MIGA: Who We Are and What We Do MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP

1. MIGA: Who We Are and What We Do MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP

2. I N S U R I N G I N V E S T M E N T S E N S U R I N G O P P O R T U N I T I E S

3. 1988 MIGA Multilateral Investment Guarantee Agency The World Bank Group 1944 IBRD International Bank for Reconstruction and Development 1960 IDA International Development Agency 1956 IFC International Finance Corporation 1966 ICSID International Center for the Settlement of Investment Disputes Promote FDI with the use of guarantees and technical assistance

4. World Bank Group Instruments IFC A-Loan IFC B-Loan IFC C-Loan IFC Guarantees (partial credit structures usually for local financing) Interest Rate and Currency Swaps Political Risk Insurance • expropriation • transfer restriction • breach of contract • war & civil disturbances • NHSFO Guarantees • partial risk • partial credit IBRD Loan IDA credits and grants Tech. Assistance

5. About MIGA MIGA was created in 1988 as a member of the World Bank Group to promote private foreign direct investment into developing countries to support economic growth, reduce poverty, and improve people’s lives

6. What We Do • Noncommercial risk insurance (guarantees) for investors and lenders • Investment dispute mediation • Technical assistance to help countries attract and retain FDI • Online information on investment opportunities and operating conditions in developing countries (pri-center.com)

7. Our Strategic Priorities • Focusing on sustainable development • Opening up difficult or frontier markets, especially in conflict-affected countries • Supporting investments in Africa and the world’s poorest countries • Supporting complex projects • Promoting cross-border investments between developing countries

8. Types of Investments Covered • Equity • Shareholder loans • Loan guarantees • Loans from financial institutions • Non-shareholder loans • Non-equity direct investment …other forms of investment such as technical assistance and management contracts, asset securitizations, capital market bond issues, leasing, services, franchising and licensing agreements, may also be eligible for coverage.

9. Eligibility Requirements Eligible investments • Cross-border from one member country (developed or developing) into another developing member country • Primarily “greenfield” investments • If an existing investment, must have high developmental impact

10. Terms of Coverage Amount of coverage • MIGA can typically arrange cover for all amounts, either on its own books or through co/reinsurance • No minimum amount for guarantee or size of investment • Amounts can include interest principal for debt and future retained earnings for equity • Equity covered up to 90% and debt up to 99% Tenor • Minimum 1 year, up to 20 years; investor decides on the duration of a guarantee • Investor can cancel the contract after the 3rd anniversary Pricing • Premium rates are decided on a per project basis and vary by country, sector, transaction and the type of risk insured • Premiums are paid annually or semi-annually and are calculated as a percentage rate applied to the amount of coverage

11. Overview: MIGA’s Coverages • Inconvertibility and Transfer Restriction • Expropriation • War and Civil Disturbance • Breach of Contract • Non-Honoring of Sovereign Financial Obligations

12. Political Risks Covered by MIGA (I) Inconvertibility and Transfer Restriction • Protects against losses arising from inability to • convert local currency into foreign exchange within the host country • transfer funds out of the host country • In case of convertibility restrictions, MIGA’s compensation is based on official rate of exchange at the Date of Loss • Currency depreciation and devaluation not covered • Conversion and transfer have to be lawful in the Host Country at the time when MIGA’s coverage is issued

13. Political Risks Covered by MIGA (II) Expropriation • Protects against losses arising from: • Nationalization and confiscation • Creeping expropriation (a series of acts that are expropriatory taken in sum, e.g. gradual changes in tax regime) • Expropriation of funds (e.g., “account freeze”) • Expropriation also if the Project Enterprise • is deprived of a substantial benefit • constituting a fundamental right (e.g., under a Project Agreement) • essential to its overall financial viability (normally this implies insolvency or impending insolvency of the Project Enterprise) • Non-discriminatory regulatory measures not covered, unless such measures have a confiscatory effect

14. Political Risks Covered by MIGA (III)War and Civil Disturbance • Three forms of coverage • Loss of Assets • Temporary Loss of Income (for equity) • Permanent Loss of Use • Loss has to be a direct and immediate result of acts of war, revolution, rebellion, insurrection, coup d’état, civil war, civil commotion, riots • Act of sabotage or terrorism can also be covered • Acts must pursue a broad political or ideological objective

15. War and Civil Disturbance (cont.) Temporary Loss of Income (Equity Investments) • Short-term business interruption coverage not offered on a stand-alone basis, but added to the WCD coverage upon request • Compensation based on • lost business income, • unavoidable continuing expenses and • extraordinary expenses to resume operations

