23201 2001 MULTILATERAL INVESTMENT GUARANTEE AGENCY * WORLD BANK GROUP annual reporto AS A MEMBER OF THE WORLD BANK GROUP, THE MULTILATERAL INVESTMENT GUARANTEE AGENCY (MIGA) PROMOTES FOREIGN DIRECT INVESTMENT INTO EMERGING ECONOMIES TO IMPROVE PEOPLE'S LIVESAND REDUCE POVERTY. TABLE OF CONTENTS i highlights FYoi iv letterto the Council of Governors vi message from the Executive Vice President I MIGA in focus 17U IN MEMORIAM Dr. Ibrahim Shihata I9| guarantees program 59 technical assistance services 83 legal services 87 policy and evaluations 93 financial overview and financial statements 11 appendices 125 abbreviations and endnotes MICA MEMBERSHIP MEMBERS-i54 COUNTRIES CATEGORYSONE (INDUUSTR AL)12 ASniia a, Aint,, Berg -n, Carrion, UDnoar, Fin ,,J. Frara, Ca-r-ynr C .. I lPd ,inlan, Itly, a~pn,P ninir, o a Ni, -iny. Parugal, Spa n, S-adnn. Saita- and, Unma, (ingoam [aired Aroma CATEGORY TWO IDFGF.OPINCr 132 AfriEn Angol, Anon, Aorswan, A.lion', BR,k aa Fain C-nrroo, Cape ononam - in , Scion, Cinreal APr nan Aepabhia, Dannoaran a Anpab a of ConAn, Anpibhin of~~~~Vd, C,f,~ Af -R~p,Ihhc D- -t R~ubc P C.g. R~~bl, Congo. Cota du in, Ey0ana L- Gana, Enana, Ethrnop a. Tho Gambia, Cirana A 1, ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Cana-, KSeag, L-nton, Madagaina, Mama , Ma, . M-,nranr M-a-,nn SM ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Moonmoqan, N-bona. Nigorn, Sn-ga, , S,ynihe on, S -n [none, S-tnh Alina, Sada-.Snaarlan, [ana- a,Toga, Aganon,ZDamon, G moanb- AniaePacific Aneglanea,,hCamonon,,Cri~ a EJi, Md0 nae p.bApo innS K-in Lan Poop C'n D--oraBi Bep ab r Ma, agy-a Fed-iand SBaBe of M inn Ma-ngal a ,, ,an Palt-ne P,loa Pagan SN,,,(.n,n, Pni pg.n Sama S ri5a Pnrn, Sin Lai.k~ Ton rd. Sao.arnw, Vrenna M d dln Easto N rth AfoAn. Alge a,Aalna- Aia b ARpo a bcf Egypn, Iran, J,nraa Rn,o i, Lnan,b- L bya, Malta, Macann, Onio, Qarai. San,i Arabi,, Tan a-, Unite,d eA,b CEn atb, Ropabglia f`Simo no. E-aopenEeotal Asia Aloania, A--neen, A-nba ia,Anao, An-na -ai noLoao Sloi-egna na C-lana man, Cip-a, C-ha RnpJbl a, Enetn a. Ge-g a HP Snigary, Kaaknnmnn Kyngsa Rep,n a. Lat, a L,trn-ana FYR a Maand- Mnlda-, P. and, Roma a, Bon an Feno-ono, Slova, Ropan in, ASo... U~o ktie A-naoiaaaaibb-a AnAon-jn,TS al3adra, Aa.,aadoo, Aol1 an, An .m... Sia I, Con, ,Co nia a,U, Gon Ao, Comm a,. . Pnm n RaApab a nao,El Fan--a Pa-gnnnn n-r, Sn A In, nod N,ine, St L-a a, Sr S inne danonr Cinan,d ens,T. ad and Cobago. Ji P BR. an SV.a.a. a a.. a ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~COUNTRIES EARRENaTIYFUEFILLING MEMBERSHIP REQUIREMENTS- aCOUNTRIES nAn,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~CATFCORn TWO (DFESLOF SC) n Afri:a Chaa, Gabo- Cae-B scam-, [mo-a, Nign AR-an AsisaPacific Sn Oma klalan a'. CaiAn DiAiddle E.asBNnft!,APniaa Sy- nArabRAepLbIk C'gnyTo. EanpoaContoa1 Asia Bap,,onna, Federa Rnpabina of Syog,,nn (P"nni nAG oUoOfi Dgo-b- pre mq ons None-b-n Lade A-deia a Eacibboa Ann gna an an d o Sum an-na table 1 ISSUED GUARANTEE PORTFOLIO AND FOREIGN DIRECT INVESTMENT (FDI) FACILITATED, FYgo-ol go 91 92 93 94 95 96 97 98 99 oo 01 total guarantees 4 11 21 27 38 54 68 70 55 72 53 66 539 hI * hI I htI issued=(no.) nh i g nh liZ g hts amount 132 59 313 374 372 672 862 614 830 1,310 1,605 2,000 9,145 issued F Yo° (US$ M) eFtimated FDI 1.0 o.g o.6 1.8 1.3 2.3 6.5 4.7 6.1 5.2 5.5 5.2 41.2 facilitated (US$ B) figure i EARNED PREMIUM, FEE AND INVESTMENT INCOME, FYgo-ol US$ M, excludes other income premium and fee income ~~~~~~~~~~~~~~~investment inconne 2001 36.5 30.4 2000 295 235 1999 2.9 204 _l 1998 24.1 13.7 1997 24.6 10 0 1996 21.9 9.4 1995 14.4 7.4 1994 9.9 4.7 1993 5.8 5.0 1992 3.1 5.4 1991 1.8 7.2 990o 0.5 7.2 r figure 2 COUNTRY MEMBERSHIP, FYgo-ol new members in FYoi: Central African Republic and Thailand members 2tess0o comnpieting membership 2001 154 12 2000 152 14 1998 145 17 1996 134 21 1994 121 26 1992 85 30 1990 58 27 figure 3 TECHNICAL ASSISTANCE PROJECTS, number, FYq6-oi 2001 59 2000 41 1999 45 1998 16 1997 34 1996 24 highlights FYol GUARANTEES FYoi FYoo Amount of new issuance US$ 2.0 B US$ 1.6 B Estimated amount of FDI facilitated IUSS 5.2 B US$ 5.5 B Number of contracts issued 66 53 Number of projects supported 46 37 Net exposure US$ 3.2 B US$ 2.8 B Gross exposure US$ 5.2 B US$ 4.4 B Coverage for Priority Areas 28 projects in IDA-eligible countries (see p. iii) 8 projects in Africa 18 investments in small and medium-size enterprises (SMEs) * 8 "South-South" investments (among developing countries) Cuarantee Landmarks First coverage for projects in Jordan, Panama, and Togo - First coverage of a capital markets issue, water project, and performance bond * First simultaneous use ofthe Cooperative Underwriting Program (CUP)' and facultative reinsurance 500th guarantee issued (for a project in Moldova) * Four MIGA-supported projects received awards from major publications Cooperation Seven cooperation agreements with national investment insurers and international financial institutions * Two training programs for partners * Five new CUP partners and four new facultative reinsurance partners * $153 million in private capacity mobilized through the CUP * $602 million of capacity mobilized through facultative reinsurance Claims MIGA's guarantees are once again available in Indonesia after the government began to repaythe $i5 million claim the agency had paid at the end ofthe previous fiscal year ii multilateral investment guarantee agency wor d bank group highlights FYoi TECHNICAL ASSISTANCE SERVICES Assistance for investment promotion intermediaries * Longer-term projects accounted for two-thirds of the work program Field programs in East Asia and Central America increased in complexity, including strategic planning and hands-on training IDA-eligible countries accounted for more than half ofthe work program Products and Services * Investment Promotion Toolkit launched, becoming the top-selling publication ofthe World Bank Group in the month following its release * PrivatizationLink Web site relaunched with new content, including over 700 profiles of state-owned assets being divested in 70 countries AGENCY-WIDE * Europe-Africa Office launched * More than 50 field missions u ndertaken, including four 'mobile offices" in Asia, Central America and Colombia, Southeastern Europe, and West Africa * MIGA sponsored the Sixth Annual Africa Mining Investment Symposium in Burkina Faso (first time held in Sub-Saharan Africa) box 1 INVESTING IN THE POOREST COUNTRIES The International Development Association (IDA) isthe World Bank Group's concessional lending window, which provides long-term loans at concessional rates to the poorest developing countries. The mission of IDA is to support efficient and effective programs to reduce poverty and improve the quality of life in the World Bank Group's poorest member countries. IDA helps build the human capital, policies, institutions, and physical infrastructure needed to bring about equitable and sustainable growth, with the goal of reducing disparities across and within countries and promoting equitable access to the benefits of development. In fiscal 2001, MIGA issued guarantees for i8 projects in IDA-eligible countries, totaling $396 million. IDA-eligible countries account for 24 percent of MIGA's current gross guarantees portfolio. Also, 20 of the 38 countries receiving MIGAtechnical assistance are IDA-eligible. multilateral investment guarantee agency word bark group iii LETTER TO THE COUNCIL OF GOVERNORS James D. Wolfensohn, president of the Multilateral Investment Guarantee Agency (MIGA) and chairman of its Board of Directors, submits to the Council of Governors on behalf of the Board of Directors and in accordance with MICA's bylaws, this report and audited financial statements for the fiscal year endingJune 30, 2001. Following the Council of Governors' approval of the MIGA Review 2000 report at the October 2000 Annual Meetings in Prague, the agency has further intensified efforts in its guarantee activities. During the past fiscal year, particular attention was paid to priority areas that are not usually adequately supported by other investment insurers. These priority areas are: Africa; IDA-eligible2 countries; South-South investments (among developing countries); investments in SMEs; and complex infrastructure projects. Implementation of this strategy has been a success. MIGA's political risk guarantee issuance reached a new record of $z billion in gross coverage across 66 contracts of guaranLee. with a particular focus on the aforemnentioied prioriLy areas. As regards the agency's technical assistance activities, in keeping with the strategic course set forth in the MIGA Review 2000 report, the agency has increased its efforts to improve the capacity of select developing countries' investment promotion agencies to develop and implement investment promotion strategies. Technical assistance was provided to 38 countries, and longer-term capacity building commitments were focused on 28 countries where these efforts are both particularly needed and expected to pay div- idends, in terms of attracting more foreign direct investment in the near future. Through its information products and services, MIGA employed new technologies and tools to dis- seminate information on investment opportunities and business operating conditions in developing member countries. MIGA paid its first claim at the end of fiscal 2000-and began receiving repayment of the claim by the host country in fiscal 200l. Additionally, MICA worked with investors and host countries to prevent claims from arising and to mediate investment disputes. Only with an adequate capital base can MIGA continue its growth and the pursuit of the strategic directions approved by the Council of Governors. This underscores the importance of MIGA's General Capital Increase, approved by MlGA's Council of Govemors.3 To date, 51 of MIGA's 154 member countries have subscribed all or a portion of their subscription, for a total of $330 million. I take this opportunity to urge member states to finalize their subscriptions and lead the agency to a successful conclusion of its General Capital Increase subscription period, which ends on March 29, 2002, 50 that the agency may continue, and even expand, its unique and important role in supporting development. June30, 2001 iv multilateral investment guarantee agency wcr d bank group BOARD OF DIRECTORS and alternates, as ofJune 30, 2001 ABDULAZIZ MOHD. YAACOB, Nguyen Doan Hung I GIRMAI ABRAHAM, Richard H. Kaijuka I KHALID M. AL-SAAD, Mohamed Kamel Amr I YAHYA ABDULLAH M. ALYAHYA, AbdulrahmanM.Almofadhi I ANDREIBUGROV,EugeneMiagkov I YUZOHARADA,Atsushi Inoue I NEILFRANCISHYDEN,LewisD.Holden I FINNJ0NCK,AnnaBrandt I MATTHIAS MEYER, Jerzy Hylewski I JEAN-CLAUDE MILLERON, Emmanuel Moulin ITERRIE O'LEARY, Sharon Weber FRANCO PASSACANTANDO, Helena Cordeiro PHILIPPE M. PEETERS, Emin Dedeoglu | STEPHEN PICKFORD, Rosemary Stevenson JAN PIERCY, (vacant) I MOISES PINEDA, Jose H. Machillanda I JAIME RUIZ, Luis Antonio Balduino I AHMED SADOUDI, Inaamul Haque I HELMUT SCHAFFER, Eckhardt Biskup I BALMIKI PRASAD SINGH, Mahbub Kabir I MARIO SOTO-PLATERO, Roberto Garcia-Lopez I PIETER STEK, TamaraSolyanyk I BASSARYTOURE,PauloF.Gomes I GUANGYAOZHU,ChenHuan I multilateral investment guarantee agency wold Dank< grcup v MESSAGE FROM THE EXECUTIVE VICE PRESIDENT a~~~~~~~~ OVERVIEW X Fulfilling its mandate to facilitate productive foreign direct investment into developing countries, MIGA 7 completed another successful year of operations, with strong demand for all its services. We also forged a new strategic path for the future. In fiscal 2001, during the Annual Meetings in Prague, the Council of Governors approved the periodic review of MIGA's activities, which is mandated by its Convention. The "MIGA Review 2000"4 is built on the central pillars of developmental impact, financial soundness, client orientation, and partnerships. Based on an extensive market survey, and in an attempt to intensify MIGA's unique role in the World Bank Group, the review gave greater emphasis to certain "priority areas": Africa, IDA-eligible countries, South-South investments, investments in SMEs , and complex infrastructure projects. These areas have been identified both because of their development impact and because they are not generally supported by other agencies or investment insurers. In the second year of the subscription period for the General Capital Increase, MIGA expanded its activities, both in quantitative and qualitative terms. Following the new strategic direction, significantly more projects were insured in the priority areas. For example, Africa-which accounts for about two percent of FDI flows into developing countries-stands at 12 percent of MIGA's gross guarantees portfolio and more than 13 percent of the net portfolio. To better support its efforts in Africa, MIGA also launched a new Europe-Africa office in Paris. Further reflecting these priorities, 19 of the 28 countries receiving long-term, in-depth technical assistance for investment promotion agencies in the past fiscal year were IDA-eligible. MIGA also introduced a number of new products, both for investors and investment promotion intermediaries. Most notably, we issued first-time coverage for a water project and a performance bond (in Ecuador), and for a capital markets trans- action (in Brazil). The agency also launched new tools for developing country investment promotion intermediaries, such as the Investment Promotion Toolkit and FDI Xchange. MICA published a new, in-depth review of the development impacts of MIGA-guaranteed projects, Investment Insurance and Development Impact- Evaluating MIGA's Experience. The review highlights what has remained constant throughout the changes in MIGA's environment, namely that productive foreign direct investment is crucial to sustained growth in developing countries. To more fully assess the effects of MIGA activities, an independent Operations Evaluation Unit was created during the fiscal year. vi multilateral investment guarantee agency world bank group message from the executive vice president As part of its implementation ofthe COSO exercise,5 designed to improve MIGA's internal controls and risk management, the agency held Control Self-Assessment workshops, in which approximately 90 percent of staff participated. Following up on the workshops, an interdepartmental task force presented recommendations on improving the agency's internal controls, organization, and culture; these were unani- mously endorsed by M IGA management and are being implemented. MIGA is now entering the third and final year of the subscription period of its General Capital Increase, approved by the Council of Govemors in March 1999. As of June 30, 2001, $330 million of the $850 million increase had been received, with con- tributions from 51 member countries. The overall number of MIGAmember countries, meanwhile, increased to 154, as Thailand and the Central African Republic completed the membership requirements. FISCAL 2001 SUMMARY In fiscal 2001, MIGA issued 66 guarantees, covering 46 projects and representing $2 billion of gross issuance. After cancellations, reductions, and replacements, gross exposure increased to nearly $5.2 billion, up 19 percent from fiscal 2000, while net exposure stood at just under $3.2 billion, a 12 percent increase from the previous year These MIGA-guaranteed projects are expected to facilitate $5.2 billion in FDI, bringing the estimated cumulative amount of FDI facilitated since MIGA's inception to more than $41 billion. This year, MIGA provided first-time coverage for projects in Jordan, Panama, and Togo. In total, 78 developing countries have benefited from hosting MIGA-guaranteed projects since the agency began operations. Of particular note have been our efforts in the priority areas mentioned above. Guarantees were issued for 18 projects in IDA-eligible countries; they now represent 3o and 24 percent of the net and gross portfolios, respectively. Eight of those 18 projects were in Sub-Saharan Africa. Twelve guarantee contracts for eight projects were issued to investors from developing member countries (Brazil, Israel, Mauritius, Panama, Singapore, South Africa, and Turkey). In addition, 18 investments into SMEs were supported. Fiscal 2001 has also been a banner year for cooperation with other investment insurers. We mobilized $153 million in additional capacity through the CUP, while adding five new private partners to the program. Overall, 13 private insurers have now become MIGA CUP partners. We also engaged extensively in partnerships with national and private providers of political risk insurance through facultative (project- specific) reinsurance, which mobilized $602 million of capacity. Facultative rein- surance was provided by one official insurer and nine private insurers and reinsurers. Additionally, MIGA continued to benefit from its treaty reinsurance arrangements with ACE and XL insurance companies. Both facultative and treaty reinsurance play a key role in mobilizing additional investment insurance capacity for projects in developing countries and in reducing the agency's exposure. MIGA also worked more broadly with official insurers and development finance institutions, especially from developing countries. We signed Memoranda of Understanding with the People's Insurance Company of China, the Korea Export Insurance Corporation, the Islamic Corporation for the Insurance of Investment and Export Credit of Saudi Arabia, PricewaterhouseCoopers Deutsche Revision AG of Germany, Finnvera of Finland, the Finanzierungsgarantie-Gesellschaft of Austria, and multilateral investment guarantee agency war d bank group vii message from the executive vice president the Export Credit Insurance Organization of Greece. Additionally, the agency provided training at MIGA's offices for staff of eight national insurers. The partnerships with, and training of, investment insurers from developing countries should encourage South-South investments, while collaboration with official finance agencies of developed nations is expected to facilitate investments into SMEs in developing countries. MIGA has also worked closely with the rest of the World Bank Group to maximize synergies and avoid overlap between various service providers. In particular, MIGA has been closely coordinating its provisioning of technical assistance with the World Bank/IFC's Foreign Investment Advisory Service (FIAS) to provide a "one-stop shop" for host country clients. MIGA strengthened its delivery of in-field technical assistance, undertaking some 59 project activities in support of FDI promotion efforts worldwide. The agency convened the Sixth Annual African Mining Investment Symposium in Burkina Faso, marking the first time this international event was held in Sub-Saharan Africa. This unique event brings together interested investors from around the world and relevant government officials from all parts of Africa. New tools for online investment promotion, such as the FDI Xchange and IPAworks, developed this past year, underscore the agency's role as a pioneer in using the Internet to promote FD I flows. By providing instant e-mail notification of potential investment opportunities to investors, FDI Xchange will enable users to immediately link with all relevant information. In addition to completely updating its PrivatizationLink Web site, MIGA also launched a site specifically dedicated to publi- cizing privatizations in Russia (PrivatizationLink Russia). in a joint effort with the Russian government and several other partners. Having paid its first claim at the end of the previous fiscal year, M IGA continued to work with the government of Indonesia and reached an agreement on repayment of the claim. I am happy to report that Indonesia and the agency have been able to come to an acceptable solution that allows the agency to reopen its services, on a case-by-case basis, in that country. Our legal team has also continued to provide investment dispute mediation services to nonguarantee holders. In addition to the six successful resolutions in which the agency has been involved since its inception, MIGA is currently working with the government of Ethiopia to help resolve more than 70 long-standing claims by foreign investors. As MIGA prepares for a new fiscal year, I am confident that our innovations and improvements-involving new products, partnerships and approaches for all of the agency's programs-will lead to better, more effective services for our clients. As a result, we will be able to facilitate more FDI, particularly in the priority areas, and play our part in the fight against global poverty. Motomichi Ikawa June30, 2001 viii multilateral investment guarantee agency -or d b-r group MICA OFFICERS left to right IKARIN MILLETT, Director, Investment Marketing Services GERALD T. WEST, Director, Policy and Evaluations IMOTOMICHI IKAWA, Executive Vice President IROGER PRUNEAU, Vice President, GuaranteesI ANGUS SCRIMGEOUR, Vice President and Chief Financial Officer ITONY WAN, Manager, Central Administration I LUIS DODERO, Vice President and General Counsel multilateral investment guarantee agency worli bank grovp ix A\~~~~~~~~~~~~~~~~ k>~~~~~~~~~~~~~~~~~~~~~Kj w ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~YO' PRODUCING RESULTS During the past year, MIGA continued to provide its clients-investors, investment promotion intermediaries, and the developing countries themselves-with the high- quality products and services needed to promote FDI. Demand for our services, including guarantees, technical assistance, online investment promotion, and investment dispute mediation, has never been greater. And we have answered our clients' call-with record guarantee issuance, especially to poorer countries, and new products that are helping them in very practical ways. MIGA's uniqueness lies in the fact that its sole purpose is to promote productive flows of foreign investment into developing countries. Recognizing that the environment in which MIGA and its clients operate has been changing rapidly (and will continue to change), the agency has focused on a host of innovative efforts-new products, part- nerships, and approaches-designed to improve the efficacy and relevance of its services. These innovations are also consonant with MIGA's efforts to concentrate more intensively on certain priority areas, such as the poorest countries (especially in Africa), investments into SMEs, South-South investments, complex infrastructure projects, and targeted technical assistance for those most likely to translate that assistance into actual FDI inflows. Despite a recent downturn in FDI into developing countries, prompted by a slowing global economy, MIGA's guarantee program again reached new heights in fiscal 2001. The agency issued $2 billion in protection against noncommercial risks for 46 new projects.6 Of these, i8 insured investments into SMEs, 18 were in the world's poorest countries, eight covered projects in Africa, and eight were cross-border investments among developing countries-helping MIGA to fulfill its mandate of facili- tating FDI to promote economic growth in its developing member countries. These projects are expected to account for $5.2 billion in total FDI flows, bringing the total facil- itated by the agency since inception to an estimated $41 billion. Notable new developments induded MIGA's first-time coverage of a capital markets deal, a performance bond, and a water project. The year also saw MIGA offer its first guarantees ever for ventures in Jordan, Panama, and Togo. multilateral investment guarantee agency woldd bank g'oup 1 MIGA in focus The agency opened a new Europe-Africa office during fiscal 2001 to support European investors, especially with respect to investment opportunities in developing member countries in Eastern Europe and Africa, and to collaborate more effectively with Europe-based development agencies. MIGA also signed seven new cooperation agreements with investment insurance agencies and development finance institutions. It expanded its facul- tative reinsurance and cooperative underwriting agreements, as it continued to mobilize partners to boost the availability of political risk insurance and meet its clients' needs. MIGA has continued its leadership role in supporting investment promotion intermediaries in developing countries through technical assistance, advisory services, and online investment promotion instruments. The past year saw growing demand for MIGA's technical assistance services from clients across all regions. MIGA's hands-on technical assistance emphasizes the transfer of best practice in FDI promotion. It takes many different forms, encompassing the range of services required to support investment promotion intermediaries at all stages of development. The new Investment Promotion Toolkit, for example, affords MIGA the opportunity to broaden its outreach by pro- viding a foundation of information that can be used as a reference by investment promotion intermediaries and as an adjunct to the assistance provided. In fiscal 2001, MIGA implemented 59 technical assistance or advisory service projects. In many cases, these projects were multifaceted efforts incorporating strategy development, hands-on training, assistance in information technology, and other elements of service delivery. More than half (20) of the countries receiving technical assistance are IDA-eligible (see box i), the poorest MIGA member countries. A significant portion of the technical assistance activities was undertaken in cooperation with the World Bank Group's private sector units and FIAS. The changing nature of investment flows and the rapid evolution of Internet technology have led MIGA to be particularly innovative in online investment pro- motion. Tools such as PrivatizationLink and IPAworks serve the same overall goal: to provide host country agencies with state-of-the-art instruments for attracting investments. MIGA has also continued to develop and enhance these online services that have earned international recognition, and which enjoy great popu- larity with our clients. MIGA's investor information resources are utilized by more than 25,000 people every month, many from the developing world. MIGA pays 1st claim, signs 500th guarantee As an insurer, MIGA stands ready to pay a valid claim when it is filed. Until recently, however, the agency was able to use its good offices, working with investors and host countries (by definition, MIGA members) to resolve all potential claims situations. Paying its first claim shortly before issuing its 5ooth guarantee highlights the value and popularity of MIGA's guarantees-and its commitment to prudent underwriting of projects that support productive development. MIGA's first claim was paid at the end of the previous fiscal year for a MIGA-guaranteed power project in Indonesia. Since that time, however, the 2 multilateral investment guarantee agency wor d ban, group MIGA in focus country has begun to reimburse the agency for the $15 million claim, and MIGA is once again offering political risk insurance coverage in Indonesia. Shortly after the claim was paid, the issuance of MIGA's 5ooth guarantee spot- lighted the agency's unflagging commitment to reducing poverty by facilitating FDI into those economies investors most often ignore. This $6i million guarantee, to Uni6n Fenosa Internacional S.A., a Spanish investor, for a power project in Moldova, covers investments in the upgrading of three electricity companies, which are expected to help reduce significant power shortfalls and blackouts. The project is an important component in Moldova's efforts to reform its energy sector. boxz LANDMARK PROJECTS EARN HONORS Industry experts gave top marks to MIGA's first coverage of a capital markets transaction (see p. 6) and three other MICA-guaranteed projects in fiscal 2001, showcasing projects that stood out in their com- plexity, innovation, and quality. Receiving four awards was the $1.7 billion refinancing of BCP, the Brazilian mobile telecommuni- cations company, in the region's largest telecomms deal to date. The project, guaranteed in fiscal 2ooo, involves establishing and operating a cellular telecommunications network in the Sao Paulo metro- politan area. It is expected to benefit some 18.5 million people. The transaction involved a diverse group of participants, including export credit agencies, commercial banks, and public and private insurers. Political risk insurance was the lynchpin that enabled BCP to extend its refinancing to five years. The deal was named "Latin American Loan of the Year" by International Financing Review, "Latin American Telecomms Deal of the Year" and "Overall Americas Deal of the Year" by Project Finance magazine, and "Americas Telecomms Deal of the Year" by Project Finance International. The awards were based on such criteria as difficulty of market conditions, innovativeness, and number of players involved. Taking home Project Finance's award for "Latin American Oil and Gas Deal of the Year' was Barracuda, a deep-sea oil and gas production project that is expected to increase Brazil's oil production by about i8 percent and reducethe country's reliance on imports. MIGA provided $72 million in coverage to the project's Japanese and German sponsors and lenders, and facilitated a further $5o million in private political risk insurance through its CUP. The MIGA-guaranteed Julietta mining project also received accolades from Project Finance, which named the undertaking "European Mining Deal ofthe Year." The project, the first Russian mining deal to close in four years, received political risk insurance from MIGA in fiscal 2000. NEW PRODUCTS AND SERVICES: MEETING CLIENT DEMANDS Dramatic changes in the global economy over the past decade have produced new opportunities and challenges for the developing world and for countries in transition from a centrally planned economy to a market-based system. Globalization, instant access to information via the Internet, large-scale privatization schemes and devolution of powers from central governments to regional governments and parastatal entities have combined to produce a far more complex, interconnected world. multilateral investment guarantee agency world bank group 3 MIGA in focus For investors and host countries in the developing world, the untapped opportu- nities are enormous-but the challenges in realizing this potential are also formidable. In addition, investor interest has traditionally focused on only a handful of countries that currently receive the lion's share of FDI flows to the developing world. This means that other countries must first have in place the basic legal and regulatory infra- structure to support investments. They also need state-of-the-art tools and customized training to spread the word to potential investors about investment opportunities in their countries. As the investment marketplace has become more complex and Internet-dependent, so too have the needs of host country agencies involved in investment promotion. Even if investors are aware of these opportunities, however, many of them may perceive the potential noncommercial risks of a project to be too great to consider making the investment without some sort of protection. particularly in the form of political risk insurance. In fact, traditional political risk insurance no longer seems fully adequate for many of the new types of investments being made now-complex infrastructure deals, capital market transactions, privatizations in sensitive sectors such as water, and projects involving regional governments or parastatal companies. During the past year, MIGA has worked hard to develop and launch new products and services that meet the changing needs of our clients and reflect the momentous shifts in FDI flows. Investment Marketing Services: Connecting developing countries to potential investors MIGA has been conceptualizing, developing, and implementing new tools to help developing country clients attract and retain FDI. One such tool is the Investment Promotion Toolkit, which was formally launched at the Sixth Annual Conference of the World Association of Investment Promotion Agencies (WAIPA) in Geneva in February 2ool. The nine-module toolkit is a comprehensive compilation of international best practices in investment promotion, and represents first-hand insights gained during MIGA's 13 years of experience providing technical assistance to emerging economies and developing countries worldwide. MICA developed the toolkit over an 18-month period and field-tested and revised it according to feedback received and knowledge garnered during implementation. The toolkit provides a valuable reference tool for sustaining investment initiatives after completion of MIGA's formal capacity building work. The toolkit is designed for use by a broad range of investment promotion intermediaries. Demand for the toolkit has been tremendous: In March 2OO1, the month following its official launch, it was the World Bank Group's best-selling publication. PROMOTION In response to burgeoning demand from users of its online services for increased TOO L K I T options for receiving investment information, MICA has developed the E, D I Xchla nlge, an e-mail based update service. Piloted this year, the new service offers corporate investors timely and specific information about direct investment opportunities matching their expressed interests-geographic, sector, type, and size of investment- A s a bld in emerging markets worldwide. to lD PRow1" The FDI Xchange notifies potential investors, their advisers, and financial insti- 4 , tutions worldwide of new investment opportunities and business environment infor- mation in developing countries and economies in transition. This information is 4 multilateral investment guarantee agency world barl groUD MIGA in focus sourced directly from investment promotion and privatization agencies, as well as other qualified organizations promoting inward investment. Users of the service * '~: receive regular e-mail updates with links to the full text of the new investment oppor- tunity and links to other relevant data and analysis on the specific country or sector. Another important feature of the service is that investment promotion entities, privatization agencies, and other content providers are able to catalogue their new U 0 ; 0 95, i iinformation resources directly into IPAnet and the FDI Xchange through a secure online interface. MIGA plans an intensive program of short-term assistance to these content providers as it deploys the service. As part of its efforts to help clients bridge the digital divide, MIGA piloted I PAworks this past year. IPAworks is a prepackaged Web site with customizable features, created r * m,+iffi- E specifically for investment promotion intermediaries that lack the in-house capability to establish a professional Web presence. IPAworks has already been used in W0 _i Cambodia, the Lao People's Democratic Republic, and Vietnam. The leaders of - -c..i-... Vietnam's Ho Chi Minh City were so pleased with the IPAworks site that they have translated the entire contents into Vietnamese and developed a sister site that can be a, ,,._,,., ,.,. accessed by domestic investors. Keeping pace with the rapidly developing online investment community, MIGA this year completed the total upgrading of the PrivatizationLink Web site- www. privatizationlink.com. Reflecting feedback on desired features and data from a PrivatizationLink user survey and a user focus group, the new version of PrivatizationLink includes enhancements in site design and navigation, as well as sig- -: tnificant upgrades in content and functionality. ra , , ".