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Regional Risks for Doing Business 2018 - Insight Report - World Economic Forum
Insight Report

Regional Risks
for Doing Business
2018
Regional Risks for Doing Business 2018 - Insight Report - World Economic Forum
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Regional Risks for Doing Business 2018 - Insight Report - World Economic Forum
Regional Risks
for Doing Business
2018

Strategic Partners
Marsh & McLennan Companies
Zurich Insurance Group

Academic Advisers
National University of Singapore
Oxford Martin School, University of Oxford
Wharton Risk Management and Decision Processes Center, University
of Pennsylvania

                                                                    Regional Risks for Doing Business   3
Regional Risks for Doing Business 2018 - Insight Report - World Economic Forum
4   Regional Risks for Doing Business
Regional Risks for Doing Business 2018 - Insight Report - World Economic Forum
Contents
Preface                             07

Introduction                        08

Regional profiles                   11
  Europe
  Eurasia
  Middle East & North Africa
  Sub-Saharan Africa
  South Asia
  East Asia and the Pacific
  North America
  Latin America and the Caribbean

Results at a glance                 28

Methodology                         36

Acknowledgements                    37

                                         Regional Risks for Doing Business   5
Regional Risks for Doing Business 2018 - Insight Report - World Economic Forum
6   Regional Risks for Doing Business
Regional Risks for Doing Business 2018 - Insight Report - World Economic Forum
Preface
                                     The World Economic Forum has               and that may also reverberate across
                                     been publishing The Global Risks           societies and the world at large.
                                     Report since 2006, highlighting each
                                     year the vulnerability of our increas-     Nation states acting alone cannot
                                     ingly networked and interconnected         manage, let alone resolve, the global
                                     world to volatility and disruption. The    challenges facing the world. At present,
                                     relevance of the risk perspective has      however, coordinating at the global
                                     only increased with time. Globally, we     level appears increasingly fraught with
                                     have been living through a period of       potential tensions, such as differences
                                     unprecedented improvements in liv-         of political values between some coun-
                                     ing standards, but this period is also     tries or the challenges of maintaining
                                     unsettled and unsettling. We can see       political legitimacy within others. Some
                                     signs of how vulnerable many of the        of these tensions are less pronounced
                                     complex systems that make up our           at the regional level, and we expect re-
                                     world are: from the environmental to       gions to play an increasingly active and
                                     the financial and the societal to the      important role in the world in the years
                                     geopolitical, the signs of strain are      ahead. For this reason, understanding
                                     evident.                                   the risks each region faces is essen-
                                                                                tial if we are to better understand the
Mirek Dušek,                         In The Global Risks Report 2018 we         forces shaping the global landscape.
Deputy Head for Regional and
                                     noted that this is now a multipolar
Geopolitical Affairs,
                                     and multiconceptual world – not only       This new report has been a collabora-
Member of the Executive Committee,
                                     has global power shifted, but differ-      tive effort, and we would like to thank
World Economic Forum
                                     ences in norms and values among            all those across the Forum who have
                                     the world’s powers have become             contributed to it—in particular, our
                                     more important. Predictions – particu-     colleagues in the Centre for Regional
                                     larly in the West – that global systems    and Government Affairs and the Centre
                                     would converge have not stood the          for the New Economy and Society.
                                     test of time and we are moving into        We would also like to thank Marsh &
                                     uncharted international waters. One        McLennan Companies (MMC) and
                                     consequence of the geopolitical shifts     Zurich Insurance Group, our long-
                                     that are under way is the increasing       standing strategic partners on The
                                     likelihood that regional developments      Global Risks Report.
                                     will impact the broader international
                                     system.

                                     It is against this backdrop that the
                                     World Economic Forum this year
                                     publishes Regional Risks for Doing
                                     Business, to offer regional perspec-
                                     tives on the impact of risks. As the
                                     title of this new publication sug-
                                     gests, we are looking at regional risk
                                     through the prism of the private sec-
                                     tor (whereas the annual Global Risks
                                     Report takes a broader perspective).
                                     Our starting point here: the risk-relat-
Aengus Collins,                      ed findings of the Forum’s Executive
Head of Global Risks and the
                                     Opinion Survey, which each year
Geopolitical Agenda,
                                     polls approximately 12,000 private-
World Economic Forum
                                     sector decision-makers drawn from
                                     around 130 economies. This commu-
                                     nity can offer important insights into
                                     shocks that may disrupt industries,

                                                                                              Regional Risks for Doing Business   7
Regional Risks for Doing Business 2018 - Insight Report - World Economic Forum
People waiting to fill out employment applications in São Paulo, Brazil. (REUTERS/Paulo Whitaker)

Introduction
At a time of heightened uncertainty across the international system, understanding the
regional risks landscape is more important than ever.

Each year in The Global Risks            or uniform. Even the most global                   regions and countries. The fact that
Report, we emphasize the                 of risks crystallize locally and are               the survey’s sample is drawn solely
importance of assessing risk from        experienced differently. If global risks           from the private sector means that
a global perspective. The world of       demand our attention, it is ultimately             the risk perceptions captured here
risk is shot through with systemic       because they entail harm to the lives              differ in important respects from those
interconnections requiring responses     and livelihoods of particular people in            covered in The Global Risks Report
that look beyond the local. This fact    particular places. These particularities           (see box on page 10), but the findings
has become more intuitively apparent     cut across numerous dimensions,                    allow us to complement our usual
over the past decade as the world        from wealth and nationality to gender              global perspective with a greater focus
has struggled to keep pace with truly    and profession.                                    on local variation.
global crises and transformations
across multiple fields: economic,        In this report, we are seeking to
technological, environmental, societal   shed some light on one of these                    Economic and political strains
and geopolitical.                        dimensions: the regional. Using the
                                         results of the large-scale Executive               While the analysis in the sections that
To say that a rich understanding of      Opinion Survey that we carry out each              follow is regional, important global
how risks are evolving requires a        year for our Global Competitiveness                patterns emerge from our survey
global and systemic perspective is not   Report, we can see how worries                     findings. As the table on page 9
to suggest that they are homogeneous     about global risks differ across                   indicates, the top-ranked risk across

8   Regional Risks for Doing Business
Regional Risks for Doing Business 2018 - Insight Report - World Economic Forum
Top ten risks of highest concern globally

