Mongolia responds quickly to bank’s insolvency

Mongolia responds quickly to bank’s insolvency

Монгол улсын тэргүүлэх банкны нэг дампуурсан нь тус улсын банкны системийн сул болон давуу талыг харуулахын хажуугаар компаний засаглалын дутагдалтайг илэрхийлж байгаа ч үүнийг зохицуулах дээд байгууллагууд түргэн арга хэмжээ авчээ.

Хадгаламж Банк төлбөрийн чадваргүй болсноо албан ёсоор мэдэгдсэний дараа энэ оны 7 дугаар сарын 22-нд Монгол Банкны банкуудын хяналтын хэлтсийн ажилтнууд Хадгаламж Банкийг улсын мэдэлд авснаа зарласан байна. Тус улсын тав дахь том банк байсан Хадгаламж Банкны нийт актив (ойролцоогоор 600 ам.доллар), 500 салбар, 300 гаруй ажилтан болон 1,7 сая хэрэглэгчдийн данс Монгол улсын Төв Банкны мэдэлд шилжсэн. Мөн тус банк 120 сая ам.долларын өртэй бөгөөд үүнд Хадгаламж Банкны экс эзэмшигч- Жаст Группийн Ерөнхийлөгч холбогдоод байгаа юм.

Нийт актив хөрөнгийн хэмжээгээр Монгол улсын банкны салбарын 8 хувийг Хадгаламж Банк эзлэх бөгөөд тэтгэвэр тэтгэмж тараах зэрэг төрийн санхүүгийн үйлчилгээний 55 орчим хувийг гүйцэтгэдэг байжээ. Хадгаламж Банкийг төрийн мэдэлд шилжүүлсэн энэ явдал 4 жилийн өмнө буюу 2009 онд Зоос Банк болон түүний өмнөх жил Анод Банкуудад болж байлаа.

7 дугаар сарын сүүлээр Fitch агентлагийн нийтэлсэн мэдээлэлд Хадгаламж Банкны уналт нь компаний засаглал болоод банкны салбарын хууль дүрмийн сул талыг тод томруунаар харуулж байна гээд цаашид бизнесийн салбарт сэтгэл түгшээж байна гэжээ. Түүнчлэн удаашралд ороод байгаа уул уурхай, барилгын салбарт банкны систем хэтэрхий найдвар тавьсан нь уналтанд ороход нөлөөлсөн гэжээ. Мөн сайтар хянах ёстой байсан хүчин зүйлийн нэг нь банкнуудын зээлийн чанарыг сулруулдаг төгрөгийн элэгдэл хорогдол буюу 6 дугаар сарын сүүлээр нийт зээлийн 30 хувийг гадаад валют эзэлж байжээ гэж Fitch сэтгүүл сануулжээ.

“Санхүүгийн тогтвортой байдлыг хадгалах үүднээс одоогийн учирсан нөхцөлд хязгаар тогтоох зайлшгүй хатуу чанга байдал хэрэгтэй гэж бодож байна.Учир нь Монгол Улсын тогтворгүй эдийн засаг огцом зээлийн уналтаас хохирч болзошгүй” гэжээ.

Хадгаламж Банкыг төрийн мэдэлд шилжүүлсэн даруйд Morgan Stanley-ийн High Yield Sovereign Researchийн мэдэгдснээр тус банканд аюул тулгараад байгаа зүйл бараг үгүй байсан бөгөөд хамгийн сүүлийн санхүүгийн үзүүлэлтээр шаардлага хангасанд тооцогдсон байна. Ийм хурдан төрийн мэдэлд шилжүүлсэн нь Монгол улсын банкны системд бүхэлд нь итгэх итгэлийг сулруулж байна гэжээ.

