Country Risk Analysis Mathematics & Economics Research Paper (Research Paper Sample)

Country Risk Analysis: Libya
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Country Risk Analysis: Libya
How Political Risk Threatens Libya's Ability to Socially Reproduce Itself
This report will examine political risk in the state of Libya. Libya is a North African country. Political risk involves government corruption, bureaucracy, wars, civil unrest, government attitude to foreign direct investment and multinational corporations, blockage of funds transfers from the country, currency inconvertibility, and attitude of consumer's attitude to foreign business ("Political Risk. Slideshare.net," 2020). Thus, the political risk may threaten the country's ability to socially reproduce itself in several ways, including hindering investment and altering consumption patterns.
Government corruption can be a significant obstacle to local investment and production. Corruption leads to misallocation of resources by distorting market incentives and the free play of market signals ("Political Risk. Slideshare.net," 2020). When corruption involves bribes, it leads to markets failing to operate efficiently as Adam Smith's invisible hand is negatively impacted. Eventually, local talent and entrepreneurs are drained of their productive capacity, which will undermine gross domestic product. Tax revenue means to develop infrastructure and subsidies local production may be misappropriated, further undermining output. Papaconstantinou et al. (2013) noted that it increasys the cost of doing business and undermines business revenue. Thus, corruption obstructs the efficient operation of markets, leads to resources misallocation, increasyd business costs, reduced confidence in the economy and government, and destroyed local talent and entrepreneurship, leading to the country failing to socially reproduce itself.
Wars and civil uprisings may damage infrastructure and threaten business assets and safety. (Wakkee & Moser, 2016) commented that threats of war and internal and external battles devastate production. The World Bank (2020) noted that wars and civil unrest displace people, leads to the destruction of physical stock, including infrastructure like bridges, hence depressing and disrupting economic activities. Thus, when the economies face threats of wars and civil unrest, their ability to socially reproduce itself depreciates as the economy shrinks.
Bureaucracy is also a significant political risk factor that may affect Libya from socially reproducing itself. According to the corporate finance institute (2020), bureaucracy is the source of red tape, bureaucratic delays, bureaucratic corruption, nepotism, complexity, and operations' inflexibility. Entrepreneurs and local talents and find it complicated and time-consuming to invest in profitable ventures. Complex business registration systems, paperwork, and inflexible processes may derail motivation and scare local and foreign direct investment. (Wakkee & Moser, 2016) also noted that nepotism might shun foreign direct investment when the government crafts policies to set local enterprises at an advantage that foreign investors; an uneven playing field is created. Eventually, gross national investment and gross domestic product negatively impact.