Political risks in Asia Pacific

Miners operating in or planning to enter the resources sector in the Asia Pacific will face higher political risk factors than other geographies as a direct result of the impact on the region of globalization. This warning was issued by the Regional Underwriter, Political Risks, Chubb Insurance, Ms Ann Russell-Cook, addressing the Paydirt Asia Pacific Downunder Conference in Perth, last week. “As a region, the Asia Pacific has faced significant pressure as part of the general globalization of trade, particularly in the past 10-15 years,” she said. “While globalization seems to be the path to development, there are often losers that can create a backlash that is religious, cultural or racial.

“In the key Asia Pacific markets where there are mining opportunities, the impact of globalization and political stability or instability, are major considerations for the future success of mining operations there. The pace at which Asia Pacific governments open up to international growth opportunities by providing stable regulatory environments, and their response to currency fluctuations, terrorism and other adverse events, are now critical factors for mining.

“Major impacts are likely to come from the high energy dependent countries in this region where most of their energy is imported and where social, religious and other tensions have to be more finely balanced against the need for high economic growth.”

Ms Russell-Cook said if she had to identify one critical issue for miners in each country in the Asia Pacific, it would be as follows:

ChinaRegional versus Central Government regulations in the context of deregulation by Beijing. Miners should effectively ‘double up’ to ensure that all rules are covered at all layers of Government.

IndiaA strong supporter of foreign and direct investment, but with opposition from local industry encouraging a ‘slow down’ in approval processes for mining investment.

IndonesiaConcerns at the pace of regulatory reform and lack of certainty in any negotiations of terms, conditions and licences.

Papua New GuineaLeadership issues have settled down, mining sector regulations have improved but the need for unpopular economic reforms may create social tensions.

PhilippinesThe main issue is government leadership, succession plans and concerns re policy implementation.

Solomon IslandsFundamentals restored and major transformation underway. A ‘watch this space’.

Thailand: Last week’s coup has overridden concerns on political stability but military commitments to restore democracy create another ‘watch this space’ scenario.

VietnamConsiderable bureaucratic confusion in trying to deliver Government economic reforms and concern re ad hoc Government policy targeting specific industry sectors.