Магадгүй Хадгаламж Банк санхүүгийн бэршээлд орсон талаар тодорхой үзүүлэлтүүд байхгүй байсан ч энэ талаар өмнөх жил анхааруулж байсан байна. 4 дүгээр сард Moody-ийн Хөрөнгө Оруулагчдийн Үйлчилгээгээс Монгол улсын банкны системийн талаар таагүй дүгнэлт хийсэн бөгөөд өргөн хэрэглээний бараанд суурилсан хөөрөгдөлтөд хэтэрхий тулгуурласан эдийн засагтай байх үедзээлийн огцом өсөлт банкуудад эрсдэл авчирсан гэж үзжээ.

Түүнчлэн муугаар бодоход банкуудын хязгаарлагдмал хөрөнгийн эх үүсвэрийг зөвхөн алдагдал хүлээх муу нөөцөөр хангаж байсан. Ийм тохиолдолд “одоогийн зээлийн өндөр өсөлтийг хангахад банкны чадавхид хязгаарлагдмал хөрөнгө дарамт учруулна” гэжээ.

Хэрэв эдийн засаг муудаж эхэлбэл эсвэл энэ жилд болоод буй гадаад валюттай харьцах Монгол төгрөгийн ханш буурвал Монгол Банкны гадаад валютийн санхүүжилтийн өндөр үзүүлэлт тэднийг эрсдэлд оруулж болзошгүй гэж өнгөрсөн 10 дугаар сард Fitch анхааруулж байжээ.

Гэсэн ч Хадгаламж банкны уналт банкны салбарт итгэх итгэлгүй болгосон гэх боловч банкны удирдлага төрийн мэдэлд шилжсэн нь олон талын нааштай хэмээн дүгнээчид үзэж байна. Эдийн засагч Д.Жаргалсайхан энэ салбарын эрсдэлтэй байдлын талаар хэлэхдээ ашиг сонирхолын зөрчилдөөн болон компаний муу засаглалын улмаас эрсдэлтэй нөхцөл байдал үүссэн гэжээ.

“Монгол Банк одоо бүхнийг хяналтандаа аваад байна.Би бүх банкийг ийм гэж бодохгүй байна.Гэхдээ бид эндээс сургамж авах хэрэгтэй” гэж тэрээр 7 дугаар сарын 22 нд Блумбэргт өгсөн ярилцлагадаа хэлжээ.

Мөн Хадгаламж банкны уналтын дараахан Японы Хөрөнгө Оруулалтын банк Номура үүнд нааштай зүйл харагдаж байна гээд Монгол улсын банкны системийн нийт хөрөнгө нь ДНБ-ний ойролцоогоор 77%- тай тэнцэх тул төр ямар ч хувийн банк хүндрэлтэй байдалд орвол санхүүгийн бэрхшээлээс аврах хүчин чадалтай гэсэн байна. Түүнчлэн Хадгаламж банкинд дахин хөрөнгө оруулах сан “маш хийж болмоор зүйл” гэж Номурагийн зүгээс үзсэн байна.

Өргөн хэрэглээний барааны тэсрэлтийн удаашрал тэр дундаа Хятад улсын эдийн засгийн өсөлтийн хувь зогсонги байдалд орсон нь Монгол улсын банкуудад нөлөөлөх талтай. Гэсэн ч уул уурхайн томоохон гол гол төслүүд магадгүй энэ жилийн сүүлээр хэрэгжээд эхэлбэл мөнгөний урсгал бөглөрлөөс гарах боломжтой. .

Mongolia responds quickly to bank’s insolvency 

The collapse of a leading Mongolian bank has underscored both the weaknesses and strengths of the banking system, with an apparent failure of corporate governance prompting a swift reaction from regulatory authorities.

On July 22 officials from the banking supervision department of Mongolia’s central bank announced that Savings Bank (known locally as Khadgalamj Bank) had been taken over by the state after being formally declared insolvent. Formerly the country’s fifth-largest bank, Savings Bank has been placed under the State Bank of Mongolia, with all its assets (estimated at up to $600m), 500 branches, some 3000 staff and the accounts of its 1.7m clients being shifted to the public sector bank. Also acquired was the estimated $120m worth of debt held by the bank, most of which is linked to Savings Bank’s former owner, holding company the Just Group, with the central bank absorbing the red ink. 

