Multilateral Investment Guarantee Agency Research Articles

Research on China's Overseas Investment Expropriation Insurance ——Based on MIGA's Experience and Enlightenment

With the promotion of the "Belt and Road" initiative, the scale of China's overseas FDI has been growing exponentially, and the exposure of Chinese enterprises to overseas investment to political risks has also been on the increase. It is common for major capital-exporting countries in the world to safeguard themselves against overseas investment risks by creating an overseas insurance system for such investments. Amongst them, the Multilateral Investment Guarantee Agency (MIGA) is a representative insurance system, which is also a modality that China can learn from. At this moment, the China National Export and Credit Insurance Corporation (Sinosure) is the exclusive domestic commercial enterprise that covers overseas capital investment insurances in China. There are still some deficiencies in the scope of coverage, insurance premium regulations and underwriting conditions in the field of insurance. This essay investigates the issues of collection on insurance for Sinosure 's overseas ventures, learns from MIGA's insurance system, and puts forward suggestions for improvement.

Rewarding a friend: Does the World Bank direct non-commercial risk insurance to countries that support US foreign policy interests?

ABSTRACT Many scholars have investigated the politics of World Bank Group (WBG) lending, often finding that WBG loans are distributed in ways that advance US policy interests. However, the organisation’s other major activity, promoting foreign direct investment (FDI), has received little attention. This study fills this void in the literature, with attention to the Multilateral Investment Guarantee Agency (MIGA), the youngest of the five agencies that collectively make up the WBG. MIGA provides multinational companies with insurance to protect their investments from non-commercial risks in host countries, such as the outbreak of civil war or government expropriation. Given considerable evidence that WBG loans support US interests, MIGA’s risk insurance may be similarly politicised. However, since MIGA is financially independent and prohibits political activity, we theorise that US influence operates informally through MIGA staff, who reward US-aligned countries to ‘please the principal,’ and hence ensure that the US continues to support the Agency. Empirical analysis based on over 1500 MIGA-insured investments covering 121 member countries over the 1990–2020 period shows that MIGA insurance is disproportionately rewarded to investments in host countries that support US policy interests. Our findings suggest that this politicisation is primarily staff-led.

Preliminary Study on Construction of China’s Overseas Investment Insurance System Based on Comparative Analysis of Investment Insurance Systems of the US, Japan, Germany, and MIGA

With the advancement of the Belt and Road strategy, China’s foreign direct investment has grown rapidly, and the political risks faced by Chinese enterprises in overseas investment are also increasing. It is a common practice in the world’s major capital exporting countries to prevent overseas investment risks by establishing an overseas investment insurance system. Among them, the insurance systems of the United States, Japan, Germany, and the Multilateral Investment Guarantee Agency (MIGA) are the most representative, and they are also models for countries to follow. At present, China has not yet established a legal system for overseas investment insurance. China Export & Credit Insurance Corporation is the only operating institution that provides overseas investment insurance in China, and its overseas investment insurance business only accounts for a small proportion and has not played its due role in safeguarding overseas investment. This paper, on the basis of comparative analysis of foreign experience, combined with China’s actual problems and needs, selects the most worthy reference systems of various countries and proposes specific ideas for establishing and improving China’s overseas investment insurance system.

Litigating Terror in The Sinai After The Egyptian Spring Revolution: Should States Be Liable to Foreign Investors for Failure to Prevent Terrorist Attacks?

The ambiguity of the due diligence standard of the Full Protection and Security obligation in investment treaties persists to this day. A recent ICSID tribunal found a developing state liable for breaching the Full Protection and Security obligation due to its inability to protect a foreign investment against terrorist attacks in a remote deserted area. In this article, we analytically criticize the Ampal v. Egypt arbitral award against the comprehensive factual matrix behind the case. Based on our criticism of Ampal, we argue that developing states should not be liable for failing to prevent or stop terrorist attacks under the Full Protection and Security obligation when they exert efforts relevant to their limited capacity to offer such protection. Further, we argue that investors should also optimize political risk insurance offered by the Multilateral Investment Guarantee Agency when they choose to invest in a host state that might be vulnerable to terrorist attacks, might face potential insurgencies, or suffer from political turmoil. Finally, we highlight the importance of integrating other subfields of international law – such as international human rights law – to the international investment arbitration system, especially in defining what acts or omissions are required of a host state to fulfill the due diligence standard of the Full Protection and Security Obligation.

