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fragile and conflict affected states

Fostering Private Sector Development in Fragile States: A Piece of Cake?

Steve Utterwulghe's picture
Private sector development (PSD) plays a crucial role in post-conflict economic development and poverty alleviation. Fragile states, however, face major challenges, such as difficult access to finance, power and markets; poor infrastructure; high levels of corruption; and a lack of transparency in the regulatory environment. 

The private sector has demonstrated its resilience in the face of conflict and fragility, operating at the informal level and delivering services that are traditionally the mandate of public institutions. However, in post-conflict situations, PSD can have predatory aspects, thriving on the institutional and regulatory vacuum that prevails. The private sector will need to create 90 percent of jobs worldwide to meet the international community’s antipoverty goals, so pro-poor and pro-growth strategies need to focus on strengthening the positive aspects of PSD, even while tackling its negative aspects.

Focusing on fragile nations

With a rapidly increasing share of the world's poor now living in countries and territories classified as fragile or conflict-affected states, improving the conditions for private sector development can be one way for these countries to generate economic growth. This is an emerging priority of the Bank, and was a focus of much of the Investment Climate department’s work last year.