Political risk in India highest, says Hong Kong study

Singapore: India, Malaysia and Thailand face the highest political and social risk among Asia-Pacific countries in 2009, mainly because of internal instability, a political risk consultancy said.

India's highest risk score of 6.87 on a scale of 10 also reflected fears over Pakistan, the Hong Kong-based Political & Economic Risk Consultancy (PERC) said in a report, warning of social unrest and insecurity if things worsened in the neighbouring nation.

The consultancy assessed 16 countries on factors such as the risk of disruptive political change, the threat posed by social activism and vulnerability to policy changes by other governments. A score of zero represented the best socio-political situation and 10 the highest risk.

Contributing to India's high score was uncertainty over the outcome of general elections next year, rising communal violence and increased militant attacks, PERC said in the report released on Monday.

"India, Thailand and Malaysia are not so much vulnerable to negative fallout from the global financial crisis as they are to factors that are mainly internal," Robert Broadfoot, managing director of PERC, told Reuters.

"For these countries, the coming global economic storm is only going to make a bad situation worse," he said. "India's underlying attractions to foreign investors should remain no matter who wins the next election," the report said.

Thailand is the second riskiest country in Asia for 2009 with a score of 6.28, as the current political turmoil threatens to drag into 2009 and is eroding the country's key institutions.

The consultancy projected Thailand's worst case scenario to be if the King of Thailand dies before the turmoil is resolved. As for Malaysia, the third riskiest in the region, the report said the struggle for political power was aggravating racial and religious tensions.

"The status quo is changing in ways that will see a stronger political opposition than in the past," said the report. Japan, Hong Kong, Singapore and Australia were ranked most stable and low in political risk for 2009 even though their economies are likely to be hurt by the global financial crisis, PERC said.

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For the United States, being at the epicentre of the financial crisis has weakened the country economically and psychologically, PERC said. The U.S. political and military profile will be lower than before and it will become less aggressive in pushing its views on other countries.

In Asia, the US may rely more on its regional allies such as Japan, Singapore and Australia to push its agenda. China scored 5.33 on PERC's scale and the consultancy expects the world's most populous nation to have a difficult year in 2009 as the government tries to sustain economic momentum and boost domestic demand in the face of weaker export markets.

"Despite a desire to get average Chinese to spend more, layoffs in factories, weak stock prices and lower real estate prices in key markets like Shanghai are likely to make average Chinese turn more cautious in their consumption," said PERC.