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Political Risk in Asia: Context and Catalysts

The Rebalance author Mercy Kuo regularly engages subject matter experts, policy practitioners, and strategic thinkers across the globe for their diverse insights into the U.S. rebalance to Asia. This conversation with Daniel Wagner – Managing Director of Risk Solutions at Risk Cooperative and author of Global Risk Agility and Decision Making, Managing Country Risk and Political Risk Insurance Guide – is the 76th in “The Rebalance Insight Series.”

What do you see as the top five key political risks in Asia for 2017?

1. China oversteps its bounds while flexing its muscles, sparking widespread condemnation in Asia and beyond, and heightening tension throughout the region.

2. The U.S. overcompensates for missing the mark in implementing its Asia Pivot and ramps up its military presence in the South China Sea, which would also heighten regional tension.

3. North Korea successfully launches long-range ICBMs [inter-continental ballistic missiles], prompting a stern response from the U.S., leading either to a threat of war or another effort at multilateral talks.

4. Indonesia fails to successfully manage its Muslim extremist groups and regional terrorism rises.

5. Myanmar’s “experiment” with democracy proves to be a failure and the military takes over control of the government.

Explain the strategic context and catalysts of emerging market risk.

As the world continues to gyrate from the political paradigm shift under way with the rise of “alternative” political movements, emerging markets will struggle to adjust to the “new normal.” Will they become part of the shift or attempt to maintain the status quo? All countries will face this dilemma, but for developing nations and emerging markets, the stakes are even higher as, in many cases, their ability to continue to grow economically and maintain social order will depend on the continuation of a delicate balance between the rights of individuals, protection of domestic industries, minimizing income disparity, and maintaining security. Doing so becomes more difficult when the status quo elsewhere is in the process of being disrupted. Those governments that fail to anticipate the pace and depth of change may in the end fall.

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