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The entry of Syrian refugees into Lebanon and Jordan has resulted in unprecedented social and economic challenges to both countries. These are felt on a day-to-day basis by all Lebanese and Jordanian citizens whether through higher rents and declining public service availability, or through health and education infrastructure that is stretched beyond its limits. There is no doubt that both host countries have been incredibly generous to refugees, particularly at the societal level. However, the tensions between host communities and refugees within Lebanese society are obvious and in both countries a lot of government and societal discourse about refugees has become palpably resentful. Even if a meaningful political settlement and ceasefire inside Syria are achieved, the refugees are likely to remain where they are for many years; the crisis therefore requires long-term planning on the part of host governments in collaboration with local civil society and multinational institutions. Specifically, it requires attention to economic development needs, including infrastructure upgrading and job creation, to improve life for all vulnerable populations, refugees and host communities. The crisis has put a huge strain on the fiscal capacity of both countries so urging more state spending may seem counter-intuitive. However, development spending is justified for several reasons. First, the economies of Lebanon and Jordan were suffering from economic problems beforehand. Third, the fact that most of the refugees in both countries are not in camps has created particularly challenging problems as reaching the refugees and serving their needs is even more expensive than it would otherwise be. It also means that across-the-board development spending is the most efficient way to address the humanitarian crisis. In both Jordan and Lebanon economic challenges preceded the refugee crisis. For example, the annual GDP growth rate dropped from 8. In Lebanon the onset of the Arab uprisings resulted in a reduction in foreign direct investment and a sharp decline in tourism. Flows of natural gas from Egypt to Jordan were sharply reduced through most of due to sabotage of the pipelines linking the two countries, resulting in increased fuel costs. However, the economic challenges facing both countries run even deeper. The situation in Lebanon is marked by sharper economic and regional inequalities, accompanied by deep social cleavages and sectarian fault lines that have been exacerbated by the Syrian conflict. The North region has the lowest per capita expenditure in the country, along with the highest levels of inequality. These two regions have been historically marginalised as reconstruction after the end of the civil war in Lebanon in saw most wealth flow to the greater Beirut region. However, both Jordan and Lebanon are loath to embark on major development spending. There is fear that substantial investment in refugees will provide incentives for further inflows — or integration of existing refugees. A Jordanian minister admitted in that conditions are calibrated to provide minimal aid so that refugees will have no incentive to remain, and this appears to be an unspoken policy in other host countries as well. This line of thinking is erroneous, even from a self-interested perspective. First, neglecting this issue hurts the domestic population as much as the refugee population. Second, the decision or ability to return home for many Syrians will depend on a number of other issues too. Syrians who come from areas where there is no possibility for economic life or where they are too fearful for their lives will prefer to stay, even if it means living in destitution. Third, ignoring the issue will cause more problems than if attempts were made to tackle them head on. The host countries have an incentive to provide refugees with a decent living so as to avoid the social problems that will arise from extreme poverty and destitution. And everyone has an interest in keeping children in schools and away from exploitation. Finally, all the neighbouring countries will benefit from a future Syria that is strong socially and economically. Allowing Syrians to pursue their livelihoods and build their capacity today is an investment in the long-term regional economy. In the case of Lebanon, in addition to fears of integration there is also the real issue of weak state capacity. The inflow of foreign aid could give the government the ability to strengthen its capacity without the accompanying fiscal strain. Shifting to development means investment in upgrading the water, electricity and health infrastructure as well as launching projects perhaps with mixed public and private sector involvement that can generate jobs and alleviate poverty. Such spending should target all vulnerable communities particularly in the most under-served areas. This should be accompanied by outreach that both allows local communities to express their grievances and publicises the efforts being made by the state and aid community in addressing their needs along with those of the refugees. Increased local input, transparency and media outreach are key to getting local and national communities on board with these projects and to better informing refugee communities of their rights. Close cooperation is needed so that the efforts of multinational institutions such as the World Bank and the IMF complement the efforts of host countries, UNHCR and other aid organisations, rather than working at cross purposes. The continuation of pre-existing policy goals such as fiscal consolidation and lowering debt-to-GDP ratios must be weighed against new needs for development and infrastructural investments. Both the academic and the policy literature on economic policies in conflict and post-conflict situations have shown that traditional economic policy that focuses on austerity or state retrenchment is inadequate or even counterproductive in these circumstances. In such situations, political goals must take precedence over economic ones. Though large-scale initiatives carry certain risks, so does inaction, particularly as both refugee and host communities become increasingly restless. Omar S Dahi odahi hampshire. Lynne Rienner, Boulder. Latest issue Forthcoming issues Previous issues.

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