Annual Report INSURING INVESTMENTS ENSURING OPPORTUNITIES 20 15 MIGA’s MISSION To promote foreign direct investment into developing countries to support economic growth, reduce poverty, and improve people’s lives. Annual Report 2015 WORLD BANK GROUP 2015 SUMMARY RESULTS Message from the President of the World Bank Group and Chairman of the Board of Executive Directors This has been a pivotal year Our aim is to help countries translate global experience into practical know-how to solve their most difficult problems. for global development. The This year, the World Bank Group committed nearly $60 billion in loans, grants, equity investments, and guarantees to its members and private businesses. IBRD delivered record international community’s amounts of financing for any year except at the height of the global financial crisis, with commitments totaling $23.5 billion. And IDA, the World Bank’s fund for the poorest, has just had the decisions in 2015 will have strongest first year of a replenishment cycle ever, committing $19 billion. Thanks to our determined and dedicated staff, we have been able to strengthen our performance and ensure that long-term impacts on the the development knowledge and expertise within our institution moves more easily around the globe. world’s ability to reach our As the world seeks to go from billions to trillions of dollars in development finance—with sources of financing from high-, middle-, and low-income countries—the work of our entire goal of ending extreme World Bank Group will be critical to driving private sector investment to emerging markets and fragile countries. IFC and MIGA, two of our institutions focused on private sector poverty by 2030. development, are strengthening their efforts in this regard. This year, IFC provided about $17.7 billion in financing for private sector development, about $7.1 billion of which was mobilized from investment partners. MIGA issued $2.8 billion in political T oday, nearly 1 billion people still live on less than $1.25 a day. This is a staggering number, but it is important to remember that over the past 25 years, the world has reduced risk and credit enhancement guarantees underpinning various investments, including in much-needed infrastructure projects. the rate of extreme poverty by two-thirds. Over that time, Nearly 1 billion people living in extreme poverty want an equal many countries have succeeded in making the seemingly opportunity for a better life. They are counting on policies impossible possible. and programs that give them a chance. Governments must seize this moment. Our private sector partners must explore Ending extreme poverty by 2030 will be difficult but entirely new investments. The World Bank Group, our multilateral possible. For decades, the World Bank Group’s principal development bank partners, and our new partners on the institutions—the International Bank for Reconstruction horizon, must all work together to not let this opportunity slip and Development (IBRD), the International Development away and collaborate with real conviction. Working together, Association (IDA), the International Finance Corporation (IFC), we can promote inclusive and sustainable growth, as well as and the Multilateral Investment Guarantee Agency (MIGA)— opportunity for the poor and the vulnerable. We can be the have distilled and analyzed our global experience in fighting generation that ended extreme poverty. poverty. We have learned from our experience what has worked for development and what has not in specific contexts, and some clear patterns have emerged. Evidence shows that great gains can be made through the strategy of “grow, invest, and insure.” We must promote strong, sustainable, and inclusive economic growth; we must invest in people—especially in health and education; and we must build social safety nets and protections against natural disasters and pandemics to prevent people from plunging into extreme poverty. DR. JIM YONG KIM President of the World Bank Group We also know that, as an institution, the World Bank Group and Chairman of the Board needs to better meet the evolving needs of low- and middle- of Executive Directors income countries. In a world where capital is more easily available, we must emphasize our greatest strengths—the marriage of our vast knowledge with innovative financing to deliver programs that have the greatest impact on the poorest. MIGA