This year New York’s Democratic presidential primary will have more impact than usual. Since it comes at a time when Bernie Sanders has won 7 out of the last 8 contests, he brings a good deal of momentum to the New York race.  

Problematic polling for New York’s primary

Before actually looking at the data and making a forecast, it is useful to talk about the methods themselves. Famous game theorist, Anatol Rapoport once said that statistical models were best used in situations where people “don’t stop to think”.

When there were far more party loyalists and far fewer independents it was much easier to forecast elections. This primary season is quite different since there are large numbers of voters who do not usually participate coming out for atypical candidates like Trump and Sanders. Polls that draw from a pool of “likely voters” may have limited validity if unlikely voters show up in droves.

There are other problems with polls. Major survey firms have reported that their work is now harder because of the move from landlines to cell phones and because people now value their privacy more than they used to in responding to surveys.

This combination of factors explains an increasing number poor forecasts like the one in Michigan this election season. Of course, since polls are drawn from attitudes they can also be very volatile and tied to events taking place around the time of their interviews.

A close examination of the Clinton-Sanders race should include intangibles like Bernie’s Brooklyn accent and status as a NY native. It should also include Hillary’s New York roots since she has lived in Westchester since the Clintons left the White House, and represented the state for eight years in the U.S. Senate.

There are also the usual demographics like who is supported by younger voters, older voters, minorities, women and white males. There are geographic questions like urban-rural or suburban voters and how these environments will affect voter behavior.

Based upon these and other polls the widely respected Five Thirty Eight gave Clinton a 98% chance of winning the New York primary. The only problem is that Five Thirty Eight also gave Clinton a 99% chance of winning in Michigan because polls taken in the last month before the election had Hillary ahead by 5%-20%. In fact, Sanders squeaked by with a 50%-48% victory.

Beyond polls

Clinton enjoys an institutional advantage in the New York Democratic Party. Since she played an active role during her husband’s presidency and represented New York in the Senate, Clinton has developed a number of high end associations that serve her well. For instance, she was endorsed by New York Governor Andrew Cuomo.

Cuomo was HUD Secretary under Bill Clinton. She has also been endorsed by Mayor Bill De Blasio. He served as a regional director of HUD during the Clinton presidency and was campaign manager for Hillary’s U.S. Senate race.

While Cuomo has emerged as a Democratic moderate and is comfortably a Clinton “New Democrat”, De Blasio worked for an NGO that supported the Sandinistas and has been an advocate for the minority communities of New York.

He is closer to Sanders ideologically but is instead supporting Clinton. There are a wide range of elected officials in New York who worked closely with Hillary when she represented the state. They are actively supporting her as are labor unions she worked with.

According to recent polls Clinton is running roughly two to one against Sanders among women and Blacks. Clinton’s support among women is especially strong among those over 40. Some of this support reflects New York’s early and central role in support of feminism. Planned Parenthood had its roots in Brooklyn and much of the activism and demonstrations of the 1970s occurred in New York.

Many of these long term feminists see Hillary’s election for president as a key step forward for women. Hillary is also expected to do well in the suburbs and upstate as she did in her 2008 primary victory against Barack Obama.

Bernie Sanders is leading a movement that includes many of the disaffected. Where Hillary’s approach to progress been as an elite lawyer, Bernie’s has been as a community and political activist.

While both candidates have been making tours of New York City and upstate neighborhoods people have been respectful and even supportive of Hillary but they appear roused by Bernie. He had eighteen thousand people show up for a rally in the South Bronx. He had crowds accumulate when he ate a Nathan’s hot dog and spoke on the Coney Island Boardwalk.

Where Hillary is measured and sometimes vague, Bernie is honest, well focused, and sometimes too direct. Direct and honest while even sometimes talking over people is a hallmark of New York communication style. He fits his audience. He’s leading by 11% among all voters under 40 who may favor commitment over nuance.

Who is going to win?

While opinions could shift as a result of whatever is said during the April 14th debate it’s unlikely that this will be the case. Much of the recent dialogue between the two has not really broken new ground.

Sanders seems to be making inroads into Hillary’s support among Black voters. This is because Ben Jealous, Spike Lee, Harry Belafonte and Erica Garner have been very vocal and visible in their support.

Most recently Keith Ellison, a Muslim congressman from a mixed Black-Jewish district in Minnesota committed himself to Sanders. If Blacks and Hispanics turn out and shift moderately towards Sanders things will go well for him.

This is true if young people turn out as well. As Ken Sherrill, a former West Side Democratic District Leader and long time political science professor, recently said about this race “ anything can happen”.

I would anticipate a marginal victory for Clinton. A major reason is that New York has very stringent voter registration laws that require new registrations or party changes some three months ahead of the election. It’s also a closed primary.

Many of Sanders’ young supporters may not have registered or forgot to to change their registrations from “independent” to Democrat. One would expect that older voters, suburbanites, and professionals would be more likely to get this right and they most often support Clinton.

More importantly, there is no formal party home for grassroots candidates like Sanders. In the 1940s-80s, New York had a strong reform movement that set up alternate Democratic clubs to counter old time party bosses.

Something like this needs to be resurrected to provide a home for grassroots independent candidates. If young people or minorities can not vote and are not assisted in doing so by any organization it is likely that Hillary will carry the day.

The post Unboxing the New York Democratic presidential primary appeared first on Global Risk Insights.

The London 2016 mayoral election has descended into personal attacks and identity politics, worrying for a position to lead a global city.

The 2016 election for London’s new mayor is an important one, given that London is one of the largest and richest capital cities in the world. London is one of the most important financial hubs in the world (alongside New York, Hong Kong and Singapore), and consequently a common location for major offices of corporations or banks. Therefore the mayor of London is a very powerful position.

Both candidates open to typecasting

It is disappointing to see the race for this important role descending into personal attacks and identity politics between the candidates. What should be an election about important issues such as housing, the economy, and uniting communities has become an election about extremism, racism and party politics-particularly when it comes to the main front-runners Zac Goldsmith (left) for the Conservatives and Sadiq Khan for Labour.

Sadiq Khan is Labour’s candidate for the election, and he is also a British-Pakistani Muslim. Predictably, Khan has been a victim of Islamophobia in this election campaign. For example Khan has been accused (by Zac Goldsmith and the Conservatives) of giving ‘oxygen’ to extremists by sharing platforms with them and having links to controversial figures such as Suliman Gani and Babar Ahmed.

While the stories do raise questions about Khan, it is doubtful they would have been raised or even investigated with such scrutiny if he was not Muslim. When taking the stories into account it seems that Khan was simply in the same room as figures with questionable views rather than sharing the views himself; although it remains unclear as to what actually happened in these instances.

Zac Goldsmith is the Conservative’s candidate for the election, and he is also a member of the elite Goldsmith banking family.  As a Conservative MP descended from a rich Jewish family, living in privilege, and schooled at Eton, Goldsmith has followed a somewhat stereotypical path. Being married to a member of the equally rich Rothschild family does not help.

As a result Goldsmith is as vulnerable to being typecast as Khan. This has certainly been the case on some occasions. For example Goldsmith has been criticised for his ‘non-dom’ status which he inherited from his father Sir James Goldsmith which Goldsmith has used pay less tax. His £10 million in earnings over the past 5 years has also raised eyebrows.

Ultimately questions have been raised as to whether Goldsmith can really lead London and represent its people when many are continuing to struggle with austerity cuts and a sluggish economy. As with Khan, it is doubtful these questions would have been raised if he was not the Conservative candidate, went to Eton and was a Goldsmith.

Other parties also raise concerns

Other candidates have also been associated with identity politics and potentially racism. Sophie Walker is the candidate for the Women’s Equality Party running purely on the policies of improving the lives of London’s women, an admirable ticket but one which seemingly ignores half of the city’s population. The British National Party and Britain First are running candidates claiming to put British people first and are predictably being labelled as racist by some.

The United Kingdom Independence Party (UKIP) are running on a strong anti-immigration ticket. Finally there is George Galloway running as mayor for his Respect party, a figure who has had a history of dirty politics with comments such as ‘Jewish free zone’ and saying Julian Assange was guilty of nothing more than ‘bad sexual etiquette’. Ultimately this mayoral election has become more about where people come from and their genetic makeup than it is about policies; which is just divisive, damaging and frankly sad.

This election is important because of London’s status as a global financial centre and its importance to the world economy. Therefore for its leader to be decided more by what religion they follow, what family they come from, where they were born and whether they are a man or a woman is an election which is missing the point and is potentially dangerous.

There is a real danger of people voting with their heart rather than their head and while that could result in a leader who brings people together it could also result in the winning candidate being the one who ran the most effective attacks on their opponents and not having the best policies.

Simply put, the London election could put the capital’s economy and subsequently the world’s economy at risk.

In conclusion the 2016 London mayoral election remains one to watch. Before the crucial EU referendum, from both a British and global perspective, the election could be very important to how the world economy fares. For everyone’s sake we have to hope that mayoral politicking has hit rock bottom as far as dirty tricks are concerned and will soon focus on the  important issues of the day, rather than where the candidate comes from.

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President Daniel Ortega’s move to nominate his wife Rosario Murillo as vice-president has riled the opposition, as the government’s lip service to feminism covers an attempt to create an increasingly autocratic political dynasty.

With national elections scheduled for November 6th, President Daniel Ortega is aiming to secure his third consecutive term. A long-time figure in Nicaraguan politics, Ortega has been criticized, both domestically and internationally, for his dictatorial tendencies. For instance, concerns for Nicaraguan democracy were raised in 2014 when the constitution was amended, allowing Ortega to be re-elected indefinitely.

More recently, the Supreme Court ousted Eduardo Montealegre – leader of the opposition Independent Liberal Party (PLI) in June. Last Friday the court went further, unseating 16 PLI politicians who had refused to acknowledge Montealegre’s replacement. This has only further consolidated the hold of Ortega’s Sandinista National Liberation Front (FSLN) party (which holds more than two-thirds of the seats) in the national legislature.

Keeping it in the family

The latest affront to the opposition came yesterday, following Ortega’s announcement that he has chosen his wife, Rosario Murillo, as his vice-presidential candidate. Ortega’s opponents have pointed out that such a move violates the constitution – characterizing the decision as further evidence of his dynastic ambitions. While initial polling places Ortega with some 65% of the vote, his choice of vice-president has galvanized the opposition. Despite this, Ortega is likely to win the November election, a turn of events that would cast a negative forecast for Nicaragua’s democratic prospects.

The president stated the vice-president had to be a woman, citing Murillo the obvious choice. Conversely, opponents of the government, such as former opposition congressman Eliseo Nunez have called the move nepotistic and farcical: “to me it is an insult – not just to all Nicaraguans, but also to the entire Sandinista movement – because it says that in Nicaragua there are no Sandinistas or Sandinista women who can aspire to this role; only the Ortega-Murillo family.”

Murillo has been the driving force behind Ortega’s change of style, with paramilitary uniforms being replaced by civilian clothes, pink campaign posters, and less confrontational rhetoric. It is important to note that these changes are not merely cosmetic, as many Nicaraguans already surmise that Murillo is pulling the strings. Even before her nomination as vice-president she has been the official spokesperson of the government, with ministerial rank, as well as chair of all ministerial meetings.

Despite appeal to feminism, violence against women remains rampant

Murillo and Ortega have cobbled together an odd mixture of progressive socialism, with ultra-conservative Catholicism and Murillo’s various new age beliefs. Murillo has become the regime’s poster girl and cheerleader, one who is campaigning for Ortega with feminist slogans, touting empowerment and pointing to the high numbers of female officials.

It is true that Nicaragua ranks very highly in terms of gender parity in positions of power, yet local feminist organizations continue to feel unrepresented, as female politicians in the Ortega government are more loyal to the FSLN than any feminist agenda. Outside of the political elite, life for ordinary women in Nicaragua remains fraught with dangers.

Moreover, despite the government styling itself as pro-feminist, Nicaragua continues to be one of only six countries that forbids abortion under any circumstance. The country also has very high rates of underage pregnancies, the second highest rate of domestic abuse in Latin America, and many incidents of femicide (the killing of women because they are women and/or considered property). President Ortega himself is even accused of sexually abusing his step-daughter for years, yet has hidden behind presidential immunity and Nicaragua’s short statute of limitations for sexual violence.

These dismal facts exist alongside Nicaragua’s deteriorating economic freedom and ease of doing business, and HDI scores (ranked 108th, 119th, and 132nd in 2015 respectively). The one bright spot is Nicaragua’s comparative safety, as the country is not faced with the levels of gang violence of other Central American states. Furthermore, while openly anti-American, especially given the FSLN’s struggle against the Contras, Nicaragua has yet – unlike Venezuela – to become antagonistic towards American and other foreign firms. This is reflected by a GDP growth rate that has averaged 5% in the last five years, as well as foreign investment, notably a $50 billion Chinese canal building venture.

Despite this, Nicaragua is facing economic uncertainty and slowdown, as the commodity supercycle ends, Ortega’s ally Venezuela faces implosion, and inflation ticks up: reaching 4% in 2015, thus eroding the gains from a 4.9% GDP growth rate.

Don’t cry for me Nicaragua

Political dynasties are commonplace in Latin America, yet Ortega has justified his choice by invoking feminism, a new take on an old tactic. Ortega has ample inspiration of other power-couples at hand, be it from Juan and Eva Peron (herself a feminist campaigner), or more recently the dubious power plays of Nestor and Cristina Kirchner. Ironically, while Ortega’s nomination of his wife has led to accusations of dynasty building, Ortega himself came to power on the heels of the Nicaraguan revolution against the Somoza dynasty in 1979.

