Asia Country Risk Ratings

China (CHN) 

China overall country risk score remains at medium, but political interference and regulatory and legal risks have shifted up from medium to medium-high.  China authorities shift away from the private sector towards state socialism has seen new regulatory efforts in the gaming market in late 2023, after a mid-year crackdown on the healthcare sector.  State owned enterprises and local governments are becoming more important in the economy, which is reducing the role of profits and the private sector.  The risk of doing business remains at medium, though global business are shifting some supply chains from being too China centric post COVID and after the Ukraine war.  Meanwhile, the risk of political violence remains medium-high.  Greatest concern surrounds China’s goal of reunification with Taiwan and the potential escalation of military activities in the Taiwan Strait. In the worst case, this could entail a blockade or full scale invasion.  The risk of severe sanctions from the U.S. and G7 means that these options are high cost and unlikely in 2024.  Meanwhile, China economic measures remain comfortable, with the exchange transfer risk at medium.  A current account surplus, plus substantial FX reserves, helps to support this rating (China is also on a multi-year diversification from U.S. Treasuries into gold).  The inability to provide fiscal stimulus remains at medium.  China has room for extra fiscal stimulation should slower growth risk a hard landing, while the dominance of domestic investors means that China’s authorities can persuade investors to rollover debt.  Banking sector vulnerability also remains at medium, despite worries about the long-term downturn in the residential property sector.  Non-performing loans, primarily held by small and city banks, can be managed through potential takeovers by larger banks and local governments. China's authorities also possess significant experience, as demonstrated by the successful bailout of the four largest banks during the 1997-03 period. 

Hong Kong (HKG)

Hong Kong is assigned a medium-low overall risk, with political violence at the same risk level. The recent district council elections, however, revealed dissent among the population, with only 27.5% voter turnout, a significant drop from the 2019 elections (71%). Criticism was directed at the process requiring candidates to prove their "patriotism" and secure nominations from governmental committees. The city is characterized by a legal environment that favors business investment by providing strong intellectual property rights, facilitating the mobilization and allocation of capital, and minimizing bureaucratic procedures. Nevertheless, the legal and regulatory risks have risen from low to medium-low due to concerns that mainland China could pose threats to the city's rule of law, particularly in data privacy and access to business information. The risk of political interference is deemed medium-low, primarily from the National Security Law (NSL) enacted in 2019, impacting fundamental freedoms and resulting in detentions based on political beliefs. Both the risks of supply chain disruptions and doing business remain low. Hong Kong has a strong and expanding infrastructure network that facilitates overcoming logistical challenges; however, natural disasters and rising geopolitical tensions between China and the US could negatively affect this factor. The city is characterized by its promotion of competition, openness towards internalization, flow of information, educated workforce, and an established number of developed industries, which improves the business environment. Although, in recent months, there has been a growing concern that not only global financial conditions, but underlying and deeper factors (such as political interference) might be translated into investors being more cautious. From an economic perspective, the IMF forecasts Hong Kong to grow 2.9% both in 2024 and 2025. The anticipated increase in the general government gross debt (as % of GDP) from 7.0% in 2024 to 7.6% in 2025 indicates a less optimistic near-term outlook. The city has experienced a slow post-pandemic recovery, impacted by geopolitical tensions and a weakened external environment. The budget deficit for the 2023-24 financial year, exceeding HK$100 billion (USD 14.1 billion), results from reduced revenue and weaker-than-expected economic growth. On this matter, Finance Secretary Paul Chan has suggested increasing charges for public services, but at the same time ensuring that underprivileged groups would continue to receive support through social security. The sovereign non-payment risk is assessed as medium, with a medium-low risk associated with the government's ability to provide stimulus. Lastly, the exchange transfer risk remains medium-low. Hong Kong authorities intervened multiple times in 2023 to defend the currency peg, leading to a decrease in their ample FX reserve assets. Traders express skepticism about the authorities' ability to maintain the peg, crucial for financial stability and positioning the city as an international financial hub.

