Mobilizing Investment with Big Impact
April 29, 2014—The private sector is widely recognized as playing a major role in many developing countries, especially in creating jobs. In recent years, private investment has significantly outpaced official development assistance. MIGA’s role as a provider of political risk insurance and credit enhancement facilitates the continued expansion of private investment flows into emerging markets to achieve the World Bank Group (WBG) goals of ending extreme poverty and boosting shared prosperity. MIGA’s Executive Vice President Keiko Honda discussed the Agency’s new strategy and more.
Q. How does MIGA’s new positioning feed into the context of the World Bank Group goals?
A. MIGA aspires to achieve beyond just the deal—we want to make significant development impacts that contribute strongly to the WBG twin goals. We do this more by collaborating with the WBG through the Country Partnership Framework (CPF) discussions and during consultations involving our focus countries, sectors, and projects.
Q. So how does MIGA fit into the CPF?
A. We have to be strategic and focused. By working closely with our colleagues on the CPF, we believe we can also have effective coordination with the Global Practices and Cross Cutting Solution Areas. We have been growing over the last few years and our added value stems from our ability to mobilize private sector investment in challenging environments that are often beyond the risk tolerance of commercial sources of capital. MIGA by itself can achieve positive impact on a project basis but by working closely with the WBG we can achieve developmental outcomes with huge impact, as we have seen in Côte d’Ivoire. Having said that, I want to note that to support the private sector MIGA itself must be financially sustainable—so we are always mindful of managing our own risks and ensuring our business solutions are geared to market demands.
Q. What are the new priorities?
A. Our focus areas continue to be IDA and fragile and conflict-affected states and complex projects that can be transformational. We will work in middle income countries where we can have an impact. For example, MIGA supported a financial project in Hungary that enabled the client to expand its investor base in the capital markets.
Q. How will MIGA work with the WBG to achieve results?
A. MIGA’s ability to instill confidence among investors is derived from its strength as a member of the WBG with access to knowledge, experience, and key decision-makers that other providers cannot match. Our collaboration with IFC, IBRD, and IDA reinforces the WBG’s ability to design a full spectrum of solutions that can lead to transformational development where it is most needed, and in a way that ensures environmental and social sustainability. The number of joint investments and development projects between MIGA and IFC has been growing. And recently, IBRD and MIGA signed an agreement to exchange their relative financial exposures in client countries. The first exchange involves Brazil and Panama. This will allow MIGA and IBRD to diversify their portfolios, while creating more room to increase the Bank Group's ability to do additional business in these countries.
Q. What’s in it for the countries and the people?
A. I can think of a number of examples where close collaboration has meant impact for the country. The WBG program in Côte d’Ivoire I mentioned is a clear illustration of how collaboration can have transformational impact in a country emerging from protracted conflict. The intra-Group cooperation has become more common in recent years. For example, MIGA guarantees in the power sector in Kenya supported the Thika Power Generating Company, where MIGA was complemented by an IDA Partial Risk Guarnatee and IFC involvement in a project that will help bring a reliable power supply to Kenyans. Ongoing work, most notably in countries such as Nigeria, Vietnam, Brazil, and Colombia, offers further examples where the combination of MIGA products with other WBG interventions has the potential to lead to higher overall impact for client countries.
Q. MIGA has been growing over the last few years. Do you see this continuing?
A. Yes. MIGA is planning to increase its issuance of new guarantees by nearly 50 percent from FY13 to FY17. We will continue to work with our colleagues in the World Bank Group and look forward to strengthened country engagement through the Country Partnership Framework process. We will also engage with other participants in the political risk insurance market, including public, private and multilateral investment and trade credit insurers. We feel our ability to deliver on our strategic objectives, and be a reliable partner for the private sector, remains strong.