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The East: International Investment Guarantees Growing

  • Robert Lyle

Washington, 12 September 1997 (RFE/RL) - The international agency which provides insurance guarantees for investment projects around the world says it sold insurance this past year for the first time for projects in Azerbaijan, Georgia and Romania.

The Multilateral Investment Guarantee Agency, known as MIGA (MEE-ga), a World Bank affiliate organization, says that in the financial year ending June 30, it sold a record 70 investment guarantee contracts totaling $614 million in 25 developing nations.

The agency says what is most significant about its guarantees is that they leverage or bring in so much additional private money. The $614 million of guarantees issued in the just finished fiscal year, it says, brought in another $4.7 billion in private investment and directly created 4,000 new jobs.

The number of projects supported rose in 1997, but the total value declined by over 28 percent from 1996 because the agency used up all of its available capital.

MIGA has been seeking an increase of paid-in capital so it can expand its operations, says Executive Vice President Akira Iida. Despite continuing opposition from its richer member nations, Iida says he is hopeful of agreement on an increase of $1 billion during the Hong Kong World Bank/IMF annual meetings next week. That would represent a near doubling of its resources.

Still, using a variety of means to stretch its resources, MIGA says it provided insurance guarantees for nine major projects in East and Central Europe and Central Asia in 1997.

The first ever MIGA guarantee in Azerbaijan was for an $18.3 million Turkish investment to establish a Coca Cola bottling facility near Baku.

This was part of an effort to encourage investments between developing nations, says MIGA. Three other Turkish business investments were supported in Kazakhstan and Russia as well during the year -- a $3.2 million guarantee for establishing an investment bank, a $17 million guarantee for one of Turkey's largest construction companies to build an office building on the banks of the Moscow river, and a $23 million investment guarantee for a Turkish company's investment in a joint venture soft-drink facility in Rostov.

Other investment projects supported by MIGA in the 1997 financial year in the region included: a $1.2 million guarantee for a Spanish company's investment in an aluminum alloy plant in Samara in southwest Russia; a $7.2 million investment guarantee to a major Dutch bank to establish a Moscow branch; a $3.7 million insurance coverage of a Greek bank's investment in the Bulgarian Investment Bank; a $3.4 million guarantee to the same Greek bank for its investment in a Georgian commercial bank in Tblisi; and a $15.8 million investment guarantee for the Greek bank to buy a part of the Black Sea Bank of Romania.

Of its total investment guarantee portfolio, MIGA says it has 23 percent invested in projects in Europe and Central Asia, focused on the poorer countries which are unable to buy such investment guarantees on the open market.

To date, says MIGA, it has never had to make good or pay out on any of its guarantees. The agency was formed in 1990 and has 141 member nations, including most of the nations of East and Central Europe and Central Asia. Only three -- Latvia, Tajikistan and the former Yugoslav republics of Serbia and Montenegro -- are not yet members. Latvia and Tajikistan are in the process of fulfilling membership requirements, but Belgrade's application has stalled.