1 February 2018 – How to Drive FDI into Developing Economies? MIGA’s Political Risk Insurance and Credit Enhancement Solutions are Essential
New York, 1 February 2018 – Ms. Keiko Honda, Executive Vice President and CEO, Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group provided a briefing for all representatives of the LDCs, LLDCs and SIDs on investment guarantees and how they are an essential instrument for driving investment into the SDGs.
The High Representative for the OHRLLS, Under Secretary-General, Ms. Fekitamoeloa ‘Utoikamanu welcomed a future partnership with MIGA, “It is my sincere hope that this is the beginning of a closer working relationship between MIGA and OHRLLS, as we seek to effectively support the 91 most vulnerable countries to attract Foreign Direct Investment flows and fully unlock its development potential.”
Ms. Honda explained that MIGA products were an essential instrument for private investment in developing countries, “MIGA’s guarantees help private sector projects access finance that would otherwise be unavailable to them or help countries to obtain access to financing at lower rates for large amounts and long tenors than governments typically are able to obtain on their own.”
She then outlined how MIGA supported projects have advanced the Sustainable Development Goals. MIGA projects have provided power to approximately 38.7 million people, created an estimated 90k jobs, and reduced GHGs by 3.2 million metric tons (Figure A below). As of FY17, the organization has issued US$19.5 billion in guarantees.
Figure A: Core areas of development impact, FY14-FY18Q2
1 Full-time and temporary
2 In the case of patients reached, in FY14 and FY16 there were no hospital projects
3 GHG emissions avoided is being calculated from FY17
Source: MIGA development impact estimates
Under the rubric of investment, the briefing highlighted case study examples of how MIGA guarantees work in Myanmar, Afghanistan, Senegal, Bangladesh and Zambia. In Afghanistan, for example, MIGA issued guarantees that covered 1.35 million Euro of projects to rebuild the country’s agricultural sector (Figure B).
Figure B: Example of a MIGA guarantee for Afghanistan’s agricultural sector
The briefing was followed by a very positive and informative exchange between Member States and the panelists. Governments expressed their interest in learning more about what drives private investors and foreign direct investment in their respective constituency groups (LDCs, LLDCs and SIDs). Ms. Honda stated that governments themselves can do a lot to move the needle on furthering FDI, “What we’re missing these days isn’t the money. What we’re missing is investable projects.” Governments can do things like set appropriate tariffs or provide support to projects to get them off the ground.
Another area that was emphasized was the idea of risk-sharing. Risk (actual and perceived risk) is one of the most crucial determinants for investors, so slicing the risk and sharing that risk is an important component to ensuring a project is attractive to the investment community.
The session closed with Ms. Honda emphasizing that the underlying philosophy of MIGA is that it works with countries to ensure development goals are realized. She provided an example of high-risk projects that the institution provides guarantees for that deliver high development impact. “We know that mobile phones and telecommunications infrastructure is one of the highest-risk sectors in conflict countries. Even though that risk is high, MIGA wants to continue working on these projects anyway because we know just how vital that infrastructure is in delivering development outcomes.”
MIGA: The Multilateral Investment Guarantee Agency (MIGA) is a member of the World Bank Group. Its 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 guarantees protect investments against-non-commercial risks and can help investors obtain access to funding sources with improved financial terms and conditions. Since its 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. For more information on MIGA: https://www.miga.org/
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