Thursday, May 13, 2010

Fast-Growing Russia, Nigeria Pose Investment Risks, Study Shows

By Mark Drajem

(Bloomberg) -- The developing nations with the fastest-growing economies including Russia, Nigeria, Iraq and Angola are also the most hazardous for business investment, according to risk-management adviser Maplecroft.

With the economic slump in the U.S. and Europe, companies from those regions are flocking to large or oil-rich developing countries in search of new opportunities. Those economies have inconsistent protections for property rights, weak regulations and lax legal remedies, according to a report to be released today by Bath, England-based Maplecroft.

“The countries where the Western companies need to be, also have the challenge of being where the legal and regulatory environments are most weak,” Alyson Warhurst, the chief executive of Maplecroft, said in an interview.

In Brazil, Russia, India and China -- the so-called BRIC nations -- “supply-chain complicity” such as labor and human rights violations, pose great risks to foreign investors, Maplecroft said.

“They face several dilemmas in addressing these abuses, not least monitoring risk in lower tiers of supply chains or preventing a worsening of conditions for youth or migrant workers who have few alternatives,” Warhurst said.

The analysis of 172 countries ranked them on the respect for the rule of law, property rights, access to the legal system, corruption, corporate governance and regulatory frameworks.

The highest-risk countries are Myanmar, Somalia, North Korea, the Democratic Republic of Congo and Turkmenistan. The nations with the best protections for investors are Norway, Finland, Luxembourg, Iceland and New Zealand.

Oil-rich nations pose the greatest risks, Warhurst said.

Russia’s economy, which is forecast to expand by 4 percent this year by the International Monetary Fund, is ranked as the 20th riskiest, according to the Maplecroft report. Iraq, forecast to grow by 7.3 percent, is the 13th riskiest; Angola, set to expand 7.1 percent, is 14th; and Nigeria, set to grow 7 percent, is 19th.

--Editors: Romaine Bostick, Steve Geimann.

To contact the reporter on this story: Mark Drajem in Washington at

To contact the editor responsible for this story: Larry Liebert at

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