A significant increase in conflict, terrorism and regime instability in MENA (Middle East and North Africa), along with intensifying political violence and resource nationalism in East Africa, are among the key factors driving a global rise in political risks for investors, according to the sixth annual Political Risk Atlas (PRA) by global risk analytics company Maplesoft.
In addition, the PRA reveals that the potential for societal unrest to exacerbate political instability is heightened in countries such as Bangladesh, Belarus, China, Kazakhstan, Saudi Arabia and Viet Nam. This is due to the erosion of democratic freedoms, increasing crackdowns on political opposition and the brutality by security forces towards protesters, compounded by rising food prices and worsening working conditions.
Maplecroft’s Political Risk Atlas 2014 (PRA) includes 52 indices developed to enable companies and investors to monitor the key political issues and trends affecting the business environment of 197 countries. The Atlas includes both dynamic political risks, which focus on short-term challenges, such as rule of law, political violence, the macroeconomic environment, resource nationalism and regime stability, as well as structural long-term political risks, such as economic diversification, resource security, infrastructure quality, societal resilience and the human rights landscape, all which are essential ingredients of a country’s long term growth environment.
“The trend of increased dynamic political risk is largely driven by longer-term societal challenges, such as threats to human security and the undermining of political freedoms by oppressive regimes,” states Maplecroft CEO Professor Alyson Warhurst. “This increases the potential for societal unrest and instability, particularly in countries with high levels of social gains, such as education and IT literacy, among a disenfranchised youth.”
Countries categorised as ‘extreme risk’ in Maplecroft’s Oppressive Regimes Index increased from 16% in 2011 to 23% in 2014. More than 50% of countries are now categorised as ‘extreme’ or ‘high risk’ in this index – a source of significant concern for foreign investors that may become complicit with the actions of these regimes or face disruption to business continuity as a result of societal unrest. The countries with the most significant disparity between political freedoms and social gains, with the highest potential for societally forced regime change, are Uzbekistan (ranked 8th inthe Oppressive Regimes Index), China (9th), Saudi Arabia (11th) Turkmenistan (12th), Belarus (16th), Cuba (22nd), Bahrain (24th), Viet Nam (25th), Kazakhstan (32nd) and UAE (42nd).
www.belsat.eu/en, via maplesoft.com