ANNUAL REPORT 2015 | 1 GLOBAL COMMITMENTS LATIN AMERICA & THE CARIBBEAN The World Bank Group $10 maintained strong support for BILLION developing countries over the past year as the organization focused on delivering results more quickly, increasing its relevance for its clients and partners, and bringing global solutions to local challenges. OUR IMPACT DRIVING ECONOMIC GROWTH IBRD/IDA IFC The World Bank Group leveraged its strengths, 27,700 2.5 million expertise, and resources kilometers of roads constructed jobs provided or rehabilitated to help countries and other partners make a real impact 49 million 237 million customers supplied with on development—by driving people and micro, small, and phone connections medium enterprises reached economic growth, promoting with financial services inclusiveness, and ensuring MIGA sustainability. 100,325 jobs provided $14.7 billion in new loans issued by MIGA clients 2 | MIGA ANNUAL REPORT 2015 EUROPE & CENTRAL ASIA $10 billion 60 EAST ASIA & THE PACIFIC $9 $ BILLION BILLION in loans, grants, equity investments, and guarantees to partner $5 countries and private businesses. BILLION MIDDLE EAST & NORTH AFRICA $11 Total includes multiregional BILLION and global projects. $15 SOUTH ASIA BILLION SUB-SAHARAN AFRICA Regional breakdowns reflect World Bank country classifications. PROMOTING INCLUSIVENESS ENSURING SUSTAINABILITY IBRD/IDA IFC IBRD/IDA IFC 123 million people received health, nutrition, 3.4 million farmers assisted 41 million tons of CO2 equivalent emissions 9.7 million metric tons of greenhouse and population services expected to be reduced emissions expected to be reduced 14.5 million 3.5 million students received educational with support of special climate instruments as a result of IFC investments in FY15 beneficiaries covered by social safety net programs benefits 34 countries with strengthened public $19.5 billion in government revenues MIGA financial management systems generated by IFC clients 21.8 million MIGA people provided access to power 4 million people provided access 142 million to clean water people provided access to transport $3.0 billion in government revenues generated by MIGA clients MIGA ANNUAL REPORT 2015 | 3 THE INSTITUTIONS OF THE WORLD BANK GROUP The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries, consisting of five institutions with a common commitment to reducing poverty, increasing shared prosperity, and promoting sustainable development. International Bank for Reconstruction Multilateral Investment Guarantee Agency (MIGA) and Development (IBRD) provides political risk insurance and credit enhancement to lends to governments of middle-income and creditworthy investors and lenders to facilitate foreign direct investment in low-income countries emerging economies International Development Association (IDA) provides International Centre for Settlement of Investment Disputes interest-free loans, or credits, and grants to governments of (ICSID) the poorest countries provides international facilities for conciliation and arbitration of investment disputes International Finance Corporation (IFC) provides loans, equity, and advisory services to stimulate private sector investment in developing countries WORLD BANK GROUP FINANCING FOR PARTNER COUNTRIES By fiscal year, in $ millions World Bank Group 2011 2012 2013 2014 2015 Commitments1 56,424 51,221 50,232 58,190 59,776 Disbursements2 42,028 42,390 40,570 44,398 44,582 IBRD Commitments 26,737 20,582 15,249 18,604 23,528 Disbursements 21,879 19,777 16,030 18,761 19,012 IDA Commitments 16,269 14,753 16,298 22,239 18,966 Disbursements 10,282 11,061 11,228 13,432 12,905 IFC Commitments3 7,491 9,241 11,008 9,967 10,539 Disbursements 6,715 7,981 9,971 8,904 9,264 MIGA Gross Issuance 2,099 2,657 2,781 3,155 2,828 Recipient-Executed Trust Funds Commitments 3,828 3,988 4,897 4,225 3,914 Disbursements 3,152 3,571 3,341 3,301 3,401 1. Includes IBRD, IDA, IFC, and Recipient-Executed Trust Funds (RETF) commitments, and MIGA gross issuance. RETF commitments include all recipient-executed grants, and therefore total WBG commitments differ from the amounts reported in the WBG Corporate Scorecard, which includes only a subset of trust funded activities. 2. Includes IBRD, IDA, IFC, and RETF disbursements. NOTE: The disbursement total for 2015 has been corrected since publication of the print edition. It includes previously omitted IDA data. 3. Long-term commitments for IFC’s own account. Does not include short-term finance or funds mobilized from other investors. 