Unlocking Viable Investment Opportunities in Fragile Economic Markets

Fragility in different economic markets will and can be ascertained to several different things; nevertheless, fragile countries have several similar economic weak points including booming populations, weak governance and volatile economic environment.

 Therefore; this article will seek to uncover ways to significant opportunities to scale-up private investments in markets struggling with stress of fragility and conflict.

So, some key points to be discussed will include:

(i) Improve the regulatory environment: Policies, laws and regulations play a vital role. Over the past years it is clear how in several African states for instance how the inflexibility and lack of introduction to favourable laws, has stifled growth and the intervention of foreign aid and the introduction of technology to facilitate necessary market initiatives. That said, over the years certain improvements has been made in establishing international norms for transparency and conduct and yet more still needs to be done.

(ii) Provide local currency loans: Exposure to currency risks during lending transactions can hinder accessibility to financial options for local entrepreneurs and investors alike; thus such risk needs to be reduced. Opportunities to spread currency risks for local entrepreneurs will need to immediately expand in a context of growing private capital flows to FCS (Fragile and Conflict Situations). Initiatives like this will enhance local financial markets and provide entrepreneurs and investors with the long-term scope they need to invest in scaling up.

(iii) Reduce the first loss risk of pioneer investors: This particular point has to surface as one of the inherently common situation in an economically fragile market, which is of most necessity to address in order to spur growth and unlock opportunities in fragile markets. Pioneer investors in such markets face a number of risks; including (i) limited and or lack of market information, (ii) political instability (iii) poor infrastructure (iv) and poor leadership in many of these markets to name a few. To add, commonly it is usually the case where these pioneer investors see their first-mover advantage disappear as soon as new entrants appear on the scene with significantly lower costs and risks. Assisting pioneer investors to manage these risks; it needs to be an important component in redesigning the use of official development assistance (ODA) and the collaboration of Multilateral Development Banks in fragile situations.

(iv)   Scale-up the use of guarantees by international financial institutions: Risks in fragile markets are significant and different within those markets itself (depending on which sectors considered), and is considerably different in non-fragile markets. In this instance of financial and conflict situations, the instability of risk is most dominant. It is so because of their ownership structures and mandates multilateral development banks that are well-positioned to insecure these risks, and to mediate disputes before they turn into losses. Political risk insurance in fragile markets is traditionally concentrated in natural resource sectors (i.e.: Agriculture) nonetheless this risk is expanding into other sectors including infrastructure and financial services. Leaders within fragile markets need to collaborate with insurance agencies such as the Multilateral Investment Guarantee Agency to provide a capital base of political risk that will be sufficient to meet increased demand in such unstable markets.

(v)  Invest in governance: Public investment via government capacity is crucial for a return to stability in all (and I write boldly) fragile markets. These investment/s can never be short-term interventions because returning to economic stability takes a while, and so interventions deployed will always will be ongoing and will require tweaking. To add; these interventions need to be carefully coordinated and will require long-term commitment from development financiers, multilateral institutions, Insurance institutions, NGOs and economic agents and political actors across all board.

(vi) Invest in skills and jobs for young people: Many of the states if not all within the fragile markets are characterized by booming population growth. Perhaps this growing population is a blessing given that it is tapped into and used appropriately. However certain analysis argues that of all the 67 countries around the world recently experiencing a boom in youth, yet majority of these countries are affected by unrest and fragility. This presents a huge concern as investments in the opportunities for adolescents, in addition to primary education, need to increase. Likewise, the integration of vocational courses from early on coupled with the creation of technology hubs should clearly enable access of young people to new skills and technologies in the field of digitization and otherwise.

There is yet several other ideas that can be discussed within this article; however the author has decide to draw the article to a close here for the sole purpose of streamlining the focus of the argument.