India (IND)
India overall country risk rating remains medium. As India stands at the crossroads of political evolution, the political forecast suggests a continuation of the Bharatiya Janata Party's (BJP) rule, poised to complete its full term in office until May 2024. Bolstered by a majority in the Lok Sabha (lower house), the BJP-led coalition is anticipated to strengthen its representation in the Rajya Sabha, reducing the likelihood of parliamentary impasses. This solidifies the government's ability to implement policies after the upcoming general election.  Narendra Modi, a dominant political figure since 2014, is expected to retain his influence even after the next election. His high approval rating and deep-seated influence provide a stabilizing force, though challenges may arise in elevating other leaders within the BJP's ranks. The party's focus on existing policies, including efficient public service delivery and government subsidy schemes, aims to secure continued public support.

The political landscape is marked by the Indian National Congress's diminishing vote share, impacting its effectiveness as the primary national opposition party. The formation of the Indian National Developmental Inclusive Alliance (INDIA) by opposition parties, including Congress, aims to contest the 2024 general election.  As the nation prepares for the upcoming election in April-May 2024, the BJP is expected to secure a record third term. Prime Minister Narendra Modi's perceived success in enhancing India's global standing reinforces his popularity. Despite potential leadership transitions due to Modi's advanced age, the BJP's victory should ensures policy continuity. Rahul Gandhi, the de facto leader of Congress, is anticipated to be Modi's main opponent. However, his popularity, despite outreach efforts like the Unite India March, is expected to fall significantly short of Modi's widespread support. Setbacks for Congress in state elections may hinder the opposition's ability to present a cohesive national policy agenda.  Nonetheless, in the run-up to the election, political volatility will persist. Communal clashes as seen in previous election years are likely in isolated parts of the country. However, no serious unrest is expected. The electoral machinery is formidable and the security provided by the government will ensure no serious clashes come up. Elections in the states of Jammu and Kashmir though could prompt some violence as the region remains tense. Overall though, India’s political landscape will gear up for the upcoming elections in May 2024 but political and social stability will persist.  

Indonesia(IDN)
Indonesia overall country risk rating remains medium. Indonesia, the world's fourth-most populous nation, is poised for a significant political transition as President Joko Widodo, widely known as Jokowi, is set to step down in early-2024 after a presidential election.  Looking ahead to the upcoming legislative and presidential elections scheduled for February 14, 2024, the centre-left Indonesian Democratic Party-Struggle (PDI-P) is expected to maintain its position as the largest single party in the House of People's Representatives (DPR). With 128 seats, the PDI-P enjoys a consistent lead in public surveys over rivals such as Golkar (85 seats) and Gerindra (78 seats). The electoral landscape is marked by strong patronage networks, which mitigate significant swings in party support.   As a consequence, the political landscape remains tense and divided. The anticipated successor is Prabowo Subianto, the current defence minister representing the Great Indonesia Movement Party (Gerindra).  A tie-up between Prabowo and Gibran Rakabuming Raka, Jokowi's eldest son, is expected to result in victory for the former. This alliance, coupled with endorsements from Gerindra and support from four out of seven parties in the DPR, positions Prabowo as a formidable contender. As the political baton is passed, the landscape is expected to retain stability, with Prabowo likely adopting Jokowi's strategy of incorporating politicians from diverse parties into the administration. However, opinion polls suggest that the election will be tight and other candidates such as PDI-P's presidential candidate Ganjar Pranowo also have a high probability of succeeding. It is noteworthy that none of the candidates show any radical difference from the current president’s policy-making perspective suggesting that political stability will sustain in the aftermath of the elections. Meanwhile, given the expectation of Prabowo succeeding, despite potential inefficiencies, he is likely to continue Jokowi's policies, including the promotion of downstream processing industries. Factors such as easing consumer price inflation and steady employment growth are predicted to limit major public protests in the near future. However, the closely contested presidential election in 2024 could trigger unrest among supporters of the losing candidate, echoing the protests following the 2019 election.

Indonesia's foreign policy aims for positive relations with a diverse range of countries. Striking a balance and avoiding significant alignment with any particular bloc, Indonesia may experience minor frictions, especially concerning territorial disputes between ASEAN and China. Notably, relations between Indonesia and Malaysia are anticipated to improve following the resolution of a long-standing maritime border dispute. 