  1   Unemployment or underemployment

  2   Failure of national governance

  3   Energy price shock

  4   Fiscal crises

  5   Cyber-attacks

  6   Profound social instability

  7   Failure of financial mechanism or institution

  8   Failure of critical infrastructure

  9   Failure of regional and global governance

 10 Terrorist attacks

the world in 2018 was “unemployment                   19 countries that ranked it number            were in Eastern Europe and Eurasia,
or underemployment”, with “failure                    one, 14 were from Europe and North            a pattern that reflects the increasing
of national governance” in second                     America (the others were India,               importance of that part of the world
position. The unemployment risk,                      Indonesia, Japan, Singapore and the           as global geopolitical balances are
in particular, needs to be cautiously                 United Arab Emirates). By contrast,           recalibrated. Environmental concerns
interpreted, as it may reflect quite                  of the 34 countries that ranked               did not make it into respondents’
different challenges across countries                 “unemployment or underemployment”             global top ten risks, in sharp contrast
and regions, such as weak growth,                     first, 22 were from sub-Saharan Africa.       to recent editions of The Global Risks
talent shortages or labour-market                                                                   Report, where environmental risks
disruptions caused by automation.                     What of the other main risk categories?       have been increasingly predominant.
But regardless of these interpretative                Ten years on from the start of the            This reflects the specifically business-
details, the fact that unemployment                   global crisis, financial risks slipped        focused framing of the risk-related
and governance failures top the list of               in the global rankings. “Fiscal crises”       question in the Executive Opinion
global business risks should ring alarm               dipped from second place in last              Survey and also highlights the need
bells about the strains on our basic                  year’s Executive Opinion Survey to            for a diverse range of perspectives on
political and economic systems.                       fourth place this year, and “failure of       which global risks are most pressing.
                                                      financial mechanism or institution”
Another prominent finding of this year’s              dropped from sixth to seventh. There
survey is a jump for cyber-attacks, from              were regional exceptions to this trend,       Regional futures
eighth position according to last year’s              such as “asset bubbles” jumping to
data to fifth position this year. This is no          second place in Europe, but overall the       We are living in geopolitically volatile
surprise. A number of massive cyber-                  results of this survey do little to counter   times, and the international system is
attacks took place in 2017 – notably                  worries about economic and financial          under profound strain from multiple
WannaCry, Petya and NotPetya                          complacency that we voiced earlier this       directions. Institutions, assumptions
– causing extensive operational                       year in The Global Risks Report 2018.         and patterns of action that have
disruption and financial losses for                                                                 previously been taken for granted
organizations around the world. We                    Geopolitical concerns were relatively         are now being called into question
will look back at 2017 as the year that               muted, with “failure of regional and          by many around the world. There will
the world began to take seriously the                 global governance” and “terrorist             be a temptation in some quarters to
potential extent of our vulnerability                 attacks” in ninth and tenth place             hope for a return to the international
to cyber-attack disruptions. In our                   globally, respectively. The starkest of       status quo ante, but one lesson
survey, “cyber-attacks” tended to be                  geopolitical risks, “interstate conflict”,    from the science of complexity is
flagged as a concern in the world’s                   was ranked in the top three risks in          that resolving a systemic disruption
more advanced economies. Of the                       17 countries. Most of these countries         may require the establishment of a

                                                                                                                   Regional Risks for Doing Business   9
Regional Risks for Doing Business 2018 - Insight Report - World Economic Forum
new equilibrium rather than a return
      to an old one. The world now faces a
      period of collective reimagination and
      renewal, in which core norms, values                                          How Regional Risks for Doing Business
      and priorities may be more openly                                             and The Global Risks Report compare
      contested than before. It is already
      clear that regions will be a central part
      of this story, and it is also evident that                                   The scope of this report differs from our flagship Global Risks
      new distributions of risk are emerging                                       Report. The Global Risks Report presents a holistic assessment
      around the world. In the sections that                                       of the dangers facing the world, considering risk across multiple
      follow, we begin to sketch out the                                           dimensions, including potential harms to countries, companies and
      contours of the evolving regional risks                                      individuals. By contrast, the analysis in this report relies on data
      landscape.                                                                   from our annual Executive Opinion Survey, which informs our annual
                                                                                   Global Competitiveness Report. We have included a risk-related
                                                                                   question in this survey, to gauge businesses’ perceptions of the
                                                                                   global risks they expect to present an operational challenge in the
                                                                                   next ten years.

                                                                                   Specifically, respondents were presented with our core list of 30
                                                                                   global risks and asked to select “the five global risks that you believe
                                                                                   to be of most concern for doing business in your country within
                                                                                   the next ten years”. This narrower focus leads to different issues
                                                                                   rising to prominence. For example, while environmental risks have
                                                                                   become increasingly predominant in The Global Risks Report, they
                                                                                   are absent from the top ten risks globally according to the Executive
                                                                                   Opinion Survey. This is not to suggest that environmental risks have
                                                                                   become less important overall, but that businesses do not expect
                                                                                   environmental issues to be among the main operational risks they
                                                                                   face over a ten-year time frame.

Fifth globally, cyber-attacks are seen as the top risk in three regions. (REUTERS/Alessandro Bianchi)

     10     Regional Risks for Doing Business
Regional Profiles

                    Regional Risks for Doing Business   11
Europe
                                                                                                                                    “Significant residual
Top ten risks in Europe                                                                                                             post-crisis nervousness
     1    Cyber-attacks                                                                                                             remains about the health
     2    Asset bubble                                                                                                              of the financial sector.”
     3    Failure of national governance

     4    Failure of financial mechanism or institution

     5    Unemployment or underemployment

     6    Fiscal crises

     7    Failure of urban planning

     8    Interstate conflict

     9    Large-scale involuntary migration

     10 Data fraud or theft

 Note: See Methodology section for details of the survey’s coverage in this region.

Cyber-attacks are seen as the biggest threat to doing business across Europe, but
economic and financial risks remain a concern.

Europe is a large and diverse                                         The “cyber-attacks” risk was not as               sector, but in total “failure of financial
region, comprising 37 countries in                                    clear a front runner for our European             mechanism or institution” ranked as a
our categorization – the 28 current                                   respondents as it was for their                   top-five risk for businesses in 18 of the
members of the European Union plus                                    counterparts in either North America              region’s countries, suggesting significant
nine other countries including Turkey                                 or East Asia and the Pacific. One                 residual post-crisis nervousness about
and most of the Western Balkan states.                                manifestation of this is in the variety           the health of the financial sector.
Across the region, “cyber-attacks”                                    of risks that topped respondents’ lists
emerged as the leading risk to doing                                  of concerns in Europe’s four largest              Another sign of post-crisis unease in
business, largely as a result of its                                  countries. “Cyber-attacks” came first             Europe is the fact that “asset bubbles”
prominence in many of the region’s                                    in both Germany and the UK, but in                were ranked as the second-biggest risk
most advanced economies. In total, this                               France and Italy, domestic economic               to doing business across the region,
risk ranked number one in 12 countries.                               and financial conditions were of greater          albeit only narrowly ahead of the risks in
Europe was affected by the series of                                  concern. French respondents cited                 third and fourth place. This risk emerges
major attacks that took place in 2017 –                               “unemployment and underemployment”                as a particular concern in Central
for example, the WannaCry ransomware                                  as the number one risk to doing                   Europe, ranking first in the Czech
attack badly disrupted the UK’s health                                business in the country, highlighting             Republic, Hungary and the Slovak
system and Germany’s rail system – and                                long-running structural problems in               Republic. It came second in a further 12
and estimates suggest that the number                                 the labour market that successive                 countries, stretching across the region
of cyber-attacks across the region                                    governments have struggled to deal                from Ireland to Cyprus. The underlying
increased by around a third in the first                              with. In Italy, the number one risk               driver of this widespread nervousness
quarter of 2018, compared to the same                                 was “failure of financial mechanism               is likely to be found in the role played
period last year.                                                     or institution”. There have been                  in Europe’s post-crisis recovery
                                                                      particular fragilities in the Italian financial   by expansionary monetary policy,
12       Regional Risks for Doing Business
The European Central Bank headquarters in Frankfurt, Germany. (REUTERS/Kai Pfaffenbach)

