destruction and protection; downstream effects of upstream
   development; highway construction through previously remote regions inhabited by politically
   powerless, indigenous minorities. In all these problems and activities, the potential
   differential impact on winners and losers needs to be taken into account by any concerned
   donor.

   

   Inclusion. Development projects can be designed and implemented in ways that bring potentially
   conflicting groups together in win-win relationships. The Gal Oya irrigation project in Sri
   Lanka is a well-known example. In 1980 the Sri Lankan government asked USAID to help
   rehabilitate the deteriorating Gal Oya system. In addition to the need for refurbishing the
   infrastructure, the project required agronomic and water distribution improvements to realize
   its production potential. The USAID project funded a technical assistance team from Cornell
   University to address the agronomic and water problems.

   

   The essence of the water problem was maldistribution. Farmers at the upper ends of the canals
   were drawing out most of the water, leaving insufficient water for the farmers at the lower
   ends of the channels. The technical assistance team convinced the upper farmers that they were
   actually using too much water for optimal cultivation. By reducing their off-take, the upper
   farmers left sufficient water flowing through the lower reaches of the canals to meet the
   needs of the lower farmers. With the aid of the Sri Lankan facilitators who were members of
   the technical assistance group, the upper and lower farmers on each canal were brought
   together in water "user groups" that took responsibility for managing their own canal usage.

   

   The upshot was increased production all along the canals and the abatement of the hostility
   the lower farmers  had previously held for their upper neighbors. The social engineering that
   had been designed to overcome the core technical/economic weakness of the project had the
   secondary consequence of promoting good relationships between antagonistic groups. What makes
   Gal Oya a significant example of conflict prevention is the fact that the upper farmers were
   Sinhalese, the lower farmers Tamil. Subsequent efforts of the Tamil insurgent organization,
   the Tamil Tigers, to persuade the Tamil farmers to withdraw from the water user groups and end
   their cooperation with the Sinhalese farmers have failed. The project had created a common,
   inclusive interest on the part of the Tamil farmers, rendering them impervious to the calls
   for them to join in the country's larger, long-running ethnic conflict. In years when the
   water supply has been low due to inadequate rainfall over the Gal Oya watershed, the upper
   farmers have even voluntarily lowered their own off-take in order to share the available water
   equitably with the lower farmers.

   

   The Gal Oya presents a striking contrast with another irrigation project in Sri Lanka which
   was marked by deliberate exclusion of Tamils. The Mahaweli irrigation project is massive
   compared with Gal Oya, the largest single infrastructure project ever undertaken in the
   country's history.  During the long years of design and preparation, the government had touted
   Mahaweli in triumphalist ethnic terms, had planned on settling only landless Sinhalese farmers
   on the new lands the project would be watering, and had even cancelled out (purportedly on
   technical grounds) a canal that would have brought water to a region farmed by Tamils. The
   Tamils saw Mahaweli as a major confirmation that the Sinhalese majority was bent on a national
   policy of exclusion and hegemony.

   

   Construction of Mahaweli depended upon donor finance. The donors recognized that Tamil
   exclusion would have a major impact on the country's heated ethnic politics. At one point
   three of the principal donors - the World Bank, Canada, and the US - met with the Mahaweli
   authority and recommended that Mahaweli should draw lessons from Gal Oya on inclusion. The
   authority rejected the recommendation. Rather than applying more severe pressure, or
   threatening to withdraw their financing, without which Mahaweli would likely have collapsed,
   the donors proceeded to support the project anyway. Much later, a World Bank evaluation
   concluded that the decision to proceed represented a missed opportunity for promoting conflict
   avoidance:

   

   If the Bank, along with other donors, had forcefully raised concerns about regional and ethnic
   balance and had convinced [the government] to appropriately modify the "Accelerated Mahaweli
   Development Program," it is by no means certain that this alone would have prevented the
   full-scale conflict that erupted in 1983. However, this is not to say that such concerns
   should not have been raised and been made part of conditionality. ^[vi]