Korea, Dem. People’s Republic (PRK)
North Korea’s overall risk level remain very high. Political violence, political interference and legal & regulatory risk remain very high. North Korea resumes to be a country with extreme and very strict laws, such as that any insult of Kim Jong-Un and his family might lead to the death penalty. Therefore, there is no freedom of speech. Executions can be considered a common punishment in North Korea. For instance, citizens were executed for disobeying a law that forbids them to watch foreign films or for pointing at a portrait of Kim II-sung. Kim Jung-un continues to improve the country’s nuclear reserves and weapons. North Korea recently launched a spy satellite that can observe major US and South Korea military sites, such as the Pentagon. It has been reported that North Korea received technical help from Russia for this satellite in exchange for military weapons for use in Russia’s war with Ukraine. Russia funds have also helped North Korea, though the economy remains in difficulties due to the authoritarian regime Supply chain disruption remains high. 

Lao DPR (LAO)
Laos’s overall risk level remains medium high. Thongloun Sisoulith remains president and Sonexay Siphadone the prime minister of the country. Political violence has dropped from medium to medium low, with legal & regulatory risk high and political interference medium high. An attempt to assassinate an activist, Anousa Luangsuphom, occurred in April. The government of Laos has now signed an agreement with China General Nuclear to develop a renewable energy base in the northern part of Laos. Laos has been going through an economic crisis, due to the enormous borrowing of funds to finance these infrastructure projects from China. This has led to high levels of inflation and debt, but also the depreciation of the Laotian Kip. Supply chain disruption remains medium high. Growth is expected to be 4% in 2023 and 2024, according to the IMF. Laos’s situation makes it one of the poorest countries in South East Asia. CPI is expected to reach 28.1% in 2023 and 9.0% in 2024. The central bank of Laos has been increasing significantly the key interest rate the past 12 months from 3% to 7.5% trying to reduce inflation. Laos’s government debt/GDP ratio remains too high at 122% in 2023.  Thus sovereign non-payment remains medium high, with exchange transfer at a medium. The Laotian Kip continues to depreciate, reporting record lows against the US dollar, causing greater inflation combined with the global inflation of oil and food. Banking sector vulnerability has declined from medium low to low, whilst the inability of government to provide fiscal stimulus has increased from medium high to high. 

Malaysia (MYS)
Malaysia overall country risk rating remains medium-low. Anwar Ibrahim, leader of the multiracial Pakatan Harapan (PH) coalition, will find it challenging to spearhead a unity government incorporating pro-Malay factions. This inclusive approach will continue to constrain Anwar's progressive agenda, as the government refrains from dismantling ethnic-Malay preferences. Policies such as affirmative action for bumiputera (ethnic Malays and indigenous peoples) in education and corporations will therefore remain intact, preserving the support of the pro-Malay bloc within the PH parliamentary majority.  However, the political landscape may witness increased ethnic tensions over discriminatory policies favouring bumiputera, potentially straining the unity government.  As a consequence, Anwar will attempt to balance tackling race-related reforms with initiatives aimed at economic growth, anti-corruption measures, and institutional reforms. Recent initiatives include separating the attorney-general's chamber from the public prosecutor and introducing a political finance act. Meanwhile, the government's shift from blanket to targeted subsidies in 2024 will aim to support the lower-income group.  This backdrop all leaves the political violence measure at medium.  Although a unity government is usually a recipe for political instability, the unity of this government is reinforced by the law against party-hopping and the reluctance of the Barisan Nasional (BN, part of coalition) to collaborate with the opposition Parti Islam se-Malaysia (PAS). Further, despite concerns over UMNO's weakened state, following corruption charges against its leader Ahmad Zahid Hamidi, the unity government's stability remains intact.  On the geopolitical front, all appears favorable. Malaysia’s foreign policy focuses on pragmatism, maintaining balanced relations with various countries. Therefore, Malaysia will continue to avoid taking sides between the US and China, emphasizing engagement with established groups like ASEAN, the UN, and the Organization of Islamic Co-operation. This all helps economic stability and exchange transfer remains medium.  Sovereign non-payment risk remains medium, with the government debt/GDP ratio elevated though not high at 67% of GDP.  