Another important influence is likely the current political situation in the United States. The 2016 U.S election also puts American political dynasties in the spotlight, as pro-Ortega observers in Nicaragua can point to the back and forth between the Bushes, and (if Hillary wins) Clintons over the last 25 years to counter allegations of a nascent Ortega-Murillo dynasty.

With Hillary Clinton (herself part of another political power couple) securing the Democratic nomination and promoting herself as a feminist, Ortega is likely taking notes.

As feminism continues to increase its profile in mainstream political discourse, Ortega can draw on the FSLN’s revolutionary Marxist-Leninist past (and its attendant calls to equal opportunity) to draw a link to modern feminist calls for equality, to re-legitimize the party in the post-Cold War era. By coating the party with a thin layer of ‘feminist’ rhetoric, Ortega can try to shake off his incumbent status and regain some revolutionary zeal by claiming to again stand at the frontier of the people’s struggle.

Furthermore, by adopting the veneer of feminism, Ortega and Murillo can claim a moral high ground and – to a certain degree – insulate themselves from Western criticism. Just as autocrats have draped themselves in the language of independence and human rights, so too can the language of feminism be co-opted in the war of words with the United States and others. In doing so Ortega forces the U.S to appear hypocritical when criticizing a regime which allegedly supports American ethical standards.

Under the Radar uncovers political risk events around the world overlooked by mainstream media. By detecting hidden risks, we keep you ahead of the pack and ready for new opportunities.

Under the Radar is written by GRI analyst Jeremy Luedi.

The post Under the Radar: Nicaragua is using feminism to undermine democracy appeared first on Global Risk Insights.

All times are Eastern Standard

7:00pm: Polls close in Florida and begin to close in New Hampshire.

Florida is a critical win for Mr. Trump to maintain his narrow path to 270 electoral votes. Secretary Clinton will need high voter turnout in the greater Miami area, particularly among its Hispanic population. Early voting in the state is already running high, particularly among Hispanics, to Mrs. Clinton’s benefit.  Turnout will need to look promising in the 7:00 to 8:00pm hour as polls in Florida’s panhandle, a critical area for Mr. Trump, will close at 8:00pm.

Also pay attention to Florida’s Senate race.  Senator Marco Rubio is trying to fend off a strong challenge from Democrat Patrick Murphy.  While Senator Rubio is currently ahead in the polls, a close Florida Senate election or, certainly, a Murphy win would be an early, ominous sign for Republicans in their bit to retain control of the Senate.  This race will also provide an early look at whether Republican voters are willing to split their votes between a highly polarizing Donald Trump at the top of the ticket and a down-ballot slate of Republicans.

Many, but not all polling places in the state of New Hampshire will begin to close at 7pm and will provide an early indication of turnout strength for both Mr. Trump and Mrs. Clinton. It is unlikely the state will be called for either candidate until all polls are closed at 8pm. New Hampshire is also home to one of the key Senate races of the evening between Republican Senator Kelly Ayotte and challenger, Governor Maggie Hassan.  Should Governor Hassan pick up this seat, it will provide Democrats one of the four or five seats (depending upon the party of the Vice President) required for Democrats to gain control of the Senate. Like Florida, turnout for Senator Ayotte will also indicate Republicans’ willingness to split their votes between Mr. Trump and down-ballot Republican candidates.

7:30pm: Polls close in North Carolina and Ohio.

In North Carolina, Secretary Clinton will need to realize a strong turnout in the Charlotte area as well as the research triangle of Raleigh-Durham.  North Carolina will provide some insight into the turnout levels among millennials in Raleigh-Durham area, home to the University of North Carolina and Duke University, as well as African Americans who appear to be voting in lower numbers as indicated by early voting levels. Turnout of these two demographics, described as the Obama electorate, will be key to a Clinton victory, and low turnout indicators in North Carolina will be a significant concern for Democrats up and down the ballot. North Carolina may also provide insight into the validity of the claim of a hidden Trump vote who, while unwilling to publically proclaim support for him, will nevertheless materialize at the polls. If this claim holds water, it will be revealed in higher than expected Trump support among college-educated white voters.

Another possible Democratic pick-up in the Senate can be found in North Carolina. Here, Republican Senator Richard Burr is running slightly ahead of Democratic challenger Deborah Ross in the polls. This will be a key Senate seat for Republicans to retain early in the evening.  A Republican loss here would significantly reduce their likelihood of retaining Senate control given more competitive races to be decided later in the evening.

Ohio seems to be trending in Mr. Trump’s favor, and will prove a must-win for his election.  While both North Carolina and Ohio will prove essential for Mr. Trump, a loss in Ohio would likely signal an early end to the election evening. This state will also provide an indication of Mr. Trump’s ability to turnout base voters in what it called a Get-Out-The-Vote (GOTV) operation. Mr. Trump will have to run very high in driving his core support among middle class and working class white voters to the polls. A higher-than expected turnout in Ohio for this voting demographic would demonstrate a stronger than expected Trump GOTV operation and prove a good, early omen for the candidate moving forward.

8:00pm: Polls close in Pennsylvania, Michigan, New Hampshire, and Illinois.

Secretary Clinton currently leads in polls in both Pennsylvania and Michigan, however the high numbers of blue collar and working class white voters in each state make them competitive for Mr. Trump.

In Pennsylvania Mrs. Clinton will need strong turnout in the Philadelphia area.  Turnout here will provide perhaps the strongest indicator yet of whether African American turnout will be lower as indicated by early voting levels. Mrs. Clinton will also need to perform well in the “collar counties” surrounding Philadelphia. This area is home to a large percentage of college-educated, affluent whites and married, white women, two key swing demographics historically open to voting Republican.  If Mrs. Clinton sweeps this area, it will indicate that, despite his late outreach, Mr. Trump has been unable to attract educated whites and married women. For his part, Mr. Trump will need a strong turnout in central and western Pennsylvania, areas dominated by working class white voters.

Another key race in the bid for Senate control is found in Pennsylvania between Republican Senator Pat Toomey and Democratic challenger Katie McGinty.  This is currently a tossup race and will likely be decided by strength of turnout, whether in the Philadelphia metropolitan area for Democrats or in western Pennsylvania for Republicans.

Like Pennsylvania, Michigan is also trending for Mrs. Clinton. Both states have historically seemed like tight races in Presidential election cycles only to support the Democratic candidate. It is clear Mrs. Clinton is concerned about Michigan as she has recently deployed surrogates and critical resources to shoring up the state, part of Mrs. Clinton’s blue firewall. Mr. Trump must pick-off one state currently trending in Mrs. Clinton’s favor, and Michigan, with its high level of working class white voters seems like a possible contender. An outside win here for Mr. Trump would greatly improve his path to 270 electoral votes.

While not competitive in the Presidential race, the Senate race in Illinois between Republican Senator Mark Kirk and his challenger, Democratic Congresswoman Tammy Duckworth, seems like a guaranteed pick-up for the Democrats bid for the Senate.

9:00pm: Polls close in Arizona, Colorado, and Wisconsin.

As of mid-October, polls in both Arizona and Colorado were tight.  Since the FBI’s announcement that it had re-opened its investigation into the Clinton emails, Arizona, an historically Republican state, has trended strongly in Mr. Trump’s direction.  He must win this state to maintain a path to 270 electoral votes.

Colorado was trending in Mrs. Clinton’s favor, but polls have tightened considerably since the FBI announcement.  While this is not a must-win for the Secretary, like Colorado, this is a must-win for Mr. Trump.

While Wisconsin is not competitive at the Presidential level, the Senate race between Republican Senator Ron Johnson and his challenger, the former Democratic Senator Russ Feingold appears likely to flip to the Democrats. This, along with the Senate race in Illinois, should provide a second pick-up for Democrats in their bid to retake the Senate.

10:00pm: Polls close in Nevada, Iowa, and Utah.

Polls in Nevada and Iowa both currently show Mr. Trump leading Secretary Clinton by 3 points, barely within the margin of error. Both of these states are a must-win for Mr. Trump.  Of the two, Iowa is the more likely to vote in Trump’s favor.  In Nevada, Mr. Trump will need strong voter turnout in Reno as well as a lower than expected turnout among the state’s high Hispanic population.

Utah is a deep red state, but a strong challenge from Independent candidate Evan McMullin is giving Mr. Trump heartburn. In a normal election year, Utah would vote solidly for the Republican, but the state’s Republicans have not “come home” to the divisive Republican candidate choosing instead Mr. McMullin’s independent candidacy as a protest vote. Mr. McMullin’s Mormon faith is a strong draw to Utah’s population, however Mr. Trump’s poll numbers have improved here recently. He must win the state if he has any hope of winning the Presidency.

Nevada’s Senate race also provides Republicans their best hope for a pick-up. Election for the seat being vacated by retiring Senate Minority Leader Harry Reid is currently too close to call between Republican candidate Joe Heck and Democratic candidate Catherine Cortez Masto.  Should Republicans be able to flip this seat, it would significantly reduce the likelihood that the Democrats will gain control of the Senate, even with a possible swing vote from a Vice President Tim Kaine.

The post Election night: what to watch, hour by hour appeared first on Global Risk Insights.

Europe is full of loud stories, and yet beneath the noise there are first time democratic elections shifting the tide of East-West relations, like Moldova.

Moldova, between Ukraine and Romania, held its first democratic presidential elections on 30 October 2016. Many believe the election, aside from the obvious democratic symbolism, can be a key tipping point in Euro-Russian relations. As the close elections head towards a run-off on 13 November 2016, Igor Dodon holds the lead as a pro-Russian candidate of the Socialist Party, followed closely by pro-European candidate Maia Sandu.

Moldova is primarily an agricultural nation, and among the poorest in continental Europe. Moldova, along with Belarus and other Commonwealth of Independent States (CIS) nations, constantly face the challenge of straddling European Union (E.U.)-Russian relations, with some believing the E.U. holds the key to economic success, while others seek better relations with Russia. Dodon makes it clear that he is seeking increased relations with Russia as the key to stimulating their economy.

Primarily representing the poor rural areas of North and South Moldova, Dodon is quite different than his opponent Maia Sandu. Sandu pulls the majority of her support from the more urban Central Moldova, surrounding the capital of Chisinau. Furthermore, Dodon leads his campaign on a pro-Russian platform, and Sandu sets a pro-European tone aimed at further Western integration. “I believe in European values and that E.U. integration is the appropriate development,” said Sandu in a recent interview.

From these tones it is easy to deduce that there are two different paths for the tiny European country. Unlike Georgia and the Baltic States, Moldova has yet to completely buy into the European project, complicating the region for Europe, while also not accepting Russian assistance. Moldova is not the only Eastern European country to go through this crisis of identity.

Georgia and Ukraine, though troubled by Russian interference, have outwardly pursued The North Atlantic Treaty Organization (NATO) membership and continued inclusion in European agreements. However, each step taken towards European inclusion by these former Soviet States results in increased hostilities with Russia, a consistent consideration for the political economy.

The question of Moldova’s future, while likely different than Georgia’s, is not one of good and evil, but one of East and West. If Dodon rises to power, it may cause significant challenges for expansion of E.U. trade networks such as the E.U. Association Agreements. This existing agreement proliferating political and economic integration between Europe and its neighbors is already in place, Dodon may not be keen on expanding it, instead opting to limit it.

Dodon’s language indicates a focus on the economic welfare of Moldova, increasing his appeal to the large agricultural community. With the E.U. economically floundering to the West, Dodon will see the benefits to taking an Eastward turn toward Russia. His campaign, featuring outward support of Vladimir Putin, signals that the Eastward turn will, indeed, come to pass under his watch.

Though there is little fear, the Association Agreements could fall apart under Dodon, and his presidency could curtail future integration into the E.U. neighborhood. Those watching the East must observe closely how Europe deals with yet another Russian-leaning state on its borders. Without forceful economic diplomacy from Europe, a Dodon administration may signal slowing E.U. trade influence in the Black Sea region.

There is, of course, the chance that Sandu could take office. Her administration would almost certainly strike a different tone. Sandu is vocally pro-European and pro-European trade. She believes that Europe, instead of Russia, is the best future for Moldova. Whether or not she is correct, her presidency could present enormous opportunity for European traders.

With Sandu at the helm, those involved in European trade could see a future of opportunity. Though Moldova’s economy remains fragile, her desire for economic diplomacy could foster a win-win for both her country and Moldova, opening new opportunities for European influence in this oft-overlooked country.

As always, both East and West may view this election through the lens of the Euro-Russian tension. Openness of former Soviet states toward the West always carries the potential for Russian opposition, and the West should be mindful of this. If Europe oversteps its bounds under a Sandu presidency, it could see a higher degree of Russian influence in the region in compensation for a pro-European leader.

Furthermore, if Dodon wins it could signal another Eastern European country electing a leader that may diverge from Europe, following in the footsteps of Hungary and Poland. The Moldovan election is crucial, if not for its own sake, then for that of the entire Eastern European political economy. Those invested in the burgeoning free-trade economy will see opportunities shift either West or East in this election.

Therefore, as the complex economic future of Moldova unfolds in the runoff election, eyes must be on both a possible European confrontation, as well as the potential for a renewed connection to Russia itself. Regardless of who wins this close election, Moldova must continue to balance between its Eastern and Western neighbors.

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Despite unforgivable slips in the 2016 US presidential race, the polling industry must be strengthened, not discredited. It remains crucial in an era in which markets are hypersensitive to political outcomes.

By 11:00pm EST on November 8, 2016, after commercial breaks allowed the world to swallow the unexpected reality of a Donald Trump presidency, pundits pinned the blame on public opinion polls. Electoral experts firmly renounced major polls for miscalculating the electoral outcome by biblical proportions into the morning hours. Mr. Trump, who according to the superstar electoral statistician Nate Silver had a 28.6% of winning the election, ended up flipping the states of Michigan, Wisconsin, and Pennsylvania. He also took the key battleground states — Florida, Ohio, and North Carolina.

