Normally, foreign direct investment (FDI) requires peace and stability. The purpose of this study is to examine the reverse relationship: whether, when and how FDI can be attracted and utilized in post-conflict conditions to promote economic stability and development, thereby making a contribution to peace-building.
Focusing on Croatia and Mozambique, this study examines the particular issues of FDI attraction and benefit arising in post-conflict countries, as set out in a likely government agenda:
- What kinds and volumes of FDI inflows can be expected when conflict ends and over what timeframes? What policy measures impact these outcomes?
- What are the key contributions of FDI, and how can these be improved by government policies and programmes?
Confronting a war-torn landscape, a prospective investor that seriously considers plunging in is likely to want to carve out a physical and operational enclave that minimizes the investment´s contact with, and dependence upon, the battered national economic environment. This entails a light footprint, privileged entry and operating conditions, and minimum contact with the host economy. Yet the low-contact preference of foreign investors directly confronts the post-conflict government´s economic peace-building agenda, which seeks to maximize the contributions of FDI to tax revenues, employment, skill development, infrastructure rehabilitation, and local supplier sales.
Croatia and Mozambique have balanced these competing agendas effectively, thus managing to both attract and benefit from FDI in their economies. FDI has made significant contributions towards the economic growth and stability that have helped entrench peace in both countries since emerging from conflict in the early 1990s. After reviewing their experiences, the report concludes with a number of lessons for policymakers in other post-conflict countries.