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ANNUAL REPORT 1998

1 9 8 8-1 9 9 8

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CONTENTS

Letter to the Council of Governors iv

Board of Directors v

Message from the Executive Vice President vi

Officers of the Agency viii

Profiles: New Officers of the Agency

Executive Vice President ixVice President, Guarantees xVice President and Chief Financial Officer x

Highlights of Fiscal 1998 1

MIGA Member and Signatory Countries 2

Guarantee Program 4

Africa 14Asia and the Pacific 17Europe and Central Asia 19Latin America and the Caribbean 23Middle East 28

MIGA's Guarantee Clients 30

Technical Assistance Services 32

Investment Marketing Services 32Legal Technical Assistance 38

Financial Statements 39

Appendixes 55

Governors and Alternates 56

Directors and Alternates: Voting Power 59

Signatories to MIGA's Convention 61

Fiscal 1999 Budget 62

Business Profile 63

CONTENTS

LETTER TO THE COUNCIL OF GOVERNORS June 30, 1998

James D. Wolfensohn, President of the MultilateralInvestment Guarantee Agency (MIGA) and Chairmanof its Board of Directors, submits to the Council of

"":'Q Governors, on behalf of the Board of Directors and inNl - vitt accordance with MIGA's bylaws, this report and au-

dited financial statements for the fiscal year endingJune 30, 1998.

The Board of Directors is pleased to report thatfiscal 1998, MIGA's 10th anniversary year, was yet

/ ;j_ another successful year. To support MIGA's futuregrowth, the Board approved a general capital increase,and in April 1998 the Council of Governors put thecapital increase to a vote by MIGA's members. Thevoting period will be open for one year. The WorldBank made a $150 million grant to MIGA as part ofthe recapitalization process.

During the year, the guarantees portfolio continued to grow and to become morediversified. MIGA maintained its claims-free record. MIGA's technical assistance activi-ties were favorably evaluated by external consultants, and a new operation was launchedin Africa to support investment promotion activities.

iv MIGA ANNUAL REPORT 1998

BOARD OF DIRECToRsJune 30, 1998

Directors AlternatesKHALID M. AL-SAAD MOHAMED KAMEL AMRKHALID H. ALYAHYA KHALED AL-ABOODI

JUANITA D. AMATONG MURILO PORTUGALALI BOURHANE LUC-ABDIADEN

KACIM BRACHEMI INAAMUL HAQUE

ANDREI BUGROV EUGENE MIAGKOVJUAN CARIAGA VALERIANO GARCIA

JOAQUIM R. CARVALHO GODFREY GAOSEBENZO DEL BUFALO INIGO FERNANDEZ DE MESA

LEONARD GOOD ALAN DAVID SLUSHERLUC HUBLOUE NAMIK DAGALP

JANNES HUTAGALUNG SUN VITHESPONGSEYOUNG-HOI LEE CHRISTOPHER Y. LEGG

Li YONG ZHAO XIAOYUMATTHIAS MEYER JERZY HYLEWSKI

JEAN-CLAUDE MILLERON OLIVIER BOURGESSATORU MIYAMURA KIWAMU INOUE

ILKKA NIEMI FRODE NEERGAARDGUS O'DONNELL MYLES WICKSTEAD

FRANCO PASSACANTANDO HELENA CORDEIROJAN PIERCY MICHAEL MAREK

HELMUT SCHAFFER ECKHARDT BISKUPSURENDRA SINGH SYED AHMED

PIETER STEK MIHAI N. TANASESCU

BOARD OF DIRECTORS V

_____ a M.I.G.A.|t<

MESSAGE FROM THE EXECUTIVE VICE PRESIDENT

Fiscal 1998 (July 1, 199 7 to June 30, 1998)is a benchmark year in MIGA's history.First, in September 1997, the Develop-

- t; 7 it; ll~ > t ment Committee met in Hong Kong dur-F., X9I X r : ing the Annual Meetings of the World Bank

Group and reached an agreement on the$1 billion recapitalization package forMIGA. The package consists of an $850

IF million capital increase ($150 million paidt- \ --- .-- in cash and $700 million in callable capi-

tal) and a grant transfer of $150 millionfrom IBRD to MIGA. The IBRD transferwas executed on April 9, 1998. The capi-tal increase is subject to the approval ofthe Council of Governors. The Board ofDirectors formally approved the recapital-ization package and, in April, recom-mended the issue to the Council of Gov-ernors for a formal vote. (The voting periodwill be one year.) Although subscriptionand payment may require additional timein member countries due to national clear-

ance procedures, the capital increase will enable MIGA to continue to deliver importantservices for the development of its Category II member countries. These actions repre-sent strong support by clients and shareholders of MIGA's achievements and their recog-nition of MIGA's importance in promoting the cause of development.

During the year MIGA's Board was also engaged in serious discussions on the policyframework under which MIGA should operate. These discussions included disclosurepolicy, environmental policy and procedures, development effectiveness, inspection poli-cies, and workers' rights. The outcome of these discussions will be implemented in thecoming fiscal year.

Vi MIGA ANNUAL REPORT 1998

Important changes took place on other fronts also. MIGA changed its provisioningmethodology from premium-based to risk-based. MICA has also been successful in ex-panding its Cooperative Underwriting Programs with private insurers. Further, the pro-posed change in the Brokers Program is expected to have positive results in increasingprojects in IDA countries and intra-Category II investments.

MIGA's Investment Marketing Services department was evaluated by independentconsultants. The consultants' report recommended an enhancement of various initiativesundertaken in recent years. The fiscal 1999 Budget and Three-Year Business Plan, whichwas approved by the Board, reflects the results of this evaluation. In addition, IPAnet,MIGA's website for the dissemination of investment-related information, gained inter-national r ecognition through its selection by the Financial Times as Website of the Weekin April 1998.

