With their multiplicity of chronic problems, these countries pose some of the toughest development challenges. Poor governance and extended internal conflicts are common among these countries, which all face similar hurdles: weak security, fractured societal relations, corruption,breakdown in the rule of law, and lack of mechanisms for generating legitimate power and authority. As low-income countries, LICUS also have a huge backlog of investment needs and limited government resources to meet them.

Past international engagement with these countries has failed to yield significant improvements, and donors and others continue to struggle with how best to assist fragile states. LICUS are characterized by weak policies, institutions, and governance. The Bank identified 25 such countries in fiscal year 2005. These 25 countries have a number of similarities: their infant mortality rate is a third higher than that of other low-income countries, life expectancy is 12 years lower, and their maternal mortality rate is about 20 percent higher.

There are also important differences among LICUS. Some grew at around 4 percent per annum during 1995-2003. Others had negative growth rates of a similar magnitude. Some have abundant natural resources, while others are resource-poor. These differences are recognized in four business models that the Bank developed to work with countries in crisis: deterioration, prolonged crisis or impasse, post-conflict or political transition, and gradual improvement. More >