Mr. Silver is not the only expert who was wrong. Every major publication, think tank, and agency able to forecast the election predicted a Trump loss by margins making Silver’s forecast look optimistic for the Trump campaign. Gallup published an article on November 2 (less than a week before election day), stating that the Trump campaign’s ratings were the “worst in recent election years”, with a 29% national approval rate.

News broadcasting stations, however, were the furthest off the mark. The day before election day, all major cable stations had Clinton winning by a couple points: Fox, ABC, and CBS had Clinton up by 4 points; while NBC had Clinton ahead of Trump by 6 points. Polls funded by other publications and agencies also forecasted a Clinton win, albeit by a smaller margin: The Economist and YouGov had Clinton up by 4 points while Reuters and Bloomberg had her up by 3 points.

The following headlines from The Economist articles provide a glimpse into the level of disproportional forecasting going into Election Day:

• “Hillary Clinton has got this. Probably. Very probably.” Published Election Day five hours before the first votes were tallied.
• “The Economist Explains: How did the Polls Get it Wrong?” Published November 9, the day after Election Day.
• “Epic Fail.” Published November 10, two days after Election Day.

This sequence, which starts cautiously optimistic, then defensive, and finally accepting, is representative of the sentiment among the pundits. Going forward, experts should not jump to discredit the entire polling industry but rather allow academia to reassess the methodology for future national polls. A technical review of polling companies should address the following stress points.

Geography, demography, and electoral system

Concerning the research design, national polls usually have a sample size of 1,000 people. In a geographically massive and culturally heterogeneous country of 320 million people such as the United States, sample sizes may need to be significantly larger to cover more counties, including rural areas, to have a deeper footprint among the electorate.

Polls were somewhat accurate when analyzing the overall national popular vote, but highly inaccurate at the state and local level. A miscalculation at the state level can make a large difference under the Electoral College’s points system. The disproportionate tally mechanism of the Electoral College brings into question how polls can correctly predict a national election in a highly decentralized electoral system, especially with an untraditional candidate such as Donald Trump.

Political marginalization and the lure of the anti-establishment option

Mainstream polls may also want to revisit how to capture politically marginalized groups. One unifying characteristic among three unexpected electoral outcomes in 2016 — Brexit, the Colombian peace plebiscite, and the U.S. presidential elections — is the undocumented strength of a resentful anti-establishment silent majority. The polls may be missing this significant chunk of the electorate, which is composed of diverse demographic and income groups. The silent majority’s level of distrust with the establishment may have spilled over to independent institutions such as polling agencies, leading this important cohort to reject polling requests en masse.

In the three electoral cases presented, there was no stark contrast in the options available and voters were left to choose between a menu of suboptimal scenarios. In Brexit, Leave supporters were willing to sacrifice macroeconomic stability for bureaucratic sovereignty. In Colombia, No supporters sacrificed the demobilization of the most enduring guerrilla in the western hemisphere for the possibility of tougher sanctions. In the United States, Trump supporters turned down political and diplomatic experience for a systemic shock to the establishment.

These cases are not traditional or simple. Voters had to logically process a very rough menu of choices, which only increased popular dissatisfaction. Given the context of broad public distrust of government, polls may need to readjust their methodology to more effectively capture the pulse during untraditional electoral patterns.

Polls are adjusted to a dichotomous party-based political model, when perhaps, the establishment and party do not have the influence over voters they once had. Paul Ryan, Speaker of the House of Representatives, said “Trump pulled off an enormous political feat”, meaning that Trump won mainly with his persona and without the full backing of the party machine. The Republican Party remained fractured over Trump’s candidacy until the end.

Maybe this anti-establishment wave of electoral politics in established liberal democracies has not been grasped by big data. Pollsters are hanging on to an old party-based model in a context in which parties are mistrusted, as they represent a decaying governing elite.

Polls, democracy, and markets

The polling blunders of 2016 cannot be taken lightly. In the era of ultra-low interest rates and thin yields, the markets — particularly currencies — have become hypersensitive to political outcomes. The recent market politically induced volatility also transcends borders.

More than ever, electoral outcomes have a direct implication on global markets, even if the policies promised in campaigns are unfeasible in the short-term. The U.S. election, for example, has severely altered a large number of currencies, regardless of the country’s current account balance or general economic standing. The currency market’s reaction to Trump’s election is symptomatic of the deep economic interconnectedness of the global economy.

If political stakeholders have placed so much trust in polls, it is because they have worked successfully in the past. Yes, 2016 has been an unconventional year for democracy and therefore polls as well, but this is no excuse to discredit the industry as was done by pundits on Election Day. Rather, firms should reassess how polls are structured in unorthodox political contests and recalibrate the qualitative methodology to treat voters as complex social beings instead of robots.

The post Forecasting unconventional elections: What can be done? appeared first on Global Risk Insights.

East Timor and Australia have agreed to a new maritime border which would give East Timor control of a $40 billion oil field. But not everyone is happy.

With the host of maritime disputes in the Pacific, it is encouraging to see efforts at reconciliation and compromise, as Australia and East Timor have announced their intention to create a new maritime border agreement in 2017. In the wake of meetings in Singapore, which the Permanent Court of Arbitration Conciliation Commission described as “productive” where both parties “reaffirmed their commitment to work in good faith,” an agreement is likely to emerge in September 2017.

The area of contention concerns the maritime border between Australia and East Timor in the Timor Sea. After its independence from Indonesia in 2002 – an event which was facilitated by Australian support – East Timor created the Joint Petroleum Development Area with Canberra, which created a profit sharing scheme for oil and gas extraction in the Timor Sea. After independence, East Timor had no permanent maritime border with Australia, yet this very area housed significant oil and gas resources. This agreement was hastily signed by East Timor, as the nascent nation desperately needed income sources.

In 2006 Australia and East Timor signed a temporary border treaty, which saw a 50:50 revenue sharing scheme and also delayed final border arbitration for 50 years. In recent years, there has been growing discontent in East Timor over the terms of this treaty, which many Timorese see as an unfair agreement negotiated with a far stronger partner. Relations between the two countries hit a low point in 2013 after allegations emerged that Australia had bugged Timorese cabinet meetings during the 2006 negotiations.

East Timor’s Prime Minister Rui Maria de Araujo summed up the island nation’s feelings towards Australia in a 2015 interview, stating that “having [spying devices] as an advantage for you to negotiate something that is a matter of death and life for a small country, I think is  – at least morally – a crime [sic].” The fact that East Timor has managed to agree on 98 percent of its borders with Indonesia – its former oppressor and genocidal overlord – with the remaining two percent to be finalized in 2017-2018, before reaching a deal with Australia shows how broken bilateral relations with Canberra have been.

East Timor looking towards a new sunrise

At the heart of the longstanding dispute is the Greater Sunrise oil and gas field. Discovered by Woodside Petroleum in 1974, the field’s five trillion cubic feet of gas and 225.9 million barrels of oil (valued at $40 billion) has remained stuck in political limbo and untapped. Woodside owns 33.44% of the field, with Phillips-Conoco controlling 30%, Shell 26.56% and Osaka Gas 10%. This group has sought to finally develop the field, yet East Timor’s 2015 suit in the Hague scuppered those plans. Woodside is predicting a commodity price rally in 2019, and encouraged by improving bilateral ties, has called on Canberra and Dili to reach an agreement as soon as possible.

The core point of contention has been thus: Australia has argued its border extends along the continental shelf, whereas East Timor has called for the border to be halfway between the two countries, a move which would place the majority of the Greater Sunrise field within Timorese waters.

It is therefore encouraging that despite such animosity, both countries are making steady progress towards a permanent resolution in 2017. Having taken Australia to the Hague and invoking the United Nations Convention on the Law of the Sea (UNCLOS), both countries have decided to work together to enlarge East Timor’s maritime territory in order to give it more access to the region’s oil and gas resources. UNCLOS is a friend to small nations, yet has been challenged by countries like China, especially in the South China Sea.

Australia and East Timor’s commitment to working in good faith could offer an example for productive regional dispute resolution. Australia withdrew from the UNCLOS’ compulsory dispute settlement procedures in 2002, yet it has managed to cooperate with UN organs to work on a solution with East Timor. Australia’s reservations about UNCLOS are mirrored by China’s resistance to outside mediation. Furthermore, the power disparity between Australia and East Timor is just as stark as that between China and countries like the Philippines. Furthermore, both the Timor and South China seas are contested for their oil and gas wealth, involve gross power disparities among claimants and dominant powers skeptical of UN arbitration.

Why is progress happening now?

Recently, Australia agreed to East Timor’s demand to scrape the 2006 treaty. In return East Timor dropped its espionage case against Australia in January; allegations which were being used to validate its efforts to abolish the treaty. East Timor is facing significant pressure to resolve the maritime dispute, as the country is quickly running out of viable oil reserves. East Timor’s oil and gas income peaked in 2012, and has been declining ever since; its Kitan oil field stopped producing in 2014, and the country’s last remaining field – Bayu-Undan – is expected to cease production between 2020-2022. This is a very troubling scenario for East Timor as oil and gas revenues account for 75% of the state budget. It is therefore in the country’s interest to resolve the dispute as soon as possible.

Despite wisely investing in the development of a petroleum fund, East Timor cannot sustain itself on investment revenue alone, and is being forced to withdraw from the principal: at current rates the country will be bankrupt in a decade. Moreover, alongside international pressure from the UN, it is in Australia’s best interest to ensure East Timor’s stability. If East Timor becomes a failed state, Australia will undoubtedly face not only a refugee crisis, but potentially renewed Indonesian efforts to reacquire the island. Indeed, Australia led the UN intervention in the country in 1999: failing to act on the border issue, and letting East Timor fall would severely damage Australia’s international image and increase regional instability.

East Timor’s pending bankruptcy has led some Timorese to question the government’s reliance on oil and gas, arguing that the country needs to address basic needs and diversify the economy, rather than engage in more mega-projects. This is has been echoed by both the IMF and World Bank, with the later stating that “East Timor must employ its finite resources effectively and implement key reforms to support a more diversified economy […] a combination of marginal investment and high costs also raise important questions [about] the quality and prioritization of the infrastructure programme.”

Indeed the $2 billion price tag to get Greater Sunrise off the ground dwarfs the $1.39 billion 2017 state budget. The current government also wants to build a processing plant in the country in order to create jobs. Opponents of this plan argue that the costs of such a project would outweigh the benefits, especially since existing infrastructure exists in Darwin, or could be repurposed from the Bayu-Undan floating platforms. Opponents have also criticized the government for being out of touch with the needs of ordinary citizens, focusing instead on prestige projects such as joining ASEAN.

2017 elections complicate matters

East Timor’s Parliament – Red: FRENTILIN, Light Blue: CNRT

These criticisms come as the government touts its successes and engagement with Australia ahead of upcoming presidential and parliamentary elections in 2017. The problem for those who oppose the government’s trajectory is that both major parties – FRETILIN and the National Congress for Timorese Reconstruction (CNRT) – have been in an informal power sharing agreement since the 2012 election created a hung parliament, which has left the country without an effective opposition.

In 2016 a new party – the People’s Liberation Party (PLP) was founded by the popular former corruption commissioner Aderito Soares in order to fill this gap. The PLP is critical of the government’s development strategy and is seeking to make corruption and basic service provision key election issues.

East Timor’s current president, Taur Matan Ruak, joined the current government as an independent in 2012. As the election – slated for sometime between mid March and the end of July – gets closer, Ruak is expected to resign as president and run as the PLP’s prime ministerial candidate. Currently there is no declared CNRT presidential candidate, so it remains unclear whether the party will field its own candidate or support FRETILIN’s Francisco Guterres.

Soares and Ruak are a popular couple, and put the PLP in a good position. While support for the PLP is growing, it is unlikely to form government: capturing 20% of the vote is seen as a good result, especially for such as young party. The PLP is angling for third party status, a role currently occupied by the languishing Democratic Party. While not expected to form government, the PLP could benefit from a protest vote, and it would certainly not be the first populist upset in recent months.

Regardless of East Timor’s ultimate development focus, the main threat facing the government in 2017 is its ability to present a united front in, and thereby successfully concluding negotiations with Australia. Any fragmentation will present Australia with an opportunity to play on the FRETILIN government’s fears about anti-development / anti-oil critics to force more concessions out of Dili in return for a speedy resolution to the border dispute. It remains to be seen whether Greater Sunrise will see a rising East Timor or if the light of day lays bare the country’s divisions.

Under the Radar uncovers political risk events around the world overlooked by mainstream media. By detecting hidden risks, we keep you ahead of the pack and ready for new opportunities.

Under the Radar is written by Senior Analyst Jeremy Luedi.

The post Under the Radar: East Timor’s $40 billion oil conundrum appeared first on Global Risk Insights.

Last Wednesday, Mohamed “Farmajo” Mohamed, a former Prime Minister and a dual Somali-American citizen, was elected President of Somalia. Farmajo defeated former president Hassan Mohamud in the second round of the election with a final tally of 184 votes to 97 votes.

Last week, Somalia held presidential elections in a high-security compound in the capital of Mogadishu. There were 24 presidential candidates, ranging from the incumbent President Hassan Mohamud to the Minister of Education of Puntland Ali Haji Warsame. Since Somalia still has fledgling national institutions and an underdeveloped security apparatus, the populace cannot exercise its right to vote. Instead, Somalia’s 329 members of the upper and lower houses of parliament cast ballots for the president.

