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Economic Impact of Peacekeeping

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.

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Economic Impact of Peacekeeping

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  1. Economic Impact of Peacekeeping Michael Carnahan

  2. Sponsors

  3. 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

  4. Purpose of Project • Fill this gap in understanding • Provide information – to inform choices • Identify win-win recommendations • Allow informed trade-offs to be made

  5. 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

  6. 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

  7. 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

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

  9. Figure 2.1: Inflation Rates During United Nations Mission Tenure

  10. Fiscal Impact • Assessed budget • Less external spending • Less funds not spent • Less spending leaked into imports • Equals local spending • Multiplier effect

  11. 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

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

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

  14. Figure 2.3: Estimated Local Impact as a Share of GDP

  15. Figure 2.4: Breakdown of Local Impact

  16. 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

  17. 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

  18. 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?

  19. 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

  20. 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

  21. 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

  22. Unintended Impacts • Revenue collection • Expectations for working environment and living standards • Broader economic impact of policy decisions • Planning horizons • Distributional impact

  23. Recommendations • Mandate and structure (GA/SC) • Labour market (ICSC/GA) • Outsourcing (5th Committee/GA) • Administrative changes (Secretariat) • Donor programs (donors) • Implementation (Secretariat)

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