AT A GLANCE: - The Multilateral Investment Guarantee Agency (MIGA) was created in 1988 as a member of the World Bank Group to promote foreign direct investment into emerging economies to support economic growth, reduce poverty, and improve people’s lives.
- MIGA encourages developmentally beneficial investment in markets that traditional investors and insurers shy away from. MIGA accomplishes this by insuring investments against political risks such as expropriation, breach of contract, and war and civil disturbance; resolving investment disputes related to the projects it guarantees; and helping developing countries attract and retain private investment.
- Since its inception, MIGA has provided more than $18.5 billion in guarantees (insurance) for some 600 investment projects in 96 developing countries. MIGA currently has an outstanding guarantees portfolio of $6.5 billion.
- Projects supported by MIGA create jobs, provide water, electricity, and other basic infrastructure, rebuild collapsed financial systems, generate tax revenues, transfer skills and technological know-how, and help countries tap natural resources in an environmentally sustainable way.
What we do Concerns about uncertain political environments and perceptions of political risk often inhibit investment. As a result, most foreign direct investment (FDI)—a key driver of economic growth—goes to just a handful of countries. MIGA’s guarantee program acts as a catalyst to open up markets to FDI and support projects with the strongest development impact. MIGA also helps developing countries define and implement strategies to promote investment, in addition to disseminating information on investment opportunities. The agency uses its legal services to resolve potential investment disputes between investors and host governments, to keep investments, and their benefits, on track. Why we do it The private sector is an important pillar of development. In addition to donor aid and public sector investment, the private sector can play a key role in reducing poverty. Investment needs today are greater than ever, and developing country governments are often not be able to shoulder the burden—financially or technically—of addressing these needs on their own. The private sector can help economies grow and avert the need for governments to use funds better spent on acute social needs, while taking advantage of the opportunity to make profitable investments. Investors are more optimistic about investing abroad than in recent years, but they recognize that noncommercial risks exist and that there is a need for effective risk management to maneuver the potential hazards that can come with overseas investment. As a member of the World Bank Group, MIGA provides a unique umbrella of deterrence against political risks related to government actions that may have a negative impact on projects. Our priorities and impact MIGA’s operational strategy plays to our market strengths—attracting investors and private insurers into underserved markets that carry a higher perception of risk. The agency’s strategy focuses on specific areas where we can make the greatest difference:
Infrastructure development is an important priority for MIGA, given the estimated need for $230 billion a year solely for new investment to deal with the rapidly growing urban centers and underserved rural populations in developing countries.
Frontier markets —high-risk and/or low-income countries and markets—represent both a challenge and an opportunity for the agency. These markets typically have the most need and stand to benefit the most from foreign investment, but are not well served by the private market.
Investment into conflict-affected countries is another operational priority for the agency. While these countries tend to attract considerable donor goodwill once conflict ends, aid flows eventually start to decline, making private investment critical for reconstruction and growth. With many investors wary of potential risks, political risk insurance becomes essential to moving investments forward.
South-South investments (investments between developing countries) are contributing a greater proportion of FDI flows. But the private insurance market in these countries is not always sufficiently developed and national export credit agencies often lack the ability and capacity to offer political risk insurance.
Today, projects in IDA-eligible countries account for more than half of MIGA’s outstanding portfolio. Africa—home to 30 percent of the world’s poor—accounted for 38 percent of projects supported by MIGA in the last fiscal year.
Projects supported by MIGA have widespread benefits: local jobs are created, tax revenue is generated, skills and technological know-how are transferred, and more. Local communities often receive significant secondary benefits through improved infrastructure, including roads, electricity, hospitals, schools, and clean water. FDI supported by MIGA encourages local investments and spurs the growth of local businesses that supply related goods and services. Many investors, lenders, and other insurers simply would not support projects in poorer countries without MIGA’s involvement. MIGA’s guarantee coverage requires investors to adhere to social and environmental standards that are considered to be the world’s best. Without World Bank Group involvement, projects can and do go ahead without adequate safeguards. Conclusion With nearly half of our planet’s citizens living in poverty, the need for sustainable investment is greater today than ever. Investors are optimistic about the prospects of investing abroad, but recognize the noncommercial risks that accompany the opportunity. With appropriate risk management, there are opportunities for investors to make profitable, productive investments that will benefit people in the developing world. As a member of the World Bank Group, MIGA is committed to acting as a catalyst to open up markets to FDI and support projects that have the strongest development impact possible.
Related links What is the investment guarantees program? Why does MIGA provide investment guarantees? How does MIGA help investors find out about opportunities? MIGA News and newsletters 2007 MIGA Annual Report The Small Investment Program MIGA in Conflict-Affected Countries (PDF) The Afghanistan Investment Guarantee Facility (PDF) - ### - Updated March 2008 Media Contact:
Angie Gentile, (202) 473-3509, Email: agentile@worldbank.org
Investor Contact:
Michael Durr, (202) 458-4798, Email: mdurr@worldbank.org |
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