Before national elections took place on February 8^th, elections had been delayed four times with serious concerns over intimidation and fraud. Although Somalia has a homogeneous population, clan considerations have long dominated the political arena since the collapse of Siad Barre’s dictatorial regime in 1991. Under Barre’s regime, general clan sociopolitical networking — could have created more cohesive and stable governance — was suppressed in favor of more sclerotic nepotism. Without dynamic networking among the various clans for 22 years, Somalia’s government regressed and each clan vied for political supremacy. Even though a national constitution was adopted in the summer of 2012, the same problems tied to tribalism that became pervasive in the 1990s still persist today.

On the campaign trail, the new president Farmajo promised to revamp Somalia’s security forces and to eventually limit the country’s reliance on foreign troops from the African Union Mission in Somalia (AMISOM). The Somali federal government’s restricted scope of authority has been problematic when coupled with the presence of Al-Shabaab, the Islamist militant group operating in southern parts of Somalia. The principal aim of Al-Shabaab’s leadership has been the creation of a nationwide Islamic caliphate. Late last month, Al-Shabaab militants attacked a hotel in Mogadishu, leaving 28 persons dead. According to media reports, the hotel that was attacked is situated near the national parliament building; the attack itself consisted of an initial bombing and subsequent gun attacks.

What could complicate Somalia’s domestic security situation is the involvement of neighboring Ethiopia. In 2006, US-backed Ethiopian troops supported the Somali Transitional Federal Government (TFG), the predecessor of the Somali federal government over the Islamic Courts Union (ICU). Somalis have long been wary of Ethiopia’s direct involvement in Somalia’s security situation and Somali national politics with Ethiopia ostensibly able to create divisions among Somalia’s clans as an outside actor.

Last month, an Ethiopian think tank linked to the Ethiopian central government warned that a Darod presidency — the Darods are one of Somalia’s major clans — might lead to an even more precarious situation in Somalia. President Farmajo hails from the Darod clan while former former president Mohamud is from the Hawiye clan. Before elections this week, Mohamud had travelled to the Ethiopian capital of Addis Ababa five times in the last month alone. While the Ethiopian’s central government’s support of Mohamud was overt, Hailemariam Desalegn, the Prime Minister of Ethiopia, has vowed to work closely with Farmajo.

On top of concerns of tribalism and Somalia’s security situation, the Somali economy remains underdeveloped. Areas of the economy that might show promise with a better security situation are agriculture, fishing, and livestock. In order to bolster the Somali economy, the Somali national army (SNA) must be able to repel attacks from Al-Shabaab militants without assistance from AMISOM security personnel. Although the SNA boasts roughly 22,000 members, AMISOM has not regularly coordinated operations with SNA troops. Beyond acute concerns related to the security situation and the economy, a nationwide famine could exacerbate tension in the country. Last week, three United Nations agencies warned that six million people face a very real risk of famine in Somalia. In 2011, roughly 250,000 people died as a result of famine.

While it is unclear at what pace Farmajo plans to craft and implement his policies while in office, his administration in the Somali federal government will have to spearhead an agenda of political transparency, cautiously push for an independent standing army, and propel an economy that has not had a framework for development in decades.

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Less than two months before Iran elects its next president, the country faces a set of political and economic challenges. The outcome of the elections will have a significant impact at home and will set the tone for Iran’s international policy in the next four years. While President Rouhani’s re-election is a likely prospect, a victory for the country’s hard-liners cannot be ruled out.

May 19 is set to be a decisive date as Iranians head to the polls to elect their next president. The election will be closely watched by investors and the international community, and is likely to have deep repercussions at home and abroad. More than one year after the landmark signature of the Joint Comprehensive Plan of Action (JCPOA), also known as the nuclear deal, which opened the country to international investments, the May elections are widely seen as a test of Hassan Rouhani’s reformist agenda.

Rouhani is seeking re-election but his campaign faces challenges from Iran’s hardliners (or principlists) and senior clerics. Donald Trump’s criticism of the nuclear deal during the U.S presidential campaign has also cast a shadow over the future of U.S-Iranian relations and the nuclear agreement.

Iran faces a combination of political and economic risks

The relaxation of economic sanctions following the signature of the nuclear deal has opened up and provided a boost to the Iranian economy, resulting in more foreign investments and an increase in exports and oil revenues. In December, Rouhani’s government announced an ambitious new budget plan of $100billion in a bid to stimulate growth. The Iranian population has nonetheless seen little improvement in its living standards.

Unemployment rates went up in 2016 and job creation remains one of the key economic challenges for the months ahead. International investors are still cautious to launch and expand operations in the country as a result of wider regional instability and security concerns, lack of transparency and remaining U.S sanctions. The latest IMF report on Iran underlined the positive effect of the lifting of sanctions on economic growth while highlighting Iran’s structural problems. Growth was mainly driven by the oil sector in 2016 and has not reverberated through other business sectors.  

Domestic and international politics is another risk factor. Iran has stepped up its involvement in the Syrian conflict alongside Russia and Turkey. The country’s growing involvement in Syria and ongoing support for Shia militias in the region continues to fuel distrust among the international community regarding Iran’s intentions and reliability as a partner.

The election of Donald Trump in the U.S has opened a period of uncertainty for Iran’s nuclear deal and the future of U.S-Iranian relations. The American president’s tough approach to Iran could encourage investors to put their projects on hold in the upcoming months. Additionally, the tensions between reformists and hardliners, and the divergent views of Iran’s leadership about the future of the country could further complicate the picture and act as a deterrent for investors.

The prospects for Rouhani’s re-election

Since 1981, every Iranian president has secured a second term in power. Despite the diplomatic success of the nuclear deal, several factors could affect Rouhani’s ability to be re-elected. Rouhani has staked his re-election on the economic benefits brought by sanctions relief. As the lifting of sanctions fails to deliver the expected results for the people, Rouhani’s government faces growing criticism from the opposition. Earlier this month, Iran’s Supreme Leader Ali Khamenei criticised the government for its economic record, stating that “people should feel improvements regarding creation of jobs and manufacturing.”

During his first term in office, Rouhani relied on a diverse and fragile coalition of conservatives, reformists and moderates. The difficulties of keeping the coalition together have weakened his position in Iranian politics and could affect his ability to secure re-election.

The election of Donald Trump in the U.S has defied predictions and emboldened Iran’s hard-liners. The Islamic Revolutionary Guard Corps, particularly powerful under the Ahmadinejad presidency, is looking to regain the influence it has lost under Rouhani’s presidency. While no candidate has yet emerged among the hard-liners, it is clear that Rouhani will face strong opposition from the selected candidate.

Rouhani’s prospects are also affected by the battle between reformists and hard-liners for the succession of Ali Khamenei. Khamenei’s health has prompted speculations about potential successors and their visions for Iran’s international policy as the Revolutionary Guards and the country’s leading clerics attempt to secure the selection of an anti-reformist candidate.

The death of former Iranian president Akbar Hashemi Rafsanjani in January dealt a blow to the reformist camp. Rajsanjani was not only a staunch supporter of the nuclear deal and a key ally for Rouhani but also a member of the Assembly of Experts, the council tasked with choosing Khamenei’s successor.

The impact of the high-stakes election

In the context of heightened tensions between Iran and the American administration, the outcome of the elections is expected to have a deep impact on Iran’s prospects in the next four years. The results will set the tone for Iran’s relations with the West and will determine whether Iran will pursue its policy of economic liberalisation.

Rouhani’s re-election would increase the chances of maintaining the nuclear deal in place despite uncertainties on the stance the new U.S administration will adopt. A Rouhani victory would also send a signal to investors about Iran’s commitment to further opening its economy to foreign investments.

While polls suggest that the incumbent president is likely to be re-elected, the victory of a hard-line candidate cannot be ruled out entirely. This scenario would cast serious doubt over the future of the nuclear deal by adding to the risks of violations on both sides, while offsetting the path of economic liberalisation chosen by Rouhani since 2013.

The post Iranian elections highlight future challenges appeared first on Global Risk Insights.

The killing of Lipolelo Thabane, ex-wife of Prime Minister Thomas Thabane on June 14th highlights the country’s instability, coming only two days before the inauguration of Prime Minister Thabane. While it remains unclear who the perpetrators are, there are suspicions that the death was politically motivated. The divisive nature of Lesotho’s politics has seen PM Thabane amass a large collection of rivals, all of whom could have orchestrated the incident in order to send a message.

PM Thabane’s estranged wife filed for divorce in 2012, yet was awarded all the perks and privileges of the first lady in a court decision in 2015. This came about despite Thabane having remarried, with his new wife joining him on his return from exile in February as well as on the recent campaign trail. While PM Thabane’s opponents in the outgoing government and military may be behind the murder, Lipolelo Thabane may have also been killed by allies of the Prime Minister in order to tie up any loose ends. An additional theory is that the incident was a random murder, yet the victim and timing raises considerable suspicions. Whatever the reason, the event underlines the tensions in the country, and presents a jumping off point for an examination of the risks facing Lesotho.

Lesotho’s election see-saw

The recent June election constitutes the third in five years, as the seven party coalition of Prime Minister Pakalitha Mosisili lost a vote of confidence in March. Mosisili and Thabane are long standing political rivals. Mosisili ruled the country from 1998 until 2012, when he lost power to Thabane and his All Basotho Convention (ABC). In 2014, Thabane faced a failed coup and fled the country, leading to change of government in 2015 which returned Mosisili to power.

Despite defeating Mosisili in the most recent election, Thabane’s ABC only won 48 of the 80 directly contested seats. Consequently, Lesotho is in store for yet another coalition government as the ABC needs to secure enough partners to control 61 of the 120 total seats to attain a majority. The outgoing regime is not going to making things any easier. Concerns of influence peddling have arisen following the promotion of 32 officers only days before the election: an official memo was released the day after the vote. Critics of Mosisili claim that this was a political move to maintain influence after he leaves office. Mosisili’s detractors also point to the appointment of his son to the influential Lesotho Highlands Water Commission. Said organization is leading Lesotho’s 30 year plan to establish near total domestic electricity generation plus water and electricity exports to South Africa – both highly lucrative ventures: the $2 billion second phase is currently underway.

Former Prime Minister Phakalitha Mosisili

The killing of Lipolelo Thabane tarnishes the UN’s congratulations on a peaceful election sent to Lesotho on June 8th. Since the incident, neighbouring South Africa has called for calm in the country. Lesotho is fully surrounded by South Africa, and any instability in the small kingdom would effectively become an internal problem for South Africa as well, especially if a humanitarian exodus and / or conflict emerges. The fact that Lesotho is divided between the largely pro-Thabane capital and north and pro-Mosisili south adds another destabilizing dimension to the mix.

Consequently, South Africa has made it clear that it will not tolerate any threats to the transition of power and Lesotho’s stability. International relations and cooperation minister Maite Nkoana-Mashabane stated that “not in any corner of our [Southern African Development Community] not in any corner of our continent will we ever tolerate a military coup […] So on the coup thing, I think it is clear as [daylight] we will not allow it to happen, not in our backyard. That’s not a threat; it’s just the way it is.” South Africa’s deputy president, Cyril Ramaphosa is to attend Thabane’s inauguration on June 16th, accompanied by a substantial security detail, whose presence is in part to ensure that the event runs smoothly. Mosisili expressed his distrust of Ramaphosa in 2015, due to his ties with outgoing deputy prime minister Mothetjoa Metsing, highlighting the kinds of internal divisions within the former regime that saw the coalition fall apart.

The elephant in the room: Lesotho’s military

The failed 2014 coup underlines South Africa’s concerns about the role of the military in Lesotho. The Lesotho Defence Force maintains that the storming of buildings in the capital Maseru in 2014 was not a coup, but rather a pre-emptive strike against the police who the military claim were creating a rival armed faction. Thabane points to the threat on this life and his flight to South Africa as evidence to the contrary. In any case, either scenario hardly instills confidence. Moreover, the entire incident was triggered by the firing of Lt. Gen. Tlali Kamoli, whose replacement Maaparankoe Mahao was killed following Thabane’s flight to South Africa. A month prior to Mahao’s death, Thabane’s friend and ABC founder Thabiso Tsosane was also gunned down by unknown assailants.

The tense state of affairs is made painfully clear by Thabane’s refusal to accept a military security detail following his election as prime minister. It is standard procedure for the prime minister-elect to be appointed a military escort, yet Thabane has opted for his own private security detachment. This, combined with the fact that Thabane has not cancelled the long-term lease on his residence in South Africa, demonstrates his continued distrust of the military.

Prime Minister Thomas Thabane (left) and Mothetjoa Metsing (right)

Mothetjoa Metsing has done little to assuage these concerns. Speaking to supporters on election day, Metsing stated the following: “Let me tell you that is is because of the members of this country’s army who put their necks on the block that we ended up taking power, and if today Thabane attains power, it is clear that some of them would be in danger.”

In the light of such statements, it is unsurprising that Thabane remains uncomfortable being guarded by members of a military he maintains tried to kill him in 2014. Moreover, there are widespread rumours in Maseru that the military officers assigned to guard Thabane post-election were part of a group formerly protecting and working with Metsing, who has a long-standing rivalry with Thabane. The presence of armed soldiers at many polling stations on election also raised concerns about voter intimidation, especially since the Mosisili government had pledged to restrict the army to barracks on election day.

For his part, Thabane has floated the idea of altering Lesotho’s security framework, looking to countries such as Costa Rica which have transitioned to alternate defence arrangements. “When we win [the election], we will gradually look at examples in the world where there are armed people who are not a classical army so that jobs would be kept and nobody would suffer and new recruits will undergo a less classical military training,” notes Thabane in a recent interview. Such a dramatic policy change would certainly raise the hackles of Thabane’s detractors in the military as well as outgoing PM Mosisili. The degree to which such a proposal stems from Thabane’s personal history with the military or from loftier aspirations remains uncertain. Nevertheless, Lesotho’s successive coups since independence point to a concrete underlying problem.

