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Maplecroft releases new high-level analysis of operational and reputational risks in Angola, Indonesia, Nigeria, Philippines and South Korea

02/06/2011

Angola

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

The government of President Dos Santos has taken overt measures to silence opposition and has demonstrated itself to be increasingly sensitive to criticism; a trend which could deteriorate in the lead-up to the upcoming elections in 2012. The 2010 arrests of 38 activists in the oil-rich Cabinda province indicate that some of the government’s crackdown on freedom of expression has been targeted at critics of oil and gas investment in the country. As the government continues to crack down on dissent, it is likely that energy companies will become vulnerable to criticism that they are benefiting from repressive policies of an autocratic government with which they might be accused of being too close.

Compliance with environmental legislation and Environmental Impact Assessment guidelines in Angola remains deficient, and the enforcement capacity of the government is very weak. Inspection and enforcement mechanisms are overall inefficient and ineffective, owing to a lack of institutional capacity, institutional collaboration, and properly trained staff. Given the poor quality of environmental governance, businesses should apply the highest international environmental standards to avoid negative reputational consequences and potential legal actions that may be undertaken as a result of environmental damages.

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Indonesia

Maplecroft's in-depth Country Risk Report on Indonesia 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.

Foreign businesses are at heightened risk from Islamist terrorism, with attacks occurring on a regular basis. Attacks increasingly target the Christian community and local police force, although operations against ‘western’ interests have allegedly also been planned in 2010 and 2011. While there has been mention of plots to launch Mumbai-style attacks on western targets in Indonesia, there has not been much specification of plans, limiting the credibility of these statements. In West Papua, alleged human rights violations by the military and limited economic development continue to fuel attacks on foreign employees.

Despite international campaigns against deforestation in Indonesia and a proposed January 2011 moratorium on deforestation, the practice is still on-going. Business activities that directly result in deforestation or encroachment onto native or protected forests are at risk of reputational damage. Further, businesses that utilise products in their supply chain such as palm oil or wood pulp for paper may also face a reputational risk. Businesses should undertake detailed studies on proposed construction areas to ensure that they do not engage in deforestation or encroachment upon native or protected forest.

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Nigeria

Maplecroft's in-depth Country Risk Report on Nigeria 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.

Inter-communal and political violence is an enduring risk in Nigeria; a country which is deeply divided along regional, religious and ethnic lines. These divisions are represented on a nationwide level by a predominantly Muslim north and a largely Christian south. The most recent manifestation of Nigeria’s increasingly polarised society has been severe election-related violence before and after polls in April 2011. Investors face direct security risks to employees and assets as a result of violence, especially during elections and periods of inter-communal tensions. The possible need to employ security forces could create additional cost burdens and may put companies at risk of complicity in the potential human rights violations committed by such forces.

Nigeria is widely perceived to have one of the most significant problems with corruption in the world, despite government efforts to implement anti-corruption policies. Corruption represents a serious risk to business in almost all commercial sectors, whilst corruption is endemic within significant parts of the public sector and government. Foreign investors and businesses operating in Nigeria face significant legal, regulatory and reputational risks stemming from widespread corruption in the country. Thus investors should attempt to mitigate the risks posed by the practice.

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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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South Korea

Maplecroft's Country Risk Briefing on South Korea 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.

The risk associated with political violence is a noteworthy one and is specifically related to the incalculable North Korean leadership. Military confrontation in 2010 has prompted President Lee Myung-bak to revise the posture of his forces, allocate more funds towards firepower and enhance military relationships with both China and the US. As long as North Korea takes a ‘brinkmanship’ approach to diplomacy, political violence will remain a considerable risk in South Korea and consequently to businesses operating there. President Lee Myung-bak’s strong reaction to the bombing of Yeonpyeong Island has indicated that he anticipates more aggression in the future and political violence remains an ever present concern.

Corruption appears to be prevalent within President Lee Myung-bak’s government, demonstrated by the recent allegations of corrupt practice undertaken by a key economic government aide. Chang Soo-man fronted the government’s defence procurement agency responsible for 40% of the South Korean defence budget and has been charged with accepting bribes from a construction lobbyist. Key employees of the Financial Supervisory Service (FSS) are also accused of endemic corruption, accepting bribes from construction project investors, necessitating the initiation of a task force to reform the financial regulatory system. Businesses and investors operating in South Korea will be at risk of complicity in corrupt practice and need to conduct careful due diligence along the supply chain whilst engaging in contracts.

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