< 1 nThe revamped site now offers country fact sheets detailing privatization programs in individual countries. Another new feature is the best practice collection of reports, Pr! - .W, X studies, and articles on trends and leading-edge practices in privatization. To promote interaction among privatization practitioners, users can provide ratings and written feedback on the content presented. Furthermore, the new version includes a Practitioners' Corner, designed to support those involved in structuring transactions and containing a collection of hands-on learning and networking resources, and an Investors' Coiner, which users can personalize to monitor the investment and advisory opportunities according to their sector or geographic interests. For almost two years, MIGA has been working with the Russian government to gather and publish information on the state privatization program online. These efforts culminated with the launch of PrivatizationLink Russia-russia.privatizationlink.com- in October 2000. PrivatizationLink Russia is a joint initiative of MIGA, the government of Russia, and the Canadian International Development Agency (CIDA), and is also supported by the World Bank. It is designed to make information on privatization in Russia more transparent and accessible. For the first time, investors have instant, free access to business profiles of state-owned companies and assets currently for sale in the Russian Federation, along with details on the laws, regulations, and procedures goveming these transactions. Guarantees: Pioneering new insurance tools, entering new markets MIGA also developed new products to meet the changing needs of its guarantee clients. In a move that broke new ground for financing in developing countries, MIGA multilateral investment guarantee agency world bank group 5 MIGA in focus issued a $90 million guarantee for the securitization of loan and lease receivables from the financing of medical equipment in Brazil. The deal marked several important firsts, including MIGA's initial foray into capital markets coverage, as well as Brazils first internationally rated securitization of medical equipment receivables. MIGA issued the guarantee to MSF Funding LLC, which will use the financing proceeds to originate new loans and leases in Brazil, where specialized medical equipment-such as MRI and CT scanners-is in short supply, and much of what exists is obsolete. MIGA proved key to improving the risk profile of the notes and helping the investor secure the financing needed. The Class A Notes received an A2 rating from Moody's Investor Services and an A rating from S&P and Fitch IBCA. According to Moody's Investor Services, the ratings assigned exceeded Brazils B2 rating because of MIGA's presence. The deal also received top honors from Structured Finance International magazine, which named it the year's "Best Securitisation of Emerging Market Assets." With the signing of an $18 million guarantee for a project to provide potable and sanitary water services in Guayaquil, Ecuador, MIGA crossed two other important thresholds. The guarantee marked the agency's first coverage of a water utilities investment and ofa performance bond. The guarantee covers an investment to privatize and upgrade municipal water services, as well as a performance bond posted by the company for the operating con- cession. The bond guarantees the company's delivery of specified services-successful management, expansion, and operation of the water services-within the concession time period. MIGA's guarantee protects against the wrongful call of the bond. The coverage resulted from MIGA's ongoing quest to provide the right products and services to meet client needs. box 3 NEW PUBLICATIONS FOCUS ON RANGE OF MIGA ACTIVITIES To bring MIGA's experiences to a wider audience and promote greater transparency, the agency peri- odically publishes detailed accounts of activities in which it is involved, including information on its cooperation with other entities that facilitate FDI, the impact of its various activities, and the methodologies it employs. This year MIGA published two books, Investment Insurance and Developmental Impacts: Evaluating MIGA's Experience and International Political Risk Management: Exploring New Frontiers. It also released "MIGA Review 2000," which outlines future priorities and strategic directions for the agency. These can all be ordered from World Bank Publications at books@worldbank.org, or through MIGA's Web site (www.miga.org), where readers can also order MIGA's Investment Promotion Toolkit, discussed above. Investment Insurance and Developmental Impacts: Evaluating MIGA's Experience shares thefindings of MIGA's evaluation workwith the interested public. ltfocuses on evaluations of 52 projects guaranteed by MIGA from fiscal 199i-96, and finds that the projects generally met or exceeded their anticipated developmental impacts. In fact, the projects evaluated facilitated $7.1 billion in investment-$S.3 billion more than investors had initially expected to invest when they insured their projects with MIGA. Those same 52 projects also directly created more than 15,500 6 multilateral investment guarantee agency .orld bark g'oup MICA in focus jobs, often in areas of high unemployment or underemployment. Other important effects include increased tax revenues and exports, as well as environmental benefits and training for local workers. The book is especially useful to readers seeking to better understand how private FDI contributes to the development process, as well as for those interested in the methodology of developmental impact analysis. International Political Risk Management: Exploring New Frontiers examines transfor- mations in the political risk insurance market in the 1ggos that resulted from changes in the broader insurance industry and from the rapid and complex expansion of FDI into emerging markets. It brings together the views and experiences of those who shaped the industry in the past decade- as academics and practitioners from the international investor, lender, and insurance communities. The book is a valuable guide for those considering private sector investments and privatizations in the developing world, as well as for independent analysts and scholars in the field of political risk management. "MIGA Review 2000" is the agency's newest five-year review, which is mandated by Article 67 of MIGA's Convention. This strategy paper reviews MGA's activities over the past five years, analyzes key elements of its external operating environment, and develops detailed future strategic directions for the agency. The "multi-niche" strategy described in the paper focuses MIGA on opportunities which only it can serve, orwhich would not be realized without MIGA's involvement. NEW PARTNERSHIPS: WORKING TOGETHER FOR DEVELOPMENT From its earliest days, MIGA has known that, as a relatively small multilateral insti- tution, its ability to deliver the greatest potential impact for developing countries must lie in fostering relations with a variety of partners. This is true for both the guarantees program and for the agency's technical assistance services. The result has been dynamic relations with private and public institutions-relations that grow deeper and broader every year. Sometimes the best synergies are found closest to home. In this vein, MIGA has been working more closely than ever with other members of the World Bank Group to ensure that its activities are well coordinated and serve the common goal of reducing poverty. This includes the joint preparation of country assistance strategies and evaluations, as well as collaboration on a project-specific basis, with IFC and the World Bank. More partners = More FDI flows MIGA's guarantees program has continued to develop partnerships on all fronts. We are proud to have the most far-reaching network of private partners of any public investment insurer. In addition, MIGA has been pioneering hands-on assistance for the growing number of public investment insurers in developing countries, responding to their interest in promoting greater FDI flows within the developing world. During the year, MIGA signed seven Memoranda of Understanding (MOU) with export credit agencies and international financial institutions: the Islamic Corporation for the Insurance of Investments and Export Credit (ICIEC) of Saudi Arabia, Austria's finance and guarantee agency (FGG), Finland's export credit agency multilateral investment guarantee agency world bark g'oup 7 MIGA in focus (Finnvera), People's Insurance Company of China (PICC), PricewaterhouseCoopers Deutsche Revision of Germany, the Export Credit Insurance Organization (ECIO) of Greece and the Korea Export Insurance Corporation (KEIC). This brings the total number of such partners to 18. These partnerships allow MIGA to strengthen cooperation and complement oper- ations with the national entities of member countries, with a view to maximizing the efficiency of respective services. They also allow for cooperation in coinsurance and reinsurance and for jointly providing an array of services to investors. For investors, this collaboration mobilizes increased political risk insurance coverage for longer periods of time, and allows MIGA to provide a one-stop service to meet all guarantee needs. For insurers, these partnerships offer the added comfort of M IGA's involvement in underwriting and in the event of a dispute or claim. Ceremony for MOU on Coopere 2001. 5. 21 jL~~~~~~~~~~~~~~~~~~u' a s-n+ The agreements to collaborate are not just an unfulfilled notion: MIGA and its partners work hard to take the promise from idea to practice. A good illustration of this photos left, Europe-Afr ca Office is the agency's partnership with SIMEST, Italy's development finance agency. The two Director, Christophe Bellinger, recently worked together on a new project in the Slovak Republic, putting into practice speaking at MOU signing with Creek a recent agreement to jointly promote FDI into developing economies. Export Credit Insurance Organization Through its reinsurance and syndication activities, MIGA continued to lead its partners in Athens; center, EVP Motomichi into transactions that they may not have otherwise undertaken. This is illustrated by Ikawa signing cooperation agreerent MIGA's reinsurance of the Osterreichische Kontrollbank (OeKB), Austria's export credit of the Export Credit nsurance agency and new MIGA partner, for a banking project in Bosnia and Herzegovina. and Department ofthe People's Insurance coverage for a tniesinig project in Tanzania by a syndicate of private inrsurers, assembled by Company of China; right. Mr I kawa MIGA and coinsured with Canada's Export Development Corporation (EDC). formal zing agreement with Tai-l,m Throughout the fiscal year, MIGA furthered its relationships with private and Korea Export Insurance Corporat on. public insurance partners such as Lloyd's of London, Chubb and Son, Munich Re, EDC, and Japan's Ministry of International Trade and Industry (EID/MITI). It concluded its first reinsurance agreements with American International Group, Inc. (AIG), OekB of Austria, and Finnvera of Finland. 8 multilateral investment guarantee agency -,, d bank group MIGA in focus MIGA also added five new partners, including four Lloyd's Syndicates, to its Cooperative Underwriting Program (CUP). The CUP is an arrangement wherein MIGA is the insurer-of-record but retains only a portion of the exposure, with the remainder underwritten by one or more private insurers. The product was designed to encourage private insurers to enter transactions that they may not have felt comfortable undertaking alone. Another increasingly important aspect of partnership is the training MIGA photos eft, Mr. Ikawa greeting Dr. provides to representatives of investment insurance agencies and development finance Winfried Braumann, head of FCG, institutions from around the world. MICA uses this training to help promote Austria's finance and guarantee agency, knowledge sharing and capacity building among national agencies, especially those at MOU signing in Vienna; right, MICA from developing countries. The training showcases best practices in political risk staffwith FCC representatives. insurance and information exchange on underwriting techniques and offers a platform for fostering future cooperation and network creation. Last year, MIGA conducted two training programs, attracting participants from eight countries (Austria, Denmark, Italy, Kuwait, Malaysia, Panama, Saudi Arabia, and Thailand). The programs included sessions on country risk analysis, contract drafting, sector-specific underwriting, and online information services on investment opportu- nities in developing countries. This training has enabled attendees to not only liaise with MIGA and the rest of the World Bank Group but also to get better acquainted with other insurers. Forging alliances for improved investment promotion Similar collaboration was evidenced in the new technical assistance initiative announced at the May 2001 Conference on Least Developed Countries (LDC III) in Brussels. A cooperative effort among MIGA, FIAS, the United Nations Conference on Trade and Development (UNCTAD), and the United Nations Industrial Development Organization (UNIDO), the initiative is known as the Multi-Agency Technical Assistance Programme. Under the Programme, participating agencies will provide advice and services covering the full range of policies and activities needed to create an attractive environment and promote inward FDI to selected pilot countries. In each country, collaborating agencies will conduct a needs assessment and supporting inves- tigations required to define the specific elements of the work program. From this assessment, a tailored set of objectives, scope of work, implementation plan, and antic- ipated outcomes will be established, and a detailed cost estimate and collaborative program schedule will be prepared, in partnership with the client country. multilateral investment guarantee agency wor d banK group 9 MIGA in focus MIGA is also working with the private sector in conducting an international survey of factors and trends underlying corporate investment decision-making. MIGA has also photos left, Srilal Perera, MICA's continued to receive support from the Swiss government, which has provided funding ChiefCounsel,sharingtheworkingsof to support its technical assistance efforts in Central Asia, from Japan for Asian and the agency with MICA partners; right, African initiatives, from Canada's CIDA for PrivatizationLink Russia, and from Federica dal Bono, Business Develop- Austria's FGG, which supports the worldwide deployment of MIGA's online services, went Officer, providing additional including FDI Xchange. train ng. Collaborating with other World Bank Group members MIGA has made significant progress in implementing a systematic approach to ensure that foreign investment-related issues play an appropriate role in the World Bank Group's country and overall development strategies. In a joint initiative with the World Bank, MIGA is studying of the role of political risk insurance in fostering FDI into conflict-affected countries. Two case studies are being written on Bosnia and Herzegovina and Mozambique, and will be finalized in the next fiscal year Coordination with IFC in the field has also strengthened considerably, most notably in Asia and Africa. Special arrangements were made with IFC to market MIGA's activities in South Asia and Southern Africa. In India, a local IFC staff member has been marketing MIGA's activities on a part-time basis, and in South Africa, arrangements have been made for a MIGA staff tnember to market the agency's services with IFC's logistical support. The South African initiative has already started to foster closer relationships with new and existing clients, and has brought about a better awareness of MJGA's activities in the region. Likewise, the launch ofthe African Connection Telecomms Databank drew and capi- talized on the strengths of the World Bank and IFC, and of the many African governments involved. MIGA also put to good use the partnerships established in pro- viding its technical assistance to a spectrum of beneficiaries. Worldwide, MIGA is 10 multilateral investment guarantee agency worc ban, group MIGA in focus collaborating with the IBRD and host countries in formulating private sector strategies for Armenia, Cape Verde, El Salvador, Guatemala, Nicaragua, Nigeria, Romania, Senegal, Thailand, and the Federal Republic of Yugoslavia. MIGA has also strengthened its working relationship with FIAS, and has partnered with the group in organizing field work, investment promotion strategy development, and investor facilitation efforts. NEW APPROACHES: STRATEGIC DECISIONS, BETTER OUTCOM ES Perhaps the most difficult undertaking any institution or corporation can engage in is to think differently about how it reaches for its goals. After soliciting input through external and internal reviews, MICA began to make some strategic decisions during the past year that have already produced favorable results and should have a profound longer-term effect on how we can most effectively deliver on our developmental mandate. MIGA Review 2000 provides an in-depth description of this new strategy. Its three main conclusions should be underscored. First, the agency will concentrate on certain priority areas: the poorest countries, especially in Africa; investments into SMEs; coverage for investments among developing countries; complex infrastructure projects; and technical assistance to those most likely to translate that help into FDI flows in the medium term. Since most of these are frontier areas, special efforts and new approaches are needed. Second, the agency will take measures, through internal and external controls, that ensure its operational effectiveness and measure how well it is actually doing in fulfilling its mandate. Finally, the review and the COSO self-risk assessment exercise both suggested that the agency could improve its internal operations by better capturing synergies between departments (see p. vii). Catalyzing agency-wide synergy to spur African investment Over the past year, MIGA has worked to catalyze FDI flows to Africa by maximizing synergy from an agency-wide collaborative effort. The focus has been on selected countries that offer prospects for significant new business. In October 2000, a strategy for this pilot program was defined and is now operational. MIGA's field representation has recently been augmented by a part-time special representative based in Nairobi, Kenya, as well as MIGA's Europe-Africa outreach office in Paris. Ghana, Mozambique, Senegal, and Tanzania were selected as the pilot countries and an interdepartmental team was designated to develop programs for each of them. Country selection criteria included the potential to attract higher FDI flows in the near future and to benefit the most from MIGA's technical assistance activities. In addition to these efforts, Promote Africa (MIGA's field function with offices in Lom6, Togo and Windhoek, Namibia, and other regional representatives) will continue to strengthen business involvement with partners from outside the region. In Ghana, efforts have been made to increase awareness of MIGA's guarantee service, and agency representatives have met with authorities from the new gov- ernment on an upcoming review of the country's investment promotion structure and MIGA's potential assistance in this process. multilateral investment guarantee agency wor d bank grou,p 11 MIGA in focus Following up on FIAS recommendations for the establishment of a new investment promotion agency in Senegal, MIGA, in conjunction with the World Bank, has developed a five-year strategy for that country's agency that will be submitted for funding to the Bank's Board of Directors. A MIGA mobile office visited Senegal in March 2001. In Mozambique, MIGA has identified support needs in investment promotion to develop a program for donor consideration, and support has already been tentatively identified. Finally, for Tanzania, tourism and tourism-related infrastructure have been iden- tified as promising recipients of FDI. A fast-track initiative in the tourism sector, com- prising a stakeholder workshop leading to an investor roundtable, has been agreed to with government authorities and local business leaders. On the basis of a review of the Tanzania Investment Centre and discussions with donors. MIGA developed a capacity building program to support the Centre's restructuring. Reaching our clients: New places ... MIGA expanded its client outreach efforts in fiscal 2001 through a new Paris-based office, complementing its field representation in Tokyo, Bosnia, Southern and East Africa, and Switzerland. The new office is part of the agency's efforts to increase the level of FDI from Europe into developing countries, particularly those in Africa and Eastern Europe. During its first six months, the office has focused on facilitating the underwriting of new projects, especially those involving SMEs, following up on work initiated in a satellite office in Switzerland. In addition, the office is developing new partnerships with bilateral development organizations and stakeholders, as well as member country governments represented in Europe. MIGA also had a field presence, financed by the Policy and Human Resource Development Fund of Japan. in Southern and West Africa. Likewise, the Promote Africa program afforded new opportunities for MIGA to develop and utilize rela- tionships with regional partners in support of outreach and marketing efforts ini- tiated in Washington. A special representative in a staff exchange program with the Common Market for Eastern and Southern Africa (COMESA), and with the Nairobi- based African Trade Insurance Agency (ATI), worked with regional private sector and government representatives to promote the use of guarantees as a means of attracting FD I. Funded by the European Union (EU), a staff member based in Bosnia and Herzegovina continued the agency's collaboration with the European Commission on the joint guarantee trust fund, a partnership begun in 1997 to promote FDI in the formerly war-torn country. MIGA's representative for Asia, based in Tokyo and funded by the Miyazawa Initiative,' helped to develop and administer missions from headquarters to the region. In addition to its more permanent field offices, MIGA conducted road shows and visits around the world as part of its mobile office program. The effort featured seminars and meetings on MIGA's activities in Asia, Latin America, the Middle East and North Africa, Southeast Europe and West Africa. This outreach has enabled MIGA to raise its 12 multilateral investment guarantee agency ,r d bank gr2up MIGA in focus profile and bring about a better awareness of its activities among members of various local business communities, and has been particularly helpful in promoting investments among developing countries. . .. and a new look As part of a comprehensive initiative to strengthen MIGA's impact and reach through * a new look and revamped marketing materials, a new corporate brochure was U I produced and translated into French and Spanish, accompanied by fact sheets on the $>0T / i agency's sectoral and regional impact and investment marketing services. The revised Ul 0 >, / i Investment Guarantee Guide was also translated into several languages, including * Arabic, Chinese, French, German, Italian, Japanese, Spanish, and Turkish. In order to improve client friendliness, the Preliminary Application Form for guarantees was streamlined and made accessible on the Web. New unit to better evaluate M IGA's development effectiveness Since MIGA is first and foremost a development agency, one of the most important questions that it must always address is: What is the developmental impact of MIGA's activities, both at the aggregate and project levels? From the beginning, MIGA has sought to estimate the developmental impacts of prospective guarantee projects. An evaluation framework has evolved, with MIGA reporting its findings to the Board of Directors and to the broader public (see box 3). Evaluation staff also provide input into the guarantee process on whether a given project will likely have a beneficial developmental impact in the host country. Evaluation officers and other staff undertake onsite evaluations of a significant pro- portion of MIGA-guaranteed projects,8 once these have had sufficient time to become operational, to see whether the impacts are actually meeting initial expec- tations; in many cases, the developmental impact was found to significantly exceed initial estimates. The next step in the evolution of MIGA's evaluation efforts was taken at the beginning of fiscal 2001: A separate Operations Evaluation Unit was established. The unit's mandate has been extended to cover not only the evaluation of guarantees oper- ations, but also of MIGA's advisory and technical services. The institutionalization of an independent evaluation function within MIGA will enhance the objectivity, accountability, and feedback of evaluation findings. The unit will be able to work more closely with other parties, both within the World Bank Group and externally, that evaluate developmental impacts; this will add further depth and breadth to MIGA's evaluation efforts. multilateral investment guarantee agency world bank grojp 13 MIGA in focus box4 LOOKING BACK-SPAIPA Frequently, MIGA-guaranteed projects have direct and indirect developmental impacts far beyond what the investors initially anticipated when applying for a MIGA guarantee and beyond requirements of local authorities. These impacts, often discovered during project evaluation site visits, frequently go unheralded because they are usually not captured by standard assessment techniques. A MIGA-guaranteed soft drink bottling project in Brazil, which has acted as a good corporate citizen and undertaken extensive efforts to foster recycling, is a good example of such effects. SPAI PA S/A - INDUSTRIA BRASILEIRA DE BEBIDAS (SPAIPA - S5o Paulo Interior e Parana), Brazil's third- largest soft drink bottler and distributor, operates in the states of Parana and S5o Paulo, primarily in the city of Curitiba. In 1996, SPAIPA benefited from three MIGA guarantees totaling $20.25 million, covering investments by Gribal S.A. of Uruguay as well as loans provided by Lloyds TSB Bank plc and BankBoston to expand the company's operations. The total investment in the expansion was $69 million. That same year, SPAIPA and local recycler LATASA launched a recycling program that has served as a model for other bottlers and has had significant positive impacts on the local communities. Reflecting the innovative approach of both SPAIPA and Curitiba to environmental issues, SPAIPA also developed a highly maneuverable, electric cargo-handling vehicle, called "Ecocargo," that is now being used for dis- tributing drinks in densely populated urban areas. SPAI PA became the first bottler in Brazil to initiate a partnership with local schools, LATASA and the government ofParang. InJune1996, it launched the Escola (School) program in Curitiba, and quickly expanded it to cover three other cities (Maringa, Aracatuba, and S5o Jose do Rio Preto). Currently, more than 1,goo institutions with 300,000 students participate. photos I left,aSPAIPAemployeecol- Under the Escola program, schoolchildren in participating schools collect aluminum cans for lecting recyclables from Escola recycling. SPAIPA collects the cans and delivers them to LATASA. The schools, in turn, receive much- Atua§5o in Curitiba, Brazil; right, a needed equipment for their efforts. The schools choose from a long list of "prizes," which include items student listening to a SPAIPA environ- such as fans, water fountains, copiers, computers, wheelchairs, and sports supplies. To date, the schools mental representative talking about the benefits of recycling. 4% 14 multilateral investment guarantee agency world Dark g,ojp MIGA in focus have received equipment worth nearly $5oo,ooo in exchange for the more than 70 million aluminum cans coilected. When a school enrolls in the program, SPAIPA employees visit the school and explain the program and the environ mental benefits of recycling. This meshes with efforts by the governments of ParanA state and the city of Curitiba to promote environmental awareness from the earliest possible age. SPAIPA's ongoing, innovative efforts are not only contributingto a better environment in S5o Paulo and Parana states, but also to a better understanding of environmental issues, particularly among the segment of society that will be most affected by those issues: the area's children. In addition, through their participation in the program, these children are contributing to improving their schools by earning much-needed equipment for their institutions. 9 multilateral investment guarantee agency wor d bank group 15 "When I joined the Bank on August i, 1983, as general counsel, I was convinced that the need for an international agency to encourage foreign investment was greater than ever. Such investment not only was concentrated in a few countries; its volume had started an his- torical decline. An agency supported by the World Bank and receivingthe full confidence of both capital exporting and importing countries could, in my view at the time, reverse that trend to the In memoriam benefit of both sides. In particular, it could play a significant role by rebuilding confidence in investing in developing countries and by breaking the psychological barrier that magnified political risks... The basic objective of the newly projected agency, to which I gave the name of the Multilateral Investment Guarantee Agency was described in terms ofencouraging and promoting the flow of private resources among members for productive purposes." lS DR. IBRAHIM SHIHATA 1937-2001 This year, MIGA mourns the loss of one of its most important founding fathers, Dr. Ibrahim Shihata, whose inspiration, courage, and determination were instru- mental in the agency's founding. We remember a man of vision who left a profound legacy in his native Egypt, in the Middle East, at the World Bank, and for MIGA. At a very young age, Dr. Shihata emerged as one of the most brilliant legal minds from the developing world, He achieved national acclaim in Egypt after graduating from the Cairo University and Harvard Law School. He was both an intellectual, teaching law, and a successful practitioner of law. He was the legal architect of some of the most far- reaching and significant economic developments in the Middle East in the 197os. His efforts came during a tumultuous time, when much of the world's wealth shifted almost overnight to the oil-producing countries. Dr. Shihata's vision was clear: this vast wealth had to be shared, and shared equitably. This was the basis for his determination to design and create institutions necessary to engineer the distribution of wealth. In 1983, he was appointed Vice President and General Counsel of the World Bank, the first-ever from a developing country. As a result of his indefatigable efforts, in 1985, the Convention establishing the Multilateral Investment Guarantee Agency was opened for signature. With Dr. Shihata playing an important shepherding role, sur- mounting a variety of obstacles and forging important compromises among stake- holders, MIGA commenced operations in 1988. MIGA's staff is grateful to him for his creative spirit, convictions, and perse- verance. In many ways, MIGA's creation was the embodiment of Dr. Shihata's vision. In a broader context, the operations of the agency have improved the lives of thousands of poor people in developing countries, linking their destinies to his ini- tiative and courage. For MIGA, his outstanding contributions shall forever remain a legacy. "Interestingly, the major problem MIGA seems to be facing now, contrary to the initial expectations of many, is that demand for its services by far exceeds its capacity to supply it in full." multilateral investment guarantee agency w-oId bark group 17 x:~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~\ qy,, VA A V, NO~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ v, Ah~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~+~ INSURING INVESTMENTS, ENSURING OPPORTUNITIES Innovation, flexibility, outreach to clients and partners. These are the hallmarks of MIGA's guarantees program, which in fiscal 2001 forged a strategic path focused on promoting investment into the world's poorest countries, in Africa, among developing countries, and in small and medium-size enterprises. This was a path that led to positive results. Fiscal 2001 yielded 66 contracts of guarantee in 28 developing member countries, for an all-time high in coverage. The increase in contracts reflects an effort to underwrite smaller projects with a high developmental impact. These results are also a solid indication of MIGA's commitment to using investment guarantees to encourage FDI-and ultimately improve people's lives and reduce poverty. GUARANTEES REACH RECORD N UM BERS WHILE PRIORITY AREAS SEE PROGRESS MIGA's guarantee coverage once again struck new heights, reaching $2 billion in fiscal 2001 and offering protection against political risks for investments in 28 developing countries. This represents a 25 percent increase in the amount of coverage over the previous year. This number grows to $2.15 billion when con- sidering amounts covered by other insurers through the CUP (see box 6). The out- standing portfolio at the end of the year was $5.2 billion before reinsurance and net of cancellations (see figure 4). Net premium income, fees, and commissions totaled $36.5 million. MIGA issued first-time guarantees for projects in Jordan, Panama, and Togo as it worked to fulfill its goal of regional diversification and to reach countries that have not been significant beneficiaries of FDI. Efforts to promote South-South investments-those among developing countries-also bore fruit: 12 guarantees were issued to investors from Brazil, Israel, Mauritius, Panama, Singapore, South Africa, and Turkey for investments in Brazil, Ecuador, Kazakhstan, Mozambique, Nicaragua, and Vietnam. multilateral investment guarantee agency wo, d bank grcup 19 guarantees program The agency also provided guarantees for 18 projects in support of SMEs. Fifteen guarantee contracts totaling $186 million were issued for projects in Africa. And 26 con- tracts totaling $396 million were issued for projects in IDA-eligible countries: Mozambique (6), Bosnia and Herzegovina (5), Guinea (3), Zambia (2), Togo (2), Albania, Angola, Kyrgyz Republic, Moldova, Nicaragua, Pakistan, Tanzania, and Vietnam (one each). Contracts issued for these projects accounted for 24 percent of MIGA's fiscal year gross issuance (see box i). box 5 WHAT IS THE GUARANTEES PROGRAM? In today's interconnected global economy, businesses increasingly recognize that investment opportu- nities exist in emerging economies. But for multinational companies and small and medium-size busi- nesses alike, concerns about uncertain policy environments and perceptions of political risk often inhibit investment. As a result, FDI tends to go to a handful ofcountries, leavingtheworld's poorest economies largely ignored and many attractive investment opportunities unexplored. MIGA's guarantees program works to address these concerns by offering political risk insurance to investors. Through its investment guarantees, MIGA offers protection against four types of noncommercial risk associated with FDI: currency inconvertibility and transfer restrictions, expropriation, war and civil disturbance, and breach of contract. Guarantees are available for many types of investments going into developing member countries, such as new cross-border investments, multicountry projects, as well as expansions and privatizations ofexisting projects. In the pastyear, MIGA also issued coverage for capital markets transactions and performance bonds for the first time. The agency's top-rated insurance has many other benefits, allowing investors and lenders to venture into new markets with confidence and potentially achieve investment grade ratings or higher for emerging market securities. Financial institutions also benefit by being able to leverage their country limits and thus reduce country risk provisioning and transaction costs. figure 4 GROWTH OF GROSS EXPOSURE, FYgo-ol, US$ M 2001 5,179 2000 4,365 1999 3,676 1998 2,862 1997 2,499 1996 2,277 1995 1,623 1994 1,048 1993 745 1992 421 1991 191 9ggo 132 20 multilateral investment guarantee agency wor d Dank g,o p guarantees program EFFORTS CONTINUE TO DIVERSIFY PORTFOLIO At the sectoral level, MIGA's portfolio saw some modest distribution shifts (see figure 5). In terms of gross coverage, oil and gas projects showed the largest increase, growing from 2 percent of the portfolio in fiscal 2000 to 5 percent in fiscal 2001. The agribusiness and financial sectors also claimed a larger portfolio share, with coverage climbing by 2 percent for each. Coverage for the mining, manufacturing, and services sectors decreased slightly, while infrastructure and tourism stayed just about even. Change was also visible when it came to subsectors. A shift in gross coverage for financial projects reflected the agency's push to support mortgages and loans intended primarily for SMEs, as well as MIGA's landmark coverage for a securitization deal of loan and lease receivables in Brazil. Within infrastructure, the transportation subsector also grew, increasing from just o.i percent of gross coverage in fiscal 2000 to more than 2 percent of the total. Likewise, a glance at the regional distribution of MIGA's portfolio would probably not reveal some of the important changes going on beneath the surface. For years, Latin America has accounted for a large share of the portfolio, and at 57 percent in fiscal 2001 continued to do so. But within the region, Central America and the Caribbean have grown and now total nearly 12 percent of the agency's gross coverage, with new projects being insured in countries such as the Dominican Republic, Guatemala, and Nicaragua. The agency's gross exposure in Africa stayed even at 12 percent, but the number of contracts and projects both grew, reflecting an ongoing effort to support smaller investments in the region. MIGA's commitment is clearly demonstrated by its issuance of 15 contracts for eight projects in Angola, Guinea, Mozambique, Tanzania, Togo, and Zambia. In fact, Tanzania and Mozambique are now the eighth- and ninth- largest countries in MIGA's portfolio, respectively, and together account for 6.7 percent of gross exposure. Even though Asia claimed a smaller share of the gross portfolio in fiscal 2001, coverage there grew in absolute terms. The agency insured two important projects in the region, including a large infrastructure project in the Philippines and telecommu- nications project in Vietnam. The Middle East and North Africa, too, saw an increase in representation, nearly doubling its share of MIGA's portfolio with the Jordan potash project. figure 5 OUTSTANDING PORTFOLIO DISTRIBUTION, by sector, percent, FYol financial 36 infrastructure 30 manufacturing 9 mining 9 services 6 oil and gas 5 agribusiness 3 tourism 2 multilateral investment guarantee agency wor d bark group 21 guarantees program figure 6 OUTSTANDING PORTFOLIO DISTRIBUTION, by host region, FYol 23% Europe and Central Asia Asia and the Pacific 14% Asialandothe Pacific 14% 4 '' ; 0 tw 0 4 | 3t iddle East and North Africa <;; 0 t . . ! aX Sub-Sah~~~~aran Africa .... .. . ~~~12% net % 47% Latin America and the Caribbean gross % 57% Coverage was also strong in Europe and Central Asia, where MIGA issued 19 guarantees for 12 projects in Albania, Bosnia and Herzegovina, Kazakhstan, Kyrgyz Republic, Moldova, Romania, the Russian Federation, and the Slovak Republic. DEMAND INCREASES AS REGIONALAWARENESS GROWS This progress was due in part to the agency's ongoing series of in-depth regional visits, known as its "mobile office" program. In fiscal 2001, MIGA conducted seminars and meetings in Asia, Latin America, Southeastem Europe. and West Africa. This outreach has enabled MIGA to raise its profile and bring about a better awareness of its activities among stakeholders and members of various local business communities, and has been particularly helpful in promoting investments among developing countries. During a visit to the West African countries of Mali, Senegal, and Ghana, MIGA staff listened to many high-level government officials and business representatives discuss local investment priorities and challenges. The key message coming out of the trip was that investment needs to be stepped up for West Africa to develop its full potential, and MIGA is well placed to bring more foreign investors and local businesses together. In addition to the consultation, the group visited project sites sponsored by MIGA and IFC to get a first-hand look at the business operating and investment environment. An agency trip to East Asia and the Pacific Rim took staff experts to eight countries-Australia, Cambodia, China, Japan, the Republic of Korea, the Philippines, Singapore, and Thailand-to talk about the value of political risk insurance for investments in the region and elsewhere. In addition to formal seminars, staff met with representatives of financial institutions, potential investors, and those involved in 22 multilateral investment guarantee agency wor d bank group guarantees program promoting investment opportunities. The trip was particularly timely, given persistent investor concerns in the wake of the financial crisis, as well as untapped business opportunities in the region, as in Thailand, MIGA's newest member country. One of the trip's focal points was to promote South-South investments. A mobile office to Central America and Colombia provided another platform for getting the word out about MICA and its services. The trip came at a good time, given the regions emergence from a two-year recession spawned by the backlash from the global financial crisis of the late 1ggos. Agency staff held seminars on guarantee products for potential investors in Barranquilla, Colombia, and in Guatemala City. In addition, MIGA representatives met one-on-one with investors and companies in those countries as well as in Belize, Costa Rica, El Salvador, Honduras, and Nicaragua. One of the missiorns focal points was to promote investments among developing countries. Follow-up meetings have produced cooperation arrangements to support business development in the region. MIGA completed its outreach activities for the fiscal year with a series of seminars and meetings on the West Coast of the United States and in Greece, Italy, Spain, and Slovenia. The strong support MIGA received from IFC during many of these trips under- scores the close working relationship the agency has developed with the World Bank Group on private sector development. photos I above, women washing clothes on the banks ofthe Niger River in Segou, l Mali. MIGA-supported projects in Africa often convey many development benefits, including access to clean, running water. right, Roger Pruneau, MIGA's Vice President of Guarantees; Mamadou Sidibe, Director General of "Somapil"; William Dadzie, MIGA; Mossadeck Bally, President of the West Africa Enterprise Network; and Bakary Camara, Director General ofSafcar Cecar and Jutheau, visiting a small, locally owned kitchenware factory in Bamako, Mali. multilateral investment guarantee agency wor d bank group 23 guarantees program figure 7 OUTSTANDING PORTFOLIO DISTRIBUTION, by investor country [net covera ge], percent, FYol Netherlands 17.0 United States 16.3 UK and Territories 12.3 Spain 10.1 Austria 7-5 Canada 6.8 Germany 4.5 France 4.3 South Africa 3.7 Japan 3.4 Turkey 2.6 Brazil 2.4 Mauritius 2.0 Israel 1.3 Other* 5.8 Argentmna, Belgiurn, Cyprus, Denmark, Finland, Greece,irdia, Italy, Luxembourg, Nonway, Panama, Portugal, Singapore, Sweden, Switzerland, Uruguay (cr% each) table 2 TEN LARGEST COUNTRY EXPOSURES IN MIGA'S PORTFOLIO, FYoi percentage share of outstanding portfolio host country gross exposure % of gross net exposure* % of net US$ M US$ M Brazil 887.5 1777 31271 9.9 Argentina 693.6 13.4 258.7 8.2 Peru 271.4 5.2 157.4 5.0 Russian Federation 263.5 5.1 144.2 4.6 Ecuador 210.4 4.1 129.4 4.1 Colombia 192.9 3.7 118.9 3.8 Dominican Republic 181.4 3.5 123.1 3.9 Tanzania 175.2 3.4 70.5 2.2 Mozambique 171.3 3.3 129.6 4.1 Turkey 157.9 3.1 87.2 2.8 total 3,206.1 62.0 1,531.1 48.6 * Net oftreaty andfacultative reinsurance. 