particularly in the Eurozone, where the                       risk to doing business in the region.                       been an important factor in this trend,
decision of the European Central Bank                         It ranks top in four countries (Bosnia                      and is likely to remain a source of strain
to begin large-scale asset purchases                          and Herzegovina, Croatia, Greece and                        within and among the region’s countries
in 2015 marked a pivotal moment for                           Lithuania), and in second position in                       in the years ahead. Migration ranked
the bloc. The potential worry is that                         a further four (Malta, Portugal, Serbia                     only ninth across the region as a whole,
central bank bond purchases may                               and the UK). The result in the UK is                        but respondents in certain countries
have artificially inflated the value of                       particularly dramatic – a year ago,                         placed it much higher: it ranked
assets across many classes, raising                           respondents assessed this risk as only                      second in Finland, Macedonia and
the prospect of disruptive corrections                        their seventh most significant concern.                     Romania, and third in Austria, the Czech
when, in time, monetary policy begins                         Its jump in the ranking now appears                         Republic, Latvia, Norway, Sweden and
to tighten. Take the housing market as                        to align with widespread reports of the                     Switzerland.
an example. Between the first quarters                        growing strains that the process of
of 2008 and 2015, house prices                                exiting the EU is placing on the UK’s
across the EU dropped by 4.5%; in the                         political and governmental institutions.
subsequent three years, they increased
by 13.7%, with much higher rates                              Although Brexit represents a particularly
of increase being recorded in some                            momentous challenge, the UK is far
countries during that time, such as                           from alone in experiencing political
Hungary (39.5%), Latvia (33.1%), Ireland                      disruption. Numerous countries across
(32.1%) and Portugal (29.5%).                                 the region now find themselves having
                                   1

                                                              to adapt long-standing patterns of
Given the relative level of development                       government and governance to a new
of most of the countries in Europe,                           electoral environment characterized
it is striking that “failure of national                      by increasing political fragmentation,
governance” ranks as the third-highest                        polarization and populism. Migration has

1
    Eurostat, House Price Index, https://ec.europa.eu/eurostat/statistics-explained/index.php/Housing_price_statistics_-_house_price_index (link as of 1/10/18).

                                                                                                                                               Regional Risks for Doing Business   13
Eurasia

Top ten risks in Eurasia

     1    Energy price shock

     2    Interstate conflict

     3    Fiscal crises

     4    Unemployment or underemployment

     5    Profound social instability

     6    Large-scale involuntary migration

     7    Unmanageable inflation

     8    Failure of financial mechanism or institution

     9    Natural catastrophes

     10 Failure of national governance

 Note: See Methodology section for details of the survey’s coverage in this region.

Vulnerability to energy price shock is ranked as the top risk to doing business in Eurasia,
but only narrowly ahead of interstate conflict.

The Eurasia region is increasingly                                    interesting given the country’s recent     of increasingly fractious regional and
enmeshed in the complicated                                           experience of acute vulnerability to       global geopolitical affairs: although
evolution of the world’s geopolitical                                 energy-price volatility – the sharp        Russia-Ukraine tensions are largely
and geo-economic affairs. According                                   decline of energy prices in 2014 was       frozen, they remain a source of risk
to business leaders across the region,                                extremely disruptive – but it is worth     and are one of the factors that have
“energy price shock” is, by a small                                   noting that the related risk of “fiscal    contributed to a sharp deterioration
margin, the biggest risk to doing                                     crises” was ranked as the most             in relations between Russia and
business. This reflects the huge                                      pressing concern by respondents in         many Western countries in recent
importance of the energy sector                                       Russia.                                    years. Elsewhere, a flare-up of
across the region – it accounts for up                                                                           conflict remains possible in Nagorno-
to 35% of GDP in some oil-producing                                   Geopolitical tensions are another worry    Karabakh, the contested territory at
countries, and the fiscal budgets of                                  for Eurasia’s businesses, according        the heart of a decades-long dispute
both exporters (such as Azerbaijan,                                   to our survey. The fact that “interstate   between Azerbaijan and Armenia.
Kazakhstan, the Russian Federation                                    conflict” ranked second across the         The election in May 2018 of a new
and Turkmenistan) and importers                                       region is something of an outlier – no     government in Armenia may spur
(Armenia, Ukraine, Georgia and the                                    other region placed this risk in the       new efforts to unblock the impasse
Kyrgyz Republic) are vulnerable to                                    top five. It was seen as the most          and, in August, Angela Merkel said
sharp swings in prices. “Energy price                                 serious risk in two of the region’s        Germany would be willing to help
shock” ranks as the most serious                                      countries (Azerbaijan and Georgia) and     find a diplomatic resolution. The fact
risk in two countries, Ukraine and                                    was ranked second in another two           that Georgia’s businesses placed
Kazakhstan, and is a top-five risk in                                 (Armenia and Russia). The emphasis         “interstate conflict” at the top of their
a further six, including Russia. This                                 placed on this risk by businesses in       list of risks reflects the continuing
relatively low ranking in Russia is                                   Russia comes against the backdrop          potential for instability around the
14       Regional Risks for Doing Business
“Fiscal budgets of both
                                                                                                                   exporters and importers
                                                                                                                   are vulnerable to sharp
                                                                                                                   swings in energy prices.”