Fiscal 1998 was also a year of change in MIGAs management. Mr. Roger Pruneaureplaced Mr. Leigh P. Hollywood as Vice President, Guarantees in February 1998. Mr.Angus Scrimgeour joined MIGA as Vice President and Chief Financial Officer in Sep-tember 1997. I am scheduled to leave MIGA on July 8, 1998, when my second termexpires. Overall, this was a year of preparation for these changes.

Finally, April 1998 marked the 10th anniversary of MIGA's establishment. Managementdecided to hold a series of commemorative events, including a serrinar on The Role of Politi-cal Risk Insurance in Project Finance to be held at the Annual Meetings in Washington D.C.,in October.

I am grateful for all the support I have received during my six-year tenure with MIGA.

Akira IidaJune 30, 1998

MESSAGE FROM THE EXECUTIVE VICE PRESIDENT Vii

ZM.I.G.A. l _________________________________

OFFICERS OF THE AGENCY

LisDodero VI i P a e|~~~ ~~ ~~~~~~~~~~~~~~~~~~~~ l -~

D l .- a M e 'c of G' :Vii MIA AN REPR 1

(Left t right

Lui Doero Vie PesientandGenralCouseAnu cimgor iePeietad he1iaca fie

Akira Iida, Executive Vice President ~~~ ~ j

Lus oderoPuna, Vice President,an Generalonsels

Viii MiGA ANNUAL REPORT 1998

PROFILIs: NEW OFFICERS OF THE AGENCY

Executive Vice PresidentOn June l2, 1998, Mr. Motomichi Ikawawas appointed MIGA's Executive VicePresident, effective July 9, 1998.

Mr. Ikawa graduated from the Universityof Tokyo in economics and undertookgraduate work at the University of Cali-fornia, Be:rkeley (Ph.D. Candidate in eco-nomics).

He joirLed the Ministry of Finance ofJapan in 1969 and served in a varietyof positions in the International FinanceBureau. H-le held posts as Director of theInternaticnal Organization Division, theForeign Exchange and Money MarketDivision, and the Development PolicyDivision.

Mr. Ikawa also served as Managing Director, Coordination Department, at the Over-seas Economic Cooperation Fund. Mr. Ikawa's most recent assignment in the Ministry ofFinance before joining MIGA was as Senior Deputy Director-General of the Interna-tional Finance Bureau.

Mr. Ikaxva's previous international experience includes service as an economist at theOECD in Paris and as Director of the Budget, Personnel, and Management Systems De-partment of the Asian Development Bank in Manila. He was Japan's deputy during theIDA 11 negotiations and has represented his country in a number of high-level interna-tional meetings, including the G7 African Expert Group meeting, the G8 DevelopmentExperts meeting, APEC and ASEM Deputies meetings, and the G8 Preparatory FinancialSub-sherpa meeting for the Birmingham Summit.

PROFILES: NEW OFFICERS OF THE AGENCY iX

Vice President, GuaranteesMIGA welcomed its new Vice President,

Guarantees, Mr. Roger Pruneau, a Canadiannational, in February 1998. Prior to join-ing MIGA, Mr. Pruneau served as Execu- -

tive Vice President and Chief FinancialOfficer of the Export Development Cor-poration, Canada's export credit agency.He began his career in 1974 as an economistin the Fiscal Policy Division of Canada's LI

Department of Finance and subsequently / /served in various capacities in the Cana- i

dian government and the government ofQuebec before joining the Export Develop-ment Corporation in 1987. /

Vice President andChief Financial Officer

Mr. Angus Scrimgeour, a British national,became MIGA's new Vice President andChief Financial Officer in September 1997.Prior to this appointment, Mr. Scrimgeourhad served for one year as a consultantto MIGA in connection with its capitalreplenishment. Earlier in his career, MrScrimgeour served as a Vice President ofCitibank, Vice Chairman of Henry CookeCroup, and Chief Executive of BanksideUnderwriting Agencies. He was instrumen-tal in the rescue of the Corporation ofLloyd's and served as a Director of Lloyd'sCSU Board and a member of Equitas Ex-ecutive Committee.

X MIGA ANNUAL REPORT 1998

HIGHLIGHTS OF FISCAL 1998

Country lembership O As part of the funding package, theWorld Bank made a grant of $150 mil-

o Two new countries signed the MIGA lion to MIGA.Convention; the number of signatorycountries now totals 162. E Gross income reached $192.4 million,

including a grant from the World BankE Four countries completed membership o$10mlin; ne inom atrpo

requirernents; the number of member vo $14. million .countries now totals 145.

a MIGA adopted a new risk-based provi-

Guarantee Operations sioning methodology; general reservesfor claims increased from $55 million

o Fifty-five guarantee contracts were issued, to $220 million.involving gross exposure of $830.9 mil-lion. Technical Assistance Services

a First projects were assisted in Angola,Bolivia, Equatorial Guinea, Cape Verde, auThe A i-P s ProgramiwasDominican Republic, India, Kenya, launched with its base in Namibia.Mozambique, Ukraine, and Uruguay. a IPAnet, MIGA's on-line investment pro-

* The total number of developing mem- motion clearinghouse, gained interna-her countries that have benefited from tional recognition, and now has moreMIGA-guaranteed projects is now 62. than 8,000 registrants in 175 countries.

a The total number of guarantee contracts a PrivatizationLink was launched to pro-issued is now 348. vide on-line information about invest-

ment opportunities arising from priva-* Total foreign direct investment facili- tization of state-owned enterprises.

tated is estimated at $25 billion.a A regional strategy workshop for tour-

a Key policies on disclosure of informa- ism development was conducted in co-tion, protection of the environment, and operation with the Southern Africa De-labor standards were discussed by velopment Community.MIGA's Board of Directors.

a The first Global Mining Investment Op-a MIGA continued its claims-free record. portunities Symposium was organized.

a Several training activities to strengthenFinancial investment promotion agencies were

a A capital increase of $850 million ($ 150 implemented.million paid in cash and $700 million a Independent consultants reviewed thecallable capital) was recommended by activities of the Investment MarketingMIGA's Board of Directors to the Coun- Services, found them effective, and rec-cil of GDvernors; the Council has put ommended an expansion of technicalthe matter to a vote. assistance activities.

