Global stability is unlikely to improve this year, increasing political risks for investors, according to Maplecroft’s annual Political Risk Analysis.
Widespread corruption and potentially divisive elections in key markets, increasing terrorism fatalities and aggressive Russian foreign policy have increased the level of risk, the annual analysis stated.
“Poor governance, extreme levels of corruption and civil unrest are among the key challenges facing business operations in the emerging markets over 2015,” said Charlotte Ingham, principal political risk analyst at Maplecroft. “Corruption not only undermines overall governance levels, but also serves as a key source of popular dissatisfaction.”
Corruption and a lack of political will to combat the problem are thought to have driven mass demonstrations in Brazil, India, Ukraine and Venezuela, the analysis stated. Divisive elections in Nigeria, Myanmar, Venezuela and Thailand are expected to increase civil unrest and violence further.
The analysis also highlighted the significant surge in terrorism risks in 2014, with total global fatalities increasing by about one quarter to 18,598 between 1 November 2013 and 31 October 2014 compared with a yearly average of 14,951 in the period 2008 to 2013.
Despite attempts to combat the Islamic State, the upward trajectory of terrorism and political violence is expected to continue this year, the PRA stated. Outside Syria, Iraq and Nigeria, Maplecroft highlights Egypt and Libya as countries to watch, as terrorist incidents have nearly doubled in the past year.
The analysis also states Russia is considered a “grave source of political risk uncertainty”. Western sanctions following its annexing of Ukraine have “effectively shut major Russian corporations out of international financial markets and barred energy firms from further operations in Russia’s oil sector”, the analysis states.
Somalia was ranked the highest out of 198 countries rated on 54 political risks for terrorism, conflict and rule of law.
Top ten countries posing an ‘extreme risk' for dynamic, short-term risks:
3. Central African Republic
4. South Sudan
8. DR Congo