The Risk Report series, supported by the Funk Foundation, offers a new analytic approach to assess political risks and their potential consequences in 25 countries. An analysis of the country’s most important conflict lines, influential people and upcoming events reveals the impending changes in a country. Against the backdrop of entrepreneurial decision-making in light of direct investments or transactions the series also shows how these changes affect the attractiveness of overseas sites.
All reports will be published and downloadable by mid-July on this website. Reports will be available on Iran, Belarus, Turkey and Egypt, and many more.
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Risk Report Brazil (07/2018)
Brazil is the “B in BRICS” – the largest economy in South America and one of the leading emerging markets of the 21st century. But how much of this positive development trend has remained after five years on consecutive crisis? Corruption scandals at the very top of the state, mass protests and an economic recession have permanently clouded the prospects for stability. Presidential elections, to which many observers attribute a trend-setting significance, are scheduled for October this year. Will Brazil succeed in reverting to its former status as a regional power hub and global economic asset, or will it turn to an inward-looking country struggling to cope with internal crises in the future?
Risk Report China (07/2018)
China’s economic and political rise is and remains the talk of the town – albeit currently rather involuntarily due to the increased tensions with the United States and the threat of a trade war. Beijing appears to see itself less as a revisionist power vis-a-vis Washington, yet claims to return to its traditional place as the Middle Kingdom, among others through the enormous “Belt and Road Initiative“. How will this change China’s relations with the outside world? President Xi Jinping not only declared himself an advocate for free trade in the past year, he is also following in the footsteps of Mao Zedong to leave his mark on Chinese domestic politics. Will he be powerful enough to enforce unpopular reforms such as inefficient state-owned enterprises, market access or financial market regulation?
Risk Report Egypt (07/2018)
From anchor of regional stability to failing giant and back? After his re-election in March 2018, Egyptian President Abdel Fattah al-Sisi wants to put his country, with 90 million inhabitants the most populous of the Near and Middle East, also back on the economic track. The second strongest economy on the African continent experienced significant domestic and violent upheavals in recent years, but al-Sisi’s autocratic rule is seen by many as a mid- and long-term problem rather than a sustainable solution. Will he nevertheless succeed in implementing urgently needed structural economic reforms, rehabilitating the dilapidated state budget and luring investors into the country?
Risk Report South Korea (07/2018)
Over the past 60 years, South Korea has developed from the agricultural state it was after the War into one of Asia’s most modern economies, with large companies producing goods highly sought after around the globe.
And yet, the sheer frequency of corruption scandals has undermined trust and confidence of not only many South Koreans – but also of international partners and potential investors. Korea’s economy is in urgent need of structural reforms, to give small and medium-sized enterprises enough breathing space and to enable healthy growth and innovation. President Moon Jae-in has pledged to reform and appears to shake things up, especially in relations with North Korea. Will he succeed in preserving South Korea as an economic and investor friendly wonderland is spite of major demographic pressure?
Risk Report Thailand (07/2018)
For Thailand, 2018 could be a decisive year. Elections are due in November and domestic unrest and protests over the sluggish economic growth and military rule loom large. Yet how willing is the junta, ruling Thailand since 2006, to even consider returning to the path of democratization? While overall investment from abroad in Thailand, which is currently well below its potential growth, is declining, the involvement of German companies in Thailand- after all around 600 – has increased significantly in the recent years. Will Thailand be able to overcome the state of political instability in the short and medium term – even without a strong king? And what opportunities and risks do investors have to consider?
Risk Report Ukraine (07/2018)
Since the 2014 Maidan protests and the subsequent Russian annexation of the Crimean peninsula, Ukraine‘s public image had been determined by the war in the east of the country, but also domestic scandals and crises, which had triggered dramatic economic consequences. Although the country remains highly dependent on Russian energy supplies, and despite ongoing tensions, especially German companies have not withdrawn from Ukraine. But despite a promising IT industry and visa liberalization, Kiev is still at a crossroads regarding its relations to especially Western investors. Hence, Ukraine urgently needs to modernize economic structures and combat rampant corruption. The 2019 Elections loom large, will Ukraine succeed in implementing reform processes and embark on a sustainable development towards stability and economic growth?
Risk Report USA (07/2018)
Nearly two years after the surprise election of US President Donald J. Trump, the United States appears to remain in domestic and foreign policy turmoil. To many, this administration remains a factor of unpredictability. Washington’s European partners in particular are wondering to what extent the US is currently even interested in cooperation on global issues such as climate change, but also in terms of free trade and tariffs. If not, how long can we expect the current “America First” confrontation course to last? It is apparent, on the other hand, that this government is more entrepreneur-friendly than others – which new opportunities may arise for non-American companies and what are the risks beyond Trump’s term of office?
