Over one year into its deepest global financial crisis in the post-war era, the world economy is entering a phase of economic recovery and financial stabilization. Financial market conditions are signaling much improved investor confidence and a revival of risk appetite for emerging markets. Yet concerns over political risks are high. As part of its mandate to encourage investment to developing countries, the Multilateral Investment Guarantee Agency (MIGA) seeks to foster more understanding of the role of political risk, and instruments to mitigate it. This objective for this report is to examine (i) overall trends in political risk perceptions, and how they relate to financial flows -- particularly foreign direct investment (FDI) to emerging markets, (ii) corporate views on foreign investment intentions and the political risk environment in emerging markets, in the context of the financial crisis (iii) whether the political risk insurance (PRI) industry is well positioned to deal with the fallout from the crisis, as well as longer-term shifts in demand for political risk guarantees.
Given MIGA s mandate and the growing weight of emerging markets as a source of FDI, particular attention was paid to South-based investors and PRI providers in the general analysis.