Political risk entails more than a host country taking advantage of investment from foreign sources. A more subtle form of political risk is attributable to the host government's mismanagement of policies that may be intended to attract foreign direct investment, but may have unintended consequences. A perfect example is the ''One Million Tonne Sugar Program " sponsored by the government of Vietnam during the mid-1990s. What appears to be a very lucrative investment for foreign investors becomes a financial disaster due to the inability of the government to allocate resources efficiently and police its borders from smugglers.
Copyright © 2006 Institute of Finance Case Research. This article first appeared in Journal of Finance Case Research 8, no. 2 (2006): 9-20.
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Arnold, Tom, Bonnie Buchanan, and Janice Lo. "The Subtlety of Political Risk with Foreign Direct Investment: The Case of the Vietnamese Sugar Industry." Journal of Finance Case Research 8, no. 2 (2006): 9-20.