Recent events surrounding the Dubai World debt standstill raise broader questions about the political risks of investing in the Arab World. The good news is that growth and FDI have risen markedly in recent years; yet, risks undoubtedly remain. I researched the issue in depth for a new Perspectives from the Multilateral Investment Guarantee Agency (MIGA) that highlights the diversity of risks within the Arab World.
The Arab World, like other developing regions, provides both potential risks and rewards for international investors. The most important message from the Perspectives piece, though, is that risks vary significantly by country, by sector, and by project. As a result, it’s crucial not to take a one-size-fits-all approach to investing in the region.
Case in point: The Arab World is perceived as being prone to war and civil disturbance. Yet available data from the Berne Union shows no claims for war and civil disturbance in Arab countries. Here we see a considerable gap between perceptions and reality.
I recently represented MIGA in a special working group of the OECD focused on Iraqi reconstruction. It was an interesting and useful gathering, attended by Iraqi civil servants from across the administration, export credit agencies, and of course private sector representatives interested in doing business in the country.
On Wednesday, May 5, 2010, MIGA convened a panel discussion on the state of political risk in the world economy, which proposed to answer the pregnant question: “Are we moving into a riskier world?”
MIGA Chief Operating Officer, James Bond, moderated a panel that included:
Recently, my colleague Cara Santos Pianesi flagged an op-ed she thought might interest me. The aptly-titled op-ed, Resource wealth need no longer be a curse was written by Mats Berdal and Nader Mousavizadeh and published in the FT on March 25th.
Lebanon is a country of expatriates. Nine million of its 11 million inhabitants live abroad, in places as diverse as Terra del Fuego, Côte d’Ivoire, and Columbus, Ohio. The Lebanese Diaspora remains profoundly committed to its mother country, remitting money to family back home, investing, and visiting as tourists.
MIGA recently launched its new World Investment and Political Risk report in London to a gathering of investment and political risk experts. Based on a joint MIGA – EIU Political Risk Survey conducted last year, the report underscores that political risk remains one of the main obstacles to FDI in emerging markets.
Breaking news! The OrPower4 Project has been awarded:
African Renewables Deal of the Year 2009 from Project Finance Magazine.
After a long journey to Nairobi, in the midst of a much-needed shower, the room went black. Fortunately the lights came on a few seconds later. My good fortune was only due to the fact that the hotel’s generator kicked in – with its attendant high cost and environmental and safety hazards.
I’m no stranger to the power outages that present themselves nearly every evening in this part of the world, but it’s one thing to experience a minor inconvenience, quite another for the business that is losing money due to power outages, the student who is losing out on opportunities because she can’t study at night, or the doctor trying to treat a victim of a late-night road accident. And these are the lucky ones. Only 15 percent of all Kenyans have any access to electricity.
My thanks again go out to the World Bank InfoShop for the opportunity to hear and meet former World Bank Chief Economist—and, indeed, Nobel Laureate—Joseph Stiglitz, who came to speak yesterday about his new book, "Freefall: America, Free Markets, and the Sinking of the World Economy". His trademark frank analysis was both refreshing and enlightening; especially interesting, if troubling, was his view that central bankers’ inflation-hawk instincts will increase the likelihood of a double-dip recession.
This was a very general presentation about some of the hubristic, anti-regulatory thinking that created the conditions for the recent crisis and the errors in countries’ responses to it. Stiglitz also excoriated the failures of political will and the power of the strongly entrenched, well-represented interests currently standing in the way of true reform. These are his views, of course—I make no claims to know enough about what “really” happened to be authoritative on the subject, other than to say that his arguments were persuasive and his examples illuminating.
One subject I was surprised to hear him discuss, however, was the role of interconnected global capital markets in financial crises. This was a key issue raised after the Asian crisis in the late 1990s; less so for the current “great recession”—although Stiglitz’s tag line that this was a crisis “made in America” and exported around the world reflects a common conclusion of much recent analysis.