A Message from the Executive Vice President, Yukiko Omura
The past few years have seen their share of investment ups and downs, with traditional investors withdrawing from emerging markets for a number of reasons. Now, with economic recovery underway, companies are looking to re-engage in overseas investment. At the same time, a new group of investors is starting to make its mark, namely, investors from developing countries. But along with this burgeoning investment appetite comes a healthy dose of caution, particularly when it comes to political risk.
Many companies are placing a renewed focus on MIGA, thanks to our unique role as a multilateral risk mitigator. Over the years, MIGA has earned a solid reputation as a political risk insurer that is willing to enter markets the private sector shies away from. MIGA’s added value as a partner also lies in our ability to help increase the length of loans by reducing lenders’ concerns about the safety of investments, and provide unequaled country, sector, environmental, and social expertise. And the word is getting out about how our mediation services are saving clients from disputes before they become real claims situations, keeping projects on track and revenues flowing.
In addition, many of MIGA’s shareholders feel more comfortable having investors come in with our guarantees, given our mandate of ensuring local developmental impact and in maintaining environmental and social standards.
But we at MIGA are not content to rest on our reputation. In fact, we work hard to make sure our products and services adapt continually to market needs. To this end, over the past year we’ve been working to streamline our underwriting procedures, for example, reducing the time from application to contract signing by months for small and medium-size investors. For larger, more complex projects, we work closely with our clients throughout the due diligence process to the signing of the contract. We’ve also been making important progress on meeting new challenges in the marketplace, such as lender requirements related to pledge of shares issues.
MIGA is also innovating in the area of capital markets. Today’s marketplace is moving away from a focus on equity and looking more towards lenders as a key source of finance. At the same time, we’re seeing more and more lenders eyeing bonds issues as a way of generating funds, versus the traditional syndication of loans. This shift offers an important opportunity for MIGA. That’s because lenders are more often putting together bond issues to provide financing for projects in developing countries, where perceptions of risk tend to be high. Our political risk coverage can offset risk perceptions that may have put a cap on the rating of a bond issue, thereby making the issue more palatable to a broader pool of investors and lowering the cost of the issue. We see tremendous potential in this area, particularly in the finance-heavy infrastructure sector.
On the political risk insurance front, the private market today is exhibiting a greater risk appetite and eagerness to move into new regions, but, faced with the costs of rebuilding in the wake of Katrina and other issues, the market is still keen to have MIGA out in front.
This is our niche—working as part of the World Bank Group franchise to mitigate risk in the most difficult markets—and we are pleased to bring this unique strength to our clients around the world. Our challenge going forward is to keep communicating with our clients