   

   The suggestion here that ethnic inclusion, in the context of deep inter-ethnic division, 
   should have been made a condition for donor support of a country's centerpiece development
   project, is important. As in the East-West Pakistan case, the possibility that the tensions
   might have been mitigated, perhaps rendered more amenable to negotiation and nonviolent
   resolution, remains an untestable hypothesis. But the hypothesis is credible. A reshaped
   Mahaweli would have served as a high-profile example of co-operant, common-interest, ethnic
   relations, and a national symbol of minority inclusion. As such, the project could have
   increased the numbers of moderates on both sides and reduced the polarizing leverage of the
   extremists.

   

   In these particular irrigation projects the ethnic groups were geographically concentrated but
   lived in contiguous areas that provided opportunities for their being embraced by the same
   projects. In regions where different groups are located without such contiguous, embracing
   opportunities, it may be possible to promote a sense of fairness through the financing in
   parallel of projects that are technically divisible, i.e. where separate and equivalent
   facilities can be located in each group's area in place of one large facility. Esman cites a
   World Bank project in Lebanon that put a waste disposal plant in each "confessional"
   community's territory instead of installing one large facility in one community's territory.
   He also cites an example in manufacturing in which an NGO-assisted project in Tadjikistan was
   designed "to avert economic competition and create economic interdependence among two hostile
   ethnic communities. One was given wool-producing machinery, the other carpet-making equipment.
   Economic interdependence fostered incentives for their joint economic success." ^[vii]

   

   Aid projects in many sectors may create opportunities for inclusion, reducing inequalities, or
   weighing in against deliberate discrimination. To identify such opportunities, donors need
   systematically to examine potential conflict-relevance when planning program coverage and
   individual project design. Unequal access to education, especially at the higher levels, has
   been a source of deep discontent within groups less economically advanced in a number of
   conflict histories in Asia and Africa. If the inequality has arisen from historic imbalance in
   the location of educational facilities, donor educational aid can help right the imbalance by
   favoring the areas where the disadvantaged group(s) is concentrated. If the inequality has
   arisen from access discrimination, donors may make the elimination of discrimination an
   absolute policy condition, regardless of the particular level, disciplines, or physical
   aspects of the education system the aid is intended to strengthen. Aid resources should not be
   put into an education system if tertiary access is limited by discriminatory language
   requirements.

   

   Donor projects to strengthen public administration may open up opportunities to address
   inequalities or discrimination or may inadvertently involve a donor in discriminatory
   practices.  Civil servant training opportunities provided by projects designed to strengthen
   particular ministries or public sector functions, especially advanced overseas training that
   bestows professional credentials on the trainees, can be important in situations where an
   aggrieved group is generally disadvantaged because of educational deprivation. The donor
   should require trainee selection and subsequent placement to take account of such imbalances. 
   In projects of wider scope, for example aiming to help civil service reform, it should be
   incumbent on the donor to examine system-wide hiring and promotion practices.

   

   Projects helping to strengthen specific technical functions of government, e.g. agricultural
   research or primary health care, should take account of the location pattern of field service
   facilities; are there underserved groups or areas, and if so, should that be corrected? If it
   has been a matter of discriminatory policy, the donor should insist on an appropriate policy
   change or withdraw from the activity.

   

   Assistance for development policy analysis and research, which may be located in a government
   planning bureau, central statistical office, or university or independent policy institution,
   should not overlook horizontal inequalities or roots of inter-group hostilities. For example,
   in many countries there are deep-seated prejudices stemming from popular belief that domestic
   commodity marketing systems are controlled by conspiring and exploiting ethnic minorities.
   Empirical research may demonstrate (as was the case in Thailand) that the markets are very
   competitive and that profit margins in fact are thin. Or if monopsony conditions are shown to
   be the reality, steps can be developed to foster competition.

