Pages

Monday, September 2, 2013

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.




No comments: