Conflict has a far-reaching impact on the private sector. It damages the fundamental structures that underpin private sector activity, pushing businesses into the informal sector and forcing entrepreneurs to find new ways to operate. The implications are far-reaching: a diminished private sector means fewer jobs, lower incomes and damaged livelihoods. As countries and regions emerge from periods of conflict, one of the most pressing challenges is to re-establish an investment climate conducive to private sector activity. A strong investment climate provides the conditions necessary to put labor and capital back to work, creating jobs and wealth. Private sector activity can also play an important role in delivering public services and, more subtly, start to replenish some of the social capital that is destroyed during conflict. In these ways, getting the private sector back on its feet becomes a vital factor in cementing the peace and setting countries on a sustainable path to peace and development.

This paper explores these themes. It provides an overview of how conflict affects the investment climate and underlines why it is so important to promote an investment climate that supports private sector activity in the period following conflict.

This paper was co-written by Rob Mills and Qimiao Fan of the Investment Climate Capacity Building team.  It was then presented by Rob Mills at a the "Private Sector Development and Peacebuilding – Exploring Local and International Perspectives" conference in Berlin on September 14, 2006.  For more information about the conference, please visit the official website.


Click here to download the paper(432 KB PDF)

Click here to view the Powerpoint Presentation(176 KB PDF)