While economic recovery programs may be short- to medium-term in nature, they should 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 (to be read in conjunction with the guidance notes):

• Program and projects contribute to the strengthening of local capacities by supporting or complementing existing structures, services and institutions (see guidance notes 1 and 2).
• Program or project design includes an exit strategy for international NGOs and other external actors that will not continue operations in the long term, and includes a clear transition strategy to longer-term development initiatives as appropriate (see guidance note 3).
• Program and project planning includes determining how the supported interventions will feed into longer-term economic development initiatives (see guidance note 4)
• Economic recovery activities supported will not harm the environment or individuals in terms of operations, products, and waste.

Guidance Notes:

1. Supporting local capacity: Across conflict, post-conflict and disaster 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 in program design. It is also important to consider how shifts in socio-economic structures will impact access to economic opportunities, particularly by 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: For a program looking to increase commercial skills training for youth, it is generally better to build upon existing and/or traditional means of transferring knowledge—for example, using formal institutions such as schools and apprenticeships, rather 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 production or delivery and avoid market distortions by under- or over-pricing, and should be clearly detailed and documented in program budgets. Staffing should also be priced appropriately at market rates. Costs should include labor, inputs, rent and utilities, transportation, as well as long-term maintenance or replacement costs for equipment and shadow prices for subsidies. While subsidies may be initially 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 should procure suppliers at the market rate that are manufactured locally, and if that is not possible then through local business. A financial services institution offering loans should set interest rates at the onset to ensure long term operational and financial viability of the institution.

3. Exit strategy: The program design should describe how the international NGO or other external actors will hand over responsibility to local service providers, at the end of the intervention or during the transition to longer-term programming. The exit strategy should also include 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 program design, and set forth as one of the program goals. This includes identifying the component activities, timelines, and project deliverables to ensure sufficient time for capacity building of local actors in the event 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 to the same target group when another initiative is trying to develop a sustainable vocational training institution that is working towards cost recovery for similar trainings.