Track 1: Country Risk and International Political Risk Management

Country and political risk attention seems to be shifting from developing countries to developed ones. Simultaneously, there is a rise in populist and nationalist views among a number of politicians in the western world. When such people are elected they may bring trade and investment restrictions, higher government spending and lower taxes, resulting in wider fiscal deficits and restrictions on immigration. Surprisingly, some of such views have even been able to gain additional power recently.
Donald Trump was elected as the US president in 2016 by campaigning over such perspectives; and one of the first decisions of his government was abandoning the Trans Pacific Partnership Agreement. Even the future of Transatlantic Trade and Investment Partnership Agreement is not really clear under the Trump administration though the negotiations are still in progress. His policies on free trade, inward foreign direct investment, NATO, foreign policy and immigration etc. are reflecting a significant shift from the traditional approaches in US. The relations of US with the EU countries have also been in a general deterioration since Trump came into power.
Another interesting event has been Britain’s exit from EU, so called the Brexit, following a referendum in June 2016. After this decision, many Eurosceptic politicians in other European countries celebrated the result, and expected other countries to follow the British example. The French presidential elections in April 2022 were a very important stage in shaping such expectations for the future as Marine Le Pen was also running for the presidency, based on an anti-EU campaign. Though pro-EU Emmanuel Macron’s presidency had calmed down such concerns; this was followed by the Italian elections in September 2022. In Italy, Giorgina Meloni from the political party named Fratelli d’Italia [Brothers of Italy] has won the elections and become the new prime minister. Observers expect that the new Italian government would also be Eurosceptic. In a way, all these are not really surprising as it seems that a full recovery from the global financial and economic crisis is not yet on the horizon. On top of this, the immigration to European countries has accelerated. In fact, the war in Ukraine has also intensified the tension among the vulnerable sections of societies in European countries.
The outbreak of Covid-19 was first discovered in Wuhan in November 2019. But very quickly it has been a global pandemic. The repercussions of the pandemic have been disastrous, not only in health terms but also in economic terms. Over 6 million people have died, and due to lockdowns and ensuing supply chain shortages led to huge economic contraction. In many countries, governments had pursued monetary easing to overcome such economic affects. When the results of these policies were combined with the effects of the economic policies implemented in the post-2007 financial crisis, it was inevitable that inflationary results would emerge. The aforementioned inflationary pressures expanded with the effects of the war that started with Russia's invasion of Ukraine on commodity markets.
The war in Ukraine is itself a long story. It started with the Ukrainian territory Crimea’s annexation by Russia in March 2014 with a military intervention. This has changed the security position on the European continent significantly. There were initially contradicting views even within EU over the conflict. However, throughout the time the disagreement between the Russian and Ukranian governments escalated over the aspirations of Ukraine to be a member of Nato, and on 24 February 2022, the Russian troops invaded Ukraine. The invasion has resulted in tens of thousands of deaths and caused Europe's largest refugee crisis since World War II, with millions of people being displaced in Ukraine. Many of them now are refugees in a number of European countries. After the invasion, it now seems that all European countries have concerns due to the unpredictability of Russia that does not avoid using even military power.
In the late 1980s after the collapse of communist regimes and the end of the cold war, however, there was initially a huge optimism for peace and political stability in Europe. Yes, there was a long civil war in the ex-Yugoslavia in the centre of Europe for a very long time; but with the impetus of the end of cold war, the European Union started an ambitious enlargement process and then many newly independent or ex-communist countries have either joined the EU or applied for full-membership. While all such developments were in progress, Russia was forced to accept all these as she was also in her own restructuring process. In 1999, Vladimir Putin first became the prime minister and then the acting president in Russia. Since then, Russia’s standing regarding the world political events have resembled the Soviet period.
While the western world has been struggling with these developments, the developing countries are also having important problems with further implications on the industrial word. One of such major affairs is the civil war in Syria started in 2011 and still continues. At the moment, nobody can predict which type of resolution will be the final stage. But even this single event has caused millions refugees’ flow from the region mainly to Europe. The Syrian refugees have particularly been a burden on neighbouring Turkey, and also on Greece and Germany not only financially but also regarding social and political aspects.
Another interesting political risk case could be Turkey. Since the coup attempt on 15 July 2016, there have been important political developments in the country. Just after the coup attempt, a state of emergency was declared; and then a referendum was held on 16 April 2017 to amend the country’s constitution. This was followed by a major structural change in the political structure to replace the existing parliament-based government with a presidential system. As a results, there are serious uncertainties regarding the countries capability to attract foreign direct investment.
It is interesting to go through all these events which are, in fact, not the all. Let us keep in mind that we have not yet even mentioned the acts of global terrorism in major cities in the world. As is known, the deaths have been counted by hundreds by now.
These issues are not only political but they may have significant economic or business-related consequences and ethical implications. For instance, the Brexit has already proved that there will be unexpected outcomes on multinationals’ operations in Britain. For example, it is claimed that many banks and financial sector companies based in London are planning to relocate their operations somewhere in the continental European cities such as Frankfurt.
In this environment, probably caused partly by the global financial and economic crisis, there are serious concerns among business people, politicians, academics and thought leaders that the world is getting more insecure due to global terrorism, nationalist and authoritarian tendencies etc... Naturally, multinational corporations’ FDI activities cannot be isolated from all such developments. Therefore, country and political risk management will surely be a very interesting area to study particularly these days. In other words, in the current global environment of high country and political risks and policy uncertainty, it will certainly be valuable to examine the evolution of risk perceptions of multinationals and also the tools and techniques they use to skilfully manage such risks. Analysing how investors perceive and deal with these risks will additionally contribute to a better understanding of the role of risk insurance in the post-crisis investment landscape, and how it can help to multinationals’ direct investment activities in high risk regions or countries.
In this respect, this conference track will bring research outcomes analysing the current situation and potential future developments regarding country and political risk management within the framework of foreign direct investment and all other activities of multinational corporations. As an extension of this main theme, availability and use of risk insurance may be also evaluated. It is expected that prospective papers to be submitted will explore both theoretical issues in the field and practical issues in formulating policy and strategy and it will also pay attention to the issue of employment and growth regarding multinationals and foreign direct investment.
Therefore, empirical and conceptual research papers, or work-in-progress papers, or extended abstracts are welcomed.