MIGA: Who We Are and What We Do
MULTILATERAL INVESTMENT GUARANTEE AGENCY
WORLD BANK GROUP
INSURING INVESTMENTS  ENSURING OPPORTUNITIES
The World Bank Group
1944
IBRD
International Bank for
Reconstruction and Development
1960
IDA
International Development Agency
1956
IFC
International Finance Corporation
1966
ICSID
International Center for the Settlement of
Investment Disputes
1988
MIGA
Multilateral Investment Guarantee Agency
Promote FDI with the use of guarantees and
technical assistance
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
3
World Bank Group Instruments
IFC A-Loan
IFC B-Loan
IFC C-Loan
IFC Guarantees (partial
credit structures usually for
local financing)
Interest Rate and Currency
Swaps
Political Risk Insurance
 expropriation
 transfer restriction
 breach of contract
 war & civil
disturbances
 NHSFO
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
Guarantees
 partial risk
 partial credit
IBRD Loan
IDA credits and grants
Tech. Assistance
4
About MIGA
MIGA was created in 1988 as a member
of the World Bank Group to promote private foreign
direct investment into developing countries
to support economic growth, reduce poverty, and
improve people’s lives
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
5
What We Do

Noncommercial risk insurance (guarantees) for investors and lenders

Investment dispute mediation

Technical assistance to help countries attract and retain FDI

Online information on investment opportunities and operating
conditions in developing countries (pri-center.com)
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
6
Our Strategic Priorities

Focusing on sustainable development

Opening up difficult or frontier markets, especially in conflict-affected
countries

Supporting investments in Africa and the world’s poorest countries

Supporting complex projects

Promoting cross-border investments between developing countries
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
7
Types of Investments Covered






Equity
Shareholder loans
Loan guarantees
Loans from financial institutions
Non-shareholder loans
Non-equity direct investment
…other forms of investment such as technical assistance and
management contracts, asset securitizations, capital market bond issues,
leasing, services, franchising and licensing agreements, may also be eligible
for coverage.
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
8
Eligibility Requirements
Eligible investments

Cross-border from one member country (developed or developing) into
another developing member country

Primarily “greenfield” investments

If an existing investment, must have high developmental impact
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
9
Terms of Coverage
Amount of coverage

MIGA can typically arrange cover for all amounts, either on its own books or
through co/reinsurance

No minimum amount for guarantee or size of investment

Amounts can include interest principal for debt and future retained earnings for
equity

Equity covered up to 90% and debt up to 99%
Tenor

Minimum 1 year, up to 20 years; investor decides on the duration of a guarantee

Investor can cancel the contract after the 3rd anniversary
Pricing

Premium rates are decided on a per project basis and vary by country, sector,
transaction and the type of risk insured

Premiums are paid annually or semi-annually and are calculated as a percentage
rate applied to the amount of coverage
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
10
Overview: MIGA’s Coverages

Inconvertibility and Transfer Restriction

Expropriation

War and Civil Disturbance

Breach of Contract

Non-Honoring of Sovereign Financial Obligations
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
11
Political Risks Covered by MIGA (I)
Inconvertibility and Transfer Restriction

Protects against losses arising from inability to


convert local currency into foreign exchange within the host country
transfer funds out of the host country

In case of convertibility restrictions, MIGA’s compensation is based on
official rate of exchange at the Date of Loss

Currency depreciation and devaluation not covered

Conversion and transfer have to be lawful in the Host Country at the time
when MIGA’s coverage is issued
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
12
Political Risks Covered by MIGA (II)
Expropriation

Protects against losses arising from:




Expropriation also if the Project Enterprise




Nationalization and confiscation
Creeping expropriation (a series of acts that are expropriatory taken in sum, e.g.
gradual changes in tax regime)
Expropriation of funds (e.g., “account freeze”)
is deprived of a substantial benefit
constituting a fundamental right (e.g., under a Project Agreement)
essential to its overall financial viability (normally this implies insolvency or
impending insolvency of the Project Enterprise)
Non-discriminatory regulatory measures not covered, unless such measures
have a confiscatory effect
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
13
Political Risks Covered by MIGA (III)
War and Civil Disturbance

Three forms of coverage



Loss of Assets
Temporary Loss of Income (for equity)
Permanent Loss of Use

Loss has to be a direct and immediate result of acts of war, revolution,
rebellion, insurrection, coup d’état, civil war, civil commotion, riots

Act of sabotage or terrorism can also be covered

Acts must pursue a broad political or ideological objective
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
14
War and Civil Disturbance (cont.)
Temporary Loss of Income (Equity Investments)

Short-term business interruption coverage not offered on a stand-alone
basis, but added to the WCD coverage upon request

Compensation based on

lost business income,

unavoidable continuing expenses and

extraordinary expenses to resume operations
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
15
Political Risks Covered by MIGA (IV)
Breach of Contract

Protects against loss arising from breach or repudiation of a project
agreement (e.g., in infrastructure and power projects)

Project agreement must be entered between the Host Government on the
one hand and Guarantee Holder and/or Project Enterprise (for Equity
investments only) on the other hand

MIGA covers “denial of justice” risks:



Failure to pay on a valid arbitral award or judgment by a state court rendered
against host government or
No recourse to judicial or arbitral forum by the investor or Project Enterprise
May cover obligations of sub-sovereigns and SOEs, subject to certain
restrictions
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
16
Breach of Contract (cont.)
Coverage of SOEs


