The role of foreign direct investment in post-conflict peacebuilding

Official URL: http://risc01.sabanciuniv.edu/record=b1628628 (Table of Contents)

Civil wars and political violence can be ended by an agreement or ceasefire, sustainable peace, however, requires much more steps in the transition from war to peace. In a large extent the success of such transition depends on the success of economic recovery of a post-conflict country. Foreign direct investment is one of the main factors that can facilitate such recovery; however, the effects of such investment on the post-conflict peace are not clear. In order to understand the effects of the foreign direct investment on post-conflict peacebuilding, this thesis presents a rational choice model of strategic interactions between the state, the rebels and a foreign investor. The propositions of the model are illustrated with real life examples derived from Niger, Nigeria and Turkey. Finally, this paper argues that the most positive impact on peace is likely to be produced by FDI with high and positive economic externalities valued by the local population even higher than the redistribution policies of the state. Other possible equilibriums, however, lead either to recurrence of conflict in the short run, in case if revenue distribution activities of the government will threat the legitimacy of rebels, or to sustenance of the truce in the short run but exacerbation of the latent conflict. Based on these finding this paper provides several policy recommendations which according to this thesis can be potentially interesting and beneficial for both investors and policy makers.