The Investment Climate In Post Conflict Situations

Abstract: This paper is a policy review of the role of investment climate in post-conflict situations. It summarizes the broad range of ways in which conflict negatively affects the investment climate, from macroeconomic instability to a degraded regulatory framework. It stresses that attention needs to be paid to the broader "enabling environment," including institutions, governance, capacity, and social capital. It suggests that a vibrant private sector underpinned by a good investment climate is particularly important in the post-conflict recovery phase for three reasons: it generates employment, provides public services where the state has retrenched, and builds social capital. By addressing these important "greed and grievance" factors, the private sector helps reduce the likelihood of a return to conflict. The paper concludes by distilling key lessons relating to the management of the post-conflict reform process. Despite the importance of a good investment climate, greater effort is needed to ensure that private sector development reforms are included in the first round of post-conflict policymaking. Local ownership of reforms and enhanced local capacity to implement them is key to sustainable improvements in the investment climate. Development partners have an important role to play in facilitating dialogue and promoting partnerships between public and private sector stakeholders. At the same time, development partners need to ensure that their presence in fragile post-conflict economies does not damage the very sector they are trying to support.

This paper is a policy review of the role of investment climate in post-conflict situations. It summarizes the broad range of ways in which conflict negatively affects the investment climate, from macroeconomic instability to a degraded regulatory framework. It stresses that attention needs to be paid to the broader "enabling environment," including institutions, governance, capacity, and social capital. It suggests that a vibrant private sector underpinned by a good investment climate is particularly important in the post-conflict recovery phase for three reasons: it generates employment, provides public services where the state has retrenched, and builds social capital. By addressing these important "greed and grievance" factors, the private sector helps reduce the likelihood of a return to conflict. The paper concludes by distilling key lessons relating to the management of the post-conflict reform process. Despite the importance of a good investment climate, greater effort is needed to ensure that private sector development reforms are included in the first round of post-conflict policymaking. Local ownership of reforms and enhanced local capacity to implement them is key to sustainable improvements in the investment climate. Development partners have an important role to play in facilitating dialogue and promoting partnerships between public and private sector stakeholders. At the same time, development partners need to ensure that their presence in fragile post-conflict economies does not damage the very sector they are trying to support.

Private firms are at the forefront of the development process, providing more than 90 percent of jobs, supplying goods and services, and representing a significant source of tax revenues. Their ability to grow, create jobs, and reduce poverty depends critically on a well-functioning investment climate--defined as the policy, legal, and institutional arrangements underpinning the functioning of markets and the level of transaction costs and risks associated with starting, operating, and closing a business. The World Bank Group has provided extensive support to investment climate reforms. This evaluation by the Independent Evaluation Group (IEG) assesses the relevance, effectiveness, and social value of World Bank Group support to investment climate reforms as it relates to concerns for inclusion and shared prosperity. IEG finds that the World Bank Group has supported a comprehensive menu of investment climate reforms and has improved investment climate in countries, as measured by number of laws enacted, streamlining of processes and time, or simple cost savings for private firms. However, the impact on investment, jobs, business formation, and growth is not straightforward. Regulatory reforms need to be designed and implemented with both economic and social costs and benefits in mind; IEG found that, in practice, World Bank Group support focuses predominantly on reducing costs to businesses. In supporting investment climate reforms, the World Bank and the International Finance Corporation use two distinct but complementary business models. Despite the fact that investment climate is the most integrated business unit in the World Bank Group, coordination is mostly informal, relying mainly on personal contacts. IEG recommends that the World Bank Group expand its range of diagnostic tools and integrate them in the areas of the business environment not yet covered by existing tools; develop an approach to identify the social effects of regulatory reforms on all groups expected to be affected by them beyond the business community; and exploit synergies by ensuring that World Bank and IFC staff improve their understanding of each other's work and business models.

