Business environment reforms in fragile and conflict-affected states: from a transactions towards a systems approach

Our objective is to advance the understanding of the nexus between business environment reforms (BER) and conflict, fragility, and underdevelopment. We examine the evidence and the lessons of BER in fragile and conflict-affected states (FCAS), based on the experience of four African countries (Rwanda, Sierra Leone, Uganda, and Ethiopia) that have or are transitioning from a fragile environment to greater stability and more sustained economic growth. We use a qualitative case study approach that draws on several data sources to inform its analysis, including one-on-one interviews, roundtable focus groups, and an analysis of documents, reports, and data. A total of 83 respondents participated in our research. We develop a systems approach rather than a transactional approach to recognize the complex network of interconnected and interacting business interests, agendas, and systems in FCAS. We argue that BER has the greatest potential to advance achievement of sustainable development when it is attentive to three objectives at the same time: stimulating broad-based economic growth, expanding economic opportunity in formal and informal markets, and addressing drivers of conflict and fragility. When BER focuses predominantly on economic growth as an end outcome, it risks contributing to perverse impacts and fails as a policy instrument to foster inclusive development. The implications for international businesses entering or operating in FCAS are substantial and may require atypical capabilities. At a policy level, we highlight the potential trade-offs between international business promotion and foreign business attraction, and social and development policy, and the implications of that for transnational governance going forward.