24 multilateral investment guarantee agency ior d bank grouip guarantees program AGENCY LEVERAGES ITS COVERAGE During the fiscal year, MIGA's reinsurance, coinsurance, and trust funds allowed it to leverage its own coverage to serve more clients, both investors and host countries. Reinsurance and coinsurance Reinsurance continued to be important in reducing the agency's exposure to loss, as well as allowing MIGA to encourage private sector insurers to participate in transactions with a positive developmental impact they would probably not insure otherwise. MIGA's resolution of its first claim ever has greatly rein- forced partners' confidence in its ability to avoid losses by recovering claims and in the value of the "MIGA franchise." Important transactions in fiscal 2001 were supported under the CUP and facul- tative (per project) reinsurance programs. These include an oil and gas project in Brazil that combined a CUP agreement with Chubb and facultative reinsurance by the Lloyd's market; the completion of a gold mine transaction in Tanzania, which constituted the biggest MIGA facultative reinsurance project to date; a manufacturing project in Jordan, for which MIGA concluded its first facultative reinsurance contract with Finnvera of Finland and in which the European Investment Bank and the Islamic Development Bankacted as lenders; and coverage of a loanby Banco Santander Central Hispano to support medium-term financing of SMEs by Banco Galicia in Argentina, for which MIGA concluded its first facultative reinsurance agreement with AIG. box 6 WHAT IS THE COOPERATIVE UNDERWRITING PROGRAM? In 1996, MIGA created a special product to encourage private insurers to offer political risk coverage for projects in developing member countries where insurers may not have been comfortable or willing to offer insurance on their own. Through the CUP, MIGA helps allay insurer concerns by acting as the insurer-of-record and issuing a contract of guarantee for the entire amount of insurance requested by an investor, but retaining only a portion of the exposure. The remainder is underwritten by one or more private insurers. The premium rates, claims payments, and recoveries are all shared on a proportional basis. multilateral investment guarantee agency word banrk group 25 guarantees program table 3 FACULTATIVE REINSURANCE OBTAINED BY MIGA * indicates new partners in FYol investment insurer country ACE Global Markets, Lloyd's Syndicate 2488 UK Alleghany Consortium, Lloyd's Syndicate 376* UK C.N.R. Atkin Esq., and Others, Lloyd's Syndicate 1183 UK Compagnie Fran,aisecd'Assurance pour le Commerce Exterieur (COFACE) France Cox Insurance Holdings PLC., Lloyd's Syndicate 2591 UK Export Credits Guarantee Department (ECGD) UK Export Development Corporation (EDC) Canada Finnvera Plc* Finland Garanti-Instituttte for Eksportkreditt (GIEK) Norway Global Re, B.V., captive insurer of Philips Electronics N.V. Netherlands MGnchener RGckverischerungs-Gesellschaft Germany National Union First Insurance Co. of Pittsburgh (AIG)* USA Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO) Netherlands S.J. Catlin, Esq., and Others, Lloyd's Syndicates 1003 and 2003 UK Sovereign Risk Insurance Ltd. Bermuda Steadfast Insurance Company (Zurich) USA The Goshawk War and Political Risks Consortium, Lloyd's Syndicate 9132 UK XL Brockbank War and Political Risks Consortium, Lloyd's Syndicates 588, 86i, and 1209 UK table 4 FACULTATIVE REINSURANCE PROVIDED BY MIGA * indicates new partner in FYoi investment insurer country Compahila Espanola de Seguros de Credito a la Exportaci6n (CESCE) Spain Export Development Corporation (EDC) Canada Ministry of International Trade and Investment (M ITI) Japan Nordia Insurance Company (Pan Financial, Inc.) USA Osterreichische Kontrollbank A.G. (OeKB)* Austria Overseas Private Investment Corporation (OPIC) USA 26 multilateral investment guarantee agency coUd bark group guarantees program table 5 COOPERATIVE UNDERWRITING PROGRAM PARTICIPANTS * indicates new partners in FYoi investment insurer country ACE Global Markets, Lloyd's Syndicate 2488 UK A.D. Hicks, Esq. and M.H. Wheeler, Esq. and Others, Lloyd's Syndicate 1007* UK A.F. Beazley, Esq. and Others, Lloyd's Syndicate 623* UK Cox Insurance Holdings PLC., Lloyd's Syndicate 2591 UK General Security Insurance Company (Unistrat) USA Great Northern Insurance Company (Chubb & Son) USA Gulf Insurance Company U.K. Limited (Citicorp/Travellers)* UK/USA H.H. Hayward, Esq., and Others, Lloyd's Syndicate 1084 UK Hiscox Syndicates Limited, Lloyd's Syndicate 33* UK Kiln 51o Combined, Lloyd's Syndicate 510* UK S.J. Catlin, Esq., and Others, Lloyd's Syndicates 1003 and 2003 UK Steadfast Insurance Company (Zurich) USA XL Brockbank War and Political Risks Consortium, Lloyd's Syndicates 588, 861, and 1209 UK figure 8 CUMULATIVE AMOUNTS OF CAPACITY MOBILIZED, US$ M facultative reinsurance 2001 1118 525 CUP 2000 516 372 1999 278 115 note: Facultative reinsurance refers only to reinsurance obtained by MIGA. While somefacultative reinsurance and CUP capacity had been mobilized earlier, both programs became mainstream MIGA products in 1999. Hence, all data is cumulative as offiscal 1999. multilateral investment guarantee agency world bank group 27 guarantees program Trust funds MIGA continued to administer two investment guarantee trust funds for Bosnia and Herzegovina and for the West Bank and Gaza to facilitate foreign investment into these areas. Bosnia and Herzegovina Trust Fund In partnership with the European Commission, MIGA established the EU Investment Guarantee Trust Fund for Bosnia and Herzegovina three years ago. As part of this effort, a marketing representative was placed in Sarajevo to raise awareness about MIGA among foreign investors. The representative also played a role in discussing with the Bosnian authorities and inter- national donor community the improvements to and needs of the investment climate. This work paid off with the signing of a guarantee for a project in fiscal 2000, and four more in the past fiscal year: one for investments guaranteed by Austria's export credit agency and reinsured by the trust fund for the Bosnian branch of the Austrian bank OVAG, one by the Raiffeisenbank of Austria, one for an investment by Hypo- Alpe-Adria Bank, also Austrian, and another for a Dutch investment in a medical dialysis facility in the Republika Srpska. Total MIGA and EU coverage of Bosnian FDI exceeds $70 million. The West Bank and Gaza Investment Guarantee Trust Fund This trust fund was created to provide political risk insurance administered by MIGA and in cooperation with the Palestinian Authority. Fund contributors are the Palestinian Authority, the European Investment Bank, and the government of Japan. MIGA has received applications for approximately $20 million in potential new investments in the West Bank and Gaza in infrastructure, manufacturing, real estate, services, telecommunications, and tourism. Southeastern Europe Trust Fund MIGA has been working to establish a political risk guarantee trust fund for Southeastern Europe, with a special focus on SMEs, to be financed by the donor community. THE FUTURE MIGA's challenge in the face of a changing global economy is to remain an industry leader in facilitating FDI that is environmentally, socially, and developmentally sound, especially into those countries that need it most. To do so, MIGA will continue to be innovative and flexible in the types of projects it supports and the products and services it provides, while seeking to mobilize its partners to increase the availability of political risk insurance. Fiscal 2001 saw important developments along these fronts that will enhance the agency's ability to address its strategic priorities. The years ahead will see continued efforts in this regard, including stronger marketing and expanded outreach to inter- national investors through mobile offices and field representation, closer part- nerships and alliances with national and private insurers, and expanded collaboration with the private insurance industry through coinsurance and treaty and facultative reinsurance. 28 multilateral investment guarantee agency wor d ban, group guarantees program table 6 MIGA'S GUARANTEES PORTFOLIO IN IDA-ELIGIBLE COUNTRIES host country gross exposure % of gross net exposure % of net US$ M US$ M Albania 8.6 0.17 8.6 0.27 Angola 21.8 0.42 21.8 o.69 Armenia 2.7 0.05 2.7 0.09 Azerbaijan 40.6 0.78 40.6 1.29 Bangladesh 79.5 1.54 64.9 2.o6 Bolivia 14.6 0.28 14.6 0.46 Bosnia and Herzegovina 46.o o.89 46.o 1.46 Cape Verde 2.2 0.04 2.2 0.07 C6te d'lvoire 12.9 0.25 12.9 0.41 Georgia 2.1 0.04 2.1 0.07 Guinea 51.5 0.99 51.5 1.63 Guyana 30.6 0.59 30.6 0.97 Honduras 14.1 0.27 14.1 0.45 Indonesia 56-5 1.09 53.0 1.68 Kenya 42.2 0.81 23.4 0.74 Kyrgyz Republic 50.7 o.98 45.7 1.45 Lesotho 23.8 0.46 23.8 0.75 Macedonia, FYRof 17.3 0.33 17.3 0.55 Madagascar 1.3 0.03 1.3 0.04 Moldova 63.8 1.23 33.2 1.05 Mozambique 171.3 3.31 129.6 4.10 Nepal 19.1 0.37 11.4 0.36 Nicaragua 80.8 1.56 40.4 1.28 Pakistan 96.8 1.87 80.0 2.53 Sri Lanka 3.2 o.o6 3.2 0.10 Tanzania 175.2 3.38 70.5 2.23 Togo 7.4 0.14 7.4 0.24 Uganda 42.8 0.83 33.3 1.05 Vietnam 20.0 0.39 15.0 0.48 Zambia 33.3 o 64 33.3 1.o6 total (30) 1,232-70 23.80 934.4 29.61 No longer IDA-eligible China 113.1 2.18 80.0 2.54 multilateral investment guarantee agency worid bank gro-p 29 guarantees program table 7 MEMORANDA OF UNDERSTANDING FOR GUARANTEES MIGA and ... date signed Export Credit Insurance Organization, Greece June 2001 Korea Export Insurance Corporation (KEIC), Rep. of Korea May 2001 PwC Deutsche Revision AG December 2000 Wirtschaftsprdfungsgesellschaft (PwC), Germany People's Insurance Company of China (PICC), China N ove mbe r 2000 FINNVERA PLC, Finland October 2000 Islamic Corporation for the I nsurance of I nvestment October 2000 and Export Credit (ICIEC), Saudi Arabia Finanzierurngsgarantie-Gesellschaft m.b.H. (FGG), Austria October 2000 Eksport Kredit Fonden, Denmark May zooo Malaysia Export Credit Insurance Berhad May 2000 SocietA Italiana per le Imprese all'Estero, Italy November 1999 Export Credit Bank of Turkey October1999g Export Finance and Insurance Corporation, Australia May1999g Export, Import and Investment Insurance Department April 1999 ofthe Ministry of international Trade and Industry, Japan ECICS Credit Insurance Ltd., Singapore November 1998 Inter-Arab Investment Guarantee Corporation February 1997 Export-Import Bank oflIndia March 1996 Compagnie Fran~aise pour le Commerce Exterieur, France December 1994 Islamic Development Bank (IDB), Saudi Arabia JUlY1994 photo ITopi Vesteri, Director, Major Customers and Export Credit Cuarantees Unit, Finnvera, and MIGA EVP MotomichilIkawa review the MOU docu ments. 30 multilateral investment guarantee agency orl bank group guarantees program box7 MICA HELPS NEW AFRICAN TRADE AND INVESTMENT PROMOTION AGENCY In its ongoing efforts to support FDI flows into developing countries, and particularly into Africa and among African countries, M IGA has been providing advice and other assistance to the nascent African Trade Insurance Agency (ATI), which is expected to be formally launched in the second halfof2001. ATl's objective is tofacilitatetrade and investment intoAfrica, and from African nations into other parts ofthe developingworld, by providing insurance against a varietyof noncommercial risks. ATI may also provide insurance against commercial risks in Africa. Membership is open to all African countries, with the initiative being launched by Burundi, Kenya, Malawi, Rwanda, Tanzania, Uganda, and Zambia. Other African countries have already expressed interest in joining this new agency. ATI will cooperate with private risk insurers to provide insurance products tailored to the needs of the market, and has appointed a highly respected Lloyd's underwriter as its first managing director. Users are expected to include African and non-African firms and banks selling and financing goods and services to partici- pating African nations, as well as African firms from member states trading with or investing in non- African developing nations. MIGA will continue to support this endeavor by providing ongoing training for ATI staff, sec- ondment of MIGA staff to ATl's Nairobi headquarters, and support of ATl's membership drive. The World Bank, for its part, will provide credits to participating countries to back up ATI-issued insurance policies. By addressing head-on the risk perceptions of firms doing business in Africa, this African-led initiative is an important step in increasing the continent's share of FDI flows to developing countries, which has remained low, despite significant economic liberalization. multilateral investment guarantee agency wor d Dank group 31 guarantees program GUARANTEES ISSUED IN FISCAL 2001 All projects insured by MIGA in fiscal 2001, grouped by region and country, are described on the following pages. Asia and the Pacific W#4YJC>j PAKISTAN Habib Bank AG Zurich (Habib Bank AG Zurich Pakistan) MIGA has provided a guarantee to Habib Bank AG Zurich for its equity investment in its Pakistan branches. The guarantee is for $2.7 million and provides coverage against the risks of transfer restriction and expropriation of funds. Habib Bank AG Zurich is already present in Pakistan, with seven branches in locations around the country, and offers general banking products, financial advisory services, and capital market trans- actions. This investment will allow Habib Bank AG Zurich to expand and diversify the services already offered, and to broaden its coverage by opening two new branches. MIGA has provided similar guarantees to Habib Bank AG Zurich twice in the past. The project is expected to produce significant developmental benefits. It will expand the availability of financing to SMEs, and lower the costs of financing by increasing competition in the financial services industry. It will also broaden the range and quality of banking services, by introducing new technologies, such as ATM machines and electronic banking. The project will require hiring approximately 25 new staff, for whom extensive training programs will be provided. An estimated $0.7 million is expected to accrue to the government in annual tax revenues. PHILIPPINES EGIS Projects S.A. Westdeutsche Landesbank (West LB) (Manila North Tollway Corporation) MIGA is providing guarantees totaling $87 million to EGIS Projects S.A. of France for its equity investment and to a syndicate of banks led by West LB for a loan to the Manila North Tollway Corporation. Coverage is against the risks of transfer restriction, expro- priation, and war and civil disturbance. Recent economic prosperity has accelerated motorization and demand for mobility in Manila, causing severe traffic congestion and environmental problems. One of the area's key arteries is the North Luzon Expressway, which is in urgent need of repair. The project involves widening and rehabilitating 82 kilometers of the expressway, Southeast Asia's oldest toll road. Also participating in the undertaking are IFC, Asian Development Bank, EFIC (Australia's export finance agency), and COFACE (France's export credit agency). The refurbished highway is expected to move industrial traffic away from heavily congested areas and improve traffic flows. This will allow for more rapid movement of goods and people between Metro Manila, the economic zones of Subic and Clark, the international airports of Manila and Clark, the international port of Manila, and several other important industrial zones in the area. A number of 32 multilateral investment guarantee agency worid banl g,au guarantees program multipurpose complexes are already being built along the highway corridor to take advantage of the high traffic volume out of Metro Manila. Additionally, the project will contribute to the reduction of vehicle operating costs and provide increased road safety. During the two-year construction period, the investment is expected to create 1,ooo temporary jobs. VIETNAM France Cables et Radio Vietnam Pte. Ltd. MIGA issued $1o million in guarantee coverage to France Cables et Radio Vietnam Pte. Ltd. for its nonequity direct investment, via a business cooperation contract, with the state-owned Vietnam Post and Telecommunications agency. The guarantee is pro- tecting the investor against the risk of transfer restriction. The contract calls for the two companies to work together-on a build-and- transfer basis-to construct, install, and maintain at least 540,000 new fixed telephone lines in East Ho Chi Minh City over a 15-year period. The project area should see a major boost in the number of lines per person (teledensity) by 2003, with an increase of 20,000 lines in the city's rural outskirts. Teledensity, currently at 5 percent, is expected to reach 21 percent by the project's completion in 2005. The project sponsor also plans to spend about $1 million a year to train local staff. @JC O'S0 Europe and Central Asia ALBANIA Commercial Bank of Greece S.A. (Intercommercial Bank S.A. Albania) MIGA provided the Commercial Bank of Greece S.A. with a $7 million guarantee to cover its equity investment in the Intercommercial Bank S.A. Albania, one of its sub- sidiaries. The investment will be protected against transfer restriction, expropriation, and war and civil disturbance. The project will introduce a number of financial services previously unavailable in Albania, an IDA-eligible country. Currently, the bank has only one location, in Tirana, but other branches and offices are planned. The project will broaden the range and quality of financial services in Albania, especially in project finance, trade finance, and money market activities. It will also increase the availability of medium- and long-term capital to SMEs and retail firms, and provide them with lower costs of funding. The target for these services includes small and medium-size domestic firms and domestic retail companies, as well as foreign companies. The project supports the government's financial sector reform and privatization program, and is expected to provide training to its 6o new local employees. multilateral investment guarantee agency world bank group 33 guarantees program BOSNIA AND HERZEGOVINA International Dialysis Centers B.V. (International Dialysis Center Banja Luka DOO) The project, marking the first foreign investment in the Bosnian health sector, is for the creation and management of a renal dialysis facility in the city of Banja Luka. MIGA provided two guarantees, totaling $1.3 million, to the International Dialysis Centers B.V. of the Netherlands. The first guarantee is for an equity investment in the International Dialysis Center Banja Luka in Bosnia and Herzegovina, covering the risks of expropriation, and war and civil disturbance. The second guarantee covers obligations of the Health Insurance Fund and the Republika Srpska for the provision of dialysis services, protecting the investor against breach of contract. The European Union Investment Guarantee Fund, administered by MIGA, is providing additional coverage. Renal dialysis treatment is an acute problem in Bosnia and Herzegovina, and the new facility is expected to provide high-quality dialysis scrvices for up to a fourth of all dialysis patients living in the Republika Srpska. The project uses state-of-the-art medical equipment, which is helping to improve life expectancy and quality of life for dialysis patients. As the treatment center is located within an existing hospital, the latter will benefit from refurbishment of the premises for the new facility. In addition, the project will supply a medical waste and water treatment unit, and is already pro- viding extensive technical, medical, and managerial training to staff of the new facility. BOSNIA AND HERZEGOVINA Hypo-Alpe-Adria Bank AG (Auro Banka dd) MIGA issued two guarantees to Hypo-Alpe-Adria Bank for an equity investment in, and shareholder loan to, Auro Banka in Bosnia and Herzegovina. The equity investment will be covered against the risks of expropriation, and war and civil disturbance; the shareholder loan will be covered against transfer restriction, expropriation of funds, and war and civil disturbance. MIGA's exposure totals $21.9 million. The European Investment Trust Fund will also cover up to $1.8 million. With this project, Auro Banka intends to expand and diversify its services, which include trade, corporate finance, and retail banking in 26 branches throughout the Federation of Bosnia and Herzegovina and the Republika Srpska. The project will contribute to restructuring the country's financial sector by improving the quality and diversity of financial products and by increasing the number of Western European banks in the region. Such an expansion will be conducive to a greater degree of regional integration. Specifically, SMEs in the agriculture and construction sectors will gain access to lower-cost financing. In addition, Auro Banka will contribute an estimated $0.5 million in annual tax revenues and provide extensive training programs for approximately 15 new staff each year over the next three years. 34 multilateral investment guarantee agency woald bark group guarantees program BOSNIA AND HERZECOVINA Osterreichische Volksbanken AG (Volksbank BH dd) Osterreichische Volksbank AG opened its doors for business in Sarajevo last summer The project is insured through the Osterreichische Kontrollbank, Austria's main financial and information service provider. MIGA has underwritten the $2.7 million reinsurance as administrator of the European Union Investment Guarantee Trust Fund. Volksbank BH's activities will include consumer loans, short- and long-term business loans (targeting SMEs), financial leasing, credit cards, and international and local payments. The guarantee provides coverage against the risks of transfer restriction, expropriation, and war and civil disturbance. In the aftermath of the civil war, a competitive source of private financing is needed to facilitate the transition to a market-based economy. As the first Western European bank in-country, the project will have a significant developmental impact, helping to increase consumer confidence and improve the standards of local banks, particularly the quality and diversity of financial products. It will also provide access to the banking sector for SMEs, which have suffered from a lack of financing in recent years. Moreover, the project will contribute about $1.25 million annually to the government in the form of profit taxes, duties, and royalties, and is expected to create 78 new jobs. BOSNIA AND HERZEGOVINA Raiffeisen Zentralbank Osterreich AG (Raiffeisenbank dd Bosnia and Herzegovina) MIGA issued a guarantee of up to $3.8 million in coverage for a shareholder loan by Raiffeisen Zentralbank Osterreich AG for the development of Raiffeisenbank dd in Bosnia and Herzegovina. The project will finance the development of Raiffeisenbank's operations throughout the country, making it the first foreign bank to have activities in the Federation of Bosnia and Herzegovina and in the Republika Srpska. The coverage is for the risks of transfer restriction and expropriation of funds. Coverage of up to $1.8 million is also being offered under the MIGA-administered European Union Investment Guarantee Trust Fund. The project supports the country's focus on accelerating the privatization of banks and enterprises and reforming the financial sector. These priorities are key to stimu- lating the private sector development and reconstruction needed to help the country continue on its path of post-war recovery. Specifically, the project aims to help facilitate the economic integration of the entities, offer a full range of banking services to local SMEs, and to introduce new banking methods and technology to the country. multilateral investment guarantee agency wold bark grojp 35 guarantees program KAZAKHSTAN Fintur Holdings B.V. Financials Pamukbank TA$ (GSM Kazakhstan OAO Kazakhtelecom LLP) MIGA issued further guarantees totaling $23.5 million for equity investments and two shareholder loans provided to GSM Kazakhstan by Fintur Holdings B.V. of the Netherlands and Pamukbank TA$ of Turkey. MIGA's gross exposure under the project, including the guarantees issued in 1999, is $32 million. The project entails the expansion of existing digital cellular technology in Kazakhstan and extension of services into previously underserved areas. The project will contribute to the development of modern telecommunication services in Kazakhstan using the GSM (Global System for Mobile telecommunication) network. The expansion also includes the integration of Internet and satellite and data transmission services. MIGA will support an increasingly important and growing sector in the Kazakhstani economy, while consumers will benefit from the availability of high- quality telecommunication services. The Kazakhstani GSM subscriber base is expected to increase to 460.ooo by year-end 2001, from 141,000 at the end of 2000. MOLDOVA Uni6n Fenosa Internacional S.A. (Red ChijinSu, S.A.; Red Centru, S.A.; and Red Sud, S.A.) A $61.1 million guarantee is giving Uni6n Fenosa Internacional of Spain protection against the political risks of transfer restriction, expropriation, war and civil dis- turbance, and breach of contract for investments in the upgrading of three newly pri- vatized electricity distribution companies in Moldova. The project is expected to help reduce power shortfalls and blackouts that until recently disrupted service delivery up to eight hours a day in some parts of this Eastern European country. The guarantee, MIGA's second for a project in Moldova, covers part of an investment by Uni6n Fenosa. which bought the electricity distribution companies from the government in February 2000. The purchase was part of an energy sector overhaul engineered by the World Bank and the Moldovan government to help revive the economy in a country where more than half the population lives on less than $1 a day. The IFC and the European Bank for Reconstruction and Development are both lending $25 million to the project. The project's chief thrust is to reduce technical and commercial energy losses- resulting mainly from poorly maintained equipment and low levels of bill collection- that have made the companies financially unsustainable and led to unreliable power supply. Investments will focus on metering and a state-of-the-art customer man- agement and billing system. Infrastructure and technology improvements are expected to lead to decreased carbon dioxide emissions. The project is expected to have a significant impact on the lives of Moldovans, and will be an important component in Moldova's efforts to reform its energy sector. 36 multilateral investment guarantee agency orbd bark group guarantees program ROMAN IA Raiffeisen Zentralbank Osterreich AG (Banca Agricola S.A.) Raiffeisen Zentralbank Osterreich AG of Austria received a MIGA guarantee for its equity investment in Banca Agricola S.A. in Romania. The $47.7 million guarantee, which covers the investment against expropriation, will allow Raiffeisen to further develop its activities in Romania. Under the development plan, the bank will both expand current services and enlarge the number of banking services it offers to small and medium-size businesses, as well as to retail customers. Banca Agricola, the third largest branch network in the country, is expected to help broaden the range and quality of commercial banking services and provide lower costs of financing. Through worldwide cooperation agreements linking Raiffeisen Zentralbank and numerous commercial banks, the project should enhance the inflow of F DI into Romania. An estimated $10 million will accrue to the government over the next three years in the form of taxes and dividends. ROMAN IA Osterreichische Volksbanken AG (Volksbank Romania S.A.) Osterreichische Volksbanken AG has received a eioo million MIGA guarantee for a shareholder loan to expand the operations of its wholly owned subsidiary, Volksbank Romania S.A. The coverage offers protection against the risks of transfer restriction, expropriation, war and civil disturbance, and breach of contract. Facultative reinsurance of C35 million was obtained. RUSSIAN FEDERATION Victory Oil B.V. (ZAO Stimul) Victory Oil B.V. receiveda $ioo million guarantee from MIGAforits equityinvestment in the joint stock company ZAO Stimul. The guarantee will protect the investment against transfer restriction, expropriation, and war and civil disturbance. Half of the guarantee is covered by facultative reinsurance. The project involves the expansion of an oil field located in the southern Ural Mountains, near the city of Orenburg. State-of- the-art drilling and processing equipment will be installed to develop oil and gas reserves. Production is expected to reach 30,ooo barrels of oil a day by 2004. The modern equipment installed will increase production and introduce new safety standards. All of the produced gas will be sold locally; some of the oil will be exported. The Russian government will receive an estimated $42.5 million in annual taxes, 6o percent of which will go to the local government. The investment is expected to create 648 highly paid temporary construction jobs in the Orenburg city area. multilateral investment guarantee agency woK d ba-r group 37 guarantees program RUSSIAN FEDERATION Louis Dreyfus Negoce S.A. (Louis Dreyfus Vostok LLC) Building on last year's support of an investment by Louis Dreyfus N6goce S.A., MIGA provided an additional $5 million guarantee for the company's loan to Louis Dreyfus Vostok. This brings total MIGA exposure for the project to $20 million. The guarantee will support a recently established agricultural trading company in Russia, offering coverage against the risks of transfer restriction, expropriation. and war and civil disturbance. The project involves the promotion of efficient local distribution channels for wheat and sunflower oil, reducing the current wastage of thcse two products. Approximately 95 percent of all goods and services will be procured locally. The project is expected to create 75 new jobs and provide training in logistics, international trade, and market-risk analysis. SLOVAK REPUBLIC MarioBoselli Yarns S.p.A. (Twista sro) An Italian business broke ground on a project in the Slovak Republic one year after MIGA and Italian development finance agency SIMEST agreed to jointly promote FDI into developing economies. Support for this project is the result of a Memorandum of Understanding signed by the two agencies in November 1999, which put a special emphasis on working with SMEs. The project involves the expansion and modernization of a company, Twista Sro, for producing and processing synthetic yarn in Humenne, Slovak Republic. MIGA has issued a $713,000 guarantee to MarioBoselli Yarns S.p.A. (MB Yarns), covering the investment against the risks of transfer restriction and expropriation. S I MEST helped fund the project by providing a portion of the equity needed for the capital increase. Twista allows MB Yarns to draw on the Slovak Republic's relatively skilled labor force and low production costs. Production is expected to increase by about 40 percent to 2,500 tons per year for Twista alone, and may lead to higher production for other Slovak businesses that use the factory. Exports to Poland and the Czech Republic, as well as Italy, are expected to see a significant jump. In addition to creating new jobs, mostly for women, in a region affected by high unemployment, the project will make an extensive contribution to technology transfer by bringing state-of-the art machinery into the country's synthetic textile industry. 