Mongolia (MNG)
Mongolia’s overall political risk rating remained medium when compared to previous risk analysis period, and there is only one change in this reporting period as the risk of political interference increased from medium to medium-high. Living costs and corruption remain serious pressures over the government. The National Statistical Committee announced on January 11 that annual inflation in Mongolia reached 7.9% in December 2023 from 8.6% in the previous month, which was the lowest reading since July 2021 as food inflation reached a 29-month low of 12.2%. The relief in inflation has been accompanied by strong GDP growth figures as Mongolia's economy is expected to grow by 5.8% in 2023, 6.2% in 2024 and 6.4% in 2025, according to World Bank forecasts. Despite these developments, the currency depreciation and high prices for imported goods continue to affect the economy negatively. Socially, issues of food and energy prices, weak employment growth and corruption scandals could ignite social protests, explaining Mongolia’s medium-low risk of political violence. High levels of non-performing loans and corporate debt payments becoming less feasible due to monetary policy tightening, maintaining Mongolia’s medium-low banking sector vulnerability. Sovereign non-payment remains a medium risk, with a high foreign currency-denominated debt and a persistent current account deficit mitigating any advances that could have been made due to favorable economic conditions and strengthening public finances. The main institutional risks remain significant due to medium-high political interference and legal and regulatory risks. Poor control of corruption and low quality of governance are concerns for investors. The landlocked and mineral resources-rich country hopes to double its GDP-per-capita to $10,000; this will require a huge ramp up in investments in its key mining and metals sector, the country’s Finance Minister Javkhalan Bold recently stated. 

Papua New Guinea (PNG)
Papua New Guinea’s overall risk level remains medium high. James Marape remains president of the country after being elected in 2022. Political violence and political interference remain medium high, with legal & regulatory risk remains high. Papua New Guinea has now signed a defence agreement with the United States, to which Marape appeared to be hesitant at first. He did not want PNG to appear as a chess piece in the battle between US and China to expand their allies in the Pacific. The agreement caused protests against the agreement in several universities across the country. Supply chain disruption remains medium high. PNG’s growth rate is expected to be 3.0% in 2023 and at 5% in 2024, according to the IMF. Papua New Guinea is the largest economy among the Pacific islands, with great potential in investment, but also enormous trade. PNG’s CPI inflation has been stable and is forecasted to be at 5.0% in 2023 and 4.9% in 2024. The central bank of Papua New Guinea decreased the interest rate from 3.5% to 3.0% in October 2023 and 2.5% in November. PNG continues to have a current account surplus and at greater levels than 10% of the GDP, but is expected to decrease to 15.9% in 2023 and to increase to 17.7% in 2024. Sovereign non-payment payment and exchange transfer remain medium high, though the government looks to have brought the debt/GDP trajectory under control at moderate levels. The main currency utilised is the Papua New Guinean Kina, which has slightly depreciated in value over the last 12 months. The risk of doing business remains high, as banking sector vulnerability remains medium low.  

Singapore (SGP)

