Programs reflect market realities, basing decisions related to program design and implementation on a thorough understanding of the underlying supply of and demand for goods and services and how the organization of markets determines power and governance among different market actors. Programs are flexible, allowing managers to revisit programmatic assumptions and operations given changing market conditions.

Key Indicators (to be read in conjunction with the guidance notes):

• Market opportunities are analyzed and validated before programs invest in economic recovery activities (see guidance note 1).
• Activities at all levels of individual markets are considered in program design and implementation (see guidance note 2).
• Markets are constantly monitored for changes in order to enable programs to adjust their interventions to best meet market conditions (see guidance note 3 ).
• Interventions focus on commercially-oriented actors (see guidance note 4).
• Relationships between buyers and sellers are facilitated to broker trust as well as increased sales and profits (see guidance note 5).

Guidance Notes:

1. Identifying markets: Understanding the markets in which enterprises and households operate is essential to the appropriate choice of program activities. Economic recovery programs should target enterprises and households operating in relatively stable, equitable and potentially high-growth markets that provide an opportunity for expansion or increased income. Markets that lack these characteristics will not provide the incentives (signals) to encourage farmers, entrepreneurs and manufacturers to invest in their businesses, adopt new technologies, or benefit from program activities, and thus should not be targeted for investment.

Example: Investments in revitalizing a local textile industry may be wasted, if it cannot compete with an imported product in terms of cost or quality in local and regional markets.

2. The market: Considering the weakness of most economic actors in post-conflict and disaster environments, economic recovery efforts should consider dynamic approaches and multiple interventions along the entire value chain – from input supply to producers to end-markets to external policy makers. Prescribed, uniform approaches at one level, risk creating market distortions due to unbalanced growth. Market failures can be addressed through a portfolio of financial service provision, improved technology use, networking and other services. Where one agency does not have the capacity to implement multiple activities, it should consider coordinating with other service providers (see Common Standard 6).

Example: Single large investments in agricultural production or processing may result in a drop in market prices or be compromised by under capacity in processing or storage facilities. On the other hand, a program may support a company in finding new markets for its products as well as supporting its raw material suppliers to meet newly identified market demands, helping to avoid market distortions.

3. Responding to market demand: Developments across market actors should be monitored to identify emerging opportunities or constraints. Regular monitoring of the market will determine where investments will need to be started or adjusted to have the greatest impact. Developing the monitoring and evaluation (M&E) strategy (see common standards 3 and 8) to achieve this goal should be completed at the design stage of program implementation. Effective strategies can range from simple local price monitoring and meetings with regional wholesalers to more complicated tracking of work commodity prices and trends.

Example: Agricultural cooperatives might be unable to capitalize on higher prices for a specific cash crop in urban areas, if they are not aware of the change in price or the type of crop or processing demanded. Similarly, careful monitoring may show that investing in new varieties and seed production may have greater impact than continued investment in fertilization or pest management.

4. Commercially-oriented actors: Economic recovery assistance should be directed to commercially-oriented actors (whether within vulnerable groups or outside them) capable of providing the greatest impact in revitalizing strategic market sectors in the economy. For example, investments in a network of small agro-input suppliers may contribute more to economic recovery through job creation and increased accessibility of seeds and other inputs for a large number of small-holder farmers than targeting assistance to a larger, state-owned competitor.

5. Building trust and relationships: Markets in conflict-affected regions are often characterized by high levels of mistrust between market participants, due to unregulated markets, lingering tension between conflict groups, and wide-scale corruption. These tensions should be examined through tools such as conflict maps to understand the local situation and avoid exacerbating tension. Program interventions can also facilitate relationship building between market actors by facilitating contracts between buyers and sellers and other forms of linkages. Agencies involved in these activities should work through local actors wherever possible and plan for their exit from the outset.