Investigating the ‘curious’ case of civil war and foreign direct investment: evidence from Sudan

Abstract

Abstract It is typically argued that civil war acutely inhibits inward flows of foreign direct investment (FDI). However, the evidence is inconsistent and does not support the assumed negative relationship between civil war and FDI. Some studies suggest that FDI enters countries with internal armed conflicts unabated; others show that civil war economies exhibit strong increases in FDI during conflict. Underpinned by a liberal interpretation of war, this scholarship finds these trends to be surprising, counter-intuitive and curious, arguing that FDI enters conflict zones in spite of violence. In contrast, critical perspectives can provide insights by acknowledging that violence can facilitate economic processes such as FDI, creating a particular form of security and stability that can be conducive to FDI inflows. This article examines the Second Sudanese Civil War (1983-2005), a country which exhibited strong increases in FDI during phases of the conflict. It is argued that particular types of violence perpetrated by the government’s armed forces and pro-government militias – groups which were sympathetic to the interests of key investors in the oil industry – facilitated FDI in Sudan’s oil sector during the 2000s to the detriment of large sections of the civilian population affected by the violence.