Multilateral investment guarantee agency

Multilateral investment guarantee agency

Assignment on MIGA, (multilateral investment guarantee agency)

Considerable attention has been focused in recent years on the need to remove barriers impeding the growth of foreign investment in developing countries. The concept of providing foreign investors with financial guarantees against non-commercial risks in developing countries has emerged as a means of improving the investment climate in these countries.

There is need for a multilateral investment guarantee agency to improve the investment climate by issuing guarantees and engaging in other investment promotion activities.

The idea of establishing a multilateral investment guarantee agency emerged in the 1950s. President Clausen revived the concept in his first address to the Bank's Annual Meeting in 1981. And a paper entitled "Main Features of a Proposed Multilateral Investment Guarantee Agency" was distributed to the Executive Directors in May 1984. On the basis of that document, consultations were held with member governments of the Bank (IBRD). In September 1985, the Executive Directors finalized the draft Convention and recommended to the Board of Governors that it adopt a resolution opening the Convention for signature. The Convention Establishing the Multilateral Investment Guarantee Agency (MIGA) was submitted to the Board of Governors of the International Bank for Reconstruction and Development on October 11, 1985, and went into effect on April 12, 1988.

The Multilateral Investment Guarantee Agency is an autonomous international organization with "full juridical personality" under international law (Article 1) with the mission to promote foreign direct investment (FDI) into developing countries and to help, support, economic growth, reduce poverty, and improve people's lives.

Objective;

MIGA’s main objective is encouraging the flow of investments for productive purposes among its member countries and in particular to its developing member countries (Article 2).

As its mentioned in the convention;

CONVENTION

ESTABLISHING THE

MULTILATERAL INVESTMENT

GUARANTEE AGENCY

Preamble

The Contracting States

Considering the need to strengthen international cooperation for economic development and to foster the contribution to such development of foreign investment in general and private foreign investment in particular;

Convinced that the Multilateral Investment Guarantee Agency can play an important role in the encouragement of foreign investment complementing national and regional investment guarantee programs and private insurers of non-commercial risk.

Article 2. Objective and Purposes

The objective of the Agency shall be to encourage the flow of investments for productive purposes among member countries, and in particular to developing member countries, thus supplementing the activities of the International Bank for Reconstruction and Development (hereinafter referred to as the Bank), the International Finance Corporation and other international development finance institutions.

To serve its objective, the Agency shall:

(a) issue guarantees, including coinsurance and reinsurance, against non-commercial risks in respect of investments in a member country which flow from other member countries

(b) carry out appropriate complementary activities to promote the flow of investments to and among developing member countries; and

(c) exercise such other incidental powers as shall be necessary or desirable in the furtherance of its objective.

The reference to "investments for productive purposes" emphasizes the Agency's concentration on concrete projects and programs in all sectors of the economy. In addition to guaranteeing investments in these member countries against non-commercial risks, the Agency is to carry out complementary activities to promote investment flows (Article 2(b)). Article 23 of the Conventions sets out the promotional activities the Agency will provide.

MIGA focus on insuring investments in the areas where it can make the greatest difference.

• Countries eligible for assistance from the International Development Association (the world’s poorest countries)
• Fragile and conflict-affected environments
• Transformational Projects – large scale and significant investments, with the potential for bringing about transformational change in the host country
• Energy Efficiency and Climate Change - complex energy and infrastructure projects that improve energy capacity as well as transportation projects that have a positive impact on pollution control (such as mass transport)
• Middle Income Countries where it can have strong impact

As a multilateral development agency, MIGA only supports investments that are developmentally sound and meet high social and environmental standards.

MIGA fulfill its mission by providing political risk insurance guarantees to private sector investors and lenders. MIGA’s guarantees protect investments against-non-commercial risks and can help investors obtain access to funding sources with improved financial terms and conditions. Its unique strength is derived from our standing as a member of the World Bank Group and its structure as an international organization with our shareholders including most countries of the world. Since its inception in 1988, MIGA has issued more than $28 billion in political risk insurance for projects in a wide variety of sectors, covering all regions of the world.

In concluding; MIGA's mission is to support economic growth, reduce poverty, and improve people's lives. In order to achieve this, the Agency needs a clear understanding of the development outcomes of the projects it supports. MIGA's Development Effectiveness Indicator System (DEIS) collects a common set of indicators from clients to demonstrate results across all projects; volume of investment catalyzed, direct employment, taxes paid, and value of locally procured goods. And it also measures sector-specific indicators.