Strategic political and corporate leadership will be more challenging in a Middle East undergoing deep structural changes; success will lie in combining resilience, fast reactions and a subtle appreciation of the dynamics at play
Expectations for socio-economic and political change triggered by the Arab Spring remain high and are unlikely to subside in 2013. Governments across the region need to manage demands from more vocal and politicised populations
In 2013, the Gulf States will increasingly influence and be influenced by dynamics in the wider Middle East region. Drawn closer to their neighbours, how GCC leaders choose to define the Gulf's role in a changing Middle East will have important implications for business
Dubai, 20 January 2013: Control Risks, the global business risk consultancy, today launches its annual RiskMap report, the key reference point for policy makers and business leaders needing to plot global trends over the coming year. Now in its 30th year, RiskMap highlights the most significant underlying trends in global risk and security, and provides a detailed view from the markets that will matter most in 2013.
Introducing RiskMap, Andreas Carleton-Smith, Regional Director, Control Risks Middle East said: "RiskMap this year describes a world in which certainties are in shorter supply and leadership more difficult to exercise. With growing social unrest in Iraq, Egypt, Syria and Pakistan fuelled by heightened domestic political tension, managing companies within the Middle East region has become as much about reacting swiftly and decisively to changing leadership circumstances as it has to do with the implementation of a strategy or policy."
The MENA region will face numerous challenges in the coming year, many of which were triggered or intensified by the Arab Spring. Transition processes in countries that have undergone regime change will continue to drag on and cause periods of political instability - and in some cases social unrest. Leaders across the region will find it difficult to deal with more vocal and politicised populations. Expectations for socio-economic and political change remain high in many places and are unlikely to ease in 2013.
- Iraq's national unity government will remain under strain in 2013 amid heightened tensions between competing factions. Prime Minister Nuri al-Maliki will face repeated calls to step down, but is likely to survive the year. Social unrest will persist in Sunni-majority provinces whilst relations between the federal and Kurdistan Region governments will remain fraught, preventing any resolution to disputes over territory and oil contracts. Outright conflict remains unlikely
- Syria's civil war will continue to intensify, and even President Bashar al-Assad's fall would be unlikely to stem violence. 2013 is likely to see further regional fallout from Syria, with Lebanon, Turkey, Jordan, and Iraq liable to face both external security threats and mounting domestic political tensions as a result. External actors will continue to involve themselves in the Syrian civil war with the hope of shaping the outcome of conflict--though decisive intervention remains unlikely
- While Egypt will continue to experience political turmoil in 2013, the Muslim Brotherhood-linked President Mohamed Morsi and his allied Freedom and Justice Party will remain the country's most powerful political force. Morsi will seek to play a more assertive role in regional diplomacy, with the need for foreign aid and investment underpinning a pragmatic approach
- Pakistan faces a testing year as parliamentary and presidential elections are due and the influential army and judicial chiefs are scheduled to retire. With all key decision-makers subject to change, the country is facing the prospect of governance void and policy drift at a critical juncture where state finances are fragile and NATO drawdown from Afghanistan is adding to security concerns
- Communal violence, a weak central government and assertive local stakeholders will challenge investors operating outside Libya's major cities
- Yemen's political transition will remain fragile due to elite rivalry, a complex web of competing interests and poor economic performance. The transitional government will continue to struggle to assert its authority, particularly in rural areas, meaning that the security environment will remain feeble.
- Weapons proliferation in North Africa and the Sahel, coupled with instability in northern Mali, will drive greater security cooperation between North African governments. Although regional political cooperation will be clouded by poor bilateral relations between Algeria and Morocco, the transitional states of Tunisia, Libya and Egypt may find greater scope for political collaboration and economic integration
- Bitter, personal in-fighting between Iran's ruling conservative factions will intensify before June 2013's presidential elections, while sanctions continue to damage the economy and restrict opportunities for investors
Despite these considerable challenges, opportunities for investors still exist in surprising places for those able to map and manage the complexity and significant risk of a volatile world. This year RiskMap emphasises the extent to which a company or country's ability to exploit these opportunities increasingly depends on the ability of leadership to embed not just resilience but suppleness in their organisations and states.
About Control Risks
Control Risks is a global risk consultancy specialising in political, security and integrity risk. The company enables its clients to understand and manage the risks of operating in complex or hostile environments. Through a unique combination of services, wide geographical reach and by adopting a close partnership approach with clients, Control Risks helps organisations effectively solve their problems and realise new opportunities across the world.
www.controlrisks.com
For the map graphic or for further information please contact:
Control Risks:
Claire Peddle
Regional Marketing Manager, Middle East
+ 971 4 3723 017 claire.peddle@controlrisks.com
Appendix: Significant risk rating changes and country analysis for 2013
Gabon
Political risk raised from medium to high
Opposition to President Ali Bongo within the ruling party is mounting, while a multi-party opposition coalition was formed in September 2012, but political stability is unlikely to come under threat. Political interference is likely to rise in the oil sector as the government uses the planned adoption of a new hydrocarbons code to augment fiscal pressure on foreign operators. Trade union pressure for more stringent local content policies is also set to grow. However, the security environment will remain relatively benign and easily manageable for foreign companies.
