MIGA Reports Strong Results in Fiscal 2001: Progress seen in priority areas

MIGA Reports Strong Results in Fiscal 2001: Progress seen in priority areas

Washington, DC, September 12, 2001 — Access to power, safe water, education, healthcare, roads—these are just some of the ways the Multilateral Investment Guarantee Agency helped the poor in developing countries over the last year, according to the agency's Annual Report 2001.

MIGA achieved these and other strong developmental results in fiscal 2001 by encouraging investors to venture into countries where non-commercial risks usually inhibit investment and by helping the countries improve their investment climates and know-how for attracting new business. The agency paid special attention to the world's poorest countries, especially in Africa, small and medium-size enterprises, investments between developing countries, and complex infrastructure projects.

"This has been an exceptionally rewarding year on multiple fronts, and I'm pleased to report that we have met or exceeded nearly all of the goals we set forth," said the agency's Executive Vice President,
Motomichi Ikawa.

Guarantees make their mark

Despite a recent downturn in foreign direct investment (FDI) into developing countries, prompted by a slowing global economy, MIGA issued a record $2 billion in guarantee coverage over the fiscal year, protecting projects in poor countries against the risks of transfer restriction, expropriation, breach of contract, and war and civil disturbance. Another $153 million was issued under the agency's coinsurance program.

"MIGA continued to lead the way in facilitating investment where it is needed most, and ensuring the developmental impact of these investments," said Ikawa, who emphasized that all projects are consistent with the World Bank Group's country assistance strategy and receive the approval of each host country.

The projects are expected to have a significant developmental impact, meeting social needs and creating opportunities in host countries through the generation of export and tax revenues, job creation, and technology transfer. At the individual level, people are benefiting in many ways. For example:

• Low-income residents of Rio de Janeiro, who face serious hazards from illegal power connections, are receiving safe, legal connections for the first time. The service is part of Light Serviços de Electricidade SA's ongoing program, guaranteed in part by MIGA, to upgrade the city's electricity transmission and distribution systems. For the 150,000 new low-income clients who benefited in 2000 alone, the program doesn't just provide safe, reliable power; it documents proof of residence, necessary for getting a phone and establishing credit.
• Access to treatment for impaired kidney function is an acute problem for residents of Bosnia-Herzegovina, where the region's prolonged civil war and uneven investment in health care have resulted in obsolete treatment centers. A recent infusion of foreign cash for the creation and management of a new renal dialysis facility in Banja Luka is helping to address the issue. MIGA is supporting the investment with two guarantees, totaling $1.3 million, to the International Dialysis Centers BV of the Netherlands.
• Another project is working to rehabilitate and partially privatize Mozambique's largest sugar estate, severely damaged during the country's prolonged civil war. The project is expected to create thousands of jobs and generate significant economic and social benefits (e.g., power, potable water) in one of the poorest, most highly indebted countries. MIGA is extending $65 million in investment insurance to a consortium of Mauritian companies and to the Industrial Development Corporation of South Africa.

Of the 46 projects covered in 28 developing countries, 18 are for small and medium-size enterprises, 18 are in the world's poorest countries (those eligible for aid from the International Development Association), eight are in Africa, and eight are cross-border investments between developing countries.

Projects in sub-Saharan Africa account for 12 percent of MIGA's outstanding gross portfolio and over 13 percent of the net portfolio, compared with the 2 percent share of overall FDI that flows into Africa as a whole. While the region accounts for the same share of the portfolio as last year, the number of projects is growing, reflecting an ongoing effort to cover smaller investments in the region. Today, Tanzania and Mozambique are among the top ten countries benefiting from MIGA's insurance.

Outstanding guarantees issued in IDA-eligible countries represent 30 and 24 percent of the net and gross portfolios, respectively. And MIGA issued 12 guarantee contracts to investors from Brazil, Israel, Mauritius, Panama, Singapore, South Africa, and Turkey for investments in other developing countries.

The fiscal 2001 projects are expected to facilitate about $5.2 billion in FDI flows, bringing the total facilitated by the agency since inception to around $41 billion. "MIGA is an important catalyst, increasingly promoting FDI into poorer countries where investors simply would not venture without MIGA's support," said Roger Pruneau, the agency's vice president for guarantees.

Other notable developments included first-time coverage of a capital markets deal in Brazil, of a performance bond and a water project in Ecuador, and for ventures in Jordan, Panama, and Togo.

Outreach grows

Fiscal 2001 was a banner year for cooperation with other investment insurers, with MIGA adding five new Cooperative Underwriting partners and teaming up with a host of national and private political risk insurers to add another $602 million in coverage for projects in developing countries. Seven new cooperation agreements were signed with official insurers and development finance institutions from China, Korea, Saudi Arabia, Germany, Finland, Austria, and Greece.

MIGA also extended its client outreach efforts through a new Europe-Africa office, complementing its representation in Tokyo, Bosnia-Herzegovina, Southern and Eastern Africa, and Switzerland. The new office is part of a move to increase FDI from Europe into developing countries, particularly in Africa and Eastern Europe.

Agency connects developing countries to potential investors

The fiscal year saw growing demand for MIGA's technical assistance, advisory services, and online investment promotion instruments-designed to meet the individual needs of investment promotion intermediaries in developing countries.

"Our hands-on technical assistance really emphasizes the transfer of best practice in FDI promotion, with a special focus on our priority areas," said Karin Millett, who heads MIGA's Investment Marketing Services Department.

In fiscal 2001, MIGA strengthened its delivery of field-based technical assistance, undertaking some 59 project activities in support of FDI promotion efforts worldwide. In many cases, these projects were multifaceted efforts incorporating strategy development, hands-on training, implementation of information technology tools, and other elements of service delivery. Nineteen of the 28 countries receiving long-term, in-depth technical assistance were eligible for IDA loans.

"The changing nature of investment flows and the rapid evolution of Internet technology have led us to be particularly innovative in the area of online investment promotion," said Millett.

MIGA's new Investment Promotion Toolkit and tools such as PrivatizationLink and IPAnet provide host country agencies with state-of-the-art instruments for getting the word out about investment opportunities and business operating conditions. PrivatizationLink Russia, a joint effort with the Russian government and other partners dedicated to publicizing privatizations in Russia, was another fiscal 2001 online offering. MIGA's web-based investor information resources are used by over 25,000 people, many from the developing world.

Progress reported in other areas too

Over the year, MIGA published a new, in-depth review of the agency's developmental impact and established an independent evaluation unit to more fully assess the impact of its activities. Meanwhile, the number of MIGA member countries increased to 154, as Thailand and the Central African Republic completed membership requirements.

MIGA paid its first claim at the end of fiscal 2000 and began receiving repayment of the claim by the host country in fiscal 2001. Work continued to prevent claims from arising and to mediate disputes with other investors and host countries, including Ethiopia, where MIGA is working with the government to resolve a number of long-standing claims.

"As MIGA prepares for a new fiscal year, I am confident that the innovations and improvements in fiscal 2001 will lead to better services for our clients," said Ikawa. "As a result, we will be able to facilitate more foreign direct investment, particularly in the priority areas, and play our part in contributing to economic development and poverty alleviation that is socially and environmentally sustainable."

For information:
Moina Varkie, mvarkie@worldbank.org, t. (202) 473-6170
Angela Gentile, agentile@worldbank.org, t. 202.473.3509