Disaster capitalism, neo-liberal peace and a return to war

Peace in Sri Lanka is increasingly an international legal fiction – an assumption contrary to ground realities. The ebb of peace in the palm-fringed, tourist-friendly island is indexed in the return of 'dirty war', a rising body count, trickle of refugees to South India, as well as suicide bombings and barricades in Colombo. For the first time, there have been coordinated attacks on international aid agencies. As the head of the Scandinavian peace Monitoring Mission noted recently, there is an ongoing low-scale, low-intensity war.

Even though neither the Liberation Tigers of Tamil Eelam (LTTE), nor the government has formally withdrawn from the Ceasefire Agreement (CFA), the new war continues the spiral of the (para-) militarisation of civil society, with a 'war economy' sustained by terror, taxation and international post-conflict and post-Tsunami reconstruction assistance. These trends point to the possibility that the current conflict may also achieve a self-sustaining momentum beyond ethnic minority grievances as it has done in the past.

In this context, it is important to analyse the role of the international community, which, though a set of apparently external observers, has become intrinsically embedded and intertwined in Sri Lanka's conflict and peace process over the past decade. Given the massive international aid industry and bureaucracy in the country, the return of war despite the best efforts of Norway raises fundamental questions about their relevance and impact on conflict transformation.

A recent study of peace processes has noted that, of 38 internationally mediated peace efforts in the decade between 1989-1999, 31 had returned to conflict within the first few years. International assistance in low-intensity armed conflicts and peace processes may either ameliorate or become part of a renewed conflict cycle. As such, the attempt here is to develop a structural analysis of the three principal actors in Sri Lanka – the government of Sri Lanka, the LTTE and the international community – and their relationship, based on study of the political economy of the international aid industry and bureaucracy.

The war, peace and reconstruction industry

Not too far back, in 2003, Sri Lanka was projected in international reconstruction and development conference circles and media as a test case of 'liberal peace building and reconstruction'. After the Norwegian-brokered Ceasefire Agreement in 2002, three separate international pledging conferences for Sri Lanka were held in Oslo, Washington and Tokyo. The conferences ended with the promise of USD 4.5 billion for post-conflict reconstruction. Four co-chairs were appointed to Sri Lanka's peace process – Norway, Japan, the EU and US. The World Bank, having positioned itself to lead the expanding international reconstruction industry and bureaucracy in the island, was appointed custodian of the North East Reconstruction Fund (NERF).

Given donor emphasis on the privatisation of development assistance, international consultants, private companies and I/NGOs competed for lucrative reconstruction contracts in Sri Lanka in the peace interregnum – from de-mining, to road building, to peace education and advertising. More recently, the December 2004 Asia Tsunami disaster drew a large number of volunteers and technical experts, unfamiliar with local languages, institutional structure and culture. Despite this, reconstruction has been painfully slow, primarily due to the fact that the international aid industry has snatched away local and regional ownership of the recovery operation. This is in stark contrast to India and Thailand, which refused most forms of international assistance after the Tsunami, but are far ahead in the task of reconstruction.

Over the past half-century of war and natural disaster, Sri Lanka's politicians and policymakers have developed a culture of 'aid dependency', even though ground-level facts point to the necessity of a different approach – the country is no longer a least-developed county, has an almost 90 percent literacy rate, a number of under and unemployed graduates, and it exports technical skills overseas. There are several questions that need to be asked about the reconstruction effort: why is national expertise marginalised in reconstruction? Do aid pledges materialise? And how much of the assistance actually reaches the country or the communities affected by war, natural disaster and poverty?

There have been few systematic reviews of donor assistance and its impact. There is the Strategic Conflict Assessment for Sri Lanka – commissioned and launched by the World Bank, the Department for International Development of the UK (DFID), the Asia Foundation and other donors – that was recently released. That report did not meet the need for a transparent analysis of the assistance coming into Sri Lanka. Arguably much of the aid pledged and disbursed for peace and reconstruction in the country is 'phantom aid', defined by the relief organisation ActionAid as "aid that never materialises to poor countries, but is instead diverted for other purposes within the aid system" (see box).

