![Sample our Politics & International Relations journals, sign in here to start your FREE access for 14 days]({"type":"image" , "src" : "/sda/5947/TOC-Subject-Sample-2021-Politics-International-Relations.jpg"})
Abstract
The transition from war to peace is fraught with tension and the risk of a return to bloodshed. With so much at stake, it is crucial that the international community and local stakeholders make sense of the complex mosaic of challenges, to support a lasting, inclusive and prosperous peace. Recent missions, such as in Afghanistan, Somalia or Sudan, have highlighted the fact that there can be no one-size-fits-all approach to steering countries away from violence and towards stability.
This Adelphi offers a series of economic perspectives on conflict resolution, showing how the challenges of peacebuilding can be more effectively tackled. From the need to marry diplomatic peacemaking with development efforts, and activate the private sector in the service of peacebuilding aims, to the use of taxes and natural-resource revenues as a financial base for sustainable peace, this issue considers how economic factors can positively shape and drive peace processes. It examines the complex ways in which power and order may be manifested in conflict zones, where unpalatable compromises with local warlords can often be the first step towards a more lasting settlement. In distilling expertise from a range of disciplines, this Adelphi seeks to inform a more economically integrated and responsive approach to helping countries leave behind their troubled pasts and take a fuller role in constructing their futures.
Notes
UNCTAD, World Investment Report, (New York and Geneva: UNCTAD, 2005, 2006, 2008, 2009).
See, for instance, Pieter Bouwen, ‘Corporate Lobbying in the European Union: The Logic of Access', Journal of European Public Policy, vol. 9, no. 3, 2002, pp. 365–90.
See, for instance, Paul Collier and Anke Hoeffler, ‘Greed and Grievance in Civil War’, Oxford Economic Papers, vol. 56, no.4, 2004, pp.563–95; Nils Petter Gleditsch and Ranveig Gissinger, ‘Globalization and Conflict: Welfare, Distribution, and Political Unrest’, Journal of World Systems Research, vol. 5, no. 2, 1999, pp. 247–300.
See, for instance, Laura Alfaro, ‘Foreign Direct Investment and Growth: Does the Sector Matter?’, unpublished manuscript (Boston, MA: Harvard Business School, 2003); Andreea Mihalache and Quan Li, ‘Modernization vs. Dependency Revisited: Effects of Foreign Direct Investments on Food Security in Less Developed Countries', International Studies Quarterly, forthcoming.
A foreign affiliate is a company located in country A (host country) and owned by a parent located in country B (home country).
Between 1980 and 2004, in developing countries, primary FDI flows as a percentage of GDP range from -11% (Namibia in 1993) to 74% (Solomon Islands in 1994), with a mean of 1.4 and a standard deviation of 5. Manufacturing FDI flows as a percentage of GDP range from -1% (Venezuela in 1984) to 21% (Cambodia in 2001), with a mean of 1.4 (e.g., Mexico in the 1990s, Thailand in 1990, Cape Verde in 1994) and a standard deviation of 3. Service-sector FDI flows as percentage of GDP range from -1% (Argentina in 2002) to 60% (Cambodia in 1995), with a mean of 1.9 (Honduras in 2001 and 2002, Bulgaria in 1998, Uganda in 2000) and a standard deviation of 5.
Overseas Private Investment Corporation (OPIC), Annual Report (Washington DC: US Government Printing Office, 2004), see http://www.opic.gov/publications/reports-handbooks/annual.
OPIC, Annual Report, 1999, ibid.
OPIC, Annual Report, 1992, ibid.
OPIC, Annual Report, 2005, ibid.
Nils Petter Gleditsch et al., ‘Armed Conflict 1946–2001’.
For more information on OPIC, see www.opic.gov.
OPIC was actually established in 1971, when, through Executive Order 11579, it was deemed the successor of the Agency for International Development (AID), created in 1961. Since 1961, AID, then OPIC, have provided support and political-risk insurance to US investors in developing countries.
Theodore H. Moran and Gerald T. West (eds), International Political Risk Management, Volume 3: Looking to the Future (Washington DC: the World Bank, 2005).
Paul Collier, ‘On the Economic Consequences of Civil War’, Oxford Economic Papers, vol. 51, no. 1, 1999, p. 170.
Andrew R. Morrison, ‘Violence or Economics: What Drives Internal Migration in Guatemala’, Economic Development and Cultural Change, vol. 41, no. 4, 1993.
Bruno S. Frey, Simon Luechinger and Alois Stutzer, ‘Calculating Tragedy: Assessing the Costs of Terrorism’, Journal of Economic Surveys, vol. 21, no. 1, 2007. See also, Collier, ‘On the Economic Consequences of Civil War’.
Alfredo Rangel, ‘Parasites and Predators: Guerrillas and the Insurrection Economy of Colombia’, Journal of International Affairs, vol. 53, no. 2, Spring, 2000.
UNCTAD, Development and Globalization: Facts and Figures, UNCTAD/GDS/CSIR/2004/1, (New York and Geneva: UNCTAD, 2004), p. 44, available at http://www.unctad.org/en/docs/gdscsir20041_en.pdf.
Ibid., p. 44.
