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New briefings and in-depth reports launched – Algeria, Angola, Azerbaijan, Benin, Brazil, Colombia, Malaysia, Mongolia, Morocco, Philippines, Russia

16/06/2011

Algeria

Maplecroft's Country Risk Briefing on Algeria offers detailed analysis and maps of the governance framework, the regulatory and business environment, political violence, human rights, the environment and climate change, plus an economic overview.

Algeria’s history of conflict and its powerful security apparatus contribute to its resilience against ongoing protests. In general, demonstrators have not made total regime change their core demand. Instead, matters of public servant salaries, jobs, affordable housing and an end to repressive security laws have been the central themes. Yet an anti-regime element nonetheless exists, and even ‘reform’ minded activists are seen as a threat to the regime. This is apparent in the move by President Bouteflika to make a series of concessions in order to placate popular unrest. Yet the government’s gesture of reforms, including the end to a decades-old emergency law, has been widely seen as hollow.

An ongoing insurgency targeting security forces poses a risk to foreigners and threatens to disrupt business operations. Attacks in April and May indicate an increase in militant violence, particularly in the northern region. Whilst this uptick has targeted security personnel, there is the risk that violence will incorporate foreigners as well. An escalation in the number of attacks and state retaliation raises the risk to companies operating in the midst of warring parties. Foreign firms associated with the government or its security apparatus may be targeted due to such an association. Moreover, al-Qaeda in the Islamic Maghreb (AQIM) and its criminal affiliates target foreigners, especially through kidnappings.

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Angola

Maplecroft's Country Risk Briefing on Angola offers detailed analysis and maps of the governance framework, the regulatory and business environment, political violence, human rights, the environment and climate change, plus an economic overview.

Instability in Angola is still present as a result of animosity between the ruling MPLA and main opposition party UNITA after the 27-year civil war which ended in 2002 following a peace deal. Separatist rebels continue to fight a low-intensity armed struggle in the oil-rich exclave of Cabinda, situated north of Angola’s mainland and to the east of the Democratic Republic of the Congo. The Front for the Liberation of the State of Cabinda (FLEC) fights against the Angolan government, which it says does not inject enough oil revenue back into the province. Although somewhat fractured, FLEC remains volatile despite government claims they had defeated the insurgency in 2009. Landmines left behind remain a danger throughout the country.

Many families increasingly rely on their children for financial support and the practice of child labour remains endemic to society. Regulation banning child labour is weak in the informal sector where child labour is prevalent. Angola was added to the US Labour Department’s forced and child-labour list in December 2010. The authorities claim that they do not have the necessary resources to ensure compliance in the informal sector. Children are forced to participate in the worst forms of labour in Angola, including child prostitution, with former child soldiers most vulnerable. For foreign businesses operating in, or with supply chains in Angola, the addition of the country to the list highlights the significant risk of complicity in instances of forced and child labour.

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Azerbaijan

Maplecroft's Country Risk Briefing on Azerbaijan offers detailed analysis and maps of the governance framework, the regulatory and business environment, political violence, human rights, the environment and climate change, plus an economic overview.

There are frequent reports of arbitrary arrest and detention of human rights defenders, journalists and political activists in Azerbaijan. Individuals who voice dissident opinions face threats, physical harassment, and also extensive instances of pre-trial detention of over 18 months. The arrest of an anti-government blogger, who helped organise street protests on 2 April 2011 and was sentenced to two and a half years in prison on drug charges, has been condemned by international human rights NGOs. Street protests are unlikely to result in political unrest on a similar scale to that found in the Middle East and North Africa (MENA) region, as demonstrations are insufficiently organised and the security forces are well versed on preventing unauthorised dissent and dispersing protests.

Corruption is widespread in Azerbaijan, although there have been efforts undertaken to prosecute cases. In response to demands by the political opposition for his resignation, President Aliyev has vowed to fight corruption. Major shortcomings and weak implementation were identified in the country’s anti-corruption legislation, by a November 2010 Council of Europe GRECO (Group of States Against Corruption) evaluation report. Moreover, bribery of foreign and international officials, domestic and foreign jurors and arbitrators as well as bribery in the private sector and trading of influence are not adequately addressed by legislation.

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Benin

Maplecroft's in-depth Country Risk Report on Benin offers high-level analysis and illustrative subnational maps of the governance framework, the regulatory and business environment, political violence, human rights, the environment and climate change, plus an economic overview

Companies operating in Benin should expect to deal with severe backlogs as they conduct ordinary bureaucratic procedures. As a result, they are likely to incur lengthy delays and costly processes, as well as a moderate degree of uncertainty. The administration of justice is similarly impaired by inefficiency, resulting in a weak enforcement of contracts and court rulings and putting investors at a risk of added uncertainty and financial costs. Recourse to international arbitration provides scope for increased certainty. Businesses are likely to face attempts to solicit bribes as they conduct business operations, and should thus be particularly mindful of the legal and financial risks posed by allegations of involvement in corrupt practices.