HIGHLIGHTS OF FISCAL 1 998

-E IM.I. ________

MIGA MEMBER AND SIGNATORY COUNTRIESJune 30, 1998

145 MEMBER COUNTRIESINDUSTRIAL-20

Austria* France Japan SpainBelgium Germany Luxembourg SwedenCanada Greece Netherlands SwitzerlandDenmark Ireland Norway United KingdomFinland Italy Portugal United States

DEVELOPING-125

AFRICA South Africa Belarus ColombiaAlgeria Sudan Bosnia-Herzegovina Costa RicaAngola Swaziland Bulgaria DominicaBenin Tanzania Croatia Dominican RepublicBotswana Togo Cyprus EcuadorBurundi * Tunisia Czech Republic El SalvadorBurkina Faso Uganda Estonia GrenadaCameroon Zambia Georgia GuatemalaCape Verde Zimbabwe Hungary Guyana

CRnegpubemofratic ASIA/PACIFIC Kazakhstan HaitiCongo, Republic of Bangladesh Kyrgyz Republic HondurasC6te dIlvoire China Lithuania JamaicaEgypt, Arab Fiji Macedonia, former Nicaragua

Republic of India Yugoslav Republic of PanamaEquatorial Guinea Indonesia Moldova ParaguayEritrea Korea, Republic of Poland PeruEthiopia Malaysia Romania St. LuciaGambia, The Micronesia, Federated Russian Federation St. Vincent and theGhana States of Slovak Republic GrenadinesGuinea Nepal Slovenia Trinidad and TobagoKenya Pakistan Turkey UruguayLesotho Palau- Turkmenistan VenezuelaLibya Papua New Guinea UkraineMadagascar Philippines Uzbekistan MIDDLE EASTMalawi Samoa BahrainMali Singapore* LATIN AMERICA/ IsraelMauritania Sri anka JordanMauritius Vanuatu CARIBBEAN KuwaitMorocco Vietnam Argentina LebanonMozambique Bahamas, The MaltaNamibia EUROPE/ Barbados OmnanNigeria CENTRAL ASIA Belize QatarSenegal Albania Bolivia Saudi ArabiaSeychelles Armenia Brazil United Arab EmiratesSierra Leone Azerbaijan Chile Yemen, Republic of

17 COUNTRIES IN THE PROCESS OF FULFILLING MEMBERSHIP REQUIREMENTSINDUSTRIAL-1

Australia

DEVELOPING-16

AFRICA ASIA/PACIFIC EUROPE/ LATIN AMERICA/Central African Cambodia CENTRAL ASIA CARIBBEAN

Republic* Mongolia Latvia St. Kitts and NevisChad Solomon Islands Tajikistan SurinameGabon Thailand Yugoslavia, FederalGuinea-Bissau Republic of MIDDLE EASTNiger (Serbia/Montenegro) Syrian Arab RepublicRvan da

* New member and aignatory countries.

2 MIGA ANNUAL REPORT 1998

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Guinea, India, Kenya, Mozambique.Ukraine, and Uruguay.

* Coinsurance agreement signed with

GUARANTEE PROGRAM Brockbank Syndicate Management lttd.,of Lloyd's of London, to provide up to

Fiscal 1998 was a year of innovation and $100 million in additional insurancechange for the guarantee program. Man- per project on an ad hoc basis underagement developed a new range of prod- MIGA's Cooperative Underwriting Pro-ucts and services and discussed key policies gram (CUP) (see page 6).to enhance the developmental benefits ofMIGA-insured investments. MIGA issued * First contract signed with Zurich-55 guarantee contracts during the year, American Political Risk under MIGA'stotaling $830.9 million in coverage. These CUP (seepages 23-24).investments benefit 26 developing coun-tries, of which 10 countries have received u Broker Program revised to facilitate moreMIGA-insured investments for the first effective assistance toprioty clients suchtime. Income from net premiums and fees as small and medium-size enterprisesand commissions totaled $24.1 million. and developing country investors.In addition, MIGA has one commitmentletter for $10 million in potential cover- a First temporary overseas offices set upage. MIGA's total issued coverage reached for direct meetings with prospective in-$4.2 billion at the end of fiscal 1998, and vestors, banks, and insurance brokers.the outstanding portfolio was $2.9 billion,before reinsurance and net of cancellations u Three major seminars sponsored on po-(figure 1). litical risk inxvestment insurance.

Other milestones reached in fiscal 1998 n Management discussed key policies oninclude: disclosure of information, the environ-

ment, and labor standards, underlining* MIGA's first guarantees in 10 new MIAGs mandate to promote develop-

countries, namely, Angola, Bolivia, Cape mentally and environmentally sound in-Verde, Dominican Republic, Equatorial vestments in developing countries.

FIGURE 1. GROWTH OF GROSS EXPOSURE, FISCAL 1990-98(millions of US. dollars)3,000 2,862

Z,500 2,276 2,499

2,000 - 1,622

1,500 _1,048

1,000 74

500 421132 19

FY90 FY91 FY92 FY93 FY94 FVYS FY9 FY97 FY96


o Additional contributions provided for longer periods of insurance. A number ofMIGA's West Bank and Gaza Invest- new insurers have also entered the market.ment Trust Fund by the European In-vestment Bank and the government ofJapan. MIGA's (ollaboration with Other

