MIGA Approves new Facility for Conflict-Affected and Fragile Economies
MIGA Approves new Facility for Conflict-Affected and Fragile Economies
Move Underscores Agency’s Commitment to World Bank Group Priority
Washington, April 10, 2013 – The Multilateral Investment Guarantee Agency (MIGA), the political risk insurance arm of the World Bank Group, announced today the Agency’s Board of Directors approved the creation of the Conflict-Affected and Fragile Economies Facility. The Facility will further deepen MIGA’s support for investments into conflict-affected and fragile economies, while responsibly managing the Agency’s risk exposure.
“This new Facility will allow MIGA and our reinsurance partners to provide political risk insurance to projects in very difficult contexts that may not go forward without an effective risk-mitigation strategy,” said Ravi Vish, MIGA’s Director and Chief Economist, Economics and Sustainability. “Projects insured by the Facility will contribute to rebuilding efforts by bringing much-needed capital, employment, technology, and skills.”
The World Bank estimates that more than 1.5 billion people live in countries or territories experiencing conflict and fragility or in countries with high levels of criminal violence. The private sector, particularly through foreign direct investment (FDI), plays an important role in long-term reconstruction and stabilization efforts in these economies. Supporting investments into conflict-affected and fragile economies is a strategic priority for MIGA and its gross portfolio in this area has increased from $428 million in June 2010 to nearly $1.3 billion as of December 31, 2012. In the past year alone, MIGA has supported three investments in Côte d’Ivoire that brought in $2.5 billion in FDI.
“Historically we’ve issued guarantees for many small-scale investments in conflict-affected and fragile economies, and increasingly we’re also supporting large, transformative projects in the infrastructure and energy sectors,” said Michel Wormser, MIGA’s Vice President and Chief Operating Officer. “This new Facility will allow us, together with our partners, to further expand our operations in fragile and conflict-affected economies, creating jobs and economic opportunities in those countries.”
In supporting FDI and long-term lending, the Facility will deploy its resources for projects that have a positive development impact on the local economy and contribute to ending poverty and boosting shared prosperity. By supporting projects in labor-intensive industries, such as agribusiness and light manufacturing, the Facility will strive to promote direct job creation. Its support to infrastructure projects will underpin further private sector investment and also lead to direct and indirect employment generation.
The Facility will use donor partner contributions and guarantees as well as MIGA guarantees to provide an initial loss layer to insure investment projects in conflict-affected and fragile economies. MIGA is targeting an initial amount of $80 million from donor partners.
The Government of Canada has confirmed that it will provide funding in support of this innovative new initiative. “Revitalization of the private sector plays an important role in helping countries emerge from fragility and conflict,” said Julian Fantino, Canada’s Minister of International Cooperation. “The establishment of this facility will encourage private investors to share their expertise, innovation, and resources with fragile economies around the world and contribute to sustained economic growth that will help people move from poverty to prosperity.”
In addition to the CAD $20 million in funding from the Canadian International Development Agency, discussions are advanced with other potential donors. MIGA will also leverage the initial loss layer with significant private reinsurance by partnering with the reinsurers in the excess loss layer. MIGA anticipates providing aggregate risk mitigation of $400 million in conflict-affected and fragile economies through using the Facility during its initial years. The Facility’s impact is expected to be substantially in excess of this amount over its twenty-year life. The Agency plans to launch the Facility this year once additional donor partner commitments have been secured.
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MULTILATERAL INVESTMENT GUARANTEE AGENCY
A Member of the World Bank Group
1818 H Street, NW, Washington, DC 20433
MIGA Contact:
Mallory Saleson, MIGA
Tel: +1 202 473-0844
E-mail: msaleson@worldbank.org
Rebecca Post, MIGA
Tel: +1 202-473-1964
E-mail: rpost@worldbank.org
Cara Santos Pianesi
Tel: +1.202.458.2097
E-mail: csantospianesi@worldbank.org