Piracy has become over the years an increasingly significant risk for the whole Gulf of Guinea, although the phenomenon remains prevalent off the coast of Nigeria. Over 2011 Nigerian pirates have nevertheless carried out a number of attempted and successful hijackings off the coast of Benin. Businesses should be aware of the heightened risk of piracy along Atlantic shipping routes which may result in additional transportation costs related to increased insurance costs, re-routing and extra fuel costs. Companies may also need to take on additional costs to hire onboard security forces to protect crewmembers and cargo.

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Brazil

Maplecroft’s Human Rights Report on Brazil offers in-depth analysis, maps, key recent events and stakeholder viewpoints on civil and political rights, human security, access to remedy, and labour rights.

The prevalence of forced and child labour presents significant risks to companies operating in Brazil, particularly in the agricultural and construction sectors. While federal legislation provides a good framework for the protection of labour rights, the geographic vastness of the country and a substantial informal sector make it difficult to enforce labour standards in rural areas. Brazil’s labour standards may be better enforced in the coming years, given that the size of the formal sector is reported to be growing. In late 2010, the Ministry of Labour announced that for the first time Brazil has more formal than informal workers, although unofficial estimates still suggest that the latter make up 55% of the workforce.

Brazil’s 700,000-strong indigenous population does not receive consistent protection from the Brazilian government. Harassment and intimidation have often been used to force indigenous peoples from profitable land. With the plight of Brazil’s indigenous peoples receiving considerable international attention, it is in the interests of foreign companies not to become involved in projects which may lead to the dislocation or mistreatment of these peoples.

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Colombia

Maplecroft's in-depth Country Risk Report on Colombia offers high-level analysis and illustrative subnational maps of the governance framework, the regulatory and business environment, political violence, human rights, the environment and climate change, plus an economic overview.

Colombia’s internal armed conflict shows little improvement in terms of frequency and intensity of attacks and continues to pose extreme human security threats to the civilian population. Social resilience deteriorates as the number of registered internally displaced people continues to rise. The newly adopted Victims Law aims to end the four-decade long conflict, but has yet to be implemented.

Although the risks of political and regime instability are low, the lead up to the October 2011 local elections will certainly increase challenges to levels of democratic governance. Candidates to public offices and other human rights defenders are at very high risk of becoming the targets of human security and civil rights violations. Allegations of corruption also continue to surface in Colombia, and often relate to the awarding of contracts at the local level. There is therefore a high risk of complicity in corrupt practices for businesses operating in the country. Economic and business conditions remain positive but companies should pay close attention to upholding labour rights and engaging indigenous communities in consultations over proposed projects that may affect their lands.

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Malaysia

Maplecroft’s Human Rights Report on Malaysia offers in-depth analysis, maps, key recent events and stakeholder viewpoints on civil and political rights, human security, access to remedy, and labour rights.

Malaysia has been placed in the ‘high risk’ category in Maplecroft’s Human Rights Risk Index for the second consecutive year. Maplecroft’s report reveals that freedom of speech and press are severely restricted in Malaysia. Despite constitutional guarantees, the government often invokes restrictive laws, which it claims is necessary to protect national security and ensure public order. Moreover, there are frequent reports that journalists are subjected to harassment and intimidation by politicians and businessmen who do not tolerate negative media coverage. Consequently, business may be perceived to be complicit when investing in companies with extensive state involvement.

Citing Maplecroft’s 2011 Working Conditions Index, the report highlights Malaysia’s ‘extreme risk’ status, which has accompanied a deterioration of working conditions. This reflects the excessive working hours in the manufacturing and agricultural sectors, the absence of a national minimum wage and poor occupational health and safety records in the manufacturing sector. Malaysia presents a higher risk in this respect than a number of its regional counterparts, including the Philippines (‘medium risk’), Singapore and Viet Nam (‘high risk’). Businesses face financial and operational risks where excessive working hours and poor workplace health and safety conditions result in occupational accidents and illnesses.

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Mongolia

Maplecroft's Country Risk Briefing on Mongolia offers detailed analysis and maps of the governance framework, the regulatory and business environment, political violence, human rights, the environment and climate change, plus an economic overview.