38 multilateral investment guarantee agency wor d ban< group guarantees program 'at>i ~¶QJLatin America and the Caribbean ARG ENTINA Banco Santander Central Hispano S.A. (Banco de Galicia y Buenos Aires S.A.) Banco Santander Central Hispano S.A. of Spain received two MIGA guarantees-one for $48 million and one for $11 million-for its shareholder loans to Banco de Galicia y Buenos Aires S.A., one of Argentina's largest banks. The coverage is for the risks of transfer restriction and expropriation of funds. The guarantees are covering two projects in support of Banco Galicia's efforts to enlarge its SME and mortgage programs at competitive rates and terms. By lowering the costs of longer-term financing, the projects are expected to improve the ability of agribusiness, manufacturing, and healtbcare companies to expand their production facilities and increase output. Banco Galicia employees will receive special training programs related to the above financing. In addition, the projects will provide mortgage financing of up to 30 years. They are expected to generate approximately $4 million in tax revenues over the next five years. ARGENTI NA Dresdner Bank Lateinamerika AG Hamburger Hafen- und Lagerhaus AG (Exologistica S.A.) MIGA is providing $4.2 million in guarantees for an equity investment by Hamburger Hafen- und Lagerhaus AG and a loan by Dresdner Bank Lateinamerika AG for Exologistica S.A., an Argentine logistics company. Both guarantees offer coverage against the risk of transfer restriction. The company's services include transportation, warehousing, logistical administration, and specialty services such as labeling, packaging, and stamping. The investments will allow the company to buy and refurbish additional premises to expand its operations. The project will contribute to Argentina's efforts to streamline and modernize its transportation and logistic services industry. The company aims to increase produc- tivity and lower transaction costs to its clients by offering "just-in-time" and "low-stock" delivery methods by using electronic data information links. Since a significant portion of Exologistica's services are targeted at MERCOSUR countries, the project will con- tribute to the regiorf s economic integration. Approximately 50 new jobs will be created and extensive training for professional and technical staff will be provided in-house and at local universities. ARGENTINA Hamburger Hafen- und Lagerhaus AG Kreditanstalt for Wiederaufbau (KfW) (Exolgan S.A.) MIGA issued guarantees to Hamburger Hafen- und Lagerhaus AG and to KfW, acting on behalf of a group of commercial banks, for their investment and loan to Exolgan multilateral investment guarantee agency orld bar, grojp 39 guarantees program S.A., a container terminal enterprise. The investment is covered against the risk of transfer restriction, and the loan against transfer restriction and expropriation of funds. Total MIGA gross exposure is up to $26.9 million. The project involves the con- struction of a logistics park-"Parque Logistico Sur"-south of Buenos Aires, which will serve as a central facility for providing logistics services to local and international import-export companies. The project encompasses four new warehouses, operational infrastructure, and an office building at the container terminal. When complete, the park will contain 11o,ooo square meters of warehouses, some of which will be fully automated, climate controlled, and bonded. The project will help lower the high costs associated with providing logistics services to local and international import-export companies. Exolgan S.A., in coop- eration with other companies, is expected to have a significant social impact in the eco- nomically disadvantaged neighborhoods adjacent to the project site, by improving the living and working conditions through the provision of approximately 6oo new houses. The project is expected to create 16o jobs, and an additional 200 during the construction of each warehouse. An extensive training program will be implemented onsite for the positions created. As a significant portion of goods handled by Exolgan S.A. are trade transactions between MERCOSUR countries, the project is expected to support regional trade. ARGENTINA Banco Santander Central Hispano S.A. (Banco Rio de la Plata S.A.) A $30 million MIGA guarantee was issued to Banco Santander Central Hispano S.A. of Spain for its shareholder loan to Banco Rio de la Plata S.A. The guarantee protects against transfer restriction and expropriation of funds. The agency will cover an addi- tional $70 million through its Cooperative Underwriting Program. The project aims to increase financing at competitive rates for mortgages and SMEs in Argentina, with 8o percent of the loan to be used to increase the availability of medium- and long-term financing. The project will also provide a wide range of financial services to local, regional, and international clients. The mortgage program will support the purchase, construction, and rehabilitation of residential houses for individuals and the acquisition of business premises for cor- porations. It will also improve the ability of companies operating in the manufacturing sector to expand their production facilities and increase output. The project will con- tribute an estimated $0.3 million to local authorities in annual tax revenues. ARGENTI NA Banco Santander Central Hispano S.A. (Banco Rio de la Plata S.A.) Banco Santander Central Hispano S.A. receiveda $200 million MIGA guarantee for its shareholder loan to Banco Rio de la Plata S.A., offering protection against the risks of transfer restriction and expropriation. Of this amount, $150 million is being reinsured. The project will support the expansion of Banco Rio's operations in Argentina, following up on a guarantee issued earlier in the fiscal year. The undertaking focuses 40 multilateral investment guarantee agency -r d ba- gr^up guarantees program primarily on small-scale mortgage lending in the form of long-term finance to indi- viduals and corporations, and aims to expand financing to SMEs. The investment holds significant development potential. Banco Rio de la Plata S.A. is one of just two banks in the country to offer 3o-year residential mortgages. With the investment, the project enterprise should be able to substantially increase the number of mortgages it can offer, particularly to its primary client base of low- to middle-income households. Banco Rio de la Plata S.A. will also be able to provide better rates on its loans to both individuals and corporations, enabling more people to buy homes and small and medium-size businesses to grow. The project is expected to pay about $2 million a year in taxes. _ BRAZIL t __:<-MSF Funding LLC (MSF Trustee Ltda) MIGA issued a $90 million guarantee to MSF Funding LLC (MSF) in its first coverage of a capital markets issue, and the first internationally rated securitization of Brazilian loan and lease receivables from the financing of medical equipment-marking a milestone for both MIGA and Brazil. The guarantee covers floating-rate notes issued by MSF Funding LLC, whose parent company, MSF Holding Ltd., provides loan and lease financing for the supply of high technology diagnostic imaging and radiation therapy equipment to hospitals, physician groups, and clinics throughout Latin America. The notes are based on the company's future leasing revenues and secured by US dollar-denominated financing contracts in Brazil. The guarantee will protect MSF's ability to convert funds generated in local currency into U S dollars and to transfer them outside the country, as well as guaranteeing the company against expropriation of its Brazilian bank accounts. The project aims to address the shortage of adequate spending on health care. 4 i ii k .MSF is using the financing proceeds to originate new loans and leases in Brazil, where specialized medical equipment is in short supply and much of what exists is obsolete. The equipment being financed includes magnetic resonance imaging, computed tomography imaging scanners, and other medical devices, which will help improve the quality and cost-efficiency of the country's health care services, particularly for cancer patients. The project is expected to have many other developmental benefits, including the training of local medical staff in the equipment's use and an estimated contribution of $io million a year in taxes to the Brazilian government. photos I top, a technician at Santa Paula MIGA proved key to improving the risk profile of the notes and helping the Hospital, SJo Paulo, Brazil, analyzing investor secure the financing needed, enabling the issue to be rated above Brazils local feedback from an MRI scanner made available through a MIGA-guaranteed and foreign currency ratings. The Class A Notes received an A2 rating from Moody's project; bottom, Dr. George Schahin Investor Services and an A rating from S&P and Fitch IBCA. The Class B Notes were right, chief owner and administrator of rated Baa2 and BBB respectively, and the Class C Notes received a BB rating. The Santa Paula Hospital, and Dr Sergio guarantee was reinsured with eight Lloyd's of London syndicates and with the Franco demonstrate the capabilities of Netherlands Development Finance Co. (FMO). FMO is also a shareholder in MSF surgaeons to operate on taors and Holding Ltd., together with IFC, and Philadelphia International Equities. other cerebral problems with no incision, no blood, and no side-effects. multilateral investment guarantee agency world bank group 41 guarantees program BRAZIL Deutsche Bank AG New York Branch Itochu Corporation Mitsubishi Corporation (Barracuda-Caratinga Leasing Co., B.V.) MIGA is providing a $72 million guarantee for investments by Itochu Corporation, Mitsubishi Corporation, and Deutsche Bank AG in two deep-sea oil and gas production facilities in the Campos Basin, Brazils largest offshore oil and gas reserve. The agency is providing an additional $48 million in coverage through its Cooperative Underwriting Program. The guarantee covers the investment against the risks of expropriation and transfer restriction. Japan's Ministry of International Trade and Industry (EI D/MITI) has also issued coverage for a syndicated commercial bank loan. The project entails the construction of floating production, storage, and offloading facilities in the Barracuda and Caratinga oil and gas production fields located about 8o kilometers off the coast of the state of Rio de Janeiro. The investment will expand capacity by building on infrastructure that is already serving the Campos Basin. The facilities will be owned by Barracuda-Caratinga Leasing Co., B.V. and operated and maintained by Petrobras, Brazil's national oil company. By leasing the facility, Petrobras has been able to reduce its financing burden, which has improved its financial position and thereby facilitated its partial privatization. Project construction began in July 2000, with oil delivery projected in 2003. The project will increase the energy generation capacity and availability of domestically produced oil and gas for the Brazilian petrochemical and energy industries, and is expected to increase the oil processing and production capacity of the Campos Basin by about 300.000 barrels a day. An estimated $1 billion in oil imports will be substituted a year, since all production outputs are destined for the local energy market. The project will create about 3,000 jobs during the construction phase and 300 jobs during the operational stage. Extensive training will be provided. BRAZIL ECI Telecom Ltd. (Global Village Telecom Ltda.) MIGA provided ECI Telecom Ltd. of Israel with a $20 million guarantee for its loans to Global Village Telecom Ltda. (GVT) in Brazil. The guarantee offers protection against the risks of transfer restriction, expropriation, and war and civil disturbance. The project involves the construction and operation of a fixed line telephone network in the central and southern regions of Brazil. GVT is a facilities-based integrated communications provider offering state-of-the-art voice, data and Intemet-related services to corporations and other customers in the center-south of Brazil. GVT is licensed as the second carrier in its concession area and is deploying an ultra-modern hybrid wireline and fixed wireless network to execute its strategy. The project will provide cost-efficient and reliable telecommunication services to cities and remote communities, thereby substantially increasing teledensity. GVT is cur- rently employing 1,500 Brazilian nationals, and will increase to approximately 2,500 in the next several years, offering extensive training. Additional employment will be created through external labor and subcontractors for the construction and maintenance of the infrastructure. The project should generate an average of $ioo million in taxes a year. 42 multilateral investment guarantee agency hcr d bank gr^up guarantees program BRAZIL Citibank, N.A. (Light Servi,os de Electricidade S.A.) A MIGA-guaranteed project is working to upgrade electricity services in power- strapped Brazil, providing safe, legal power connections throughout Rio de Janeiro, including in low-income communities. The $23 million guarantee went to a bank syndicate led by Citibank N.A., covering part of a loan to Light Servi,os de Electricidade S.A. against transfer restriction and expropriation. The project is expected to improve transmission and distribution by establishing and upgrading power networks and installing transformers and meters. :~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. .. ... .. ... The project calls for the supply of power to 176,ooo additional households and photos I MICA guarantees are helping 250 industrial customers. In coordination with the local govemment and NGOs, Light Light Servicos de Electricidade S.A. also has a special program (PRONAI) to upgrade conditions in low-income areas, provide power connections throughout where safety hazards such as electrocution are rife, and to provide essential services at Rio de Janeiro, including in low-income an affordable cost. The recent power crisis has added a new urgency to the program, communities where safety hazards which in 2000 reached out to about 150,000 new low-income clients. By 2005, Light abound, as in Rocinha, pictured here. expects to be present in 728 slums and 594 low-income communities. For slum residents, the program provides a steady, safe source of power and helps document proof of residence, necessary for getting a telephone and establishing credit. Through the program, Light also works to increase both the quality and quantity of educational programs at the local level, through scholarships, training activities, and the donation of computers and hardware to local schools. BRAZIL Mitsui & Co., Ltd. Mitsui&Co. (U.S.A.), Inc. (Furukawa Industrial S.A. Produtos E1ectricos) MIGA has issued a $5 million guarantee covering a shareholder loan made by Mitsui & Co. (U.S.A.), Inc., a subsidiary of Mitsui & Co., Ltd., to Furukawa Industrial S.A. Produtos Eletricos in Brazil. MIGA's guarantee covers the loan against the risks of multilateral investment guarantee agency wcrld bank grouo 43 guarantees program transfer restriction and expropriation of funds. Furukawa owns several cable manufac- turing facilities in Brazil. The loan covers the expansion, modernization, and enhancement of the company's facility, one of the most modern manufacturing facilities for telephone, electronic, and optic cables in the country. The loan will enhance the company's ability to support the ongoing improvement of Brazils information technology infrastructure through the use of fiber optic technology by providing faster and inexpensive data communication links. Along with creating technology transfer opportunities, the project will increase the number of Internet service providers, multimedia service operators, and voice communication service providers, leading to wider Internet access in the country. An estimated 70 percent of the raw materials used in production of the fiber will be purchased locally. BRAZIL Banco Santander Central Hispano S.A. (Banco do Estado de Sao Paulo S.A.) MIGA issued a $200 million guarantee to Banco Santander Central Hispano S.A. for its shareholder loan to Banco do Estado de S5o Paulo S.A. (Banespa), offering pro- tection against the risks of transfer restriction and expropriation. $150 million of the guarantee was syndicated in the private market. The project supports the expansion of Banespa's operations in Brazil. Under the project, 50 percent of the loan will go into the expansion of mortgage lending-primarily loans to individuals who wish to purchase, construct, or renovate residential buildings, as well as loans to corporations for the purchase of business space. The rest of the funds will enable Banespa to offer lower-cost financing to SMFs, particularly in the agricultural and manufacturing sectors, enabling them to acquire new machinery and equipment. The project will thereby contribute to the expansion of production facilities and the output of companies in these sectors. It is also expected to generate approximately $1.2 million in annual tax revenues. COLOMBIA Banco Santander Central Hispano S.A. (Banco Santander Colombia S.A.) A $1oo million MIGA guarantee was issued to Banco Santander Central Hispano S.A. for its shareholder loan to Banco Santander Colombia S.A. The guarantee will protect the loan against transfer restriction and expropriation of funds. A quarter of the guarantee is being covered through facultative reinsurance. Banco Santander Colombia, a key provider of financial services in the country, offers a plethora of financial products and services at more than a hundred branches and customer service locations throughout the country. The financing will help the bank expand its loan service program to offer low-cost, medium-term financing to SMEs. As a result of the project, Colombian SMEs, especially in the manufacturing sector, where they are most active, will be able to acquire new machinery and equipment. The project will thus help increase output. Simultaneously, the improved availability of sources of financing will increase competition and ameliorate the quality of the financial sector. This project supports the consolidation and restructuring of the banking sector 44 multilateral investment guarantee agency /or cd bank group guarantees program and plays an important role in diversifying MIGA's Colombian portfolio, which cur- rently consists of two active projects, both in the infrastructure sector. COSTA RICA Wings of Papagayo, LLC (Grupo del Istmo de Papagayo, S.A.) A $16.4 million MIGA guarantee is protecting an equity investment in a Costa Rican development project against the risk of transfer restriction. The project involves the development of a 210-room resort set on approximately 120 acres of the Papagayo Peninsula in the country's Pacific northwest province of Guanacaste. The hotel is part of a much larger government program to develop the peninsula's tourist potential, which includes plans to develop residential, hotel, and commercial venues. MIGA's guarantee is for the resort's construction and expansion. The project is expected to generate considerable government revenues and be a significant foreign exchange earner. Some 500 jobs will be created during the con- struction phase and more than 340 permanent local positions thereafter. A budget of $3.5 million is allocated for training onsite and abroad. The resort will rely on local building materials, and an estimated 70 percent of products will be purchased locally, notably agricultural produce, providing income to a considerable number of local entrepreneurs. DOMINICAN REPUBLIC Coastal Corporation Coastal Aruba Investor N.V. (Coastal Petroleum Dominicana S.A.) MIGA is providing $23.9 million in guarantees to the Coastal Corporation (recently merged with El Paso Energy), protecting both a loan guarantee and an equity investment in Coastal Petroleum Dominicana S.A., a Dominican gas provider, against the risks of transfer restriction, expropriation, and war and civil disturbance. The project consists of the construction of an onshore bulk-liquid terminal for the receipt, storage, and distribution of liquefied petroleum gas and diesel fuel. Fuel for cooking and heating is in short supply in the Dominican Republic, and the project is expected to meet close to 40 percent of domestic demand for gas products. Most of the spare parts and consumables required for the ongoing operations will be procured locally. The project is expected to generate 200 local jobs during the construction phase and 17 during the operational stage. For the latter, extensive training will be provided in the operations of the terminal. multilateral investment guarantee agency wo'Il bark group 45 guarantees program ECUADOR International Water Services (Guayaquil) B.V. (International Water Services Guayaquil Interagua C. Ltda.) MIGA achieved several firsts with the signing of an $i8 million guarantee for the rehabilitation and expansion of water services in Guayaquil. Ecuador. The project represents MIGA's first coverage of a water project and of a performance bond. The guarantee offers protection against the risks of expropriation and war and civil disturbance for an investment by International Water Services B.V. of the Netherlands in an Ecuadorian subsidiary. It also covers a performance bond-posted in accordance with the 30-year concession-that guarantees the company's successful management. expansion, and operation of the water services, against the risk of wrongful call. The investment aims to improve the services and operating performance of the existing municipal water utility, especially to poor areas that have little access to potable water and poor sanitary conditions, by reducing the amount of water that is unac- counted for and increasing cash collection. During the first five years of the concession, improvements must be made in the quality of water services, as well as in the number of potable water and sewage connections. Service coverage is expected to increase by 30-40 percent. The new project is expected to help improve health and living con- ditions for the local population, while reducing the cost of water for those who currently rely on other sources of water. ECUADOR Construtora Norberto Odebrecht S.A. (Hidropastaza S.A.) Construtora Norberto Odebrecht of Brazil received a $150 million MIGA guarantee for its loan guaranty to BNDES (Brazirs national economic and social development bank) for its loan to Hidropastaza S.A. The guarantee covers the risk of breach of contract, with an additional amount is to be covered under the CUP. The project involves the construction and operation of a run-of-river hydroelectric plant, called San Francisco Hydroelectric, southeast of Quito. The 230 MW power plant will be located almost entirely underground, with water from a nearby river fed to generators via an under- ground tunnel. Electricity generated at the plant will be sold either on a spot basis in Ecuador or through short-term purchase agreements with public and private organi- zations. The hydroelectric project is expected to significantly help the country's power sector expand its capacity, leading to a reduction in the average energy price in the wholesale market and helping to alleviate current bottleneck problems. The project will play a pilot role in the sector's privatization. Major savings will result from the plant as the energy will substitute for expensive fossil fuel imports. Moreover, the project will have a positive downstream effect on industries heavily dependent on power, such as cement plants and steel mills. The project is expected to give priority to the use of local labor, infrastructure, and services during construction. Hidropastaza will generate about i,5oo jobs during the construction phase and approximately 70 local permanent positions thereafter. Employees will receive extensive training, both in Brazil and Ecuador, using advanced technology. Over the first five years of operation, an estimated $27 million will accrue to the government in the form of taxes and dividends. 46 multilateral investment guarantee agency wor d ba2S grkup guarantees program ECUADOR Dole Food Company, Inc. (Bananapuerto Puerto Bananero S.A.) MIGA guaranteed a shareholder loan from Dole Food Company, Inc., to the Ecuadorian company Bananapuerto Puerto Bananero S.A. The guarantee, MIGA's first for a project in Ecuador's transportation sector, offers $15.4 million in coverage against the risk of expropriation. The project involves the construction and operation of an international port on the island of Trinitaria, needed to handle the country's growing fruit exports. The planned port will contain fully modernized equipment and will be accessible by two major highways. The new port operations will initially provide approximately 300 construction jobs in an area of high unemployment. Thereafter, an estimated 235 new local jobs will be created for the handling of bulk and containerized shipments to the area. Once operational, the new facilities will allow for increased exports, estimated at $200 million annually, thereby boosting the availability of foreign exchange and supporting the dollarization process, as well as sustaining the growing and vital fruit export sector in Ecuador. Moreover, it may provide an incentive for an increase in fresh produce farming. The new port facilities should help attract other foreign investors. GUATEMALA Uni6n Fenosa Internacional S.A. (Distribuidora El6ctrica de Oriente S.A.; Distribuidora El6ctrica de Occidente S.A.) MIGA is providing insurance coverage for the privatization of two state-run power distribution companies in Guatemala. The $96.6 million guarantee was extended to Uni6n Fenosa Intemacional S.A., of Spain, for its equity investment in and loan to Distribuidora El6ctrica de Oriente S.A. and Distribuidora Electrica de Occidente S.A. The project involves the purchase of 85 percent of shares in the two companies. In addition to assuming management and operational control, the project will help support Guatemala's rural electrification program, a major strategy to address economic imbalances arising from the dearth of electricity in rural areas. The guarantee is protecting the project against the risks of transfer restriction, expro- priation, and war and civil disturbance. By assisting in the implementation of the government's rural electrification program, the project will contribute to the expansion of services to more than 220,000 new customers in underdeveloped areas of Guatemala that have suffered from power shortages and blackouts. The privatization will allow for increased electricity distri- bution without a substantial addition of generating capacity and for a significant improvement in the delivery of service. The increased reliability and efficiency of power distribution is expected to foster overall economic activity in Guatemala. Moreover, the transfer of skills and technology will result in enhanced customer service, widespread use of metering, and the installation of modern information systems. multilateral investment guarantee agency wor d bank group 47 guarantees program NICARAGUA Bank Hapoalim B.M. (Ormat Momotombo Power Company) MIGA continued its support for the Ormat Momotombo Power Company in Nicaragua with the issuance of a $63.3 million guarantee to Bank Hapoalim of Israel for its loan to the power company. MIGA guaranteed an equity investment in the project last fiscal year. The insurance covers the project against the risks of transfer restriction, expropriation, and war and civil disturbance. The project involves the rehabilitation and expansion of an environmentally friendly geothermal power generation plant and associated facilities. The project expects to offer electricity at a lower cost than most competitors, helping to lower the weighted average cost of electricity in Nicaragua. The upgrades, introducing additional capacity, will also bring the project into compliance with modern industry environmental standards. The plant will pay approximately $11 million in taxes and procure 90 percent of its goods and services locally. PANAMA Lloyds TSB Bank plc (Lloyds TSB Bank plc Panama Branch) MIGA broke new ground with its $3.3 million guarantee to cover a loan by Lloyds TSB Bank plc to expand its Panama branch. The coverage, MIGA's first for a project in the country, will help the branch extend the repayment terms of the shareholder loan, which will then form part of a syndicated loan to a power generation company in Panama. The guarantee offers protection against the risks of transfer restriction, expro- priation, and war and civil disturbance. The project's goal is to refinance a short-term facility, provide additional working capital, and finance some capital expenditures related to the upgrading of existing pro- duction facilities. The financing is expected to help the power company strengthen its balance sheet and make it less dependent on rolling over short-term debt, while helping to develop the country's overall financial sector. PERU Mitsui & Co. (U.S.A.). Inc. (Mitsui del Peru S.A.) Mitsui & Co. (U.S.A.), Inc. is making an equity investment in Mitsui del Peru S.A., which MIGA is insuring, along with future dividends. MIGA's $1 million coverage is against the risks of transfer restriction and expropriation of funds. The infusion of new capital will allow Mitsui del Peru, a trading and investment firm, to extend its activities in the country, and in particular will enable it to participate in the privatization of Peru's transportation sector that is currently underway. The increase in Mitsui del Peru's activities will contribute directly to the growth of the Peruvian economy. The company's trading activities currently generate approxi- mately $i1o million a year through exports to Japan, North America, and Europe. The additional capital is expected to enable Mitsui del Peru to increase this export business by 3 0 percent. Through its investment activities, the company will also be contributing to the privatization of state-owned enterprises, as well as to the establishment of new ventures in the country. The project is expected to increase the annual tax revenues Mitsui del Peru pays to the govemment to more than $1.25 million, as well as indirectly assist in job creation in Peru. 48 multilateral investment guarantee agency wor d bank group guarantees program a OJ)"2cJ Middle East and North Africa JORDAN Kemira Danmark A/S (Kemira Arab Potash Co., Ltd.) A new MIGA-supported project is on track to begin producing fertilizer and animal feed supplement in Aqaba, Jordan, marking the agency's first coverage for a project in that country. The $39.1 million MIGA guarantee will protect an investment by Kemira Danmark A/S of Denmark in the Kemira Arab Potash Co., Ltd. The coverage is for two shareholder counter-guaranties provided to its affiliate company, Kemira Agro Oy of Finland, for guaranties to the project financiers (the European Investment Bank and the Islamic Development Bank). MIGA is protecting the investment against the risks of transfer restriction, expropriation, and war and civil disturbance. The project is significant in many ways, not least of which is the international collaboration involving numerous parties. As MIGANs first project in Jordan, it also underscores the agency's intent to play a larger role in the region. The deal is the first reinsurance of a MIGA contract by Finnvera, Finland's investment insurance agency. The collaboration is the result of an October 2000 agreement between the two agencies to work together to coinsure and reinsure projects, with the goal of increasing Finnish investment into emerging economies. The project consists of the construction of a new plant to produce and export a spe- cialty fertilizer and an animal feed supplement. Minerals from the Dead Sea and Eshidiya region will provide the primary product input. The project enterprise plans to annually export 150,000 tons of potassium nitrate (fertilizer) and 75,000 tons of di- calcium phosphate (animal feed supplement). MIGA expects the project to create an estimated 140 jobs, benefit directly from advanced technology and generate an average of $54.5 million of fertilizer exports during the first five years of operation. The project will also supply fertilizer to the local market. photo I a project manager points out the Kemira/jordan project site. multilateral investment guarantee agency wor d bank group 49 guarantees program Sub-Saharan Africa @JC ANGOLA Desco A.B. (Desco Angola Lda.) MIGA is providing a $1 million guarantee to Desco A.B., a Swedish construction company. The guarantee covers an equity investment in Desco Angola Lda. against the risks of war and civil disturbance, as well as expropriation. The project entails the construction, ownership, and management of an office building in the Miramar district, located in central Luanda, where there is a significant shortage of quality office space. This is the agency's fourth guarantee for a project in this IDA-eligible country. This SME will employ approximately 40 local people during the construction phase and will contribute to raising the overall construction standards in Luanda. Other externalities include the development of related businesses associated with maintenance and repairs. The building is expected to generate more than $200,000 in tax revenues for the government of Angola during the first five years of operation. Approximately 8o percent of all goods and services will be procured locally. GUINEA Agro-Industrial Investment and Development S.A. (Soci6t6 des Grands Moulins de Guin6e S.A.) MIGA issued a $9 million guarantee for a shareholder loan made by Agro-Industrial Investment and Development S.A. of Panama to Societ6 des Grands Moulins de Guinee S.A., a mill that produces flour for local distribution and bran for export. This follows previous contracts issued by MIGA for the initial equity and debt investments in the project enterprise. The new coverage is for an additional shareholder loan to restructure and refinance the project's debt. It offers protection against the risks of expropriation, and war and civil disturbance. The flour mill, the only one in the country, helps offset the need to import flour. In addition, the project is employing local workers, providing staff training, and initiating community involvement through university training programs and local sports events. The project is also benefiting local flour distributors and users by providing cheaper, fresher flour, saving about $4 million a year in imports and generating export and foreign exchange revenue. 