For new macroeconomic and economic policies to achieve optimal diversification results, it is important for countries to strengthen their institutions. As this report has shown, conflict and governance have very substantial implications for diversification.
Conflict always undermines diversification, while good governance (broadly defined) is empirically shown to lead to desirable diversification results. The policy recommendation that flows from these results is that it is important that countries invest in peace-building and peace-promoting institutions that can proactively deal with threats of conflict flare-up or resurgence.
Where conflict exists, be it at the national level or across borders between countries in a given subregion, it is important to have effective institutions to address prevention or resolution. Having conflict prevention and resolution as a key feature of institutions within the RECs is one way in which diversification efforts could be deepened. Countries that aim to deepen diversification also need to invest in good governance structures and institutions. Governance institutions that have to be strengthened should cut across the rule of law and public order – including a judiciary that effectively deals with commercial disputes, as well as tax administration institutions that establish a predictable investment climate.
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