Mongolia’s foreign relations are largely driven by the country’s interaction with China and Russia. Extensive economic dependence can however lead to problems – should China ever choose to drastically reduce its relations with Mongolia, the impact on the economy would be significant. While there is no indication that this will happen, the relationship between the two countries has not been entirely smooth. Growing Russian influence has also had an impact on attempts by western donors to bring standards of corporate governance to the country. For example, the US had agreed to give US$285 million to renovate Mongolia’s existing railroad, but one of the conditions for the aid was an external audit of Ulaanbaatar Railway. This condition was blocked by Russia, forcing the Mongolian government to come up with replacement projects on which to use the US funding.

Weak rule of law and significant corruption present direct challenges to doing business in Mongolia. The mining and banking sectors have been identified as emerging areas for potential corruption due to the potentially enormous spoils from these sectors. Public officials may be inclined to extract bribes in licensing or embezzle mining revenues. However, accountability may increase with the draft mining law, currently under review, which aims to improve the social benefit of the country’s mineral resources and will likely establish improvements in transparency within the sector.

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Morocco

Maplecroft's Country Risk Briefing on Morocco offers detailed analysis and maps of the governance framework, the regulatory and business environment, political violence, human rights, the environment and climate change, plus an economic overview.

Morocco now risks an increase in attempted acts of political violence in light of a developing protest movement and environment of regional unrest. Main sources of potential violence remain Islamic extremists, as evidenced in the 28 April bombing in a Marrakech cafe. Tourists and foreign workers continue to be soft-targets of extremists. Security forces have claimed to prevent attacks in the past yet the detention and alleged torture of suspects adds a source of tension between the government and the people. Social activism has remained largely peaceful and not directed towards foreigners, but this environment may be exploited by militants, resulting in a potential escalation of violence.

Investors continue to face a challenging business environment in Morocco. Sources of complaint include delays in processing and the overall level of bureaucracy. As indicated in the World Bank’s Doing Business Report 2011, Morocco suffers from long delays to establishing businesses, a high number of procedures required for paying taxes, and hurdles in hiring and firing staff, among other hindrances. Foreign companies also face a tendering process insufficient in terms of information and transparency. In a global and regional environment, where scrutiny of corrupt practices has become intense, companies may face greater examination and criticism when competing for and potentially winning bids. Firms will benefit from actively and transparently operating according to international best practices standards.

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Philippines

Maplecroft's in-depth Country Risk Report on the Philippines offers high-level analysis and illustrative subnational maps of the governance framework, the regulatory and business environment, political violence, human rights, the environment and climate change, plus an economic overview.

While the government is keen to encourage foreign investment and provides incentives to try and do so, the complicated regulatory framework of the Philippines remains an obstacle to drawing more foreign companies or investors. Amongst the key problems deterring investment are complicated procedures for starting and closing a business, corruption, a complicated tax system and several sector specific restrictions on foreign investment. When investment disputes do arise, they are very rarely solved quickly. Reaching final settlement often takes years, and the average time it takes to enforce a contract is significantly higher than in most countries in the region. Investors thus face the risk of operations being disrupted by drawn out legal processes.

The southern Philippines continues to be used by terrorist groups as a base to organise, raise funds, train and operate. Here, the government is confronted with a long-standing separatist conflict on Mindanao Island and the Sulu archipelago, as well as a communist insurgency. The presence on Filipino soil of foreign Islamist outfits is also a cause for concern. Terrorist violence in the southern Philippines poses a high risk to foreign companies operating in the area. The communist insurgency in particular targets foreign companies in a bid to put pressure on the central government. Personnel of foreign companies are at risk of kidnapping by insurgents.

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Russia

Maplecroft's in-depth Country Risk Report on Russia offers high-level analysis and illustrative subnational maps of the governance framework, the regulatory and business environment, political violence, human rights, the environment and climate change, plus an economic overview.

Russia’s economic growth is expected to return to 4% in 2011 and 4.4% in 2012, signalling a recovery from the 7.8% contraction witnessed in 2009 (IMF data). However, the economy remains highly dependent on commodities for revenue, with tax collection poor and non-commodity growth weak. With Russia’s abundance of natural resources and large market, prospects ought to be bright, however, the country is hampered by bureaucracy and limitations on foreign ownership that have deterred more substantial investment.

The World Bank assesses that climate change poses a “severe threat” to Russia. Temperatures are rising faster than the world average. The effects of climate change are expected to be particularly acute in northern regions. Melting permafrost results in costly deterioration to infrastructure, including oil and gas extraction sites and pipelines that are critical to economic vitality. Widespread forest fires that took place in the summer of 2010 have also been attributed to climate change dynamics. Businesses should be aware of the infrastructure damage risk stemming from both increasingly frequent natural disasters and more gradual structural decay. Operations in Siberian regions will be especially vulnerable, with the operational costs potentially prohibitively high. 

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