Political Risk in Singapore

Economist and policy framers have always wanted to understand the impact of political risk on investments in a country. Multinational Companies, International Financial Institutions have spent a considerable amount of time in trying to understand the country risk (i.e. external environmental risks as opposed to risks that are internal to a particular company). Companies would like to analyze political risk by putting the available information into computer spreadsheets and use specific forecasts to analyze the impact of political risk on investments.

 

Most often it is the credibility of the Government both at the national and local level that often has a positive or negative impact on the flow of investments.

 

Governments play a critical part in determining the flow of foreign direct investment (FDI) and hence the level of globalization through trade and investment policies, legal systems and other administrative and political roles. Any perceived uncertainty about Government polices a guidelines would result in political risk.

 

The impact of Globalization has had an effect on political risk too. Usually developing countries have unstable governments and volatile sociopolitical environments. Even as the world becomes a global village, different national cultures, ideologies and aspirations continue to create political conflicts. Developing countries have their own macroeconomic goals and focus on a catch up rate of growth, industrialization, increase in employment and repayment of heavy foreign debts .A developing countries political system may not have reached a maturity and would like to legitimize itself in face of ethnic, religious or other competing group. The combinations of these factors could have an impact on the quality and stability of political institutions and in turn influence the investment decisions of Multinational Companies.

Political Risk In Singapore is relatively low. In fact according to the Political And Economic Risk Consultancy, PERC, Singapore enjoys the lowest political risk in Asia. Singapore being a democratic country has elected representatives to rule the nation. It has since Independence, enjoyed relative political stability, which has transformed into better business opportunities for the nation.