Fiscal Year 1997: Guarantee Results
Washington, D.C., July 29, 1997 — The Multilateral Investment Guarantee Agency (MIGA) today announced the results of its guarantee activities for fiscal 1997 ending June 30. MIGA issued a record 70 guarantee contracts (US$614 million in new coverage) for projects in 25 developing member countries. The portfolio was broadened by writing coverage for investments in 11 new countries--Algeria, Azerbaijan, Bahrain, Colombia, Egypt, Georgia, Guatemala, Guinea, Paraguay, Romania, and Sri Lanka. Fiscal 1997 was a challenging year for the Agency as it sought to respond to the twin pressures of meeting continued heavy demand for its guarantee services and the need to optimize the use of its guarantee capacity.
MIGA country membership rose to 141 with the addition of six new countries during the fiscal 1997, further extending the potential scope of MIGA's guarantee activities. An additional 19 countries have signed the MIGA Convention and are in the process of fulfilling membership requirements.
Commenting on the results for the fiscal year, Leigh P. Hollywood, MIGA's Vice President, Guarantees, said:
"I am pleased that MIGA continues to maintain a well-diversified portfolio by country and sector. The fact that Brazil, currently the highest beneficiary of MIGA's investment guarantees, accounts for only 8 percent of the portfolio outstanding is a good indication of our success. Infrastructure is the fastest-growing sector in MIGA's portfolio, growing from only 1 percent in fiscal 1992 to 17 percent in fiscal 1997. Infrastructure-related investments now account for more than 35 percent of the total active applications in our pipeline."
Estimates of the development impact of MIGA's fiscal 1997 projects include the creation of about 4,000 jobs and facilitation of approximately US$4.7 billion in foreign direct investments in the developing countries in which they were located. The 293 guarantee contracts issued in MIGA's history have facilitated an estimated US$20 billion in foreign direct investment in 52 developing member countries and economies in transition, and have helped to generate approximately 40,000 new jobs in those countries.
Innovations in Guarantee Activities
MIGA intensified its efforts to use innovative risk transfer mechanisms and collaborate with other insurers. In April 1997, in an unprecedented development, MIGA signed a quota share treaty (or whole portfolio) reinsurance agreement with ACE Insurance Company, Ltd., of Bermuda, one of the world's largest reinsurers. This agreement is the first of its kind between a private insurer and a multilateral agency to provide long-term (up to 20 years) political risk insurance for investments in developing countries. It provides expanded capacity for MIGA's prospective clients without increasing the Agency's own retained liability.
MIGA also issued its first contract under the Cooperative Underwriting Program (CUP), a form of coinsurance designed to encourage private insurers to provide coverage of investments in developing countries where they otherwise might not assume the risk without the backing of a multilateral institution such as MIGA. The Agency signed a CUP agreement with Enron Corporation of the United States for a power project in Indonesia. Under this program, MIGA is the insurer-of-record, but retains only a portion of the risk for its own account; the remainder of the coverage is underwritten by a private insurer. The CUP program is expected to generate additional investment insurance capacity from private insurers in the future.
MIGA also established in fiscal 1997 two Investment Guarantee Trust Funds to facilitate foreign investment in Bosnia and Herzegovina and in the West Bank and Gaza, respectively. These Trust Funds will follow the parameters of MIGA's guarantee program and will provide long-term (up to 15 years) insurance for eligible small and medium-size investments. MIGA will issue investment guarantees on behalf of, and pay compensation from, the Trust Funds. The Bosnia and Herzegovina Fund is sponsored by a credit line of ECU10.5 million by the European Union, and the Trust Fund for the West Bank and Gaza is being financed by a contribution by the Palestinian Authority through a loan of US$10 million from the International Development Association.
MIGA also offers investment marketing services to host countries to help them promote their own private investment opportunities more effectively. In fiscal 1997, 95 countries benefited from the Agency's technical assistance services. Highlights included MIGA's fourth annual African Mining and Business Opportunities Conference, which attracted over 500 participants; a symposium on tourism and related infrastructure investment opportunities in the Andean Region; and a series of workshops executed in collaboration with the OECD, to train government and private sector officials from Eastern Europe and Central Asia in investment promotion techniques and strategies. MIGA also launched a new version of its Investment Promotion Network (IPAnet), an Internet-based electronic marketplace for investment promotion in emerging markets (www.ipanet.net). The new features include a streamlined user interface, enhanced search capabilities, and new data sources. It provides easy desktop access to investment databases, business news, targeted communications, market intelligence, and directories (hyper-linked to web sites of listed organizations). MIGA is collaborating with other international organizations, such as UNIDO, UNCTAD, and the G-77 Chambers of Commerce Network, to deliver information on investment opportunities and business partners in emerging markets. As of July 1997 firms and individuals in more than 150 countries are accessing and sharing information through IPAnet.