Why Should the Factor of Political Stability Be at the Very Top of the List of Criteria Used to Evaluate the Attractiveness of Potential Foreign Investments?

Why should the factor of policy-making stability be at the genuinely top of the constitute of criteria used to label the drawing card of emf hostile investitures? in that location are several issues that should be considered when evaluating the attractiveness of a potential foreign investment. Among them we stomach stress three of import groups of criteria ordinary market risks, commercial risks and political risks (the ones in focus in this essay).Political risks are caused by changes in a countrys political structure or policies and, correspond to Hollensen (2007) ownership, operating and transfer risks are the main types that a marketer can face. Restrictions in repatriation of profits, change of government party, civil strife, diversity and wars can threat the attractiveness of a plastered market. J. Eli Margolis (Estimating State Instability 2012) move to create a method that could befriend warning such problems as the Arabic Spring.As we know today, it is not plainly cheap labor that FDI is constantly want political conditions must join the economicalal ones so the investment has the chance to be succeeded. As an example, we can talk some the Solomon Islands after serious civil turbulence, natural law and order were restored and political and economic line started improving gradu solelyy. However, political instability remained a challenge and so, a key barrier in attracting foreign direct investment into the country. Trade Policy review-WTO). Despite all this evidence we can al expressive styles materialise different opinions. According to Peter D. Bennett and Robert T. putting surface (JMR 1972), political instability can be considered as a primary consideration in foreign investment decisions wholly within combined contexts of region and economic development and not as a general reason. Risk is not entirely about the possibility of losing market part or profits. Politic stability is super important.Taking the Irish case a s an example, their consumption to be free from British settlement resulted in a policy of sinewy macroeconomic stability and honest bureaucracy. As a result, nowadays more than half of the Irish economy is foreign owned. there is political risk in all nation exclusively also a wide range of procedures that countries can take in to become more attractive to foreign investment ( E. g. Ease or unfreeze instability through humanitarian or government aid S. Korean/ N.Korean 1999). In conclusion, I can say that terrorist act and corruption are great threats for FI but there is always a way to face the situation and succeed. A exposit analyses of the host market and anticipation of certain risks is essential for the success of the investment and that is wherefore the factor of political stability should be at the very top of the list of criteria used to evaluate the attractiveness of potential foreign investments. Filipa Florencio 26/03/2013