Nils Petter Gleditsch et al., ‘Armed Conflict 1946–2001’.
Data on FDI flows reported by the United Nations Committee on Trade and Development are on a net basis—‘capital transactions credits less debits between direct investors and their foreign affiliates’. For more information, see http://www.unctad.org/Templates/Page.asp?intItemID=3153.
FDI data come from the World Development Indicators (WDI), a dataset collected by the World Bank. For more information, see http://data.worldbank.org/data-catalog/world-development-indicators.
Based on data from the WDI.
Colombia face civil war in 1998-1990, 1992-1993, 1998-2002, and again in 2004 (UCDP/PRIO Armed Conflicts Dataset, v. 3-2005b; Gleditsch et al., ‘Armed Conflict 1946–2001’).
Based on data from the WDI.
For more information about MIGA, see http://www.miga.org/. Information about the investment projects insured through MIGA is available at http://www.miga.org/projects/index_sv.cfm. Information about the investment projects insured through OPIC is available in the agency's Annual Reports. The most recent reports can be accessed online at http://www.opic.gov/publications/reports-handbooks/annual. Reports released prior to 2000 are available upon request.
This paper focuses on the interaction between investors and governments and the respective behaviour of each. Another explanation for continued FDI flows to countries with political violence takes into account the characteristics of conflict: when conflict is contained in a small area of the country, investments may continue to unaffected regions.
Robert C. O'Sullivan, ‘Learning from OPIC's Experience with Claims and Arbitrations', in Theodore Moran and Gerald West (eds), International Political Risk Management, Volume 3: Looking to the Future, (Washington DC: The World Bank, 2005), pp. 30–74, p. 34.
See Achim Wennmann, ‘Guidelines for Mediators: Private Sector Investment’, CCDP Issue Brief, no. 3, March 2010, pp. 1–8; OECD, ‘Resource Flows to Fragile and Conflict-Affected Countries’ (Paris: OECD, 2009), available at http://www.oecd.org/dataoecd/14/14/43293581.pdf.
More information about the survey, implemented by EIU, ACE, IBM and KPMG in October 2006, is available at http://a330.g.akamai.net/7/330/25828/20070329204830/graphics.eiu.com/files/ad_pdfs/eiu_Operating_Risk_wp.pdf.
Andreea Mihalache, ‘Gambling on Conflict: Profiling Investors in Conflict Countries', unpublished paper, September 2009.
The analyses that lead us to this conclusion are available upon request. Our models control for lagged FDI, economic growth, development, market size, capital openness, democracy and country fixed effects. FDI data were collected from UNCTAD records (Mihalache and Li, ‘Modernization vs. Dependency Revisited’).
F. Kydland and E. Prescott, ‘Rules Rather Than Discretion: The Inconsistency of Optimal Plans’, Journal of Political Economy, vol. 85, 1977, pp. 473–90; F. Kydland and E. Prescott, ‘Time to Build and Aggregate Fluctuations', Econometrica, vol. 50, 1982, pp. 1345–71.)
Andrew T. Guzman, ‘Why LDC's Sign Treaties That Hurt Them: Explaining the Popularity of Bilateral Investment Treaties', Virginia Journal of International Law, vol. 38, pp. 639–88, 659.
Customary law represents the general and consistent practices of states that they follow from a sense of legal obligation; Jack L. Goldsmith and Eric A. Posner, The Limits of International Law (New York: Oxford University Press, 2005), p. 23.
Guzman, ‘Why LDC's Sign Treaties That Hurt Them’, p. 659.
Ibid., p. 681.
UNCTAD, World Investment Report (WIR): FDI Policies for Development: National and International Perspectives (New York and Geneva: UNCTAD, 2003), p. 171.
Some double-taxation treaties and free trade agreements also have investment clauses.
Mary Hallward-Driemeier, ‘Do bilateral Investment Treaties Attract foreign Direct Investment? Only a Bit… and They Could Bite’, Policy Research Working Paper no. 3121 (Washington DC: World Bank, 2003); Tim Büthe and Helen V. Milner, ‘The Politics of Foreign Direct Investment into Developing Countries: Increasing FDI through International Trade Agreements?’, American Journal of Political Science, vol. 52, no. 4, October 2008, pp. 741–62.
Zachary Elkins, Andrew T. Guzman, and Beth A. Simmons, ‘Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960–2000’, International Organization, vol. 60, no. 4, Fall 2006, pp.811–46.
Ravi Ramamurti, ‘The Obsolescing Bargaining Model: MNC-Host Developing Country Relations Revisited’, Journal of International Business Studies, vol. 32, no. 1, 2001.
Our sample includes 184 non-OECD countries, observed between 1975 and 2004. We excluded OECD countries from this analysis because their disproportionately large economies and higher economic integration makes them more likely to sign BITs.
We estimated cross-sectional linear models of FDI flows and BITs, controlling for economic development, which is the foremost determinant of FDI flows. We also compared average FDI across subsamples of the data.
Laura Alfaro, ‘Foreign Direct Investment and Growth’; Mihalache and Li, ‘Modernization vs. Dependency Revisited’.
Also see Wennmann, ‘Guidelines for Mediators', p. 5.