Planting Seeds on Rocky Ground

This article is written by Experts from Afghan Government, Private Sector, and Academia Share Views on Investing in Conflict-Affected and Fragile States.

Evidence points to economic growth, rising income, and integration into the global economy as critical factors in helping countries emerge from conflict and avoid the somewhat high risk of relapse. Foreign aid can bolster a country in the immediate aftermath of conflict, but eventually these flows decline as other trouble spots emerge across the globe.

To avoid a vicious circle of poverty and conflictin of countries, Girod points to some important factors. First, solid domestic leadership can provide a strong signal to the investor community by adhering to the agreements made with international financial institutions. Second, the prior existence of democratic institutions provides a mechanism for addressing grievances.

Much has been made of the “resource curse” and it is true that some of the countries with the red flags that Garver noted are rich in resources. But, he argued, the resources and the curse are not inseparable; the onus is on government and investors alike. Instead of attracting responsible investors committed to the long-term success of a project, countries with weak leadership and endemic corruption end up with junior and speculative companies that are hoping to flip their assets.

When it comes to investment destinations that show opportunity with a reasonably committed—if somewhat weak—government, what can investors do to mitigate risks? Garver enumerated a number of important factors, stressing that all must be addressed. “You need to understand the country and the nature of the conflict so that the investment meets the country’s needs. Don’t create big winners and losers. Address the concerns of local communities and understand their context.” Investors should also avoid cutting deals with governments that seem too good to be true. “You need to enter into fair and transparent deals that can withstand changes in government.” He also stressed the importance of choosing strong local partners and staff. In addition to addressing these “soft” issues, investors can seek political risk insurance or limited recourse project finance to add a layer of “hard” protection.

Further information


Partnership types

Advocacy of global issues

Regions / countries / territories

Asia: Afghanistan

Global issues

Peace and security