MIGA in Zagreb, Croatia October 15, 2013 maintaining FDI flows in a risk-averse world

1. MIGA in Zagreb, Croatia October 15, 2013 maintaining FDI flowsin a risk-averse world Olivier J. L. Lambert, MIGA Europe Office (Paris)

2. MIGA and Croatia • Croatia has been a member of MIGA since 1993 • MIGA has supported many investments into Croatia: • 15 guaranteed projects to date • 7 active projects • Gross exposure for active projects: US $ 946.7 million (8.97% of total MIGA gross exposure) • Sectors: Banking & Services mainly • Active discussions held with other foreign investors into Croatia: • Infrastructure and Financial sectors mainly • MIGA is now looking to support Croatian investors into emerging markets

3. The World Bank Group • The International Bank for Reconstruction and Development (IBRD) • The International Development Association (IDA) • IBRD: • Loans to middle-income • countries • Advisory services • Guarantees and risk • management • IDA: • Donations and zero-interest loans to least developed countries The International Center for Settlement of Investment Disputes (ICSID) • Specialized dispute resolution institution • Facilities for independent conciliation and arbitration of investor- State disputes • Enables individuals or companies to bring up claims against foreign governments • The Multilateral Investment Guarantee Agency (MIGA) • Guarantees against non-commercial risks • Dispute resolution services for guaranteed investments The International Finance Corporation (IFC) • Investment services for the private sector • Advisory Services for companies and private investors for questions related to the private sector • IFC Asset Management Company

4. MIGA Political Risk Insurance covers non commercial risks 1. Currency Transfer Restriction & Inconvertibility Cover • Protects against losses arising from inability to convert local currency into forex for transfer outside the host country or transfer/excessive delays in acquiring forex 2. Expropriation Cover • Protects against losses arising from nationalization and confiscation; Creeping expropriation (e.g. gradual changes in tax regime); Expropriation of funds (e.g. "account freeze” ) 3. War and Civil Disturbance Cover • Protects against: Loss of Assets; Temporary or 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 ;acts of sabotage or terrorism can also be covered 4. Breach of Contract Cover • Protects against losses arising from the government’s breach or repudiation of a contract with the investor (e.g., a concession or a power purchase agreement) • Coverage extends to sub-sovereign risks, interest rate hedging instruments and capital market transactions 5. Non-Honoring of Financial Obligations (NHFO) Cover • Protects against losses resulting from a government’s failure to make a payment when due under an unconditional financial payment obligation or guarantee related to an eligible investment • Since June 2013, a new cover: NHFO for SOEs that are: a) controlled by the State; b) performing a public service or governmental function; c) creditworthy and financially viable.

5. Eligibility Criteria Financial instruments covered • Equity • Shareholder loans • Loan guaranties • Non-shareholder loans (e.g. stand-alone debt) as long as they relate to a investment/project with some form of direct investment • Non-equity direct investment (e.g. management and turnkey contracts) • Capital market transactions (no equity required) Investments characteristics • Cross-border from one member country (developed or developing) into a developing member country • Primarily “greenfield” investments but also existing investments since November 2010 Clients or Guarantee holders • Investors • Banks • DFIs and other government agencies

6. 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% (plus up to an additional 50% of the investment contribution to cover earnings attributable to, and retained in, the project) • Loans and Loans guaranties covered up to 95% of the principal (and up to 99% on a case-by-case basis) plus up to an additional 150 percent of the principal to cover interest that accrues over the term of the loan Tenor • Minimum 3 year (1 year for loans), up to 15 years (and possibly 20 years if justified by the nature of the project); investor decides on the duration of a guarantee 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

7. MIGA’s Tailored Program for SMEs • MIGA’s Small Investment Program (SIP): Designed to facilitate investments into small and medium-size enterprises with simple projects and involved in the finance, agribusiness, manufacturing and services sectors • Eligibility: Fulfill two of the following three criteria: • No more than 300 employees • total assets not more than $15 million • total annual sales not more than $15 million • Standardized package of risk coverage: Currency inconvertibility and transfer restriction; expropriation; war, terrorism and civil disturbance • 53 outstanding contracts for SIP projects (October 2012)

8. MIGA Value Proposition for Investors

9. MIGA’s Claims Track Record Highlights • MIGA has supported more than 700 projects since inception • MIGA has assisted clients in resolving more than 100 disputes • MIGA has successfully facilitated the settlement of disputes in all currency transfer/ inconvertibility issues Claims history • MIGA has paid claims in six cases • All other cases have been resolved or the claim withdrawn • MIGA has never had a dispute with a client with regard to a claim • In all these cases, MIGA has maintained good relationships with the Host Government • Deterrence effect & early involvement to resolve difficult / complex situations will ensure the largest number of projects are successful

10. Process and Structure: How Does it Work? • 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

11. Standard Project Structure Bank (Parent/Subsidiary) ForeignInvestor “Home Country” can be holding company based offshore in a MIGA member country Certain types of management contracts, whose remuneration depends on revenues or profits of project, are eligible as “equity” Loan Equity/ Shareholder Loan Home Country Host Country Concession Project Enterprise/JV Government or Relevant HC Authority Contractor Non-honoring of Sovereign Guarantee possible if Project Enterprise is PPP or JV w/ SOE and Government provides unconditional guarantee on loan Infrastructure Works

12. Small Investment ProgramBitaka S.A.,2011 • In December 2011, MIGA issued guarantees of €3.8m ($5.1m equivalent) to FonsMediterrània Capital, F.C.R. de RégimenSimplificado of Spain (FMC) covering its equity investment and shareholder loan in Bitaka S.A. (Bitaka) in Tunisia • The coverage is for a period of up to 5 years against the risks of transfer restriction, expropriation, and war and civil disturbance • Bitaka provides low-cost, innovative solutions to mobile operators in Tunisia. The mobile sector is mainly pre-paid and relies on payment solutions to connect the majority of the population • Indirectly the project contributes to the continued growth of the mobile sector in Tunisia, which has an impact on GDP growth (a 10 percentage point increase in mobile penetration generates a 0.81 percentage-point increase in economic growth for low and middle-income economies) FMC risk risk Shareholder Loan Equity investment Spain Tunisia Bitaka S.A.

13. MIGA Highlights MIGA’s Gross Exposure (US$ billion) • Key Figures • Supported more than 750 projects for a total of $27.2 billion during FY90-12 • Portfolio: $10.76 billion in June 2013 • Issued record $2.8 billion guarantees in FY13 • MIGA’s Strengths • Subscribed capital and retained earnings: $ 2.5Bn • Strong capital base and ability to pay compensation in the event of large-scale losses • Highly rated multilateral acknowledged by Basel II 10.8 10.3 9.1 Sector breakdown – FY13 7.7 7.3 6.5 5.4 5.3 5.1 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Total new issuances by region – FY13 2.78 2.56 1.89 1.46

14. Contact Information Europe Regional OfficeMultilateral Investment Guarantee Agency66 Avenue d'Iéna 75116 Paris France www.miga.org/emea Olivier J. L. Lambert, Regional Manager t. 33-1-4069-3158 olambert@worldbank.org

15. Thank You! www.miga.org/emea

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