Savings Bank accounts for around 8% of Mongolia’s banking sector in terms of assets and about 55% of government financial services, through the disbursement of pensions and receiving payments for state utilities. The move on Savings Bank was the first time in four years that the state had intervened in such a way, having rescued Zoos Bank JSC in 2009, and Anod Bank JSC the year before. 

At the end of July, ratings agency Fitch issued a report saying the collapse of Savings Bank highlighted weaknesses in corporate governance and regulation of the banking sector and raised concerns regarding the business environment. The report said the failure underscored the banking system’s reliance on the mining and construction sectors, both of which have slowed. Another factor that had to be monitored was any depreciation of the local currency, which could weaken banks’ loan quality, with up to 30% of all loans in foreign currency as of the end of June, Fitch warned. 

“We believe that much greater rigour is needed in implementing existing related-party/concentration limits to maintain financial stability, as Mongolia’s volatile economy could suffer from rapid credit deterioration,” the report said. 

Soon after Savings Bank’s takeover, Morgan Stanley’s High Yield Sovereign Research issued a note saying there had been little to indicate that a collapse was imminent and the most recent available financial metrics appeared satisfactory. The company said the speed of the closure could weaken confidence in the Mongolian banking sector as a whole. 

While there may not have been any immediate indications that Savings Bank was in trouble, there had been cautionary notes struck over the past year. In April, Moody’s Investors Service assigned a negative outlook to the Mongolian banking system, a measure it said reflected the challenges the banks faced during a period of rapid loan growth in an economy it described as being increasingly exposed to commodity-driven boom-bust cycles.

The report said the banks’ limited capital resources provided only a weak buffer to absorb losses in the case of a downside scenario. In such an event, “limited capital will put a strain on banks’ ability to maintain current high loan growth”, Moody’s said. 

Last October Fitch had warned that the high level of foreign currency funding by Mongolian banks had the potential to raise their risk profiles, potentially leaving them exposed if the economy weakened or the Mongolian tugrik lost value against overseas currencies, as has been the case this year. 

Though the collapse of Savings Bank has dented confidence in the banking sector, some analysts are taking a number of positives from the takeover, in particular regarding the swift response from banking authorities. Economist D. Jargalsaikhan downplayed suggestions the sector was in crisis, though he said the situation showed the risks involved when potential conflicts of interest and poor corporate governance arose. 

“The central bank now has things under control,” Jargalsaikhan told Bloomberg news agency on July 22. “I don’t think all the banks are like this but we should draw certain lessons.” 

Also seeing a positive was Japanese investment bank Nomura, which said in a report soon after the fall of Savings Bank that with the Mongolian banking system holding assets equivalent to around 77% of GDP, the state would have the capacity to bail out any private bank that fell into difficulty. Nomura said the funds needed to recapitalise Savings Bank would be “very manageable”. 

The slowing of the commodities boom, and in particular the easing in the Chinese economy’s growth rate, will likely affect Mongolia’s banks. However, there should be a rebound once some major mining developments come on-stream, probably in the latter half of this year, unblocking clogged revenue flows.

 

Multilateral Investment Guarantee Agency (MIGA) World Bank Group

Multilateral Investment Guarantee Agency (MIGA)

MIGA is a member of the World Bank Group. Our mission is to promote foreign direct investment (FDI) into developing countries to help support economic growth, reduce poverty, and improve people's lives.

 The Convention Establishing the Multilateral Investment Guarantee Agency (MIGA) was submitted to the Board of Governors of the International Bank for Reconstruction and Development on October 11, 1985, and went into effect on April 12, 1988. The Convention was amended by the Council of Governors of MIGA effective November 14, 2010.

