World Bank Agency to Support Foreign Direct Investment into Africa

World Bank Agency to Support Foreign Direct Investment into Africa

JOHANNESBURG, SOUTH AFRICA, March 25, 2002 — The Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, held a seminar today to launch its new regional office in Johannesburg. The event focused on the need for infrastructure investment in Southern Africa and for foreign direct investment (FDI) to support the Spatial Development Initiatives.

Speaking at the launch, the agency's Executive Vice President, Motomichi Ikawa, said FDI could break the cycle of low savings and productivity in Africa, transforming it into a cycle of reinvestment and expansion.

He emphasized the importance of foreign direct investment flows to meeting the challenges of Africa — a priority region for MIGA — and the need to promote FDI in parallel with reform efforts. MIGA-supported projects create local jobs, generate tax revenue and transfer skills and technological know-how, all of which play a key role in economic growth.

He said political risk coverage to private investors who are attracted by business opportunities but are concerned about political risks encourage FDI flows into developing countries. "Non-commercial risk insurance provides confidence to investors and not only helps them recover losses resulting from adverse government actions, but actually deters such actions."

The seminar today discussed the New Partnership for Africa's Development (NEPAD). At the core of progress with NEPAD's priorities is a need for adequate infrastructure, which is currently not in place.

"The resources needed for infrastructure expansion in developing countries are huge, and the public sector cannot do it alone. Private capital is needed to help meet the challenge," Ikawa said.

MIGA Chief Representative for Africa, Ken Kwaku, said: "MIGA looks forward to encouraging FDI in this sector and working with NEPAD in this regard. We will focus on transactions in support of privatization efforts and involving public-private partnerships."

Through its investment guarantees, MIGA offers protection against four types of noncommercial risk associated with FDI, namely currency inconvertibility and transfer restriction, expropriation, war and civil disturbance, and breach of contract.

Since its creation, MIGA has facilitated an estimated US$42 billion in foreign direct investment by covering investment projects in 79 countries and providing more than US$9 billion in guarantees

In 2001 MIGA's outstanding guarantees portfolio in Africa was composed of 35 percent in mining, 21 percent in manufacturing, 18 percent in agribusiness and 17 percent in infrastructure, with the remainder in tourism, finance and related industries.

"The new office is part of the agency's commitment to encourage more foreign investments into Africa and South-South investments within the region," Kwaku said. "FDI flows have become crucial for many African countries to be winners in the process of globalization.

"This new location will also enable us to forge closer partnerships with agencies that are eager to invest in Africa and make progress in our efforts to support economic growth in our fight against poverty."

For information:
In South Africa:
Ken Kwaku, Kwaku@worldbank.org, t. 011.341.9000
Martin van Niekerk, Junxion Communications, t. 012.342.0456
In Washington:
Angela Gentile, agentile@worldbank.org, t. 202.473.3509