Transparency and accountability are central in support to fragile situations

Two new Policy Briefs discuss international companies and natural resource exploitation

There is no frontier separating fragile states from the global economy. The political instability and physical insecurity of fragile states has not resulted in a lack of interest from international companies. Rather, foreign investment is predominately focused on the exploitation of natural resources amidst the poor governance, protracted poverty and violent conflict that characterize these environments. The combination of foreign investment in malign economic and political environments has resulted in international companies having a resoundingly detrimental influence in fragile states. They act as vehicles producing value out of natural resources through

the international market place, often cementing the political power of oppressive governments, exacerbating inequality, or worse, intensifying and prolonging civil wars. As one response Denmark must not fail to promote corporate social responsibility in fragile states. Financial transparency and human rights initiatives offer the first step in ensuring that this detrimental influence is corrected.

Paradoxically many of the world’s fragile states have become dysfunctional, despite vast resource endowments. It is important to rethink the governance of valuable resources, not only because this sometimes leads to state fragility, but also because improved resource management offers ways out of fragility and towards economic growth and development. Problems with natural resource governance are frequently associated with: 1) situations of extreme state fragility where groups clash in violent conflict over resources or in attempts to secede by a resource-rich part of a country; or 2) lack of economic development and the persistence of repressive regimes, with little ability or desire to promote growth and welfare for their citizens. For donor countries, a fine balance must be struck to ensure that state strength, resource extraction and economic growth positively reinforce each other, rather than resulting in the two undesirable outcomes.

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