 Overview - MIGA

MIGA is a member of the World Bank Group. MIGA’s mission is to promote foreign direct investment (FDI) into developing countries to help support economic growth, reduce poverty, and improve people's lives.

MIGA’s strategy

MIGA’s operational strategy plays to our foremost strength in the marketplace—attracting investors and private insurers into difficult operating environments. We focus on insuring investments in the areas where we can make the greatest difference

• Countries eligible for assistance from the International Development Association (the world’s poorest countries)
• Conflict-affected environments
• Complex deals in infrastructure and extractive industries, especially those involving project finance and environmental and social considerations
• South-South investments (from one developing country to another)

MIGA offers comparative advantages in all of these areas—from our unique package of products and ability to restore the business community's confidence, to our ongoing collaboration with the public and private insurance market to increase the amount of insurance available to investors.

Click here to read our strategy for fiscal years 2012-2014.

As a multilateral development agency, MIGA only supports investments that are developmentally sound and meet high social and environmental standards. MIGA applies a comprehensive set of social and environmental performance standards to all projects and offers extensive expertise in working with investors to ensure compliance to these standards.

MIGA’s products

We fulfill our mission by providing political risk insurance guarantees to private sector investors and lenders. MIGA’s guarantees protect investments against-non-commercial risks and can help investors obtain access to funding sources with improved financial terms and conditions. Our unique strength is derived from our standing as a member of the World Bank Group and our structure as an international organization with our shareholders including most countries of the world. Since our inception in 1988, MIGA has issued more than $28 billion in political risk insurance for projects in a wide variety of sectors, covering all regions of the world.

We also conduct research and share knowledge as part of our mandate to support foreign direct investment into emerging markets. This underscores our position as a thought leader and source of pertinent information for the political risk insurance community.

MIGA’s team

Our people have extensive experience in political risk insurance, with backgrounds including banking and capital markets, environmental and social sustainability, project finance and sector specialties, and international law and dispute settlement. Meet our senior management.

MIGA’s shareholders

A Council of Governors and a Board of Directors representing our member countries guide the programs and activities of MIGA. MIGA’s corporate powers are vested in the Council of Governors, which delegates most of its powers to a Board of Directors. Voting power is weighted according to the share of capital each director represents. The directors meet regularly at the World Bank Group headquarters in Washington, DC, where they review and decide on investment projects and oversee general management policies.

 History 

The idea for a multilateral political risk insurance provider was floated long before MIGA’s establishment—in fact as far back as 1948. But it was not until September 1985 that this idea started to become a reality. At that time the World Bank’s Board of Governors began the process of creating a new investment insurance affiliate by endorsing the MIGA convention that defined its core mission: "to enhance the flow to developing countries of capital and technology for productive purposes under conditions consistent with their developmental needs, policies and objectives, on the basis of fair and stable standards to the treatment of foreign investment."

On April 12, 1988 an international convention established MIGA as the newest member of the World Bank Group. The agency opened for business as a legally separate and financially independent entity. Membership was open to all IBRD members, and the agency began with capital stock of $1 billion. MIGA’s original 29 members were: Bahrain, Bangladesh, Barbados, Canada, Chile, Cyprus, Denmark, Ecuador, Egypt, Germany, Grenada, Indonesia, Jamaica, Japan, Jordan, Korea, Kuwait, Lesotho, Malawi, Netherlands, Nigeria, Pakistan, Samoa, Saudi Arabia, Senegal, Sweden, Switzerland, United Kingdom, and United States.

MIGA was created to complement public and private sources of investment insurance against non-commercial risks in developing countries. MIGA’s multilateral character and joint sponsorship by developed and developing countries were seen as significantly enhancing confidence among cross-border investors.

Today, MIGA’s mission is straightforward: To promote foreign direct investment into developing countries to support economic growth, reduce poverty and improve people’s lives.

 MIGA Member Countries (179)

MIGA insures cross-border investments made by investors in any MIGA member country into a developing member country.