New guidelines permit coverage of contracts with an SOE where:

It is controlled by the Host Government or its political subdivision

It performs a public service or fulfills a governmental function (like a utility) and

Either:
•
The Host Government, as a matter of law, is responsible for its financial liabilities or
•
It is creditworthy on a stand-alone basis
In some cases where the contract is with an SOE that does not meet these
criteria (e.g. Dakar Ports), MIGA has the option of covering a Host
Government guarantee in BoC
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
17
Political Risks Covered by MIGA (V)
Non-Honoring of Sovereign Financial Obligations

For unconditional financial payment obligations or guarantees of the Host
Government

Examples:




Host Government unconditionally guarantees repayment of loan by Project
Enterprise
Host Government assumes unconditional obligation to inject equity or other
funding on demand or at date certain
Not Eligible: Host Government issues performance guarantee relating to power
purchase agreement (guarantee not unconditional)
No arbitral award is required
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
18
Non-Honoring of Sovereign Financial Obligations
Eligibility Requirements

Sovereign Financial Obligation must be associated with:


an eligible investment project with measurable developmental impacts
Whose obligations are eligible?



Central governments (e.g., guarantee issued by MoF)
Sub-sovereign obligations (i.e., provincial or municipal governments) eligible on
a case-by-case basis
Guarantees issued by an SOE not eligible
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
19
MIGA’s Underwriting Process
1
Investor
 Marketing and origination
 Preliminary Application
 Definitive Application
 Early Screening Project Review Meeting
(“ESM”)-chaired by the Director of Operations Group
 Underwriting and host country approval
2
MIGA
(1–3 months)





Developmental impact
Environmental, Social review
Pricing and reinsurance
Economic financial viability, country risk
World Bank Group policy
•
•
•
•
•
•
•
Available online
Free, confidential
2 pages
Determines eligibility
More detailed analysis of a
project
Fees due ($5k up,
depending on the type of
project)
Starts underwriting
process
 Project Review Committee (“PRC”)-Track “A”
projects (complex/high risk)
 Final Approval Meeting (“FAM”)-Track “B” projects
(simpler/low risk)
3
Investor
and MIGA
 Sign contract of guarantee
 Monitoring, evaluation, contract maintenance
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
20
MIGA’s Claims Track Record



Over 600 projects with MIGA support, more than 90 cases treated as
possible claims, but in which no claim has been paid.
MIGA has successfully facilitated the settlement of disputes in all currency
transfer/inconvertibility issues and since inception has paid claims in 6 cases:

Afghanistan ($575 for war and civil disturbance in FY11) – (paid by MIGA Administered Trust
Fund)

Indonesia ($15 million for expropriation in FY00)

Nepal ($144,600 for war and civil disturbance in FY05)

Argentina ($558,311 for expropriation in FY05)

Kenya ($491,100 for war and civil disturbance in FY09)

Madagascar ($12,824 for war and civil disturbance in FY09)
All other cases have been resolved (before or after the claim was filed) or
the claim was withdrawn
Deterrence effect ensures that only a small number of projects that MIGA supports encounter problems
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
21
Why Investors Choose MIGA









Expertise in complex projects and in challenging environments
Credit enhancement
Longer tenors (up to 15-20 years)
World Bank Group “umbrella” of deterrence
Track record in dispute resolutions
Mobilization of reinsurance capacity
Best practices in environmental and social management
Prompt claims payment
Access to World Bank Group expertise and resources
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
22
ANNEX: Key Statistics about MIGA
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
23
MIGA’s 2011 Highlights
Gross exposure 1990 -2011 ($ billion)
9.1
Key Figures
•
7.3
projects for a total of $24.5 billion
7.7
during 1990-2011
6.5
5.2
5.3
5.3
5.1
5.2
Issued 1,030 guarantees for 651
5.4
5.1
•
Gross exposure: $9.1 billion in FY11
•
Issued $2.1 billion in FY11 in support
of 38 projects
•
$415.3 million for investments in
IDA-eligible countries (of which $228
million was in sub-Saharan Africa)
•
Four new host countries: Iraq,
Kosovo, Liberia, Republic of Congo
02
03
04
05
06
07
08
09
10
11
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
24
Gross Exposure in 2011
Guarantees Issued in FY11, by Region
(by number of projects)
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
Guarantees Issued in FY11, by Sector
(by $ volume)
25
Contact Information
Washington, D.C.:
Izumi Kobayashi
Executive Vice President
ikobayashi@worldbank.org
Michel Wormser
Vice President and Chief
Operating Officer
mwormser@worldbank.org
Edith P. Quintrell
Director, Operations
equintrell@worldbank.org
Ana-Mita Betancourt
Director and General Counsel,
Legal Affairs and Claims
abetancourt@worldbank.org
Ravi Vish
Director and Chief Economist,
Economics and Policy
rvish@worldbank.org
Lakshmi Shyam-Sunder
Director and Chief Financial
Officer, Finance and Risk
Management
lshyam-sunder@worldbank.org
Marcus S.D. Williams
Adviser, Strategy and Operations
mwilliams5@worldbank.org
Singapore:
Paris:
Kevin W. Lu
Regional Director, Asia-Pacific
klu@worldbank.org
Olivier Lambert
Manager, Europe
olambert@worldbank.org
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
26
www.miga.org
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP
27