Social Synergy Sukuk (Double-S Sukuk): A Solution for Pandemic Crisis

The COVID-19 pandemic crisis is projected to plunge over half a billion people (580 million) globally into extreme poverty. This exploratory paper proposes an innovative Social Synergy sukuk (Double-S sukuk) for alleviating the alarming upsurge in extreme poverty triggered by the pandemic in the face of limited resources. The Double-S sukuk is designed with Multilateral Development Banks (MDBs); such as Islamic Development Bank subscribing to the sukuk at a discounted profit rate, issued by a country facing the pains of the pandemic. The profit will be paid by a charitable Non-Governmental Organization; such as Bill & Melinda Gates Foundation as an incentive to the crises country contingent upon judicious utilization of the funds for the pre-agreed social targets achieved within timely milestones that trickle down to uplift the citizens from the pandemic pains of extreme poverty. The country will only pay the principal component. Furthermore, a suitable MDB; such as Multilateral Investment Guarantee Agency (MIGA) will issue a charitable guarantee to enhance the sukuk rating and cut issuance costs. This enhancement makes the sukuk an attractive BASEL III High-quality-liquid-asset (HQLA). Instead of begging the public for charity, the Double-S sukuk will be open to the public to invest alongside MDBs for a discounted profit rate to crowd-in the social/ethical conscious private sector to raise cheaper and larger funds for an apt synergistic crisis alleviation. The methodology used in this study is qualitative based on content analysis of relevant academic journals, industry reports and policy documents.

De-risking Renewable Energy Investments in Developing Countries: A Multilateral Guarantee Mechanism

Summary Mitigation of global warming requires substantial investment in electricity generation from renewable sources. A large share of new generation capacity is required in regions with adverse financing conditions. We propose a global guarantee mechanism to reduce risk premia of renewable energy investments by means of risk pooling and increased market efficiency. Policymakers could establish this mechanism by scaling up existing international risk guarantee initiatives. We estimate the net present value of overall savings at US$2018 1.5 trillion globally for investments by 2030, with the largest relative savings (between 20.5% and 22%) in Sub-Saharan Africa and the Maghreb. The savings from such a mechanism outweigh its estimated average yearly operating cost. By lowering the cost of decarbonization in high-risk countries, the proposed mechanism offers policymakers a tool to make current global mitigation pledges more achievable and enables the global community to pursue more ambitious climate action.

Assessment of the Political Risk in a Country: a Practitioner’s View

Political risk is inherent to foreign investment. It stems from either the government's or the political regime's instability, or restrictive and compelling governmental policies. To cope with this risk, two complementary instruments are used: risk assessment and deterrent measures. Taking into consideration South America, the author explains how the political risk assessment is realized through risks indexes, public or corporate: each carries its own criteria as shown here by the analysis of General Motors and Union Carbide methods of assessment. The author then discusses the means available to the investor to forecast and minimize the negative effects of the actualization of a political risk. He identifies two main categories of deterrent measures: business oriented strategies carried out by the investor or legal techniques of protection. Among the latter, the author analyses the stabilization and internationalization clauses; the security offered by certain bilateral or multilateral treaties to foreign investment; the guarantees agreed upon by organizations such as the Multilateral Investment Guarantee Agency; the transfer of domicile of legal entities.

Innovation in Political Risk Insurance: Experience from the Multilateral Investment Guarantee Agency

AbstractThe Multilateral Investment Guarantee Agency (MIGA) is the youngest of The World Bank Group's four financial institutions, but it has a long history of innovation in its mandated sphere: political risk insurance and credit enhancement. MIGA's mission is to foster cross‐border investment flows to support development, with the goal of eradicating poverty and enhancing shared prosperity in emerging market and developing economies. The path to accomplishing this mission has, however, been continually evolving. This article provides a discussion of the: (1) contextual backdrop to innovation for a multilateral financial institution providing political risk insurance; (2) the importance of political risk insurance and the traditional coverage provided; (3) the expanded capability to de‐risk private investments as seen through the lens of innovation at MIGA; and (4) a conclusion on the continuing importance of innovation in a changing global environment.