Risk Report Poland (05/2018)
Could Poland lose its position as the top investment location in Central and Eastern Europe? Poland is the third-largest consumer market in the region, attracting investors and international companies with its strong economy, well-developed infrastructure and a considerable high-skilled labor force. However, since 2015, Poland, which remains the largest recipient of EU cohesion funds, repeatedly made negative headlines, inter alia with controversial judicial reforms. In addition to subsequent tensions with Brussels, the confrontational course of the ruling right-wing conservative PiS party has raised heightened uncertainty for foreign companies about political stability and Warsaw’s future economic policy. Amid this highly volatile situation, international partners and investors are advised to pay attention to a number of scenarios.
Risk Report Vietnam (05/2018)
With planned economy out of the picture, has Vietnam become a “socialist republic” in name only? In the past decades, Vietnam has written a unique economic and developmental success story. Once among the world’s poorest, the country had continued on the path of reform since the 1980s and has fully opened up to globalization. Companies benefit from low wages, subsidies and tax benefits – many of them have even already relocated their production, from China to there. Nevertheless, in order for Vietnam to follow the path of a Best-Case-Scenario and remain an island of stability in Southeast Asia, reforms are needed especially in the judiciary and in the fight against corruption.
Risk Report Mexico (05/2018)
Not only due to its geography, Mexico has become a dynamic location for trade and investment in Latin America. Since 2000, it has a free trade agreement with the European Union, German companies alone employ more than 130,000 people in the country. Despite extensive reforms, the outgoing government of Pena Nieto had not succeeded in also boosting growth rates. New uncertainties loom large, given repeated US threats to terminate NAFTA in the case that new rules of origin can’t be agreed upon. The outcome of the Mexican presidential elections in July and its implications act to the challengers the country faces in its near future.
Risk Report Iran (05/2018)
In 2019, the Islamic Republic of Iran celebrates its 40th anniversary. The country, one of the richest countries in terms of resources, has an tremendous economic potential, also because of its approximately 80 million inhabitants, among them many young and well-educated. Both in terms of foreign and security policy, however, the country is facing difficult times ahead. Tehran’s great hopes to escape the decade-long state of international isolation with the JCPOA treaty concluded in 2015 and sanctions partially lifted also threaten to be shattered. At the same time, political and economic reforms are unavoidable also within the country if Tehran wants to prevent a resurgence of recent protests. Which are scenarios beyond the worst-case that could play out for Iran?
Risk Report South Africa (05/2018)
After nearly ten years in office, South African President Jacob Zuma cleared the way for Cyril Ramaphosa in February 2018. Although anything but a newcomer to politics, Ramaphosa had openly opposed corruption and nepotism in state institutions, and his election raises hopes for necessary structural reforms, including in economic policy. In recent years, political instability has unsettled investors as well as devastating agency ratings. In order for the “newcomer” to regain the lost confidence of both South Africans and foreign companies and avoid that the worst-case scenario of an economic collapse will become reality, he will need to quickly create better conditions and enhance legal certainty.
Risk Report Belarus (05/2018)
Will Belarus be able to do the splits between Moscow and Brussels? Often described as Europe’s last dictatorship, Belarus has been under President Alexander Lukashenko’s autocratic rule since 1994 and is considered internationally isolated. Protests in 2017 were followed by increased levels of domestic repression. At the same time, Minsk is seeking better relations with the West, lifting the visa requirements for EU citizens in 2017, along with a liberalization of the digital economy that is seen as revolutionary for the country. Given the current confrontation between Belarus’ key international partners, which are the scenarios likely to expect for the country’s future?
Risk Report Argentina (02/2018)
Argentina is the second largest economy in South America, it is equipped with rich natural resources and attracts investors with comparatively well-trained personnel. However, many foreign companies are put off by the 2001 experience of national bankruptcy and the economic policy under the former presidential pair Kirchner. With the election of the new president Macri, new opportunities are opening up for investor-friendly policies.
The future of the country will depend on how well Macri handles the pressures applied to him by the street and the opposition. The scenarios deal with three different outcomes.
Risk Report Italy (02/2018)
Italy is one of the most important economic powers in the European Union; it is among the 10 largest economies in the world. Yet, due to stricken banks, a crushing tax burden and extreme national debt, which massively restrict its political leeway, Italy is also among the EU states that signal a comparatively higher risk. Over the last months there have even been discussions about an Italian exit from the EU.
The scenarios deal with what kind of consequences the elections in March 2018 and the formation of government might have for the country: From the “sick man” to the model student of Europe – will the election results pave the path for a European economic crisis or will Italy manage to build a broad government coalition and become a strong, reform-oriented, European partner?
Risk Report Saudi Arabia (02/2018)
Saudi Arabia – at present the world’s biggest oil exporter and with a high political influence in the Golf region – is undergoing a process of change. The reform project “Vision 2030” proposed by the new crown prince Mohammad bin Salman is aimed at diversifying the country’s economy, strengthening the fields of education and research and attracting more foreign investors and tourists. Within the population as well as in the extended royal house, opposition against this encompassing reform project has been growing.
The future of Saudi Arabia therefore depends on the successful realization of these reform plans. The scenarios illustrate how a reform failure might affect the liberalization of the country, as well as its relations with neighboring states. However, a moderate implementation could be also possible, at the end of which there would be an improvement of the human rights situation and a political and economic environment that is profitable for investors as well.