                                                                                                         Oil tanks at a processing plant in Kazakhstan. (REUTERS/Shamil Zhumatov)

disputed territories of South Ossetia                          economy peers are outside the reach                         respondents included this risk among
and Abkhazia, which were recognized                            of the fiscal authorities.                                  their top ten was Latin America, which
as independent entities by Russia                                                                                          ranked it second against a backdrop
in 2008, leading to a breakdown in                             Respondents ranked unemployment                             of deep societal fissures in numerous
diplomatic relations between Georgia                           fourth overall across the region. It                        countries. In Eurasia, concerns about
and Russia.                                                    ranks as the second-highest risk in                         social instability can be linked to
                                                               Kyrgyzstan and Tajikistan and the                           issues including corruption, income
In addition to “energy price shock”,                           third-highest in Armenia and Georgia.                       inequality and economic security.
other economic risks cited prominently                         Caution is needed in interpreting                           These tendencies have manifested
by our respondents were “fiscal                                these unemployment results at the                           themselves in a number of ways: there
crises” and “unemployment and                                  regional level as conditions differ                         have been changes of government
underemployment”. As noted above,                              widely among countries. For example,                        in Armenia, Georgia and the
fiscal concerns were ranked as                                 according to the latest available data,                     Kyrgyz Republic, and ongoing anti-
the most pressing risk in Russia. In                           unemployment across the region                              government protests in a number of
addition to energy-price vulnerabilities,                      ranges from 18% in Armenia to                               other countries.
other potential contributors to fiscal                         2.3% in Tajikistan, suggesting that
strain in Russia and across the region                         businesses in these two countries are
include the comparatively high level of                        facing quite different labour-market
economic activity that takes place in                          challenges.
untaxed parts of the economy. This
                                 2

creates potential knock-on financial                           According to our survey respondents,
risks for well-established businesses,                         “profound social instability” is the
which can be left to pick up a                                 fifth most important risk to doing
disproportionate amount of any gaps in                         business in Eurasia. This is unusually
overall tax revenues, as their shadow-                         high – the only other region in which

2
    Tamkin, Emily. “Russia’s Informal Sector Hits Its Highest Level in Over a Decade.” Foreign Policy, 18 April 2017.

                                                                                                                                              Regional Risks for Doing Business   15
Middle East and North Africa

Top ten risks in MENA

     1    Energy price shock

     2    Unemployment or underemployment

     3    Terrorist attacks

     4    Failure of regional and global governance

     5    Fiscal crises

     6    Cyber-attacks

     7    Unmanageable inflation

     8    Water crises

     9    Illicit trade

     10 Failure of financial mechanism or institution

 Note: See Methodology section for details of the survey’s coverage in this region.

Geopolitical and economic risks predominate in much of the region, but cyber-attacks
are a growing concern as the regional economy becomes more sophisticated.

Although the top two risks across                                     faces serious economic challenges        governance”, “failure of regional and
the Middle East and North Africa                                      and is in dire need of reforms.          global governance”, “failure of financial
                                                                                                     3

(MENA) region are economic                                                                                     mechanism or institution”, “failure of
in character (“energy price                                           Other countries attaching high           critical infrastructure” and “spread of
shock” and “unemployment or                                           prominence to domestic and               infectious diseases”.
underemployment”), the deep                                           regional fractures in the survey
fissures within and among many of                                     were Tunisia, with “profound             Although “energy price shock” has
the region’s countries are evident in                                 social instability” ranked first, and    risen from second place last year to
the responses to our survey. This                                     Algeria, where respondents ranked        become the top-ranked risk across
is perhaps clearest in Lebanon,                                       “failure of regional and global          the region, this development needs to
where the most cited risk to doing                                    governance” first. In both Israel and    be balanced with the fact that “fiscal
business was “state collapse or                                       Jordan, “terrorist attacks” topped       crises” dropped sharply in the survey
crisis”, with “terrorist attacks”                                     businesses’ lists of concerns.           rankings, from first position last year
second and “failure of national                                       In Yemen – where a profound              to fifth in 2018. Oil prices increased
governance” in third position.                                        humanitarian crisis has resulted         substantially between our 2017 and
Lebanon has not been able to                                          from a protracted civil conflict         2018 surveys, from around $50 to
form a government since elections                                     that is deeply entangled in the          $75. This represents a significant
in May 2018, in part because of                                       aforementioned regional rivalries        fillip for the fiscal position of the
the strains caused by increasingly                                    – the gravity of conditions in the       region’s oil producers, with the IMF
complex geopolitical rivalries across                                 country is illustrated by the spread     estimating that each $10 increase in
the region. Although the country                                      of concerns that respondents             oil prices should feed through to an
has endured long periods without a                                    prioritized from our list of 30 global   improvement on the fiscal balance
government before, Lebanon now                                        risks, including: “failure of national   of three percentage points of GDP.
16       Regional Risks for Doing Business
“Deep fissures within
                                                                                                                   and between the
                                                                                                                   region’s countries are
                                                                                                                   evident in the survey.”

                                                                                                        A view of the old quarter of Sanaa, Yemen. (REUTERS/Khaled Abdullah)

However, vulnerabilities to swings in oil                    the region’s 15 countries), rather                        regional economy and a global trend
prices have not disappeared, and are                         than great prominence in many                             towards increased corporate focus on
particularly pronounced in countries                         of them. At a national level, this                        cyber risks in particular is evident in a
where government spending is rising.                         risk ranks in the top three for five                      number of other MENA countries. For
This group includes Saudi Arabia,                            countries: Bahrain, Egypt, Morocco,                       example, “cyber-attacks” was ranked
which the IMF estimated in May 2018                          Oman and Tunisia. Nevertheless,                           as the second most important risk in
had seen its fiscal breakeven price                          unemployment is a pressing issue in                       three countries other than the UAE:
for oil – that is, the price required to                     the region, particularly for the rapidly                  Israel, Qatar and Saudi Arabia.
balance the national budget – rise to                        expanding young population: youth
$88, 26% above the IMF’s October                             unemployment averages around 25%                          The ongoing need for regional action to
2017 estimate, and also higher than                          and is close to 50% in Oman.                              mitigate environmental concerns was
the country’s medium-term oil-price                                                                                    reflected in the fact that “water crises”
target of $70–$80. It is no surprise,                        The United Arab Emirates is                               ranked eighth across the region. In
then, that Saudi Arabia remains one                          something of a regional outlier in the                    Egypt and Iran, respondents viewed
of five countries in the region that rank                    survey – respondents focused on                           “water crises” as the top risk to doing
“energy price shock” as the top risk                         technology-related risks in a very                        business. The potential severity of
to doing business in our survey, along                       similar way to their counterparts in                      water-related risks has been highlighted
with Bahrain, Kuwait, Oman and Qatar.                        Europe and North America, with                            in recent months by a scandal in Iraq
                                                             “cyber-attacks” ranked first, “misuse                     that has led to a reported 17,000
Although “unemployment and                                   of technology” in third place and “data                   people being poisoned by polluted
underemployment” is ranked second                            fraud” in fourth. However, although                       drinking water.
across the region as a whole, this                           the UAE’s focus on technological
reflects a consistent level of lower                         risks is unusually pronounced, it
placings across all of the region’s                          is not unique. The combination
countries (it is in the top ten in 12 of                     of increasing sophistication in the

3
     “Lebanon’s Economy Has Long Been Sluggish. Now a Crisis Looms.” The Economist, 30 August 2018.
4
    International Monetary Fund, Regional Economic Outlook: Middle East and Central Asia Statistical Appendix, May 2018, p.7.