Singapore overall country risk rating remains low. Singapore’s political landscape will be stable in the near and medium term, supported by the ruling People’s Action Party’s (PAP) majority in parliament. Although the PAP lost some political hold during the 2020 elections, the technocratic government’s focus on addressing concerns such as inequality, immigration, and talent mismatch will ensure that political stability sustains. 
Meanwhile, the political transition from the PAP's "third generation" to the "fourth generation" leadership, led by Lawrence Wong, is anticipated, with the prime minister-in-waiting expected to take over by November 2024. Singapore's ethnic diversity poses a minor risk to political stability, with efforts to increase political representation for minorities. However, the ethnic Chinese majority is expected to remain the dominant political force. The government's cautious approach aims to avoid major unrest, supported by strict local laws on censorship and limitations on public demonstrations. The political violence measure remains low.
In terms of upcoming elections, despite recent political incidents affecting the PAP's support, it is expected to win the next general election in the medium term, albeit with a reduced vote share below 60%. The Workers' Party (WP) is projected to maintain its nine elected seats, while other opposition parties may have a modest chance of entering parliament. 
Turning towards Singapore's foreign policy focuses on an open multilateral trading system and maintaining good relations globally. The city-state aims to become a regional carbon-trading hub, launching a carbon-exchange platform and signing agreements with various countries. The country's commitment to open trade includes expanding its network of free-trade agreements and actively pursuing digital economy agreements (DEAs).  This all supports a medium low exchange transfer risk and sovereign non-payment remains medium-low.  In the face of escalating US-China tensions, Singapore is expected to maintain a neutral stance, leaning towards China economically while collaborating with the US and its allies on security matters. The city-state advocates for a more united and integrated Association of Southeast Asian Nations (ASEAN) and aims to address issues like the South China Sea disputes and the humanitarian crisis in Myanmar.
Despite occasional minor disputes, Singapore's diplomatic ties with Malaysia remain generally solid, with discussions about resuming the high-speed railway project between Singapore and Kuala Lumpur. Overall, Singapore's political climate appears poised for stability, with a focus on economic growth, regional collaboration, and maintaining a neutral stance in global geopolitics. 

Taiwan (TWN)
Taiwan overall country risk score of medium-low reflects economic strength and only moderate and intermittent tensions with China over reunification.  Economic indicators remain strong helped by a well-structured economy/controlled inflation and a huge current account surplus.  This leaves exchange transfer at a low rating, while the risk of doing business remains at a low rating. Risk of sovereign non-payment has moved down from medium-low to low, which reflects the low government debt/GDP trajectory.  However, though political violence remains at medium-low, the geopolitical situation with China is fluid after the January 13 election.  DPP victory in the presidential election risks could increase China pressure before the new president takes power on May 20.  This can take the form of large scale military exercises that raises geopolitical pressures for Taiwan and intermittently proves disruptive for businesses.  Military strategists however argue that the risk of full scale invasion by China remains low, as a seaborne operation would require a much strong China navy to counterbalance the risk that the U.S. supports Taiwan by blockading key China ports.    

Thailand(THA)

Thailand overall risk rating remains at medium high.  Following Thailand’s elections in May 2023, the country’s political forecast appears to be marked by both challenges and promises of reform.  The government led by Srettha Thavisin of the Pheu Thai Party (PTP) will face challenges from within the coalition intermittently, as it attempts to balance pro-monarchy order against reforms aimed at furthering democracy.  Although the legislative election in 2023 saw the Move Forward Party (MFP) gain maximum vote share the inclusion of military-aligned parties with the PTP ensure that a coalition government was formed and sidelining the MFP.  Despite the ruling coalition's substantial majority in the House of Representatives, consisting of 314 seats out of 500, internal differences among constituent parties will pose significant hurdles. The military-aligned Phalang Pracharat (PP) and United Thai Nation (UTN) parties, former rivals of the PTP, are keen on maintaining the existing political order that favors the army and establishment, in contrast to the PTP's commitment to greater democracy. Meanwhile, the alliance between the PTP and military-aligned parties has left both reformists and conservatives disheartened.  We would note that this collaboration thwarted the anti-establishment Move Forward Party (MFP) from assuming power and advocating for monarchy reforms. Notably, the PTP's traditional "redshirt" supporters, who once fought against the military's role in governance, are now finding themselves disillusioned and this over the medium term will pose a challenge. Another factor undermining the party’s anti-military stance is the recent return of Thaksin Shinawatra, the de facto leader of the PTP and a former prime minister. Thaksin, benefiting from a royal pardon reducing his eight-year jail sentence to one year, currently resides in a hospital, citing health issues, further reinforcing perceptions of power abuse. The leadership transition with Thaksin's daughter, Paetongtarn, becoming the new PTP leader also underscores the dynastic nature of the party.  On the opposition front, the Move Forward Party (MFP) faces a grave accusation – attempting to overthrow the constitutional monarchy through its campaign to amend the lese-majesty law. The Constitutional Court is set to deliver its verdict end-January 2024, with expectations that the party dissolution will be avoided to prevent an increase in anti-monarchy sentiments. However, if the MFP were to dissolve, large-scale protests could ensue, potentially disrupting business operations. Nevertheless, it is anticipated that strict measures by security forces will be employed to maintain control and prevent significant political instability.  This all leaves the political violence measure at high and legal and regulatory risk at medium-high.  Looking ahead, the PTP-led government plans a constitutional referendum, foreseeably resulting in democratic reforms without explicitly challenging the royal-military establishment. Proposed amendments include electing, rather than appointing, the Senate (the upper house) to diminish the army's political role. Despite these changes, the current prime minister's position is unlikely to shift, given the ruling coalition's comfortable majority in the House of Representatives. We note though that Thailand's political landscape has witnessed a series of political coups and therefore a minimal risk of a coup cannot be entirely ruled out. This is likely only in the event of persistent and serious conflicts between the PTP and the military. Meanwhile, a localized insurgency persists in Thailand's southern provinces, primarily Muslim-majority areas, involving low-level attacks on security forces. The risk of escalation following the Gaza conflict is considered modest, presenting a minimal threat to overall political stability.  On the macroeconomic front, the swing back to current account surplus is slower than expected, as tourism is taking time recovering to 2019 levels – partially as China tourists are travelling less overseas.  Government debt/GDP has stabilized at 62% but is not coming down and this accounts for the medium rating for sovereign non-payment.   

