INVESTMENT PROTECTION
Political risk has become one of the most relevant concerns for investors in developing countries. Although global economic uncertainty remains as the major concern, investors participating in the Global Investment Competitiveness Report (GIC) 2017 continue classifying political risk as one of the most important obstacles to FDI in developing countries. 30 While all political risks can pose serious constraints to FDI, the main concerns of investors are directly related to the conduct of the Government, such as lack of transparency and predictability (50 percent), adverse regulatory changes (49 percent), delays in obtaining necessary Government permits and approvals (47 percent), and restrictions in transferring and converting currency (42 percent).
GIC 2017 also shows that political risk and lack of confidence may lead already established investors to cancel their plans to expand or reinvest in the host countries, and sometimes to leave the country. To minimize political risks, investors seek both strong legal protection and a predictability and efficiency in implementing laws and regulations.
An Investor Survey conducted by WBG team in 2014 in Mongolia confirmed that Investor protection is a critical issue for investors in the country. Nearly 80 percent of the responding companies felt their investment was at risk of leaving the country because of lack of investor protection. The total amount of investment at risk of being lost due to inadequate investor protection was estimated to be US$1.9 billion, or 90 percent of their total investments.
Investors were of the view that lack of regulatory transparency and arbitrary government action were the main factors causing grievances (82 percent). Expropriation and discrimination were the next most pressing issues for the companies interviewed.
Source: http://nda.gov.mn/backend/files/nIPra39MTkcc2Wi.pdf