As things stand, Thabane’s need for coalition partners limits his political capital and puts into question his reform plans for the military. 2017 has the potential to either begin a period of reform or simply mark another year of deadlocked politics: don’t cancel that lease just yet.

Under the Radar uncovers political risk events around the world overlooked by mainstream media. By detecting hidden risks, we keep you ahead of the pack and ready for new opportunities.

Under the Radar is written by Senior Analyst Jeremy Luedi.

The post Under the Radar: 2017 is a make or break moment for Lesotho appeared first on Global Risk Insights.

The Malaysian general election campaigning season has been shaken up by the return of Mahathir Mohamad, a former prime minister who intends to challenge the party he once led. His return may be a key factor in uniting the opposition and reviving allegations of corruption against the current prime minister.

Political parties are mobilizing in preparation for general elections which must be held by August 2018. The main coalitions are Barisan Nasional, which has won every election since it was founded in 1973, and Pakatan Haraban, which has been steadily gaining vote share over the past decade. The election is significant because of two factors: the return of Mahathir Mohamad, a former prime minister who has joined the opposition coalition, and the 1MDB scandal which continues to dog the current prime minister Najib Razak. Together these two factors may be able to lead the opposition to an unprecedented victory.

A twisted web

Mahathir was Malaysia’s longest serving prime minister, serving 22 years between 1981 and 2003. Even after his retirement he remained a vocal critic of his successors. Now at age 92 he has come out of retirement to join the opposition coalition alongside the former deputy prime minister he had previously jailed, Anwar Ibrahim, with the aim of defeating the party he once led.

Anwar, the founder of the opposition party, is currently in jail on charges of sodomy similar to, but separate from, those leveled against him by Mahathir. Yet despite their troubled past Anwar has embraced Mahathir’s return to the fray. The reason is that Mahathir could be a unifying figure for the fragmented opposition coalition and an opportunity to win over previously inaccessible rural constituencies. After all, the opposition coalition is currently without a leader, since Anwar can hardly govern from jail and would require a full royal pardon to take part in the upcoming election.

The opposition’s situation has been bolstered by Najib’s association with the 1MDB scandal. American investigators have linked money taken from 1MDB, a government owned development firm, to Najib’s own accounts as well as those of his friends and associates. Najib has dismissed these allegations as politically motivated, though it is not clear what the ulterior motive would be. In 2015 it was unclear if Najib would survive the scandal, but having managed to retain his position as Prime Minister he will now have to face voters.

Corruption and the economy

This election could be a defining moment for Malaysian politics which have been plagued with corruption scandals for decades including the Felda Global Ventures scandal (2017), the 1MDB scandal (2015), the National Feedlot scandal (2012) and the Port Klang Free Trade Zone scandal (2008). Strikingly, no one has been held accountable for the Port Klang scandal or for the 1MDB scandal.

The most recent scandals, however, are occurring at a time when corruption is the mot du jour – from Brazil to Pakistan populations are becoming increasingly frustrated with systemic cronyism, corruption and inequality. The ability for information to be shared and spread online means that groups, and youth in particular, can be mobilized to hold their leaders accountable. In the past strong economic growth, limited information sharing capacity, and a weaker press may have suppressed Malaysian voter concerns about corruption. Better information sharing capacity combined with the opposition’s attempt to weaponize corruption allegations may turn the tide against entrenched groups.

A survey conducted by Transparency International found that 59% of Malaysians felt that corruption had increased in the past year and 62% felt that the government was doing a poor job of fighting corruption. The upcoming election may reveal how these sentiments translate into votes.

A long time coming

The current ruling coalition, Barisan Nasional, has never lost an election since it was founded in 1973 and Malaysia’s top position features an unbroken line of prime ministers from the UMNO, the coalition’s main party.

Their continued control, however, is no longer so certain. Barisan Nasional has gradually lost vote share over the past several elections. In 2004 they won a solid 63.8% of the vote and 51.4% in 2008. In 2013 they won only 47.4% of the popular vote but maintained control of parliament which led to accusations of gerrymandering.

A victory for Pakatan Haraban would be a sign of disillusionment with the status quo among voters. Perceptions of economic well being and representation, not just corruption, will define voter outlooks. If the Malaysian economy weakens voters may turn to Pakatan Haraban. Reforming entrenched interests and cracking down on corruption will continue to be a challenge regardless of who wins the election.

The post Corruption allegations take center stage in Malaysian general election campaign appeared first on Global Risk Insights.

Despite the political and economical instability facing South America, the small nation of Paraguay is experiencing growth.

This upturn is due to a record soy harvest alongside a number of infrastructure projects supporting predictions of the country’s economy to grow by more than 4.2 percent this year.

The crops

The most important part of the Paraguayan economy is its agricultural sector that is the world’s fourth-largest soy exporter. The 2016/17 soy crop yield is estimated to be more than 10 million tonnes and expectant to be worth $3 billion. These figures are very important to an economy that lacks in mineral resources while the nation has recently been affected by weather conditions that have destroyed 430,000 hectares of high-protein wheat sown this year.

The Minister of Finance, Santiago Peña, affirmed “What’s interesting about this [soy] harvest is the impact that it has on the whole supply chain and on other sectors. When we add up commerce, transportation and the financial sector, it’s going to be a very strong year.”

Paraguay has enjoyed an agricultural boom with the production of grain from 2 million metric tons in 1991 to an expected 17 million tons a year. It has been a process supported by investment in its agricultural sector.

“We have managed to greatly increase agricultural production without occupying much more land. Production grew to over seven fold in the last twenty-six years, while the farmed area only doubled,” as stated by Hector Cristaldo, President of the Paraguayan Farmers Association.

The country is experiencing growth, as in May, economic activity grew nearly 5 percent year-on-year. A result prolonged by the support of greater investment into its infrastructure since the centre-right President, Horacio Cartes, won the election in April 2013. Paraguay in that same year joined the international bond markets but will not return to these markets this year since raising $500 million in debt.

Public dismay

Growing dismay amongst its agricultural communities has been reported by a proposed 15 percent export tax on corn, soy and wheat exports that have acted as a catalyst for mass protests. The Paraguayan government has argued that the agricultural sector contributes too little to the country when compared to other sectors.

Approximately, 2.6 million people live in rural zones and account for 30 percent of the population. While 2.6 percent of landowners, the small elite, hold 85.5 percent of Paraguay’s lands, of whom the state has been known to act in favour of. The government’s tax proposal would affect the incomes of farming populations, fearing they would become of the nation’s growing poverty epidemic while the proposal could pressurise the risks of pushing Paraguay’s agricultural boom into jeopardy. Alongside this, the government has vetoed a decision in August, after promising 2 days before that to subsidize small and medium farmers for the refinancing of agricultural debts, enraging farmers even further.

Link

Further rising tensions

With over 40 percent of its 6.8 million population living in poverty, Paraguay is still considered one of Latin America’s poorest countries. While growth is expected, the country is plagued with corruption and political unrest that threatens Paraguay’s fragile democracy.

Earlier this year between March and April, further protests were experienced when demonstrators set fire to Paraguay’s Congress building in response to President Horacio Cartes attempts to change a constitutional amendment that would enable Cartes to run for a re-election. The disruption ended with the Chamber of Deputies of Paraguay rejecting the constitutional amendment proposal. The strong public response against the government is a reflection of the nation’s murky past when it was under rulership by dictator Alfredo Stroessner between 1954-1989.

But despite the recent public outcry against the current President, results of next years April 2018 elections look like Paraguay will follow Latin America’s recent populist trend and continue with the conservative Colorado party. Paraguay’s Minister of Finance, Santiago Peña, will run for office as leader of the Colorado party that has ruled Paraguay for a combined 61 years, only losing recently in 2008 to the centre-left Christian Democratic Party led by the Fernando Lugo. The Colorado party is believed to win the next election as Peña has indicated he will have similar policies to Cartes.  

The effect

While the President’s attempt at altering the amendment to run for president has been negated, other proposals such as the tax on the agriculture sector brings unnecessary uncertainty amongst Paraguay’s already dismayed farming population. This will also present a risk towards disturbing the country’s booming agricultural sector.

With the upcoming Presidential elections, the President’s current party believes an election victory is within their reach, again. But while the party continues to implement controversial policies, they risks disturbing Paraguay’s population, which could ultimately end in a surprising election result and disrupt the much needed economic growth.

The post Paraguay’s agricultural sector: how much is at risk? appeared first on Global Risk Insights.

Côte d’Ivoire is a frontier market often overlooked by multinationals as a viable investment opportunity. Here are some brief reasons why investors with a risk appetite should start paying attention.

Growing political stability

Côte d’Ivoire is no stranger to violence and political instability. On December 24, 1999, the country suffered its first ever coup d’état at the hands of a military junta led by General Robert Guéï. In October of the following year, Guéï attempted to legitimize his rule by holding an election.

However, when it became clear he would lose, he disbanded the electoral commission and declared himself victor. This caused a violent uprising of his opponent’s supporters— Laurent Gbagbo —leading to the General’s ouster and Gbagbo ascension to the presidency.

Since this period, the country has experienced serious political violence in the form of two civil uprisings from 2002—2007 and 2010—2011. Perpetuating questions of presidential legitimacy and propagating political instability.

Perhaps unsurprisingly (or ironically) Gbagbo, like his predecessor, was also ousted after refusing to accept the results of the 2010 elections. Gbagbo’s electoral opponent, Alassane Ouattara, a trained economist, swept into power after winning the elections and ousting Gbagbo with French military assistance. In late 2011, Gbagbo was arrested and charged on four counts of crimes against humanity committed by forces under his direct command during the violence 2010—2011.

The tide seems to have shifted since Ouattara took office in 2010. He has presided over an average annual economic growth rate of 6.3 percent between 2010 and 2016, and over 9 percent since 2012. Another strong sign of stability was the 2015 national elections—Ouattara’s bid for reelection.

The country was able to avoid a repeat of the extreme levels of violence that followed their two previous presidential elections. It is clear that the economic explosion in Côte d’Ivoire, led to a resounding reelection win by Ouattara, who secured 83.7 percent of the officially tallied votes, and has played a role in tamping down violence in the country.

In 2017, Ouattara also faced political violence and mutinies from the military. However, through dialogue, the government was able to reach a compromise with the military ending the revolt within a week. These incidents indicate that the country has a long way to go to become a truly stable nation, however, they appear to be embarking on the right path.

Promising demography

Côte d’Ivoire has a population of approximately 23.7 million, 58 percent of which is under the age of 24. Why does that matter? It matters because large percentages of young adults—human capital—can portend sustainable economic growth and an expanding market.

As labor forces around the world decline, the Ivorian government can leverage its demographic profile to maximize its competitive advantage. However, to achieve this, the government needs to continue its investments in infrastructure, healthcare and particularly education.

Only 53 percent of the population under 24 is literate, however, Côte d’Ivoire’s 2016-2020 national development plan (NDP) provides a roadmap for the country to increase its educational resources, amongst other investments, and implementation is already underway.

According to the NDP, overall primary school enrollment has increased from 73 percent in 2008 to 98 percent in 2014 and accessibility to education continues to improve. Additionally, the strong economic growth the country has seen over the last seven years appears to be creating the right conditions for a less violent and more productive future, for the expanding population, and an attractive market for foreign investment.

Strong economic outlook

Côte d’Ivoire is a commodity driven economy—world’s largest producer of cocoa beans—and remains sensitive to changes in global commodity prices. However, increasing political stability under Ouattara’s leadership and expanding foreign investment has made the country the fastest growing economy in Africa.

The country remains on a path of strong economic growth even as the agricultural sector, 17 percent of the economy, continues to decline due to poor weather conditions.

Although weather is out of their control, the government has been deft at securing the necessary capital to fund their growth plans. In May 2016, at a donor meeting Côte d’Ivoire was able to secure $15 billion in financial pledges, twice the amount they originally sought from bilateral donors.

Additionally, a 2016 World Bank report indicates that Côte d’Ivoire is emerging as one of Africa’s top performing economies. The report points to the diversification of exports, stronger fiscal and monetary policies, effective public and private institutions, and a competitive business environment. There have even been discussions that by 2020, the country’s growth rate, low debt burden and increasing domestic consumption will elevate it to emerging market status.

Conclusion

Some multinationals are already taking notice. In May 2017, Heineken opened a new state-of-the-art brewery on the outskirts of the country’s capital, Abidjan, having invested €150 million in its construction. Burger King opened its first location in the country in late 2015 and western brands including Nike, Lacoste, MAC, among others have proliferated throughout the country.

Nonetheless, there remain issues that must be addressed including a dearth of reliable market data, high poverty rate—46 percent of the population, high levels of corruption, and limited infrastructure development. Even with these challenges, the Ouattara government appears willing to make the necessary changes and investments to strengthen the country through its commitments in the NDP.

Despite its recent history, Côte d’Ivoire is certainly emerging as a powerful economic player in West Africa and is worth paying attention to.

The post Côte d’Ivoire should no longer be overlooked in the market appeared first on Global Risk Insights.

President Daniel Ortega’s move to nominate his wife Rosario Murillo as vice-president has riled the opposition, as the government’s lip service to feminism covers an attempt to create an increasingly autocratic political dynasty.