Developing Countries (154)

ASIA AND THE PACIFIC: Afghanistan, Bangladesh, Cambodia, China, Fiji, India, Indonesia, Korea (Republic of), Lao People's Democratic Republic, Malaysia, Maldives, Micronesia (Federated States of), Mongolia, Nepal, Pakistan, Palau, Papua New Guinea, Philippines, Samoa, Singapore, Solomon Islands, Sri Lanka, Thailand, Timor Leste, Vanuatu, Vietnam

EUROPE AND CENTRAL ASIA: Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Bosnia-Herzegovina, Croatia, Cyprus, Estonia, Georgia, Hungary, Kazakhstan, Kosovo, Kyrgyz Republic, Latvia, Lithuania, Macedonia (FYR) of, Malta, Moldova, Montenegro, Poland, Romania, Russian Federation, Serbia, Slovak Republic, Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan

LATIN AMERICA AND THE CARIBBEAN: Antigua and Barbuda, Argentina, Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, St. Kitts & Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Trinidad & Tobago, Uruguay, Venezuela (República Bolivariana de)

MIDDLE EAST AND NORTH AFRICA: Algeria, Bahrain, Djibouti, Egypt (Arab Republic of), Iran (Islamic Republic of), Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Tunisia, United Arab Emirates, Yemen (Republic of)

SUB- SAHARAN AFRICA: Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo (Democratic Republic of), Congo (Republic of), Côte d'Ivoire, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia (The), Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mozambique, Namibia, Nigeria, Niger, Rwanda, São Tomé and Principe, Senegal, Sierra Leone, Seychelles, South Africa, South Sudan, Sudan, Swaziland, Tanzania, Togo, Uganda, Zambia, Zimbabwe

Industrialized Countries (25)

Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Slovenia, Spain, Sweden, Switzerland, United Kingdom, United States

Countries in the Process of Fulfilling Membership Requirements (1)
ASIA: Myanmar

Investment Guarantees 

Investors and lenders in today's dynamic investment climate understand the potential benefits of investing in emerging markets. They also understand the critical importance of addressing the political risks that may accompany an investment in such markets. MIGA can help investors and lenders deal with these risks by insuring eligible projects against losses relating to:

• Currency inconvertibility and transfer restriction
• Expropriation
• War, terrorism, and civil disturbance
• Breach of contract
• Non-honoring of financial obligations

MIGA offers coverage for five non-commercial risks. Coverages may be purchased individually or in combination.

• Currency inconvertibility and transfer restriction

 Protects against losses arising from an investor’s inability to legally convert local currency (capital, interest, principal, profits, royalties, and other remittances) into hard currency (Dollar, Euro or Yen) and/or to transfer hard currency outside the host country where such a situation results from a government action or failure to act. Currency depreciation is not covered.  In the event of a claim, MIGA pays compensation in the hard currency specified in the contract of guarantee.

• Expropriation

Protects against losses arising from certain government actions that may reduce or eliminate ownership of, control over, or rights to the insured investment. In addition to outright nationalization and confiscation, "creeping" expropriation—a series of acts that, over time, have an expropriatory effect—is also covered. Coverage is available on a limited basis for partial expropriation (e.g., confiscation of funds or tangible assets).

In case of total expropriation of equity investments, compensation to the insured party is based on the net book value of the insured investment. For expropriation of funds, MIGA pays the insured portion of the blocked funds. For loans and loan guaranties, MIGA can insure the outstanding principal and any accrued and unpaid interest. Compensation would be paid upon assignment of the investor's interest in the expropriated investment (e.g., equity shares or interest in a loan agreement) to MIGA.

