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New analysis from Maplecroft identifies key investment risks in Ecuador, Iraq, Pakistan, Sudan and Turkey

25/05/2011

Ecuador

Maplecroft's Country Risk Briefing on Ecuador offers detailed analysis and maps of the governance framework, regime stability, external relations, corruption, the regulatory and business environment, political violence, human rights, and the environment and climate change.

President Correa is likely to run for a further term in office in the 2013 elections. However, political polarisation will likely expand, increasing the threat to regime stability. This risk was demonstrated by an attack on President Correa by protesting Ecuadorian police forces in September 2010 that culminated in him being held captive for several hours until military forces secured his release. Correa alleges that the attack was an attempted coup d’état. However, the protesting forces vehemently deny the charges, which they initiated in protest at the imposition of austerity measures. The revolt could signify a return to a lack of political stability and points to the potential for further uprisings, but President Correa has reclaimed stability and control since his brief detention.

The Ecuadorian government continues to show commitment to its leftist agenda, which could result in further attempts at strengthening state control over natural resources and key economic sectors. The US Department of Commerce warns that “the legal complexity resulting from the inconsistent application and interpretation of its existing investment laws complicates enforcement of contracts and increases the risks and costs of doing business in Ecuador”. Since the new Constitution was approved in September 2008, the state’s role in the economy has significantly expanded. This has particularly been the case in the extractive industries where foreign investment is subject to government approval and tightened regulations.

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Iraq

Maplecroft's in-depth Country Risk Report on Iraq offers high-level 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.

Iraq continues to underachieve commercially and economically. Its overall business environment has deteriorated according to World Bank data, which places the country 166th out of 183 in terms of its overall business environment. Businesses continue to face a multiplicity of risks when undertaking projects in Iraq. Infrastructure may be damaged as a result of attacks. Given the security situation in the country, vandalism and theft of valuable assets constitute a credible risk.

Corruption is rampant in business and government. The country is categorised as ‘extreme risk’ in Maplecroft’s Business Integrity and Corruption Index. Recent protests across the country underscore the public’s frustration with obvious corrupt practices. The response of some officials has been to put the spotlight on individual corrupt ministries and officials. Yet this ignores the wider-scale systemic nature of the problem. As such, the practical business challenge of endemic corruption is likely to remain more or less unchanged. Companies continue to risk complicity in corruption, in contravention of international and domestic laws. Investors and businesses are likely to face heightened reputational risk as attention inside Iraq and abroad increasingly focuses on corrupt practices.

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Pakistan

Maplecroft's in-depth Country Risk Report on Pakistan offers high-level 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 death of Osama bin Laden may presage a surge in retaliatory attacks, but it is hoped that the loss of such a charismatic figure will have a demoralising effect which reduces al-Qaeda recruitment in Pakistan. However, the intensity and frequency of terrorist incidents across the country point to a state that is arguably at war. Between January 2003 and 20 February 2011, terrorist attacks across Pakistan have resulted in 33,213 casualties. Terrorism attacks in Pakistan present risks to infrastructure, business operations, supply chains and to foreign staff. Businesses operating in Pakistan may need to consider private security assistance to protect their staff and employees, although this carries risks if security staff are not screened, trained and managed responsibly.

Child labour is a widespread problem in Pakistan. Children engage in child labour to their detriment of their education due to high rates of poverty and must financially contribute towards the household income. It is documented that there are over 1 million child labourers working in hazardous sectors, such as brick kilns, mining and agriculture. Companies may face reputational risks in relation to allegations of complicity with suppliers accused of using child labour. Such reputational risks can have significant financial ramifications, for example when investors divest, leading to a loss of market share or reduction in competitiveness.

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Sudan

Maplecroft's Country Risk Briefing on Sudan offers detailed analysis and maps of regime stability, corruption, political violence, human rights, and the environment and climate change.

After decades of civil war and unrest, Sudan is scheduled to be formally partitioned into two countries on 9 July 2011. Negotiations over citizenship, border demarcation, the division of Sudan’s roughly US$38bn of foreign debt and over oil-revenue sharing remain to be resolved. Thus, there is a risk of escalating inter-communal violence and ongoing tensions between the North and the South. It appears likely that the South will review the international business agreements which it is set to inherit from the Khartoum government. Probable political instability in the nascent South Sudan may expose investors to risk, although the highly underdeveloped region, which is eager for investment, may also present business opportunities.

Escalating tensions in the build-up to independence could result in extensive instability in the region. Armed groups allied to the North and South have engaged in widespread violence during 2011. Hundreds of people are reported to have been killed in clashes since the January 2011 referendum, whilst the North has occupied the disputed Abyei region and has been accused of razing southern-supporting villages in disputed oil-rich regions. The violence in 2011 highlights Sudan’s entrenched ethnic, cultural, religious and regional tensions. Low-level conflict and tensions in Darfur, among other fractious regions, also remain an acute concern. Unrest in Darfur, and other regions which are set to remain in the North, could be accentuated by unrest in the South. For investors, political violence represents a risk to both employees and property, whilst businesses should also be aware of how their operations impact upon regional conflicts and tensions.

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Turkey

The Labour Standards Report on Turkey offers in-depth analysis for all major labour issues, country scores, maps, key recent events and stakeholder viewpoints.

Child labour is used in a large number of sectors in Turkey, which is categorised as a “high risk” country in Maplecroft’s 2011 Child Labour Index. The worst forms of child labour are particularly prevalent in agricultural and forestry activities.  According to the US Department of Labor’s Bureau of International Labor Affairs (ILAB), citrus fruits, cotton, cumin, furniture, hazelnuts, peanuts, pulses and sugar beets are among the goods produced by child labour in Turkey. However, the decreasing prevalence of child labour in most sectors has lifted the country out of the “extreme risk” category. In the absence of rigorous social auditing and monitoring mechanisms throughout operations and supply chains, businesses face risks of complicity in the use of child labour.

Discrimination is widespread in Turkey, with women, sexual minorities, persons with disabilities and people living with HIV/AIDS frequently experiencing discriminatory treatment. Discrimination against women is particularly prevalent and starts at an early age. A September 2009 study by Turkey’s State Planning Organisation (SPO) and the World Bank reveals that the share of women participating in the labour force dropped from 34.3% in 1988 to 24.5% in 2008 (although this increased to 27.2% in February 2011). The study indicates that Turkey’s female labour force participation rate in 2008 dropped below that of any country in Europe, Central Asia, and the OECD as a whole.

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