Economic recovery programs, even those that are short- to medium-term, contribute to long-term recovery by working to strengthen local markets, institutions, and enterprises and ensuring that all program activities include up-front exit strategies for outside actors.

Key Indicators (Read in conjunction with the guidance notes):

• Interventions support or complement existing structures, services, and institutions in order to strengthen local capacity (see guidance notes 1 and 3).
• All programs run by international NGOs and other external or short-term actors include an exit strategy, with a transition strategy to longer-term development initiatives as appropriate (see guidance note 3).
• Program design specifies how the program interventions will feed into longer-term economic development initiatives (see guidance note 4).
• Program design analyzes whether and how economic recovery activities might harm the environment or individuals, and includes measures to minimize this harm.

Guidance Notes:

1. Supporting local capacity: Across crisis environments, markets and socio-economic structures survive and continue to function, even though they have been disrupted. It is important to consider these structures and the roles that various market actors, local institutions, and socio-economic norms play when designing interventions. Equally important is to consider how shifts in socio-economic structures will impact access to economic opportunities, particularly for vulnerable groups, such as women and youth. If local institutions, structures, or services exist, programs should address the obstacles and market failures faced by these institutions first, before looking to establish new systems or institutions altogether.

Example: A program that increases vocational skills training for youth supports existing schools and apprenticeship programs better than developing a new training center.

2. Pricing appropriately: As much as possible, products and services should be priced to include all related costs to reflect the true cost of delivery and avoid market distortions by under- or over-pricing. Costs should be clearly detailed and documented in program budgets. Costs should include labor (including staffing at market rates), inputs, rent and utilities, and transportation, as well as maintenance or replacement costs for equipment and estimated real (shadow) prices for subsidies. While subsidies may initially be needed to encourage the participation of a particular group, they should be kept to a minimum and eventually phased out. Under-pricing of costs can lead to the eventual deterioration of service or to other providers dropping out of the market.

Example: A reconstruction program procures supplies, manufactured locally, at the market rate; if that is not possible, then it purchases through local businesses.

A financial services institution offering loans should set market-based interest rates at the outset to ensure its long-term operational and financial viability.

3. Exit strategy: The program design should describe how the international NGO or other external actors work with local authorities and organizations from the onset, or seeks to build the capacity of such providers to take on services by the end of the intervention or in the transition to longer-term programming. Crowding out local providers may seem expedient in the short run, but in the long term, building the capacity and legitimacy of local actors (governments, businesses, or NGOs) leads to more sustainable benefits for the target population. The exit strategy should detail how operating costs will be covered beyond the initial program funding period, as appropriate, taking into account that cost recovery in crisis environments may take longer than the length of a grant period. The steps toward exiting or transitioning to longer-term programming should be integrated into the overall design and set forth as one of the program goals. This includes identifying the component activities, timelines, and project deliverables to ensure sufficient time to build the capacity of local actors in the event that they will take over some activities. Where the intervention is expected to end entirely, the program design should describe how the benefits to the target population will be sustained.

4. Lead into long-term programming: Much of economic development is interrelated. As such, program designers should understand and build on previous and current programming by international NGOs, multilateral donors, local NGOs, government, and other actors. The program should lead into, or be coordinated with, future programming, with a logical sequence to the various economic activities. It is also important that the program does not undermine other existing or future long-term programming.

Example: A short-term, small-grant business start-up program should try to link to a longer-term financial services program. On the converse side, a program should not provide vocational training for free, when another initiative is trying to provide similar training to the same group and charges fees to cover its costs.