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Email this citationCIAO DATE: 04/04
Promoting Democracy-building and Security through Private Investments
Franz-Lothar Altmann
January 2004
Abstract
In principle, private investments can be domestic as well as foreign ones, having of course in many respects quite different effects on democracy-building and security. On the other hand, certain features are also common in general, and I will first try to make some remarks on general effects of private investments , regardless of their domestic or foreign contents . First of all, one can certainly state in general that in order to increase private investments , legislation, legal enforcement and public administration in the respective countries must become transparent and with regard to public administration also more effective. Labor market regulations must become flexible, liberalized for reducing the risk of investors to become chained to encrusted labor laws from former times.
Private investment strengthens the private sector. The smaller the public sector becomes , the more the population becomes aware that private entrepreneurship and civil society is now responsible for the community, and the less opportunities for corruption remain. Corruption is blossoming when lousily paid bureaucrats decide about the placement of public orders for infrastructure, public construction works, procurement with licenses and so forth. The private sector furthermore will develop cooperative bodies to lobby its interests . Foreign investors will bring more experience and more natural consciousness for those cooperative bodies, and will support the build- up of associations and other forms of lobbyism.
If we now turn to foreign direct investments which might be the more interesting part of investment activities w ith r egard to f astening democr acy-building and security, then, first of all, one must admit that FDIs do not necessarily go only into democracies or countries being already on the path towards democracy. Examples here are China and the former socialist countries in Eastern and South East Europe. If investments promise to be profitable then investors will go into any kind of state, may it be democratic or authoritarian. Sometimes even authoritarian states promise more micro-security than democratic ones since centralist control and strong dictatorial police force can provide more security to persons and premises than weak infant democracies !
But the Central Eastern European experience shows very distinctly, on the other hand, that on a broad basis private capitalist investors seemingly prefer similar political and legal frameworks if the general circumstances, i.e. the basic legal framework, are sufficiently developed. The investor's rush into Poland, Czech Republic and Hungary in the 1990s prove this behaviour, whereby in these cases certainly the clear EU-member ship perspective was and still is an additional supporting factor.