50 multilateral investment guarantee agency wor d bank group guarantees program GUINEA Guinea Investment Company Ltd. Banque Belgolaise, S.A. Rand Merchant Bank Westdeutsche Landesbank (West LB) (Alumina Company of Guinea Ltd.) MIGA provided a $40 million guarantee to Guinea Investment Company Ltd. for its investment in Alumina Company of Guinea Ltd. MIGA also provided a guarantee to Banque Belgolaise, Rand Merchant Bank, and West LB for their loans to that company. The guarantees are protecting the investments against the risks of war, civil dis- turbance, and breach of contract. Another $40 million in coverage is provided through the Cooperative Underwriting Program. The project includes a bauxite mine, an alumina plant, captive electricity and water utilities, and a 144-kilometer railway linking the project site to the Conakry port. Alumina Company of Guinea is one of Guinea's major mining projects and the only alumina-producing facility in Africa. It will service $27 million of Guinea's government-guaranteed external debt in the first five years and generate more than $100 million in export revenues annually. The operation is the main employer (about 2,000 employees) in Fria, a town of about 70,000 people that was created around the plant. Residents of Fria depend on the mine and production operations for their supply of potable water, electricity, and medical assistance. Moreover, the project supplies housing to employees and their dependents, a locally staffed hospital, and other important social benefits, such as roads and schools, and extensive employee training. Almost a quarter of goods and services will be procured locally. This is MIGA's second project in Guinea, an IDA-eligible country. MOZAMBIQUE Banque Nationale de Paris (BNP Nedbank Mo,armbique SARL) A $4.5 million MIGA guarantee is supporting an equity investment and a shareholder loan from Banque Nationale de Paris to BNP Nedbank Mo§ambique SARL. The guarantee offers coverage against transfer restriction and expropriation of funds. The investment will be used for the creation of a corporate and trade finance facility, which will open up lending to more applicants. In the wake of the civil war and recent floods, banking facilities are key to sup- porting the country's reconstruction efforts. By expanding BNP Nedbank's oper- ations, the project will strengthen the financial sector and provide additional long- term finance to firms in leading industrial sectors. Training programs, new computer systems, and the introduction of best practices are expected to raise local banking standards. multilateral investment guarantee agency wor d bank group 51 guarantees program MOZAMBIQUE Industrial Development Corp. of South Africa Ltd. Sena Development Ltd. Sena Holdings Ltd. Societ6 Marromeu Ltd. (Companhia de Sena SARL) A new MIGA-guaranteed project is expected to help rehabilitate and partially privatize Mozambique's largest sugar estate, creating thousands of jobs and generating significant economic and social benefits in the country's Marromeu region. MIGA is - _ extending $65 million in investment insurance to the "Sena Group"-a consortium of Mauritian companies-and to the Industrial Development Corp. of South Africa Ltd., covering their equity investments, management and technical assistance contract, and _ loan for the project. The project entails the 75 percent privatization, rehabilitation, and management - of the former Sena Sugar Estate, which was severely damaged during Mozambique's L- . prolonged civil war. Combined with infrastructure improvements, the change should lead to the production of 100,000-125,000 tons of raw and refined sugar a year, helping the country raise its production capacity to about a third of pre-war levels. The investment, located on the Zambezi River, will involve the development and farming of 1,0ooo hectares of cane fields. The project will be the largest economic development undertaking and main employer in northern Mozambique, which has attracted little FDI. Companhia de Sena SARL will be the country's leading sugar producer, selling about 70 percent of its sugar domestically and 30 percent abroad. An estimated 8o,ooo-loo,ooo tons a year of imported sugar could be substituted by this project, thereby guaranteeing a reliable domestic supply. Transportation (road and water) infrastructure will be built. Other developmental benefits include the establishment of potable water points, the electrifi- cation of the Marromeu village, and the upgrading of a local school and hospital. M I GA is guaranteeing fees paid by the project enterprise for technical assistance to - -' management and transfer of technology services. TANZANIA Barrick Cold Corp. of Canada (Kahama Mining Corp. Ltd.) photos MlGA's guarantee is covering an A new MIGA guarantee will help tap the potential of Tanzania's underdeveloped Fnvestment to rehabihtate and partially pr<- vat ye Mozambique's largest sugar estate. mining sector, helping the country diversify its economy. In fiscal 2001, Barrick Gold Shown above are the factory boiler dyke, and Corp. of Canada received a $56.3 million MIGA guarantee for its investment in an roofundergoing repairs. underground gold, silver, and copper mine in Tanzania. Private insurers are providing facultative reinsurance. The insurance will cover the investment against the risks of transfer restriction, expropriation, and war and civil disturbance. Canada's Export Development Corporation is coinsuring the project. The project involves establishing and operating a mine and mill complex. Over the life of the mine, the project is expected to annually produce 420,000 ounces of gold, 240,000 ounces of silver, and 3.8 million kilograms of copper Innovative approaches are being taken to dispose of tailings, using paste technology and backfilling in the underground mine. 52 mualtilateral investment guarantee agency rld ba- group guarantees program The investment will contribute to the development of the country's infrastructure. Communities surrounding the plant will benefit directly through improved access to potable water drawn from the water pipeline being constructed by the project sponsors, the availability of electrical power to local households, and the development of roads. The project created approximately 1,500 jobs during construction and more than i,ooo new jobs to operate the facilities. Under agreement with the government, the project enterprise will prepare and carry out an effective employment and training program for its Tanzanian employees in each phase and at all levels of operation. The project will pay an estimated $75 million in taxes, royalties, and duties to the government during the initial 15 years and procure some $1o million a year in local goods and services. TOGO Joseph Fermon Banque Belgolaise, S.A. (Societe Cotonni&e des Savanes S.A. [SOCOSA]) In its first project in Togo, MIGA is providing Banque Belgolaise and Joseph Fermon, chairman of the Continental Eagle Corporation, the world's largest cotton equipment manufacturer, guarantees totaling $7.4 million. The guarantees are against the risks of expropriation, and war and civil disturbance. They cover an equity investment and loan to a cotton concession, Societe Cotonniere des Savanes S.A. (SOCOSA). The project, which is a new cotton ginning facility, seeks to promote exports from Togo under the Free Trade Zone Act, and supports the government's strategy of increasing economic growth in the north of the country. It will constitute the country's sixth cotton ginning factory and the largest agribusiness in the north. It will export all of the cotton produced and is expected to generate more than $6o million in foreign exchange earnings over the next five years. With approximately 195 employees, SOCOSA will be one of the main employers in the Dapaong area, and its operations will positively affect the livelihood of the local population. A comprehensive onsite and offsite technical training program will be implemented. The project is also expected to stimulate numerous downstream local businesses, including a cotton oil refinery. ZAMBIA Mitsubishi Corp. (Marunouchi Motors Ltd.) MIGA issued $2.4 million in guarantees for Mitsubishi Corp.'s investments in Marunouchi Motors Ltd. in Zambia. The guarantees cover the investment against the risks of war and civil disturbance, transfer restriction, and expropriation of funds. The project plans to expand a car dealership in Zambia, an IDA-eligible country. The facility expansion and modernization is expected to help improve the country's limited transportation resources, allowing the company to provide vehicles to local residents and enterprises, as well as governmental institutions in Zambia. The investment will help the project enterprise broaden its customer base, as well as improve its after-sales services, and thereby ultimately benefit consumers. The expansion is expected to result in the hiring of 125 local workers during the con- struction phase and lo additional permanent staff thereafter. Special courses will train technicians on how to service new vehicle models. multilateral investment guarantee agency wor d bank group 53 -  -6 - --- I MICA'S GUARANTEE CLIENTS * denotes clients with multiple MIGA guarantees ABB Kraft AS Cadbury Schweppes pIc* ABN AM RO Bank* Capital Indonesia Power I C. Aegean Free Zone, L.L.C. C.A.S., S.p.A. Afriproduce Ltd.* Catalina Lighting, Inc. Agro-Industrial Investment and CCB Management Services * Development, S.A. * Chase Manhattan Bank Alimenta, S.p.A. China Capital Development Corp.* American Cyanamid Co. Chiyoda Corp. * Anglo American Corp. of South Africa Citigroup Inc.* Anmercosa Mining (West Africa) Ltd. Coastal Corp. * Anglogold Ltd Coca-Cola Co.* Anglovaal Mining Ltd. Cogen Technologies Inc. Atlantic Commerical Finance, B.V. Commercial Bank of Greece, S.A. * Avon Cycles Ltd. Companhia Brasileira de Projetos e Obras Azertel Telekominikasyon Ve Dis Ticaret A.S. Conservation Tourism Ltd. Cooperatieve Centrale Raiffeisen- Balkcem Ltd. Boerenleenbank B.A. (Rabobank Nederland)* Banco Santander Central Hispano S.A.* Construtora Norberto Odebrecht S.A. Banff Resources Ltd.* Credit Lyonnais, S.A. Bank Austria Creditanstalt Leasing GmbH Cyprus Climax Metals Co. Bank Hapoalim B.M. * Bank Kreiss A.G.* Desco A.B. Bank of America, N.A. Deutsche Bank AG Banque Belgolaise, S.A. * Dole Food Company Inc. Banque de Commerce et de Placements S.A. Dresdner Bank AG* Banque Europeenne pour l'Amerique Latine Drummond Co., Inc. (BEAL) S.A. Dunriding Company, N.V. Banque Indosuez * BNP Paribas* ECI Telecom Ltd. Barge Energy, L.L.C. EAC/Turkey International Enterprise Inc. Barlows Tractor International Ltd. * Efes International B.V. * Barrick Gold Corp. EGIS Projects S.A. BCH International Puerto Rico, Inc. El Paso Energy International Co. * Beekay Engineering & Castings Ltd. Empresas Comegua, S.A. Bell Atlantic Investments, Inc. Endesa International, S.A. BHP Copper, Inc. Energy Investors Fund 11, L.P. Boeing Capital Corp. Enka Holding Yatirim A.S. BWF Unternehmensbeteiligungen GmbH* Enron Corp. multilateral investment guarantee agency wor d bank group 55 guarantee clients MIGA'S GUARANTEE CLIENTS (cont.) * denotes clients with multiple MICA guarantees EPED Holding Co. International Water Services, B.V. * ERI Holdings 11 Internationale Nederlanden Bank, N.V. Erste Bankder Osterreichischen SparkassenAG Italian Technology& Innovations S.r.l. Eskom * Itochu Corp. Faisal Finance, S.A. Jari Peltokangas FleetBoston Financial Co.* Joseph Fermon Fintur Holdings B.V. France Cables et Radio Vietnam Pte Ltd. Kemira Danmark A/S * Kimberly-Clark Corp. Ge.Por.Tur. sas Kintbury Investments Ltd. Greenwood Mills, Inc. Ko,bank A.S. Gribal S.A. Komatsu Ltd. Guinea Investment Co. Ltd. Kreditanstalt for Wiederaufbau Kvaerner Energy A.S. Habib Bank A.G. Zurich * Hamburger Hafen-und Lagerhaus AG * Lloyds TSB Bank, Plc Harris Advanced Technology Sdn. Bhd. Louis Dreyfus Negoce, S.A.* Holding Savana, S.A. * Honeywell, Inc. Magma Netherlands, B.V. Hydra-Co Enterprise, Inc. MarioBoselli Yarns S.p.A. Hydro-Quebec International, Inc. Marriott International, Inc. * Hypo-Alpe-Adria Bank AG Marubeni Corp. * Mediaone International Holdings, Inc. IBA, B.V. Mediocredito Centrale Illinova Generating Co. Meeco International Co. Ltd. Imperial Group Ltd. * Mees Pierson N.V. Impregilo, S.p.A. Mercurat Beteiligungs GmbH Industrial Development Corp. of Mersey Docks and Harbour Co. South Africa Ltd.* Middenbank Cura,cao, N.V. ING Bank, N.V. * Midland Bank, plc Ingersoll-Rand Co. Minorco, S.A. Interface Asia Pacific, Inc. Mitsubishi Corp. * Interfima, B.V. Mitsui & Co. Ltd. * International Dialysis Centers, B.V. * Motorola, Inc. * International Energy Partners, L.P. MSF Holding Ltd. International Paper Co. 56 multilateral investment guarantee agency world ban grouD guarantee clients MIGA'S GUARANTEE CLIENTS (cont.) * denotes clients with multiple MICA guarantees .... .... . ... . .... ....... .. -..... ................ Natexis Banque Sithe International, Inc. New Arian Resources Corp. Sociedade de Empreitadas Adriano, S.A.* Newmont Gold Co. Societe de Promotion Financiere et Nissho Iwai Corp. d'lnvestissment, S.A. * Noranda Inc. Societe Generale, S.A. * Nordic Power Invest A.B. Societe Marromeu Ltd. Standard Bank London Ltd. Osterreichische Volksbanken AG Starlight Telecommunications Ltd., L.L.C. Ormat International Inc. * Statkraft SF Sumitomo Corp.* Pamukbank T.A. * Sunnen Products Co. Parmalat, S.p.A. Philips Electronics, N.V. Teck Corp. .. .......... ... ..... .. ... Promofin Outremer, S.A. The Bank of Nova Scotia * Puerto Seco, S.A. The Fuji Bank Ltd. Purolite International Ltd. Tilda Holdings Ltd. * photo I Luis Dodero of MIGA and Kay Touton S.A.* McKeough ofEl Paso Energy visiting the Radisson Hotels International Inc. MIGA-guaranteed ECKG power plant in Raiffeisen Zentralbank Osterreich AG * Ukrainian Investment Fund Ltd. Kladno, Czech Republic. The project Rand Merchant Bank UMC Equatorial Guinea Corp. involved significant environmental and technical upgrades and expansion of the Remetal, S.A. Unatrac International Co. - S.A.E. Czech Republic's first independent Rio Algom Ltd. * Union Bank of Switzerland power plant. Rio Tinto Overseas Holdings Ltd. Union Carbide Corp. Rockfort Power Associates Inc. Uni6n Fenosa Internacional S.A. * Rover Overseas Holdings Ltd. US WEST International Holdings, Inc. USEC-Precursor, Inc. S.A. White Martins Salvintur-Sociedade de Investimentos Vaasan Saippua Oy - Vasa Tval Ab Turisticos, S.A.* VBC Energy Corp. Santander Brazil Risk Insured Trust Victory Oil B.V. Schmalbach-Lubeca AG * Volvo Truck Corp. Scudder Latin American * Secil - Companhia Geral de Cal e Cimento, S.A. * Wartsila Development, Inc. * Sena Holdings Ltd. * Westdeutsche Landesbank * SF-Bau Projektentwicklung GmbH Wilken Group Ltd. Siemens AG* multilateral investment guarantee agency wo ld bark group 57 Th V  K  N N A - - N V GROWING DEMAND FOR TAILORED ASSISTANCE The past year saw robust demand for MIGA's technical assistance services from clients across all regions. MIGA's Investment Marketing Services Department's mission is to equip investment promotion intermediaries with leading- edge tools and techniques to strengthen their capacity to attract and retain foreign direct investment. MIGA's hands- on technical assistance emphasizes the transfer of best practices in FDI promotion, while MIGA's online information services leverage these capacity-building efforts by linking investors directly to relevant information on investment opportunities and business operating conditions. Offering a broad array of services MIGA's technical assistance takes many different forms, encompassing the range of services required to define and deliver support to investment intermediaries at all stages of development. In most instances, MIGA uses the Needs Assessment Framework as a baseline for assistance at the country level, to assess the capabilities and limitations of a client in its efforts to attract FDI. Tlhe Needs Assessment Framework is also the basis from which MIGA develops recommendations for further steps to be taken to improve the prospects for FDI, with or without our involvement. For those countries in which further involvement is war- ranted, MIGA provides client-specific support through one-on-one strategic planning, hands-on training and coaching, tailored workshops, investor targeting exercises, and assistance in information technology (IT) and its application. Topics covered are as broad as the range of needs that are identified, including program planning, market research, investor targeting, investor servicing and aftercare, and Web site development, among others. Some clients might also be referred to FIAS for assistance, or to external parties for support. As MIGA has moved over the past several years from short-term assistance to longer-term capacity building, there has been a need to establish new, objective criteria by which the effectiveness of its interventions can be judged. Thus, in fiscal 2001, the multilateral investment guarantee agency wrr d bank group 59 technical assistance services Investment Marketing Services department defined and implemented a new project reporting system to improve its monitoring and evaluation capabilities. Technical assistance activities are now being tracked and assessed on a geographic and functional basis for each project undertaken, and baseline data collected for FDI flows in each country, recognizing that there are long lead times involved in investment promotion and many external factors which influence a country's ability to attract and sustain investment. MIGA's assistance is client-specific and therefore success measures depend to a degree on the stage of development and sophistication of the particular client agency. With the project data standardized and baseline data established, MIGA is broadening its monitoring and evaluation activities to examine the effects of our long-term projects on the MIGA-assisted investment promotion agency's ability to attract investment and by tracking the broad FDI flows into client countries by sector and country of origin. Taken together, the data on project activities and FDI flows will present a more detailed picture of the economic prospects for the country and the role of MIGA services. In fiscal 2001, MIGA implemented 59 technical assistance or advisory service projects. Forty of these (67 percent) were long-term technical assistance projects. In many cases, these projects were multifaceted efforts incorporating strategy devel- opment, hands-on training, assistance in information technology, and other elements of service delivery. More than half (20) of the 38 countries receiving technical assistance are IDA designates. A significant portion of the technical assistance activities were undertaken in cooperation with the World Bank and FIAS. Asia and the Pacific 4CO5f' MIYAZAWA INITIATIVE During the past year, MIGA continued its work under the Miyazawa Initiative. MIGA's efforts in the Republic of Korea, the Philippines and Thailand under this $1 million initiative are discussed below. Initiatives are being prepared for Indonesia; however, deeper work on an investment promotion strategy will depend on progress in legal and regulatory reforms relating to FDI and investment approvals. MIGA is coordinating its efforts there with the World Bank and FIAS. REPUBLIC OF KOREA Early in fiscal 2001, MIGA facilitated a Needs Assessment of the Korean Investment Service Center (KISC), a part of the Korean Trade Investment Promotion Agency in Seoul. KISC asked MICA to conduct the assessment to coincide with KISC's second anniversary, with the intention to use the results as a guide toward meaningful capacity building going forward. During the assessment, MIGA guided KISC staff in bench- U marking their organization against best practices worldwide. In Seoul, MIGA also presented a seminar on greenfield investment for KISC and the Korea Office of the Investment Ombudsman. Although the Republic of Korea has experienced tremendous FDI inflows over the past two years, they have almost 60 multilateral investment guarantee agency world banl group technical assistance services exclusively been in the form of mergers and acquisitions. The Republic of Korea is now focusing more attention on targeting and attracting greenfield investment. The seminar highlighted trends in FDI flows to Asia and provided insight into how investment decisions are made by foreign investors. Most recently, MIGA has been working with KISC to better position the country to attract greenfield investments in the high-technology industry. PHILIPPINES In the case of the Philippines, coordination among competing agencies in terms of their approach to attracting FDI is a focal point of the program. MIGA has convened capacity-building sessions with national and regional investment promotion agencies, including the Board of Investments (BOI), Export Processing Zone Authority, and regional promotion entities for Davao, Mindanao, Subic, and other locations. MIGA conducted an information technology workshop for the BOI of the Philippines and other related government agencies. The workshop focused on the content, design, and marketing aspects of good investment promotion Web sites, and included concrete suggestions on how to improve BOI's Web presence. It also covered online research on sectors and companies to support the targeting exercises undertaken through MICA's capacity-building program. THAILAND Building upon the institutional needs assessment conducted in fiscal 2000, MIGA convened a capacity-building workshop for 6o staff members of the Thai Board of Investment. The program focused on the microeconomic business environment and the development and implementation of a comprehensive investor targeting program. pent Promotion Skills i- MIGA's work with the agency on targeting is continuing, and work has begun on investment promotion skills building. A training program was held with staff on how to research Thailand's target industries. Bookmark files-lists of international business Web sites compiled by MIGA staff-were used as key resource materials. During hands-on sessions, participants were shown how to find data on FDI trends, target companies, and sectoral information. INDOCHINA In a work program extending throughout the fiscal year, MIGA assisted the governments of Cambodia, the Lao People's Democratic Republic, and Vietnam in establishing an Internet presence to service investors online. In each location, MIGA provided a detailed orientation to senior officials. The sites were built using a MIGA-designed Web application for investmentpromotion intermediaries (IPAworks), which allows agencies to launch Web sites with minor customization to a template incorporating best practices that MIGAhas identified. MIGA also provided assistance in securing in-country support for the site to ensure a locally maintained Internet presence. multilateral investment guarantee agency wor d bank gromp 61 technical assistance services This technical assistance is offered through the PHRD program, funded by the Japanese government, which aims to help the governments of Cambodia, the Lao People's Democratic Republic, and Vietnam (and has also included assistance to Mongolia) improve their ability to attract private investment. MIGA has provided technical assistance in the region through various activities such as training, develop- ing marketing materials, and installing new information management systems for investment promotion agencies. A mission to the region in January 20o0 marked the final stage of the technical assistance. MIGA staff visited the agencies to gauge the overall level of integration of products and services provided under the project to ensure that they have been installed and accepted with highest client satisfaction. System documentation was completed in the fourth quarter of fiscal 2001. SOUTH PACIFIC ISLANDS In conjunction with FIAS, MIGA delivered an investment promotion training seminar for the management and directors of investment promotion agencies in the South Pacific. The event was attended by i f representatives from the Cook Islands, Fiji, Kiribati, the Marshall Islands, Nauru, Niue, Palau, Papua New Guinea, Samoa, Tonga. Tuvalu, and Vanuatu. Because of their size and relative geographic isolation, they face unique challenges when trying to promote FDI. The main sectors of investment in most of the economies are tourism, fisheries, and light manufacturing. MIGA's recent experience working with the Organization of Eastem Caribbean States brought to bear useful techniques the South Pacific islands could draw on to address promotional issues of their own. The participants were also familiarized with the guarantees MIGA offers to facilitate investment. Europe and Central Asia 0 Over the past year, MIGA has collaborated extensively with the Organization for Economic Cooperation and Development (OECD), World Bank and FIAS in efforts to formulate and implement private sector strategies for the countries of Southeastern Europe. In addition, Switzerland is funding a grant program for MIGA to deliver a portfolio of capacity-building activities, including an investment promotion skills- building program for East European and Central Asian countries. In September 2 000, MIGA convened a workshop in Geneva under the program on how to use the Internet to conduct sectoral research for staff of Central European, Southeastern European, and Central Asian investment promotion agencies. The sectors of focus included electronics, automotive components, information technology services, and mining. 62 multilateral investment guarantee agency aCrd b0ank gorup technical assistance services ARMENIA A joint MIGA/FIAS mission was undertaken to evaluate the possibility of a long-term capacity-building program for the Armenian Development Agency (ADA). The mission was designed to effect a clear link between the recommendations of an earlier FIAS report on the investment environment andapossible MIGA program. MIGAmet with key ministers and advisers to the President of Armenia, and worked closely with i representatives of the ADA, the World Bank, and IFC, and with donor agencies to * assess the progress made on enacting the recommendations of the FIAS report and to assess the development needs of the ADA. The mission was fully supported by the World Bank field office, and a compre- hensive report with recommendations has been produced by MIGA and submitted by the World Bank to the Armenian govemment. It is expected that this work will lead to a multidonor, multiyear capacity-building program designed to enhance ADA's ability to undertake effective promotion of Armenia as a location for foreign investment. During the mission, MIGA also worked with the ADA to help it prepare and execute an investor conference organized by the World Bank and IFC in May 2001. KYRGYZ REPUBLIC A component of MIGA's Eastern Europe and Central Asia capacity-building program, funded by the Swiss government, made provision for an investment pro- motion workshop in the Kyrgyz Republic. In preparation, MIGA undertook an initial assessment of the Kyrgyz Republic's investment promotion structures and designed a workshop program with the twin objectives of developing the expertise of the officials responsible for investment promotion, and deepening the support for FDI within government agencies. The delivery of the program was timed for December 2000, after the presidential election, a period of intense interest in policy issues. The five-day workshop program for investment promotion interme- diaries included a day-long session for 30 representatives of key departments and agencies and received extensive media coverage. In addition to supporting the capacity development of the agencies' staff, the program contributed to broad awareness of the potential role of FDI during this period of policy formation for the new presidency. ROMAN IA MIGA visited Romania in June 2001 at the request of the Ministry of Development and Prognosis to provide advice on how best to introduce, organize and fund its capacity to effectively promote foreign investment, and to propose a capacity-building assistance program for the relevant ministry or agency. In conjunction with the World Bank country team, MIGA undertook an assessment of the current situation in Romania vis-a-vis FDI, and made recommendations for building on the current structure of FDI promotion to develop an improved and more proactive capacity for investment pro- motion. MIGA is currently discussing a detailed proposal both within the World Bank Group and with clients in Romania. multilateral investment guarantee agency world bank group 63 technical assistance services RUSSIAN FEDERATION Privatization Link Russia -russia.privatizationlink. corn MIGA is in the final stages of the PrivatizationLink Russia project-an initiative to . develop a bilingual investment information service for domestic and foreign investors . _ interested in Russian privatization opportunities. In this effort, MIGA has partnered 3 with CIDA, which provided $500,000 for the requisite field work, software devel- opment, and project promotion. Initiated in April 1999, the project is being carried r out in cooperation with the Ministry of Property Relations of the Russian Federation and the Russian Federal Property Fund. PrivatizationLink Russia is designed to increase the transparency of the privati- zation process in Russia by making more in-depth information available online .... to potential investors around the world. Investors now have free desktop access to s- .-._s_ - n business profiles of state-owned companies and assets currently for sale in the Russian Federation, along with details on the laws, regulations, and procedures gov- erning these transactions. The PrivatizationLink Russia service was officially launched in October 2000 at the US-Russian Investment Symposium. organized by the John F. Kennedy School of Government of Harvard University in conjunction with the Financial Times and other organizations. In November 2000, the Ministry of Property Relations informed MIGA of its plans to significantly increase the scope of privatization in Russia over the next two years, resulting in a higher-than-expected volume of company profiles to be publicized through PrivatizationLink Russia. The ministry requested that MIGA explore possible ways to extend the project and, together with the ministry's information technology team, develop a database synchronization mechanism so that company data can be automatically transferred from the ministry to the online database. Efforts are underway to finalize the technical work in cooperation with the Ministry of Property Relations. MICA also held discussions with the Investment Policy Department of the Russian Ministry of Economic Development and Trade with regard to the department's potential involvement in the PrivatizationLink Russia project and technical assistance that MIGA might provide to it. FEDERAL REPUBLIC OF YUGOSLAVIA In May 2001, MIGA participated in a joint mission with the World Bank and IFC to Belgrade to contribute to the overall development of detailed plans for a Transition Grant being prepared to support the country leading up to membership in the World Bank Group organizations. MIGA undertook a detailed assessment of the technical assistance needs of the recently established Serbian Investment and Trade Promotion Agency. MIGA also designed a program of assistance to support the start-up phase of this new agency. The capacity-building program is expected to commence early in fiscal 2002. REGIONAL ACTIVITIES Since the mid-iggos, MIGA has been partnering with the OECD, the Turkish __ Development Agency, and others, in a program to strengthen the capacity of countries E LtOElN in Eastern Europe and the former Soviet Union to attract FDI. As part of this program, 64 multilateral investment guarantee agency wo' d Da- g,o,p technical assistance services MIGA participated in several events at the Istanbul-based Centre for Private Sector Development over the past year, including regional meetings of chief executive officers (CEOs) of investment promotion agencies (IPAs), held in September 2000 and February 2001. The September meeting marked the opening by the OECD Secretary General of new premises for the Centre, made available by the Turkish government. The purpose of this meeting was to encourage govemments in the region to give greater priority to supporting investment promotion activities in their countries and to define support that international agencies could give to this effort. The February meeting provided an opportunity to revise the work program and to present the new MIGA Investment Promotion Toolkit to the participants. MIGA also participated in the Summit Economic Forum of the Central European Initiative (CEI), an intergovernmental forum for cooperation in the Central Eastern European region, in Budapest. The World Bank's Europe and Central Asia (ECA) Region actively supported the event through speakers and other contributions, and MIGA staff spoke on "Information Technology and Investment Promotion" and presented its investment marketing and guarantee services in a panel discussion on international financial organizations. IPAnet currently serves as an information dissemination tool for CEI projects. CEInet, the electronic network of CEI, was one of the first sponsors of IPAnet, beginning in 1997. An Internet Skills Training Workshop for Eastern European and Central Asian IPAs was conducted by MIGA in Geneva in September 2000. Eighteen participants from 14 different countries (Azerbaijan, Bulgaria, Czech Republic, Estonia, Hungary, Kazakhstan, Kyrgyz Republic, Latvia, Macedonia, Mongolia, Poland, Romania, Slovenia, and Switzerland) were trained to use the Intemet for investment promotion, focusing on both the marketing and research aspects of the Internet. It was organized in cooperation with the UNCTAD Division on Investment, Technology and Enterprise Development and WAIPA. Thanks to funding from the Swiss government, MIGA was able to finance the travel and subsistence costs of lo participants. Their overall positive feedback on the workshop emphasized the high demand and need for training in the areas of leveraging IT solutions to improve the efficiency of the IPAs' business processes and keeping abreast of latest IT developments. MIGA plans to continue these Internet training workshops and deliver them on a subregional or country basis. ,|*C o:;cJ Latin America and the Caribbean MIGA's technical assistance and capacity-building activities in Latin America and the Caribbean are oriented toward developing and consolidating substantial investment promotion capacity within the region's IPAs through long-term assistance programs. Countries with ongoing projects include Bolivia, El Salvador, Guatemala, Nicaragua, and Panama. In some countries, MIGA has developed cooperative arrangements with others in the World Bank Group to provide host country agencies with a broader spectrum multilateral investment guarantee agency wodad bark groJp 65 technical assistance services of services and assistance. To achieve a wider and longer lasting impact, a full range of investment services and training modules have been developed in Spanish. These new materials, and their delivery in Spanish, have expanded the spectrum of intermediaries serviced during the training exercises. They have also enabled the inclusion of key gov- ernment officials, free zones and industrial park personnel and others involved in the investment promotion process. BOLIVIA At the request of the Ministry of Foreign Trade and Investment, MIGA conducted an assessment of the institutional environment for investment promotion during December 2000. Bolivia is interested in substantially increasing its investment promotion capability to attract FDI. Working closely with the ministry and its implementing agency, CEPROBOL, and assisted by the World Bank, Inter-American Development Bank (IDB), UNCTAD, and UNIDO, a targeted investment promotion program is being implemented that will focus on promoting sectors such as apparel, textiles, jewelry, agro-industry, wood- working, and export services. Depending on the availability of funds, a medium-term technical assistance and capacity-building program will be implemented in the coming years that will indude MIGA's investment promotion toolkit, investor targeting, foreign promotion assistance, contact management, and investor information systems. In May 2001, MIGA was asked by the Commonwealth Development Corporation (CDC) to deliver a market research workshop for its staff in Santa Cruz, Bolivia. The purpose was to provide hands-on training on how to research online data on sector trends and companies to be targeted by CDC. As one of the main outputs of the workshop, a cus- tomized list of online resources for the six sectors targeted by CDC was created. In addition to the training, MIGA delivered concrete recommendations to ensure best use of online resources by CDC staff to support its market intelligence efforts. EL SALVADOR Since December 2000, MIGA has been working with the Board of Directors and man- agement of PRO.ESA, the national agency for investment promotion, to develop an investment promotion strategy. A first draft was developed and circulated among all the board members and management in PRO.ESA in early 2001, who then discussed and refined the draft. In March 2001, MIGA conducted a mission to El Salvador, consisting of three separate activities: (1) assist PRO.ESA and its Board of Directors in finalizing the P R 0 * E S A agency's promotion strategy for the next 12 months; (2) demonstrate a beta version of a contact management system for the agency's potential investor lead pipeline; and (3) provide specialized training in investment promotion techniques for the agency staff and management, managers from local free trade zones, and representatives from govemment institutions and other partners. 