World Investment and Political Risk

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These annual reports about world investment trends and political risk are produced by the Multilateral Investment Guarantee Agency of the World Bank Group.

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    World Investment and Political Risk 2010
    (World Bank, 2011) Multilateral Investment Guarantee Agency
    Political risk remains the top preoccupation for foreign investors operating in developing countries over the next three years, in spite of persistent concerns over the global downturn in the short term. The global economic recession triggered by the financial crisis that has unfolded over the past two years has not spared the developing world. Yet, the fragile and modest recovery now under way is being led by developing countries, which are expected to remain attractive destinations for Foreign Direct Investment (FDI). In light of overt political risk perceptions, the revival of FDI to these destinations calls for continued risk mitigation, including Political Risk Insurance (PRI). In the short term, concerns over the fallout from the financial crisis appear to dominate investors' preoccupations. Yet, FDI projections and surveys conducted for this report suggest that investors are cautiously optimistic about prospects for a global economic recovery led by the developing world. As a result, FDI to developing countries is expected to recover over the medium term. Investors from the primary industries, as well as those based in developing countries, appear particularly bullish in their investment intentions. As concerns over the health of the global economy recede, political risk considerations will return to pre-eminence for investors from both developed and developing countries.
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    World Investment and Political Risk 2009
    (World Bank, 2009) Multilateral Investment Guarantee Agency
    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.