                                                                                                                                         Regional Risks for Doing Business   17
Sub-Saharan Africa

Top ten risks in sub-Saharan Africa

     1    Unemployment or underemployment

     2    Failure of national governance

     3    Energy price shock

     4    Failure of critical infrastructure

     5    Fiscal crises

     6    Failure of financial mechanism or institution

     7    Failure of regional and global governance

     8    Water crises

     9    Food crises

     10 Unmanageable inflation

 Note: See Methodology section for details of the survey’s coverage in this region.

Economic risks continue to weigh on businesses across the region, as do concerns
about governance and the condition of critical infrastructure.

Of the 34 countries in sub-                                           masks deep-seated problems. More         Eswatini, and Namibia). The
Saharan Africa that we                                                than 70% of the region’s workers         region’s debt-to-GDP ratio has
surveyed, “unemployment and                                           are in vulnerable employment –           increased significantly over the past
underemployment” was identified                                       compared to a global average of          decade (from 23% in 2008 to 46%
as the most pressing concern                                          46% – and 37% are in extreme             in 2017), and the high proportion
for businesses in 22 of them. No                                      working poverty, which is defined by     of public borrowing accounted for
other region recorded anything                                        the International Labour Organization    by foreign-currency debt (60%)
like this level of consensus among                                    as income of less than $1.90 per         is a particular concern against
respondents, highlighting the                                         day.5 People in sub-Saharan Africa       a backdrop of rising US interest
profound challenges that the region                                   are still disproportionately likely to   rates. As well as creating the
faces on this issue, particularly in                                  enter the labour market at a young       conditions for potential future debt
light of the demographic changes                                      age, and the region has the world’s      crises, rising levels of indebtedness
that lie ahead. The UN projects that                                  lowest levels of access to higher        also limit policy-makers’ short-term
the working-age population of Africa                                  education – this combination is likely   flexibility: the IMF and the African
will more than double to 1.6 billion                                  to perpetuate a cycle of low skills      Development Bank (AfDB) have
by 2050, a trend that could open                                      and working poverty.                     already noted that rising debt-
new economic opportunities for the                                                                             servicing costs are diverting public
continent, but only if jobs can be                                    Economic vulnerabilities are also        spending from investment. And
created in huge quantities.                                           reflected in a number of other risks     the pressing need for investment
                                                                      cited by businesses. “Fiscal crises”     is highlighted in the fact that
According to World Bank data,                                         ranked number five across the            respondents ranked “failure of
Africa’s official unemployment rate                                   region, and was in the top three         critical infrastructure” fourth across
is just 7.3%. However, this figure                                    for four countries (Burundi, Chad,       the region.
18       Regional Risks for Doing Business
“Over 70 percent of
                                                                                                            workers are in vulnerable
                                                                                                            employment —compared
                                                                                                            to a global average of
                                                                                                            46 percent.”

                                                                                           Traders at a night market in Nairobi, Kenya. (REUTERS/Thomas Mukoya)

The second-highest risk cited by                           Vulnerability to energy price shock           things – conflict, drought, rising food
businesses across sub-Saharan                              remains a factor in the region,               prices, weak governance and the
Africa is “failure of national                             although business concerns on this            strains of rapid urbanization. During
governance”. Although this risk came                       front have eased somewhat since               2017, nearly 32 million people were
top in only two countries (Ethiopia and                    last year according to our survey             food-insecure and in need of urgent
Mozambique), it ranked in the top five                     results. Looking at the region’s most         assistance across north-eastern
for a further 18 countries, including                      significant oil exporters, this risk          Nigeria, Somalia, Yemen and South
the region’s largest economies                             ranked fourth this year in Nigeria            Sudan.6 “Water crises” ranked
(Nigeria and South Africa). There were                     (down from third last year), while            number one in Namibia, and number
interesting political developments                         it did not feature in the top ten in          two in Botswana and South Africa.
during the second half of 2017, with                       Angola. The sharp drop in oil prices          In late 2017, urgent measures were
a number of regional leaders stepping                      in 2014 caused fiscal and balance-            taken to prevent Cape Town running
down, allowing more reform-minded                          of-payments problems for numerous             out of water; “day zero” – when taps
successors to take their place.                            African oil producers, highlighting the       in the city run dry – has now been
However, several countries in the                          need for structural adjustments to            pushed back to 2019.
region are ruled by ageing leaders                         boost resilience. However, in its 2018
or family dynasties that perpetuate                        economic outlook, the AfDB noted
their rule through constitutional                          that these adjustments are being
amendments or postponement of                              implemented at a very slow pace.
elections. In the Democratic Republic
of the Congo (DRC), for example,                           Water and food crises ranked eighth
elections have been postponed twice                        and ninth respectively across the
since November 2017, and are now                           region, highlighting the continuing
scheduled to take place in December                        challenge of meeting basic needs
2018.                                                      against a backdrop of – among other

5
    International Labour Organization. World Employment and Social Outlook, 2018.
6
    Food Security Information Network. Global Report on Food Crises, 2018.

                                                                                                                             Regional Risks for Doing Business   19
South Asia
                                                                                                                           “Rising energy prices and
Top ten risks in South Asia                                                                                                expansionary monetary
     1   Failure of national governance                                                                                    and fiscal stances point
     2   Unmanageable inflation
                                                                                                                           to inflationary risks.”
     3   Unemployment or underemployment

     4   Failure of regional and global governance

     5   Cyber-attacks

     6   Failure of critical infrastructure

     7   Energy price shock

     8   Failure of financial mechanism or institution

     9   Water crises

     10 Large-scale involuntary migration

Note: See Methodology section for details of the survey’s coverage in this region.

Political and economic concerns predominate among businesses in South Asia, with
cyber-attacks also viewed as a concern.

