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Home / News / Political tensions pose most urgent risk in 2019, says WEF report

Rising geopolitical and economic tensions are the most urgent risk in 2019, according to the WEF's Global Risk Report. Alex Irwin-Hunt reports.

The Global Risk Report from the World Economic Forum (WEF), which incorporates the results of the annual Global Risk Perception Survey of about 1000 experts and decision-makers, reports that 90% of respondents expected rising geopolitical and geo-economic tensions to be the most urgent risk in 2019.

Trade disputes, specifically the US-China trade war between the world’s two largest economies, worsened in 2018, with 88% of respondents expecting further erosion of multilateral trading rules and agreements.

Wariness of foreign acquisitions have intensified since the acquisition of German robotics company Kuka by Chinese application manufacturer Midea for $5.3bn in 2016, kickstarting EU countries to impose stricter foreign investment regulations.

Rising tensions pose risks to 2019 FDI flows into Europe, as Germany reduced its threshold at which foreign investments can be blocked in August 2018 while the UK and France took initial steps to increase government powers to block foreign investments.

Furthermore, the European Commission proposed EU-wide measures in December 2017 to control non-EU investment into European companies, as only 12 out of 28 member states have screening mechanisms.

Tightening of regulation has focused on technology companies, due to the potential for the dual use of technology to raise national security concerns. Chinese telecoms behemoth Huawei has had its 5G network technology blocked by several countries, including the US and Australia, while Germany announced on January 17 that it is considering similar security measures.

OECD countries are tighardening their position on foreign investment, while China, one of the most restrictive countries in terms of FDI in the world, is beginning to reduce its curbs on investment.

Chinese commerce minister Zhong Shan has said China would both reduce the number of industries in which it restricted foreign investment and allow full foreign ownership in more areas of the economy, as stated by a transcript posted on the ministry of commerce’s website on January 20.

There are worries that global debt could reduce the appetite for investment in 2019. “Global debt is now 225% of global GDP, including both private and government debt, which reduces the ability and short-term muscles to invest,” said World Economic Forum president Borge Brende at a press conference on January 16.

The report stressed the shortfall of investment in infrastructure and its risks, forecasting that by 2040 the investment gap in global infrastructure will reach $18000bn against a projected requirement of $97000bn.

“All risks will be amplified by weakening infrastructure,” said John Drzik, president of Marsh Global Risk and Digital, at a press conference on January 16.

Global FDI flows fell by 23% in 2017, and fell a further 41% in the first half of 2018 year-on-year, according to the United Nations Conference on Trade and Development.

This article is sourced from fDi Magazine
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