66 multilateral investment guarantee agency work bank group technical assistance services GUATEMALA At the request of the National Competitiveness Program and the Minister of Economy, MIGA assisted in the establishment of the new investment promotion agency, PROGUAT-Invest, in Guatemala. MIGA helped develop detailed job descriptions and evaluation criteria for the selection of key staff members, as well as suggesting an orga- nizational structure and indicative budgetary requirements for the agency. A selection committee was organized to interview and select the final candidate for the CEO position of the agency, and MIGA served as an adviser to this group. During the trip, meetings were also organized with the Ministry of Economy and the Competitiveness Program to discuss plans for MIGA's current capacity-building and technical assistance program. Earlier in the year, MIGA conducted a validation workshop to provide an opportunity for open discussion among key stakeholders on proposed free zones legislation. PANAMA MIGA is working with the World Bank's Private Sector Advisory Services (PSAS) in Panama. PSAS has signed an advisory mandate with the Panamanian Inter-oceanic Regional Authority-ARI-to act as advisor for the conversion to civilian use of the former US Howard Air Force base and surrounding land. The focus of MIGA's work is to assess the facility's comparative and competitive advantages for a Special Economic Zone; identify high-potential activities for the former base and develop scenarios for their development; recommend a legal and tax regime; help define institutional arrangements to regulate and manage the base, including the creation of a dedicated development agency with a clear definition of its functions and procedures; and identify bottlenecks to FDI. During the initial mission in June 2001, MICA played a key role supporting public relations for the project in Panama, making presentations to business leaders and associations, government insti- tutions, and other relevant stakeholders regarding the objectives, approach, and risks and rewards of the project. When necessary, MICA will also provide advice to the project leaders and consulting teams on the quality control and supervision of the work under development. N ICARAGUA MICA staff traveled to Nicaragua in September 2000 to conduct an institutional assessment of the Center for Exports and Investments, the national IPA. In the process of evaluating the Center and the investment environment, the MIGA team met with C E I1 more than 50 individuals from the private and public sectors, both local and foreign. In January 2001, MIGA presented the results of the assessment to key stakeholders in the investment promotion arena. Based on the insights and recommendations of the assessment, the MIGA team was able to design a long-term assistance program to be implemented in conjunction with the World Bank's lending operations. The Nicaragua project provides MIGA with the opportunity to cooperate with World Bank lending operations and will likely serve as a model that can be replicated in other countries in the region and around the world. The first components will include staff and stakeholder training in investment promotion techniques, the multilateral investment guarantee agency woild bank grojp 67 !ehnicaI assistance services implementation of an investor tracking system, and a dedicated seminar on generating leads through market intelligence activities. These activities will be supported by the distribution of the Investment Promotion Toolkit, which will serve as reference materials and guidance for the stakeholders in Nicaragua. box 8 NEW APPROACH TO PROVIDING TRAINING IN INVESTOR TARGETING One ofthe greatest challenges faced by investment promotion agencies is howtotargettheir investment promotion efforts to those investors with the highest probability for investing in their country, and to do so in a cost-effective manner. With these needs in mind, M GA's investment promotion officers designed a lo-day course on con- ducting market intelligence and investor research that was offered in Washington in April 2001. , Investment promotion officers from Bolivia, El Salvador, Guatemala, and Nicaragua were introduced to .1 market research techniques and trained in the use of print and online resources available through a , spectrum of industry and company databases and Web sites, including those of the World Bank. . * 'J Extensive training was provided in Internet-based research, and participants used these new skills to work on specific targeting projects for their respective countries and priority sectors. At the end of the program, they returned home with valuable information resources, company contacts and new skills to facilitate future market intelligence gathering in support oftheir investment promotion efforts. This training not only complemented technical assistance and capacity-building efforts underway photo I participants in April 2001 with each national agency, but provided an opportunity for the participants to develop new networks of investor targeting workshop for Latin colleagues within the region, paving the way for potentially valuable approaches to regional promotion. American investment promotion agencies, accompanied by MICA staff. REGIONAL ACTIVITIES In January 2001, MIGA participated in the Fifth Annual LAC Hotel and Tourism Investment Forum. The forum was organized by the University of California at Los Angeles and was supported by a number of private sector tourism associations, . ('enferencia Larinoaurcna dec Zonas Frtancas including the International Hotel and Restaurant Association, the Caribbean Hotel Conas lRia 20 Association, and the World Travel and Tourism Council. The World Bank Group was represented by MIGA and IFC. This is the third year that MIGA has contributed to the organization of this event, which attracted 400 participants representing private and public sector organizations from 18 countries. The forum explored investment and development opportunities in the region and examined the issues that could shape the tourism sector in the 21St century. Both traditional investor countries and developing countries ofthe LAC region were represented. MIGA also participated in the Fifth Latin American Free Zones Conference, held in August 2000 in San Jose, Costa Rica. Free zones have played an important role as a development instrument for countries promoting FDI. In Latin America alone, com- panies located in free zones account for more than three million jobs. They have been an essential factor in the extraordinary FDI growth evidenced in countries such as Costa Rica and Honduras, and more countries are considering free zones as an element of their development strategies. 68 multilateral investment guarantee agency wor d D2nk group technical assistance services During the conference, meetings were arranged with key MIGA clients from Nicaragua and Guatemala, as well as participants from Argentina, Bolivia, Colombia, Cuba, El Salvador, Honduras, and Panama. In addition, MIGA delivered a brief presentation to representatives from the leading free zones in Central America regarding the range of services the agency provides. The representatives discussed regional cooperation plans to promote investment and the role that MIGA can play in facilitating these efforts to attract investment and develop promotional capacity. The Central American and Caribbean Free Zones Conference held in Guatemala City, Guatemala, in March zooi, also included MIGA representatives. The conference hosted many of the main free zones from the region, as well as leading governmental representatives and investment promotion agencies. *J. (K tJ) Middle East and North Africa SAUDI ARABIA Saudi Arabia has recognized the importance of actively promoting FDI, particularly in nontraditional sectors. The government recently enacted investment legislation that included the formation of the Saudi Arabian General Investment Authority (SAGIA) to drive this process. During September, at the request of its Governor, HH Prince Abdullah, MIGA participated in a joint mission with FIAS to Riyadh. MIGA identified key areas and systems required by SAGIA to fulfill its new investment promotion mandate. REGIONAL MIGA contributed to a regional workshop in Amman, Jordan, on investment pro- motion for heads of IPAs from the Middle East and North Africa, organized by the Inter-Arab Investment Guarantee Corporation and FIAS. MIGA staff presented a paper entitled "Reaching Investors Through Cyberspace-The New Paradigm for Investment Promotion" and participated in a discussion panel on the same topic. Potential areas of collaboration between MIGA and the Inter-Arab Investment Guarantee Corporation, as well as various investment promotion agencies represented at the Forum, were discussed. In November 2000, a Promote Africa representative gave an overview of MIGA activities at a conference in Tripoli, Libya. multilateral investment guarantee agency wold bark groJp 69 technical assistance services Sub-Saharan Africa rg rMi) During the past year, MIGA developed a program for Sub-Saharan Africa intended to maximize synergy from an agency-wide collaborative focus on selected countries that offer prospects for significant new business. As a result, intensive multicomponent programs were developed for Senegal and Mozambique, and additional work is underway to define and implement similar programs in other countries on the con- tinent that will continue into the year ahead. In some of these countries, MICA's work is integrated with current FIAS programs, and in all cases is supportive of the World Bank Group's country assistance strategies for the respective countries. In addition to efforts from Washington, Promote Africa, MIGA's field functions in Lome, Togo and Windhoek, Namibia, as well as other regional representatives, continued to assist private and public sector efforts to strengthen business involvement with partners from around the world. BENIN In February 2001, MIGA/Promote Africa met in Benin with the members of the Privatization Commission and the Vice President in charge of privatization, to discuss the need for implementing a strategy to acquire up-to-date information on the investor selection process for dissemination by MIGA. Following on these meetings, the government of Benin signed a Memorandum of Understanding to post information on the divestiture process and assets through PrivatizationLink. CAM EROON In December 2000, MIGA provided technical assistance to the Societ6 Nationale d'Investissement of Cameroon to help the agency with issues related to information technology, in particular with developing a Web presence. MIGA's assistance to the organization, which has a mandate to promote investment into the industrial sector in Cameroon, consisted of presentations to key staff on how to develop and market an Internet presence. CAPE VERDE MIGA prepared a detailed action plan for technical assistance for PROMEX, the Center for Investment and Export Promotion, in December 2000. The action plan was closely linked to earlier assistance delivered by FIAS and to requests from PROMEX to the World Bank for support of the agency. EQUATORIAL GUINEA MIGA began discussions with the government of Equatorial Guinea regarding its interest in receiving technical assistance in support of its national investment pro- 70 multilateral investment guarantee agency wo,r d bank group technical assistance services motion activities. This effort will be implemented in the next fiscal year and M IGA will be collaborating with FIAS in defining and implementing the work program. GHANA As part of its continuing support of Ghana's investment promotion efforts, MIGA, in partnership with the Ghana Investment Center, undertook a detailed survey of investors who had shown interest in doing business in the country in the previous six months. From various private and institutional sources, the survey yielded contact information for 120 potential investors. The list generated will be used by MIGA's Guarantees Department and the Center in providing further information on MIGA's guarantee program and other incentive schemes in the country to potential investors. MIGA conducted a field mission in May 2001 to identify capacity-building support needed by the main investment promotion intermediaries in the light of the new gov- ernment's policies promoting FDI. MALAWI MIGA worked with the Malawi Investment Promotion Agency (MIPA) to design and install new technology to enhance its FDI promotion functions. Assisted by technical specialists, MIGA carried out the successful implementation of a new investor tracking system, including customization, installation, training, and post-implementation support for MIPA. Key staff members were trained on the software's functionality and application in investment promotion efforts. MAURITIUS In August 2000, MIGA conducted a comprehensive Needs Assessment of the Mauritius Export Development and Investment Authority (MEDIA) in Port Louis, Mauritius. About 25 MEDIA staff members, representing a cross-section of the agency, took part in the three-day program. The results of the assessment serve as a roadmap for MEDIA in fine- tuning the agency's competitiveness in attracting new FDI. MOZAMBIQUE MIGA worked with the Mozambique Investment Promotion Center (CPI) to develop a scope of work for the technical assistance CPI requires to complete its institutional restructuring and to make progress on developing the Mozambique free zone program. The program designed by MIGA would include assistance in developing and implementing a multiyear strategic plan, installation of an Investor Tracking System, further development of CPI's Web site, and assistance in developing and imple- menting effective sectoral promotion strategies. In addition, the Mozambique government has requested MIGA's support in developing a program to strengthen investment in the country's tourism sector multilateral investment guarantee agency wor d bank group 71 technical assistance services NIGERIA In July 2000, MIGA participated in a World Bank Group mission to assess the Nigerian private sector and the prospects for increased FDI as part of the development of the country assistance strategy. The team focused on the national IPA-the Nigeria Investment Promotion Commission-and included discussion of possible capacity- building programs which MIGA could deliver once steps have been taken to put a suitable legal and regulatory framework in place. In August 2000, MIGA contributed to the strategy for the development of the solid minerals sector in Nigeria. Staff mod- erated technical panels and made a presentation on risk perceptions, reforms, and the competitiveness of Nigeria, provided input into the policy and institutional aspects of mining development, and helped shape final recommendations. SENEGAL In one of several technical assistance collaborations between MIGA and the World Bank during the year, MIGA prepared a five-year business plan for APIX, Senegars national agency for investment and infrastructure. The plan served as the basis for the agency to receive $i million in funding from a World Bank loan preparation facility. The plan will also be presented to private sector stakeholders, who lobbied for the establishment of the agency. Since the plan was approved. MIGA has continued to provide technical assistance. MIGA visited Senegal in February 2001, prepared the groundwork for APIX to work with international experts, and provided a three-day investment promotion training skills workshop to staff of the agency. MIGA retumed to Senegal in June 2001 to finalize the business plan to assist APIX in implementing its information systems. TANZANIA In collaboration with the government of Tanzania and other stakeholders, MIGA is organizing an investment facilitation conference focusing on tourism and economic infrastructure that will be held in fiscal 2002. The objective of the conference is to assist the government in marketing opportunities for productive private sector investment in Tanzania. MICA convened capacity-building and consensus-building workshops to initiate the dialogue for the Tanzania investment facilitation conference, and conducted a study of the tourism sector. It is hoped that the study and workshops will assist in strengthening Tanzania's policy and regulatory framework as well as deepening sectoral linkages, thereby stimulating activities in others sectors. MIGA is also working with the IPAs of Tanzania and Zanzibar to design and implement investor tracking systems and enhance their Web presence using M IGA's IPAworks software. UGANDA MIGA staff visited Uganda in April 2001 to assist in installation and conduct training in support of an investor tracking system for the Uganda Investment Authority. MIGA is also providing assistance to the authority in migrating its business operating con- ditions database to a Web site structure using IPAworks. 72 multilateral investment guarantee agency wor d ban' group technical assistance services ZAMBIA A MIGA team visited Zambia in March 2001 to follow up on a needs assessment undertaken for the Zambia Investment Center in fiscal 2000, and to define necessary * *#w1 1 g assistance from MIGA. After reviewing progress made since the assessment was con- ducted, MIGA coordinated with the United States Agency for International Development to arrange funding to support the Center's installation of an Investor Tracking System and to redesign its Web site to improve its impact as a promotional outreach vehicle. REGIONAL EVENTS Sixth Annual African Mining Investment Symposium For the first time, this annual event was held in Sub-Saharan Africa when MIGA convened the symposium in Ouagadougou, Burkina Faso, in December 2000. The symposium attracted more than 200 representatives of private international mining companies and over lo o public sector delegates from African countries. A roundtable meeting between African mining ministers and mining company executives set the tone by focusing on: recent global mining trends and their implications for Africa; the interface between governments and mining companies; the need to improve the legal, regulatory, fiscal, and institutional framework for mining; and ways to maximize development impacts. The symposium highlighted the consensus that mining devel- opment should take place in a manner that affords maximum protection to the environment and safeguards the rights of local communities. Opened by the President of Burkina Faso, the first part dealt with current trends and challenges facing the mining sector while the second part focused on the pro- motion of specific investment opportunities by participating countries. The general sessions resulted in a number of private meetings between country representatives and interested companies with a view to making investments. Following the symposium, R. ....... .. . . . 0visits were organized to gold and base metal mines throughout Burkina Faso. First phase evaluation interviews were completed in Ouagadougou. The vast photos top, MICA EVP Motomichi majority of both private and public sector participants interviewed were highly compli- Ikawa (left) and the President of Burkina mentary and positive about the symposium, reporting that, in their belief, there were Faso, H.E. Blaise Compaore, at the significant potential business benefits from attendance for their organizations. There opening of the 2000 African Mining was a strong feeling that the selection of Ouagadougou as the location for the con- Investment Symposium; bottom, the ference meant that the most "serious" industry players were present and, indeed, MIGA organizing team, from left- many suggested that the size and structure of the event made it much easier to meet Shantal Persaad, Kofi Egbeto, William and discuss business opportunities and to share experiences and issues of common Dadzie, and Robert Whyte. professional interest. There was much anecdotal evidence of transactions being dis- cussed and developed at the symposium. MIGA will conduct further evaluation to assess the post-conference business activity resulting from the event. African Connection (AC) This initiative to promote investment in telecommunications infrastructure on the continent was begun by African leaders in 1999, and has since been supported by MIGA and the World Bank. Following the establishment of the AC Secretariat this year, MIGA began working with the Secretariat's staff to upgrade the pilot version of the AC multilateral investment guarantee agency wor d b-C gro-p 73 technical assistance services Telecomms Database and to transfer responsibility for the site to the Development Bank of Southern Africa, which is housing the Secretariat. The AC Telecomms Database is designed to be a resource for telecomms investors, policymakers, and regulators. It contains a compilation of the laws and reg- ulations governing African telecommunications, market overviews and analysis of sector markets in the region, a collection of best practice materials on telecomms reg- ulation, as well as in-depth information on investing in Africa. MIGA is in the process of completing its implementation plan for the site, which calls for: enhancing the features and content of the AC Telecomms Database; integrating the information service into a larger Web site addressing the full scope of activities being carried out under tlle AC initiative; recruiting a conterit mnanager to work within the Secretariat to maintain the site; and implementing a sponsorship-driven fundraising program to support the future operation of this unique online resource. 5ARIE DE SON! AWN LE MMIE MMNI SBWiWM ET PARTENAI Other Regional Events S 2 MIGA/Promote Africa teamed with the Executive Secretariat of ECOWAS (Economic __e_ A Community of West African States) and the Port Authority of Lomb in jointly organizinga Maritime Investment and Strategic Partnership Forum inLome,Togo, in April 2001. The objective of the Forum was to identify investment opportunities in the maritime sector, and to initiate a coastal shipping project, ECOMARINE, that a group of investors in West Africa will implement to reduce obstacles to FDI and facilitate regional integration. Elsewhere in the region, MIGA convened a series of regional capacity-building workshops for investment promotion officers from the countries that comprise the Southern Africa Development Community (SADC). Throughout the year, sessions were held in Malawi, Mauritius, Mozambique and Zambia, with participants from Ethiopia, Ghana, Mauritius, Mozambique, Tanzania, Uganda, Zambia, Zimbabwe, and the US (via videoconference). r MIGA/Promote Africa also participated in a conference, organized by the UN EconomicCommissionforAfrica,onThe RoleoflnvestmentPromotionAgenciesinAfrica that brought together 21 chief executives and senior staff from 13 regional investment photos I top, opening ceremony by Prime Minister Agbeyome Kodjo of -' . i Togo; bottom, ministers following the opening ceremony; left, Christophe Bellinger and Kofi Egbeto of MICA during meeting with the Prime Minister. 74 multilateral investment guarantee agency ruor d bank group technical assistance services promotion organizations. The participants gathered in Addis Ababa to share views on their role and functions in promoting investment in Africa, the obstacles they encounter, and the modalities for making investment promotion agencies more effective in their functions. MIGA, with support from the World Economic Forum, hosted the Third Annual Roundtable of Investment Promotion Agencies Heads of SADC IPAs, in South Africa. The event was attended by lo IPA executives from the SADC region and provided a forum for them to discuss and consider the implications of preferential trade agreements recently negotiated with the EU and United States. Immediately following the roundtable, MIGA staff attended the World Economic Forum's Southern African Economic Summit, where the IDA credit supporting the Africa Trade Initiative was signed, and information was provided to investors interested in Africa concerning MIGA's insurance against noncommercial risks. multilateral investment guarantee agency wor d bank grojp 75 GLOBAL PRODUCTS AND SERVICES MIGA is a pioneer in the field of online investment information, having developed and launched four Web sites over the past six years. Beginning with IPAnet in 1995, PrivatizationLink in 1998, PrivatizationLink Russia in 2000, and the African Connection Telecomms Database in 2001, MIGA has taken a lead role in mobilizing and publishing information on investment opportunities, conditions, and partnerships to the more than 25,000 monthly users of these services worldwide. Information dissemination services are not necessarily transaction-based. They are designed to provide legal and regulatory information, business operating conditions, and a wide range of data to support investor decision-making. In the case of PrivatizationLink, however, concrete transactions have been linked to the service, including sales of several state-owned enterprises in Armenia and Moldova to Italian and U.S. firms. The value of MIGA's online information services to the international investment community is also evidenced through the highly positive responses received in user surveys. In fiscal 2001, MIGA conducted a survey of more than g,ooo professionals as a part of its preparatory work for the FDI Xchange, an email-based investment update service to be launched later this year. MIGA received 330 responses from a broad range of companies, including major Fortune 500 corporations as well as SMEs. Overall, the respondents indicated a high level of interest in receiving this new information service, with 6o percent very interested and 34 percent somewhat interested. The survey also provided positive empirical, if anecdotal, evidence of user satis- faction with IPAnet and PrivatizationLink. Comments from survey respondents included the following observations: "Clearly this service is most important, as ongoing updating and researching ... is very time consuming and most cannot afford to carry it out"; and, "Thank you for your good work! I am very grateful and use your information frequently." Notable developments for each of the services and new global products are discussed below. 76 multilateral investment guarantee agency vor a ban< group technical assistance services THE INVESTMENT PROMOTION NETWORK j wwwipanet.net - i MIGA's flagship investment promotion Web site, IPAnet, continued to attract significant traffic flows in fiscal 2001, averaging some 343,ooo hits a month over the year. The site's performance was particularly strong in terms of amount of time that users spent on each visit, averaging 18 minutes. Page views, the number of pages or screens loaded, were also strong and stable over the period at about 250,000 impressions per quarter. With some 19,000 registered users from around the globe, and thousands more visiting the site on a regular basis, IPAnet has become the central location for FDI infor- mation on the Web. Content on the site has expanded substantially with new documents and links added to keep the site current to encourage repeat use, a partic- ularly important feature. Of the more than io,ooo entries catalogued in IPAnet/PrivatizationLink databases, over 34 percent are related to IDA-eligible countries. On a regional basis, Sub-Saharan Africa as well as Eastern Europe and Central Asia are particularly well represented. Also during the year, MIGA completed an extensive set of upgrades to the operating system and application software underlying MIGA's online investment information services. This effort also included updating several of the Web-based appli- cations and automating many routine maintenance functions to increase operating efficiency and cope with the rising volume of site visitors and registrants to the agency's online services. table8 IPANETSTATISTICS, FYoi Ql Q2 Q3 Q4 total hits 852,605 968,500 966,012 1,334,948 4,122,065 impressions 240,060 285,857 259,320 351,832 1,137,069 (page views) user sessions 34,636 43,220 42,813 51,039 171,708 session length 16.7 18.63 18.15 i8.56 18.01 * (average minutes) * average multilateral investment guarantee agency wor d bank group 77 technical assistance services figure 9 IPANET USER PROFILE, by organization, FYol number industry 3,393 30 consutants 1,940 17 governments 1,224 11 fi ncial insitutiions 1,101 10 anITgusiness services research and education 1,035 9 investmen promr1tion 986 9 agencies/a visors business media 416 4 business associations 396 4 non-governement organizations 309 3 international organizations 279 2 other organizations log 1 figure lo IPANET REGISTRANTS, by region, FYoi number % North America 7,513 40 Western Europe 4,166 22 East Asia and the Pacific 2,075 1 Eastern Europe and Central Asia ,691 9 Sub-Saharan Africa 1,231 6 Latin America and the Carribean 1,133 6 Middle East and North africa 637 3 South Asia 544 3 figure 11 IPANET DOCUMENTS, by region, FYol number % Eastern Europe and Central Asia 2,892 25 Sub-Saharan Africa 2,642 22 Latin America and the Carribean 1,679 14 East Asia and the Pacific 1,591 13 Western Europe 952 8 Middle East and North Affica 860 7 North America 557 5 South Asia 362 3 other-global 301 3 78 multilateral investment guarantee agency world bank group technical assistance services PRIVATIZATIONLINK I wwwprivatizationlink.com MIGA completed a four-month effort to completely revise the PrivatizationLink site. p gBased on feedback from a PrivatizationLink user survey and an international focus P * : group, the new version of PrivatizationLink, launched in April 2001, includes enhancements in Web site design and navigation, as well as significant upgrades in content and functionality. In particular, the requirement to register in order to access much of the site has now been eliminated. Registration is only required to access the Business Directory and to enable the personalization of content presented. Enhancements to the site are numerous. Special entryways into the data have been added, catering to the needs of its target audience. The new Practitioners' Corner is targeted to users involved in structuring transactions, such as privatization agency personnel, and contains a collection of hands-on learning and networking resources, as well as templates of company profiles and the World Bank's databank of historical transaction statistics for privatization in developing countries. The Investors' Corner is aimed at those who want to track investment and advisory opportunities by providing a quick snapshot of the latest data, such as tender announcements and procurement notices for advisory services. A new personalization option allows investors to cus- tomize this feature by sector, region and subject to suit their own requirements. figure 12 PRIVATIZATIONLINK PROJECT PROFILES, FYol A ~~~4, 27 Europe and Central Asia East Asia and the Paci 4 M 20 Sub-Saharan Africa Latin America and the Caribbean 6 9i 16 countries profiles multilateral investment guarantee agency word bank group 79 technical assistance services Content has been greatly enhanced. A Best Practice section has been added that contains case studies and resources with useful information for privatization practi- tioners classified by topic. Users have the opportunity to share their ratings of the indi- vidual resources cataloged in this section, as well as view feedback from other users. MICA has also developed a new Country Fact Sheets collection, offering at-a-glance summaries of privatization trends in the regions and of country privatization programs. Fact sheets have been completed for all regions, 16 countries in Europe and Central Asia and 16 countries in Sub-Saharan Africa, three countries in the Middle East and North Africa region, and selected other countries. FDIXCHANGE MIGA completed the technical design for the pilot version of the FDI Xchange, a Web- and e-mail-based update service designed to keep investors informed of significant new investment opportunities and changes in the business operating envi- ronment in developing countries and economies in transition. An important element of this initiative involves developing the capability for investment promotion entities, privatization agencies, and other content providers to catalog their new information resources directly into IPAnet and the new e-mail service through an online interface. MIGA plans an intensive program of short-term assistance to these content providers as part of the deployment of the new service. MI GA met with several potential marketing partners (e.g., development finance insti- tutions and outward IPAs) as well as potential content providers to identify a core group of partners to participate in the pilot phase of the service, which is scheduled for fiscal 2002. INVESTMENT PROMOTION TOOLKIT MIGA's Investment Promotion Toolkit was formally launched at the Sixth Annual General Meeting of WAIPA in Geneva. The event was convened in March 2001 and attended by 96 people representing 48 IPAs in more than 40 countries. The Toolkit is a compilation of best practice in investment promotion, covering the full range of activities from establishing an IPA through image building, investor targeting and outreach, establishing linkage programs, and implementing monitoring and evaluating programs. The how-to guide was developed by MIGA and is provided to clients to support and supplement its capacity-building program and is also available for sale through the World Bank publications office (see box 3). SECTORAL RESEARCH During the past year, MIGA undertook to expand its compendia of online sectoral resources for investor research, in cooperation with the Joint Library of the World Bank and International Monetary Fund. MIGA carried out a program of research to identify and assess online sectoral information sources, both free and fee-based, that would be of use to the staff of investment promotion intermediaries as they identify potential investors and benchmark their attractiveness to investors in specific sectors. 80 multilateral investment guarantee agency wor d bDrk group technical assistance services The output of this research consists of analyses and hyperlinks to relevant Web sites featuring competitive, industry, and company data, compiled for eight selected sectors electronics, automotive components, IT services, apparel, food processing, telecommunications, tourism, and mining. The sectors were chosen based on several selection criteria: the sector's importance for FDI in terms of number of employees, in terms of foreign assets, as well as sectoral research needs communicated by MIGA clients. The objective ofthe research is twofold: to deepen MIGA's sector-specific database and to be able to offer clients new tools to use in conducting their strategic planning and investor targeting. These sectoral research resources will be employed in MIGA's training sessions, such as Internet workshops and skills training seminars on how to carry out sectoral targeting campaigns. These new resources were tested during the Internet Workshop for Europe and Central Asian IPAs held at the end of September 2000. In hands-on exercises during the workshop, they proved to be tremendously useful when carrying out sectoral research tasks. MIGA plans to continue developing these research resources in addi- tional sectors, G8 DOT FORCE MIGA was invited to participate as part of the World Bank representation to the second plenary meeting of the Digital Opportunities Task Force (DOT Force), which was held in Cape Town, South Africa. The DOT Force is a G8 initiative, bringing together repre- sentatives from the public, private and not-for-profit sectors from G8 and selected developing countries. The objective of the task force is to prepare a report with concrete recommendations on how the G8 can contribute to creating digital opportunity for all and bridging the global digital divide, for presentation and discussion at an upcoming G8 summit. MIGA outlined its use of online information services for promoting FDI into the developing world and participated in discussions on the need for new financing and risk management instruments to facilitate increased technology investment into emerging economies. . .m. . . . . . .e c wor . ba. . multilateral investment guarantee agency aOr di bank group 81 -<44 o;D~~~~~~~~~~~~~~~~~~~~~* MIGA's Legal Affairs and Claims Department assists member countries on matters related to foreign investment, provides legal advice to MIGA underwriters regarding the issuance of insurance coverage, and handles claims for compensation brought under contracts issued by MIGA. The first claim since MIGA's establishment was filed in the previous fiscal year. The claim was brought by Enron Corp. for loss as a consequence of the suspension by Indonesia of an independent power project in eastern Java in which Enron had invested. The claim arose under the expropriation coverage that MIGA issued to Enron in 1997. Enron's power project was unavoidably swept up in the economic turmoil that affected Indonesia at the end of the past decade. For more than a year after receipt of notice of the claim, MIGA pursued dis- cussions with Enron and Indonesia to find a mutually acceptable solution to the dispute. When the "cooling off" period set out in the insurance contract expired, MIGA became obligated to pay the claim. Talks continued for some time nonetheless, as both parties sought to restructure their relationship in a way that would have permitted the claim to be withdrawn. With Indonesia's economic sit- uation deteriorating and the prospects for financing substantial new infrastructure investment made more difficult, mediation talks were terminated in mid-2000. In accordance with its contractual obligation, MIGA then paid Enron $15 million for the loss it suffered on the project and negotiated a settlement agreement with Indonesia by which the loss will be salvaged over a three-year period. Payments under this agreement have already commenced, and MIGA has reopened its program in Indonesia. In addition to those investment disputes in which it is involved as insurer, MIGA, in accordance with its Convention, uses its good offices on a selective basis to encourage the settlement of other disputes between investors and member countries that may be brought to its attention. MIGA staff experienced in resolving conflicts relating to foreign investment provided legal assistance and guidance during the multilateral investment guarantee agency world bank group 83 legal services ~ 5k-.3 R1 I .),8+ 'i.e photo I Legal Services staff, including etA i FF < Luis Dodero, MlGA's General Counsel B 8 % . . i r ' "" ( bottom left). year to parties from numerous countries that sought creative approaches to the res- olution of their investment-related disputes. MIGA's objective in these cases is to help resolve disputes before they require formal arbitration. At any given time, MIGA's legal staffmay be consulting on as many as a dozen investment disputes around the world. A particularly contentious dispute resolved in fiscal 2001 illustrates the range of issues that can arise between foreign investors and host countries. The claimant in Matter of Id reco is an Italian construction and engineering firm that won a contract in 1987 to build and operate a water purification plant in C6rdoba, Argentina's second most populous province. The project was undertaken against a background of considerable economic instability, as the province became progressively less able to meet its financial obligations. Relations between the parties deteriorated and eventually collapsed entirely, either because of the wrongful interpretation of value added tax legislation, as the investor alleged, or because of repeated investor defaults, as the province contended. M I GA worked with the parties for four years to bring them eventually to an amicable settlement that resolved the investment dispute. Talks on several other matters are now reasonably well advanced. Mediation is normally a more expeditious form of a dispute resolution than arbitration, but when the issues are complex or a host country is challenged to rethink substantial elements of its economic policies, settlement talks can drag on for several years until the parties become comfortable enough with the results of their efforts to strike a deal. The involvement ofMIGA as a mediator ofiinvestment disputes may also relate to a general situation that jeopardizes the ability of a particular member country to attract foreign investment. This is the role that the agency is playing with respect to the expropriations of foreign investments by the Mengistu regime in Ethiopia some 84 multilateral investment guarantee agency wor d banl grouD legal services 27 years ago, where a number of expropriated foreign investors have been