2018 is expected to be a year of consolidation in Bulgaria's banking sector. New laws and transparency requirements have been implemented in this economic sector, with the hope that these initiatives will reduce allegations of questionable activities associated with the country's banking sector. This is particularly the case with locally owned banks as they seek international investment.
Turkey’s banking sector is crucial to the success of the AKP and President Erdogan. Although the sector itself primarily functions independently of government interference; there are growing concerns that it is becoming increasingly exposed to informal mechanisms of political influence. This is a summary of a report available in the Shadow Governance Intel Store, that looks at how political exposure plays out in Turkey’s banks, and assesses the repercussions this can have on the future viability and reputation of the sector going forward.
International investment in the TRNC tourist sector is impacted by the fact that the TRNC remains solely recognised as an independent territory by Turkey. In addition to this political factor, scarce energy and water resources increase the costs associated with investing in tourism. This predicament, however, has interestingly facilitated the emergence of informal investment opportunities for smaller entrepreneurs.
2018 will see Russia and China further consolidate their presence and influence in the government offices and markets of Emerging Europe. Beijing and Moscow have marked clear goals for the next year – filling the void left by a retreating EU. As a result, we will continue to see the erosion of democratic institutions and accountability, and a further rise in quasi-autocratic leadership not afraid to use informal tools of influence to consolidate their power.
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Authoritarianism, corruption, human rights violations, and political repression are elements that characterise political trends in Emerging Europe over the next year. Indeed, countries in the region will continue to move away from democratic reforms, while their ruling elite continue to secure their political power by leveraging informal mechanisms of influence.
Although the current economic standing of Belgrade’s Airport is good, the Vučić government is - yet again - close to endangering one of the most important state assets. Previous regional examples reveal how governments, for political purposes, have privatised state assets to the detriment of public coffers, and the case of Belgrade Airport could easily follow this path.
The negative demographic trends witnessed in the Balkan countries is an underreported topic with harmful effects on regional economic dynamics. The demographic factor is central to understand and predict economic development in the region, as structural problems such as labour shortages, pension funds, and higher pressure on public services, are already appearing, and will have an impact on the type of foreign investment the region can attract.
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Bosnia is witnessing steady political disintegration. A lack of political legitimacy of its borders, an unclear EU policy, and re-emergent nationalist ideologies are aggravating ethnic and religious divisions. On top of all of this sits a murky nexus of rent-seeking political leaders, dependent oligarchs and a commercial environment threatened by corruption and undue political influence.
Serbia’s information and communications technology (ICT) sector has been growing, and showing resilience in the face of economic crisis. Will the government’s newly found interest in this sector enhance opportunities, or potentially stymie growth? This depends on whether Belgrade shows support by initiating necessary reforms, or looks to exert undue influence by exposing it to an informal power play.
The energy sector in the TRNC is in need of investment, particularly to modernise its infrastructure. While the current government is losing political legitimacy, new political actors with strong ties to Ankara are likely to take control. If this happens, there is a high probability that they will increase their dealing with Turkey, potentially to the detriment of the TRNC’s own needs.
The Syrian refugee crisis is worsening the problem of child labour in Turkey. It is believed that as many as 1 million children in Turkey could be exposed to informal labour networks. Expanding concerns about child labour in Turkey are concerns for international investors, further enhancing the need to conduct integrity due diligence on supply chains and partners.
Fiat's 10-year contract with Serbia expires in December 2018, but will likely be extended. Serbia offers a favourable and profitable environment for Fiat; and will do so for as long as fully automated production is more expensive than human labour. Serbia’s sweatshop model of economic growth, however, only feeds the political elite, with low-cost manufacturing jobs contributing to poverty and a growing grey market for employment.
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