Canadian Underwriter

Dynamic political risk increasing in Middle East, improving in other growth markets

December 17, 2013   by Canadian Underwriter

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Instability as a result of the “Arab Awakening” has increased the level of dynamic political risk for foreign investors in the Middle East and North Africa a significant amount, according to the 2014 Marsh-Maplecroft Political Risk Map.

In the MENA region, more than 60% of countries have experienced a significant increase in the level of political violence since 2010, highlighting long-term risk implications of “societal forced regime change,” according to Marsh, which produced the map jointly with risk analysis and mapping firm Maplecroft.

The map highlights dynamic political risks across 197 countries, including conflict, terrorism, macroeconomic stability, rule of law, and regulatory and business environments.

Since 2010, 17 countries have experienced a significant increase in their level of risk, and more than half of those are in the MENA region, according to the map. East Africa in particular had the most countries with an increase in political violence.

Syria experienced the greatest risk increase, and ranks second-highest risk behind Somalia. For the first time, Egypt has also now been categorized as “extreme” risk for political violence, Marsha and Maplecroft also note.

“The increase in political violence in East Africa presents significant challenges to foreign investors looking to the region following the discovery of substantial oil and gas reserves,” Alyson Warhurst, CEO of Maplecroft noted in a statement.

“Underlying societal risk revealed in Maplecroft’s structural political risk index is the key driver of raised short term dynamic political risk in MENA and beyond.”

However, dynamic political risk has improved significantly since 2010, in six growth markets in particular, the map suggests: the Philippines, India, Uganda, Ghana, Israel, and Malaysia.

“This steady improvement in part reflects a fall in political violence in the Philippines, India, and Uganda, and significant improvements in governance levels in Malaysia and Israel,” the companies suggest. “A positive business and macroeconomic environment has also helped to lower the overall level of risk in these key economies.”

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