With national elections scheduled for November 6th, President Daniel Ortega is aiming to secure his third consecutive term. A long-time figure in Nicaraguan politics, Ortega has been criticized, both domestically and internationally, for his dictatorial tendencies. For instance, concerns for Nicaraguan democracy were raised in 2014 when the constitution was amended, allowing Ortega to be re-elected indefinitely.

More recently, the Supreme Court ousted Eduardo Montealegre – leader of the opposition Independent Liberal Party (PLI) in June. Last Friday the court went further, unseating 16 PLI politicians who had refused to acknowledge Montealegre’s replacement. This has only further consolidated the hold of Ortega’s Sandinista National Liberation Front (FSLN) party (which holds more than two-thirds of the seats) in the national legislature.

Keeping it in the family

The latest affront to the opposition came yesterday, following Ortega’s announcement that he has chosen his wife, Rosario Murillo, as his vice-presidential candidate. Ortega’s opponents have pointed out that such a move violates the constitution – characterizing the decision as further evidence of his dynastic ambitions. While initial polling places Ortega with some 65% of the vote, his choice of vice-president has galvanized the opposition. Despite this, Ortega is likely to win the November election, a turn of events that would cast a negative forecast for Nicaragua’s democratic prospects.

The president stated the vice-president had to be a woman, citing Murillo the obvious choice. Conversely, opponents of the government, such as former opposition congressman Eliseo Nunez have called the move nepotistic and farcical: “to me it is an insult – not just to all Nicaraguans, but also to the entire Sandinista movement – because it says that in Nicaragua there are no Sandinistas or Sandinista women who can aspire to this role; only the Ortega-Murillo family.”

Murillo has been the driving force behind Ortega’s change of style, with paramilitary uniforms being replaced by civilian clothes, pink campaign posters, and less confrontational rhetoric. It is important to note that these changes are not merely cosmetic, as many Nicaraguans already surmise that Murillo is pulling the strings. Even before her nomination as vice-president she has been the official spokesperson of the government, with ministerial rank, as well as chair of all ministerial meetings.

Despite appeal to feminism, violence against women remains rampant

Murillo and Ortega have cobbled together an odd mixture of progressive socialism, with ultra-conservative Catholicism and Murillo’s various new age beliefs. Murillo has become the regime’s poster girl and cheerleader, one who is campaigning for Ortega with feminist slogans, touting empowerment and pointing to the high numbers of female officials.

It is true that Nicaragua ranks very highly in terms of gender parity in positions of power, yet local feminist organizations continue to feel unrepresented, as female politicians in the Ortega government are more loyal to the FSLN than any feminist agenda. Outside of the political elite, life for ordinary women in Nicaragua remains fraught with dangers.

Moreover, despite the government styling itself as pro-feminist, Nicaragua continues to be one of only six countries that forbids abortion under any circumstance. The country also has very high rates of underage pregnancies, the second highest rate of domestic abuse in Latin America, and many incidents of femicide (the killing of women because they are women and/or considered property). President Ortega himself is even accused of sexually abusing his step-daughter for years, yet has hidden behind presidential immunity and Nicaragua’s short statute of limitations for sexual violence.

These dismal facts exist alongside Nicaragua’s deteriorating economic freedom and ease of doing business, and HDI scores (ranked 108th, 119th, and 132nd in 2015 respectively). The one bright spot is Nicaragua’s comparative safety, as the country is not faced with the levels of gang violence of other Central American states. Furthermore, while openly anti-American, especially given the FSLN’s struggle against the Contras, Nicaragua has yet – unlike Venezuela – to become antagonistic towards American and other foreign firms. This is reflected by a GDP growth rate that has averaged 5% in the last five years, as well as foreign investment, notably a $50 billion Chinese canal building venture.

Despite this, Nicaragua is facing economic uncertainty and slowdown, as the commodity supercycle ends, Ortega’s ally Venezuela faces implosion, and inflation ticks up: reaching 4% in 2015, thus eroding the gains from a 4.9% GDP growth rate.

Don’t cry for me Nicaragua

Political dynasties are commonplace in Latin America, yet Ortega has justified his choice by invoking feminism, a new take on an old tactic. Ortega has ample inspiration of other power-couples at hand, be it from Juan and Eva Peron (herself a feminist campaigner), or more recently the dubious power plays of Nestor and Cristina Kirchner. Ironically, while Ortega’s nomination of his wife has led to accusations of dynasty building, Ortega himself came to power on the heels of the Nicaraguan revolution against the Somoza dynasty in 1979.

Another important influence is likely the current political situation in the United States. The 2016 U.S election also puts American political dynasties in the spotlight, as pro-Ortega observers in Nicaragua can point to the back and forth between the Bushes, and (if Hillary wins) Clintons over the last 25 years to counter allegations of a nascent Ortega-Murillo dynasty.

With Hillary Clinton (herself part of another political power couple) securing the Democratic nomination and promoting herself as a feminist, Ortega is likely taking notes.

As feminism continues to increase its profile in mainstream political discourse, Ortega can draw on the FSLN’s revolutionary Marxist-Leninist past (and its attendant calls to equal opportunity) to draw a link to modern feminist calls for equality, to re-legitimize the party in the post-Cold War era. By coating the party with a thin layer of ‘feminist’ rhetoric, Ortega can try to shake off his incumbent status and regain some revolutionary zeal by claiming to again stand at the frontier of the people’s struggle.

Furthermore, by adopting the veneer of feminism, Ortega and Murillo can claim a moral high ground and – to a certain degree – insulate themselves from Western criticism. Just as autocrats have draped themselves in the language of independence and human rights, so too can the language of feminism be co-opted in the war of words with the United States and others. In doing so Ortega forces the U.S to appear hypocritical when criticizing a regime which allegedly supports American ethical standards.

Under the Radar uncovers political risk events around the world overlooked by mainstream media. By detecting hidden risks, we keep you ahead of the pack and ready for new opportunities.

Under the Radar is written by GRI analyst Jeremy Luedi.

The post Under the Radar: Nicaragua is using feminism to undermine democracy appeared first on Global Risk Insights.

President Daniel Ortega’s move to nominate his wife Rosario Murillo as vice-president has riled the opposition, as the government’s lip service to feminism covers an attempt to create an increasingly autocratic political dynasty.

With national elections scheduled for November 6th, President Daniel Ortega is aiming to secure his third consecutive term. A long-time figure in Nicaraguan politics, Ortega has been criticized, both domestically and internationally, for his dictatorial tendencies. For instance, concerns for Nicaraguan democracy were raised in 2014 when the constitution was amended, allowing Ortega to be re-elected indefinitely.

More recently, the Supreme Court ousted Eduardo Montealegre – leader of the opposition Independent Liberal Party (PLI) in June. Last Friday the court went further, unseating 16 PLI politicians who had refused to acknowledge Montealegre’s replacement. This has only further consolidated the hold of Ortega’s Sandinista National Liberation Front (FSLN) party (which holds more than two-thirds of the seats) in the national legislature.

Keeping it in the family

The latest affront to the opposition came yesterday, following Ortega’s announcement that he has chosen his wife, Rosario Murillo, as his vice-presidential candidate. Ortega’s opponents have pointed out that such a move violates the constitution – characterizing the decision as further evidence of his dynastic ambitions. While initial polling places Ortega with some 65% of the vote, his choice of vice-president has galvanized the opposition. Despite this, Ortega is likely to win the November election, a turn of events that would cast a negative forecast for Nicaragua’s democratic prospects.

The president stated the vice-president had to be a woman, citing Murillo the obvious choice. Conversely, opponents of the government, such as former opposition congressman Eliseo Nunez have called the move nepotistic and farcical: “to me it is an insult – not just to all Nicaraguans, but also to the entire Sandinista movement – because it says that in Nicaragua there are no Sandinistas or Sandinista women who can aspire to this role; only the Ortega-Murillo family.”

Murillo has been the driving force behind Ortega’s change of style, with paramilitary uniforms being replaced by civilian clothes, pink campaign posters, and less confrontational rhetoric. It is important to note that these changes are not merely cosmetic, as many Nicaraguans already surmise that Murillo is pulling the strings. Even before her nomination as vice-president she has been the official spokesperson of the government, with ministerial rank, as well as chair of all ministerial meetings.

Despite appeal to feminism, violence against women remains rampant

Murillo and Ortega have cobbled together an odd mixture of progressive socialism, with ultra-conservative Catholicism and Murillo’s various new age beliefs. Murillo has become the regime’s poster girl and cheerleader, one who is campaigning for Ortega with feminist slogans, touting empowerment and pointing to the high numbers of female officials.

It is true that Nicaragua ranks very highly in terms of gender parity in positions of power, yet local feminist organizations continue to feel unrepresented, as female politicians in the Ortega government are more loyal to the FSLN than any feminist agenda. Outside of the political elite, life for ordinary women in Nicaragua remains fraught with dangers.

Moreover, despite the government styling itself as pro-feminist, Nicaragua continues to be one of only six countries that forbids abortion under any circumstance. The country also has very high rates of underage pregnancies, the second highest rate of domestic abuse in Latin America, and many incidents of femicide (the killing of women because they are women and/or considered property). President Ortega himself is even accused of sexually abusing his step-daughter for years, yet has hidden behind presidential immunity and Nicaragua’s short statute of limitations for sexual violence.

These dismal facts exist alongside Nicaragua’s deteriorating economic freedom and ease of doing business, and HDI scores (ranked 108th, 119th, and 132nd in 2015 respectively). The one bright spot is Nicaragua’s comparative safety, as the country is not faced with the levels of gang violence of other Central American states. Furthermore, while openly anti-American, especially given the FSLN’s struggle against the Contras, Nicaragua has yet – unlike Venezuela – to become antagonistic towards American and other foreign firms. This is reflected by a GDP growth rate that has averaged 5% in the last five years, as well as foreign investment, notably a $50 billion Chinese canal building venture.

Despite this, Nicaragua is facing economic uncertainty and slowdown, as the commodity supercycle ends, Ortega’s ally Venezuela faces implosion, and inflation ticks up: reaching 4% in 2015, thus eroding the gains from a 4.9% GDP growth rate.

Don’t cry for me Nicaragua

Political dynasties are commonplace in Latin America, yet Ortega has justified his choice by invoking feminism, a new take on an old tactic. Ortega has ample inspiration of other power-couples at hand, be it from Juan and Eva Peron (herself a feminist campaigner), or more recently the dubious power plays of Nestor and Cristina Kirchner. Ironically, while Ortega’s nomination of his wife has led to accusations of dynasty building, Ortega himself came to power on the heels of the Nicaraguan revolution against the Somoza dynasty in 1979.

Another important influence is likely the current political situation in the United States. The 2016 U.S election also puts American political dynasties in the spotlight, as pro-Ortega observers in Nicaragua can point to the back and forth between the Bushes, and (if Hillary wins) Clintons over the last 25 years to counter allegations of a nascent Ortega-Murillo dynasty.

With Hillary Clinton (herself part of another political power couple) securing the Democratic nomination and promoting herself as a feminist, Ortega is likely taking notes.

As feminism continues to increase its profile in mainstream political discourse, Ortega can draw on the FSLN’s revolutionary Marxist-Leninist past (and its attendant calls to equal opportunity) to draw a link to modern feminist calls for equality, to re-legitimize the party in the post-Cold War era. By coating the party with a thin layer of ‘feminist’ rhetoric, Ortega can try to shake off his incumbent status and regain some revolutionary zeal by claiming to again stand at the frontier of the people’s struggle.

Furthermore, by adopting the veneer of feminism, Ortega and Murillo can claim a moral high ground and – to a certain degree – insulate themselves from Western criticism. Just as autocrats have draped themselves in the language of independence and human rights, so too can the language of feminism be co-opted in the war of words with the United States and others. In doing so Ortega forces the U.S to appear hypocritical when criticizing a regime which allegedly supports American ethical standards.

Under the Radar uncovers political risk events around the world overlooked by mainstream media. By detecting hidden risks, we keep you ahead of the pack and ready for new opportunities.

Under the Radar is written by GRI analyst Jeremy Luedi.

The post Under the Radar: Nicaragua is using feminism to undermine democracy appeared first on Global Risk Insights.

All times are Eastern Standard

7:00pm: Polls close in Florida and begin to close in New Hampshire.

Florida is a critical win for Mr. Trump to maintain his narrow path to 270 electoral votes. Secretary Clinton will need high voter turnout in the greater Miami area, particularly among its Hispanic population. Early voting in the state is already running high, particularly among Hispanics, to Mrs. Clinton’s benefit.  Turnout will need to look promising in the 7:00 to 8:00pm hour as polls in Florida’s panhandle, a critical area for Mr. Trump, will close at 8:00pm.

Also pay attention to Florida’s Senate race.  Senator Marco Rubio is trying to fend off a strong challenge from Democrat Patrick Murphy.  While Senator Rubio is currently ahead in the polls, a close Florida Senate election or, certainly, a Murphy win would be an early, ominous sign for Republicans in their bit to retain control of the Senate.  This race will also provide an early look at whether Republican voters are willing to split their votes between a highly polarizing Donald Trump at the top of the ticket and a down-ballot slate of Republicans.

Many, but not all polling places in the state of New Hampshire will begin to close at 7pm and will provide an early indication of turnout strength for both Mr. Trump and Mrs. Clinton. It is unlikely the state will be called for either candidate until all polls are closed at 8pm. New Hampshire is also home to one of the key Senate races of the evening between Republican Senator Kelly Ayotte and challenger, Governor Maggie Hassan.  Should Governor Hassan pick up this seat, it will provide Democrats one of the four or five seats (depending upon the party of the Vice President) required for Democrats to gain control of the Senate. Like Florida, turnout for Senator Ayotte will also indicate Republicans’ willingness to split their votes between Mr. Trump and down-ballot Republican candidates.