In May 2006, the donor co-chairs estimated that of the USD 4.5 billion pledged to Sri Lanka, USD 3.4 billion "had been provided based on Tokyo pledges and Tsunami funds, and more than 20 percent of that allocated to the north and east, including LTTE-controlled areas". No disclosure is made of how much of this aid was in the form of loans. Phantom aid in disaster situations, where the usual development project safeguards are waived due to an emergency situation, may be as high as 80-85 percent of donor assistance. In this context, the fact that Sri Lanka's aid absorption rate remains at around 17-20 percent while donors continue to pledge ever-larger sums for development assistance is not mysterious.

The international peace and development bureaucracy in the past decade in Sri Lanka has clearly gained its own self-sustaining momentum. This has happened at a time when aid may become increasingly irrelevant in a world where 'trade not aid' is seen as the way forward, particularly for countries that are no longer in the least-developed category. The development bureaucracy requires and absorbs most of the aid targeted for development, conflict resolution and poverty reduction.

Moreover, international humanitarian aid has become, as one academic termed it, "a means without end". It tends to lack an exit strategy until the money runs out, is often mistargeted, distorts the local economy, and aggravates inequality, poverty and the underlying structures of a conflict. In the long run, it develops aid dependency and aggravates conflict. The conflicting parties often blame each other for aid that never materialised. International aid may increasingly morph into the war dynamic in the conflict zones of the global South, even as it expands through processes of bureaucratisation.

At the same time, it is important to note that that the Norwegian mediators, who have often been held responsible for peace and reconstruction policy failures that originate in the World Bank- and UN-centric international development bureaucracy, are but a miniscule part of the international peace and reconstruction aid industry. Moreover, the Norwegian government that came to power in 2005 decided not to partner with the Bank in cases where structural adjustment was required as part of a peace and reconstruction package.

A bureaucratic peace

Sri Lanka's peace process has been termed a 'no war, no peace' process. Arguably, the formalistic and 'legal-bureaucratic' approach of international peace building and reconstruction largely accounts for this phenomenon. Consider, for instance, the resources, energy and experts spent on legal drafts and re-drafts of an Interim Governing Authority for the North and East (ISGA), the World Bank's North East Reconstruction Fund (NERF), Post Tsunami Operational Mechanism (P-TOMS), three international donor pledging conferences, Multilateral Needs Assessments, and the hundreds of MoUs for large infrastructure reconstruction projects in the past four years for Sri Lanka. The internationalisation and bureaucratisation of the peace process resulted in too much time spent on international development agendas, conferences and timeframes that were often at odds with the needs and priorities of those affected by the conflict.

This approach effectively eschews seeing track-one peace building as a social process. It has stemmed from, among other things, the large number of international players and the peace and reconstruction bureaucracy in the island, and the attendant coordination burden. Of course, all three actors in the conflict and peace dynamics in Sri Lanka – the LTTE (seduced by the legal fiction of 'equality or parity of the parties'), the Colombo government and the international community bent on implementing a 'neo-liberal' peace – have contributed to the legal bureaucratic approach of peace building.

Arguably, the time spent on legalese would have been better spent in the creative implementation of actually existing possibilities for power and resource sharing, enshrined in the Constitution under the 13th Amendment, and proper targeting of aid to improving the livelihoods of communities from whom fighters are recruited. There has also been a tendency to overburden an already over-determined peace process by linking everything, including natural disasters like the Tsunami (aid), to power sharing. There appears to be a need to de-link these issues and have a more balanced approach to peace and development.

The peace building approach of dialogue in various international capitals, rather than analysis of substantive issues and implementation at the ground level, seems to derive from Euro-American analytical frameworks that privilege state-centric theories of conflict resolution, developed out of Cold War inter-state conflict mediation experience. However, intrastate conflicts where resource and ethno-religious identity conflicts tend to be intertwined and are often the outcome of post-colonial state building, and require different approaches from peace builders. They require engagement with social realties within the country, and attention to internal complexities at the local and sub-national levels. Where the challenge of reconciliation is within countries, and between asymmetric parties (eg, state actors and non-state actors), peace building necessitates a less legal-bureaucratic approach.

The emphasis on legal mechanisms and processes has also obscured another picture closer to the ground – the reality of the emergence and existence of a dirty war in northeast Sri Lanka. The morphing of the peace process into war is evident when we move away from formalistic frames and focus on non-verbal speech acts – in other words, when we 'read between the said, the meant and the done'.