trying unsuccessfully to obtain compensation. In October 2000, MIGA and the government of Ethiopia concluded a Memorandum of Understanding by which MIGA was appointed mediator in an effort to find a solution to this ongoing problem. As of May 31, 2001, the deadline set by MIGA for registration of claims, more than 70 claimants had requested inclusion in the mediation process. MIGA has analyzed the evidence submitted by the claimants and is reviewing it with the Ethiopian authorities. Once the process is finished, the claimants and Ethiopia will hopefully be able to find, with MIGA's assistance, a solution for resolving these long-standing disputes. Such a resolution would also make a significant contribution to the development of the international law of dispute resolution. The cases that are now advancing toward resolution, in Ethiopia and elsewhere, suggest that MIGA's mediation facilities are filling a gap in the international law remedies currently available to foreign investors in their disputes with host countries. Diplomatic solutions are not practical for some, and formal arbitration may be too costly for others. Mediation, which is voluntary, informal, and inex- pensive, increasingly is recognized as an attractive alternative for the resolution of investment disputes. Upon the request of member states, MIGA advises on the negotiation of bilateral investment treaties and other investment-related issues. In addition, during the past fiscal year, MIGA's lawyers lectured at law schools in Argentina, Bermuda, China, Colombia, Greece, Malaysia, Singapore, Spain, Turkey, and the United States and spoke to numerous conferences and workshops to promote foreign investment. multilateral investment guarantee agency wor d bank group 85 4ft RA A. m : A A FINANCIAL OVERVIEW INCOME FROM GUARANTEES MIGA's income from guarantees, comprising earned net premium income, fees and commissions, increased by $6.9 million to $36.5 million. This reflected the level of Net Exposure and reinsurance at the end of fiscal 2000, rather than growth during fiscal 2001, because the latter was substantially concen- trated in the last month of the fiscal year. INVESTMENT INCOME MIGA's investment income increased from $23.5 million to $30.4 million in fiscal 2001 reflecting: (i) the growth of the investment portfolio from $464 million to $552 million, and (2) the investment return, which increased from 5.3 percent to 7.5 percent (or 6.o percent excluding unrealized gains). The average maturity of the investment portfolio in fiscal 2001 was 11.1 months, and unrealized investment gains accruing during the year amounted to $7.7 million. ADMINISTRATIVE EXPENSES Total administrative expenses amounted to $i1.8 million, compared with a budget of $22.1 million. The variance of $2.3 million comprised an unutilized contingency of $o.6 million, benefits savings of $o.8 million, and a general budget under-run of$o.g million. MIGA plans to carry over $0.3 million into fiscal 2002 for budget purposes, in respect of spot awards and systems development. NET INCOME Net Income was $19.6 million in fiscal 2001, compared with $10.9 million in fiscal 2000. The variance comprised: US$ M increase in premium and fee income + 6.9 increase in investment income + 6.9 increase in income from Staff Retirement Plan + 0.3 increase in provisioning -3.1 increase in administrative and other expenses - 2.3 increase in net income +8.7 TRANSLATION ADJUSTMENTS Translation Adjustments in fiscal 2001 amounted to $4.6 million, ofwhich $3.4 million related to paid in subscriptions, and $1.2 million related to other assets and liabilities. multilateral investment guarantee agency world bank group 93 financial overview INVESTMENTS, USS M, FYoI bank deposits 348 US treasury 110 sovereign governmrnt 83 US agency I OTHER ASSETS Other Assets of $53.7 million in fiscal 2001 compared with $37.4 million in fiscal 2000. The variance comprised: decrease in receivable and accrued interest -0.3 increase in prepaid pension + 2.7 increase in receivable for capital subscription + 8.0 increase in premiums receivable and prepaid + 5.9 increase in other assets +16.3 PAYABLES AND ACCRUED EXPENSES Payables and Accrued Expenses of$31 .7 million in fiscal 2001 compared with $31.6 million in fiscal 2000. Thevariance comprised: decrease in investment securities payables -1.9 increase in other payables + 1.8 increase in accrued expenses + 0.2 increase in Payables and Accrued Expenses + 0.1 94 multilateral investment guarantee agency world bank group financial overview RESERVE FOR CLAIMS MIGA's Reserve for Claims comprised Specific Claims Reserves of $o.5 million and General Claims Reserves of $294.6 million.' The provision for claims amounted to $29.7 million and reflected: (i) the increase in Net Exposure and reinsurance, offset by a significant increase in estimated future premium income, and (2) an adverse adjustment for MIGA's exposure in Argentina. COMPOSITION OF GENERAL CLAIM RESERVE, US$ M, FYoi systemic losses 208 attritional losses 76 contract level adjustments 26 reinsurer credit risk 80 administrative and 1 saivage expenses 110 net premium income (205) LIQUIDITY MIGA measures liquidity by reference to: (1) the resources which are available to pay claims ('Sources ofCash"), and (2) the capital and reserveswhich are availableto sustain losses and supportthe ongoing business ('Operating Capital'). As of June 30, 2001, Sources of Cash totaled $767 million, including MIGA's investment portfolio of $552 million, credit facilities of $1io million2, and promissory notes of $ioi million. Operating Capital of $653 million comprised General Claims Reserves of $295 million, Retained Earnings of $68 million, and Paid-in Capital of $291 million. In addition, MIGA was supported by $1,158 million of callable capital. CAPITAL INCREASE On March 29,1999, M IGA's Council of Governors approved a general capital increase of $850 million, to be subscribed over three years. As ofJune 30, 2001, 51 countries had subscribed $33p.0 million, of which $58.3 million was in cash and the balance was in the form of callable capital (see p.122 for a complete list). General Claims Reserves are intended to cover the present value of the inherent probable losses, net of related premium income, arising from the existing guarantee portfolio, based on current events and developments. 2 MIGA has credit facilities of$25 million with Union Bankof Switzerland, and $8s million with Royal Bank of Canada. Also, since June 30, 2001, MIGA has arranged credit facilities of $75 million with Lloyd's TSB. multilateral investment guarantee agency world bank group 95 financial statements BALANCE SHEET June 30, 2001 and June 30, 2000 Expressed in thousands of US dollars 2001 2000 Assets CASH $4,062 $7,904 INVESTMENTS - Note B Available-for-sale 5S52,1o6 464,448 NONNEGOTIABLE, NONINTEREST-BEARING DEMAND OBLIGATIONS - Note C 100,921 102,328 OTHER ASSETS Estimated reinsurance recoverables 192,300 111,300 Other assets 53,695 37,445 245,995 148,745 TOTAL ASSETS $903,084 $723,425 Liabilities and Shareholders' Equity LIABILITIES Accounts payable and accrued expenses $31,699 $31,560 Unearned premiums and commitments fees 25,694 17,705 Reserve for claims - Note F Reserve for claims net of estimated 295,100 264,400 reinsurance recoverables Estimated reinsurance recoverables 192,300 111,300 Reserve for claims - gross 487,400 375,700 Total liabilities 544,793 424,965 SHAREHOLDERS' EQUITY Capital stock - Note C Authorized capital ( 180,883 shares-June 30, 2001; 180,402 shares-June 30, 2000) Subscribed capital (132,869 shares-June 30, 2001; 117,694 shares - June 30, 2000) 1,437,643 1,273,449 Less uncalled portion of subscriptions 1,157,881 1,022,790 Less amounts due on called subscriptions 731 731 279,031 249,928 Payments on account of pending subscriptions 11,586 3,587 290,617 253,515 Retained earnings 74,939 55,369 Accumulated other comprehensive income 17,265) (10,424) Total shareholders' equity 358,291 298,460 CONTINGENT LIABILITIES - Notes D and E TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $903,084 5723,42S See Notes to Financial Statements 96 multilateral investment guarantee agency world bank group financial statements STATEMENT OF INCOME For the fiscal years ended June 30, 2001 and June 30, 2000 Expressed in thousands of US dollars 2001 2000 INCOME Income from guarantees Premium income $46,341 $37,443 Premium ceded 118,078) (13,037) Fees and commissions 8,203 5,128 Total 36,466 29,534 Income from investments Available-for-sale 30,356 22,101 Held-to-maturity 1,372 Total 30,356 23,473 Income from staff retirement plan - Note G 2,858 2,576 Miscellaneous income 141 141 Total income 69,821 55,724 EXPENSES Provision for claims - Note F 29,734 26,625 Administrative expenses - Notes G,H and I 19,772 18,o65 Other expenses 745 130 Total expenses 50,2S1 44,820 NET INCOME $19,570 $10,904 See Notes to Financial Statements multilateral investment guarantee agency world bank group 97 financial statements STATEMENT OF COMPREHENSIVE INCOME For the fiscal years ended June 30, 2001 and June 30, 2000 Expressed in thousands of US dollars 2001 2000 NET INCOME $19,570 $10,904 OTHER COMPREHENSIVE INCOME Translation adjustment (4,558) (1,724) Unrealized gain/loss on available-for-sale investments 7,717 (361) Total 3,159 (2,085) TOTAL COMPREHENSIVE INCOME $22,729 $8,819 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY For the fiscal years ended June 30, 2001 and June 30, 2000 Expressed in thousands of US dollars 2001 2000 CAPITAL STOCK Balance at beginning of the fiscal year $253,515 $223,404 New subscriptions z9,103 26,866 Payments on account of pending subscriptions 7,999 3,245 Ending Balance 290,617 253,515 RETAINED EARNINGS Balance at beginning of the fiscal year 55,369 44,465 Net income 19,570 10,904 Ending Balance 74,939 55,369 ACCUMULATED OTHER COMPREHENSIVE INCOME Balance at beginning of the fiscal year (10,424) (8,339) Other comprehensive income 3,159 (2,085) Ending Balance (7,265) (10,424) TOTAL SHAREHOLDERS' EQUITY $358,291 $298,460 See Notes to Financial Statements 98 multilateral investment guarantee agency world bank groap financial statements STATEMENT OF CASH FLOWS For the years ended June 30, 2001 and June 30, 2000 Expressed in thousands of US dollars 2001 2000 CASH FLOWS FROM OPERATING ACTIVITIES Net income $19,570 $10,904 Adjustments to reconcile net income to net cash provided by operating activities: Provision for claims 29,734 26,625 Accretion of discounts, net (15) Increase in other assets (16,182) (17,973) Increase in unearned premiums and commitment fees 8,095 2,139 Increase in accounts payable 188 14,725 41,405 36,405 Claim recovery (payment) - net 1,748 I (4,500) Net cash provided by operating activities 43,153 31,905 CASH FLOWS FROM INVESTING ACTIVITIES Available-for-sale portfolio: Sales and maturities 24,784,163 26,666,287 Purchases (24,867,306) (26,769,750) Held-to-maturity portfolio: Sales and maturities 39,982 Purchases Net cash used in investing activities (83,143) (63,481) CASH FLOWS FROM FINANCING ACTIVITIES Capital subscription payments 36,450 30,005 EFFECT OF EXCHANGE RATE CHANGES ON CASH (302) (293) Net decrease in cash (3,842) (1,864) Cash at beginning ofthe fiscal year 7,904 9,768 CASH AT END OF THE FISCAL YEAR $4,o62 $7,904 See Notes to Financial Statements multilateral investment guarantee agency world bank group 99 financial statements STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER June 30, 2001 Expressed in thousands of US dollars SUBSCRIPTIONS (Note C) VOTING POWER Amount Total Amount Amount Subject Number % of Members Shares Subscribed Paid-in Due to Call of Votes Total Albania 58 $628 $126 S- $502 235 0.15 Algeria 896 9,695 1,876 - 7,819 1,073 o.67 Angola 187 2,023 405 - 1,618 364 0.23 Argentina 1,254 13,568 2,714 10,854 1,431 0.89 Armenia 80 866 173 - 693 257 0.16 Australia 2,366 25,600 4,954 . 20,646 2,543 1.59 Austria 1,366 14,780 2,806 - 11,974 1,543 o.96 Azerbaijan 115 1,244 249 - 995 292 0.18 Bahamas, The 138 1,493 289 . 1,204 315 0.20 Bahrain 136 1,472 279 - 1,193 313 0.20 Bangladesh 340 3,679 736 2,943 517 0.32 Barbados 94 1,017 197 - 820 271 0.17 Belarus 233 2,521 504 - 2,017 410 0.26 Belgium 3,577 38,703 7,347 - 31,356 3,754 2.34 Belize 69 747 144 - 603 246 0.15 Benin 61 660 132 - 528 238 0.15 Bolivia 125 1,353 271 - 1,082 302 0.19 Bosnia and Herzegovina 80 866 173 693 257 0.16 Botswana 50 541 108 - 433 227 0.14 Brazil 1,854 2o,o6o 3,917 16,143 2,031 1.27 Bulgaria 643 6,957 1,321 - 5,636 820 0.51 Burkina Faso 61 660 132 528 238 0.15 Burundi 74 801 160 - 641 251 0.16 Cambodia 93 1,006 201 - 805 270 0.17 Cameroon 107 1,158 232 - 926 284 0.18 Canada 5,225 56,535 10,732 - 45,803 5,402 3.37 Cape Verde 5o 541 108 - 433 227 0.14 Central African Republic 60 649 130 519 237 0.15 Chile 485 5,248 1,050 - 4,198 662 0.41 China 4,334 46,894 9,075 - 37,819 4,511 2.82 Colombia 437 4,728 946 3,782 614 0.38 Congo, Democratic Republic of 338 3,658 731 2,927 515 0.32 Congo, Republic of 65 703 141 - 562 242 0.15 Costa Rica 117 1,266 253 - 1,013 294 0.18 Coted'lvoire 176 1,904 381 - 1,523 353 0.22 Croatia 258 2,792 540 - 2,252 435 0.27 Cyprus 183 1,980 376 - 1,604 360 0.22 Czech Republic 784 8,483 1,610 - 6,873 961 o.60 Denmark 1,265 13,687 2,598 - 11,089 1,442 0.90 Dominica 50 541 108 433 227 0.14 Dominican Republic 147 1,591 318 - 1,273 324 0.20 Ecuador 182 1,969 394 - 1,575 359 0.22 Egypt, Arab Republic of 459 4,966 993 - 3,973 636 0.40 See Notes to Financial Statements 100 multilateral investment guarantee agency world bank group financial statements STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK ANDVOTING POWER June 30, 2001 Expressed in thousands of US dollars SUBSCRIPTIONS (Note CJ VOTING POWER Amount Total Amount Amount Subject Number % of Members Shares Subscribed Paid-in Due to Call of Votes Total El Salvador 122 $1,320 $264 S$ $i,o56 299 0.19 Equatorial Guinea 50 541 108 - 433 227 0.14 Eritrea 50 541 108 - 433 227 0.14 Estonia 65 703 141 562 242 0.15 Ethiopia 70 757 151 606 247 0.15 Fiji 71 768 154 - 614 248 0.15 Finland 828 8,959 1,734 7,225 1,005 o.63 France 6,712 72,624 14,054 58,570 6,889 4.30 Gambia, The 50 541 108 433 227 0.14 Georgia 11I 1,201 240 - 961 288 0.18 Germany 5,071 54,868 10,974 - 43,894 5,248 3.28 Ghana 245 2,651 530 - 2,121 422 0.26 Greece 493 5,334 1,013 4,321 670 0.42 Grenada 50 541 108 - 433 227 0.14 Guatemala 140 1,515 303 - 1,212 317 0.20 Guinea 91 985 197 - 788 268 0.17 Guyana 84 909 182 . 727 261 o.16 Haiti 75 812 162 - 650 252 o.16 Honduras 139 1,504 291 . 1,213 316 0.20 Hungary 779 8,429 1,631 - 6,798 956 o.60 Iceland go 974 195 - 779 2 267 0.17 India 3,048 32,979 6,596 . 26,383 3,225 2.01 Indonesia 1,049 11,350 2,270 - 9,080 1,226 0.77 Ireland 65o 7,033 1,335 - 5,698 827 0.52 Israel 835 9,035 1,715 7,320 1,012 o.63 Italy 4,970 53,775 10,208 - 43,567 5,147 3.21 Jamaica 181 1,958 392 - 1,566 358 0.22 Japan 8,979 97,153 18,443 - 78,710 9,156 5.72 Jordan 134 1,450 281 - i,169 311 0.19 Kazakhstan 288 3,116 603 - 2,513 465 0.29 Kenya 237 2,564 496 . 2,o68 414 0.26 Korea, Republic of 791 8,559 1,625 . 6,934 968 o.60 Kuwait 930 10,063 2,013 - 8,050 1,107 o.69 Kyrgyz Republic 77 833 167 - 666 254 0.16 Lao People's Democratic Republic 60 649 130 - 519 237 0.15 Latvia 171 1,850 351 - 1,499 348 0.22 Lebanon 142 1,536 307 - 1,229 319 0.20 Lesotho 50 541 108 - 433 227 0.14 Libya 549 5,940 1,188 - 4,752 726 0.45 Lithuania 1o6 1,147 229 918 283 0.18 Luxembourg 160 1,731 335 - 1,396 337 0.21 Macedonia, FormerYugoslavRepublicof 88 952 181 - 771 265 0.17 Madagascar loo 1,082 216 - 866 277 0.17 See Notes to Financial Statements multilateral investment guarantee agency world bank group 101 financial statements STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCKAND VOTING POWER June 30, 2001 Expressed in thousands of US dollars SUBSCRIPTIONS (Note C) VOTING POWER Amount Total Amount Amount Subject Number % of Members Shares Subscribed Paid-in Due to Call of Votes Total Malawi 77 $833 S167 $- $666 254 0.16 Malaysia 579 6,265 1,253 5,012 756 0.47 Mali SI 876 175 - 701 258 o.i6 Malta 132 1,428 271 - 1,157 309 0.19 Mauritania 63 682 136 - 546 240 0.15 Mauritius 153 1,655 314 1,341 330 0.21 Micronesia, Fed. States of 50 541 108 - 433 227 0.14 Moldova 96 1,039 208 831 273 0.17 Mongolia 58 628 126 - 502 235 0.15 Morocco 480 5,194 1,005 - 4,189 657 0.41 Mozambique 97 1,050 210 - 840 274 0.17 Namibia 107 1,158 232 - 926 284 0.18 Nepal 69 747 149 - 598 246 0.15 Netherlands 3,822 41,354 7,850 - 33,504 3,999 2.50 Nicaragua 102 1,104 221 - 883 279 0.17 Nigeria 844 9,132 1,826 7,306 1,021 o.64 Norway 1,232 13,330 2,531 - 10,799 1,409 0.88 Oman 94 1,018 203 - 815 271 0.17 Pakistan gii 9,857 1,908 - 7,949 1,088 o.68 Palau 50 541 108 - 433 227 0.14 Panama 131 1,417 283 1,134 308 0.19 Papua New Guinea 96 1,039 208 83i 273 0.17 Paraguay 80 866 173 - 693 257 0.16 Peru 515 5,572 1,078 - 4,494 692 0.43 Philippines 484 5,237 1,047 4,190 661 0.41 Poland 764 8,266 1,653 - 6,613 941 0.59 Portugal 673 7,282 1,382 - 5,900 85o 0.53 Qatar 137 1,482 296 - 1,i86 314 0.20 Romania 766 8,288 1,604 - 6,684 943 0.59 Russian Federation 5,528 59,813 11,355 - 48,458 5,705 3.56 St. Kitts and Nevis 50 541 108 - 433 227 0.14 St. Lucia 69 747 144 - 603 246 0.15 St. Vincent and the Grenadines 50 541 108 - 433 227 0.14 Samoa 50 541 108 - 433 227 0.14 Saudi Arabia 4,332 46,872 9,071 - 37,801 4,509 2.82 Senegal 145 1,569 314 1,255 322 0.20 Seychelles 5° 541 108 - 433 227 0.14 Sierra Leone 75 812 162 65o 252 0.16 Singapore 154 1,666 333 - 1,333 331 0.21 Slovak Republic 222 2,402 480 1,922 399 0.25 Slovenia 102 1,104 221 883 279 0.17 South Africa 1,662 17,983 3,414 14,569 1,839 1.15 Spain 2,265 24,507 4,652 - 19,855 2,442 1.53 Sri Lanka 374 4,047 783 3,264 551 0.34 See Notes to Financial Statements 102 multilateral investment guarantee agency world bank group financial statements STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER June 30, 2001 Expressed in thousands of US dollars SUBSCRIPTIONS (Note q VOTING POWER Amount Total Amount Amount Subject Number %of Members Shares Subscribed Paid-in Due to Call of Votes Total Sudan 206 $2,229 $446 $- $1,783 383 0.24 Swaziland 58 628 126 502 235 0.15 Sweden 1,849 20,006 3,798 . 16,208 2,026 1.27 Switzerland 1,500 16,230 3,246 12,984 1,677 1.05 Tanzania 141 1,526 305 - 1,221 318 0.20 Thailand 421 4,555 911 3,644 5g8 0.37 Togo 77 833 167 - 666 254 0.16 Trinidad and Tobago 280 3,030 586 2,444 457 0.29 Tunisia 156 1,688 338 - 1,350 333 0.21 Turkey 462 4,999 1,000 - 3,999 639 0.40 Turkmenistan 66 714 143 571 243 0.15 Uganda 132 1,428 286 - 1,142 309 0.19 Ukraine 764 8,266 1,653 6,613 941 0.59 United Arab Emirates 372 4,025 805 3,220 549 0.34 United Kingdom 6,o95 65,948 12,876 * 53,072 6,272 3.92 United States 21,983 237,856 47,199 - i9o,657 22,160 13.84 Uruguay 202 2,186 438 - 1,748 379 0.24 Uzbekistan 175 1,894 380 - 1,514 352 0.22 Vanuatu 50 541 108 - 433 227 0.14 Venezuela Rep. Bolivariana de 1,427 15,440 3,088 12,352 1,604 1.00 Vietnam 220 2,380 476 * 1,904 397 0.25 Yemen, Republic of 155 1,677 335 - 1,342 332 0.21 Zambia 318 3,441 688 - 2,753 495 0.31 Zimbabwe 236 2,553 511 2,042 413 0.26 Total-June30, 2001 a 132,869 51,437,643 $279,031 $731 $1,157,881 160,127 100.00 Total-June30, 2000 117,694 $1,273,449 $249,928 $731 $1,022,790 144,598 Note: Amounts aggregating the equivalent of $11,586,000 have been received from (i) countries in the process of completing its membership requirements: Rwanda $61,ooo, Suriname $155,000; (ii) a country in the process of succession to membership: Federal Republic ofYugoslavia (Serbia and Montenegro) $188,000; and (iii) a member in the process of subscribing to additional shares ofthe 1998 General Capital Increase: United States $11,182,000. a May differ from the sum of individual figures shown because ofrounding See Notes to Financial Statements multilateral Investment guarantee agency world bank group 103 financial statements STATEMENT OF GUARANTEES OUTSTANDING June 30,2001 Expressed in thousands of US dollars Gross Exposure by Guarantee Currency (Note D) US Deutsche French Japanese Reinsurance Net Host Country Dollars Marks Euro Francs Yen Total (Note D) Exposure Albania $8,585 $ $ $ $ $8,585 S $8,585 Algeria 4,735 4,735 4,735 Angola 21,818 21,818 21,818 Argentina 693,589 693,589 434,858 258,731 Armenia 2,700 2,700 2,700 Azerbaijan 40,612 40,612 40,612 Bangladesh 79,542 79,542 14,670 64,872 Bolivia 14,594 14,594 14,594 Bosnia and Herzegovina 45,977 45,977 45,977 Brazil 888,453 888,453 576,394 312,059 Bulgaria 1,598 1,598 1,598 Cape Verde 2,206 2,206 2,206 Chile 22,216 22,216 22,216 China 110,237 2,911 113,148 33,128 80,020 Colombia 192,889 192,890 74,040 118,850 Costa Rica 86,272 86,272 13,290 72,982 Cote d'lvoire 12,881 12,881 12,881 Croatia 36,494 36,494 36,494 Czech Republic 10,807 69,046 79,853 7,565 72,288 Dominican Republic 181,352 181,352 58,243 123,109 Ecuador 210,360 210,360 81,000 129,360 Georgia 2,134 2,134 2,134 Guatemala 114,064 114,064 56,267 57,797 Guinea 51,462 51,462 51,462 Guyana 30,600 30,600 30,600 Honduras 14,060 14,060 14,060 Indonesia 56,496 56,496 3,527 52,969 Jamaica 93,812 93,812 4,760 89,052 Jordan 24,300 14,986 39,286 11,786 27,500 Kazakhstan 42,882 42,882 42,882 Kenya 42,190 42,190 18,745 23,445 Kuwait 50,000 50,000 50,000 Kyrgyz Republic 50,730 50,730 4,983 45,747 Lesotho 23,761 23,761 23,761 Macedonia 17,298 17,298 17,298 Madagascar 1,320 1,320 1,320 Moldova 63,792 63,792 30,546 33,246 Mozambique 143,850 27,412 171,262 41,706 129,556 Nepal 19,140 19,140 7,770 11,370 Nicaragua 80,755 80,755 40,377 40,378 See Notes to Financial Statements 104 multilateral investment guarantee agency world bank group financial statements STATEMENT OF GUARANTEES OUTSTANDING June 30,2001 Expressed in thousands of US dollars Gross Exposure by Guarantee Currency (Note D) US Deutsche French Japanese Reinsurance Net Host Country Dollars Marks Euro Francs Yen Total (Note D) Exposure Pakistan $82,540 $6,909 $7,313 $ $ $96,762 $16,793 $79,969 Panama 3,288 3,288 3,288 Paraguay 5,000 5,000 1,500 3,500 Peru 271,419 271,419 114,015 157,404 Philippines 139,500 139,500 10,450 129,050 Romania 20,256 134,001 154,257 36,273 117,984 Russian Federation 263,470 263,470 119,238 144,232 Slovak Republic 5,ooo 5,117 685 10,802 10,802 South Africa 12,300 12,300 12,300 Sri Lanka 3,236 3,236 3,236 Swaziland 32,000 27,412 59,412 29,706 29,706 Tanzania 175,230 175,230 104,733 70,497 Togo 7,431 7,431 7,431 Turkey 153,857 3,988 157,845 70,660 87,185 Turkmenistan 8,000 8,000 8,000 Uganda 42,805 42,805 9,515 33,290 Uruguay 27,735 27,735 8,320 19,415 Uzbekistan 10,000 10,000 10,000 Venezuela, R. B. de 68,500 68,500 12,450 56,o0o Vietnam 20,000 20,000 5,000 15,000 Zambia 31,000 2,349 33,349 33,349 Sub-total $ 4,846,995 514,938 $354,835 51,320 $57,172 $5,275,26o $2,052,309 53,222,951 Adjustments for dual-country oontracts. ArgentinaJChile -22,216 -22,216 i -22,216 Brazil/Bolivia -14,594 -14,594 i -14,594 Mozambique/Swaziland -32,000 -27,412 -59,412 -29,706 -29,706 Total - June 30, 2001 a S4,778,186 $14,938 $354,835 $1,320 52g,760 S5,179,040 52,022,603 $3,156,437 Total - June 30, 2000 SU11o.oL S33.370 5218.760 $1,440 $1,194 S4S.4.812 $1,548,86 52.8156 a May differ from the sum of individual figures shown because of rounding See Notes to Financial Statements multilateral investment guarantee agency world bank group 105 financial statements NOTES TO FINANCIAL STATEMENTS PURPOSE The Multilateral Investment Guarantee Agency (MIGA), established on April 12, 1988, is a member ofthe World Bank Group which also includes the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), and the International Development Association (IDA). MIGA's activities are closely coordinated with and complement the overall development objectives of the other World Bank institutions. MIGA is designed to help developing countries attract productive foreign investment by both private investors and commercially operated public sector com- panies. Its facilities include guarantees or insurance against noncommercial risks and a program of advisory services and technical assistance to support member countries' efforts to attract and retain foreign direct investment. Note A I SUMMARY OFSIGNIFICANTACCOUNTING AND RELATED POLICIES MIGA's financial statements have been prepared in conformity with International Accounting Standards and with accounting principles generally accepted in the United States of America. The policy adopted is that considered most appropriate to the circumstances of MIGA having regard to its legal requirements and to the practices of other international insurance entities. Use of Estimates The preparation of financial statements in conformity with International Accounting Standards and accounting principles generally accepted in the United States of America requires man- agement to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differfrom those estimates. Thefollowing summaryofpolicies adopted by MIGA is provided to assist readers in the interpretation ofthese financial statements. Translation of Currencies MIGA's financial statements are expressed in terms of United States dollars solely for the purpose of summarizing MlGA's financial position and the results of its operations for the convenience of its members and other interested parties. MIGA is an international organization that may conduct its operations in the currencies of all its members. MIGA's resources are derived from its capital and retained earnings in its members' cur- rencies. MIGA strives to minimize exchange rate risks in a multicurrency environment. As such, MIGA attempts to match its contingent obligations in any one currency with assets in the same currency on a pro-rata basis. Accordingly, MIGA may periodically undertake currency conversions on a pro-rata basis to match the currencies underlying its reserves with those ofthe outstanding contingencies. The purpose of these conversions will be to minimize currency exposure that may occur through operations. Otherwise, MIGA will not convert one currency into another except for small amounts required to meet certain operational needs. Assets and liabilities are translated at market rates of exchange at the end of the period. Capital subscriptions are stated in accordance with the procedures described below. Income and expenses are generally translated at an average of the market rates of exchange in effect during each month. Translation adjustments are charged or credited to other comprehensive income. Valuation ofCapitalStock Under the MIGA Convention, all payments from members subscribing to the capital stock of M IGA shall be settled on the basis of the average value of the Special Drawing Right (SDR) in terms of United States dollars for the period january 1,1981 to June 30,1985, such value being equal to $1.o82 for one SDR. Investments As part of its overall portfolio management strategy, to diversify its credit exposure to com- mercial banks and to obtain higher returns, MIGA invests in government and agency obligations and time deposits according to its credit risk and maturity policies. Government and agency obligations include highly rated fixed rate bonds, notes, bills and other obligations issued or unconditionally guar- anteed by governments of countries or other official entities including government agencies or by multi- lateral organizations. 106 multilateral investment guarantee agency world bank group financial statements Investments classified as available-for-sale, which are those securities that may be sold prior to maturity as part of asset/liability management or in response to other factors, are carried at fair value with any changes in fair value reported in the Balance Sheet as a component of other comprehensive income. Revenue Recognition Revenue from premium payments for dired insurance and reinsurance contracts assumed and ceded is recognized on a pro-rata basis over the contract period. Revenue from com- mitment fees, which are fees paid by investors to reserve for a limited period of time guarantee capacity for future use, is recognized on a pro-rata basis over the commitment period. Reserve for Claims The reserve for claims provides for probable losses, net offuture premiums, inherent in guarantee operations based upon an estimation of the net present value offuture premium income as compared to the net present value of future losses related to guarantee operations. MIGA has incurred only one loss to date (see NoteD). Accordingly, MIGA has computed expected future losses by reference to (i) the loss experiences of other insurers engaged in similar underwriting, (ii) the composition and volume of outstanding guarantee contracts, and (iii) theworldwide economic and political environment. This reserve is available to absorb probable losses inherent in outstanding guarantees and is increased by provisions charged to expense and decreased by claims settlements. The level of provision is based upon management's evaluation of probable losses, net of future premiums, that may result from (i) risks that are inherent, but unidentifiable at the time of reporting, (ii) unusually large concentrations of exposure to individual risks, countries or guarantee contracts, and (iii) an ongoing assessment of MICA's expected recovery rates. Sufficient claims reserves are established at theend of each yearto cover all ofthe inherent probable lossesarisingfrom contracts outstanding atthat time on a net present value basis; future provisions are then established to reflect changes in M IGA's out- standing portfolio. In the event of a formal filing of claim by an investor, and upon receipt of full evidence of the occurrence ofthe covered risk, MIGA normally has between two months and six months to determine its liability under the contract, depending upon the type of coverage and contract terms, and 60 days thereafter to pay the claim. Accounting and financial reporting developments In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, Accountingfor Derivative Instruments and Hedging Activities, which, as amended by SFAS Nos. 137 and 138, is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. The Agency adopted SFAS 133 effective July 1, 2000. The adoption of SFAS 133 did not have any impact on the financial position or results of operations of the Agency. In March 1999, the International Accounting Standards Committee issued IAS No. 39, Financial Instruments Recognition and Measurement. The Standard prescribes balance sheet recognition of all financial assets and financial liabilities, including derivatives. It requires financial assets and financial liabilities to be initially measured at cost, and to be carried at fair value on the balance sheet thereafter. The Standard is effective for the Agency for the year ending June 30, 2002. In September 2000, FASS issued SFAS No. 140, Accountingfor Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 140, which replaces SFAS No. 125, Accountingfor Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, provides accounting and reporting standards for securitizations and other transfers of financial assets. The accounting requirements of the Standard are effective for transfers and servicing of financial assets and extinguishments of liabilities after March 31, 2001, and must be applied prospectively. The Agency applied the provisions of SFAS No. 140 beginning April i, 2001. The adoption of SFAS No. 140 did not have any impact on the Agency's financial position or results of operations for the period. multilateral investment guarantee agency world bank group 107 financial statements Note B I INVESTMENTS Available-for-sale portfolio: Investment securities in the available-for-sale portfolio are carried at fair value. A summary ofthe available-for-sale portfolio at June 30, 2001 and June 30, 2000 is as follows: Amortized Unrealized Unrealized air (in thousands of US dollars) Cost Gains Losses Value AtJune 30, 2001 Government obligations $264,879 $6,350 $73 $271,156 Time deposits 28o,950 - 280,950 Total $545,829 $6,350 $73 $552,106 AtJune 30, 2000 Government obligations $250,141 $5s8 $1,798 $248,701 Time deposits 215,747 - 215,747 Total $465,888 $358 $1,798 $464,448 The expected maturities of investment securities in the available-for-sale portfolio atJune 30, 2001 were as follows: Amortized Fir (in thousands of US dollars) Cost Value At June 30, 2001 Due in one year or less $300,677 $301,318 Due after one year through two years 177,310 181,251 Due after two years through three years 67,842 69,537 Total $545,829 $552,106 Investments were denominated primarily in United States dollars with instruments in nondollar cur- rencies representing 8.1 percent (8.2 percent -June 30,2000) ofthe portfolio. Note C I CAPITAL STOCK The MIGA Convention established MIGA's authorized capital stock at 100,000 shares with a provision that the authorized capital stock shall automatically increase on the admission of a new member to the extent that the then authorized shares are insufficient to provide the shares to be subscribed by such member. At june 30, 2001, the initial authorized capital stock increased to 102,324(101,843- June 30, 2000) shares. The Convention further states that 10 percent ofthe members' initial subscription be paid in cash, in freely convertible currencies, except that developing member countries may pay up to a quarterofthe io percentintheirown currencies. An additional 10 percentofthe initial subscription shall be paid in the form of nonnegotiable, noninterest bearing promissory notes. The notes are denominated in freely convertible currencies and are due on demand to meet MIGA's obligations. The remaining 8o percent is subject to call when required by M IGA to meet its obligations. On March 29, 1999, the Council of Governors approved a resolution increasing the authorized capital stock of MIGA by 78,559 shares to be subscribed by members during the subscription period 108 multilateral investment guarantee agency world bank goup financial statements ending March 28, 2002. Of the additional capital, 17.65 percent is to be paid in cash, in freely usable currency. The remaining 82.35 percent is subjectto call when required by MIGA to meet its obligations. At June 30, 2001, MIGA's authorized capital stock comprised 180,883 shares of which 132,869 (117,694-June30,2000) shares had been subscribed. Each share hasa parvalueofSDRio,ooo,valued at the rate of $1.082 per SDR. Of the subscribed capital, $279,031,000 ($249,928,000-June 30, 2000) has been paid in; $731,000 (731,000 - June 30, 2000) is due and the remaining $1,157,881,0OO ($1,022,790,000June30,1999) issubjecttocall. Oftheamountspaid in,at june30,2001, $100,921,000 ($102,328,000 June 30, 2000) is in the form of nonnegotiable, noninterest bearing demand obligations (promissory notes). A summary of MIGA's capital stock at June 30, 2001 and June 30, 2000 is as follows: Initial Capital Capital Increase Total Shares (US$ooo) Shares (US$ooo) Shares (US$ooo) AtJuwe 30, 2001 Authorized 102,324 $1,107,146 78,559 $850,008 180,883 $1,957,154 Subscribed 102,324 $1,107,146 30,545 $330,497 132,869 $1,437,643 AtJune 30, 2000 Authorized 101,843 $1,101,941 78,559 $850,008 180,402 $1,951,950 Subscribed 101,843 $1,101,941 15,851 $171,508 117,694 $1,273,449 Note D I GUARANTEE PROGRAM AND CONTINGENT LIABILITIES Guarantee program. MIGA offers guarantees or insurance against loss caused by noncommercial risks (political risk insurance) to eligible investors on qualified investments in developing member countries. MIGA insures investments for up to 20 years against four different categories of risk: currency transfer, expropriation, war and civil disturbance, and breach of contract. Currency transfer protects the investor from inconvertibility of local currency returns and proceeds from the liquidation of the investment project into foreign exchange for transfer outside the host country. Expropriation protects the investor against partial or total loss ofthe insured investment as a result of acts by the host government that may reduce or eliminate ownership of, control over, or rights to the insured investment. War and civil disturbance protects the investor against losses from damage to, or the destruction or disappearance of, tangible assets caused by politically motivated acts of war or civil dis- turbance in the host country. Breach ofcontract protects the investor against the impossibility to obtain or to enforce an arbitral or judicial decision recognizing the breach of an obligation by the host gov- ernment. Investors may insure projects for any combination ofthe four types of coverage. MIGA guar- antees, other than those issued as reinsurance, cannot be terminated unilaterally by the guarantee holder within the first three years from the date of issuance. Premium rates applicable to issued con- tracts are fixed for five years. Payments against all claims under a guarantee may not exceed the maximum amount of coverage issued under the guarantee. As approved by the Board of Directors and the Council of Governors, the maximum aggregate amount of contingent liabilities that may be assumed by MIGA is 350 percent of the sum of MIGA's unimpaired subscribed capital and its reserves plus such portion of the insurance ceded by MIGA through contracts of reinsurance as the Board of Directors may determine. Accordingly, at June 30, 2001, the maximum level of guarantees outstanding may notexceed $8,121,241,000. Contingent Liability. The maximum amount of contingent liability of MIGA under guarantees out- standing at June 30, 2001 totaled $5,179,040,000 ($4,364,812,000 - June 30, 2000). The maximum amount of contingent liability is MIGA's maximum exposure to insurance claims, which includes "standby" coverage for which MIGA is committed