THE URGENCY FOR REGIONAL INTEGRATION IN ACCORDANCE TO INVESTMENT RISK MANAGEMENT

Investment is an activity which is needed by every country, especially in development country. However, the investment activity itself also brings in some risk which is called as investment risk. These investment risks usually recognized to be covered by an investment agency to protect the investor. Multilateral investment guarantee agency (MIGA) is usually used to maintained and cover the loose of investor. But, actually among the investment risks which are identified by MIGA will only responsible for the market risk, meanwhile the biggest lost for investor also came from political and financial risks which have to be recognized in advanced. This is where the export credit agency will take place. Nevertheless, there are still many loops to be identified to determine the characteristic of export credit agency itself. To deal with those kinds of risks, a regional integration is needed to avoid an overlapping regulation among ASEAN Economic Communiy. Thus, will lead to a common perception on how to treat those risks and who will be responsible to cover it.

The ICSID arbitration and its contribution to development in the light of direct investments in emerging markets

The international investment disputes between states and companies have a procedural framework of dispute resolution through arbitration. This is the service provided by the International Centre for Settlement of Investment Disputes (ICSID), which was established by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 18 March 1965. ICSID is a member of the World Bank Group, which also encompass the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), International Finance Corporation (IFC) and the Agency multilateral Investment Guarantee Agency (MIGA). The goal of the Center is to facilitate the settlement of disputes between foreign citizens and local authorities where the business is conducted through arbitration. To achieve this, all Bilateral Promotion and Reciprocal Protection of Investments Treaties (BITs) contain mechanisms for resolution of disputes between investors and States similar to the ICSID Convention or refer to it. The latter, joined to an efficient implementation of awards rendered in this context, should serve emerging markets to attract the capital required to contribute to their final expansion.

(The Role of International Development Finance Institutions in Financing Infrastructure in Africa and Its Implications for Korea)

(The Role of International Development Finance Institutions in Financing Infrastructure in Africa and Its Implications for Korea)

Investment: Policy, Practice and Present Scenario

Bangladesh is a country with enormous potentials to grow faster than any other least developed countries (LDCs) of the world. Its strategic geographic location made it an attractive destination for the ancient merchants up to the modern multinationals. Bangladesh is located at the middle points of two fastest growing economic superpowers, China and India. These two countries have about 2.6 billion populations with quickly increasing purchasing power. Bangladesh has a domestic market of about 15 million consumers. It would be very much cost effective to produce a product in Bangladesh and market into India and China under SAARC and other international duty free arrangements. Besides, these all Bangladeshi products (other than armaments) enjoy complete duty and quota free access to developed countries like EU, Japan, Canada and Australia. Bangladesh is a signatory to the Multilateral Investment Guarantee Agency (MIGA); Overseas Private Investment Corporation (OPIC), USA; International Center for Settlement of Investment Disputes (ICSID); World Intellectual Property Organization (WIPO). It has bilateral agreements to avoid double taxation with 28 countries. Foreign investment in Bangladesh is 100% safe and secured by the Foreign Private Investment (Promotion & Protection) Act 1980. We have a large number of young and energetic populations with about 59.3% economically active people. According to a recent study conducted by the Japan External Trade Organization (JETRO) factors of production like land, labour, fuel, vehicles, rental and hiring skilled management people etc. are very much competitive here in Bangladesh in comparison with 29 cities and region of Asia. Comparing cities are Seoul, Beijing, Shanghai, Guangzhou, Dalian, Shenyang, Quingdao, Shenzhen, Hong Kong, Taipei, Singapore, Bangkok, Kuala Lumpur, Jakarta, Batam, Manila, Cebu, Hanoi, HO Chi Minh City, Da Nang, Yangon, New Delhi, Mumbai, Bangalore, Chennai, Karachi, Colombo, Dhaka and Yokohama. Bangladesh is offering hassle free remittance of earning by foreign professionals, repatriation facilities of dividend and capital at exit of foreign investors, permanent resident permits on investing US$75,000 and citizenship on investing US$500,000. Five years tax holidays package for investment at Dhaka and Chittagong divisions and seven years tax holiday’s package for investment at other divisions of the country. There are eight functioning Export Processing Zones (EPZs) namely Adamjee, Chittagong, Comilla, Dhaka, Ishwardi, Karnaphuli, Mongla, and Uttara–EPZ with all sorts of infrastructural, managerial, utilities and other relevant facilities. Already investors from 32 countries invested in these EPZ’s and operating business successfully.