In this context, adding another layer of international bureaucracy in the form of Bill Clinton or some other UN Envoy to Sri Lanka will only deflect from the focus on substantive issues. Rather, a new peace process led perhaps by the Norwegians would need to thin the international aid bureaucracy and agencies, and focus on substantive issues, including improving poverty reduction among conflict and Tsunami-affected communities. In short, an exit strategy, rather than extended time frames, for aid is necessary for much of the international aid industry in Sri Lanka. This would enable a more locally owned and hence sustainable peace process.

The economics of peace

Though fisheries are arguably Sri Lanka's greatest natural resource, given the unpolluted ocean and rich breeding grounds that surround the country, international development assistance over the decades has not focused on the need to target and up-scale the fisheries sector for poverty alleviation and conflict de-escalation in the north or south. Throughout the peace process, the north and east coastal fisheries communities continued a subsistence economy. Sri Lanka's two main donors, Japan and Norway, both have highly industrialised fisheries sectors.

The most influential number of combatants in the LTTE hail from impoverished coastal fisheries and rural agricultural communities in the northeast. In fact, the LTTE sank a Chinese fishing trawler perceived to be poaching on local fishing grounds in 2003. To transform the conflict, it is crucial to develop the fisheries sector and industry to enable viable livelihoods for poor communities from which fighters are recruited. The impoverished fishing communities of the north and east and the socially marginalised caste groups on the coast have been the most radicalised in the years of conflict, and provide the foot soldiers. The Tamil elites and Vellala or high castes have tended to eschew the LTTE's brand of nationalism, and the LTTE in turn has fought to overthrow the caste hierarchy in Tamil society.

However, the post-conflict and post-Tsunami aid industry experts have systematically overlooked the importance of enabling sustainable livelihoods for such impoverished communities. The Multilateral Needs Assessment for Tokyo and the Tsunami Needs Assessment study, conducted by the World Bank in collaboration with the Asian Development Bank and Japan's official aid agency, pegged the loss borne by the tourism industry at USD 300 million, versus only USD 90 million for the fishing industry, even though fisheries communities were far more affected. The researcher and human rights scholar Vasuki Nesiah points out that the ideological assumptions embedded in an assessment methodology that rates a hotel bed bringing in USD 200 a night as a greater loss than a fisherman bringing in USD 50 a month have far-reaching consequences.

With reconstruction measures predicated on this kind of accounting, we are on a trajectory that empowers the tourism industry to be an even more dominant player than it was in the past, and, concomitantly, one that dis-empowers and further marginalises the coastal poor. Many have noted the bias towards big business and tourism in the needs assessments of the multilateral agencies and the government, where the up-scaling of fisheries infrastructure is ignored.

The donor-people disconnect

For the first time since the conflict erupted 25 years ago, coordinated grenade attacks were carried out on three international aid agencies in Sri Lanka recently. These attacks were in the wake of widespread rumours of sexual exploitation and harassment of local women by foreign staff of INGOs in the Tsunami- and conflict-affected areas. Local women were instructed not to work with international agencies, which, it was claimed, were violating Tamil and Muslim 'culture'. There is a sense among common people that the aid industry has not delivered, but rather consumed and lived off the funds.

At the root of the critique of the aid industry is the fact and perception of gross inequality between those who came to help and the receivers of assistance, as well as the erosion of basic humanitarian ethics and values evident in the operational style of INGOs. What people see are extravagant lifestyles, lack of transparency and increased aid dependency, with a concomitant failure of donors to deliver on projects. The fact remains that the majority of large international aid agencies have not performed, and even at times blocked, local philanthropists and the business community, which did much of the work in the immediate aftermath of the Tsunami and have a far better 'delivery rate'. Exit strategies and deadlines for the large agencies also seem to have become anachronistic.

The attacks on aid agencies must be contextualised in the broader setting. Militants who lack access to information, technical critique and evaluations respond to real and perceived corruption in the aid industry with violence. Such attacks are a matter of great concern to those who believe that competent international assistance is necessary for conflict de-escalation and reconstruction. Critics however fail to acknowledge and address the general disenchantment with international aid and INGOs that has become widespread in the country since the Tsunami.