16. Political Risks Covered by MIGA (IV)Breach of Contract • Protects against loss arising from breach or repudiation of a project agreement (e.g., in infrastructure and power projects) • Project agreement must be entered between the Host Government on the one hand and Guarantee Holder and/or Project Enterprise (for Equity investments only) on the other hand • MIGA covers “denial of justice” risks: • Failure to pay on a valid arbitral award or judgment by a state court rendered against host government or • No recourse to judicial or arbitral forum by the investor or Project Enterprise • May cover obligations of sub-sovereigns and SOEs, subject to certain restrictions

17. Breach of Contract (cont.)Coverage of SOEs • New guidelines permit coverage of contracts with an SOE where: • It is controlled by the Host Government or its political subdivision • It performs a public service or fulfills a governmental function (like a utility) and • Either: • The Host Government, as a matter of law, is responsible for its financial liabilities or • It is creditworthy on a stand-alone basis • In some cases where the contract is with an SOE that does not meet these criteria (e.g. Dakar Ports), MIGA has the option of covering a Host Government guarantee in BoC

18. Political Risks Covered by MIGA (V) Non-Honoring of Sovereign Financial Obligations • For unconditional financial payment obligations or guarantees of the Host Government • Examples: • Host Government unconditionally guarantees repayment of loan by Project Enterprise • Host Government assumes unconditional obligation to inject equity or other funding on demand or at date certain • Not Eligible: Host Government issues performance guarantee relating to power purchase agreement (guarantee not unconditional) • No arbitral award is required

19. Non-Honoring of Sovereign Financial Obligations Eligibility Requirements • Sovereign Financial Obligation must be associated with: • an eligible investment project with measurable developmental impacts • Whose obligations are eligible? • Central governments (e.g., guarantee issued by MoF) • Sub-sovereign obligations (i.e., provincial or municipal governments) eligible on a case-by-case basis • Guarantees issued by an SOE not eligible

20. MIGA’s Underwriting Process • Available online • Free, confidential • 2 pages • Determines eligibility 1 • More detailed analysis of a project • Fees due ($5k up, depending on the type of project) • Starts underwriting process 2 3

21. MIGA’s Claims Track Record • Over 600 projects with MIGA support, more than 90 cases treated as possible claims, but in which no claim has been paid. • MIGA has successfully facilitated the settlement of disputes in all currency transfer/inconvertibility issues and since inception has paid claims in 6 cases: • Afghanistan ($575 for war and civil disturbance in FY11) – (paid by MIGA Administered Trust Fund) • Indonesia ($15 million for expropriation in FY00) • Nepal ($144,600 for war and civil disturbance in FY05) • Argentina ($558,311 for expropriation in FY05) • Kenya ($491,100 for war and civil disturbance in FY09) • Madagascar ($12,824 for war and civil disturbance in FY09) • All other cases have been resolved (before or after the claim was filed) or the claim was withdrawn Deterrence effect ensures that only a small number of projects that MIGA supports encounter problems

22. Why Investors Choose MIGA • Expertise in complex projects and in challenging environments • Credit enhancement • Longer tenors (up to 15-20 years) • World Bank Group “umbrella” of deterrence • Track record in dispute resolutions • Mobilization of reinsurance capacity • Best practices in environmental and social management • Prompt claims payment • Access to World Bank Group expertise and resources

23. ANNEX: Key Statistics about MIGA

24. MIGA’s 2011 HighlightsGross exposure 1990 -2011 ($ billion) • Key Figures • Issued 1,030 guarantees for 651 projects for a total of $24.5 billion during 1990-2011 • Gross exposure: $9.1 billion in FY11 • Issued $2.1 billion in FY11 in support of 38 projects • $415.3 million for investments in IDA-eligible countries (of which $228 million was in sub-Saharan Africa) • Four new host countries: Iraq, Kosovo, Liberia, Republic of Congo 9.1 7.7 7.3 6.5 5.3 5.3 5.4 5.2 5.2 5.1 5.1 10 05 02 03 04 06 07 08 09 11

25. Gross Exposure in 2011 Guarantees Issued in FY11, by Sector (by $ volume) Guarantees Issued in FY11, by Region (by number of projects)

26. Contact Information Washington, D.C.: Izumi Kobayashi Executive Vice President ikobayashi@worldbank.org Michel Wormser Vice President and Chief Operating Officer mwormser@worldbank.org  Edith P. Quintrell Director, Operations equintrell@worldbank.org Singapore: Kevin W. Lu Regional Director, Asia-Pacific klu@worldbank.org Ana-Mita Betancourt Director and General Counsel, Legal Affairs and Claims abetancourt@worldbank.org LakshmiShyam-Sunder Director and Chief Financial Officer, Finance and Risk Management lshyam-sunder@worldbank.org Paris: Olivier Lambert Manager, Europe olambert@worldbank.org Ravi Vish Director and Chief Economist, Economics and Policy rvish@worldbank.org Marcus S.D. Williams Adviser, Strategy and Operations mwilliams5@worldbank.org

27. www.miga.org