It’s been almost a year since Tunisian street vendor Mohamed Bouazizi set himself on fire, sparking a wave of protests in his country and ensuing events that led to what we now refer to as the “Arab Spring”. Today, these events were remembered, and the future of the region debated, during a seminar MIGA co-hosted with the Financial Times in London on Managing Global Political Risk: Old Risks, New Moment.
Tunisia’s Minister of Finance Jalloul Ayed spoke passionately, eloquently, and with tremendous insight about the challenges and opportunities facing his country, noting many look to Tunisia as setting the pace and showing the way. “So far so good”, he noted, adding “democracy is now hopefully part of our political tradition.” But there is a daunting road ahead, dealing with the priorities, creating jobs for the hundreds of thousands of unemployed youth, encouraging much-needed investment. His biggest concern? “We cannot lose focus; we have to reform and get the job done.”
His comments touched off considerable debate about potential for true political reform and democratic governments and potential for investment, especially foreign investment, that can help lead the region onto a strong development path. Overshadowing the discussion of course was the euro zone crisis, what happens next in Brussels, and what happens with sovereign debt. Because in today’s interconnected world, everyone at the event understood deeply that much of what happens in the region will depend on the ability to “get Europe right.” The region needs investment, but that means sponsors and lenders have to be able to raise capital for the important projects that governments cannot fund in infrastructure and other areas.
And this completely ties in with MIGA’s latest annual publication World Investment and Political Risk launched at the seminar. A survey for the report MIGA conducted with the Economist Intelligence Unit shows that events in the Middle East and North Africa have had a negative effect on foreign direct investment, but that a significant majority of global investors said they have not changed their investment plans. Charles Paradis of Bouygues Construction noted it is business as usual for his firm, though the constraint of banks pulling back on lending due to the current economic turbulence put a pinch on investment. So his company is turning to multilaterals, including MIGA, for assistance. The bottom-line hope amongst many on the panel and in the audience is that transition in the region is coupled with political stability, which in turn could help contribute to economic development.
Another panel debated expropriation, the legalities of it, risks to investors, how to mitigate against the risk. This also pertains directly to MIGA’s report which notes the probability of disputes between governments and foreign investors is materially increased by an economic shock and/or significant political shift. Evidence also shows that investor disputes are more likely to be resolved—avoiding outright expropriation— by democratically elected governments rather than non-democratic regimes. Another interesting topic that prompted more debate well into the lunch hour.
The panels and the audience couldn’t tackle everything at today’s half-day seminar. There is so much to consider, so much change, risks, and possibilities on the road ahead for the global community and in particular the Middle East and North Africa region. But they certainly engaged to give it a good try.