Tuesday, 20 January 2009

Country Risks - Bhutan


ONDD, The Belgian Export Credit Agency, insures risks related to international transactions and FDI. They cover risks for export of goods and services, imports and FDI in the short, medium and long term. The figure below is the snapshot of the risk that ONDD sees in Bhutan.



Risks are categorised as follows:

1. Political Risks for short term, medium/long term and for special transactions. Medium/Long term generally refers to a credit period of more than 2 years and associated with capital and industrial projects, contracting works and services while short term refers to credit associated with current trade transactions.

While Bhutan is seen to be not risky (3/7) in the short term, in the medium/long term, the political risk is construed to be considerable (6/7)

Special transactions are also long term contracting works and services where the returns are payable from the cash generated from the project. In this case Bhutan is seen to be fairly risky at 5/7

2. Commercial Risks reflect the ability of the debtor to meet his payments and the risk indicated for Bhutan is 'B' which is medium

3. War risk is also less at 3/7

4. The risk of appropriation by the government and government action hasn't been evaluated for Bhutan.

5. Bhutan has significant transfer risks (6/7). This means that companies are more likely to face difficulties in transfering returns outside the country. 

I couldn't find the Moody's Investor Service , Standard and Poor's and Fitch ratings for Bhutan.

Such risk assessment and ratings are used by investors and firms to make investment decisions into a foreign country. These also provide us and our government information on how Bhutan is perceived outside and can input into our policy decisions.


(I have used the wesbsite of ONDD as a primary resource for this write up)

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