Investment InsurersForeign Diredt Investment and MIGA has taken advantage of the recentPolitical Risk Investment Insurance changes in the investment insurance mar-

ket to extend its efforts to promote devel-Global private flows to developing coun- opmentally sound projects and to catalyzetries soared from $42 billion in 1990 to private capital flows to its developing$256 billion in 1997, although 1997 wit- member countries. As the only global mul-nessed a slight slowdown due largely to the tilateral political risk insurer, MIGA coop-crisis in East Asia. Growth has resulted erates extensively with national and pri-from a combination of factors: liberaliza- vate investment insurers to facilitate thetion and private sector growth in develop- flow of foreign direct investment to theseing economies, particularly in the infra- countries. Forms of cooperation includestructure sector; strong macroeconomic coinsurance and reinsurance arrangementsgrowth; an increase in trade; and a more which expand the availability of insuranceintegrated global investment and produc- to investors and thereby increase the flowtion regime overall. Against this back- of foreign direct investment.ground, foreign direct investment contin-ued to form the largest portion of net National insurers are generally restrictedprivate flows, and rose fivefold, from $24 to serving investors from their own coun-billion to $120 billion, in the same period. try and are sometimes constrained by the

policies and priorities of their respectiveThe growth of foreign direct investment governments. MIGA complements the

in developing countries acted as a catalyst coverage offered by national insurers byfor, and benefited from, the expansion of providing an alternative source of invest-the investme-it insurance market. Con- ment guarantees (insurance) to investorscerns of project sponsors about restrictions who do not meet such nationality or otheron transfer of' remittances, expropriation eligibility requirements.or nationalization, and war and civil dis-turbance have inhibited the flow of for- In the private insurance market, MIGAeign investments in the past. The increas- has maintained close ties with insurers suching availability and use of political risk as ACE Limited of Bermuda, Lloyd's ofinsurance as a risk-mitigating mechanism London, the American Intemational Group,have boosted investors' confidence to in- Inc., Sovereign Risk, UNISTRAT, and Zurich-vest in developing countries. American Political Risk. While the scope

and term limits of private insurance pro-The Berne Union, which comprises 25 grams have recently broadened to accom-

investment insurers including MIGA, re- modate market demand, MIGA is often theports that the use of political risk insur- only source of long-term insurance.ance has more than doubled since 1990($17 billion), reaching $38.9 billion in 1997. MIGA cooperates with the private in-In response to global trends, private invest- surance industry through quota share treatyment insurers are increasing the capacity reinsurance and the Cooperative Under-and scope of their coverage and providing writing Program.

GUARANTEE PROGRAM S

Quota Share Treaty Reinsurance The share of infrastructure in the port-folio continued to rise, expanding sixfold

In 1997, in a breakthrough agreement with in five years. The financial sector still ac-the private insurance market, MIGA signed counts for the largest portion (38 percent)a quota share treaty reinsurance agreement of the portfolio, and includes investmentswith ACE Limited. This agreement ex- in the creation and expansion of branchpands MIGA's per project coverage limit banks and loan guarantees (figure 2).by $25 million and per country limit byup to $100 million, enabling increased sup- The guarantee contracts issued duringport of sound investments in MICA's de- the year are expected to have far-reachingveloping member countries. developmental benefits for the 26 recipi-

ent member countries. Guarantees issued

Cooperative Underwriting Program facilitated an estimated $6.1 billion in for-eign direct investment. The projects will

The Cooperative Underwriting Program generate an estimated 8,000 jobs in the(CUP) is a form of coinsurance designed 26 host countries and will involve substan-to encourage private insurers to enter mar-kets that, without the involvement of amultilateral institution such as MIGA, they

might otherwise not have entered. As part - I.of this effort, MIGA concluded a coopera-tion agreement with Brockbank Syndicate F9

Management Ltd. of Lloyd's of London inJanuary 1998. Under the agreement,Brockbank will make available up to $100 M2ning I rnniOlmillion in additional capacity per transac-tion, on a case-by-case basis. Under the IfatutrCUP, MIGA acts as insurer-of-record for 3%the entire amount at risk, but it retains onlya portion for its own account while pri- Sr_vate insurers cover the remainder. The MenuSerfvries

CUP allows MIGA to issue increased 28M r Tourism 1%amounts of insurance coverage, better serve 8%

the needs of investors, and facilitate addi-tional investment to its developing mem- FY98ber countries. Oil & Gas 2%

Mining 15%

Guarantees Growth 38%Infrasiructure

MIGA's gross exposure rose fourfold in the 19%past five years, from $745 million at theend of fiscal 1993 to $2.9 billion at the Services

Manlutnetring A'LE 1%end of fiscal 1998. MIGA further diversi- 20% Tourism

fied its guarantee portfolio by sector and Agribusiness 2% 3%

country.


tial administrative and technical skills train- investors from Argentina, Brazil, Caymaning programs fDr the employees. Islands, Malaysia, Saudi Arabia, South

Africa, Turkey, and Uruguay (figure 3).In terms of country diversification, MIGA

broadened its portfolio by issuing its firstguarantees in 0 additional countries. Of these 10 countr-ies, 7 are IDA-eligible coun-tries and 5 are-~n Sub-Saharan Africa.1I Theportfolio is now spread across 52 develop-ing member countries. Russia, with $305.7million in gross exposure, has the highest Gernn: n Belgium Singa-oreshare of the po rtfolio distribution, followed aebn Dmrk%

by Argentina (table 1). % n

MIGA's guarantee portfolio is currently ja ;_spread across 25 industrial and developinginvestor countries. MIGA makes a special ie late :effort to encourage investments from in-vestors based in its developing membercountries. Turkev is notable as both a ben- Stierland 4

it 5%

eficiary and a source of foreign direct in-vestment in MIGAs portfolio; in fiscal1998 it ranked sixth as a recipient of MIGA -ni 1% nrguarantees and was one of the top 10 in- Frc7% I turkey 3vestor countries to be covered by MIGA Uniddmi.dn Aretiafor its outgoing investments to neighbor- :ulnysin,ing developirg countries. MIGA's fiscal llri _1998 portfolio includes guarantees to Iahrad

1. The International Dev elopment Association(IDA) is theWorLd Bank Group's concessional lend- ]Whamus,I Be id Swedeing facility that concentrates its activities on very erv, e tl Switzerlandpoor countries.