The Global Investment Competitiveness report presents new insights and evidence on drivers of foreign direct investment (FDI) in developing countries, and FDI’s role in development. The report’s survey of 750 executives of multinational corporations finds that a business-friendly legal and regulatory environment is a key driver of investment decisions in developing countries, along with political stability, security, and macroeconomic conditions. The report’s topic-specific chapters explore the potential of FDI to create new growth opportunities for local firms, assess the power of tax holidays and other fiscal incentives to attract FDI, analyze characteristics of FDI originating in developing countries, and examine the experience of foreign investors in countries affected by conflict and fragility. Three key features of this Global Investment Competitiveness report distinguish it from other publications on FDI. First, its insights are based on a combination of first-hand perspectives of investors, extensive analysis of available data and evidence, and international good practices in investment policy design and implementation. Secondly, rather than exploring broad FDI trends, the report provides detailed and unique analysis of FDI depending on its motivation, sector, geographic origin and destination, and phase of investment. Thirdly, the report offers practical and actionable recommendations to policymakers in developing countries wishing to reform their business climates for increased investment competitiveness. As such, the report is meant to complement other knowledge products of the World Bank Group focused even more explicitly on country-level data, detailed reform diagnostics, and presentation of best practices. We are confident this report will bring value and fresh perspectives to a variety of audiences. To governments and policymakers, including investment promotion professionals, the report offers direct insights into the role of government policies and actions in investors’ decision-making. To foreign investors and site location consultants, the report provides information on FDI trends and drivers across sectors and geographies. For academic audiences, the new datasets on investment incentives and FDI motivations enables opportunities for additional research and analysis. Lastly, for development assistance providers and other stakeholders, the report highlights key approaches for maximizing FDI’s benefits for development.

When the guns are silenced, those who have survived armed conflict need food, water, shelter, the means to earn a living, and the promise of safety and a return to civil order. Meeting these needs while sustaining peace requires more than simply having governmental structures in place; it requires good governance. Natural resources are essential to sustaining people and peace in post-conflict countries, but governance failures often jeopardize such efforts. This book examines the theory, practice, and often surprising realities of post-conflict governance, natural resource management, and peacebuilding in fifty conflict-affected countries and territories. It includes thirty-nine chapters written by more than seventy researchers, diplomats, military personnel, and practitioners from governmental, intergovernmental, and nongovernmental organizations. The book highlights the mutually reinforcing relationship between natural resource management and good governance. Natural resource management is crucial to rebuilding governance and the rule of law, combating corruption, improving transparency and accountability, engaging disenfranchised populations, and building confidence after conflict. At the same time, good governance is essential for ensuring that natural resource management can meet immediate needs for post-conflict stability and development, while simultaneously laying the foundation for a sustainable peace. Drawing on analyses of the close relationship between governance and natural resource management, the book explores lessons from past conflicts and ongoing reconstruction efforts; illustrates how those lessons may be applied to the formulation and implementation of more effective governance initiatives; and presents an emerging theoretical and practical framework for policy makers, researchers, practitioners, and students. Governance, Natural Resources, and Post-Conflict Peacebuilding is part of a global initiative to identify and analyze lessons in post-conflict peacebuilding and natural resource management. The project has generated six books of case studies and analyses, with contributions from practitioners, policy makers, and researchers. Other books in this series address high-value resources, land, water, livelihoods, and assessing and restoring natural resources.

Countries recovering from conflicts face economic and institutional devastation ̄ of vital infrastructure such as schools, factories, communication networks, roads, railways, and water systems, as well as diminished human resources, a very weak legal structure and governmental institutions. In this context, policymakers are faced with the task of creating an integrated and comprehensive approach to post-conflict reconstruction with a view to sustainable economic development, political stability and peace consolidation. This volume critically examines the various approaches to encouraging and regulating foreign investment in post-conflict countries. From the perspectives of both the foreign investor and the host country, it suggests how policymakers in post-conflict countries can design a foreign investment strategy that brings real and meaningful economic development as part of the wider peace-building process. FDI in post-conflict countries is discussed from different methodological perspectives, including comparative law and comparative politics, based on case studies of Afghanistan, Rwanda, DRC, Sierra Leone, Liberia, Colombia, Angola and Mozambique. _______________________________

Clearing landmines, rehabilitating and integrating of excombatants, rebuilding the infrastructure, coordinating aid sources—these are just some of the issues confronting the Bank in post-conflict reconstruction. The explosion of civil conflicts in the post-Cold War world has tested the World Bank's ability to address unprecedented devastation of human and social capital.This study covers post-conflict reconstruction in nine countries, assessing relevant, recent Bank experience. It also presents case-studies for ongoing and future operations, which analyze: 1. the Bank's main strengths or comparative advantages; 2. its partnership with other donors, international organizations, and NGOs; 3. its role in reconstruction strategy and damage and needs assessment; 4. its role in rebuilding the economy and institutions of governance; 5. its management of resources and processes; 6. implications for monitoring and evaluation.

infoDev is exploring the transformative role that Information and Communication Technologies (ICTs) can have in post-conflict nations during the process of reconstruction. The case studies look at countries at different stages of post-conflict reconstruction in Afghanistan, Liberia, Rwanda and Timor-Leste, and post-revolution in Tunisia.