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Doing Business in Post-Conflict Zones: Why SMEs Are Key

Authors: Gayle Tzemach Lemmon, Senior Fellow for Women and Foreign Policy, and Ashley Harden
May 28, 2012
Next Billion


Business must be part of putting lives together after war. And economies.

Reviving institutions and rebuilding economic ecosystems are among the first priorities after fighting ends and reconstruction begins. According to the U.S. Agency for International Development, negative economic shocks of just 5 percent can increase the risk of a civil war by as much as 50 percent in fragile states. Specifically, research from Iraq has found that labor-generating reconstruction programs can reduce violence during insurgencies, with a 10 percent increase in labor-related spending associated with a 10 percent decrease in violence.

Given all the benefits of private sector investment in postconflict zones, entrepreneurship is emerging as part of the next generation of solutions for many development issues. However, too often investments—particularly from aid organizations—create dependency and are unable to sustain long-term economic growth. Building local business capacity and supporting homegrown entrepreneurs can help curb this risk.

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