• War, terrorism, and civil disturbance

Protects against loss from, damage to, or the destruction or disappearance of, tangible assets or total business interruption (the total inability to conduct operations essential to a project’s overall financial viability) caused by politically motivated acts of war or civil disturbance in the country, including revolution, insurrection, coups d'état, sabotage, and terrorism. For tangible asset losses, MIGA would pay the investor’s share of the lesser of the replacement cost and the cost of repair of the damaged or lost assets, or the book value of such assets if they are neither being replaced nor repaired. For total business interruption that results from a covered war and civil disturbance event, compensation would be based, in the case of equity investments, on the net book value of the insured investment or, in the case of loans, the insured portion of the principal and interest payment in default. This coverage encompasses not only violence in the host country directed against a host country government, but also against foreign governments or foreign investments, including the investor’s government or nationality.

Temporary business interruption may also be included upon a request from the investor and would cover a temporary but complete cessation of operations due to loss of assets or unreasonably hazardous conditions in the host country, which result in a temporary abandonment or denial of use. For short-term business interruption, MIGA would pay unavoidable continuing expenses and extraordinary expenses associated with the restart of operations and lost business income or, in the case of loans, missed payments.

• Breach of contract

Protects against losses arising from the government’s breach or repudiation of a contract with the investor (e.g., a concession or a power purchase agreement). Breach of contract coverage may be extended to the contractual obligations of state-owned enterprises in certain circumstances. In the event of an alleged breach or repudiation, the investor should invoke the dispute resolution mechanism (e.g., an arbitration) set out in the underlying contract. If, after a specified period of time, the investor has been unable to obtain an award due to the government’s interference with the dispute resolution mechanism (denial of recourse), or has obtained an award but the investor has not received payment under the award (non-payment of an award), MIGA would pay compensation. If certain conditions are met, MIGA may, at its discretion, make a provisional payment pending the outcome of the dispute and before compensation for non-payment of an award is paid.

For non-payment of an award, MIGA would pay the investor's interest in the award.  For denial of recourse, MIGA would pay the investor's interest in the amount which, according to MIGA’s claims determination, the host government would have to pay to the investor pursuant to the contract.  In either case, MIGA’s compensation would be capped by the amount of guarantee stated in the guarantee contract.

• Non-honoring of financial obligations

 Protects against losses resulting from a failure of a sovereign, sub-sovereign, or state-owned enterprise to make a payment when due under an unconditional financial payment obligation or guarantee related to an eligible investment. It does not require the investor to obtain an arbitral award. This coverage is applicable in situations when a financial payment obligation is unconditional and not subject to defenses. Compensation would be based on the insured outstanding principal and any accrued and unpaid interest.

MIGA provides political risk insurance (guarantees) for projects in a broad range of sectors in developing member countries, covering all regions of the world.

MIGA guarantees offer much more than just the assurance that losses will be recovered. Our insurance also benefits investors and lenders by:

• Deterring harmful actions - MIGA’s status as a member of the World Bank Group and its relationship with shareholder governments provides additional leverage in protecting investments.
• Resolving disputes - As an honest broker, MIGA intervenes at the first sign of trouble to resolve potential investment disputes before they reach claim status, helping to maintain investments and keep revenues flowing. If MIGA is unable to prevent a claim, our strong balance sheet allows us to make prompt payments.
• Accessing funding - Our guarantees can help investors obtain project finance from banks and equity partners.
• Lowering borrowing costs - MIGA-guaranteed loans may help reduce risk-capital ratings of projects.
• Increasing tenors - The agency can provide insurance coverage for up to 15 years (in some cases 20), which may increase the tenor of loans available to investors.Providing extensive country knowledge - MIGA applies decades of experience, global reach, and knowledge of developing countries to each transaction.
• Providing environmental and social expertise - MIGA helps investors and lenders ensure that projects comply with what are considered to be the world’s best social and environmental safeguards.

 Eligibility

MIGA insures cross-border investments made by investors in a MIGA member country into a developing member country. In certain cases, the agency may also insure an investment made by a national of the host country, provided the funds originate from outside that country. Corporations and financial institutions are eligible for coverage if they are either incorporated in, and have their principal place of business in, a member country or if they are majority-owned by nationals of member countries. A state-owned company is eligible if it operates on a commercial basis. An investment made by a non-profit organization may be eligible if it is carried out on a commercial basis.

