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The Refugee Camp Economy and the Economic Argument for Re-Conceptualizing Camps as Permanent Cities

The Refugee Camp Economy and the Economic Argument for Re-Conceptualizing Camps as Permanent Cities

Though the European Migrant Crisis has refocused Western attention toward the plight of the refugee, the issue of how a host country should deal with incoming refugees is not new. Many host countries choose to house refugees in camps, or designated areas often prepared in haste for the temporary housing of incoming refugees. However, these camps tend to exist longer than initially anticipated, and eventually begin to resemble makeshift cities, sometimes with tens of thousands of inhabitants living in a given area for an extended period of time. In time, a local economy begins to take form, and while the refugee camp economy is currently rather under researched, what economic and ethnographic research that has been done reveals key economic inefficiencies in the way camps are constructed.

In a few ways, the refugee camp economy functions much like one might expect. The primary economic actors tend to be the inhabitants themselves (as opposed to local citizens of the host country), many of whom come into the camp with previously developed productive skills and some even with access to valuable commercial networks or even financial capital back home. That being said, there are no large corporate businesses, and instead most commerce is conducted through either small specialized shops in designated market districts, or generated via the refugees’ agricultural production.

Perhaps surprisingly, there are often benefits to living and working in these camps as well. The 1951 Refugee Convention requires that taxes and tariffs levied on refugees may not be higher than the level that nationals of the same tax category pay, though often refugees do not pay taxes at all, or pay lower taxes than citizens of their host country. For example, Afghan refugee truckers working in Pakistan are exempted from licensing fees that Pakistani truckers must pay. Likewise, asylum seekers coming to Nakivale (Uganda) receive a plot of land with which to start a farm for free upon arrival. It seems from these observations that host countries generally recognize that there is typically little revenue to gain from refugees, and that refugees can typically contribute more to a country’s overall economic well-being as cheap labor than as direct revenue sources.

However, the economic costs associated with living and working in a refugee camp tend to offset or even overshadow the small benefits enjoyed by refugee workers. The most fundamental of these costs is the restrictions on movement outside of the camps. In order to travel outside of a given camp, refugees are almost always required to possess a permit issued by a settlement commander. These permits, though often in high demand, are not always easy to obtain. Werker (2007) notes that in the Ugandan camp in Kyangwali, the commander only issues permits on “one or two scheduled days each week.” Though these permits are generally free, they are issued at the commander’s discretion, exposing the permit allocation process to favoritism, prejudice, or even outright corruption.

This makes it difficult to conduct trade as a refugee. First, there are significant time costs involved, even if you know exactly when you will need the permit and when to see the commander, as the refugee must travel to the commander’s office and wait for however long it takes to see the commander, a process that the refugee must set aside at least a half of a day to complete. In addition, the refugee must have the foresight to plan ahead when exactly they will require access to an outside market, and then hope that they will be able to obtain the needed documentation when they expect to need it. Because of these high transaction costs associated with doing business with the outside world, a refugee is incentivized to start a business that caters to the needs of those inside the settlement. This means that refugee entrepreneurs are limited to maintaining small shops or general stores inside the camp itself, limiting themselves to smaller market sizes and lower growth potential.

Additionally, refugees face restrictions on their ability to work outside the camps, in addition to restrictions on their ability to leave the camp. Typically, in order to work outside of the refugee camp, refugees must get a work permit from the national visa office in the host country’s capital. This permit is difficult to obtain because of both time and monetary costs associated with obtaining the visa. In terms of monetary costs, the refugee must pay for transportation to the host country’s capital and back, and pay administration costs for the work permit itself. All-together, for the refugees living in the Kyangwali camp in rural Uganda, it costs more than a season’s worth of agricultural revenue just to make the journey to Kampala (which itself does not guarantee the permit), and around 6.5 times as much as the average season’s agricultural revenue to cover administration costs, which is “prohibitively expensive” for many refugees to obtain. With respect to time costs, the refugee must obtain a permit to leave the camp, travel to the host nation’s capital, jump through all the hoops associated with obtaining the work permit, and return to the camp before the permit to leave the camp expires. One mistake could throw off the timing of the delicately constructed journey, jeopardizing the refugee’s ability to make it back to the camp on time. The complexity and financial infeasibility of the process of obtaining a work visa discourages refugees from working outside the camp, even if the job opportunities within the camp limit the refugee’s ability to realize their full earning potential. Though specific details concerning its nature have not been recorded, similar restrictions to refugees’ movement (either by law or economics) have been reported in Zaatari (Jordan) and Calais (France), indicating that the Kyanwali account is not unique.

In addition to limiting one’s ability to work, barriers on easy movement present at many refugee camps (as well as the physical distance from the host nation’s population centers found at some of the more rural camps) contribute to unreasonably high information costs concerning economic activity in the outside world. In refugee camps, there tends to be little to no up to date information for refugee businesses concerning prices, new suppliers, best fertilizers, who is selling what crop, etc. This is particularly detrimental to farmers, and appears to at least partially explain why farmers in the Nakivale (Uganda) tend to grow maize more often than not, even when other crops have reportedly brought in seven times as much revenue in markets nearby, but outside of, Nakivale. Obviously this puts refugee businesses at a disadvantage and, much like how restrictions on work limit a refugee worker’s earning potential, the lack of up to date information limits the growth potential of refugee businesses.

