MIGA has provided guarantees to MTU Asia Pte. Ltd. (MTU Asia) of Singapore of $540,000 and $1,860,000 to cover its $0.6 million equity investment in, and $1.8 million shareholder loan to, PT MTU Detroit Diesel Indonesia (MDDI), in Indonesia. The guarantees are for a period of up to five years against the risks of Expropriation and War and Civil Disturbance.
The project involves the establishment of a distributorship in Jakarta for the distribution, sale, and maintenance of MTU diesel engines and spare parts for use in construction, power generation, and other industries including the commercial marine sector. The project will meet an increasing demand for diesel engines and improve the levels of customer satisfaction by providing extensive after sales service. In addition, the supply of high-technology, high-performance, electronically controlled diesel engines will improve the quality and efficiency of facilities to which they are installed and improve the quality of life for Indonesian residential and business users by supplying well maintained engines that reduce environmental and noise pollution.
The project will employ about 50 local people and provide a special training program for qualified service technicians. The project is also expected to generate approximately $490,000 in tax revenues for the Government of Indonesia during the first 5 years of operation. The MDDI project meets two of MIGA's priority concerns: it is a South-South investment and provides support for SMEs. Furthermore, the ECICS Credit Insurance Ltd. of Singapore, with whom MIGA shares a Memorandum of Understanding (signed in November 1998), played an instrumental role in MIGA's involvement in the project.