Mali
Political risk raised from medium to high
Islamist rebels and jihadists control the northern desert regions and democratic institutions are reeling from the March 2012 coup. Addressing the northern crisis will require a variety of stakeholders to put aside personal, institutional and national differences to oversee a concerted political-military strategy to restoring state integrity and achieve political normalisation. The international community's overarching influence and support will be a key determinant of the effectiveness of this initiative. However, the crisis resolution process will be fraught and marked by setbacks and pitfalls.
Nigeria
Political risk raised from medium to high; security raised from M; H in south-south, south-east, north-east, Plateau state and Lagos, to H, E in Borno, Yobe
Democratic institutions have proved remarkably resilient and durable in the face of crises and security challenges, but the government's policies of military containment and patronage distribution to suppress threats to national stability only partially ease structural sources of instability. Investors face prominent challenges: powerful vested interests continue to weigh over licensing and public procurement, leaving investors exposed to corruption and interference. The progress of the long-delayed Petroleum Industry Bill will remain slow; even when passed, this will not achieve all that it set out to do because of uneven and slow implementation.
Mexico
Security rating raised in Jalisco, San Luis Potosi, Michoacan
The crackdown on drug trafficking has disrupted cartels' operations, but caused the security environment to deteriorate. This has led to an increased incidence of high-impact crimes; cartels have been forced to seek alternative sources of revenue to offset drug-related losses, while smaller-scale organised criminal groups have exploited the government's focus on drug trafficking to operate lucrative kidnapping and extortion rackets. Despite president Enrique Peña Nieto's ambitious pledge to reduce the homicide and kidnapping rate by 50%, security threats are likely to persist.
Colombia
Risk ratings unchanged
The security situation is likely to remain broadly unchanged in 2013. Illegal armed groups are still able to challenge the security forces and stage attacks against economic infrastructure in their remote strongholds. However, a significant deterioration is unlikely and the government will not lose its overall grip on security. Even if peace talks between the government and the FARC progress, disaffected units and paramilitary successor groups will remain involved in illegal activities. Although the peace talks are a gamble, their failure would not threaten political stability.
Venezuela
Risk ratings unchanged
The security environment is likely to continue to deteriorate in the face of a corrupt, politicised and ill-equipped police and judiciary; at best, crime rates will climb less steeply than in recent years. Caracas and other urban areas will continue to bear the brunt of the security problems. President Hugo Chávez will maintain his statist vision of political and economic development, but plans to implement a communal system of political organisation are unlikely to get off the ground swiftly. Economic mismanagement, bureaucratic corruption and poor security will persist in 2013.
India
Ratings unchanged
Reform-hungry investors face more disappointment as the ruling Indian National Congress looks to preserve its 'pro-poor' credentials. The government's prospects in elections due by 2014 are dim, but this is unlikely to provide a fillip to reform, even though Congress arguably has nothing to lose. On the security side, religious extremism lurks as a persistent threat, as do unresolved and serious Naxalite (extreme leftist) and separatist conflicts. Cybercrime is growing problem and confidence in government responses to security problems is low.
Greece
Security rating raised from Low (M in Athens, Thessaloniki) to Medium
The continuing crisis has seen security threats manifest outside the traditional hotspots of Athens and Thessaloniki. While major violent protests and the use of explosive devices remain largely confined to those two cities, increased crime is affecting the country more widely, as are the effects of the increased popularity of extremist politics.
Ukraine
Security rating raised from Low to Medium
The threat of serious and petty crime is high, with the situation aggravated considerably by corruption in government and the law enforcement organisations. There has been a significant increase in the number of thefts, burglaries and frauds, as well as hate crimes against non-Slavic and religious minorities since 2010. Four explosions blamed on political extremists in the eastern city of Dnepropetrovsk in April 2012 injured more than two dozen people, and highlighted deficient counter-terrorism legislation and responses.
Syria
Security risk raised from high to extreme
The Syrian crisis has evolved into a full-blown civil war that is set to intensify in 2013. The Assad regime may hold on to power for some time, but will not be able to restore stability or lead a resolution to the conflict. Absent the ability or willingness of any external forces to engage constructively in the conflict, the state will continue to fragment. The disintegration of the security environment and emergence of local power vacuums will see the continued proliferation of competing interest groups and armed militias vying for control over territory and strategic infrastructure.
Yemen
Extreme security risk in southern provinces expanded, security risk in Saada lowered to high
The consolidation of the Houthi rebel group's control over the northern province of Saada in 2012 has resulted in a significant reduction in clashes with government forces, reducing security risks and the likelihood of another full-blown war between the two sides in 2013. The government of
President Abd Rabbu Mansour Hadi is under multiple pressures and is unlikely to renew war with the Houthis. Instead, the government is more likely to focus on reducing the persistent threat from militancy in southern provinces (Aden, Lahj, Dali, Bayda and southern areas of Shabwa province)
© Press Release 2013