The International Federation of the Red Cross (IFRC) in Sri Lanka represents a case study of the manner in which these agencies generate high expectations but fail to deliver due to a host of reasons. Having raised almost USD 2 billion for post-Tsunami reconstruction, 183 expatriate 'volunteers' came to Sri Lanka, each worth over USD 120,000 but with little technical expertise, knowledge of society, politics or culture, local languages or institutional structures. Having pledged to reconstruct 15,000 houses, it had built a mere 64 one year after the Tsunami. The IFRC and the Sri Lanka Red Cross Society together make up the largest pledged housing donor, and have set the bar very low. The blame for this is placed on the government's buffer zone policy or alternatively on the condition of the land.

The latest government estimates are that 21 percent of the required housing after the Tsunami is complete. That means that several hundred thousand Sri Lankans are still without permanent homes, by government estimates. Some 33,000 families, or at least 150,000 people, remain in transitional shelters. Others are living temporarily with relatives or friends.

The Red Cross was given 67 plots of land, out of which about a third had problems. But several questions arise: why did it not build homes on the remaining land? Should a relief agency such as the Red Cross have taken up long-term housing construction given the absence of expertise and experience, simply because it had managed to raise the funds? The Reconstruction and Development Agency in Sri Lanka, unlike the government of Tamil Nadu in India, has failed to evaluate the INGOs and ask under-performing INGOs to leave the country, so that others may help.

It is increasingly apparent that privatisation of post-disaster reconstruction, given information asymmetries and endemic market imperfections in the sector, is a mistake. As long as such a large, incompetent and costly international bureaucracy remains in the island, substantive and sustainable peace building and development will be elusive. There is by now extensive literature on how international peace building, humanitarian and reconstruction assistance may contribute to sustain low-intensity wars in Africa, Asia and other parts of the global South, because such aid constitutes a large and complex industry and bureaucracy in itself and for itself. There is a clear need for reform of the international aid architecture and practices in the context of what writer Naomi Klein has termed 'disaster capitalism', to enable accountability to beneficiaries and affected communities.

Neo-liberal aid

Even as the government and the LTTE are the principal actors in the conflict, it would be naïve to downplay the role of the international community in the peace process in Sri Lanka. The extent of international investment in Sri Lanka's 'peace and reconstruction' has made official acknowledgement of the return to war difficult. But the peace process, in the best of times, enabled merely a repressive tolerance. This was by no means only due to the inability of the two main armed actors to engage on difficult issues – principally the need to democratise the LTTE and Colombo government, and to professionalise and humanise the military. The international peace builders colluded with the main actors in deferring the core social, political and economic issues that structure the dynamics of the conflict, in order to promote a neo-liberal economic reconstruction agenda that is integral to the (phantom) aid industry.

With the wisdom of hindsight, this approach undermined the Norwegian-brokered CFA. The promise of USD 4.5 billion for reconstruction came with a policy requirement of structural adjustments (SAPs), and liberalisation favoured by the World Bank. Very little of this reached the communities affected by the disasters, and from which the majority of combatants are recruited. A recent Sri Lanka Monitoring Mission Report notes on the subject of child recruitment: "some underage children freely volunteer to leave their families due to economic reasons to join the LTTE." Mis-targeted aid translated into an economic bubble, a dramatic rise in the cost of living, increased inequality and poverty in the communities from which soldiers are recruited, and further erosion of the welfare state. In a very short time, the government that signed the peace agreement with the LTTE was voted out of power – and the rest is history. The tide in the affairs of men that may have led to fortune, even to peace in Sri Lanka, had turned.

Since Sri Lanka is not considered a least-developed country, the county's donor dependence is directly related to the armed conflict and the need for external mediation. International development agencies have recently recognised the profitability of working with rather than around social conflict in the post-9/11 world, increasingly focusing on projects "for democratisation, governance and conflict resolution", as the Strategic Conflict Assessment notes. Sri Lanka's strategic location and the over-capitalisation of its post-Tsunami reconstruction means that the country remains creditworthy and an attractive place for the international lending institutions and the aid industry, despite stories of donor fatigue.

Given the aid bureaucracy's embeddedness in the political economy of peace and conflict in Sri Lanka, it cannot be seen as a neutral actor or set of actors. This fact has particular relevance for much of the technical assistance and development 'knowledge' produced and sub-contracted by development agencies. There is ample evidence that the macro-polices of the Washington Consensus exacerbates intra-group and inter-group inequality and poverty that fuels (identity) conflicts in fragile states in the global South.

