Category Archives: South Asia

Protectionist clauses in the Philippine Constitution restrict foreign direct investment

Journal of Political Risk, Vol. 1, No. 1, May 2013.

Asia Foreign Direct Investment, 2003-2012.

Asia Foreign Direct Investment, 2003-2012.

Author: Priscilla Tacujan, Ph.D.

With the investment-grade credit rating granted by Fitch Ratings in March, an improved international business reputation, and sound fiscal management, the Philippines is poised to become the next foreign direct investment (FDI) destination of Asia.  Other conditions for a robust investment climate are in place: a large market, skilled human capital, youthful population, and strategic location that connects population centers across Asia. Also, the Philippines is increasingly open to international trade. By 2015, Southeast Asia will have the advantage of a single market through the Association of Southeast Asian Nations Economic Community (ASEAN).  According to data provided in the World Economic Forum’s Global Enabling Trade Report 2012, the country’s macroeconomic fundamentals are strong, making it attractive to at least a fraction of the foreign investors concerned over the Euro crisis.

Despite the improvement in the Philippine investment climate, the Philippine Constitution (1987) still has an antiquated article that supports laws restricting foreign ownership of property to 40% (Article XII), with minor adjustments and deviations by subsequent legislation. Removing the clause, and improving access and protections of foreign-owned business, would lead to a quantum leap in FDI and Philippine economic growth. Small changes to legislation are not enough. The Constitution needs to be changed in order to fully welcome foreign investors to the Philippines. Continue reading →

GDP Per Capita and Democracy Explain 87% of the Social Progress Index

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Model 1: Effect of GDP Per Capita on the Social Progress Index

Figure 1. Effect of GDP Per Capita on the Social Progress Index (Model 1)

Journal of Political Risk, Vol. 1, No. 1, April 2013.

By Anders Corr, Ph.D.

Social Progress Imperative, a global group that produces well-being data for 50 countries, released their Social Progress Index (SPI) today. The index compares countries not on GDP, but rather on a single quality of life metric as a function of housing, health, education, and environmental sustainability. The index is backed by Harvard Business School professors and the Skoll Foundation (WSJ).

Sweden, Britain, and Switzerland have the best Social Progress Index scores, because these countries have some of the highest GDPs per capita of the fifty countries in the index. It is no coincidence that the three lowest SPI scores – Ethiopia, Nigeria, and Uganda, have very low GDPs per capita. The best way to understand SPI is therefore to control for GDP per capita. Corr Analytics did simple regression analysis on SPI. Approximately 84% of the index is explained by gross domestic product (GDP) per capita (see technical details below). Countries with large economies relative to their populations will have more wealth that can be channeled to the basic necessities measured by SPI. Therefore the simpler standard used by economists for decades — GDP per capita — works quite acceptably for well-being. Continue reading →

Nepal milestone towards increased stability

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Nepal passed a modest milestone today in its attempts to improve stability . The four top political parties named Supreme Court Chief Justice Khilraj Regmi as head of an interim government. The main goal of Regmi will be to hold elections by June 21 for a new parliament empowered to adopt a constitution (ABC News).

However, we are not overly optimistic. Smaller political parties led violent riots in opposition to Regmi, it is unclear whether elections will actually be held, and even if elections are held, it is unlikely they will lead to a constitution. The last parliament elected for the purpose of deciding on a constitution — in 2008 — was unable to agree on one during its four-year tenure. Nothing fundamental has changed in Nepalese politics to suggest that a constitutional breakthrough will occur in the near future.

Watch for greater Bangladesh Army attempts to quash unrest, and a further turn towards terrorism by militant student groups

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Unrest in Bangladesh has increased due to trials against Jamaat-e-Islami leaders stemming from war crimes in 1971 (Washington Post). Watch for greater army involvement in attempts to quash violent protesters. Such military action is likely to increase a turn towards terrorism by extremist youth groups. The most active of such groups will be Jamaat-e-Islami’s militant youth wing — the Islami Chhatra Shibir (ICS).

The ICS is strongest in universities and a member of some legitimate international Islamic organizations. However, they are intolerant Wahhabists, linked to Bangladesh domestic terrorism, and likely connected to international terrorist organizations (University of Maryland).

Increased Unrest in Bangladesh

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Journal of Political Risk

By Anders Corr, Ph.D.

A few weeks ago Corr Analytics predicted a likely increase in Bangladesh unrest due to steps leading to the criminalization of the Islamist political party, Jamaat-e-Islami (canalyt.com).

With today’s arrest of a Jamaat-e-Islami party official, the predicted unrest materialized. A demonstration that clashed with police resulted in at least 61 injured. Demonstrators threw crude bombs at police, who responded with tear gas and rubber bullets. The Bangladesh Nationalist Party (BNP) — the main opposition in parliament — is now more closely allied with Jamaat-e-Islami. The BNP called for a General Strike on Thursday (Associated Press).

Given the extensive business interests and relatively strong alliance of Bangladesh with the West, it is paramount to maintain the country’s relative stability. Given the pro-Islamist outcomes of the Arab Spring events, it would not be advised to risk another such movement in Bangladesh. The US and other Western ambassadors to Bangladesh should encourage moderation of the Bangladesh Government with respect to Islamist political parties. Not doing so risks further increases in unrest, a less stable investment environment, and potential increases in Bangladesh-originated terrorism.

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