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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 16, No. 1, pp.23-58
ISSN: 1225-0279 (Print)
Print publication date 28 Feb 2003
Received 12 May 2003 Revised 14 Jan 2004

How Singapore Companies in Asean Manage Political Risk

Tracy Chan Su Yin ; Douglas Sikorski ; Louis Ta Huu Phuong
Country Officer, Singapore Ministry of Foreign Affairs, Tanglin, Singapore 248163, Tel: +65-63798329 tracy_chan@mfa.gov.sg
Visiting Professor, College of Business Administration, Seoul National University, San 56-1 Shinlim-dong, Kwanak-ku, Seoul 151-742, Korea, Tel: +82-2-880-1462 sikorski@snu.ac.kr
Associate Professor, Department of Decision Sciences, National University of Singapore, Singapore 119260, Fax: +65-7792621 biztahp@nus.edu.sg

JEL Classification: F23

Abstract

The Asian crisis served as a reminder to businessmen how fragile the world economic and political scene can be and how dangerous it was to base foreign direct investment decisions on optimistic perceptions of unending economic boom. Perceptions, whether or not they reflect actual realities in the business environment, play a very important role in the investment decisions of many corporations. This study examines the perceptions of decision-makers of Singapore companies operating in ASEAN. What are the sorts of factors that shape their perceptions and help them form a “gut feeling” about the quality of their investments? In particular this study looks at non-quantitative, non-market aspects of investment decisions, generally defined as political risk. Political risk is measured by an assessment of how managers perceive the sociopolitical conditions in the host country and the likely effect on the business climate.

Thus, we have attempted to reveal the relative importance of various factors associated with socio-political risk assessment for sample firms operating in ASEAN and the significance of particular risk factors. Likewise, we examined the risk assessment methods and risk management strategies used by Singapore-based companies.

Keywords:

Globalization, Foreign direct investment, Political risk, Risk assessment

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