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Political risk on the slide as "new order" emerges in ME

Political risk has eased in 13 countries including three Middle Eastern countries - Bahrain, Oman and the UAE - after several years of downgrades due to the Arab Spring, the political effects of the global financial crisis and persistent strains in South Asia, according to Aon's annual political risk map.

The map, created in partnership between with Roubini Global Economics, shows 12 countries experiencing downgrades in 2013, compared to 21 a year ago. Among the downgrades include seven African countries, namely Algeria, Cameroon, Chad, Ethiopia, Madagascar, Mali, and Namibia.

According to the map, a "new order" has emerged in the Middle East, reflecting a stabilisation and differentiation of political risk in the MENA region. However the research notes this might be temporary as the region is still fragile and divided between the countries with stronger economic and financial institutions and those with greater wealth which increases their resilience to adverse political and economic events. Moreover, it underscores the importance of strong corporate and financial institutions, which cushion the effects on individual countries.

"Despite the upgrades this year, businesses operating in emerging markets still face significant political risks. We work closely with our clients to identify their exposures to these risks. Supported by powerful data and analytics of current and historical trends this new interactive map gives clients unprecedented clarity when assessing their political risks in the emerging markets," says Mr Matthew Shires, Head of Aon Risk Solutions' political risk team in London.

"This year the political risk exposure across emerging markets remains volatile. However our data illustrates a differentiation led by a country's financial ability to bolster its balance sheets. Our analysis indicates that Oman, Bahrain and UAE have all experienced upgraded political risk exposure, illustrating their strength in the region to withstand the impact of the 2010 Arab Spring," adds Mr Richard Green, CEO of Roubini Global Economics.

Egyptian parliament approves sukuk law

Egypt's parliament yesterday approved a law allowing the issuance of sukuk which could provide the heavily-indebted government with a new form of finance.

The Upper House voted in favour of the law that was approved by the government and subsequently sent it to President Mohamed Mursi for final approval.

Finance Minister Al-Mursi Al-Sayed Hegazy earlier said Egypt could raise around $10 billion a year from the sukuk market - much more than some analysts expect - but added it would take at least three months to push through the necessary regulations.

Strong demand for trade credit cover seen in MENA

The MENA region is seeing strong demand for trade credit insurance (TCI), with keen appetite especially from the UAE.

Coface’s quarterly country risk assessment survey reveals a strong showing for the GCC, where TCI currently stands at AED20 billion (US$5.4 billion), with the UAE gaining an A3 rating for the first quarter of 2013.

It predicts TCI in the UAE will grow by 50% within two years in terms of volume of transactions covered. Mr Gregory Le Henand, Coface's GCC Country Manager, says the projected growth reflects the UAE’s premier position both as a regional and international import and re-export hub.

“Whilst oil prices remain high at around US$115 per barrel, GDP rates continue to underpin public spending and safeguard trade which is the lifeblood of Dubai’s economy”, he adds.

The company attributes its good results in 2012 to the emerging markets’ performance, with premiums up by 4% in MENA and double digit growth in Asia and Latin America.

Meanwhile, the Arab Investment and Export Credit Guarantee Corporation (Dhaman) will continue to provide investment and export credit guarantee services despite the ongoing political and social events in the Arab world, says its Director-General, Mr Fahad Al-Ibrahim.

Mr Al-Ibrahim says the events in a number of member states did not constitute an obstacle for Dhaman to provide its investment and exports credit guarantee services. Dhaman has also reviewed its policies and underwriting procedures, taken a number of precautionary measures, and increased the size of its operations during 2012.

Export Development Canada (EDC), the country's export credit agency, said it paid out $358 million in claims last year, up from $55 million in 2011, as a result of the unusually large claims in its political risk insurance programme due to turmoil in MENA.