Political Stability Key to Improving Investment Climate in Bangladesh

Bangladesh is a country with enormous potential to grow faster than any other least developed countries (LDCs) of the world. Its strategic geographic location has made it an attractive destination for the ancient merchants as well as the modern multinationals. This is because Bangladesh is located at the middle point of two fastest growing economic superpowers China and India. These two countries have about 2.6 billion populations having increasing purchasing power. Bangladesh has a domestic market of about 15 million consumers. It would be very much cost-effective to produce a product in Bangladesh and market it to India, China, and other countries under the SAARC and other international duty-free arrangements. Besides, all Bangladeshi products (other than armaments) enjoy complete duty and quota-free access to developed countries including the member-states of the European Union Japan, Canada and Australia. Bangladesh is a signatory to the Multilateral Investment Guarantee Agency (MIGA), the Overseas Private Investment Corporation (OPIC), the USA, the International Center for Settlement of Investment Disputes (ICSID), and the World Intellectual Property Organization (WIPO). It has bilateral agreements with 28 countries to avoid double taxation.

The Role of International Development Finance Institutions in Financing Infrastructure in Africa and Its Implications for Korea

The Role of International Development Finance Institutions in Financing Infrastructure in Africa and Its Implications for Korea

Political risk insurance as an instrument to reduce oil and gas investment risk and manage investment returns

New oil and gas supply projects are increasingly taking place in non-OECD countries, where the rule of law and the sanctity of contracts are often not as well developed as in OECD countries. The oil and gas industry faces increasing political risk at the same time that oil prices have become more volatile and project costs have escalated, sometimes squeezing margins. The exceptionally high capital intensity of the oil and gas industry makes companies particularly vulnerable to political risk. MIGA, the Multilateral Investment Guarantee Agency of the World Bank, in its World Investment and Political Risk 2011 report, broadly defines political risk as ‘the probability of disruption of the operations of companies by political forces and events, whether they occur in host countries or result from changes in the international environment. In host countries, political risk is largely determined by uncertainty over the actions not only of governments and political institutions, but also of minority groups and separatist movements’. The essence of this definition focuses on the risks arising from the adverse actions—or inactions—of governments. Political risk includes, for example, currency convertibility and transfer restrictions, expropriation, civil unrest, war and terrorism, breach of contract and non-honouring of sovereign financial obligations. Energy investors are understandably concerned that returns on projects in emerging markets could suffer as a result of political changes or instability in the host country. In 2010, a survey of the US Energy Industry conducted by the Aon Corporation, a leading global provider of risk management services, insurance and reinsurance brokerage, ranked political risk among the top five challenges facing the industry. The survey also revealed that most companies are not properly prepared to assess and mitigate political risk. Political risk insurance (PRI) is a relatively recent innovation in positioning companies to reduce oil and gas investment risk. This article explores how PRI can be used to mitigate risks in the oil and gas sector when conducting business across borders, thus helping to manage investment returns. The article discusses a comprehensive case study of the Chad–Cameroon Petroleum Development and Pipeline Project to highlight the various facets of political risk and how these can be mitigated.

Effective Governance through Decentralized Soft Implementation: The OECD Guidelines for Multinational Enterprises

Botnia S.A./Metsä-Botnia Oy's construction of the Orion pulp mill in Uruguay raised concerns regarding violations of national, regional, and international law with regard to social and environmental protection. On 18 April 2006, the Center for Human Rights and Environment (CEDHA), an Argentinean non-governmental organisation, submitted to Finland's National Contact Point (NCP) a “specific instance” regarding the possible non-compliance of Botnia S.A. (a Finnish enterprise) with the OECD Guidelines for Multinational Enterprises (OECD Guidelines for MNEs, Guidelines) when building the envisaged pulp mill in Uruguay. According to the Center for Human Rights and Environment, Botnia S.A. violated the OECD Guidelines for MNEs especially with respect to Chapter II “General Policies”, Chapter III “Disclosure”, Chapter V “Environment” and Chapter VI “Bribery”. Specific instances concerned with related issues were filed by the Center for Human Rights and Environment with the Swedish and Norwegian NCPs against Nordea, a leading financial services group of the Nordic and Baltic Sea area, for possible financing of Botnia S.A.'s pulp mill project and against the Finnish state bank Finnvera for providing export guarantees to Botnia S.A. Other fora that have in the meantime become involved in the issue are the International Court of Justice and member institutions of the World Bank Group, the International Finance Corporation and the Multilateral Investment Guarantee Agency.

