Capital with a compass: How to unlock investments in the hardest places
This Brookings Institution analysis examines the challenge of mobilizing private investment in fragile states amid a 23% contraction in aid from advanced economies since 2025. It argues that multilateral development banks (MDBs) and development finance institutions must pursue a dual strategy: strengthening governance and institutions, and leveraging their underused strategic intelligence to navigate social and political forces. The article notes that only 11% of private finance for development reached fragile states in 2023-2024, as zero-sum politics, weak social contracts, and extractive institutions deter investment. It warns that ignoring governance can entrench predatory power, citing Tunisia before the Arab Spring where politically connected firms captured 21% of profits despite minimal output. The piece concludes that MDBs hold a powerful but underutilized asset in their ability to interpret complex local dynamics.
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