“Failure of national governance” was                                 Respondents also pointed to                  detected, and second for targeted
ranked as the leading risk to doing                                  governance issues above the nation-          phishing attacks. Furthermore, there
business by our respondents in South                                 state level, with “failure of regional and   has been concern in India about the
Asia. This sentiment corresponds with                                global governance” ranking fourth            protection of citizens’ personal data
a particularly busy political period in                              across the region, and featuring most        in the Aadhaar system (the country’s
the region: there have been national                                 prominently in Nepal and Bangladesh.         biometric ID database) following
elections in the past year – in Pakistan                             Refugee and migration issues may be          a breach across four government
in July 2018 and in Nepal in November                                one driver of this, with approximately       agencies in May 2018 that exposed
and December 2017 – and another                                      700,000 people – mostly Rohingya             approximately 130 million accounts.
three are expected by the end of the                                 – having fled from Myanmar to                Elsewhere in the region, Pakistan,
year – in Bangladesh, Bhutan and                                     Bangladesh over the past year. In            Nepal and Bangladesh all rank high
Maldives. The election process is often                              addition, India-Pakistan tensions            among countries with computers
viewed with anxiety in South Asia as                                 remained ongoing in 2017, and there          running Microsoft products that report
it can be accompanied by violence,                                   have been no bilateral talks between         malware encounters.7 Furthermore,
blockades and other forms of political                               the two countries since 2015.                Bangladesh is still recovering from a
tension. Elections can also be followed                                                                           cyber-attack carried out on its central
by periods of uncertainty. In Nepal, a                               “Cyber-attacks” ranked as the number         bank in 2016 that stole $81 million.
new constitution was adopted three                                   five risk across the region, but it topped
years ago that divided the country into                              the concerns of respondents in India,        Economic risks are a prominent
seven new federal provinces, but it is                               by far the region’s largest country.         concern across the region. In India, the
still to be seen how the provinces will                              According to Symantec, India ranks           most prominent risk in this category
be governed and how the separation of                                third in the world, after the USA and        was “failure of financial mechanism or
power will work.                                                     China, for the volume of cyber threats       institution”, which was ranked third by
20       Regional Risks for Doing Business
A currency exchange in Colombo, Sri Lanka. (REUTERS/Dinuka Liyanawatte)

respondents. This reflects region-wide                        in the world – with 7.1% economic
problems: many financial institutions                         growth on average in 2019 – there are
are poorly managed and subject to                             concerns that the region will struggle
weak regulatory oversight, and there                          to deliver sufficient job creation to
has been a surge in the volume of non-                        meet the needs of a rapidly expanding
performing loans over recent years.                           population.8
“Unmanageable inflation” was ranked
as the second-highest risk across the
region. South Asia benefited from low
global oil prices in the 2014–16 period,
but a combination of rising energy
prices and expansionary monetary
and fiscal stances point to inflationary
risks. There are already indications
of mounting price pressures in some
countries: inflation in India increased
from 1.5% in June 2017 to 5.1% in
January 2018, while, in July this year,
Pakistan’s inflation rate reached a
four-year high. “Unemployment or
underemployment” was ranked as
the third leading risk in the region.
While projections from the World
Bank suggest South Asia is set to
remain the fastest-growing region

7
    Microsoft. Microsoft Security Intelligence Report Volume, v23, p.42.
8
    World Bank. South Asia Economic Focus: Jobless Growth?, 2018.

                                                                                                                              Regional Risks for Doing Business   21
East Asia and the Pacific

Top ten risks in East Asia and the Pacific

     1    Cyber-attacks

     2    Unemployment or underemployment

     3    Asset bubble

     4    Energy price shock

     5    Data fraud or theft

     6    Failure of national governance

     7    Failure of regional and global governance

     8    Fiscal crises

     9    Failure of critical infrastructure

     10 Manmade environmental catastrophes

 Note: See Methodology section for details of the survey’s coverage in this region.

Cyber-attacks ranked as the number one risk across East Asia and the Pacific, with
worries about unemployment in second place.

“Cyber-attacks” are the leading                                       President Donald Trump and North            have resulted in rising credit-card
risk to doing business across East                                    Korean leader Kim Jong-un, Singapore        fraud rates, necessitating increased
Asia and the Pacific, according to                                    was reported to be the number one           protection measures by the region’s
our survey. They topped the list for                                  target of cyber-attacks in the world.       banks.
respondents in Indonesia, Japan
and Singapore. The prominence of                                      “Cyber-attacks” ranked fifth in China,      “Unemployment and
cyber-attacks as a concern among                                      but the related risk of “data fraud or      underemployment” was ranked as
the region’s businesses reflects                                      theft” was the third-highest risk there     the second most-pressing risk across
the rapid pace of digitization and                                    according to our survey. “Data fraud        the region. This is likely to reflect a
the increasing sophistication of the                                  or theft” was ranked as the leading risk    combination of factors. Population
region’s economies. South-East Asia in                                by respondents in Malaysia, a result        growth is creating the need for robust
particular is the fastest-growing region                              that may reflect the impact of a case       rates of job creation – 11,000 people
in the world in terms of connections to                               in 2017 involving the attempted sale        are joining the workforce across the
the internet, with a projected 3.8 million                            of more than 46 million mobile phone        Association of Southeast Asian Nations
new users each month, and estimates                                   subscribers’ data. This was among           (ASEAN) every day, for example –
that its online economy will reach $200                               the largest breaches of consumer            while rapid technological advances
billion by 2025. These trends make                                    information ever recorded in Asia.          are disrupting established economic
the region a target for criminal and                                  Given that Malaysia’s population is         models and labour-market patterns.
terrorist hackers, and in mid-2018,                                   31 million, it is likely to have affected   Low-wage manufacturing sectors in
the prime minister of Singapore, Lee                                  the entire country. Across the region       many of the region’s countries are
Hsien Loong, warned of cyber-attacks                                  as a whole, the increasing prevalence       at greater risk of being disrupted
by terrorist groups, such as ISIS. In                                 of e-commerce and the growing               compared to knowledge-based
June, during the summit between US                                    popularity of new payment methods           industries in Europe and the USA.
22       Regional Risks for Doing Business
“In Hong Kong residential
                                                                                                           property prices have
                                                                                                           risen by 185 percent
                                                                                                           since the start of the
                                                                                                           decade.”

                                                                                   A model of the LP6 residential development in Hong Kong SAR. (REUTERS/Bobby Yip)

However, concerns about the labour-                     businesses to the possibility of further
market impact of new technologies                       price shocks.
are not restricted to the region’s
lower-income countries. In Australia,                   The “asset bubble” risk ranked as the
for example, estimates suggest                          third-highest regionally, and as the
that almost 40% of current jobs will                    number one risk in Cambodia and
disappear in the next 15 years, and the                 Hong Kong SAR. In Cambodia, years
country’s banks were among a number                     of rapid construction of condominiums
of sectors to announce downsizing                       and gated communities in the capital,
measures, for technological reasons,                    Phnom Penh, have created concerns
during 2018.9                                           about an oversupply, while in Hong
                                                        Kong, real-estate prices have been a
The highest-ranked risk in Australia                    source of unease for a decade. In July
was “energy price shock” (compared                      2018, residential property prices were
to a region-wide fourth-place ranking).                 up by 16.6% year on year, an increase
The country is among the leading                        of 185% since the start of the decade.
global energy exporters, but policy
failures under successive governments
have seen Australia’s energy
infrastructure fall into disrepair. A badly
managed transition from ageing coal-
fired power generation to renewables
has led to supply shortages and rapid
price increases.10 This in turn is likely
to explain the sensitivity of Australian

9
  “EDA’s Major Research Report for 2015, Australia’s Future Workforce?” CEDA, June 2015: https://www.ceda.com.au/Research-and-policy/All-CEDA-research/Research-
catalogue/Australia-s-future-workforce (link as of 1/10/18).
10
   Williams, Perry. “Why Energy-Rich Australia Suffers the World’s Priciest Power.” Bloomberg, 5 October 2017.
                                                                                                                                   Regional Risks for Doing Business   23
North America

Top ten risks in North America

     1   Cyber-attacks

     2   Data fraud or theft

     3   Extreme weather events

     4   Fiscal crises

     5   Energy price shock

     6   Asset bubble

     7   Failure of critical infrastructure

     8   Failure of urban planning

     9   Terrorist attacks

     10 Failure of climate-change adaptation

Note: See Methodology section for details of the survey’s coverage in this region.