Additionally, the extreme isolation, maintained in part by restrictions on movement, creates an environment that is ripe for predatory pricing on behalf of host country nationals doing business with refugees. The isolation of the camp means that the camp receives relatively few external traders selling goods to the refugees and buying the refugees’ agricultural products. Even if the external traders do not explicitly collude in a collective effort to cheat the refugees, the nature of this kind of oligarchic market sustains unfair prices for longer periods than in the more competitive markets that exist outside of the refugee camp.

Likewise, the isolation of camp, either as a product of sheer distance or by movement restrictions imposed on refugees, limits the market size and complexity available to refugees. As a business, this limits one’s growth and diversification potential, as it forces the business to cater to the demand of the camp exclusively, as opposed to being able to diversify to the demands of the camp and several other local markets in the region. As a laborer, the lack of diverse employment options limit’s one earning potential, as it becomes increasingly difficult to find employment that best matches one’s particular set of skills as the total market size of the camp, and subsequently the total amount of employers, decreases.

In fact, we see again and again that the status quo of refugee camps imposing strict constraints on refugees’ ability to move and work outside the camp yields economic inefficiencies (without mentioning, of course, the potentially unlawful nature of such restrictions). Naturally, one may wonder why host countries adopt these restraints on refugee movement and work in the first place. The obvious explanation is that there are security concerns with allowing refugees to move freely around a host country. Concerns over security are certainly legitimate, and can justifiably supersede concerns about economic inefficiency. Less justifiably, but certainly realistically, it would be difficult to doubt that there is a prejudicial tendency on behalf of the host country to want to keep refugees confined to certain areas, and that sometimes these prejudices can overshadow one’s better judgment.

Additionally however, restrictions on movement and work are put in place because the refugee camp is intended to provide temporary asylum from immediate danger. They are often built in haste and grow in an ad-hoc manner, as tents are pitched the day they are needed. This lack of long term planning and emphasis on temporary solutions indicates that there exists a conception that refugee camps are merely interim working and living arrangements meant to exist after the refugee has fled their home country, and before they return. Therefore, the host country is not looking to assimilate refugees into their economy, but merely support them for a few years before they leave. Restrictions on work and movement become comprehendible policies, as this makes it difficult for refugees to root themselves in their host country long term.

In the face of this observation, it becomes clear that in order to make it easier justify lifting barriers to movement and work, and realize the economic gains to be had from a large population of laborers with diverse skills, it would behoove host countries to re-conceptualize refugee camps as permanent refuge cities instead of mere spaces of temporary asylum. At first take, this idea of accepting the permanent nature of these refugee settlements explicitly undermines any hope that refugees or host countries may have of the refugees returning to the life that they once had. The ideal narrative of refugees coming to a camp to wait out a conflict in their home country until it is safe to return, is only a valid conception of the situation if it is understood that the camps, and the circumstances that drive refugees into the camps, are ultimately temporary. For the refugees themselves, framing life in a refugee camp as ultimately temporary implies an eventual return to normality, fueling a feeling of hope that is doubtlessly valuable at such a difficult time.

But this narrative has been deemed incompatible with reality by recent history. By UNHCR estimates as of 2003, the average amount of time spent in “protracted refugee situations” (i.e., refugee situations including, but not limited to, living in refugee camps) is 17 years. This explicitly undermines the narrative that refugees only need asylum for a few years while they wait out danger. In reality, refugees who come to refugee camps (or choose to formally migrate to other countries altogether) should be seen as individuals who are, more often than not, there to stay.

And once this idea of permanence is accepted, the host country is in a better position to lift the restrictions of movement and work currently imposed on migrant communities. If one believes that refugees are only in a host country for a couple years to wait out a conflict, it is easier to accept the inefficiencies associated with limiting the growth potential of refugee businesses, constricting the earning potential of refugee laborers, subjecting refugees to unfair trading dynamics, and lack of access to information. If it is accepted that the refugees will be in a given camp for an average of 17 years, the economic inefficiencies derived from restrictions on movement and work become glaring, as the host country is essentially giving up a generation of lost productivity. It becomes obvious that both the individual refugee and the host country’s economy stand to gain from the refugee’s free movement and ability to work.

Unfortunately, empirically estimating the economic effects of these restrictions on movement and work has proven difficult, and much of the academic work concerning refugee camp economies has been founded upon direct observation and the application of general economic principles. Likewise, no refugee camp has officially been designated as a permanent city or area of asylum, denying the opportunity for a natural experiment. This lack of empirical work leaves room for further exploration as to the magnitude of the claims made in this article.

What is no longer up for debate however, is whether refugee camps should be seen as temporary housing, or as permanent cities with citizens able and willing to contribute to the host country’s economy. What the persistent metropolis’ of Dadaab and Nakivale make clear is that camps tend to stay open much longer than intended, and are better thought of as permanent fixtures in their regions rather than temporary anomalies. Considering this fact, it simply makes sense to re-conceptualize refugee camps as cities, and to lift the economically unnecessary restrictions on work and movement currently imposed on the inhabitants of these cities. At the very least—perhaps if security concerns render this solution improbable—it must be recognized that current restrictions on movement and work that refugees face in camps is economically inefficient, and that finding a way of easing these restrictions would improve the welfare of the individual refugee and host country concurrently.

Of course, basic asylum for refugees fleeing immediate danger should remain the priority, and capturing the economic gains from these refugees should be of second order to this immediate need for safety. But acknowledging that there is a hierarchy of priority when dealing with refugee camps does not preclude realizing second order goals entirely. This is not about shifting the focus from providing asylum for people in need to turning desperate people into economic gains. Rather, it is about capturing what is already there.

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