2006, Organisation for Economic Co-operation and Development (OECD)
A weak governance zone is defined as an investment environment in which governments are unable or unwilling to assume their responsibilities. These “government failures” lead to broader failures in political, economic and civic institutions that, in turn, create the conditions for endemic violence, crime and corruption and that block economic and social development. About 15 per cent of the world’s people live in such areas, notably in sub-Saharan Africa.
For international business, weak governance zones represent some of the most challenging investment environments in the world. This OECD Risk Awareness Tool aims to help multinational enterprises – including small and medium size enterprises – meet these challenges. There is clearly a demand for such a tool and the business sector itself supports such work. The issue of investing responsibly in weak governance zones has been raised many times with the OECD Investment Committee and the National Contact Points (NCPs) in the context of implementing the OECD Guidelines on Multinational Enterprises. Support for an OECD initiative in this area has come from the G8 – the 2005 G8 Gleneagles Summit Communiqué calls for “developing OECD guidance for companies working in zones of weak governance”.
The Tool is based on the premise that a durable exit from poverty will need to be driven by the leadership and the people of the countries concerned – only they can formulate and implement the necessary reforms. Companies play important supporting roles and this Tool seeks to raise awareness of these roles and to help companies play them more effectively.
With respect to the role of governments in establishing an appropriate policy framework, the OECD Investment Committee invites all governments to work with it in advancing the shared goal of continuous improvement in public policy. The Policy Framework on Investment proposes practical considerations in ten policy areas that help to create the domestic conditions for private investment to flourish (e.g. good public governance and the fight against corruption, equitable and efficient tax systems, human resource development, effective competition policies and improved infrastructure). The Framework was developed through an inter-governmental and multistakeholder partnership process involving representatives from more than 60 OECD and non-OECD economies. The Investment Committee seeks to cooperate with all governments – including those representing weak governance zones – with a view to improving the effectiveness of public policy and creating a pathway to sustained economic development and greater well-being for their citizens.
Finally, the Investment Committee takes note of the interest of companies, NGOs and trade unions in the development of this instrument, the contributions they have made to its development and their continuing interest in its use. The Committee also expresses its desire to work with them to promote the use of this Tool and, in particular, to continue to work with them to develop a more extensive resource guide for companies wishing to identify sources of practical experience in meeting the challenges this Tool is intended to address. It suggests using the Risk Awareness Tool in the OECD dialogue with non-member countries.
