The 1979 Islamic Revolution in Iran spawned a cottage industry for consultants — country risk analysis. By the nature of things, the banks and multi-national corporations who support this work are charged so much that the results are rarely seen by academic or government specialists. This gives the results both a certain mystique and notoriety. How good are these studies, anyway?
One leading consultancy, Frost & Sullivan, recently decided to make its product known; it sent out one half of its Middle East volume (containing analyses of seven countries) to reviewers. The result certainly makes for fascinating reading, for the risk analysts (in each case, three specialists) do not shy from bold predictions. Offering quite precise percentages, they forecast (over both 1 ½ and 5 year periods) the likelihood of turmoil and the risks involved in financial transfers, direct investment, and export markets.
But perhaps most interesting is the prediction of the "most likely regime." It would seem that, not wanting to appear hidebound, the analysts err in favor of too much volatility. In the 1 ½ years between late 1986 and early 1988, they rated Chadli Bendjedid of Algeria only a 70 percent chance of staying in power; Husni Mubarak of Egypt, 65 percent; the IRP of Iran, 80 percent; Saddam Husayn of Iraq, 70 percent; the National Unity government of Israel, 60 percent; the Sabah family of Kuwait, 70 percent; and Mu'ammar al-Qadhdhafi, just 50 percent. Statistically, Frost & Sullivan is saying there was a 19 out of 20 chance of change in regime in one of the seven countries. Yet, more than 1 ½ years later, all seven remained in power; which leads one to think that country risk analysts do not, after all, have much of a future.