7:30pm: Polls close in North Carolina and Ohio.

In North Carolina, Secretary Clinton will need to realize a strong turnout in the Charlotte area as well as the research triangle of Raleigh-Durham.  North Carolina will provide some insight into the turnout levels among millennials in Raleigh-Durham area, home to the University of North Carolina and Duke University, as well as African Americans who appear to be voting in lower numbers as indicated by early voting levels. Turnout of these two demographics, described as the Obama electorate, will be key to a Clinton victory, and low turnout indicators in North Carolina will be a significant concern for Democrats up and down the ballot. North Carolina may also provide insight into the validity of the claim of a hidden Trump vote who, while unwilling to publically proclaim support for him, will nevertheless materialize at the polls. If this claim holds water, it will be revealed in higher than expected Trump support among college-educated white voters.

Another possible Democratic pick-up in the Senate can be found in North Carolina. Here, Republican Senator Richard Burr is running slightly ahead of Democratic challenger Deborah Ross in the polls. This will be a key Senate seat for Republicans to retain early in the evening.  A Republican loss here would significantly reduce their likelihood of retaining Senate control given more competitive races to be decided later in the evening.

Ohio seems to be trending in Mr. Trump’s favor, and will prove a must-win for his election.  While both North Carolina and Ohio will prove essential for Mr. Trump, a loss in Ohio would likely signal an early end to the election evening. This state will also provide an indication of Mr. Trump’s ability to turnout base voters in what it called a Get-Out-The-Vote (GOTV) operation. Mr. Trump will have to run very high in driving his core support among middle class and working class white voters to the polls. A higher-than expected turnout in Ohio for this voting demographic would demonstrate a stronger than expected Trump GOTV operation and prove a good, early omen for the candidate moving forward.

8:00pm: Polls close in Pennsylvania, Michigan, New Hampshire, and Illinois.

Secretary Clinton currently leads in polls in both Pennsylvania and Michigan, however the high numbers of blue collar and working class white voters in each state make them competitive for Mr. Trump.

In Pennsylvania Mrs. Clinton will need strong turnout in the Philadelphia area.  Turnout here will provide perhaps the strongest indicator yet of whether African American turnout will be lower as indicated by early voting levels. Mrs. Clinton will also need to perform well in the “collar counties” surrounding Philadelphia. This area is home to a large percentage of college-educated, affluent whites and married, white women, two key swing demographics historically open to voting Republican.  If Mrs. Clinton sweeps this area, it will indicate that, despite his late outreach, Mr. Trump has been unable to attract educated whites and married women. For his part, Mr. Trump will need a strong turnout in central and western Pennsylvania, areas dominated by working class white voters.

Another key race in the bid for Senate control is found in Pennsylvania between Republican Senator Pat Toomey and Democratic challenger Katie McGinty.  This is currently a tossup race and will likely be decided by strength of turnout, whether in the Philadelphia metropolitan area for Democrats or in western Pennsylvania for Republicans.

Like Pennsylvania, Michigan is also trending for Mrs. Clinton. Both states have historically seemed like tight races in Presidential election cycles only to support the Democratic candidate. It is clear Mrs. Clinton is concerned about Michigan as she has recently deployed surrogates and critical resources to shoring up the state, part of Mrs. Clinton’s blue firewall. Mr. Trump must pick-off one state currently trending in Mrs. Clinton’s favor, and Michigan, with its high level of working class white voters seems like a possible contender. An outside win here for Mr. Trump would greatly improve his path to 270 electoral votes.

While not competitive in the Presidential race, the Senate race in Illinois between Republican Senator Mark Kirk and his challenger, Democratic Congresswoman Tammy Duckworth, seems like a guaranteed pick-up for the Democrats bid for the Senate.

9:00pm: Polls close in Arizona, Colorado, and Wisconsin.

As of mid-October, polls in both Arizona and Colorado were tight.  Since the FBI’s announcement that it had re-opened its investigation into the Clinton emails, Arizona, an historically Republican state, has trended strongly in Mr. Trump’s direction.  He must win this state to maintain a path to 270 electoral votes.

Colorado was trending in Mrs. Clinton’s favor, but polls have tightened considerably since the FBI announcement.  While this is not a must-win for the Secretary, like Colorado, this is a must-win for Mr. Trump.

While Wisconsin is not competitive at the Presidential level, the Senate race between Republican Senator Ron Johnson and his challenger, the former Democratic Senator Russ Feingold appears likely to flip to the Democrats. This, along with the Senate race in Illinois, should provide a second pick-up for Democrats in their bid to retake the Senate.

10:00pm: Polls close in Nevada, Iowa, and Utah.

Polls in Nevada and Iowa both currently show Mr. Trump leading Secretary Clinton by 3 points, barely within the margin of error. Both of these states are a must-win for Mr. Trump.  Of the two, Iowa is the more likely to vote in Trump’s favor.  In Nevada, Mr. Trump will need strong voter turnout in Reno as well as a lower than expected turnout among the state’s high Hispanic population.

Utah is a deep red state, but a strong challenge from Independent candidate Evan McMullin is giving Mr. Trump heartburn. In a normal election year, Utah would vote solidly for the Republican, but the state’s Republicans have not “come home” to the divisive Republican candidate choosing instead Mr. McMullin’s independent candidacy as a protest vote. Mr. McMullin’s Mormon faith is a strong draw to Utah’s population, however Mr. Trump’s poll numbers have improved here recently. He must win the state if he has any hope of winning the Presidency.

Nevada’s Senate race also provides Republicans their best hope for a pick-up. Election for the seat being vacated by retiring Senate Minority Leader Harry Reid is currently too close to call between Republican candidate Joe Heck and Democratic candidate Catherine Cortez Masto.  Should Republicans be able to flip this seat, it would significantly reduce the likelihood that the Democrats will gain control of the Senate, even with a possible swing vote from a Vice President Tim Kaine.

The post Election night: what to watch, hour by hour appeared first on Global Risk Insights.

Europe is full of loud stories, and yet beneath the noise there are first time democratic elections shifting the tide of East-West relations, like Moldova.

Moldova, between Ukraine and Romania, held its first democratic presidential elections on 30 October 2016. Many believe the election, aside from the obvious democratic symbolism, can be a key tipping point in Euro-Russian relations. As the close elections head towards a run-off on 13 November 2016, Igor Dodon holds the lead as a pro-Russian candidate of the Socialist Party, followed closely by pro-European candidate Maia Sandu.

Moldova is primarily an agricultural nation, and among the poorest in continental Europe. Moldova, along with Belarus and other Commonwealth of Independent States (CIS) nations, constantly face the challenge of straddling European Union (E.U.)-Russian relations, with some believing the E.U. holds the key to economic success, while others seek better relations with Russia. Dodon makes it clear that he is seeking increased relations with Russia as the key to stimulating their economy.

Primarily representing the poor rural areas of North and South Moldova, Dodon is quite different than his opponent Maia Sandu. Sandu pulls the majority of her support from the more urban Central Moldova, surrounding the capital of Chisinau. Furthermore, Dodon leads his campaign on a pro-Russian platform, and Sandu sets a pro-European tone aimed at further Western integration. “I believe in European values and that E.U. integration is the appropriate development,” said Sandu in a recent interview.

From these tones it is easy to deduce that there are two different paths for the tiny European country. Unlike Georgia and the Baltic States, Moldova has yet to completely buy into the European project, complicating the region for Europe, while also not accepting Russian assistance. Moldova is not the only Eastern European country to go through this crisis of identity.

Georgia and Ukraine, though troubled by Russian interference, have outwardly pursued The North Atlantic Treaty Organization (NATO) membership and continued inclusion in European agreements. However, each step taken towards European inclusion by these former Soviet States results in increased hostilities with Russia, a consistent consideration for the political economy.

The question of Moldova’s future, while likely different than Georgia’s, is not one of good and evil, but one of East and West. If Dodon rises to power, it may cause significant challenges for expansion of E.U. trade networks such as the E.U. Association Agreements. This existing agreement proliferating political and economic integration between Europe and its neighbors is already in place, Dodon may not be keen on expanding it, instead opting to limit it.

Dodon’s language indicates a focus on the economic welfare of Moldova, increasing his appeal to the large agricultural community. With the E.U. economically floundering to the West, Dodon will see the benefits to taking an Eastward turn toward Russia. His campaign, featuring outward support of Vladimir Putin, signals that the Eastward turn will, indeed, come to pass under his watch.

Though there is little fear, the Association Agreements could fall apart under Dodon, and his presidency could curtail future integration into the E.U. neighborhood. Those watching the East must observe closely how Europe deals with yet another Russian-leaning state on its borders. Without forceful economic diplomacy from Europe, a Dodon administration may signal slowing E.U. trade influence in the Black Sea region.

There is, of course, the chance that Sandu could take office. Her administration would almost certainly strike a different tone. Sandu is vocally pro-European and pro-European trade. She believes that Europe, instead of Russia, is the best future for Moldova. Whether or not she is correct, her presidency could present enormous opportunity for European traders.

With Sandu at the helm, those involved in European trade could see a future of opportunity. Though Moldova’s economy remains fragile, her desire for economic diplomacy could foster a win-win for both her country and Moldova, opening new opportunities for European influence in this oft-overlooked country.

As always, both East and West may view this election through the lens of the Euro-Russian tension. Openness of former Soviet states toward the West always carries the potential for Russian opposition, and the West should be mindful of this. If Europe oversteps its bounds under a Sandu presidency, it could see a higher degree of Russian influence in the region in compensation for a pro-European leader.

Furthermore, if Dodon wins it could signal another Eastern European country electing a leader that may diverge from Europe, following in the footsteps of Hungary and Poland. The Moldovan election is crucial, if not for its own sake, then for that of the entire Eastern European political economy. Those invested in the burgeoning free-trade economy will see opportunities shift either West or East in this election.

Therefore, as the complex economic future of Moldova unfolds in the runoff election, eyes must be on both a possible European confrontation, as well as the potential for a renewed connection to Russia itself. Regardless of who wins this close election, Moldova must continue to balance between its Eastern and Western neighbors.

The post The Moldovan election: A quiet country at an important crossroads appeared first on Global Risk Insights.

Despite unforgivable slips in the 2016 US presidential race, the polling industry must be strengthened, not discredited. It remains crucial in an era in which markets are hypersensitive to political outcomes.

By 11:00pm EST on November 8, 2016, after commercial breaks allowed the world to swallow the unexpected reality of a Donald Trump presidency, pundits pinned the blame on public opinion polls. Electoral experts firmly renounced major polls for miscalculating the electoral outcome by biblical proportions into the morning hours. Mr. Trump, who according to the superstar electoral statistician Nate Silver had a 28.6% of winning the election, ended up flipping the states of Michigan, Wisconsin, and Pennsylvania. He also took the key battleground states — Florida, Ohio, and North Carolina.

Mr. Silver is not the only expert who was wrong. Every major publication, think tank, and agency able to forecast the election predicted a Trump loss by margins making Silver’s forecast look optimistic for the Trump campaign. Gallup published an article on November 2 (less than a week before election day), stating that the Trump campaign’s ratings were the “worst in recent election years”, with a 29% national approval rate.

News broadcasting stations, however, were the furthest off the mark. The day before election day, all major cable stations had Clinton winning by a couple points: Fox, ABC, and CBS had Clinton up by 4 points; while NBC had Clinton ahead of Trump by 6 points. Polls funded by other publications and agencies also forecasted a Clinton win, albeit by a smaller margin: The Economist and YouGov had Clinton up by 4 points while Reuters and Bloomberg had her up by 3 points.

The following headlines from The Economist articles provide a glimpse into the level of disproportional forecasting going into Election Day:

• “Hillary Clinton has got this. Probably. Very probably.” Published Election Day five hours before the first votes were tallied.
• “The Economist Explains: How did the Polls Get it Wrong?” Published November 9, the day after Election Day.
• “Epic Fail.” Published November 10, two days after Election Day.

This sequence, which starts cautiously optimistic, then defensive, and finally accepting, is representative of the sentiment among the pundits. Going forward, experts should not jump to discredit the entire polling industry but rather allow academia to reassess the methodology for future national polls. A technical review of polling companies should address the following stress points.

Geography, demography, and electoral system

Concerning the research design, national polls usually have a sample size of 1,000 people. In a geographically massive and culturally heterogeneous country of 320 million people such as the United States, sample sizes may need to be significantly larger to cover more counties, including rural areas, to have a deeper footprint among the electorate.

Polls were somewhat accurate when analyzing the overall national popular vote, but highly inaccurate at the state and local level. A miscalculation at the state level can make a large difference under the Electoral College’s points system. The disproportionate tally mechanism of the Electoral College brings into question how polls can correctly predict a national election in a highly decentralized electoral system, especially with an untraditional candidate such as Donald Trump.

Political marginalization and the lure of the anti-establishment option

Mainstream polls may also want to revisit how to capture politically marginalized groups. One unifying characteristic among three unexpected electoral outcomes in 2016 — Brexit, the Colombian peace plebiscite, and the U.S. presidential elections — is the undocumented strength of a resentful anti-establishment silent majority. The polls may be missing this significant chunk of the electorate, which is composed of diverse demographic and income groups. The silent majority’s level of distrust with the establishment may have spilled over to independent institutions such as polling agencies, leading this important cohort to reject polling requests en masse.

In the three electoral cases presented, there was no stark contrast in the options available and voters were left to choose between a menu of suboptimal scenarios. In Brexit, Leave supporters were willing to sacrifice macroeconomic stability for bureaucratic sovereignty. In Colombia, No supporters sacrificed the demobilization of the most enduring guerrilla in the western hemisphere for the possibility of tougher sanctions. In the United States, Trump supporters turned down political and diplomatic experience for a systemic shock to the establishment.