Co - - ponfof.XIlil1VUhlo Cl11oTElillUlil1a1nry ;1 I UARNTE PRho-RAM

GUARANTEtE PRO)GRAM 7

Marketing MIGAs Services India

In response to demands from interested MIGA's Executive Vice President led ainvestors, MIGA staff established tempo- MIGA delegation to the Berne Union'srary offices overseas to promote MIGA's Investment Insurance Committee meetingguarantee activities more widely in the in New Delhi, October 13-14, 1997. InCaribbean, Europe, and India. The tempo- conjunction with the Export-Import Bankrary offices, which operated for two to of India, MIGA conducted a two-weekthree weeks, targeted prospective local program to discuss the benefits of its guar-clients and helped MIGA to broaden its antee and technical assistance services forcontacts with other investment insurers, in- Indian investors interested in expandingsurance brokers, business associations, fi- their businesses to other developing coun-nancial institutions, prospective investors, tries. This effort followed the signing of agovernment officials, and investment pro- Memorandum of Understanding betweenmotion agencies. MIGA and the Export-import Bank of In-

dia to foster close collaboration with theThe Caribbean investor community in India.

MIGA's first temporary office overseas was Temporary MIGA offices were set uporganized in July 1997 as a two-week pi- in four major cities in India (Bangalore,lot program to promote and identify op- Calcutta, New Delhi, and Pune), headed byportunities for cross-border investments in MIGA's Asia Regional Manager for Guar-the Caribbean. The program stimulated antees. The program provided a unique op-considerable interest, especially in the in- portunity for private Indian investors tofrastructure and tourism sectors. Some 200 interact with MIGA staff. The seminars andrepresentatives from about 125 companies presentations attracted a number of prospec-and organizations attended meetings dur- tive Indian investors seeking MIGA guar-ing which MIGA provided information on antees for their investments in Africa, Asia,how its activities could assist investors and and Eastern Europe. MIGA's technical assis-developing country members.

MIGA hosted a presentation and recep- _ Mulr,a I DUn 9Sn iT E! : hi 'in (4MIEA jmtion in Barbados attended by some 50 lo- SEtIINAZ -

cal business executives from the tourism, ur _

finance, and manufacturing sectors. A I 1 14,IPJ __O~CTOILE IC-, -997 N-,'W DELI

majority of attendees represented small _ Pand medium-size companies interested inMIGA guarantees for inter-Caribbean in-vestments.

MIGA staff traveled to Dominica,Grenada, Guyana, Jamaica, St. Lucia, St. E

Vincent, and Trinidad and Tobago to dis-cuss the guarantee program. They also vis- In New Delhi, at a seminar on Overseas Investmentited local investment promotion agencies Opportunities: Mr. Philippe Valahu, MIGA's Asia

toexplain MICA's investment marketing Regiotal Manager for Guarantees (center), with EXIMBank of India's Mr. S.R. Rao, General Manager (right)

services. and Mr. S. Sridhar, Regiontal Resident Representative (left).


tance services also attracted wide interest.The initiative helped to develop closer tieswith the investor community in India.

Europe

MIGA established a temporary office inLondon for three weeks in March 1998 toenhance its relationship with clients andintermediaries in Europe. The office was lo- Xcated at the International Finance Corpora-tion [IFC) representative office in London.The effort was very successful in establish-ing direct com:mnunication with several po-tential European clients and banks. Othermeetings were arranged with investmentinsurers and insurance brokers in Amsterdam, a imiLisbon, Oslo, and Paris. In addition, MIGAsponsored a seminar for insurance brokersat Lloyd's of London (see below).

At MIGAl temporary office in London: Ms. StineAndresen, Europe and Central Asia RegonalManager for Guarantees, with Mr. Douglas

Conferences andl Seminars Gustafson, IF Special Representatiive in Europe.

London

MIGA's tempcrary office in London hosted Washington, D. Ca seminar for insurance brokers at Lloyd'sof London, which was inaugurated by In October 1997, MIGA hosted a sympo-MIGA's Executive Vice President and its sium on International Political Risk Man-Vice President, Guarantees. The seminar, agement Techniques and the Role of Po-MIGA in the Changing Investment Mar- litical Risk Insurance, sponsored jointlyketplace, was attended by a large audience with Georgetown University. This highlyof insurance brokers, private insurers, and specialized event attracted representativesrepresentatives from national insurance from leading members of the internationalprograms. The program featured presen- business community, the insurance indus-tations by representatives from the Ameri- try, rating agencies, and academia. The sym-can International Group, Inc., Lloyd's of posium provided insights into the sourcesLondon, Zurich-American Political Risk, of political risk to international investors,the U.K. Export Credit Guarantee Depart- suggested possible tools and techniques forment, and MIGA. A lively panel discus- risk management, and offered perspectivession followed on the issue of cooperation on the evolving role of political risk insur-between multilateral, national, and private ance as a component of corporate risk man-insurers. Cons[derable interest was stimu- agement. MIGA facilitated a discussion oflated for MIGCAs investment marketing ser- major political risk management and in-vices and the use of its IPAnet for informa- vestment insurance issues. A book basedtion dissemination (see section on Technical on the proceedings of the symposium isAssistance Services). being published.

GUARANTEE PROGRAM 9

The symposium on International Political Risk Management Techniques and the Role of Political Risk Insurance,held in Washington, D.C, October 1997, drew high-levelparticipants ifrm the investment insurance marketplace.

PROMOTING PRIVATE INVESTMENT IN THE WEST BANK AND GAZA

In November 1997, in collaboration with the U.S.-Arab Chamber of Commerce,MIGA sponsored a seminar on Safeguarding Investment in the West Bank and Gaza,held at World Bank headquarters in Washington, D.C. MIGA's President, James D.Wolfensohn, chaired the opening session. A large group of private investors inter-ested in investing in the West Bank and Gaza attended the seminar. Officials fromMIGA, IFC, and the World Bank also addressed the audience.

