Description:
Political risk is a top concern for
corporate foreign investors from industrialized but also
developing countries when venturing into emerging markets.
At the same time, these investors maintain a positive
outlook on economic and business prospects in the developing
world, which is expected to attract a growing share of
global foreign direct investment (FDI) as the world economy
slowly, recovers. Positive business sentiment over emerging
markets amid concerns over political perils point to a
sustained need to mitigate these perils. This, added to the
rise of South-based investors, offers opportunities and
challenges for the political risk insurance (PRI) industry.
In the current context of high uncertainty, understanding
how investors perceive and deal with political risks helps
to map out the role of PRI in the emerging post-crisis
investment landscape. This report focuses on FDI and PRI for
long-term investment, and only covers political risk in
developing countries. Although political risk also affects
other forms of private capital flows, these are beyond the
scope of this publication. The main findings of the report
are summarized as follows: i) while political risks top
foreign investors' concerns, the global economic and
financial crisis has not fundamentally altered FDI prospects
for emerging markets; ii) concerns over political risks,
combined with sustained FDI into emerging markets over the
medium term, suggest a growing need for political risk
mitigation and opportunities for the PRI industry; and iii)
the emergence of South-based investors is increasingly
shaping the global FDI environment and presents regional
growth opportunities, but also challenges, for the PRI industry.