The Central African Republic's investment climate has been persistently challenging, characterised by weak institutions and governance deficits. Enterprise diagnostics have been employed as a policy tool to identify constraints, yet their effectiveness and integration into governance reforms remain under-analysed. This analysis evaluates the role and impact of enterprise diagnostic tools on governance and policy formulation. It aims to assess the diagnostic-to-policy linkage and identify mechanisms for improving the investment environment through enhanced governance structures. The study employs a longitudinal policy analysis, synthesising data from national investment climate assessments, World Bank enterprise surveys, and government policy documents. A comparative framework analyses policy adoption and implementation cycles against diagnostic recommendations. A significant disconnect exists between diagnostic identification of constraints and subsequent policy implementation. While diagnostics consistently highlighted corruption and contract enforcement as primary impediments, fewer than 30% of the corresponding policy recommendations were fully enacted. This gap is attributed to institutional fragmentation and cyclical political instability. Enterprise diagnostics alone are insufficient to drive governance improvement in fragile states. Their utility is contingent upon integration within a coherent, politically-engaged institutional framework capable of sustaining reform beyond the diagnostic phase. Policymakers should establish a permanent, multi-stakeholder oversight body to monitor diagnostic implementation. Future diagnostics must incorporate explicit political economy analysis and be coupled with sequenced, prioritised action plans with dedicated funding and accountability mechanisms. investment climate, enterprise diagnostics, governance, policy implementation, fragile states, institutional reform This paper provides a novel analysis of the policy absorption capacity for business environment reforms, introducing the concept of the 'diagnostic-policy implementation gap' as a critical framework for understanding reform failure in post-conflict economies.
Nzale et al. (Thu,) studied this question.