There is a fundamental problem with a peace and reconstruction policy approach that claims to link 'conflict-sensitivity to development' without assessing the dominant neo-liberal development paradigm, and policy that tends to generate inequality and conflict within and between countries. The Strategic Conflict Assessment does precisely this, though it hints at the need for such a critique. Ironically, the international aid industry and bureaucracy and technical experts may be a key impediment to the production of knowledge frames that could lead to more sustainable peace building in Sri Lanka and other conflict-affected parts of the global South.

Looking ahead

For the sake of peace and development in Sri Lanka, it is important that policy-makers and others draw lessons from the past experience of international involvement. What is needed immediately is an evaluation of the performance of the various aid agencies in the country. This could then form the basis for retaining only the efficient ones, which have contributed to the task of post-conflict and -Tsunami reconstruction at the ground level. This would in turn reduce the coordination burden, and help streamline and effectively target development assistance. The Indian authorities' approach to international aid and experts, especially in the wake of the Tsunami, is a good example in this regard.

It is also important to reduce phantom aid and debt burden; and to demand greater transparency, disclosure and accountability from the international financial institutions, the UN agencies and the various donor countries regarding aid programs (loans or grants), the extent to which the aid is aid, and technical assistance. INGOs should be required to disclose budgets, qualifications of staff, and in-country spending on projects, operation and transaction cost.

The connection between resource and identity conflicts is often not adequately acknowledged in peace processes. A new peace process will need to grasp the connection between resource and identity conflicts, as well as the intra-group dynamics of the inter-ethnic conflict. This requires deepened social analysis that is not to be confused with the notion of 'social capital' that post-conflict advisors and specialists promote at the knowledge bank. Peace mediators and international development actors will need to be attentive to the discourse on inequality and poverty, and link track-one discussions to deeper social conflicts and intra-group inequalities.

The need for deeper analysis, however, should not to be confused with or used as a legitimacy clause for extending project delivery timeframes. Extended aid timeframes make for even less accountability among aid agencies, who tend to delay on project delivery and extend costly contracts, while generating a culture of aid dependency. This was clearly evident with the Tsunami recovery operation. It is important to devise exit strategies for aid agencies and to stick to the schedule.

Finally, it is to be hoped that the lessons from the peace process in Sri Lanka may serve as a turning point for a 'structural adjustment' of the international peace and development industry, and ensure accountability to communities and countries affected by conflicts. This requires getting beyond the toolkit approach to post-conflict reconstruction, with its predictably damaging macro-economic policies of structural adjustments that undo the work of peace mediators. These steps, coupled with local ownership of the peace process, may provide the way out of Sri Lanka's present quagmire.

Phantom aid

The international peace and development industry that is by now entrenched in most parts of the global South is believed to be the fifth-largest industry in the world. Conflict situations present significant 'opportunities for growth' to international aid experts and bureaucracy, exported from the Euro-American world to these regions. However, the utility of this ever-growing donor assistance to conflict-affected countries and communities is an open question. At odds with local development priorities, the international aid bureaucracy is seen to have its own self-sustaining logic that is increasingly irrelevant to either the poverty or the conflict on the ground.

A June 2005 report on aid effectiveness by the relief organisation ActionAid, titled "Real Aid: Making Aid More Effective", estimated that 61 percent of all international donor assistance is 'Phantom aid'. As opposed to 'real aid', phantom aid includes funds that are: a) tied to goods and services from the donor country; b) overpriced and ineffective technical assistance – by far the largest category of phantom aid, accounting for USD 13.8 billion; c) spent on excess administration; d) poorly coordinated and high transaction costs; e) aid double-counted as debt relief; f) assistance not targeted for poverty reduction; g) amounts spent on immigration-related costs in donor countries, etc.

The report further notes that, "eighty cents of every dollar of American aid is phantom aid, largely because it is so heavily tied to the purchase of US goods and services, and because it is so badly targeted at poor countries … Just 11 percent of French aid is real aid. France spends USD 2 billion of its aid budget each year on Technical Assistance … In real terms, the Norwegians are nearly 40 times more generous per person than the Americans, and 4 times more generous than the average Briton."