After a year of costly and high-profile breaches, cyber and data risks top the concerns
of businesses in North America.

For business executives in Canada                                     Canada, 87% of businesses reported         In the USA, a majority of the population
and the United States, cyber-attacks                                  being the victim of a successful           (65%) has already experienced a
are now the number one risk to doing                                  breach in 2017.11 In early 2018, the       personal data breach according
business. This mirrors the pattern in                                 US Director of National Intelligence       to the Pew Research Center. The
other economically advanced regions,                                  cited cyber vulnerability as a top risk    costliest data breach to date occurred
highlighting the growing reliance of                                  for government and businesses alike        during 2017 at Equifax, with sensitive
global commerce on digital networks                                   in a hearing before the Senate Select      personal information of 143 million US
that are the target of increasingly                                   Committee on Intelligence.                 consumers being breached at a cost
sophisticated and prolific attacks. In                                                                           of up to $600 million. Concerns about
this regard, 2017 is likely to mark a                                 Unsurprisingly, the closely related        data-related risks in the USA may also
watershed, with a series of massive                                   risk of “data fraud or theft” is also a    have been heightened by widespread
cyber-attacks highlighting the mounting                               concern in the region, ranking third       reporting about the exploitation of social
dangers from hackers and the need to                                  in the United States and seventh in        media networks for political purposes.
bolster public and corporate defences.                                Canada. Of the Canadian companies          For example, our survey was in the
The WannaCry ransomware attack                                        that experienced a cyber-attack in         field when the Cambridge Analytica
affected 300,000 machines across                                      2017, almost half lost sensitive data.     scandal broke, in which the personally
150 countries, while the NotPetya                                     In 20% of cases, sensitive customer or     identifiable information of 87 million
malware attack caused huge corporate                                  employee data was exposed. Recently        Facebook users was collected then
losses. For example, Merck, FedEx and                                 passed Canadian legislation will require   reportedly used in political campaigning.
Maersk each reported losses of around                                 companies covered under federal law
$300 million in the third quarter of 2017                             to report data breaches to customers,      Physical security also remains a major
alone. Moreover, the pace and scale of                                affected third parties and the federal     concern among US businesses.
cyber-attacks are increasing rapidly. In                              privacy commissioner.                      Although cyber-attacks replaced them
24       Regional Risks for Doing Business
“Extreme weather has
                                                                                                                  plagued the region and
                                                                                                                  inflicted significant costs
                                                                                                                  in the last 18 months.”

                                                                                                Sunset over hills burned in the Carr fire in California. (REUTERS/Bob Strong)

at the top of the country’s list of risks                 region and inflicted significant costs on                “Fiscal crises” and “energy price
this year, “terrorist attacks” still ranks                businesses in the past 18 months. In                     shocks” round out the top five risks
second. In October 2017, eight people                     Canada, wildfires raged through British                  identified by business executives in
were killed in a vehicular attack in                      Columbia in the summer of 2017, while                    North America. Concerns about high
New York City, the largest loss of life                   temperatures plummeted to all-time                       fiscal deficits and public debt-to-GDP
from a terrorist attack in the city since                 lows in Alberta and Saskatchewan                         ratios are nothing new in the USA, but
9/11. This risk category could also                       in early 2018. Most recently, record-                    business concerns appear to have
be capturing wider concerns about                         breaking heatwaves in the central and                    increased in the wake of a tax-cutting
the prevalence of mass shootings in                       eastern parts of the country led to the                  budget announced in February 2018:
the USA. Geopolitical security risks                      deaths of more than 50 people. In the                    last year, “fiscal crises” did not rank
are also a concern for US businesses                      USA, last year’s most costly disaster                    in the top ten among US businesses,
this year, with “weapons of mass                          was Hurricane Harvey, which inflicted                    whereas this year it ranked fourth.
destruction” (WMDs) ranking fifth                         over $125 billion in damage in August
against a backdrop of heightened                          2017, primarily due to catastrophic
insecurity regarding North Korea’s                        rainfall-triggered flooding in the
nuclear capabilities and intentions.                      Houston metropolitan area. Harvey
Neither terrorism nor WMDs ranked in                      was followed by Hurricanes Irma and
the top ten in Canada.                                    Maria in September and October of
                                                          2017 respectively, which ravaged
“Extreme weather events” ranked third                     Puerto Rico and the US Virgin Islands.
across the region, largely driven by                      In California, wildfires have affected
concerns among Canadian businesses,                       much of the population in the past
which also included “failure of climate-                  two years, causing both human and
change adaptation” in their top ten.                      environmental devastation.
Extreme weather has plagued the

11
     World Economic Forum, Global Risks Report 2018, p15.
12
     Greenwood, Max. “Almost 9 out of 10 Canadian Companies Were Breached by Cyber-Attacks Last Year.” Tech Vibes, 9 February 2018.

                                                                                                                                        Regional Risks for Doing Business   25
Latin America and the Caribbean

Top ten risks in Latin America and the Caribbean

     1    Failure of national governance

     2    Profound social instability

     3    Unemployment or underemployment

     4    Fiscal crises

     5    State collapse or crisis

     6    Energy price shock

     7    Illicit trade
                                                                                                                                 “An intense electoral
     8    Failure of critical infrastructure

     9    Natural catastrophes
                                                                                                                                 cycle has reinforced
     10 Failure of urban planning                                                                                                political polarization
 Note: See Methodology section for details of the survey’s coverage in this region.                                              across Latin America.”

Weak governance and sociopolitical instability weigh on businesses across the region,
as do concerns about unemployment.