4 | MIGA ANNUAL REPORT 2015 MESSAGE FROM KEIKO HONDA MIGA EXECUTIVE VICE PRESIDENT AND CEO 2015 marks a milestone as the MIGA continues to innovate and adapt its coverages to specific international community defines structures while rolling out new applications of its products customized its development agenda for the to meet client needs. In fiscal year 2015 we facilitated private-sector next generation. A key component loans to sub-sovereigns and state-owned enterprises in Turkey and is engaging the private sector Colombia. We introduced a new model for blended financing in Brazil to bring in new and innovative that also showcased the benefits of enhanced World Bank Group investment to help advance the collaboration. MIGA also provided its first guarantee in support of the World Bank Group’s goals of ending pension funds sector, in El Salvador, and covered a trademark license extreme poverty and boosting agreement for a highly developmental project in Nicaragua. shared prosperity. Here MIGA has a significant role to play: our At the same time, MIGA sustained its traditional coverage in critical political risk insurance and credit areas: we supported solar power generation in Honduras and Jordan enhancement for private-sector to help mitigate the impact of climate change. Additionally, MIGA projects helps catalyze investments provided coverage to a large banking institution for its subsidiaries into countries where they are needed most. in a number of eastern European countries facing difficult conditions resulting from ongoing economic turbulence. We just completed another strong year­­ —issuing $2.8 billion of guarantees for 40 projects to support investors and help them This fiscal year MIGA welcomed Santiago Assalini, our new Director, mitigate risk. Almost half of these projects backed investments into Corporate Risk. And on July 1st, we welcomed our new Vice President countries considered the world’s poorest and 15 percent supported and Chief Operating Officer, Karin Finkelston. We look forward to projects in places affected by fragility and conflict. We consider working with our team as we continue on our mission to support both these areas our top priorities. economic growth, reduce poverty, and improve people’s lives. Keiko Honda MIGA MANAGEMENT santiago g. assalini edith p. quintrell keiko honda ana-mita betancourt ravi vish Director, Corporate Risk Director, Operations Executive Vice Director and General Counsel, Director, Economics President and CEO Legal Affairs and Claims and Sustainability MIGA ANNUAL REPORT 2015 | 5 MIGA BUSINESS AND OPERATIONAL OVERVIEW HIGHLIGHTS I N FISCAL YEAR 2015, WE ISSUED A TOTAL OF $2.8 BILLION IN GUARANTEES FOR 40 PROJECTS I N MIGA’S DEV ELOPI NG MEMBER COU NTR IES. A N A DDITIONA L $3.2 MILLION WAS ISSUED UNDER MIGA-ADMINISTERED TRUST FUNDS. PROJECTS SPANNED REGIONS AND SECTORS, WITH 60 PERCENT OF THIS NEW ISSUANCE FALLING INTO AT LEAST ONE OF MIGA’S PRIORITY AREAS. AT THE END OF THE YEAR, MIGA’S GROSS E X POSURE WA S $12.5 BILLION. OF THIS, $4.8 BILLION WA S CEDED TO MIGA’S REINSURANCE PARTNERS. MIGA ALSO WELCOMED BHUTAN AS ITS 181ST MEMBER. 15 12 9 NEW GUARANTEES ISSUED BY PRIORTY AREAS* in percent 6 MIGA CONTINUES TO BE MOST ACTIVE IN OUR TOP STRATEGIC PRIORITY AREAS—THE POOREST AND THE HIGHER-RISK COUNTRIES—AND MOBILIZES SUBSTANTIAL ADDITIONAL CAPACITY FOR CLIENTS AND3GOVERNMENTS BY SUPPORTING INNOVATIVE PROJECTS AND PARTNERING WITH PUBLIC AND PRIVATE INSURANCE PROVIDERS. 0 FY11FY2011FY12 FY13 FY2012 FY14 FY2013 FY15 FY2014 FY2015 IDA-eligible countries 55% 48% 70% 29% 43% Fragile and conflict-affected countries 24% 18% 23% 50% 15% Innovative - - - - 15% Total issuance *Some projects address more than one area. MIGA included innovative projects as of FY2015. 