These cases are not traditional or simple. Voters had to logically process a very rough menu of choices, which only increased popular dissatisfaction. Given the context of broad public distrust of government, polls may need to readjust their methodology to more effectively capture the pulse during untraditional electoral patterns.

Polls are adjusted to a dichotomous party-based political model, when perhaps, the establishment and party do not have the influence over voters they once had. Paul Ryan, Speaker of the House of Representatives, said “Trump pulled off an enormous political feat”, meaning that Trump won mainly with his persona and without the full backing of the party machine. The Republican Party remained fractured over Trump’s candidacy until the end.

Maybe this anti-establishment wave of electoral politics in established liberal democracies has not been grasped by big data. Pollsters are hanging on to an old party-based model in a context in which parties are mistrusted, as they represent a decaying governing elite.

Polls, democracy, and markets

The polling blunders of 2016 cannot be taken lightly. In the era of ultra-low interest rates and thin yields, the markets — particularly currencies — have become hypersensitive to political outcomes. The recent market politically induced volatility also transcends borders.

More than ever, electoral outcomes have a direct implication on global markets, even if the policies promised in campaigns are unfeasible in the short-term. The U.S. election, for example, has severely altered a large number of currencies, regardless of the country’s current account balance or general economic standing. The currency market’s reaction to Trump’s election is symptomatic of the deep economic interconnectedness of the global economy.

If political stakeholders have placed so much trust in polls, it is because they have worked successfully in the past. Yes, 2016 has been an unconventional year for democracy and therefore polls as well, but this is no excuse to discredit the industry as was done by pundits on Election Day. Rather, firms should reassess how polls are structured in unorthodox political contests and recalibrate the qualitative methodology to treat voters as complex social beings instead of robots.

The post Forecasting unconventional elections: What can be done? appeared first on Global Risk Insights.

East Timor and Australia have agreed to a new maritime border which would give East Timor control of a $40 billion oil field. But not everyone is happy.

With the host of maritime disputes in the Pacific, it is encouraging to see efforts at reconciliation and compromise, as Australia and East Timor have announced their intention to create a new maritime border agreement in 2017. In the wake of meetings in Singapore, which the Permanent Court of Arbitration Conciliation Commission described as “productive” where both parties “reaffirmed their commitment to work in good faith,” an agreement is likely to emerge in September 2017.

The area of contention concerns the maritime border between Australia and East Timor in the Timor Sea. After its independence from Indonesia in 2002 – an event which was facilitated by Australian support – East Timor created the Joint Petroleum Development Area with Canberra, which created a profit sharing scheme for oil and gas extraction in the Timor Sea. After independence, East Timor had no permanent maritime border with Australia, yet this very area housed significant oil and gas resources. This agreement was hastily signed by East Timor, as the nascent nation desperately needed income sources.

In 2006 Australia and East Timor signed a temporary border treaty, which saw a 50:50 revenue sharing scheme and also delayed final border arbitration for 50 years. In recent years, there has been growing discontent in East Timor over the terms of this treaty, which many Timorese see as an unfair agreement negotiated with a far stronger partner. Relations between the two countries hit a low point in 2013 after allegations emerged that Australia had bugged Timorese cabinet meetings during the 2006 negotiations.

East Timor’s Prime Minister Rui Maria de Araujo summed up the island nation’s feelings towards Australia in a 2015 interview, stating that “having [spying devices] as an advantage for you to negotiate something that is a matter of death and life for a small country, I think is  – at least morally – a crime [sic].” The fact that East Timor has managed to agree on 98 percent of its borders with Indonesia – its former oppressor and genocidal overlord – with the remaining two percent to be finalized in 2017-2018, before reaching a deal with Australia shows how broken bilateral relations with Canberra have been.

East Timor looking towards a new sunrise

At the heart of the longstanding dispute is the Greater Sunrise oil and gas field. Discovered by Woodside Petroleum in 1974, the field’s five trillion cubic feet of gas and 225.9 million barrels of oil (valued at $40 billion) has remained stuck in political limbo and untapped. Woodside owns 33.44% of the field, with Phillips-Conoco controlling 30%, Shell 26.56% and Osaka Gas 10%. This group has sought to finally develop the field, yet East Timor’s 2015 suit in the Hague scuppered those plans. Woodside is predicting a commodity price rally in 2019, and encouraged by improving bilateral ties, has called on Canberra and Dili to reach an agreement as soon as possible.

The core point of contention has been thus: Australia has argued its border extends along the continental shelf, whereas East Timor has called for the border to be halfway between the two countries, a move which would place the majority of the Greater Sunrise field within Timorese waters.

It is therefore encouraging that despite such animosity, both countries are making steady progress towards a permanent resolution in 2017. Having taken Australia to the Hague and invoking the United Nations Convention on the Law of the Sea (UNCLOS), both countries have decided to work together to enlarge East Timor’s maritime territory in order to give it more access to the region’s oil and gas resources. UNCLOS is a friend to small nations, yet has been challenged by countries like China, especially in the South China Sea.

Australia and East Timor’s commitment to working in good faith could offer an example for productive regional dispute resolution. Australia withdrew from the UNCLOS’ compulsory dispute settlement procedures in 2002, yet it has managed to cooperate with UN organs to work on a solution with East Timor. Australia’s reservations about UNCLOS are mirrored by China’s resistance to outside mediation. Furthermore, the power disparity between Australia and East Timor is just as stark as that between China and countries like the Philippines. Furthermore, both the Timor and South China seas are contested for their oil and gas wealth, involve gross power disparities among claimants and dominant powers skeptical of UN arbitration.

Why is progress happening now?

Recently, Australia agreed to East Timor’s demand to scrape the 2006 treaty. In return East Timor dropped its espionage case against Australia in January; allegations which were being used to validate its efforts to abolish the treaty. East Timor is facing significant pressure to resolve the maritime dispute, as the country is quickly running out of viable oil reserves. East Timor’s oil and gas income peaked in 2012, and has been declining ever since; its Kitan oil field stopped producing in 2014, and the country’s last remaining field – Bayu-Undan – is expected to cease production between 2020-2022. This is a very troubling scenario for East Timor as oil and gas revenues account for 75% of the state budget. It is therefore in the country’s interest to resolve the dispute as soon as possible.

Despite wisely investing in the development of a petroleum fund, East Timor cannot sustain itself on investment revenue alone, and is being forced to withdraw from the principal: at current rates the country will be bankrupt in a decade. Moreover, alongside international pressure from the UN, it is in Australia’s best interest to ensure East Timor’s stability. If East Timor becomes a failed state, Australia will undoubtedly face not only a refugee crisis, but potentially renewed Indonesian efforts to reacquire the island. Indeed, Australia led the UN intervention in the country in 1999: failing to act on the border issue, and letting East Timor fall would severely damage Australia’s international image and increase regional instability.

East Timor’s pending bankruptcy has led some Timorese to question the government’s reliance on oil and gas, arguing that the country needs to address basic needs and diversify the economy, rather than engage in more mega-projects. This is has been echoed by both the IMF and World Bank, with the later stating that “East Timor must employ its finite resources effectively and implement key reforms to support a more diversified economy […] a combination of marginal investment and high costs also raise important questions [about] the quality and prioritization of the infrastructure programme.”

Indeed the $2 billion price tag to get Greater Sunrise off the ground dwarfs the $1.39 billion 2017 state budget. The current government also wants to build a processing plant in the country in order to create jobs. Opponents of this plan argue that the costs of such a project would outweigh the benefits, especially since existing infrastructure exists in Darwin, or could be repurposed from the Bayu-Undan floating platforms. Opponents have also criticized the government for being out of touch with the needs of ordinary citizens, focusing instead on prestige projects such as joining ASEAN.

2017 elections complicate matters

East Timor’s Parliament – Red: FRENTILIN, Light Blue: CNRT

These criticisms come as the government touts its successes and engagement with Australia ahead of upcoming presidential and parliamentary elections in 2017. The problem for those who oppose the government’s trajectory is that both major parties – FRETILIN and the National Congress for Timorese Reconstruction (CNRT) – have been in an informal power sharing agreement since the 2012 election created a hung parliament, which has left the country without an effective opposition.

In 2016 a new party – the People’s Liberation Party (PLP) was founded by the popular former corruption commissioner Aderito Soares in order to fill this gap. The PLP is critical of the government’s development strategy and is seeking to make corruption and basic service provision key election issues.

East Timor’s current president, Taur Matan Ruak, joined the current government as an independent in 2012. As the election – slated for sometime between mid March and the end of July – gets closer, Ruak is expected to resign as president and run as the PLP’s prime ministerial candidate. Currently there is no declared CNRT presidential candidate, so it remains unclear whether the party will field its own candidate or support FRETILIN’s Francisco Guterres.

Soares and Ruak are a popular couple, and put the PLP in a good position. While support for the PLP is growing, it is unlikely to form government: capturing 20% of the vote is seen as a good result, especially for such as young party. The PLP is angling for third party status, a role currently occupied by the languishing Democratic Party. While not expected to form government, the PLP could benefit from a protest vote, and it would certainly not be the first populist upset in recent months.

Regardless of East Timor’s ultimate development focus, the main threat facing the government in 2017 is its ability to present a united front in, and thereby successfully concluding negotiations with Australia. Any fragmentation will present Australia with an opportunity to play on the FRETILIN government’s fears about anti-development / anti-oil critics to force more concessions out of Dili in return for a speedy resolution to the border dispute. It remains to be seen whether Greater Sunrise will see a rising East Timor or if the light of day lays bare the country’s divisions.

Under the Radar uncovers political risk events around the world overlooked by mainstream media. By detecting hidden risks, we keep you ahead of the pack and ready for new opportunities.

Under the Radar is written by Senior Analyst Jeremy Luedi.

The post Under the Radar: East Timor’s $40 billion oil conundrum appeared first on Global Risk Insights.

Last Wednesday, Mohamed “Farmajo” Mohamed, a former Prime Minister and a dual Somali-American citizen, was elected President of Somalia. Farmajo defeated former president Hassan Mohamud in the second round of the election with a final tally of 184 votes to 97 votes.

Last week, Somalia held presidential elections in a high-security compound in the capital of Mogadishu. There were 24 presidential candidates, ranging from the incumbent President Hassan Mohamud to the Minister of Education of Puntland Ali Haji Warsame. Since Somalia still has fledgling national institutions and an underdeveloped security apparatus, the populace cannot exercise its right to vote. Instead, Somalia’s 329 members of the upper and lower houses of parliament cast ballots for the president.

Before national elections took place on February 8^th, elections had been delayed four times with serious concerns over intimidation and fraud. Although Somalia has a homogeneous population, clan considerations have long dominated the political arena since the collapse of Siad Barre’s dictatorial regime in 1991. Under Barre’s regime, general clan sociopolitical networking — could have created more cohesive and stable governance — was suppressed in favor of more sclerotic nepotism. Without dynamic networking among the various clans for 22 years, Somalia’s government regressed and each clan vied for political supremacy. Even though a national constitution was adopted in the summer of 2012, the same problems tied to tribalism that became pervasive in the 1990s still persist today.

On the campaign trail, the new president Farmajo promised to revamp Somalia’s security forces and to eventually limit the country’s reliance on foreign troops from the African Union Mission in Somalia (AMISOM). The Somali federal government’s restricted scope of authority has been problematic when coupled with the presence of Al-Shabaab, the Islamist militant group operating in southern parts of Somalia. The principal aim of Al-Shabaab’s leadership has been the creation of a nationwide Islamic caliphate. Late last month, Al-Shabaab militants attacked a hotel in Mogadishu, leaving 28 persons dead. According to media reports, the hotel that was attacked is situated near the national parliament building; the attack itself consisted of an initial bombing and subsequent gun attacks.

What could complicate Somalia’s domestic security situation is the involvement of neighboring Ethiopia. In 2006, US-backed Ethiopian troops supported the Somali Transitional Federal Government (TFG), the predecessor of the Somali federal government over the Islamic Courts Union (ICU). Somalis have long been wary of Ethiopia’s direct involvement in Somalia’s security situation and Somali national politics with Ethiopia ostensibly able to create divisions among Somalia’s clans as an outside actor.

Last month, an Ethiopian think tank linked to the Ethiopian central government warned that a Darod presidency — the Darods are one of Somalia’s major clans — might lead to an even more precarious situation in Somalia. President Farmajo hails from the Darod clan while former former president Mohamud is from the Hawiye clan. Before elections this week, Mohamud had travelled to the Ethiopian capital of Addis Ababa five times in the last month alone. While the Ethiopian’s central government’s support of Mohamud was overt, Hailemariam Desalegn, the Prime Minister of Ethiopia, has vowed to work closely with Farmajo.

On top of concerns of tribalism and Somalia’s security situation, the Somali economy remains underdeveloped. Areas of the economy that might show promise with a better security situation are agriculture, fishing, and livestock. In order to bolster the Somali economy, the Somali national army (SNA) must be able to repel attacks from Al-Shabaab militants without assistance from AMISOM security personnel. Although the SNA boasts roughly 22,000 members, AMISOM has not regularly coordinated operations with SNA troops. Beyond acute concerns related to the security situation and the economy, a nationwide famine could exacerbate tension in the country. Last week, three United Nations agencies warned that six million people face a very real risk of famine in Somalia. In 2011, roughly 250,000 people died as a result of famine.

While it is unclear at what pace Farmajo plans to craft and implement his policies while in office, his administration in the Somali federal government will have to spearhead an agenda of political transparency, cautiously push for an independent standing army, and propel an economy that has not had a framework for development in decades.

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