   

   Poverty assessment, pioneered by the World Bank,  has become a standard tool of development
   planning. However, the traditional core statistical bases of poverty assessment - household
   consumption levels and household income distribution - are measured by income class (income
   brackets) across an entire country population. The income data, along with social measures
   like educational attainment, is seldom recorded by ascriptive group. It provides vertical but
   not horizontal analysis. The methodology for household surveys and economic and social
   comparison needs to be adjusted to allow for inter-group status comparisons over time.

   

   Donors need to be aware of the possibility that projects justifiable on vertical, or absolute
   poverty grounds, may create horizontal problems by altering group economic rights. Recent
   conflicts in some parts of Indonesia (e.g .the Moluccas) have arisen from perceptions on the
   part of "indigenous" inhabitants that their traditional land rights (and local culture and
   political position) were being threatened by the rising numbers of migrants of different
   ethnicity and/or religion from other Indonesian islands. This inter-island migration had been
   supported and financed by the World Bank in earlier years. Farmers from densely populated
   islands had been induced to move to other lightly settled islands. At the time, the migration
   program was seen as economically justifiable, a contribution to the reduction of both absolute
   poverty and the (vertical) maldistribution of income. With benefit of hindsight, the
   subsequent violent conflict might have been avoided if attention had been paid to the
   potentialities for inter-group conflict in areas previously monocultural.

   

   Finally, the mundane details of aid project implementation may affect inter-group dynamics and
   how the donor is perceived as a player in a conflictive environment. We referred above to the
   importance of "fair"selection of persons who will benefit from training under aid project
   auspices. The award of construction and procurement contracts can also be administered in a
   manner that avoids their virtual capture by firms of an already dominant ethnic or class group
   in a divided society. Details are important - like ensuring that news about impending aid
   procurement is made public through local media that employ minority languages. If a donor
   fails to make credible efforts to distribute project participant along these lines, it may be
   seen as a party to an established public sector hegemony.

   

   Financial Support and the Overall Aid Relationship

   

   Aid in the form of financial transfers - financing for the government budget; general import
   financing; debt reduction or refinancing; "sector" loans for general support of agricultural,
   industrial, or other sector development - has traditionally provided, and signaled, broad
   donor support for, and concurrence in, a government's policies and programs. While the
   different instruments for these transfers have commonly provided the basis for dialogue on
   policies most relevant to the sector, imports, or other subjects of the specific support being
   financed, the general character of straight monetary support entails policy concurrence that
   goes to the heart of the aid relationship, well beyond the policy particulars on which we
   focused at the outset of this chapter.    

   

   The point was vividly illustrated by the donor experience in Rwanda. Over the course of the
   two decades preceding the genocide in 1994, international aid to Rwanda rose to the
   extraordinary level (in 1993) of about $50 per capita or almost 25% of GNP. The comparable
   averages for sub-Sahara Africa were about $36 and 11.5%. Despite the country's history of
   Tutsi-Hutu animosity and violence, and the unabashed Hutu agenda of reversing the colonial-era
   Tutsi hegemony, the donors acted as if the development process and their aid were ethnically
   neutral, playing out in a separate developmental sphere. As documented in a World Bank
   evaluation in 1998, after the conflict, the Bank and other donors "ignored the signs of
   growing ethnic tensions and unraveling of the political framework in the 1980s."

   

   The most explicit critic in this respect is Peter Uvin [who] finds frequent references [in
   Bank documents] to Rwanda's putative "prudent, sound management, concern for its rural
   population," and even "the social cohesion of its people" and "the ethnic and socioeconomic
   homogeneity of the country." But he finds no references to such issues as "state-sponsored
   racism; authoritarian government....and social, ethnic and regional inequality." ^[viii]

   

   According to Uvin, no donor agency denounced the official racism and racial identification
   policies, "not even in the 1990s, when it was clear they were being used to prepare for mass
   killings."^[ix]

   

   At the project level, the Bank continued its financial support (in at least one cited
   agricultural case) for activity in which there was blatant discrimination in favor of Hutus.
   The larger point, however, is that the donors persisted for years in channeling large-scale
   resources to, and through, a government that was carrying out a national strategy of ethnic
   hegemony. Much of the aid was in the form of sheer finance, the most fungible form of
   development assistance. By providing that kind of aid, especially of such a magnitude in
   relation to the economy as a whole, the donor becomes an accomplice in a regime's central
   ambitions.

