Journal of Political Risk, Vol. 4, No. 8, August 2016

Julian M. Campisi

Introduction: A Macro Analysis of Political Risk

Nigel Farage, leader of Britain’s UK Independence Party laughs as he points to a UKIP poster, before delivering a speech on the forthcoming EU referendum, in London, Friday, April 29, 2016. (AP Photo/Kirsty Wigglesworth)

The concept of political risk has landed at the forefront of media and scholarly outlets in the fields of international politics and economics after a turbulent first half to 2016. Exposure to a number of recent global ‘shocks’, including the latest waves of terrorist attacks, Brexit, and a failed coup d’état in Turkey, has led to a renewed sense of political and economic instability across the globe. However, until recently, the majority of scholars and practitioners working in the sub-field of political risk have mainly engaged with the political and economic factors that affect investments in developing economies—albeit for good reason. In many such countries, the stability and profitability of foreign investments or business ventures is more difficult to guarantee and to predict due to concerns related to political volatility, social upheaval, expropriations, and regulatory uncertainties. Yet developing nations are at the forefront of political risk analysis precisely because of the potentially lucrative business opportunities that accompany fairly rapid economic growth and development in frontier markets. Indeed, recent global foreign direct investment (FDI) flows to developing countries, spurred by growth in Asia, significantly outweighed those to developed ones as table 1 shows below.

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Journal of Political Risk, Vol. 4, No. 7, July 2016

Jeremiah S. Pam

Remarks at a symposium on ISIS: Navigating Conflict with Non-State Actors / The University of Texas School of Law, 15 April 2016

‘Prudentia’ sculpture on roof of 16th century town hall, Gross-Umstadt, Germany. Photo by: Frank Rumpenhorst/picture-alliance/dpa/AP Images

I. Introduction

In considering this conference’s subject of how the international community should respond to the challenge of ISIS, I suspect we can all agree that it is imperative that we be informed by our recent experiences with interventions in Iraq and Afghanistan. Of course, the difficult question is how those experiences should inform us. Given my own time in Iraq and Afghanistan, it is perhaps not surprising that I have a few observations from those cases that strike me as potentially relevant, to which I will turn very briefly in a moment.

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Journal of Political Risk, Vol. 4, No. 6, June 2016

Peter Solomon

Flag atop a Chinese Coast Guard vessel near Panatag/Scarborough Shoal in the South China Sea. As seen from a Philippine fishing boat on Philippine Independence Day. June 12, 2016. (Photo credit: Anders Corr and Kalayaan Atin Ito.)

China is cruising toward the finish line in what has become an uncontested race for power in the East Asia-Western Pacific region. There is no question China’s leadership understands that in order to retain the reins of power it must keep pace with the demands of its population, which is the largest in the world. After three decades of at least 10 percent GDP growth, however, the 2010s have proven difficult for China to attain that level of achievement. China’s transition to a consumer-driven economy, moreover, means that China’s growth rates will likely continue to contract as the middle class expands and cheap labor-intensive jobs move elsewhere.

One way China seeks to support its historically high growth rates is by expanding its territory and power-projection capabilities in the South China Sea. This expansion, for example, involves China’s increased naval presence and China’s transformation of half-submerged reefs into artificial islands boasting newly constructed runways in the region. China’s expansion and its professed ownership of 85% of the Sea — including reefs, islands, sand barges, and rocks — conflicts with the historic claims of ownership of such nations as Malaysia, the Philippines, and Vietnam.

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Journal of Political Risk, Vol. 4, No. 6, June 2016

The Philippine Stock Exchange at the financial district of Makati city, east of Manila, Philippines. As the Philippine economy skyrocketed 7.8 percent in the first quarter, outpacing China, the middle class in the Southeast Asian nation that has been held back by widespread poverty, political strife and corruption is for the first time in decades reaping the profits of an economic boom. Source: ACON via Flickr.

Dr. Tom K. Stern
Introduction

On June 30, 2016, Rodrigo Roa Duterte will be sworn in as President of the Republic of the Philippines. How he handles the tensions over Chinese land-grabbing, a regional arms race, plus brushes with danger when American and Chinese forces grate against one another will decide how well the Philippine economy can perform during President Duterte’s term.

What is the main risk?  That China turns warlike when told to withdraw from Philippine territory, according to an expected ruling by the International Court of Justice. Or, a risk equally bad for America, the Philippines could cave in to Chinese pressure and trade territory for big money, which China has to spend. When evaluating potential for the Philippines to acquiesce to Chinese expansion or even to favor Chinese hegemony, economic factors come into play.  China’s comprehensive strategy to tilt the Philippines into China’s orbit includes the common tools of geopolitics, including a precisely calibrated balance combining coercion and friendship.

Trade between the Philippines and China is documented for more than 2,000 years. Today many of the Philippine wealthy trace their roots to China. They may carry a Spanish name, but believe in Buddha as well as Jesus.  They speak Chinese, eat Chinese food in Manila, and work hard in a difficult economy. They may choose to be buried in Manila’s vast Chinese Cemetery. Many of them have family in China, travel there regularly, and enjoy modern life in the big cities.  Most of them love America and our society, but prefer to avoid having to choose sides. Others with democratic commitments wish to stay friends with their big brothers in Beijing, but not finally at the cost of losing America.  As in most political struggles, one can find widely divergent points of view in Manila on the desired nature of the Philippines-America-China relationship.

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Journal of Political Risk, Vol. 4, No. 6, June 2016

1876 Tilden-Hayes Election, February 1877. Source: Derrick Bostrom via Flickr.

Bhakti Mirchandani
Senior Vice President at An Alternative Investment Management Firm

Abstract

Popular resentment of changes in the economy and of the political elites administering some of those changes is palpable during this year’s presidential campaign.[1]  Public distrust is rife: the electorate views narrow moneyed interests as increasingly driving public policy and the legislative process as broken.[2]  At the same time that American voters are “tired of Washington politicians,”[3] the legacies of Presidents without elected office experience before being sworn into the Oval Office demonstrates the difficulty for outsiders to be effective Presidents.  Numerous academics, such as Arthur Schlesinger, have dedicated decades and thousands of pages to presidential backgrounds and legacies, and every four years the media examines the credentials of prospective and prior Presidents.  This article is a short opinion piece about the shortcomings of past outsider Presidents.  Their flaws ranged from cognitive bias to tolerance of corruption and from excessive use of clandestine plots to lack of political skill.  Only two of the five outsiders–Dwight Eisenhower and Ulysses Grant–were reelected to second terms.

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