Prerequisite for the investor: The Political Risk Map
I departed with a group of colleagues from Istanbul’s Atatürk Airport just a couple of hours before the horrendous attack on the facility last week. We could have been among the passengers at the airport at the time of the attack.
This is a time of terror incidents that have shattered people’s lives in Istanbul, Baghdad and Dhaka, a time for political surprises and, simultaneously, a time of political uncertainties. Who would have guessed that the United Kingdom would exit the European Union, Turkey would take steps to normalize relationships with Israel after the “one minute” incident or that Turkey would make overtures to Russia?
Emerging markets which are similarly attractive to both the Turkish investor and international investors, on the other hand, have uncertainties and, in parallel with them, bigger risks.
In these days when pleasant and unpleasant surprises are abundant, I met with the co-CEO of Aon Turkey, Ferhan Özay. The company, which specializes in risk management, insurance and reassurance broker issues, releases a “Political Risk Map” every year.
This map has been jointly prepared since 2004 by the independent research company of Roubini Global Economics, founded by famous economist Nouriel Roubini.
“The Aon Political Risk Map is an important tool for those with commercial interests in emerging markets,” Özay said.
Meanwhile, let me emphasize that this map covers countries outside the European Union and the OECD.
I asked Özay what aspects should be taken into account according to the “2016 Political Risk Map.” Indeed, at the top of the positive developments is the gradual lifting of sanctions against Cuba and Iran. The Joint Comprehensive Plan of Action between Iran and the EU has occasioned an improvement in Iran’s risk points.
On the other hand, countries such as Tajikistan, Kyrgyzstan and Kazakhstan, which are home to substantial Turkish investments, continue to possess high political and economic risks in association with the inadequate growth in Russia and the slowdown in China.
The Political Risk Map rates countries as low risk, medium low risk, medium risk, medium high risk, high risk and very high risk. The map measures risks through several factors such as political interference, political violence, sovereign non-payment, supply chain disruption, banking sector vulnerability and risks to fiscal stimulus.
African economies, which have attracted more and more Turkish investors, face three problems which are interconnected: Weaker commodity prices, a slowing China and tighter global financial conditions. In Africa, for instance, while things do not look good for Angola, Ethiopia and Gabon are becoming more attractive for the investor.
Ecuador and Venezuela top the countries with the highest risks. According to Özay, the Political Risk Map is gaining more popularity among Turkish investors who like to take risks abroad.