Strategies for Attracting Foreign Direct Investment (FDI): Assessing the Effectiveness of Post-Conflict Peacebuilding Mechanisms in the International Capital Markets

Abstract

Post-civil conflict nations have a strong incentive to attract foreign capital because it is vital for redevelopment and economic growth which in turn reduce the likelihood of conflict resumption. Although foreign investors tend to be risk averse and view states that have recently experienced conflict to be high risk environments, this paper argues that power-sharing mechanisms address the roots of civil dissent and therefore provide a positive signal to potential investors. By focusing on a particular peacebuilding mechanism this work is able to single out the impact of one strategy, namely power-sharing, and assess its effectiveness in attracting foreign direct investment.