World Bank's MIGA Opens Singapore Office, Launches Annual Report: New location to help bridge investment gap in Asia

World Bank's MIGA Opens Singapore Office, Launches Annual Report: New location to help bridge investment gap in Asia

SINGAPORE, September 17, 2002 — While foreign investment into Asia has once again reached pre-crisis levels, that recovery has been unbalanced. Some countries have recovered fully, while others continue to see a slump in foreign investment, leaving many business opportunities untapped.

The Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, was created to help in just such situations, encouraging flows of foreign direct investment (FDI) by mitigating perceived political risks that are causing investors to hesitate. The agency does this by providing political risk insurance to protect investments in developing countries against the risks of transfer restriction, expropriation, breach of contract, and war and civil disturbance.

"The fallout of the global economic slowdown and the events of September 11 are depressing foreign investment in some parts of the region. Even very strong deals in countries with a relatively developed legal and economic infrastructure are having problems closing," Motomichi Ikawa, MIGA's executive vice president, said Tuesday at a seminar to launch the agency's new Singapore Office. The event was co-hosted by International Enterprise Singapore.

Also present was Philippe Valahu, MIGA's chief of Asia operations, who will head the new office. He said: "MIGA can play a strong counter-cyclical role in environments such as this, encouraging lenders and insurers to venture into markets where they may not have otherwise felt comfortable. The agency's decision to open a regional office in Singapore is a further reflection of our strong commitment to facilitate investment into all countries of the region, especially those that are now missing out, as well as to support regional investors to extend their global reach elsewhere."

Panelists included Lee Yi Shyan, CEO of International Enterprise Singapore, Woo Chull Chung, Director, Office of Cofinancing Operations, the Asian Development Bank, and senior officials from the Ministry of Foreign Affairs and from Keppel Fels Pte. Ltd. The event focused on macro-economic trends and potential risks in the region, and ways MIGA and others can help investors feel more comfortable about taking their investments into markets they perceive to be risky.

"Recent events have shown that it is essential for Singapore players in the infrastructure services sector, with long term and heavy investments overseas, to have access to risk mitigation products and services," said IE Singapore. "The MIGA office in Singapore is significant as it enables our players to be more aware and more receptive of using mitigation tools such as political risk insurance when venturing overseas. MIGA's presence in Singapore also reinforces Singapore's status as a hub for regional risk management."

Over the past 12 years, MIGA has offered $1.2 billion in gross coverage for 69 projects in 11 Asian countries. These guarantees have facilitated about $8.5 billion in additional FDI. The region currently accounts for 10 percent of MIGA's outstanding portfolio. Projects encompass a range of sectors, with the portfolio concentrated on infrastructure projects. The agency has supported projects in a wide range of countries, such as China, Nepal, Pakistan, Bangladesh, Indonesia, and Papua New Guinea.

Projects supported by MIGA have a high developmental impact, creating opportunities in host countries through job creation, export and tax generation, technology transfer, spin-off business development, and enhanced domestic competition. For investors, noncommercial risk insurance alleviates country risk, can extend the tenor of financing and even lower costs, and deters adverse government actions.

One project, the Manila North Tollways Corporation (MNTC), illustrates the particular strengths that MIGA can bring to managing a project's risks. The project entails the expansion and rehabilitation of a toll road in the Philippines, involving $117 million in equity investments and $260 million in loans. MIGA's $87 million in coverage-against the risks of transfer restriction, expropriation, and war and civil disturbance-was critical in moving the project to financial close.

This is just one example of the hundreds of projects supported by MIGA over the past 14 years, said Ikawa, who took the opportunity of the seminar to share the findings of MIGA's 2002 Annual Report.

"Despite the challenges of the past year, MIGA issued $1.36 billion in guarantee coverage for projects in developing countries, for an estimated total of $4.7 billion in FDI facilitated," Ikawa said. "These results need to be considered against the backdrop of the exceptional hurdles we faced over the last year. I'm very pleased that we were able to continue our focus on our priority areas, and achieve solid results, despite the circumstances."

MIGA provided guarantees for 33 projects in 24 countries during the fiscal year. Its priorities were to support foreign direct investments in the world's poorest countries, in Africa, among developing countries, and in small and medium-size enterprises.

Fiscal year 2002 yielded solid results on other fronts as well. The global downturn in FDI led growing numbers of developing countries to seek MIGA's help in promoting their countries as desirable investment destinations. As a result, the agency undertook 34 technical assistance projects in 27 countries. The year also saw the launch of FDI Xchange, a customized service that provides investors with free email updates on investment opportunities in developing countries.

The agency's legal team was successful in helping an investor avert an insurance claim for a project in China, and made good progress on helping dozens of parties involved in investment disputes in Ethiopia come closer to a resolution.

"Our Singapore office should help make these services even more available to Asian investors," said Ikawa. "We will work closely with our partners, including IE Singapore, ECICS, and the Asian Development Bank, to mobilize additional insurance capacity for Asia."

For information

In Singapore: Peter Stephens,
pstephens1@worldbank.org,
t. 65.6324.4612

IE Singapore: Sophia Leong, sophia_leong@iesingapore.gov.sg,
t. +65.6433.4942

In Washington, DC: Angela Gentile, agentileblackwel@worldbank.org, t. 202.473.3509