MIGA Signs First Contract in Zambia: Promoting Investments Among Developing Countries

MIGA Signs First Contract in Zambia: Promoting Investments Among Developing Countries

Washington, D.C., June 9, 1999 — In its first contract for a project in Zambia, MIGA insured an investor from India for an investment in the privatization, modernization and expansion of a manufacturing facility in the city of Kitwe, in the Province of Copperbelt. The project reflects MIGA's continued efforts in supporting foreign investment flows among developing countries. Close collaboration with India's public insurer on this project also highlights MIGA's commitment to cooperating with other insurers in providing coverage for foreign investments in developing countries.

The project, Scaw Limited (SL), is one of the largest foundries in central Africa and the only producer of steel mill balls and castings in the country. MIGA issued US$1.8 million in coverage for a US$2 million equity investment by Beekay Engineering and Castings Limited (BECL) of India in SL. The investment is partly funded by the Export-Import Bank of India, whose participation was contingent upon MIGA's insurance of the project. The investment is covered against the risks of Transfer Restriction, Expropriation and War and Civil Disturbance.

The developmental impact of the project will be substantial. BECL will introduce a more efficient operation which is expected to lower prices, improve the quality of the products and provide a more reliable supply. SL plans to export 20 percent of its production to mines in the neighboring Democratic Republic of Congo, and to local industries including Zambia Railways, Zambia Sugar, and Chilinga Cement. The project will have an estimated positive net annual foreign exchange impact of US$24 million. The Zambian government hopes to benefit from significant cost savings, as SL had been losing money and needed upgrading of its assets. Production is expected to increase substantially and sales will double as BECL expects to make additional investments in the project. SL's personnel will undergo extensive on-site training, including hazard prevention and safety measure training.

Mr. Roger Pruneau, Vice President of MIGA Guarantees, expressed enthusiasm at MIGA's involvement in the project:

"The appeal of this project is that it promotes the flow of foreign investments between two emerging economies. I welcome Zambia as a recipient of its first MIGA-insured investment and look forward to closer partnership with India's national insurer on other projects in the future."

This is MIGA's fourth project in fiscal 1999 involving an investor from a developing country investing in another developing country. MIGA has issued more than US$200 million in coverage for investments by investors from Argentina, Brazil, India, Malaysia, Panama, South Africa, Turkey and Uruguay.