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New in-depth Maplecroft reports reveal investment risks in Colombia, Argentina, Bosnia-Herzegovina and Cambodia

15/12/2010

Maplecroft’s latest in-depth country reports analyse and detail the investment risks and opportunities existing for companies in Colombia, Argentina, Bosnia-Herzegovina and Cambodia.

Colombia

The in-depth Colombia Country Report provides a high-level analysis of risks to investments in the country, including business integrity and corruption, conflict and terrorism, human rights, governance and the regulatory and business environment.

Corruption is a major risk to business in Colombia, which is estimated to cost the country US$6 billion each year. Anti-corruption legislation does exist but the ‘parapolitics’ scandal, which exposed extensive corruption in Congress, has hindered the ability of the legislature to effectively create and implement relevant laws. Companies operating in Colombia need safeguards against corruption. They should establish clear ethical codes of conduct and guidelines on how to address potentially compromising situations in their dealings with local business partners and suppliers, as well as with government officials and the security forces.

The ongoing conflict involving terrorist groups such as FARC and ELN also presents significant risks to businesses operating in Colombia. Between April and October 2010, there were 65 terrorist attacks in Colombia, resulting in 42 deaths. Recent targets have included foreign operated mines. As such, companies should ensure that their facilities and employees have adequate security, and should regularly monitor the situation in country. However, businesses that rely on the protection of security forces are also at risk of being associated with human rights violations and should instigate best practices to minimise the risks of complicity with any abuses.

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Argentina

The goal of this report is to provide a high-level analysis of risks related to potential investments in the oil and gas sector in Argentina. These include: governance, the regulatory and business environment, political violence and human rights.

While Argentina’s regulatory framework is generally in line with international standards, business in the country can expect to face challenges, including a lack of transparency in the regulatory process, significant bureaucratic delays and frequently changing regulation. These challenges affect the energy sector in particular, which also suffers from excessive government interference in the form of high export tariffs and below-market price ceilings, creating major disincentives to investment. Having been awarded increased powers to control their hydrocarbon resources, some provinces have enacted their own hydrocarbon laws and created their own publicly-owned oil and gas companies. As a result, businesses in this sector face the added risk of potentially overlapping or conflicting legislation between the federal and provincial levels.

Corruption is also a significant problem in Argentina and poses a serious risk to businesses. Accusations of irregular contract procurement, undue influence, and illicit enrichment surface regularly and affect senior public officials and companies, including the Kirchners and Argentina’s state oil company, ENARSA.

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Bosnia-Herzegovina

The in-depth Bosnia-Herzegovina Country Report provides a high-level analysis of risks to investments in the country, including the governance framework, the regulatory and business environment, political violence, human rights and the environment and climate change.

Bosnia-Herzegovina is likely to continue to experience political instability and uncertainty into the medium term. The country remains divided. The inability of its two entities, the Federation of Bosnia and Herzegovina and the Republika Srpska (RS), to cooperate on reform issues poses a major challenge to political stability and economic development.

Serious corruption in Bosnia-Herzegovina undermines good governance, reforms and judicial independence. There have been a number of high-level cases of corruption, including in relation to public works and construction projects. Moreover, the political system tends to enable rather than fight corruption. Stakeholders have blamed the extent of corruption on the inability of the judiciary to effectively pursue corruption cases, due in part to their exposure to political pressure. Corruption by public officials has been alleged in the construction of government buildings and highways. The Law on the Conflict of Interest (2002), which applies to public officials, is unevenly and ineffectively enforced. Amendments to the Law proposed in mid-2010 could introduce even weaker punishments for public officials found guilty of such crimes by allowing them to remove the conflict of interest for only a minor fine. Corruption thus poses a major challenge to business and investments in the country.

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Cambodia

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

According to the World Bank, Cambodia’s four economic growth “pillars” in 2009 were textiles and garments, tourism, construction and agriculture (World Bank 2009). However, the recent world economic crisis has had a strong impact on the clothing industry and according to an ILO report. 70 factories closed and 70,000 jobs were lost between 31 October 2008 and 31 October 2009.

Overall, the government’s human rights record is poor and this translates into weak enforcement of labour laws, which has been exacerbated by the economic crisis. The country’s performance in relation to child labour in the informal (agricultural especially) sector, freedom of association and trafficking is lamentable. Health and safety in factories and agriculture is also a continuing problem and over 3,000 workers suffered serious workplace injuries in 2009.  Companies are therefore advised to thoroughly monitor and audit supply chains to minimise the risk of complicity with labour rights violations.

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In-depth reports contain detailed analysis, country scores, maps, key recent events and stakeholder viewpoints. They are available for all countries, sectors and issues. Please contact info@maplecroft.com for more information.