but not currently at risk. At June 30, 2001, MIA's estimate of its actual exposure to insurance claims exclusive of standby coverage is $2,628,939,000 ($2,329,948,000-June30,2000). At june30,2001, approximately37percentofthecontingentliability represents guaranteesissued thatwill expireon orafter june30, 2011. multilateral investment guarantee agency world bank group 109 financial statements As of June 30, 2001, additional guarantee capacity committed was nil ($117,000,000 - June 30, 2000). Claim Activity. In June 2000, MIGA paid its first claim, an expropriation claim related to a power project in Indonesia, amounting to $15,000,000, of which 70% was reinsured. The net amount paid by MIGA was $4,500,000. MIGA has entered into a settlement agreement with Indonesia under which the loss should be repaid in six semi-annual payments of principal and interest on the out- standing balance. As at June 30, 2001, in accordance with the terms of the settlement agreement, two installments totalling $5,825,ooo have been received. MIGA has retained $1,748,000 (30%). Note E I REINSURANCE Although MIGA obtains quota-share and facultative reinsurance to augment its underwriting capacity and to protect portions of its insurance portfolio, it remains responsible to the insured client for the entire amount of the insurance contract. Of the $5,179,040,000 outstanding contingent liability (gross exposure) as at June 30, 2001 ($4,364,812,000 - June 30, 2000), $2,022,603,000 was ceded through contracts of reinsurance ($1,548,856,000 - June 30, 2000). Net exposure amounted to $3,156,437,000 as at June 30, 2001 ($2,815,956,000 - June 30, 2000). M IGA can also provide both public (official) and private insurers with facultative reinsurance. As ofJune 30, 2001, total insurance assumed by MIGA, primarily with official investment insurers, amounted to $99,882,000 ($124,472,000- June 30, 2000). Estimated reinsurance recoverables have been determined based upon a review ofthe selected contracts in force and other available information. Premiums relating to direct, assumed, and ceded contracts for the fiscal years ended June 30, 2001 and June 30, 2000 were as follows: (in thousands ofUS dollars) 2001 2000 Premiums written Direct $56,491 $39,980 Assumed 1,697 2,207 Ceded (23,344) (16,663) Premiums eamed Direct $44,300 $35,062 Assumed 2,041 2,381 Ceded (18,078) (13,037) 110 multilateral investment guarantee agency world bank group financial statements Note F I RESERVE FORCLAIMS MIGA's gross reserveforclaimsas ofJune30,2001 amounted to $487,400,000 ($375,700,000-June3o, 2000) An analysis ofthe changes to the gross reserve for claims for the fiscal years ended June 30, 2001 and June 3o, 2000 were as follows: (in thousands of US dollars) 2001 2000 Balance, beginning of the fiscal year $375,700 $340,000 Provision for claims-net 29,734 26,625 Estimated reinsurance recoverables 81,000 14,300 Claim recovered (paid) 1,748 (4,500) Translation adjustment (782) (725) Balance, end of the fiscal year $487,400 $375,700 Note G I STAFF RETIREMENT PLAN The World Bank Group has a defined benefit retirement plan (Plan) covering substantially all of MIGA's staff. The Plan alsocovers substantiallyall the staffofIBRD and IFC. Underthe Plan, benefits are based on the years of contributory service and the highest three-year average of pensionable remuneration as defined in the Plan, with the staff contributing a fixed percentage of pensionable remuneration, and the World Bank Group contributing the remainder of the actuarially determined cost of future Plan benefits. The actuarial present values of Plan obligations throughout the fiscal year are determined at the beginning of the fiscal year by the Plan's actuary. MIGA's total contribution to the Plan is based upon the aggregate funding method. All contributions to the Plan and all other assets and income held for the purposes of the Plan are held separately from the other assets and income of the World Bank Group and can be used only for the benefit of the participants in the Plan and their beneficiaries, until all liabilities to them have been paid or provided for. Plan assets consists primarily of equity and fixed income secu- rities, with small holdings of cash, real estate and other investments. Net periodic pension income allocated to MIGA and included in incomefrom Staff Retirement Plan forthe fiscal year ended June 30, 2001 was $2,858,ooo ($2,576,000 - June 30,2000). Note H I OTHER POSTRETIREMENT BENEFITS IBRD provides other postretirement benefits for eligible active and retired World Bank Group staff, including MIGA. These benefitscan be grouped undertwo majortypes, i.e. health care and life insurance benefit and the pensions administered outside of the Staff Retirement Plan (discussed in Note G). IBRD hasdesignated assets to fund these liabilities. The assets and liabilitieswere recordedon IBRD's balance sheet. At June 30, 2001, MIGA has included in other assets an accrued/prepaid postretirement benefits cost of$27,600 ($135,000- June3o, 2000) relatingto its share ofthe postretirement benefits net assets. Expense resultingfrom the decrease in MIGA's share ofthese net assets forthe fiscal yearended June 30, 2001 was $162,6O0 ($189,000-June 3o,2000). multilateral investment guarantee agency lorld bank group 111 financial statements Note I SERVICE AND SUPPORT FEE The Agency obtains certain administrative and overhead services from IBRD in those areas where common services can be efficiently provided by IBRD. This includes shared costs of the Boards of Governors and Directors, and other services such as communications, internal auditing, administrative support, supplies and insurance. Payments for these services are made by the Agency to IBRD based on negotiated fees, chargebacks and allocated charges where chargeback is not feasible. Expenses allocated to the Agency for the fiscal year ended June 30, 2001, were $1,oo8,306 ($984,000 - June 30, 2000). Note J I ESTIMATED FAIR VALUES The estimated fair values of MIGA's cash and nonnegotiable, noninterest-bearing demand obligations are assumed to approximate their carrying values. The estimated fair value of MIGA's investments shown in Note B is based on market quotations. The estimated fair values are only indicative of indi- vidual financial instruments' values and should not be considered an indication of MIGA's fair value 112 multilateral investment guarantee agency world bank group m 0 a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~w OQ 0~~~~~~~~~~ g~~~~~~~~~5 a - :b 9|IS|5toi$ [; . r-l'l ,g,,,x,,Xlfjlg [ i S~~~~~~~~~~~~~ - . ................... .... . ................ .. . . ....................... ...................... I GOVERNORS AND ALTERNATES, as of June 30, 2001 member governor alternate Albania Shkelqim Cani Fatos Ibrahimi Algeria Mourad Medelci Omar Bougara Angola Ana Dias Lourenco job Graca Argentina Domingo Felipe Cavallo Pedro Pou Armenia Vahram Nercissiantz Karen Chshmarityan Australia Peter Costello Kay Patterson Austria Karl-Heinz Grasser Thomas Wieser A erbaijan Elman Siradjogly Rustamov (vacant) Bahamas, The William C. Allen Ruth R. Millar Bahrain Abdulla Hassan Saif Zakaria Ahmed Hejres Bangladesh Shah A.M.S. Kibria (vacanit) Barbados Owen S. Arthur GrantleyW. Smith Belarus Andrei V. Kobyakov Vladimir N. Shimov Belgium Didier Reynders Gregoire Brouhns Belize Said W Musa Keith A.Arnold Benin Bruno Amoussos Pierre John Igue Bolivia Jose Luis Lupo Flores Bernardo Requena Blanco Bosnia and Herzegovina Mirsad Kurtovic Dragan Covic Botswana Baledzi Gaolathe Wilfred Jiwa Mandlebe Brazil Pedro Samnpaio Malan Arminio Frag Neto Bulgairia Muravei Radev Martin Mihaylov Zaimov Burkina Faso Benoit Ouattara Patrice Nikiema Burundi Charles Nihangaza Dieudonne Nintunze Cambodia (vacant) (Vacant) Cameroon Martin Okouda Daniel Njainkcouo Lamere Canada Paul Martin Leonard M.Good Cape Verde Carlos Augusto Duarte Burgo (vacant) Central Africlan, Republic 'Eric Sorongope Alexis Ngomba Chile Nicol,as Eyzaguirre Mario Marcel 'China Xiang Huaicheng Jin Ligun Colombia Juan Manuel Santos Calderon Juan Carlos Echeverry Congo, Democratic Rep. of Matunguiu Mbuyamu liankir Jean-Claude Masangu Mulong Congo, Republic of Mathias Dzon Clement Mierassa Costa Rica Leonel Baruch G. Eduardo Lizano Fait C8te d'lvoire Affi N'Guessan Bouabre Bohoun Croatia Nenad Porges Josip Kulisic Cyprus Takis Klerides Andreas Tryfopidles Czech Republic Jiri Rusnok Oldrich Dedek Denmark Anita Bay Bunclegaard Carsten Staur Dominica Ambrose George Ambrose M*J. Sylvester Dominican Republic Francisco M. Guerrero Prats-R. Luis Manuel Piantini 'Ecuador Jorge Gallardo Zavala Alexander Mejia Penafiel Egypt, Arab Republic of Medhat Hassanein Ahmed Mahrous EI-Darsh El Salv'ador Juan Jose Daboub Rafael Barraza Equatorial Guinea Fortunato Ofa Mbo Melchor Esono Edjo Eritrea Gebreselassie Yosief Gabriel Fassil Ogbazghy Estonia Siim Kallas Mihkel Parnoja Ethiopi'a Sufian Ahmed Tadesse Haile Fiji Joine Yavala Kubuabola Solomone S. Kotobalavu Finland Sauli Niinisto Kaarina Rautala France Laurent Fabius jean-Piere Jouyet multilateral investment guarantee agency wor[d bank grou.p 115 appendices GOVERNORS AND ALTERNATES, as of June 30, 2001, (cont.) member governor alternate Gambia, The Famara L. Jatta Dodou B. Jagne Georgia Zurab Nogaideli Ivan Chkhartishvili Germany Heidemarie Wieczorek-Zeul Caio K. Koch-Weser Ghana Yaw Osafo-Maafo Victor Selormey Greece Yannos Papantoniou Yiannis G. Zafeiropoulos Grenada Anthony Boatswain Swinburne Lestrade Guatemala J uan Jose Serra Eduardo Humberto Weymann Fuentes Guinea CheickAhmadou Camara Cellou Dalein Diallo Guyana Bharrat jagdeo Saisnarine Kowlessar Haiti Fred Joseph FritzJean Honduras Gabriela Nunez de Reyes Victoria Asfura de Diaz Hungary MihalyVarga LaszloLengyel Iceland HalldorAsgrimsson Geir Hilmar Haarde India Yashwant Sinha Ajit Kumar Indonesia Rizal Ramli Syahril Sabirin Ireland Charlie McCreevy John Hurley Israel David Klein NirGilad Italy Antonio Fazio Mario Draghi Jamaica Omar Lloyd Davies Wesley George Hughes Japan MasaJuro Shiokwa Yoshiji Nogami Jordan Jawad Hadid Abderrzaq Bani Hani Kazakhstan Orazjandosov Zhaxybek Kulekeyev Kenya Chrysanthus Barnabas Okemo Martin Luke Oduor-Otieno Korea, Republic of Nyum Jin Chol-Hwan Chon Kuwait Yousef Hamad Al-Ebraheem Saleh MubarakAl-Falah Kyrgyz Republic Temirbek Akmataliev Kubat Abduldaevich Kanimetov Lao People's Democratic Rep. Soukanh Maharat Phouphet Khamphounvong Latvia Roberts Zile Aigars Kalvitis Lebanon Basil R. Fuleihan Fuad A.B. Siniora Lesotho Kelebone Albert Maope Molelekeng E. Rapolaki Libya Alojeli Abdel Salam Breeni Ali Ramadan Shnebsh Lithuania Jonas Lionginas Arvydas Kregzde Luxembourg Luc Frieden Jean Guill Macedonia, FroerYugoslav Rep. of Nikola Gruevski Dragan Martinovski Madagascar Pierrot). Rajaonarivelo Simon Constant Horace Malawi Mathews A.P. Chikaonda Mapopa Chipeta Malaysia Mahathir Mohamad Samsudin bin Hitam Mali Bacari Kone Mahamadou Zibo Maiga Malta I John Da!li Joseph Scicluna Mauritania Ali Gueladio Kamara Sidi Mohamed Ould Bakha Mauritius Khushhal Chand Khushiram Philippe Ong Seng Micronesia, Fed. States of John Ehsa Sebastian L. Anefal Moldova Mihail Manoli Andrei Cheptine Mongolia Chultem Ulaan OchirbatChuluunbat Morocco Fathallah Oualalou Ahmed Lahlimi Mozambique Tomaz Augusto Salomao Adriano Afonso Maleiane Namibia Andrew Ndishishi Paul Walter Hartmann Nepal Ram Sharam Mahat Bimal P. Koirala Netherlands GerritZalm Eveline Herfkens Nicaragua Esteban Duque Estrada Francisco Aguirre Sacasa Nigeria AdamuCiroma Ramsey Oubromoro Mowoe Norway Anne Kristin Sydnes Sigrun Mogedal 116 multilateral investment guarantee agency world bank group appendices GOVERNORS AND ALTERNATES, as ofjune 30,2001, (Cant.) member governor alternate Oman Ahmed Macki Mohammed bin Nasser AI-Khasibi Pakistan Muhammad Yunis Khan Javed S. Malik Palau CasmirR Rmengesau Lawrence Alan Goddard Panama Norberto Delgado Duran Domingo Latorraca Papua New Guinea Mekere Morauta Koiari Tarata Paraguay Francisco Oviedo Britez JmsSadn Peru Javier Silva Ruete Alfredo laliiie Awapara Philippines jose Isidro N. Camacho Rizalino S. Navarro Polanld Piotr'Twrors Agnieszka B. Rudniak Portuga .....joaquim Pina Moura Manuel Pedro da Cruz Baeanha Qatar ~~~~~~~~Yousef Hussain Kamal Abdll hBi KaidA-Attiya Romania MihaliNicolae Tanasescu Emil Iota Ghizari Russian Federation Viktor Khristenkoa Germ an 0. Gref St. Kitts and Nevis Denzil Douglas Wendell E. Lawrence S.Lucia Kenny P. A~nthon Bernard La Corbiniere St. Vincent and the Grenadines RalphE EGonsalves Christian Martin Samoa Misa Telefoni Retzlaff Hinauri Petana Saudi Arabia Ibrahim A. AI-Assaf Hamad AI-Sayr Senegal Makh'tar Diop Oumar Khassimou Dia Seychelles Jeremie Bonnelame Francis Chang-Leig, Sierra Leone PeteTj. Kuyembeh Samura Kamara Singapore Richard Hu Tsu Tau Khaw Boon Wan Slovak Republic i..an ...ikios Marian jusko Slovenia Anton Rop lrena Sodin South Africa Trevor Andrew Manuel Mandisi BonganiMpahlw~a Spa-inl... Rodri~gode Rato Figaredop. Juan Costa Climnent Sri Lanka Chandrika Bandaranaika Kuatna PB.ysnea Sudan Abdul Rahim Hamdi Sabir Mohamed Hassan Swaziland Meshack M,L. Shongwe, Ephraim Mandla Hlophe Sweden Bosse Ringholm Maj-1nger Klingvall Switzerland Oscar Kn Pp Walter Hofer Tanzania ~~~~~~Nassoro W. Malocho 'Peter J.Ngumbullu Thailand Somkidjatusrijpitak Somchainuk Engtraky!l Toga. .. Simnfeitcheou Pre Kossi Assimaidou Trinidad and Tobago Gerald Yetming. 'Lero Mayers Tunii Fethi Merdassi Abdelhamid Triki Turkey ~~~~~~~FaikOztrak AydinP Karaoz Turkmenistan Seitbay.Kandymov Serdar Bayniev Uganda ~~~~~~~Gerald M. Ssendaula C. M. Kassami Ukraine YrifyYekhanuoy -Vasy-l-- ho , United Arab Emirates Mohammed Khalfan Bin Khirbash Jampal N~asser,Lootah United Kingdomn Clare Short Gordoni Brow, United States Paul H. O'Neill Alan P. Larson Uruguay ~~~~~~Alberto Bension :Ariel Davrieux Uzbekistan Makhmudcjon A. Askargv S a idakba rAbd urakh im ov Va n ua'tu Joe Bomal Carlo Andrew Kausiama Venezuela Rep. Bolivariana de Gustavo Marquez Marnn. Jorge Antonio Giordani Cordero Vietnam Le DucThuyDungTh.Hon Yemen,,Republicof Ahmed Mohamed Sofan Anwar Rizq AI-Harazi Zambia James M~walimnu Mtonga Stella M. Chibanda zimbabwe baHerbe Saey Makoni Charles Tawonerera Kuwaza multilateral investment guarantee agerncy world bank group 117 appendices DIRECTORS AND ALTERNATES: VOTING POWER, as of June 30, 2001 total % of director alternate casting votes of votes total ELECTED BY THE VOTES OF THE SIX LARGEST SHAREHOLDERS Jan Piercy (vacant) United States 22,160 13.91 Yuzo Harada Atsushi Inoue Japan 9,156 5.75 Jean-Claude Milleron b Emmannuel Moulin France 6,889 4.33 Stephen Pickford Rosemary B. Stevenson United Kingdom 6,272 3.94 Helmut Schaffer Eckhardt Biskup Germany 5,248 3.29 Zhu Guangyao Chen Huan China 4,511 2.83 ELECTED BY THE VOTES OF OTHER SHAREHOLDERS PieterStek Tamara Solyanyk Armenia, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, 9,850 6.18 (Netherlands) (Ukraine) Georgia, Israel, Macedonia (Former Yugoslav Republic of), Moldova, Netherlands, Romania, Ukraine Philippe M. Peeters Emin Dedeoglu Austria, Belarus, Belgium, Czech Republic, Hungary, 9,743 6.i2 (Belgium) (Turkey) Kazakhstan, Luxembourg, Slovak Republic, Slovenia, Turkey Terrie O'Leary Sharon Weber The Bahamas, Barbados, Belize, Canada, Dominica, 8,834 5.55 (Canada) (Jamaica) Grenada, Guyana, Ireland, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines Girmai Abraham Richard H. Kaijuka Angola, Botswana, Burundi, Eritrea, The Gambia, Kenya, 8,241 5.17 (Eritrea) (Uganda) Lesotho, Malawi, Mozambique, Namibia, Nigeria, Seychelles, Sierra Leone, South Africa, Sudan, Swaziland, Tanzania, Uganda, Zambia, Zimbabwe Franco Passacantando Helena Cordeiro Albania, Greece, Italy, Malta, Portugal 7,211 4.53 (Italy) (Portugal) Finn Jenck Anna M. Brandt Denmark, Estonia, Finland, Iceland, 7,022 4.41 (Finland) (Sweden) Latvia, Lithuania, Norway, Sweden Andrei Bugrov Eugene Miagkov Russian Federation 5,705 3.58 (Russian Federation) (Russian Federation) Moises Pineda Jose H. Machillanda Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, 5,551 3.49 (Mexico) (Rep. Bol de Venezuela) Spain, Venezuela (Republica Bolivariana de) Neil F. Hyden Lewis D. Holden d Australia, Cambodia, Korea (Republic of), (Australia) (New Zealand) Micronesia (Federated States of), Mongolia, Palau, 5,197 3.26 Papua New Guinea, Samoa, Vanuatu Jaime Ruiz Luis Antonio Balduino Brazil, Colombia, Dominican Republic, Ecuador, Haiti, Panama, 5,oo6 3.14 (Colombia) (Brazil) Philippines, Trinidad and Tobago Khalid M. Al-Saad Mohamed Kamel Amr Bahrain, Egypt (Arab Republic of), Jordan, Kuwait, Lebanon, (Kuwait) (Arab Republic of Egypt) Libya, Oman, Qatar, United Arab Emirates, Yemen (Republic of) 4,878 3.o6 118 multilateral investment guarantee agency world bank group appendices DIRECTORS AND ALTERNATES: VOTING POWER, as of June 30, 2001, (cont.) total % of director alternate casting votes of votes total Bassary Toure Paulo F. Gomes Benin, Burkina Faso, Cameroon, Cape Verde, 4,510 2.83 (Mali) (Guinea-Bissau) Central African Republic, Congo (Democratic Republic of), Congo (Republic of, Cte d'lvoire, Equatorial Guinea, Guinea, Madagascar, Mali, Mauritania, Mauritius, Senegal, Togo Yahya Abdulla M. Alyahya Abduirahman M. Almofadhi Saudi Arabia 4,509 2.83 (Saudi Arabia) (Saudi Arabia) Balmiki Prasad Singh Mahbub Kabir Bangladesh, India, Sri Lanka 4,293 2.70 (India) (Bangladesh) Matthias Meyer Jerzy Hylewski Azerbaijan, Kyrgyz Republic, Poland, Switzerland, (Switzerland) (Poland) Turkmenistan, Uzbekistan 3,759 2.36 Mario Soto-Platero Roberto Garcia-Lopez Argentina, Bolivia, Chile, Paraguay, Peru, Uruguay 3,723 2.34 (Uruguay) (Argentina) Ahmed Sadoudi Inaamul Haque Algeria, Ghana, Morocco, Pakistan, Tunisia 3,573 2.24 (Algeria) (Pakistan) Abdul Aziz Mohd. Yaacob Nguyen Doan Hung Fiji, Indonesia, Lao People's Democratic Republic, 3,441 2.16 (Malaysia) (Vietnam) Malaysia, Nepal, Singapore, Vietnam In addition to the directors and alternates shown in the foregoing list, the following also served after October 31, 2000: Director End of perod of service Alternate diredor End of period of service Zhu Xian February 28, 2001 Pilar Alvarez December 15,2000 (China) (Rep. Bol. de Venezuela) Hiroaki Ishii Uapan) April 8, 2001 Note Ethiopia (247 votes) did not participate in the 2000 Regular Election of Directors. Thailand became a member after that election. Carole Brookins (US) will serve as Director effective August 20, 2001. b. Resigned effective August 1, 2001; to be succeeded by Pierre Duquesne (France) effective August 20, 2001. Resigned effective July 31, 2001; to be succeeded by Inkeri Hirvensalo (Finland) effective August 23, 2001. d Resigned effective July 6, 2001 to be succeeded by Dong-Soo Chin (Republic of Korea) effective July 23, 2001. multilateral investment guarantee agency wold bank g-oun 119 appendices SIGNATORIES TO MIGA'S CONVENTION, June 30,2001 Albania * Dominican Republic * Lesotho * Sierra Leone * Algeria * Ecuador * Liberia Singapore * Angola * Egypt, Arab Republic of* Libya * Slovak Republic * Antigua and Barbuda El Salvador * Lithuania * Slovenia * Argentina Equatorial Guinea * Luxembourg * Solomon Islands Armenia * Eritrea * Macedonia, FYR of* South Africa * Australia* Estonia* Madagascar* Spain* Austria * Ethiopia * Malawi * Sri Lanka * Azerbaijan * Fiji * Malaysia * St. Kitts and Nevis * Bahamas, The* Finland* Mali * St. Lucia * Bahrain * France * Malta * St. Vincent and the Bangladesh * Gabon Mauritania * Grenadines * Barbados* Gambia, The* Mauritius * Sudan* Belarus * Georgia * Micronesia, Fed. States of* Suriname Belgium Germany * Moldova * Swaziland * Belize * Ghana* Mongolia* Sweden * Benin * Greece * Morocco * Switzerland * Bolivia * Grenada * Mozambique * Syrian Arab Republic Bosnia and Herzegovina * Guatemala * Namibia * Tajikistan * Botswana * Guinea * Nepal * Tanzania * Brazil * Guinea-Bissau Netherlands * Thailand * Bulgaria * Guyana * Nicaragua * Togo * Burkina Faso* Haiti * Niger Trinidad and Tobago* Burundi * Honduras * Nigeria * Tunisia * Cambodia * Hungary* Norway * Turkey* Cameroon * Iceland * Oman * Turkmenistan * Canada* India * Pakistan* Uganda * Cape Verde* Indonesia * Palau * Ukraine * Central African Republic* Ireland * Panama * United Arab Emirates * Chad Israel * Papua New Guinea * United Kingdom * Chile* Italy * Paraguay* United States* China* Jamaica* Peru * Uruguay* Colombia * Japan * Philippines * Uzbekistan * Congo, Democratic Jordan * Poland * Vanuatu * Republic of* Kazakhstan Portugal * Venezuela, R. B. de * Congo, Republic of* Kenya* Qatar* Vietnam * Costa Rica * Korea, Republic of* Romania * Yemen, Republic of* Cote d'lvoire * Kuwait* Russian Federation * Yugoslavia, Federal Croatia * Kyrgyz Republic* Rwanda ** Republic of* Cyprus * Lao People's Democratic Samoa * (Serbia and Montenegro) Czech Republic * Republic * Saudi Arabia * Zambia * Denmark * Latvia * Senegal * Zimbabwe * Dominica * Lebanon * Seychelles * * Member country ** Country that has ratified the Convention but not yet completed membership requirements 120 multilateral investment guarantee agency world bar k group appendices BUDGET FY02, 'ooo US$ INCOME Net premium and commitment fees earned 41,600 Investment income i7,500 Total income 69,0oo EXPENDITURE BY ORGANIZATIONAL UNIT Executive Office 2,117 Office of Central Administration 3,345 Finance 1,459 Guarantees 8,647 Investment Marketing Services 4,273 Legal and Claims 2,435 Policy and Evaluation 1,645 Field Offices 1,431 Total MIGA Budget 25,352 EXPENDITURE BY CATEGORY Discretionary costs Staffcosts 10,057 Operational travel 1,714 Representation 162 Consultant fees 1,176 Contractual services 1,381 IFC services 56 Marketing and publications 555 Direct communications 230 Internal computing and maintenance 947 Furniture and equipment 155 Miscellaneous 287 Subtotal 16,7o2 Other direct costs Staff benefits 5,023 Office occupancy 1,266 I BRD service and support fee 1,535 Overhead 223 Subtotal 8,047 Reimbursables {15) General Contingency 600 Total MIGA budget 25,352 Note: Thefiscal 2002 budgetwas approved bythe Board of Directors in accordancewith MIGA's bylaws. multilateral investment guarantee agency wor d bank group 121 appendices SUBSCRIPTIONS TO THE GEN ERAL CAPITAL INCREASE, 51 countries, as of une 30, 2001 Shares Subscribed Amount US$ CategoryOne jig Australia 653 7,o65,460 Austria 591 6,394,620 Belgium 1,547 16,738,540 Canada 2,260 24,453,200 Denmark 547 5,918,540 France 1,852 20,038,640 Finland 228 2,466,960 Greece 213 2,304,660 Ireland 281 3,040,420 Italy 2,150 23,263,000 Japan 3,884 42,024,880 Luxembourg 44 476,o80 Netherlands 1,653 17,885,460 Norway 533 5,767,o60 Portugal 291 3,148,620 Spain 980 10,603,600 Sweden 800 8,656,ooo United Kingdom 1,235 13,362,700 United States 1,464 15,840,480 21,206 229,48,920 CategoryTwo 32 Algeria 247 2,672,540 Barbados 26 281,320 Bahamas, The 38 411,160 Bahrain 59 638,380 Belize 19 205,580 Brazil 375 4,057,500 Bulgaria 278 3,007,960 China 1,196 12,940,720 Croatia 71 768,220 Cyprus 79 854,780 Czech Republic 339 3,667,980 Honduras 38 411,160 Hungary 215 2,326,300 Israel 361 3,906,020 Jordan 37 400,340 Kazakhstan 79 854,780 Kenya 65 703,300 Korea, Republic of 342 3,700,440 Latvia 74 800,680 Macedonia, FormerYugoslav Republic of 38 411,160 Malta 57 616,740 Mauritius 66 714,120 Morocco 132 1,428,240 Pakistan 251 2,715,820 Peru 142 1,536,440 Romania 211 2,283,020 Russian Federation 2,391 25,870,620 St. Lucia 19 205,580 Saudi Arabia 1,195 12,929,900 South Africa 719 7,779,580 Sri Lanka 103 1,114,460 Trinidad and Tobago 77 833,140 9,339 101,047,980 TOTAL 30,54S 330,496,900 Percent of Total General Capital Increase: 38.88 percent 122 multilateral investment gua,antee agency world bank group appendices INVESTMENT GUARANTEE GUIDE MIGA: BRINGING CLIENTS UNIQUE STRENGTHS The Multilateral Investment Guarantee Agency (MIGA) is a member of the World Bank Group. Its purpose is to promote foreign direct investment by providing political risk insurance (guarantees) to investors and lenders, and by helping emerging economies attract private investment. MIGA's unique strengths derivefrom its structure as an international organizationwhose shareholders include mostcountries in the world. This enablesthe agency to provide an umbrella of deterrence against government actions that could disrupt investments, and allows it to influence the resolution of potential disputes-and ultimately enhance investor confidence. The agency actively cooperates with public and private political risk insurers through coinsurance and rein- surance arrangements for joint coverage of eligible investment projects. These collaborative efforts significantly increase available insurance capacity for applicants seekingto expand their businesses in developing countries. MIGA can act as the arranger for a project's total insurance requirements. WHAT IS ELIGIBLE? Investments I MIGA can guarantee new, cross-border investments, as well as investments associated with the expansion, modernization, or financial restructuring of existing projects, and acquisitions involving privatization of state enterprises. Investments should contribute to host country development objectives and be financially, econom- ically, and environmentally sound. Investments must be made in a developing country that is a member of MIGA. Eligible forms of investment include equity, shareholder loans, and loan guaranties issued by equity holders, provided the loans and loan guaranties have terms of at least three years. Loans to unrelated borrowers can be guar- anteed, provided an eligible shareholder registers its investment with MIGA. Other eligible investments include, but are not limited to, technical assistance, management contracts, leases, and franchising and licensing agreements, provided their contractual commitments have terms of at leastthree years and the remuneration of the investor is tied to a large extent to the project's operating results. Sponsors are encouraged to discuss their investment needs with MIGA. Applicants I An eligible applicant must be a national of a member country other than the country in which the investment is to be made. In certain cases, MIGA may also insure an investment made by a national of a host country, provided the funds originate from outside the host country and the host government specifically approves the investment. Corporations or financial institutions are eligible for coverage if they are either incorporated in and have their principal place of business in a member country or if they are majority-owned by nationals of member countries. State-owned corporations are also eligible if they operate on a commercial basis. WHAT POLITICAL RISKS ARE COVERED? Currency inconvertibility and transfer restriction I Protects against losses arising from an investor's inability to convert local currency (capital, interest, principal, profits, royalties, and other remittances) into foreign exchange for transfer outside the host country. The coverage also insures against excessive delays in acquiring foreign exchange due to host government action or failure to act. Currency depreciation is not covered. On receipt of the blocked currency from an investor, MIGA pays compensation in the currency specified in the contract of guarantee. Expropriation I Protects against lossesarising from host government actions that may reduce or eliminate ownership of, control over, or rights to the insured investment. In addition to outright nationalization and confiscation, "creeping" expropriation-a series of acts that, overtime, have an expropriatory effect-is also covered. Coverage is availableon a limited basis for partial expropriation (e.g., confiscationoffunds ortangibleassets). Bonafide, non-dis- criminatory measures by the host government in the exercise of legitimate regulatory authority are not considered to be expropriatory. For total expropriation of equity investments, MIGA pays the net book value of the insured investment. For expropriation offunds, MIGApaysthe insured portion ofthe blocked funds. For loans and loan guaranties, MICAcan insure the outstanding principal and any accrued and unpaid interest. Compensation will be paid upon assignment of the investor's interest in the expropriated investment (e.g., equity shares or interest in a loan agreement) to MIGA. multilateral investment guarantee agency world bank group 123 appendices War and civil disturbance I Protects against loss from, damage to, or the destruction or disappearance of, tangible assets caused by politically motivated acts ofwar or civil disturbance in the host country, including revolution, insur- rection, coups d'etat, sabotage, and terrorism. War and civil disturbance coverage also extends to events that, for a period set forth in the contract of guarantee, result in an interruption of project operations essential to overall project financial viability. Business interruption coverage is effective when the investment is considered a total loss; at that point, MIGA will pay the book value ofthe total insured equity investment. For equity investments, M IGA will pay the investor's share of the least of the book value of the assets, their replacement cost, and the cost of repair ofdamaged assets. For loans and loan guaranties, MIGAwill pay the insured portion ofthe principal and interest payments in default as a direct result of damage to the assets ofthe project caused by war and civil disturbance or as a result of business interruption caused by covered events. Breach of contract Protects against losses arising from the host government's breach or repudiation of a contract with the investor. In the event ofan alleged breach or repudiation, the investor must-be able to invoke a dispute reso- lution mechanism (e.g., an arbitration) set out in the underlying contract and obtain an award for damages. If, after a specified period oftime, the investor has not received payment or ifthe dispute resolution mechanism fails to function due to host government actions, MICA will pay compensation. MIGA may make a provisional payment pending the outcome of the dispute resolution mechanism. The coverages described may be purchased individually or in combination, but selection of the desired cov- erages must be made by an investor before MIGA issues its guarantee. WHAT ARE THE TERMS OF COVERAGE? Pricing I MIGA prices to risk, and premium rates are decided on a per project basis, usually ranging between 30 and loo basis points per risk (up to 150 in some cases) per year. Premiums are paid at the beginning of each contract period. Duration ofguarantee I MIGA provides coverage for up to 15 years (and possibly 20 years ifjustified by the nature of the project). MIGA cannot terminate the contract unless the guarantee holder defaults on its contractual obligations to MIGA, but the guarantee holder may reduce or cancel coverage on any contract anniversary date starting with the third. Amountofcoverage l Forequity investments, MIGA may guarantee upto go percentofthe investment, plus upto an additional 450 percentofthe investment contribution to coverearnings attributable to the investment For loans and loan guaranties, the agency generally offers up to 95 percent of the principal (or higher as determined on a case-by- case basis), plus up to an additional 135 percentofthe principal to cover interest that accrues overthe term oftheloan. For technical assistance contracts and other contractual agreements, MIGA may insure up to go percent of the total value of payments due under the insured agreement (up to 95 percent in exceptional circumstances). Regardless ofthe nature ofthe project, an investoris required to remain at riskfor a portion of any loss fordebt and equity. MIGA can currently issue up to US$20o million of coverage (including amounts obtained through treaty reinsurance) on its own for a single project. The agency can, however, arrange additional coverage through its rein- surance and coinsurance programs with other political risk insurers, including through its Cooperative Underwriting Program, a form of coinsurance in which MIGA is the insurer-of-record among participating underwriters. 124 multilateral investment guarantee agency world bank group abbreviations and endnotes ABBREVIATIONS AC African Connection ADA Armenian Development Agency AIG American International Group, Inc. ARI Panamanian Inter-oceanic Regional Authority ATI African Trade Insurance Agency BOI Board of Investments CAO Compliance Advisor/Ombudsman CDC Commonwealth Development Corp. CEI Central European Initiative CIDA Canadian International Development Agency COFACE Companie Francaise d'Assurance pour le Commerce Exterieur (France) COMESA Common Market for Eastern and Southern Africa COSO Committee of Sponsoring Organizations CPI Mozambique Investment Promotion Center CUP Cooperative Underwriting Program EBRD European Bank for Reconstruction and Development ECA Europe and Central Asia ECIO Export Credit Insurance Organization (Greece) ECOWAS Economic Community of West African States EDC Export Development Corp. (Canada) EFIC Export Finance and Insurance Corp. (Australia) EIB European Investment Bank EID/MITI Export-Import Insurance Department/Ministry of International Trade and Industry Uapan) EU European Union FDI Foreign Direct Investment FGG Finanzierungsgarantie-Gesellschaft m.b.H. (Austria) FIAS Foreign Investment Advisory Service FIPA Foreign Investment Promotion Agency FYR Former Yugoslav Republic IBRD International Bank for Reconstruction and Development ICIEC Islamic Corporation for the insurance of Investment and Export Credit (Saudi Arabia) IDA International Development Agency IDB Inter-American Development Bank IFC International Finance Corp. IPA Investment Promotion Agency IT Information Technology KCCL Kasese Cobalt Company Ltd. KEIC Korea Export Insurance Corp. KISC Korea Investment Service Center MEDIA Mauritius Export Development and Investment Authority MIGA Multilateral Investment Guarantee Agency MIPA Malawi Investment Promotion Agency MOU Memorandum of Understanding OECD Organization for Economic Cooperation and Development OeKB Osterreichische Kontrollbank OPIC Overseas Private Investment Corp. (USA) PICC People's Insurance Company of China PSAS Private Sector Advisory Services SADC Southern Africa Development Community SIMEST Societa Italiana per le Imprese all'Estero (Italy) SOCOSA Societe Cotonniere des Savanes SPAIPA Sio Paulo Interior e Parana UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Programme UNIDO United Nations Industrial Development Organization WAI PA World Association of Investment Promotion Agencies WEF World Economic Forum multilateral investment guarantee agency word bank group 125 abbreviations and endnotes ENDNOTES . See explanation of CUP on p. 25. 2. Countries eligible for support from the International Development Association (IDA), generally the World Bank Group's poorest members. 3. In April 1998, the IBRD made a grant transfer of$15o million to MIGA. In March iggg, MIGA's Council ofGovernors approved MIGA'scapital increase of$850 million,to besubscribed overthree years. The $330 million does not include letters of credit issued by the United States, totaling $11.2 million. 4. See box 2. 5. In fiscal 2000, MIGA initiated a Committee of Sponsoring Organizations (COSO) compliance exercise (a control self-assessment) designed to identify and address critical areas of risk in the agency's operations. COSO attestation of the reliability offinancial reporting in fiscal 2001 is expected during the early part of fiscal 2002. 6. This does not include an additional $153 million in guarantees issued under the agency's Cooperative Underwriting Program (CU P)-see pp. 25-27. 7. The Miyazawa Initiative is a special element of the Japanese Policy and Human Resource Development program that is intended to promote economic recovery in the countries most affected by the 1998 financial crisis in the region. 8. As part of a major review of M GA's development effectiveness, evaluation staff significantly increased onsite evaluations last year. As a result, the agency has reviewed approximately 80 percent of all active projects guaranteed between fiscal 1990 and fiscal 1996. The findings ofthose evalu- ations have been published; see box 2. 9. Investment Insurance and Developmental Impacts: Evaluating MIGA's Experience, p. 58 (see also box 3) 10. MIGA - The First Ten Years, Washington, D.C., 1998, pp. 46-7. 11. ibid., p.41. 126 multilateral investment guarantee agency world bank group Editor Keith Martin Editorial assistance Mary Ann Arouna Sepideh Mohadjer Copy editing Communications Development Inc. Design Suzanne Pelland Production May E. Eidi Contributors Angela Gentile-Blackwell Janice Kane Esther Lao Cecilia Sager Lorin Weisenfeld Photo credits p. iv Michele lannacci, World Bank Group p. v Michele lannacci, World Bank Group p. vi Roger Whiteside p. ix Roger Whiteside p. 8 ECIO Alpona Banerji, MIGA KEIC p. 9 Simone Wastl, FGG p. 10 Suzanne Pelland, MIlA Angela Gentile-Blackwell, MIGA p. 14 Angela Gentile-Blackwell, MIGA p. 17 Micheal Spiotro, World Bank Group p. 23 Fatou Assah, MIGA p.30 Suzanne Pelland, MIGA p. 41 Angela Gentile-Blackwell, MIGA p. 44 Angela Gentile-Blackwell, MIGA p. 48 Wei-Jen Leow, MIGA p. 52 Societe Marromeu p. 57 Janice Kane, MIGA p. 68 Dora Talavera, MIGA p. 69 Mamadou Barry, MIGA p. 74 Kofi Egbeto,MIGA p. 84 Suzanne Pelland p. 89 Enrique Rueda-Sabater, World Bank Group © 2001 Multilateral Investment Guaiantee Agency Manufactured in the United States of America All rights reserved Printed on recycled paper MULTILATERAL INVESTMENTGUARANTEEAGENCY 1818 H Street, NW Washington, DC 20433 USA t. 202.458.9292 f 202.522.2650 www.miga.org ( World Bank Group '.Rr'+. ,$>~ ,-2A . `..