Risky investments in Indonesia and Vietnam

According to a new ranking from the Emerging Markets Group of Alliant Insurance Services, Indonesia’s investment climate in the oil and gas sector has weakened significantly due to restrictions on foreign direct investments and opportunities in Vietnam remain hampered by the South China Sea dispute. The rankings has also said that investors in Egypt are at risk of confusing gradual political risk improvements for newfound, long term stability.

Indonesia and Vietnam

Alliant has said that Indonesia’s risk climate has weakened substantially over the past year, down 62% from its 2013 ranking. Michel Leonard, Chief Economist, Alliant said, ‘the downgrade is largely due to the newly imposed restrictions on foreign investments, first in the mining sector, and now the oil and gas sector. We expect this trend to continue regardless of the upcoming presidential elections.’

Vietnam followed India in the rankings and saw a drop of 19% on last year due to military tensions in the South China Sea. Leonard said, ‘Chinese authorities’ decision to move an oil rig into Vietnam’s exclusive economic zone is the most notable of many recent confrontations between China and other countries in the South China Sea. In the long term, we expect China’s actions to lead not to territorial expansion, but to China being granted rights to production in the waters it is claiming. Oil and gas companies should be aware of the changes this will bring to any current or future licensing agreements signed in the South China Sea, especially with Vietnam.’

Egypt

Egypt has received an upgrade of 5% in the rankings. Leonrad has however warned investors to remain cautious and not to overestimate these improvements. ‘Egypt has emerged from a long run of political instability and a recent regime change to show some positive movement in our risk models. However, we remain guarded about its long term prospects and warn investors not to confuse gradual improvements with medium or long term structural stability.’

Elsewhere

Thailand and Malaysia were in negative territories compared with last year whilst Yemen saw no change. Ecuador, Equatorial Guinea and Algeria saw the greatest improvement in the risk rankings while Libya, Republic of Congo, Gabon, Angola and Kazakhstan all saw modest improvements.

Adapted from press release by Claira Lloyd

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