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Expert Commentary

How Political Change in the Middle East and North Africa Is Affecting Country Risk Analysis

Political change in the Middle East and North Africa has had a profound impact on many countries in the region and beyond, pummeling many of the most established governments in the world.


Political Risk
April 2011

One of the unintended consequences of this change has been that it is prompting some country risk analysts to reevaluate how they analyze risk. In the rarified atmosphere of country risk analysis, this is a useful exercise, but for individuals and organizations that already think about the world in an esoteric fashion, the challenges are unique.

The Role of the Country Risk Analyst

Country risk analysis probably sounds to a layperson as if it is the domain of number crunchers, political scientists, and intelligence agencies. In fact, it is, but how numbers and theories are used to arrive at a meaningful conclusion varies widely, depending on the individual or organization doing the analysis. For example, many banks tend to be heavily skewed toward plugging numbers into algorithms or spreadsheets; political scientists often apply political theory to the behavior of nation-states, and intelligence officers use information to draw conclusions about the likely behavior of leaders, political parties, militaries, and other state and nonstate actors.

The job of a country risk analyst can be overwhelming, given the amounts of information that must be absorbed and synthesized into easily digestible text. When one considers that country risk analysis is not simply about politics, but also economics, sociocultural dynamics, and history, there is a lot for an analyst to contemplate in drawing conclusions. This must, of course, all be applied to each country at a given point in time. Due consideration must be given to scenarios, unexpected events, and short- and long-term trends.

Lessons from Political Upheaval in the Middle East and North Africa

Given this, what are some of the lessons a country risk analyst may learn from the recent upheaval in the Middle East and North Africa?

When Social, Political, and Economic Forces Unite, Sparks Fly

Even though political change may be expected in any country at some point in time as a result of fundamental socioeconomic disparities, high levels of corruption, rumblings in the military, or the actions of a neighboring government, the ability to anticipate when and how such change may occur presents a daunting task. In the case of Tunisia—where the spark that set off the flame of political change throughout the region occurred—the facts that so many people were disenfranchised within society and that President Ben Ali had been in power and abusing his power for so long prompted large segments of society to coalesce together to promote rapid political change. Had the poor, middle class, business community, and elements of the military not come together at the same time, the spark would, in all likelihood, not have created a flame. So, one lesson here is that social, political, and economic disenfranchisement can reach a boiling point in an instant, given the right circumstances.

Size Does Make a Difference

Although an analyst may expect that political change is likely to erupt from a larger, more important country in a given region, the fact that a country is larger and more important may prevent it from embracing political change. Very few would have predicted that Tunisia was to become the venue for the spark that turned into the flame in North Africa. Egypt was a likelier candidate, but Egypt's geopolitical importance, its prominence with respect to U.S. foreign policy and military aid, and the size and strength of its military made it a less likely candidate for radical political change. The regional implications for radical political change in Egypt made it harder to achieve with Egypt as the catalyst, but once change had begun elsewhere in the region, Egypt was certainly ripe to participate.

Change Can Be Anything but Radical

I would argue that not much has changed—either in Tunisia or Egypt; rather, figureheads have merely been removed. The fundamental elements and people in charge of the governing system that were in place prior to the change remain in place today. In addition, the aspirations of the Egyptian and Tunisian people have been thwarted. Even though some among them may want to believe something has really changed, the reality is quite the contrary. Frustration levels are higher now than they were before Ben Ali and Mubarak departed the scene because so little has changed, and so little appears likely to change in the near term.

In the case of Egypt, that frustration level is already reaching a boiling point, as many citizens appear to realize that what may result from their efforts is either a military-led government protecting the status quo or a radical government represented by the Muslim Brotherhood—not an endgame most people anticipated or wanted. So, herein lies yet another lesson: What may appear to be fundamental change isn't really change at all or may be change for the worse.

Accurate Predictions May Not Be Possible

In today's linked-in, globalized world, political change that may have been limited in regional impact has great potential to explode in scope. It's not that profound political change cannot happen in remote corners of the world that are less linked-in or globalized—of course it can and does—but what might have been limited to the departure of former President Ben Ali became a tour de force for the entire region.

A corollary here is that it will become more difficult for country risk analysts to accurately predict what happens next in the short and long term. While few analysts would have believed that one dictator after another would fall in succession in the Middle East and North Africa, few also would have imagined that a military stalemate would result in Libya. We are in uncharted territory, and the truth is that no one can really know with any certainty what will come next.

Conclusion

The job of country risk analysts has just become more complicated. Many previously accepted assumptions about the way the world works have been shattered as a result of what has happened thus far in the Middle East and North Africa. In the months to come, many unexpected events will no doubt continue to occur, affecting the foreign policies of most of the world's major governments. For country risk analysts to stay ahead of the game, they must excel in being able to use the past and present to try to predict the future. In that regard, their job is really no different than it was before—just a bit more complicated.


Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

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