International Law and the Settlement of Investment Disputes Relating To China

This article examines how international investment law can be used to resolve investment disputes in China. After a general overview over the basic structure of international investment law, it explores the international legal rules applicable to foreign investors in China and Chinese investors in third countries. It focuses on China’s obligations under the Convention on the Settlement of Investment Disputes between States and Nationals of other States; the Convention establishing the Multilateral Investment Guarantee Agency, the WTO/GATT-regime and bilateral investment treaties. It thereby illustrates China’s cautious approach to international arbitration and other international standards relating to the protection of foreign investors and the current trend in Chinese politics to turn to international law to protect its investors in third countries. The article concludes that—also caused by increasing Chinese outward investment—the international investment regime relating to China has left its infant stage and provides remedies for foreign investors in China and Chinese investors abroad.

Analysis of political risks and opportunities in public private partnerships (PPP) in China and selected Asian countries

PurposeThe paper aims to provide insight into the opportunities and impact of political risks in China and selected Asian countries on opportunities in infrastructure projects under public‐private partnership (PPP) schemes.Design/methodology/approachThe impact of political risks on PPPs was investigated through an international survey among senior staff of international lenders, investors, insurers, and legal and financial advisors from the public and private sector. The surveyed political risk categories base on the Multilateral Investment Guarantee Agency Convention and literature review. They comprise six categories: currency inconvertibility and transfer restriction, expropriation, breach of contract, political violence, legal, regulatory and bureaucratic risks, and non‐governmental action risks. The survey evaluation uses fuzzy sets and non‐parametric statistics.FindingsThe findings comprise rankings of political risk factors within China and Asian countries as well as rankings of these countries with respect to the risk categories and rankings of future PPP opportunities over time. Also, survey comments are discussed.Research limitations/implicationsThe survey response rate is relatively low with 29 respondents. This is attributed to the specialized nature of the survey questions and topic area. It also indicates that political risks are little understood and paid attention to, though significant in impact. Owing to the chosen evaluation methods for small sample sizes, the results are robust and show high correlations with market data.Practical implicationsThe results provide insight into the impact of political risks and the perceived magnitude of each risk category. It supports decision makers prioritizing and analyzing country risks.Originality/valueThe value and originality is in the use of a fuzzy‐coded survey scale to quantify perceptions on single political risk factors across China and Asian countries with focus on PPP infrastructure projects. The paper demonstrated that robust results from small sample sizes can be derived with the employed methods.

The Promotion of Investment Alliances by the World Bank

This article will examine how World Bank policies that influence national healthcare systems have been facilitated through investment alliances between members of the World Bank Group, specifically the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA), regional development banks and multinational and national company interests. The data used in this article was gathered from the information and publications available through the websites of the World Bank Group, regional development banks, multinational companies and private equity investors. Some of the loan documents available through the websites of the World Bank Group and regional development banks were consulted. The financial complexity of many of the investments in new healthcare systems provides a challenge for future regulatory systems in healthcare. The involvement of a range of private sector interests in healthcare also poses problems for continued development of health knowledge within publicly funded systems.

MIGA & its Operation (Multilateral Investment Guarantee Agency)

Considering the need to strengthen international cooperation for economic development to foster the contributing to such development of foreign investment in general end private foreign investment in particular: Recognizing that the flow of foreign investment to developing countries would be facilitated and further encouraged by alleviating concerns related to non-commercial risks.Desiring to enhance the flow to developing countries of capital and technology for productive purposes under conditions consistent with their development needs, policies and objectives on the basis of fair and stable standards for the treatment of foreign investment: The Multilateral In vestment Guarantee Agency (MIGA) was established as the smallest and youngest member of the World Bank Group in 1988 to improve people‘s lives and reduce poverty. MIGA contributes to development by offering political risk insurance (guarantees) to investors and tenders, and by helping developing countries attract and retain private investment. MLGA’s creation was in direct response to the debt crisis of 1980 s, and the subsequent realization among political Leaders that sustainable economic growth in many developing and transitional countries required the stimulation of private enterprise and flow of foreign capital for this to happen, The creation of such an agency was discussed in many international fora, particularly the World Bank.Many investors and Lenders needed comfort their respective investments would be protected against certain types of political risks. MIGA’s establishment was an attempt to address shortcomings in the investment insurance (guarantee) industry, and provide a risk mitigation service that was not readily available elsewhere. The Multilateral Investment Guarantee Agency (“MIGA”) has played an essential role in the provision of political risk insurance during its existence. On October 11, 1985, after formal approval by the Executive Directors of the World Bank, the Board of Governors adopted a resolution opening the MIGA Convention for signature.As previously stated, MIGA began operations in 1988.Since its birth, MIGA matured as an effective institution in assisting the developmental goals of lesser-developed countries by facilitating capital investment by developed nations into emerging economies.