6 | MIGA ANNUAL REPORT 2015 GROSS OUTSTANDING EXPOSURE in $ billions 12.4 12.5 10.8 10.3 9.1 FY2011 FY2012 FY2013 FY2014 FY2015 TOP 10 HOST COUNTRIES* TOP 10 INVESTOR COUNTRIES* Country Country Turkey 9.0% France 17.2% Serbia 6.8% Austria 13.0% Côte d’Ivoire 6.6% United States 11.4% Russian Federation 5.7% Germany 8.5% Vietnam 5.3% United Kingdom 6.1% Panama 4.7% Japan 5.0% Croatia 4.2% South Africa 4.6% Angola 3.9% Greece 4.0% Hungary 3.7% Spain 3.7% Ukraine 3.5% Ireland 3.7% Grand Total 53.4% Grand Total 77.2% *Gross exposure $12.5 billion, as of June 30, 2015 MIGA ANNUAL REPORT 2015 | 7 IMPACT MIGA HELPS ANGOLA TURN WAR SCRAP INTO STEEL REBAR In Angola, MIGA guarantees of $70 million are supporting the building and operation of a greenfield plant that will turn remnants of war and other scrap metal into steel rebar for the construction industry. The project represents one of the first large-scale industrial projects in Angola outside of the oil sector. There is an abundance of scrap metal throughout Angola, a legacy of the country’s protracted civil war. Collection of this scrap will provide the plant with raw materials for their steel billets while generating both environmental benefits and significant new employment. MIGA AND WORLD BANK BRING SOLUTIONS TO BRIDGE INFRASTRUCTURE GAP IN BRAZIL In Brazil, MIGA guarantees of $360.8 million are supporting a milestone project that will help make the State of São Paulo’s transport system more reliable, safe, and resilient to natural disasters. The São Paulo Sustainable Transport project combines the public and private financial instruments of the World Bank Group, working in close collaboration with the government, to provide a solution to Brazil’s investment needs-while addressing country- specific lending limits of both the World Bank and commercial lenders. MIGA HELPS TELECOMS IN DEMOCRATIC REPUBLIC OF CONGO In the Democratic Republic of Congo, MIGA guarantees of $30.2 million are supporting additional expansion of the mobile tower network. With the construction of additional towers, existing and potential mobile operators and internet service providers will be able to expand their geography and capacity. The project also supports the country’s development goals that include building a modern national infrastructure and improving access to telecoms and new technologies. 8 | MIGA ANNUAL REPORT 2015 MIGA SUPPORTS AFFORDABLE, CLEAN POWER IN INDONESIA In Indonesia, MIGA guarantees of $200 million are supporting the development and operation of a 47-megawatt run-of-the-river hydropower plant and the construction of a transmission line. The new facility will help reduce the country’s reliance on expensive fuel oil by providing a more affordable and cleaner supply of power to Indonesia’s state-owned electric utility company. MIGA’s backing will also have a demonstration effect in attracting more private investment into the power sector. MIGA BACKS INVESTMENT IN EGYPT—JOINS OTHER DEVELOPMENT PARTNERS In Egypt, MIGA guarantees of $23.4 are supporting an oil refinery project that will upgrade locally available refinery atmospheric residue into lighter products, such as diesel and jet fuel, for the domestic Egyptian market. The project will optimize domestic production of low-sulfur refined products to address consumer and industrial demand. MIGA’s support contributes to greater investor confidence in the country. The project is also backed by a number of development finance institutions—including the International Finance Corporation, the African Development Bank, and the European Investment Bank. MIGA FACILITATES EXPANSION OF PUBLIC HEALTH SERVICES IN TURKEY In Turkey, MIGA guarantees totaling $209.2 million are supporting the development of an integrated health campus in Adana, southern Turkey and a new hospital in Yozgat, central Turkey. Both projects are part of a nationwide public-private partnership program implemented by the Turkish Ministry of Health to provide improved public healthcare services. The Adana campus also has IFC support. Both projects will fill a substantial healthcare need in their surrounding areas. Visit miga.org/FY15projects for more project information. MIGA ANNUAL REPORT 2015 | 9 DEVELOPMENT RESULTS PROVIDED WITH TRANSPORT 176 million people LOCALLY PROCURED GOODS $ 265 million GROSS ISSUED 2.8 $ billion INVESTMENT DIRECT CATALYZED EMPLOYMENT $ 9.8billion 13,868 people YEARLY TAXES AND FEES $ 243 million 10 | MIGA ANNUAL REPORT 2015 Visit miga.org/development-results for more information. GOVERNANCE MIGA’S BOARD A Council of Governors and a Board of Directors, representing 181 member countries, guide the programs and activities of MIGA. Each country appoints one governor and one alternate. MIGA’s mission is to MIGA’s corporate powers are vested in the Council of Governors, which delegates most of its powers to a Board of support economic 25 Directors. The Directors meet regularly at the World Bank growth, reduce Group