Asia heats up !!Top 5 political risks in the world’s most dynamic region! December 2012! www.politicalmonitor.com.au!
!This presentation provides a brief overview of the top 5 political risks confronting the Asiaregion. It presents summary views and should be taken as such.!!The information is taken in part from Political Monitor’s series of Country Risk reports andanalysis.!!More information is available @ www.politicalmonitor.com.au ! Top 5 political risks for Asia! December 2012!
1. !FIGHTING OVER ROCKS!!• Territorial disputes over potentially resource rich islands in the South China Sea have escalated tensions in the region. Military engagement would shake regional security and global markets!• Parties to the disputes include China, Japan, South Korea, Vietnam and the Philippines. In each country nationalist pressure groups are hardening the negotiating position of respective governments!• A regional dispute resolution mechanism is required to ensure miscalculation does not escalate into a ‘hot’ dispute.!!! Top 5 political risks for Asia! December 2012!
2. !SOCIAL UNREST & CRACKDOWN IN CHINA!• The risk of social unrest in the world’s second largest economy is increasing. The Government can be expected to respond forcefully to any emerging social disquiet that threatens political stability. Such an event would affect global markets and regional security!• In 2010 there were 180,000 reported illegal protests – up 50% on two years prior illustrating rising community disquiet about inequality and corruption!!• The softening economic environment will make it more difﬁcult for the Government to paper over community discontent. Structural reforms that re-balance the economy and improve political cohesion between elites and the populace are necessary to avoid political and social turmoil.!!! Top 5 political risks for Asia! December 2012!
3. !NORTH KOREA VERSUS REALITY!• North Korea is a regime that lives in a bubble and is prone to believing its own propaganda. This increases its risk of miscalculation about how far it can push its neighbours and how strong it really is!• It is obvious to everyone that North Korea would be best served by following the path of Burma. The economy is a shambles and the people repressed. All that keeps the regime alive is China and the threat of nuclear weapons on the Korean peninsula!• Nonetheless, the North Korean regime is likely to remain in place in the short to medium term. A continuation of existing policies weighs on the regional security outlook.!!!! Top 5 political risks for Asia! December 2012!
4. !JAPANS DECLINE!• While economically weakened Japan nonetheless remains central to the Western alliance in Asia and the US pivot. A failure by Japan to remain central to East Asian security would create a power vacuum and inherent instability!• Japan’s window to reverse its trajectory towards irrelevance is closing. It must address government debt levels if for no other reason than its forecast military expenditures are dependent on a sustainable budgetary position!• Japan must also seek to resolve its territorial disputes, particularly with other members of the US alliance system, to minimise the risk of miscalculation and avoid diverting resources and time to what are second order security issues.!! Top 5 political risks for Asia! December 2012!
5. COMPLACENCY, CORRUPTION & POVERTY!• With strong growth relative to the rest of the world and a rising middle class, hungrily eyed by global investors, it would be easy for Asian regimes to proceed on the basis that all is well!• However, Asia is a region beset by inequality and rising social tensions based upon ethnic and religious rivalries and fueled by government corruption. High levels of youth unemployment in a number of countries add to the capacity for turmoil!• All of these factors featured in the Arab spring and are the basis for social and political upheaval. Asian regimes must prioritise reducing economic and political inequalities.!! Top 5 political risks for Asia! December 2012!
!Detailed analysis on these and other political risks can be found @www.politicalmonitor.com.au!!About Political Monitor!Political Monitor is a political risk research and advisory ﬁrm. Our analysis providesinsight into the implications of political risk for commercial valuations, asset selection,investment decisions, strategic planning and operational decisions. !! Top 5 political risks for Asia! December 2012!