   

   As the leading development policy institution the World Bank bears exceptional responsibility
   for the orientation of donors to issues of development strategy and of distribution. In the
   judgment of one development economist, Frances Stewart, "IMF and World Bank policy
   conditionality is `blind' to these issues, i.e. they take no account of horizontal equity in
   their policy prescriptions." For the Bank and Fund to do so "would require a quite marked
   change in their programmes for conflict-prone countries." ^[x] As we have seen, operational
   departments of the Bank may or may not try to address issues of horizontal equity; in practice
   the Bank is not monolithic. Nevertheless, Stewart's judgment is basically right. The Bank as
   an institution has long viewed horizontal equity as an issue that is essentially political and
   thereby outside its mandate as defined by its charter. Over the years, the legal guardians of
   the Bank's charter have had to give ground as more and more subjects (e.g. corruption in
   government) have been seen as development factors legitimate for Bank attention. Even on
   narrow grounds of fiduciary responsibility for helping to prevent the destruction of assets it
   has financed, and for which client countries have incurred debt, the Bank should confront
   horizontal inequity. Although the Bank's president has cited conflict prevention as an
   important objective for the institution, systematic infusion of conflict prevention into Bank
   programs will require, as Stewart points out, a marked change.

   

   In retrospect we can never know, of course, if an early and decisive donor stand against
   hegemonic policies, as in Rwanda, could have prevented genocide. Could a Malaysian approach
   have worked in Rwanda, bringing the ethnic leaders to the table to devise a transparent
   development strategy with horizontal inequities and grievances at the core?  Could the
   hegemonic policies, and the attitudes behind them, have been modified if the Bank and other
   donors had abandoned ethnic neutrality and conditioned their continued support on fundamental
   distributional reform? Unfortunately, such an approach was not tried during all the years when
   development aid was a relatively huge factor in Rwandan economic viability. Are similar
   opportunities elsewhere  being overlooked?

   

   

   

   -------------------------------

   [i].See for example The International Response to Conflict and Genocide: Lessons from the
   Rwanda Experience, 1996. Copenhagen: The Steering Committee of the Joint Evaluation of
   Emergency Assistance to Rwanda. Also, The DAC Guidelines: Helping Prevent Violent Conflict,
   2001. Paris:OECD.

   [ii].The chapter draws on Muscat, Investing In Peace.

   [iii].For a review of democracy-promotion aid efforts, see Thomas Carothers, Aiding Democracy
   Abroad: The Learning Curve," 1999, Washington, DC: Carnegie Endowment for International Peace.

   [iv].See Mason, Edward S., and Robert E. Asher, 1973, The World Bank Since Bretton Woods.
   Washington, DC: Brookings Institution. Pp. 666-675.

   [v].Herring, Ronald J., "Making Ethnic Conflict: The Civil War in Sri Lanka," in Milton J.
   Esman and Ronald J. Herring, eds., Carrots, Sticks, and Ethnic Conflict: Rethinking
   Development Assistance, 2001, Ann Arbor: Univ. Of Michigan, pp. 140-174.

   [vi].World Bank, 1998, The World Bank's Experience with Post-conflict Reconstruction, Vol. 5,
   p.145. Italics added.

   [vii].Esman, "Policy Dimensions: What Can Development Assistance Do?" in Esman and Herring,
   op. Cit. p.247.

   [viii].World Bank, op.cit., p.111.

   [ix].Uvin, Peter, 1998, Aiding Violence: The Development Enterprise in Rwanda. West Hartford,
   CT: Kumarian. P.44.

   [x].Stewart, Frances. 2000, "Crisis Prevention: Tackling Horizontal Inequalities," Oxford
   Development Studies, Vol. 28, No.3.