Turkmenistan (TKM)
Turkmenistan is assigned a high overall risk. The Central Asian country, led by President Serdar Berdimuhamedow, has a medium-high political violence risk. President Berdimuhamedow took office in 2022 when he won the election and replaced his father, Gurbanguly Berdimuhamedow. A report from the Carnegie Endowment for International Peace suggests a discord in their plans, as Serdar's vision did not align with his father's expectations.  Gurbanguly wanted to focus on international politics and expected his son to focus on domestic politics. The report goes further and argues that Gurbanguly launched an attack to gain power from his leading position in the upper house, aiming to secure nearly unlimited powers. Consistent with this context, both the legal and regulatory and political interference risks are deemed as very high, with risks stemming from the weak rule of law. Freedom House, a non-profit organization, describes Turkmenistan as a country where the economy is dominated by the state, corruption is systemic, religious groups are prosecuted, and political dissent is not tolerated. Decision-making is centralized at high levels, including the judicial branch, which operates under instructions from the executive power; moreover, the country lacks of consistent business legislation and looks cautiously at foreign investment. Supply chain risks stand at a medium-high level. In spite of relatively recent large-scale transport projects (such as the Turkmenbashi International Sea Port on the Caspian Sea) and intentions to scale up investment in roads, rails, and sea routes, Turkmenistan’s infrastructure remains weak and logistic costs very high. Putting together the different factors discussed above, the risk of doing business is one of the worst in the region, standing at a very high level. In economic terms, the IMF projects Turkmenistan's growth at 2.1% and 2.0% in 2024 and 2025, respectively, with the general government gross debt (as % of GDP) at 4.4% in 2024 and 3.9% in 2025. The country is highly dependent on commodities and has a high export concentration; however, policies to diversify the economy, including the investment in the sectors of transport infrastructure, agriculture, and non-industrial sector have been reported. A high point for the country is related to its strong sovereign balance sheet and one of the lowest public debt in the region; mostly supported by its revenue stemming from natural resources (natural gas). In this line, the approved 2024 budget intends to prioritize social welfare and economic growth, support key and traditional sector such as oil and gas, agriculture, and transportation, and bolster entrepreneurship and small and medium-sized business. These factors make both the sovereign non-payment and the government’s inability to provide stimulus at a medium level. Exchange transfer risk is high given the managed exchange rate and extensive capital controls. Foreign exchange is limited, and only a handful of businesses or individuals have the opportunity to convert currency at the official rate. Typically, obtaining approval from a government bank is necessary for companies or individuals to engage in currency conversion.