Low-Income Countries & those Coming out of Conflict

MIGA Portfolio Increasingly Weighted to Low-Income Countries and those Coming out of Conflict

WASHINGTON, DC, September 30, 2004—Despite continued falls in levels of foreign direct investment in developing countries, MIGA issued $1.1 billion in guarantees in fiscal year 2004. These guarantees covered 35 new projects, slightly down from 37 in fiscal year 2003, reflecting the fact that investors and banks remaining risk-averse when it comes to developing country exposure.
Despite the difficult operating environment, MIGA’s portfolio continued to show a marked shift toward MIGA’s target areas—those which can have the highest development impact. One of these is supporting investments in the world’s poorest countries. In fiscal year 2004, projects in countries eligible for assistance from the World Bank Group’s International Development Association (IDA) represented 57 percent of the Agency’s new business.

And of MIGA’s 35 new projects last year, 16 of them provided guarantees for investments in conflict-affected countries, paving the way for investors in places such as Bosnia and Herzegovina and Serbia and Montenegro. These two Balkan countries now rank among the top ten countries that benefit from MIGA’s insurance.

“MIGA can be especially effective playing a role in supporting sound private investments in environments which would otherwise be considered by investors to be excessively risky,” says MIGA’s new Executive Vice President Yukiko Omura. “In such situations, MIGA can manage the risks better, particularly in relation to the private insurance sector, and hence be able to provide coverage where others cannot. This role is particularly relevant when FDI flows are declining or flat.”

Omura joined MIGA in May of 2004. Since then, the agency has undertaken a realignment of its business model with the explicit purpose of focusing on areas where the agency can add the most value.

In recent years, FDI into developing countries has been declining markedly, falling by more than 25 percent from an all-time high of $180 billion in 1999. More than 60 percent of these flows goes to just five countries. At the same time, developing country investment needs, especially in basic infrastructure, are growing. During FY04, MIGA demonstrated its added value in infrastructure transactions, particularly in water by insuring three new water projects last year—two in China and one in Russia. The sector remains challenging for investors because of concerns relating to exchange rate risk and low margins. MIGA’s ability to cover sub-sovereign risk helps encourage investment in this sub-sector.

Over the past year, MIGA also continued to increase its support for the small and medium enterprise (SME) sector by providing guarantees for 14 new projects benefiting SMEs, eight of them in IDA-eligible countries. Additionally, MIGA’s Board approved a joint guarantee facility in West Africa with the World Bank, the Agence Française de Développement, and Banque Ouest-Africaine de Développement (BOAD) that is supporting smaller infrastructure projects in the sub-region.

FY04 Highlights

2004 Annual Report 
For information 
Washington, DC:
Audrey Liounis,
aliounis@worldbank.org, t. 202-473-1485