MIGA Calling Central Africa

July 9, 2008—War and conflict are devastating experiences, shattering every aspect of a country’s social, political, and economic fabric. Rebuilding conflict-affected countries requires a careful and concerted approach that draws on domestic resources, international donor assistance, and private sector resources. Foreign direct investment (FDI) can help by bringing much-needed private capital, new technology, jobs, and local spin-off industries.

FDI can also instill confidence in a country as an investment destination, encouraging the private sector to participate in the reconstruction process. But years of conflict entrench investors’ perceptions of risks. And often they shy away even when opportunities for profit are considerable.

The Central African Republic is one of these countries. For much of the period since independence in 1960, the country has been politically unstable with bouts of armed conflict. The political instability has contributed to poor socioeconomic outcomes—the Central African Republic is ranked 171st out of 177 countries in the United Nation Development Programme’s 2007-08 Human Development Index. Poverty is widespread, with an estimated 67 percent of the population living below the poverty line. Ranked 177 out of 178 countries on the ease of doing business by the World Bank’s Doing Business report, attracting foreign investment has been a difficult task.

Encouraging FDI back into such countries is the forte of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA). Since inception, the agency has supported more than 153 projects with guarantees totaling $2.8 billion in 23 conflict-affected countries. The development benefits of supported projects have been far-reaching in countries like Afghanistan, Bosnia-Herzegovina, and Mozambique. Now the agency has set its sights on the Central African Republic.

In fiscal year 2008, MIGA facilitated foreign direct investment into a state-of-the-art telecommunications network in the Central African Republic by issuing a guarantee of $37.9 million to investor Orange Participations S.A. of France. The project involves the installation, operation and maintenance of a telecommunications network operating on 100 percent digital GSM technology. MIGA’s guarantee is covering 90 percent of the investor’s equity investment, protecting against the risks of transfer restriction, expropriation, war and civil disturbance, and breach of contract for a period of up to 20 years.

The project—Orange Centrafrique S.A.—is critical to the economic development of the land-locked country, where fixed-line connections are not even available to one in 100 persons. Subscribers are expected to benefit from access, reliable service, and reduced costs due to increased competition and diverse product offerings.

“This is the first project guaranteed by MIGA in the Central African Republic,” said Justin Kouaku, Senior Underwriter at MIGA. “We hope that MIGA’s support will help boost investor confidence and catalyze further investment and development in the country.”

See the project brief for more.