MIGA provides coverage against political risks for investments in the West Bankand Gaza through a special mechanism called the West Bank and Gaza InvestmentGuarantee Trust Fund. The Trust Fund was created with contributions from thePalestinian Authority through a loan from the International Development Associa-tion, the European Investment Bank, and the Government of Japan. The fund cur-rently totals $21 million.

Mr James D. WMolfensohn, President of MIGA, addresses a conference on Safeguarding Investments in the WestBank and Gaza, organized by .MIGA and held at the World Bank headquarters. Mr Akira lida and Mr. LuisDodero of MIGA are seen seated with him.


Also in October, MIGA organized a sentations and discussions by World Bankseminar on the promotion of foreign di- Group representatives on the current eco-rect investment in Eastern Europe and nomic situation, public programs, and ex-Central Asia. Ambassadors and officials periences in Uzbekistan.from 17 embassies participated, repre-senting Armenia, Belarus, Bosnia and Herze-govina, Bulgaria, Croatia, Estonia, Georgia, Cooperation withHungary, Kazakhstan, Kyrgyz Republic, the World Bank GroupLatvia, Lithuania, the Russian Federation,the Slovak Republic, Slovenia, Turkey, and In the promotion of foreign direct invest-Turkmenistan. The seminar included pre- ment to its developing member countries,sentations by MIGA staff on the role of its MIGA's guarantee operations supplementguarantee program in facilitating foreign the activities of other parts oftheWorld Bankinvestments into the region and on its tech- Group. During the year, MIGA strength-nical assistance tools, including executive ened its involvement with the private sec-training programs and capacity building for tor development initiatives of the Worldlocal investment promotion agencies, which Bank and also continued to work closelyhelp host governments to attract such in- with IFC on a number of projects (table 2).vestments.

Management worked closely with otherIn January 1998, in cooperation with the members of the World Bank Group and

American-Uzbekistan Chamber of Com- benefited extensively from their advice onmerce, MIGA. organized a workshop on many issues, such as disclosure of informa-the investment climate in Uzbekistan. The tion and environmental policies. As a con-workshop included speakers and discus- sequence of its small size, MIGA often reliessants from the World Bank, IFC, and about on specialist departments and the exper-27 member companies from the Chamber. tise of other parts of the World Bank GroupChaired by MI GA, the event included pre- to facilitate its underwriting processes.

[il=SStilTjilill l§tillmllllllifll;i 11B111M

- -lwica de Lixivia Corasol, Lda. Soap manufacturing Angola

Grupo Cocesionaro del Oete S.A. oll roadArgentina

Kochankzerbaijn StockBank Fiancial ervicesAzerbaijan

Energy Center Kladno Electric power Czech Republic

GrainBulkHanders imitd Gran hadlin serices Kenya

Mozambique

RomanianEfes Brwery S.. ManufcturingRomania

Asia Powr Privae Limite Electrc powerSri Lanka

Kasese Cobalt Copany Ltd. MiningUganda

Tilda UgAnda Limited Rice production Uganda

GUARANTEE PROGRAM 11

MIGA participated in extensive discus- are located in Argentina, Bangladesh, Brazil,sions with both the World Bank and IFC China, Costa Rica, Indonesia, Kazakhstan,on private sector development in Africa. Pakistan, Peru, Saudi Arabia, South Africa,In addition, MIGA provided input to sev- Trinidad and Tobago, and Turkey, and in-eral reports produced by the World Bank clude projects in the manufacturing, finan-and IFC concerning strategies for African cial services, tourism, and telecommunica-development. tion sectors.

A combination of MICA staff and out-A Look Back: Developmental Impact side consultants conducted the evalua-

tion. The endeavor included site visitsDuring fiscal 1998, further efforts were and systematic gathering of data on themade to evaluate the developmental im- ex post facto impacts of these projects.pacts of MIGA-assisted projects. MIGA As a result, comparisons could be madecompleted the initial phase of this effort with the estimated developmental impactsby looking at a sample of 25 projects guar- of the projects at the time they were un-anteed in fiscal 1991-95. These investments derwritten.

RESULTS ON THE GROUND: CRESCENT GREENWOOD, LTD., PAKISTAN

In fiscal 1994 and 1995, MIGA issuedtwo guarantee contracts totaling $12million covering investments by Green-wood Mills in the construction andoperation of a fully integrated garmentproduction facility near Faisalabad,Pakistan. The project was the largest for-eign investment in Pakistan's textile sec-tor at the time. MIGA insured the U.S.-based company against the risks ofcurrency transfer, expropriation, and warand civil disturbance. Crescent Green-wood, Ltd., the project enterprise, is a r- . >. -'' f X

joint venture involving Crescent Textile pi *.- i& X_f-. irIv t

Mills of Pakistan, the Asian Finance and , ; , .*.Investment Corporation, and IFC.

As part of MIGA's ongoing projectevaluation effort, an independent con- '-Xsultant visited the project site and ana-lyzed the project's developmental impact.The consultant found the project exem-plary. It provides clean and safe working Spinning thread at Crescent Greenwood, Ltd., in Pa-conditions to its 2,750 employees, and kistan. Tzis MIGA-insured facility was the largestfor-its plant operations hold an ISO 9002 eign investmentinthecountry'stextilesectorin 1995.


