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World Investment and Political Risk 2009

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  • Multilateral Investment Guarantee Agency
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    Abstract

    Political risk is a top concern for corporate foreign investors from industrialized but also developing countries when venturing into emerging markets. At the same time, these investors maintain a positive outlook on economic and business prospects in the developing world, which is expected to attract a growing share of global foreign direct investment (FDI) as the world economy slowly, recovers. Positive business sentiment over emerging markets amid concerns over political perils point to a sustained need to mitigate these perils. This, added to the rise of South-based investors, offers opportunities and challenges for the political risk insurance (PRI) industry. In the current context of high uncertainty, understanding how investors perceive and deal with political risks helps to map out the role of PRI in the emerging post-crisis investment landscape. This report focuses on FDI and PRI for long-term investment, and only covers political risk in developing countries. Although political risk also affects other forms of private capital flows, these are beyond the scope of this publication. The main findings of the report are summarized as follows: i) while political risks top foreign investors' concerns, the global economic and financial crisis has not fundamentally altered FDI prospects for emerging markets; ii) concerns over political risks, combined with sustained FDI into emerging markets over the medium term, suggest a growing need for political risk mitigation and opportunities for the PRI industry; and iii) the emergence of South-based investors is increasingly shaping the global FDI environment and presents regional growth opportunities, but also challenges, for the PRI industry.

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    File URL: https://openknowledge.worldbank.org/bitstream/handle/10986/2688/520190PUB0flag10Box345548B01PUBLIC1.pdf?sequence=1
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    Bibliographic Info

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    This book is provided by The World Bank in its series World Bank Publications with number 2688 and published in 2009.

    ISBN: 978-0-8213-8115-1
    Handle: RePEc:wbk:wbpubs:2688

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    Postal: 1818 H Street, N.W., Washington, DC 20433
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    Web page: https://openknowledge.worldbank.org
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    Related research

    Keywords: Macroeconomics and Economic Growth - Investment and Investment Climate Finance and Financial Sector Development - Debt Markets Finance and Financial Sector Development - Banks & Banking Reform Private Sector Development - Emerging Markets Finance and Financial Sector Development - Non Bank Financial Institutions;

    References

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    1. Steven Globerman & Daniel Shapiro, 2004. "Governance Infrastructure and U.S. Foreign Direct Investment," International Finance 0404008, EconWPA.
    2. Douglas Nigh, 1985. "The Effect of Political Events on United States Direct Foreign Investment: A Pooled Time-Series Cross-Sectional Analysis," Journal of International Business Studies, Palgrave Macmillan, vol. 16(1), pages 1-17, March.
    3. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
    4. Jaya Prakash Pradhan, 2009. "Indian FDI Falls in Global Economic Crisis," Transnational Corporations Review, Ottawa United Learning Academy, vol. 1(4), pages 1-11, December.
    5. Bevan, Alan A. & Estrin, Saul, 2004. "The determinants of foreign direct investment into European transition economies," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 775-787, December.
    6. Stephen J Kobrin, 1979. "Political Risk: A Review and Reconsideration," Journal of International Business Studies, Palgrave Macmillan, vol. 10(1), pages 67-80, March.
    7. Asiedu, Elizabeth, 2002. "On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?," World Development, Elsevier, vol. 30(1), pages 107-119, January.
    8. Suma Athreye & Sandeep Kapur, 2009. "The Internationalization of Chinese and Indian Firms: Trends, Motivations and Strategy," Birkbeck Working Papers in Economics and Finance 0904, Birkbeck, Department of Economics, Mathematics & Statistics.
    9. Schneider, Friedrich & Frey, Bruno S., 1985. "Economic and political determinants of foreign direct investment," World Development, Elsevier, vol. 13(2), pages 161-175, February.
    10. Douglas P Woodward & Robert J Rolfe, 1993. "The Location of Export-Oriented Foreign Direct Investment in the Caribbean Basin," Journal of International Business Studies, Palgrave Macmillan, vol. 24(1), pages 121-144, March.
    11. Ewe-Ghee Lim, 2001. "Determinants of, and the Relation Between, Foreign Direct Investment and Growth," IMF Working Papers 01/175, International Monetary Fund.
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