IMPACT OF POLITICAL UNREST ON BUSINESS

Impact of Political Unrest in Egypt on Local and Global Business

[Name of College]

Impact of Political Unrest in Egypt on Local and Global Business

Introduction

The year of 2011 has been considered as the year of change of Middle East, as many countries witness major changes in political structure of Tunisia, Egypt and now Yemen and Lebanon. Countries of Middle East were among the major oil producers and have been the potential market for many international organizations and the business environment was considered quiet favorable for the local as well as international business. Political unrest refers to the state of chaos in a country with no uniform or steady rise in authority, for instance Tunisia, Yemen, Egypt and Lebanon are the countries who are presently facing political unrest. In this paper Egypt would be focused as Egypt was the country who in the past few years attracted investors from all over the world, which in turn helps in rapid growth and development of the country as well as the companies who had invested in the company. Due to present political situation which is completely unstable, investors who had invested in different sectors in Egypt are now concerned about the potential risk their business are having. The main purpose of this study is to analyze the impacts of political unrest in Egypt on the local as well international business. The study would also assess the impacts on worth of shareholders' value and wealth and what the potential risks are exist in Egypt for businesses.

Present Situation of Egypt

One can say that political risk is the possibility that future events and uncertainties, arising from the political situation or the adoption of certain policies by the State receiving the investment, modify the conditions under which a business has been established, and therefore change their outlook on earnings and future activities. The new conditions may be caused by:

Instability of the government or political system, caused by economic problems (poverty, unemployment and labor disputes, low per capita income, industrial or economic recession, high inflation, etc.) political (struggle between political factions or parties , armed subversion, violence or civil war, coup attempts, etc.).

Adoption of certain policies made by governments, which directly affect the operation of businesses, such as nationalization of sectors of the economy, property expropriation, limitation or substantial variation in the duty to remit or repatriate profits to foreign capital; revocation unilaterally by the State contracts with foreign companies, among others. Examples of this type of political risk are:

Governments historically emerged to protect property rights. The government is establishing a system of law and order to limit involuntary exchanges between individuals, and to enable economic accumulation. However, another problem arises here is factors which controls the government, if the government is not subject to limits, can itself confiscate the property of individuals.

After a short struggling period, Egyptian people have got success in obtaining the resignation of the President Hossani Mubarak, who was at that position since last 30 years. Contemporary political situation can ...