Spreading the Word on Investment in Conflict-Affected and Fragile Countries
MIGA Events in London, Johannesburg, Vienna, Washington, and Singapore Discuss FDI in Risky Markets, Take Investors’ Pulse
March 11, 2011—MIGA recently launched its second annual World Investment and Political Risk report by hosting roll-out events in investment hubs around the world. This year’s report looks at the role that political risk perceptions play in influencing investment into conflict-affected and fragile economies. The launch events were critical to building awareness of the importance of foreign direct investment for these destinations.
The report’s kick off in London was co-hosted by MIGA and the Financial Times. There, World Bank Managing Director Ngozi Okonjo-Iweala opened the event by asking the private sector to seek the opportunities amid the challenges of investing in conflict-affected and fragile countries. In later panel discussions, event participants concurred with the report’s finding that investors are primarily worried about adverse government intervention rather than overt political violence—even in conflict-affected and fragile economies. In particular, representatives from the investment and political risk insurance industries noted that most risk is centered on regulatory concerns, government interference, and transparency issues.
The mid-February launch event in Johannesburg underlined that sub-Saharan Africa is looking increasingly attractive as an investment destination. The Honorable Luisa Diogo, former Prime Minister of Mozambique, discussed her country’s remarkable success in moving from conflict to a dynamic market economy through careful attention to the quality of investment it attracted. Panelists noted that bank financing is available if investors choose their projects well and manage the associated risks.
By the time of the Vienna launch, revolutions and their reverberations in North Africa and the Middle East set the overall tone. This meant that, even though the event focused on Eastern Europe with some attention paid to frontier markets in Central Asia, political risk concerns were significantly heightened. In addition, event participants noted that in this region political risk insurance is seen as an effective tool to reduce risk-weighted assets on bank balance sheets. It can also help manage the uncertainties of new or difficult deal structures, for example, those that involve sub-sovereign (municipal) partners.
The Washington, DC launch event was co-hosted by the World Bank's Fragile and Conflict-Affected Countries Group and brought together World Bank colleagues, representatives from think tanks, the US government, and NGOs to share perspectives on the risks and rewards of investing in high-risk and fragile states. In particular, the event looked at the role of export credit agencies, multilaterals, and development banks in supporting investments into conflict-affected countries. World Bank colleagues’ insight from their work on the upcoming World Development Report, which focuses on these countries, was invaluable to the discussion. (See video)
The last launch event for World Investment and Political Risk was held in partnership with International Enterprise (IE) Singapore, an agency under Singapore’s Ministry of Trade. Overall, the event took a very positive tone with respect to cross-border investment opportunities and focused on how to take advantage of those opportunities, both inbound and outbound, from Asia. Participants at the Singapore event also called attention to recent events in the Middle East and North Africa, noting how these events illustrate the importance of partners, both international and domestic, in political risk assessment.