The findings revealed a consistent posi- were 63 percent higher than anticipatedtive developmental impact for all 25 proj- and exports generated were 13 percentects in areas such as human capital invest- higher.ment, job creation, technology transfer,capital market development, ancillary busi-ness development, poverty alleviation, so- Looking Ahead:cial effects, and the environment. The im- Future Developmentpacts of these projects were greater thananticipated at the time guarantees were With approval of the capital increase byissued. For example, it was initially esti- member countries expected before the endmated that 5,026 local jobs would be cre- of fiscal 1999, MIGA is poised at theated; eventually, 5,796 new jobs were cre- threshold of a new phase in its history. In-ated. Actual total investment was 14 creased insurance capacity in the privatepercent higher than anticipated (about market and closer collaboration between$1.5 billion), reflecting additional inflows investment insurers will allow MIGA toof funds. Largely due to increased produc- increase its support of foreign private in-tion, taxes paid to the host governments vestments in developing member countries

certificate. Moreover, the project has increased the work opportunities for women inthe area. They represent about 13 percent of the project's total work force. The proj-ect has also assumed environmental leadership in its sector, including planting morethan 200,000 trees within company compounds and about 21 acres of eucalyptus inthe nearby community.

The project has also provided comprehensive social infrastructure such as a residen-tial complex, transportation, and medical facilities to its employees. In addition, it hasbuilt a public school in which 182 of the 325 students are from the surroundingcommunity. To increase attendance levels, the company subsidizes the tuition of poorstudents. It has made efforts to expand the availability of electricity, improve road-ways and sanitary conditions, and increase the supply of potable water in the localcommunity:

The project has expended more than $25 million on local procurement since itsoperational start-up, helping to bolster upstream businesses that supply goods andservices to the mill (cotton, provisions, spare parts, transportation, and fuel). Otherindividuals and companies unrelated to the project (barber shops, cleaners, local banks,and food vendors) have benefited from the project, indirectly creating an estimated500 new jobs.

In macroeconomic terms, the project generates significant foreign exchange and taxrevenues for the government. It has introduced modern technology and producedhigher value-added textile products. This precedent-setting project has contributed tothe country's ability to attract additional foreign investment.


in the future. MIGA's expanded role in syn- of a soap factory in Viana, near Luanda.dicating insurance capacity among insur- The guarantees provide coverage againsters will enable it to meet more effectively the risks of transfer restriction, expropria-investors' needs for coverage and develop- tion, and war and civil disturbance.ing countries' needs for foreign investment.

The new soap factory will diversify theThe growing volume of preliminary ap- product line of the existing project enter-

plications from prospective investors is a prise, which manufactures liquid deter-good indication of the demand for MIGA's gents and scouring powder. The new rangeguarantees, even though many of these ap- of soaps will reduce Angola's dependenceplications may not result in issued guaran- on imports of these products. The devel-tees.2 The number of applications serves opmental impacts of the project includeas a useful gauge of the future scope of upstream and downstream benefits suchMIGA's portfolio and reveals the success as local procurement of plastic bottles,of previous marketing efforts. In its active wrapping, cardboard boxes, and local trans-pipeline, MIGA has approximately 1,200 port services.preliminary applications. Active registeredprojects involve investors from some 50countries, with prospective investments in 0 CAPE VERDEmore than 100 developing countries. This Secil-Companhia Geral de Calvolume and breadth, together with MIGA's e Cimento, S.A.wide country membership, bode well for Sociedade de Empreitadas Adriano, S.A.future broadening of the guarantee busi-ness and for Management's efforts to main- (Inertes de Cabo Verde, Lda.)tain a balanced portfolio.

MIGA issued four guarantee contracts to-taling $2.4 million in coverage on behalf of

Guarantees Issued Secil-Companhia Geral de Cal e Cimento,S.A. and Sociedade de Empreitadas Adriano,

The projects insured by MIGA in fiscal S.A. of Portugal for their investments in the1998 are described on the following pages: development of a basalt quarry and instal-

lation of a crushing plant to produce sandand gravel aggregates. The guarantees cover

AFRICA the investments against the risk of transferrestriction.

+ ANGOLAVaasan Saippua Oy-Vasa Tval Ab The project will be located near the capi-

Mr. Jari Peltokangas tal city of Praia, on the island of Santiago,b de Lixivia Corasol, [do.) the largest Cape Verdean island. The proj-

*Farica ect will have a positive effect on the localMIGA issued $2.3 million in coverage to availability, quality, and price of aggregates.two investors, from Portugal and Finland, It will provide access to industrial gradefor their investments in the construction products and alleviate the scarcity of con-

struction materials in Santiago.

The project also has the significant en-2. The preliminary application is a short form thatallows MIGA to make a provisional determination vironmental benefit of reducing the col-of eligibility of the investment. lection of sand from the island's fragile


beaches in order to meet the demand for The project consists of the constructionaggregates. of new storage facilities using mechanical

unloaders and overhead conveyors, whichwill increase unloading capacity to five

+ EQUATORIAL GUINEA times its current rate. It will also helpUMC Equatorial Guinea Corporation to reduce losses from spillage and pilfer-

age. Local Kenyan contractors will supplyMIGA issued its first guarantee contract goods, such as concrete and steel, and ser-in Equatoria:. Guinea, for the exploration, vices for the construction of the facilities.development, and production of oil and In addition, the project will create severalgas. MIGA's $24 million guarantee covers jobs for Kenyan nationals, and employeesUMC Equatorial Guinea Corporation of will be trained in mechanical handlingthe United States for its $272 million eq- equipment, fire emergency, and otheruity investment in the project. MIGA's health and safety procedures.guarantee covers the risks of expropriationand war and civil disturbance.

