miga in zagreb, croatia october 15, 2013 maintaining fdi flows in a risk-averse world
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MIGA in Zagreb, Croatia October 15, 2013 maintaining FDI flows in a risk-averse world. Olivier J. L. Lambert, MIGA Europe Office (Paris). MIGA and Croatia. Croatia has been a member of MIGA since 1993 MIGA has supported many investments into Croatia: 15 guaranteed projects to date - PowerPoint PPT PresentationTRANSCRIPT
MIGA in Zagreb, Croatia
October 15, 2013
maintaining FDI flowsin a risk-averse world
Olivier J. L. Lambert, MIGA Europe Office (Paris)
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
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
The World Bank Group
The Multilateral Investment Guarantee Agency (MIGA)
Guarantees against non-commercial risks
Dispute resolution services for guaranteed investments
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
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 4
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.
MIGA Political Risk Insurance covers non commercial risks
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 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
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 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
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 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)
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 8
MIGA Value Proposition for Investors
KNOWLEDGE AND EXPERTISE• Largest multilateral PRI provider• 25 years in emerging markets• Expert staff• Access to World Bank Group
resources• Best practice environmental and
social standards
UNIQUE PRI SOLUTIONS Support investments in difficult
markets Longer tenors (up to 20 years) May result in lower borrowing costs Reduce risk weighting and capital
provisioning
CLAIM DETERRENCE World Bank Group’s umbrella 177 member countries Claims track record Assistance in dispute resolution
FINANCIAL STRENGTH Recognized industry leader Strong balance sheet Diversified portfolio Implied AAA rating Reinsurance capacity
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 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
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 10
Investor Marketing and origination Preliminary Application
MIGA (3-6 months)
Definitive Application Early Screening Project Review Meeting
(“ESM”)-chaired by the Director of Operations Group Underwriting and host country approval
Developmental impact Environmental, Social review Pricing and reinsurance Economic financial viability, country risk World Bank Group policy
Project Review Committee (“PRC”)-Track “A” projects (complex/high risk)
Final Approval Meeting (“FAM”)-Track “B” projects (simpler/low risk)
Investor and MIGA
Sign contract of guarantee Monitoring, evaluation, contract maintenance 3
2
Process and Structure: How Does it Work?
1•Available online•Free, confidential•2 pages•Determines eligibility
• More detailed analysis of a project
• Fees due ($5k up, depending on the type of project)
• Starts underwriting process
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 11
Bank (Parent/Subsidiary)
Government or Relevant HC Authority
Project Enterprise/JV
Concession
Loan
Host Country
Home Country
Contractor
ForeignInvestor
Equity/ Shareholder Loan
Infrastructure Works
“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”
Non-honoring of Sovereign Guarantee possible if Project Enterprise is PPP or JV w/ SOE and Government provides unconditional guarantee on loan
Standard Project Structure
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 12
Small Investment ProgramBitaka S.A.,2011
In December 2011, MIGA issued guarantees of €3.8m
($5.1m equivalent) to Fons Mediterrània Capital,
F.C.R. de Régimen Simplificado 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
Bitaka S.A.
Equityinvestment
Shareholder Loan
Spain
Tunisia
riskrisk
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 13
MIGA Highlights
Sector breakdown – FY13
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
5.15.4 5.3
7.3 7.7
FY05 FY06 FY07 FY08 FY09 FY10
6.5
9.1
FY11 FY12
10.3
FY13
10.8MIGA’s Gross Exposure (US$ billion)
1.46
1.89
2.562.78
Total new issuances by region – FY13
MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 14
Contact Information
Europe Regional OfficeMultilateral Investment Guarantee Agency66 Avenue d'Iéna 75116 Paris Francewww.miga.org/emea
Olivier J. L. Lambert, Regional Managert. [email protected]
Thank You!www.miga.org/emea
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