headquarters in Washington, DC, where they review and decide on investment projects and oversee general poverty, and improve management policies. people’s lives. Visit the World Bank’s Board of Governors page at worldbank. org/en/about/leadership/governors for more information. In order to achieve this, the agency needs a clear understanding of the development outcomes of the projects it supports. MIGA’s ACCOUNTABILITY Development Effectiveness Indicator system (DEIS) collects a common set of indicators INDEPENDENT EVALUATION GROUP from clients to demonstrate results across The Independent Evaluation Group (IEG) assesses all projects: volume of investment catalyzed, MIGA’s strategies, policies, and projects to improve the direct employment, taxes paid, and value Agency’s development results. IEG is independent of MIGA of locally procured goods. It also measures management and reports its findings to MIGA’s Board of sector-specific indicators. MIGA’s $2.8 billion Directors and the Committee on Development Effectiveness. issuance in fiscal year 2015 is expected to IEG’s reports and recommendations are publicly disclosed on catalyze an additional $9.8 billion in public its website at ieg.worldbankgroup.org. and private co-investment. These are highlights of development results COMPLIANCE ADVISOR OMBUDSMAN expected from projects supported by MIGA guarantees signed in fiscal year 2015. The Office of the Compliance Advisor Ombudsman (CAO) is the independent accountability mechanism for MIGA and IFC and reports directly to the President of the World Bank Group. The CAO responds to complaints from people affected by MIGA and IFC-supported business activities, with the goal of enhancing social and environmental outcomes on the ground and fostering greater public accountability of both agencies. Visit cao-ombudsman.org for more information. MIGA ANNUAL REPORT 2015 | 11 MIGA ANNUAL REPORT 2014 | 11 FINANCIAL HIGHLIGHTS in $ millions FY2011 FY2012 FY2013 FY2014 FY2015 Income Net Premium Income 50.8 61.7 66.3 72.5 79.0 Investment Income 13.9 36.9 33.6 53.4 24.1 Administrative Expenses1 41.1 43.9 47.1 45.6 44.9 Operating Income 2 9.7 17.8 19.2 26.9 34.1 Administrative Expenses/ Net Premium Income Ratio 81% 71% 71% 63% 57% 1 Administrative expenses include expenses from pension and other post-retirement benefit plans. 2 Operating income equals net premium income minus administrative expenses. NET PREMIUM INCOME in $ millions 50.8 61.7 66.3 72.5 79.0 FY2011 FY2012 FY2013 FY2014 FY2015 in $ millions FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Total Economic Capital (EC)* 414 508 572 620 705 Shareholder's Equity 924 905 911 974 971 Operating Capital 1,099 1,125 1,178 1,262 1,312 Portfolio Gross Exposure 9,122 10,346 10,758 12,409 12,538 Total Economic Capital 38% 45% 49% 49% 54% to Operating Capital Ratio Gross Exposure/Operating Capital Ratio 8.3 9.2 9.1 9.8 9.6 * Total economic capital equals capital consumption from the guarantee portfolio, plus capital required for operational risk and investment risk. SHAREHOLDER’S EQUITY TO GROSS EXPOSURE GROSS Shareholder’s 1:13 NET EXPOSURE EXPOSURE equity to gross $ 12.5 SHAREHOLDER’S $ 7.7 EQUITY exposure $ .97 BILLION BILLION BILLION 12 | MIGA ANNUAL REPORT 2015 Visit miga.org/financial-statement-FY15 for more information. CONTACT INFORMATION Senior Management Keiko Honda khonda@worldbank.org Executive Vice President and CEO Karin M. Finkelston kfinkelston@worldbank.org Vice President and COO Santiago G. Assalini sassalini@worldbank.org Director, Corporate Risk Ana-Mita Betancourt abetancourt@worldbank.org Director and General Counsel, Legal Affairs Edith P. Quintrell equintrell@worldbank.org Director, Operations Ravi Vish rvish@worldbank.org Director, Economics and Sustainability Regional Hubs Asia Pacific — Timothy Histed thisted@worldbank.org Head, Singapore Office Europe — Elena Palei epalei@worldbank.org Head, Europe Hub Guarantees Carlo Bongianni cbongianni@worldbank.org Infrastructure (Telecommunications, Transportation, and Water) Muhamet Fall (acting) mfall3@worldbank.org Energy and Extractive Industries Nabil Fawaz nfawaz@worldbank.org Agribusiness and General Services Olga Sclovscaia osclovscaia@worldbank.org Finance and Capital Markets Reinsurance Marc Roex mroex@worldbank.org Business Inquiries migainquiry@worldbank.org 20 15 MULTILATERAL INVESTMENT GUARANTEE AGENCY 1818 H Street, NW World Bank Group miga.org