Monday, November 12, 2007

Instability 'threat' to business

Police with Benazir Bhutto supporters in Islamabad, 7 November 2007

The state of emergency in Pakistan will be a worry to investors there

Instability in the world's emerging markets is threatening business prospects in a number of countries around the world, a report says.

According to the Risk Map 2008 report from security analysts Control Risks as many as 57% of emerging markets have a medium political risk or above.

That, it says, could pose a significant threat to foreign investments.

The report says investments in states including Russia, Pakistan, Nigeria and Ecuador may be facing "increased risk".

Control Risks has identified a trend in these countries towards economic nationalism - the promotion of national interests in economic policy.

"Political risk is back and should be worrying investors," said Adam Strangfeld, research director at Control Risks.

"The vast majority of countries worldwide are classified as emerging markets where, increasingly, national political agendas will impact [on] the operational effectiveness of foreign investors."

'Worrying investors'

A further category of "medium political risk" - countries where foreign business is likely to face some disruption or long-term investment security cannot be guaranteed - lists Chad, China, Sierra Leone and Sudan.

A Zimbabwean holds up a new 200,000 dollar note (2 August 2007)

Zimbabwe is considered an "extreme" investment risk

Meanwhile a country with a "high political risk" is one where business is possible, but conditions are difficult or likely to become so in the future.

Afghanistan, Bolivia, East Timor, Iraq, Liberia, Nepal, Palestinian Territories and Venezuela are all seen as being high political risk.

In addition Control Risks has named states it believes are at "extreme political risk" - those in which conditions are hostile to or untenable for business.

These countries are assessed as offering no investment security, where the economy has collapsed and state bodies have ceased to function in a state of war or civil war.

The Risk Map lists Somalia, North Korea and Zimbabwe as those at extreme political risk.

'Reform on track'

The report says Africa is likely to "remain as complex as it is diverse", while in the Americas there is a widening gap between stable and developing countries and those that are politically and socially volatile.

Meanwhile Asia is preparing for elections of "great significance", including a ballot in Thailand.

The report also identifies China and India as continuing "to attempt to keep reform on track amid huge challenges".

In Europe a deteriorating economic situation in central and eastern Europe could exacerbate populism and protectionism across the region, the report says.

And in the Middle East it says the perception of the region as a source of instability and conflict will not change in 2008.

But it points out that the region is home to a "patchwork of resilient regimes that act as guarantors for political stability".

BBC NEWS | Business | Instability 'threat' to business