MIGA insures new and existing investments. For an existing investment to be considered eligible, the project must meet certain criteria. For example, MIGA may insure existing investments where an eligible investor is seeking to insure a pool of existing and new investments, or where the investor demonstrates both the development benefits of, and a long-term commitment to, the existing project. Acquisitions, including the privatization of state-owned enterprises, may also be eligible. Investors seeking clarification on eligibility are encouraged to contact us.

The types of foreign investments that can be covered include equity, shareholder loans, shareholder loan guaranties, and non-shareholder loans. All loans and loan guaranties, including those issued by shareholders of the project, must have a minimum maturity of more than one year provided that MIGA determines the project represents a long-term commitment by the investors. Other forms of investment, such as technical assistance and management contracts, asset securitizations, capital market bond issues, leasing, services, and franchising and licensing agreements, may also be eligible for coverage.

In keeping with MIGA's objective of promoting economic growth and development, investment projects must be financially and economically viable and meet MIGA’s social and environmental performance standards.

Investors are encouraged to contact MIGA to discuss the type, amount, and duration of coverage that fits their needs. The business inquiries line is available by phone at +1.202.458.2538 or e-mail at migainquiry@worldbank.org.

 Dispute Resolution 

As a member of the World Bank Group, MIGA provides an umbrella of deterrence against government actions that could disrupt insured investments and helps resolve potential disputes to the satisfaction of all parties—both of which enhance investor confidence in the safety of investments and encourage the flow of foreign direct investment. In order to prevent a potential claims situation from escalating, we provide dispute resolution services to all of our clients. In order to mitigate against the risk of loss in the case of investment disputes, we require investors to notify MIGA as early as possible of difficulties with a host government that might give rise to a claim of loss under the guarantee. To date, MIGA has been able to resolve disputes that would have led to claims in all but two cases. We have paid four additional claims resulting from damage due to war and civil disturbance.

Helping clients keep projects going – A dispute may arise when an investor alleges that the government has breached its contractual obligations or expropriated its investment. Conversely, a dispute may be brought by a host government alleging that the investor has breached its contractual obligations. Both sides may disagree about who is at fault and about how the aggrieved party should be compensated. MIGA uses its "good offices" in these cases to examine areas of responsibility and potential liability, and to help the parties reach an agreement that would settle the dispute to the satisfaction of both sides.

If the parties are unable to settle their dispute and a claim for compensation is brought by an investor under a MIGA guarantee, we will review the facts of the dispute and make a formal determination. If MIGA finds for the insured investor, we will pay the compensation to which the investor is entitled under the guarantee. Under the terms of MIGA’s Convention, we are then permitted to seek reimbursement of such payments from the host government.

 Trust Funds

MIGA makes available special guarantee facilities and trust funds to encourage investment in areas of special need, working with partners to leverage the amount of coverage the agency can provide. Currently, MIGA offers support through two trust funds:

• The Environmental and Social Challenges Fund for Africa is a pilot facility to help foreign investors address environmental and social challenges in Africa. It was created with a $1 million grant from the government of Japan.
• The West Bank and Gaza Investment Guarantee Trust Fund (Arabic) aims to encourage investors to increase investment in the West Bank and Gaza. Increased investment in productive areas is expected to contribute to the economic development of the region. MIGA administers the trust fund on behalf of its current sponsors—the Palestinian Authority and the Government of Japan.

MIGA also managed the Afghanistan Investment Guarantee Facility. The facility, now closed, provided cover for a total of five projects, and for an overall guarantee amount of $11.7 million.
MIGA also managed the European Union Investment Guarantee Trust Fund for Bosnia and Herzegovina. This $12 million fund has been fully utilized.