KUWAIT: Kuwait has low security risk and medium political risk forecasts according to the Risk Map forecast; an annual guide published by Control Risks. It shares similar forecasts with Oman, Bahrain and Qatar, while the United Arab Emirates had a low political risk forecast to go with its low security risk forecast. Meanwhile, Saudi Arabia had medium forecasts for both security and political risks.
The report mentioned the drawbacks of the ongoing privatization drive in the Middle East in general. “A privatization push across the Middle East and North Africa in 2017, including in Algeria, Egypt, Pakistan and Saudi Arabia, will act as a siren call to investors around the world. As foreign companies prepare bids for new projects and tune into public debates about the benefits that privatization offers, they should closely inspect what is on offer – and from whom,” the report reads.
Drivers of risk
The report had the following to say about the drivers of risk in the Middle East and North Africa region this year:
“The big black swan of 2017 for the Middle East region will be a potential unraveling of the nuclear deal with Iran as a result of changes in US foreign policy under President Trump. While we consider that to remain unlikely, this would have significant security and business implications for the region by pushing Iran back into aggressive foreign policy and into commercial isolation.
“Under our main scenario which provides for continuity of the nuclear deal beyond 2017, the top five likely drivers of risks to international businesses in the Middle East are:
• Geopolitics: Shifting global geopolitical relationships will be mirrored by a realignment of foreign policy alliances and priorities of major players in the Middle East. Countries such as Saudi Arabia, Egypt, Qatar and Iran will look to build or consolidate bridges with China, Japan, India and/or Russia to hedge against the uncertainty surrounding US’ and Europe’s engagement in the region. Such policy realignments are likely to play out in the commercial sphere when it comes to major project awards and bilateral trade agreements.
• Fiscal consolidation: Efforts to reduce government spending in response to low oil prices will continue to affect economic growth and dampen public investment levels across the region. They will also drive regulatory risk – particularly rises in local taxes and changes to local content regulations, as well as risks of non-payment and contract frustration. Reform efforts are also likely to trigger localized labor and/or social unrest against governments and businesses in North Africa, particularly in Algeria, Tunisia and Morocco.
• Push for FDI: Most countries in the region are putting in place plans and strategic visions to increase their attractiveness to foreign investors in an effort to diversify their economies and secure growth in sectors other than oil and gas. While these efforts may be successful in non-strategic sectors such as education, healthcare and e-commerce might, they are unlikely to succeed in other major sectors, such as energy or telecommunications, where prevailing statists trends and a desire for government interference will likely limit the extent of privatization and liberalization.
• Weakening of Islamic State: The collapse of IS territory is likely to prompt a global exodus of foreign fighters. As IS falls, many will be killed in battle, some captured trying to escape and others recruited into other groups – including rival al-Qaida affiliate Jabhat Fatah al-Sham (JFS) or continuing to operate in weak governance areas, such as the Sinai in Egypt, as well as parts of Libya, Syria and Iraq. The rest will most likely return to their home countries in Western Europe, Russia, North Africa or the GCC and will try to imbue local extremist networks in their home countries with their experience and capability. While in Iran and the GCC this trend is unlikely to trigger any significant increase in the threat of attacks, countries such as Tunisia, Morocco, Lebanon and Jordan may face higher challenges to contain returning IS fighters.
• Cyber: The conflict in Syria and the broader complex geopolitical situation in the Middle East is likely to have a significant impact on the regional cyber threat landscape in the coming year. In particular, Iran has continued to develop its capabilities and lags behind only Israel in the region in terms of its ability to conduct disruptive cyber-attacks on geopolitical rivals, though other states are also seeking to develop these tools for their own arsenals. In 2017, Iran and these emerging actors are likely to use their capabilities to conduct plausibly deniable data-wiping attacks in its rivals, using activist groups to claim credit for the incidents so as to complicate the victims’ response. These attacks are particularly likely to target governmental bodies, symbolic targets and elements of critical national infrastructure in rival states.”