Aside from the business environment it creates, a government's behavior is significant to the decisions of MNCs in other ways as well. Corporate managers are influenced by the degree to which the government keeps them informed of conflict developments. Numerous firms point to the disastrous approach of Indonesia following the fall of Suharto, when the government cut off communications with foreign corporations altogether.

Investors also consider the degree to which government action in response to war is likely to affect daily business operations. At one time, Sri Lanka's government imposed frequent curfews that hindered late-shift operations and were perceived by MNCs as having a significant negative impact on business practices and productivity. (The current Sri Lankan regime has reformed this policy.)

In countries experiencing conflict, managers closely examine the incidence of power outages and telecommunications interruptions. These are taken by potential investors as an indication that crucial utilities will be unreliable and are viewed by current investors as warning signs that conflict is destabilizing a country. As one executive puts it, "nothing sends rioters into the streets like having the lights go out."

The armed oppositions that concern MNCs most are those that have demonstrated hostility to for eigners or to private ownership of property. The African National Congress, which long espoused a socialist agenda and wide-scale nationalization of industry, was considered extremely threatening by many MNCs active in South Africa. Similarly, fundamentalist Islamic groups, like Afghanistan's Taliban, are considered a danger by Western firms.

Opposition forces that are irredentist in nature (fighting primarily for sovereign control of territory), are of less concern to MNCs. The armed opposition in Georgia has not been as worrisome to executives of the US firm that supplies electricity there. While fighting for independence in the province of Abkhazia, the opposition has indicated no hostility toward private ownership or the presence of foreign corporations. Similarly, MNCs operating in Northern Ireland are confident that private property and the rights of foreign investors will be respected, regardless of whether unionist or nationalist forces emerge victorious.

Beyond the ideological outlook of the armed opposition, specific actions undertaken by the opposition can also influence MNC decisions. Attacks on travel terminals have been perhaps the most significant deterrent. Not only do such attacks disrupt the flow of goods, they also directly affect security of personnel, the top concern of most MNCs operating in areas of armed conflict. Attacks on utilities and telecommunications terminals, like government interruptions of these services, also discourage investment.

Additionally, MNCs examine the likelihood of disruption of other inputs, most notably labor. The opposition's ability to generate strikes and slowdowns is taken by foreign investors as an indicator of likely future disruptions in production. Labor strife is also a sign of faltering government support, even in regions that have not yet been affected by armed conflict. Other large-scale protests are considered telling by corporate managers. In this regard, demonstrations that extend to the populace at large are taken more seriously than student demonstrations, which are both more common and less disruptive to business.

Naturally, attacks on MNC facilities are taken extremely seriously by both current and potential foreign investors and have an even greater chilling effect on investment than attacks on travel terminals. However, such attacks are extremely rare, unless part of a larger ideological mission.

Sector of Industry

The character of a MNC's industry has a significant influence on its willingness to enter or remain in a country affected by armed conflict. Specific characteristics that affect this decision include essential versus discretionary products, technology stability, and supply or market potential.

First, firms producing goods or services essential to the economy feel less at risk from armed conflict than do firms producing discretionary products. One executive at a power producer commented that "someone might get it in his head to score political points by closing or bombing McDonald's. No one scores those points by shutting us down-they just thrust the population into darkness."

Second, firms whose industries have fairly stable technology run the risk that a new government, or an existing government pressured for revenue, will determine that the firm offers no unique advantage to the country. This makes the firm susceptible to re-negotiation of its contracts with the government, changes in its taxation or regulatory environment, and other reductions in the quality of government treatment. Such reductions are frequently referred to as "creeping expropriation," which has come to be seen, in recent years, as a greater threat than outright nationalization. By contrast, firms in industries with constantly evolving technology are somewhat insulated from creeping expropriation, because their presence is necessary if the asset is to receive infusions of new technology and retain its value.

Third, the risk of armed conflict is frequently outweighed by the supply potential of the host country to particular industries. Oil investment continues to rush into Angola because it has among the largest proven reserves of untapped oil and gas in the world. This logic applies to the market side as well. Corporate managers indicate that, until recently, Colombia's ability to attract manufacturing investment despite its ongoing conflict stems from the fact that it is one of the wealthiest markets in Latin America. Similarly, Northern Ireland is valued by US firms as an effective entrepфt to the vast EU market.

Investment Structure

MNCs often seek an investment structure that will reduce risk from armed conflict to acceptable levels. This enhances the MNC's confidence and, perhaps more significantly, improves its ability to raise financing for the project.

MNCs most often mitigate such risk by beginning business engagement in a country with inherently low-risk ventures. Long before an equity investment is made, exports and imports frequently progress to licensing agreements or contract manufacturing. As these ventures prove successful and the MNC gains confidence in the high-risk country, it may engage in low-level equity investments such as post-production assembly, joint ventures, or small, wholly-owned investments. The success of these ventures in turn spawns re-investment. While such "venture progression" is not the universal pattern, it is a strategy MNCs frequently employ in high-risk countries, and one frequently overlooked by investment-attraction professionals.

As the assets at risk grow, many MNCs turn to political-risk insurance (PRI) to limit the risks associated with investment in countries experiencing armed conflict. PRI policies insure against damage caused by civil war, insurrection, or other politically motivated violence. Most PRI policies are global in nature, covering a single corporation everywhere it does business. Insurers may charge a premium when the company seeks to insure assets in a country confronting armed conflict. The research done by PELC indicates that the additional cost of PRI is less of a factor in MNC decisions than the availability of sufficient PRI to cover all the assets that may be at risk. When sufficient insurance is unavailable from the issuer, the MNC may seek supplemental insurance or guarantees from the host-country government. The British government, for example, has provided MNCs in Northern Ireland with "terrorist top-up" coverage to supplement insurance available from other sources.