Multilateral Investment Guarantee Agency Essay

Cheap Custom Writing Service

The Multilateral Investment Guarantee Agency, established in 1988, provides political risk insurance to  private  companies  investing  in developing  markets. As a member of the World Bank Group, its principal goal is to encourage  foreign direct  investment in developing markets  by augmenting  privately and publicly available political  risk insurance  coverage. Such insurance reduces the risk of investing in developing markets and makes them more attractive hosts for foreign direct investment.

In providing political risk insurance, the Multilateral Investment  Guarantee  Agency, more commonly known as MIGA, is guided by its principal mission of aiding in the economic development of member countries. This objective is reflected in its insurability criteria, which require insured projects be economically viable, environment-friendly, and  contribute to  the economic development  of their host countries. Consistent with its goals of facilitating economic development, infrastructure projects are a stated priority area for MIGA. This priority reflects the essential nature of infrastructure such as power, telecommunications, transportation, water, and waste management  in support  of economic  development  and  the  inability of many  developing  country  governments   to  finance its development.  A second  priority  area for MIGA is post conflict  countries.  These  countries,  because of their war histories, are often viewed as politically risky. This perception makes it particularly difficult for these economies to attract  foreign direct investment and restart the process of rebuilding their economies. This creates a particularly  important role of MIGA, which, through  the provision of political risk insurance, increases the likelihood of such investment.

The insured, companies that are nationals of MIGA member  countries,  invest outside  their  home  markets in developing countries  that  are also members of MIGA. Member countries include both developed and developing countries.  Developed country  members include Canada, the EU-15, Japan, Switzerland, and  the  United  States, which  together  account  for the vast majority of outward foreign direct outflows. Most  developing countries  including  those  in Asia, Africa, the Middle East, and Latin America and the Caribbean are members of MIGA. This extensive membership  implies that foreign investment  in most developing countries may be eligible for MIGA coverage provided other insurability criteria are met.

MIGA provides four types of political risk insurance: expropriation, war and civil disturbance, breach of contract, and transfer restriction.  Both expropriation and war and civil disturbance  coverages provide insurance against asset loss. Expropriation  coverage protects against actions by the host government that restrict or eliminate the policyholder’s ownership rights without compensation.  War and civil disturbance  coverage, as its name suggests, protects the insured against the loss of physical assets due to acts of war and civil disturbance. Breach of contract  coverage protects the investor against the possibility that the host country government fails to fulfill its contractual obligations. The final type of insurance offered, transfer restriction, protects the insured against actions such as the imposition  of capital controls that limit their ability to convert local currency  to foreign currency  for transfer  outside the country.  Insurance  may be purchased  individually or in any combination  desired by the insured. Insurable projects  include  equity investments  and shareholder loans. Coverage is generally available for a period of no more than 15 years.

While MIGA’s political risk coverage is similar to coverage that  may be provided  by private  and individual home country  governments,  MIGA also coordinates coverage from multiple insurers, both private and public. This works to increase the available coverage for a given investment  by having multiple  insurers—private, public, and MIGA—that share the project risks. In the first 19 years of its existence, MIGA has facilitated in excess of $28 billion in investment  guarantees for infrastructure projects. This is in contrast to the approximately  $5.6 billion directly guaranteed  by MIGA during this time period. This reflects the insurance expansion effect of MIGA’s dual activities.

In addition  to providing and facilitating coverage of political risk events, MIGA further manages political risk through its stature as an international institution funded by member  country  contributions. This stature provides access to member governments  that is generally not available to private and public insurers. MIGA uses this access to reduce  the likelihood of the political risk events it insures by leveraging its relationship with host country governments. This unique ability confers further advantages to potential investors  due to the  effective reduction  in political risk exposure of their project.

Bibliography:  

  1. Theodore H. Moran, Gerald T. West, and Geral-Keith Martin, Needs of the Present, Challenges for the Future (World Bank, 2008);
  2. Multilateral Investment Guarantee  Agency, “Investment  Guarantee  Guide,”  miga.org (cited March 2009).

This example Multilateral Investment Guarantee Agency Essay is published for educational and informational purposes only. If you need a custom essay or research paper on this topic please use our writing services. EssayEmpire.com offers reliable custom essay writing services that can help you to receive high grades and impress your professors with the quality of each essay or research paper you hand in.

See also:

ORDER HIGH QUALITY CUSTOM PAPER


Always on-time

Plagiarism-Free

100% Confidentiality
Special offer! Get discount 10% for the first order. Promo code: cd1a428655