In a clear reflection of continuing                                   to doing business in five countries        reflected in the risks prioritized by
political strains across much of the                                  across the region (Bolivia, Brazil,        survey respondents: “unmanageable
region, our survey respondents in                                     Ecuador, Guatemala and Panama) and         inflation”, “state collapse or crisis”,
Latin America and the Caribbean                                       it was ranked second in a further four     “profound social instability”, “food
cited “failure of national governance”                                (Mexico, Nicaragua, Peru and Trinidad      crisis” and “failure of national
as the most serious risk to doing                                     and Tobago). Meanwhile, profound           governance”. Among other things,
business for the second year in a                                     social instability ranked as the number    Venezuela’s crisis has led to mass
row. Moreover, the risk of “profound                                  one risk in Honduras and Mexico,           migration to nearby countries, including
social instability” edged up from third                               and was the second-highest risk in a       Colombia, Peru, Ecuador, Brazil and
position in last year’s survey to second                              further three countries (Bolivia, Panama   Chile. In our survey, Colombia and
position in 2018, reflecting deepening                                and El Salvador). A combination of         Chile ranked the risk of “large-scale
social tensions in parts of the region.                               societal fissures including poverty,       involuntary migration” in first and
The past two years have involved an                                   inequality, security challenges, health    second place, respectively. These
intense electoral cycle across Latin                                  risks, unemployment (and high levels of    developments may also help explain
America, which, combined with the                                     informal employment), and insufficient     why Colombia and Venezuela are the
emergence of successive corruption                                    social safety nets and retirement          only countries in the region in which
scandals at the centre of public                                      provisions constitute a tinderbox in       interstate conflict was cited among the
debate, has reaffirmed electorates’                                   numerous countries.                        top ten risks. The survey also captures
long-standing mistrust of institutions                                                                           the early stages of Nicaragua’s political
and reinforced political polarization.                                Venezuela is already in an                 crisis, which started in April 2018
                                                                      unprecedentedly critical situation,        and has since evolved into violent
Respondents ranked “failure of national                               and the extent of the collapse of its      clashes between, on the one hand, the
governance” as the number one risk                                    economy and political institutions is      government and its supporters, and,
26       Regional Risks for Doing Business
An opposition rally in Caracas, Venezuela. (REUTERS/Carlos Barria)

on the other, opponents largely drawn      The Latin American region’s economy           earthquakes in central Mexico left
from the private sector, students and      continues to be highly dependent              over 400 people dead and caused
the church. Respondents in Nicaragua       on commodities production, thus               enormous economic losses for the
ranked “failure of national governance”    energy and oil price volatility has had       country in 2017, and natural disasters
as the second most-pressing risk.          a profound impact over the years.             have also caused significant suffering
                                           The “energy price shock” risk was             and damage in Chile, Colombia, Peru,
Economic concerns are also prominent       ranked sixth overall across the region,       Brazil and the Caribbean.
across the region, with “unemployment      but it was cited as one of the top
and underemployment” and “fiscal           three concerns for doing business in
crises” ranking third and fourth.          four countries (Dominican Republic,
Unemployment has risen in Latin            Honduras, Nicaragua and Trinidad and
America in the past three years,           Tobago). However, there are signs that
reaching 8.4%, affecting over 26 million   an uptick in international commodity
people, according to the International     prices is helping the region to return to
Labour Organization. The risk of fiscal    positive economic growth, despite the
crises topped respondents’ list of         many headwinds it faces.
concerns in four countries, including
Argentina, where it tied as the number     One or both of “extreme weather
one risk with “unmanageable inflation”.    events” and “natural catastrophes”
The timing of the survey means it          rank in the top five risks for eight
will not have captured some of the         countries in this region. Extreme
subsequent deterioration of Argentina’s    weather was cited as the top risk by
economic and financial situation: for      respondents in Jamaica, where “natural
example, as of September 2018, the         catastrophes” was the top concern
country’s currency had lost 50% of         in Chile. Across the region, countries
its value against the US dollar since      repeatedly suffer extensive human,
the start of the year. “Unmanageable       physical and economic damage as
inflation” also ranks among the top        a result of hurricanes, flooding, fires,
three risks in Venezuela and Haiti.        drought and earthquakes. For example,
                                                                                                             Regional Risks for Doing Business   27
Results at a glance
The table below presents the key risk-related findings from the Executive Opinion Survey for 140 economies. In each
instance the table lists the top five risks for each economy—as cited by respondents in that economy—with “Risk 1”
indicating the most frequently cited risk.

Where there is a tie, the tied risks are presented in the same cell, separated by a dotted line, and the next cell in the row
contains an ellipsis (“…”). For example, in Angola two risks are tied for first place (“unemployment and underemployment”
and “failure of a financial mechanism or institution”) and there is therefore no risk in second place.

An asterisk beside the name of an economy indicates that the most recent available survey data are from 2017. A double
asterisk indicates that the most recent data are from 2016.

                                   RISK 1                          RISK 2                         RISK 3                          RISK 4                         RISK 5

                                                                                                                                                           Natural catastrophes
                                                                                            Failure of financial
      Albania                    Fiscal crises                     Illicit trade
                                                                                          mechanism or institution
                                                                                                                              Interstate conflict
                                                                                                                                                               Cyberattacks

                        Failure of regional and global                                      Failure of financial
       Algeria                   governance
                                                             Energy price shock
                                                                                          mechanism or institution
                                                                                                                              Terrorist attacks                 Food crises

                              Unemployment or
                              underemployment
                                                                                              Failure of national
       Angola                                                           ...
                                                                                                 governance
                                                                                                                              Terrorist attacks          Failure of urban planning
                            Failure of financial
                          mechanism or institution

                                                                                              Failure of national
                                 Fiscal crises
                                                                                                 governance
     Argentina                                                          ...                                                            ...                State collapse or crisis
                           Unmanageable inflation                                         Profound social instability

                           Large-scale involuntary                                           Unemployment or
      Armenia                    migration
                                                               Interstate conflict
                                                                                             underemployment
                                                                                                                         Profound social instability       Natural catastrophes

                                                                                                                                                                Fiscal crises
                                                                                                                        Failure of regional and global
      Australia              Energy price shock                 Cyber-attacks                   Asset bubble
                                                                                                                                 governance                  Failure of critical
                                                                                                                                                              infrastructure

                                                                                           Large-scale involuntary                                          Unemployment or
       Austria                  Cyber-attacks                    Asset bubble
                                                                                                 migration
                                                                                                                         Profound social instability
                                                                                                                                                            underemployment

                                                                                                                          Large-scale involuntary
                                 Fiscal crises                                                                                  migration
     Azerbaijan*                                                        ...                 Natural catastrophes
                                                                                                                            Energy price shock
                                                                                                                                                                     ...

                              Interstate conflict
                                                                                                                                  Illicit trade

                                                                                             Unemployment or
      Bahrain**              Energy price shock                  Fiscal crises
                                                                                             underemployment
                                                                                                                              Interstate conflict        Profound social instability

                                                              Failure of national                                       Failure of regional and global      Unemployment or
     Bangladesh              Energy price shock
                                                                 governance
                                                                                               Cyber-attacks
                                                                                                                                 governance                 underemployment

                                                           Failure of urban planning

                                                         Failure of regional and global                                                                     Unemployment or
      Belgium                   Cyber-attacks
                                                                  governance
                                                                                                      ...                              ...
                                                                                                                                                            underemployment

                                                                 Fiscal crises

28    Regional Risks for Doing Business
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