- Asia's largest economies - China, Japan, India, South Korea and Indonesia - are all undergoing or approaching important leadership transitions. The resulting politics are not conducive to effective leadership, limiting prospects for positive reforms and, in some cases, raising risks of populist policies that hurt business.
- Despite an upturn in key indicators China faces a structural economic slowdown, not just a cyclical one. It can grow above 7% for years to come, but only if new leaders tackle fundamental structural reforms. Stronger 2013 growth will boost Asia but will not roar back like in 2009; volatility and uncertainty are increasing.
- In an era of weak global growth business is more actively searching frontier markets for opportunities, with Myanmar stealing the limelight in Asia. Investors should understand it as a long-term, uncertain and very challenging bet.
- Operating challenges - ranging from labour and land disputes to governance and transparency issues - will stay high on the watch-list for many business leaders in the world's fastest-growing region. Managing such risks is getting tougher in Asia's high-potential but increasingly complex and competitive markets.
SINGAPORE, Dec. 10, 2012 /PRNewswire/ -- Control Risks, the global business risk consultancy, today publishes its annual RiskMap report. Now in its 30th year, RiskMap highlights the most significant underlying trends in global risk for businesses and investors, and offers insights from the markets that will matter most in 2013.
Introducing RiskMap, Richard Fenning, CEO, Control Risks said: "RiskMap this year describes a world in which certainties are in shorter supply, and leadership more difficult to exercise. Managing companies or countries has become as much about reacting swiftly and decisively to changing circumstances as it has to do with the implementation of a strategy or policy."
RiskMap Asia Outlook
Even as many of Asia's major economies face problems of their own, businesses and investors continue looking to Asian markets for growth as Western economies struggle to shake off the threat of crisis and recession. This trend raises the prospect of another round of consumer- and asset-price inflation as money heads east.
It also brings pressure for new investments and operations in markets where complexity and scrutiny are growing, but most key business risks remain undiminished. The lure of markets like China, India and Indonesia remains strong, while direct investors are increasingly drawn to markets such as Myanmar in the search for untapped potential.
- Sentiment on China will rebound as new leaders settle in and growth picks up, but anyone who thinks 2012 was just another cyclical blip is in for disappointment. Investment-fuelled double-digit growth isn't coming back, 2013 will indicate whether China's new leaders will take on the daunting structural overhaul needed to set a safer course, or tinker and postpone like their predecessors; we are not very optimistic.
- Japanand South Korea will both have new leaders in 2013 - probably Shinzo Abe and Park Geun-hye, respectively. Both will struggle to avoid their predecessors' fate: promising new solutions to old problems, before becoming too bogged down in political wrangling to deliver. The spending of some honeymoon political capital may temporarily relieve policy inertia, but is unlikely to do much to inspire foreign investors.
- Indonesiaand India have key elections in 2014, and related politicking and populism are increasing investment risks in these fragmented and decentralized systems. Despite Indonesia's strengths, complexities in the extractive sector discourage investment while infrastructure and regulatory progress disappoints in both countries. Corruption is under heightened scrutiny from both civic groups and enforcement agencies.
- Investors have been excited by a year of remarkable reform in Myanmar and droves of foreigners scouting deals in Yangon and Naypyidaw. This can obscure the extremely low base from which the business environment is developing, and the immense difficulty of simultaneous political and economic reform. Success will depend on developing institutions to navigate this fraught process, not just on leaders to lead it.
Summing up the outlook for Asia in 2013, Toby Latta, Regional Director for Asia Pacific, Control Risks said: "The emerging and frontier markets in Asia continue to be attractive for businesses seeking alternative areas of growth. However, leadership transitions will add to complexity in several of the region's key markets. Notwithstanding positive growth prospects for the region, business conditions will remain challenging for many, and we see risk retaining a higher position than ever before on every organisation's agenda. In less mature economies, assets, contracts and loans can be adversely affected by government actions. Navigating and managing operational issues will be an area of focus for many businesses."
RiskMap Global Outlook
Emerging markets no longer have a monopoly on political risk, which is at its highest level for decades in developed markets, primarily thanks to Europe's debt crisis. The RiskMap report also looks at how the early promise of the Arab Spring will give way to impatience and continued turbulence across the Middle East. And it sees US foreign policy remaining necessarily global, despite the temptation to shrink from the Middle East and refocus on Asia. Countries featured in this year's report include:
- Brazil, which has weathered the global financial crisis reasonably well, with the feel-good factor of the forthcoming world-class sport events evident. However, significant problems persist. Rampant corruption, high crime rates and inefficient bureaucracy have all tested successive governments, and President Dilma Rousseff is still searching for answers.
- Egypt, where we believe foreign investors need not fear the Muslim Brotherhood. With a number of seasoned business people in its ranks, a pragmatic approach to politics, and its greater appetite for tackling the pervasive corruption left by former President Hosni Mubarak, a moderate Islamist presidency may actually create the political firewall that protects the gains of Tahrir Square.
- Nigeria, which like much of sub-Saharan Africa is a popular investment story, and Lagos specifically has become a symbol of African entrepreneurship and commercial promise. However, the dynamism of this African mega-city belies a bleaker national picture with growth hampered by chronic insecurity, poor infrastructure and a growing gulf between north and south.
Despite intimidating challenges, opportunities still exist in surprising places for those able to map and manage the complexity and risk of a volatile world. RiskMap emphasises how much the ability to exploit these opportunities depends on leaders' ability to embed both resilience and suppleness in their organisations and states.
Notes to Editors:
About Control Risks
Control Risks is a global risk consultancy specialising in political, integrity and security risk. The company enables its clients to understand and manage the risks of operating in complex or hostile environments. Through a unique combination of services, wide geographical reach and by adopting a close partnership approach with clients, Control Risks helps organisations effectively solve problems and realise new opportunities across the world.
www.controlrisks.com
For the RiskMap graphic or for further information please contact:
Control Risks:
Selina Lim
+65-6227-2038 / +65-9108-3620
selina.lim@controlrisks.com
