Political risk & the banking sector in the Mena Region. (c2006)

Abstract

The MENA region is attracting the attention of foreign investors. However, since violence and instability are the chief characteristics of this region, there are hurdles that prevent economic prosperity. In recent years, terrorism has further dampened the prospects of the MENA countries. This thesis discusses the existence of political risk in the MENA region. How important is the influence of political risk on the development of banking sectors in the MENA countries? What is the current and future status of the MENA region and its integration in the global economy? The study focuses on the banking sector and the way it copes with political risk. Thus, the question which constitutes the basis of this thesis is: What are the consequences of the prevailing political risk factors on the operations of the banking sector in the MENA region? It would be prudent to make extensive use of political and governance indicators to manage political risk and to find out where vulnerabilities are, as political risk could have negative consequences on foreign investments, especially in the MENA region. Included are case studies on the banking sectors of Saudi Arabia and Sudan to illustrate the political risk factors in the region. These two MENA countries have similar ethnic, religious, and social backgrounds; and both are rich in oil resources. Yet, they are different when it comes to the effect political risk has had on their banking sectors. Saudi Arabia is strong in promoting foreign investments, while Sudan has not experienced an improvement in its financial and banking sectors. The references consulted range from books to selected articles, as well as internet sources and publications by international organizations. However, the limited availability and at times questionable accuracy of relevant information present serious challenges to any approach to political risk analysis. In addition, the capacity and willingness of governments and concerned organizations to collect and disseminate information varies among countries.