+ MOZAMBIQUEThe projefct involves the production of Industrial Development Corporation

natural gas and crude oil from a conces- of South Africa Limitedsion area off the coast of Bioko Island inthe Gulf of (Guinea. The 80,000 barrels of (Mozambique Aluminum Smelter-IMozal)oil produced from subsea wells will con- MIGA issued a $40 million guarantee innect to a floating production, storage, and its first project in Mozambique to coveroffloading system. the Industrial Development Corporation of

South Africa Limited. The guarantee cov-The project is one of the country's larg- ers the investment against the risks of ex-

est foreign nvestments and will have a propriation and war and civil disturbance.profound irr.pact on the economy. Its for-eign currency earnings will generate sig- Located near the capital city of Maputo,nificant additional revenues for the gov- the project is one of the largest foreign in-ernment. The project will also benefit the vestments in the country. The project in-local econormy by providing employment volves the construction and operation of aand technical training for local nationals. potline smelter to produce aluminum in-

gots for export.

v KENYA The project will offer an estimated 800The Mersey Docks and Harbour Company workers employment and workers will re-

(Grain Bulk Handlers Ltd.) ceive training for assembly line operationsand maintenance in aluminum production

MIGA issueL a $4.7 million guarantee for at the Hillside smelter in Richards Bay,the construction and operation of the first South Africa. They will also receive exten-modern bulk handling and storage facility sive benefits, including modern housing.for imported grains and fertilizers in theport of Mombasa. The MIGA guarantee cov- Moreover, the project is expected toers the investment of the Mersey Docks and triple the export earnings of the countryHarbourComrnpanyoftheUnitedKingdom and add more than 5 percent to itsagainst the risks of transfer restriction, ex- GDP in the initial years of operation. Thepropriation, and war and civil disturbance. project will also spur the development


of infrastructure in the surrounding area Wthrough the construction of roads, upgrad- -ing of port facilities, an increase in electricpower generation, and the building of wa-systter supply, sewerage, and drainage systems.

Tilda Holdings (Africa) Limited(Tildo Uganda Limited) IMIGA issued guarantees totaling $3.5 mil- - llion in coverage for equity and loan invest-ments by Tilda Holdings (Africa) Limitedin an agribusiness project to grow and , 7* -

process rice in Uganda. The project enter- 0 4prise, located in the Iganga District near t

the border with Kenya, will privatizeand rehabilitate a state-owned rice pro-duction enterprise. It will also producemaize and soybeans. The MIGA guaran-tees will cover the investments againstthe risks of transfer restriction, expro-priation, and war and civil disturbance.To date, MIGA has issued some $75 million in coverage in Uganda for projects intelecommunications, fisheries, cobalt min-ing, and coffee processing.

The project will have positive develop-mental benefits for Uganda. It is expectedto help the country attain its goal of self- MIGA guarantees were issiued for investments insufficiency in rice production and to be- theprivatizationandrehabilitationofastate-ownedcome a significant exporter to East and rice production facility in Kenya.Central Africa. It will eliminate rice im-ports and transfer new technologies in ricegrowing and processing. It will create an v UGANDAestimated 2,000 jobs for local Ugandans Banff Resources Ltd.and will provide them with training in rice LaSource SASmilling, engineering, product packaging, (K Cobalt C Ltd.)and marketing. Ancillary industries in thearea, such as transportation, packing, and MIGA issued two guarantee contracts to-storage services, will also benefit from the taling $49.4 million in coverage to Banffproject. Resources Ltd. of Canada and LaSource

SAS of France for their investments in aThe IFC and other development fi- cobalt processing project. MIGA coverage

nance institutions are also involved in the is issued against the risks of expropriationproject. and war and civil disturbance.


The project enterprise is an expansion v CHINAof an earlier project in which MIGA guar- Coastal Suzhou Power, Ltd.anteed Barclays Metals Ltd. of Britain and (Suzhou Coastal CogenerationSEREM of France in fiscal 1993 and 1996. Pow Plant)The plant produces cobalt cathode from Power Plant)concentrate. The additional investment will MIGA issued a $17.6 million guarantee togenerate increased exports as well as taxes cover Coastal Suzhou Power, Ltd. (Cay-and dividends for the government. It will man Islands), a wholly owned subsidiaryalso benefit downstream businesses such of Coastal Corporation of the Unitedas local hotels, engineering and contract- States, for its $19.6 million equity invest-ing firms, and fuel suppliers. ment in the construction and operation of

a 76-megawatt simple-cycle gas turbineThe project will improve local infra- power plant in Suzhou City. MIGA's guar-

structure, help eliminate an environmen- antee provides coverage against the riskstal hazard caused by stockpile seepage, and of transfer restriction, expropriation, anduse the environmentally safe "bioleaching" war and civil disturbance.process for producing cobalt cathodes.

The project enterprise, a cooperativejoint venture, is designed to alleviate thepower shortage in the urban district of

ASIA ANID THE PACIFIC Suzhou City and to improve the reliabil-ity of its power supply. The facility will re-

. CHINA place temporary boilers burning oil or coal,Andre & Cie, S.A. thus lowering coal consumption, contrib-(Nanchang Anxin Oils Fats and uting to energy conservation, and reducingFeedstuff [Group] Company Ltd.) adverse environmental impacts. The proj-

ect will contribute to the area's physical in-MIGA issued $1.7 million in guarantees frastructure with the construction of newto Andre & Cie S.A. of Switzerland cover- roads, a wharf, and a transmission line con-ing the guarantee of the loan extended by necting the plant to the local power grid.Banque Nationale de Paris. The loan willfinance an agribusiness project in JiangxiProvince, for crushing oilseeds, refining v CHINAvegetable oils, and marketing feedgrains Harris Advanced Technologyand oil by-products. The project will also (Malaysia) Sdn. Bhd.research and develop new seed-relatedproducts. MIGA's guarantee covers the in- (Harris Semiconductor [Suzhou]vestment against the risk of war and civil Company Limited)disturbance.

MIGA issued a $30.6 million guarantee toThe guarantee follows earlier MIGA Harris Advanced Technology (Malaysia)

guarantees to Andre in fiscal 1996 total- Sdn. Bhd., a wholly owned subsidiary ofing $12.6 million. Coverage is for Andre's Harris Corporation of the United States,equity investment, shareholder loan, and for the construction of a semiconductorloan guarantees to establish the joint ven- manufacturing and testing plant in China.ture with the Jiangxi Xinjian Foreign Eco- MIGA's guarantee covers the risks of trans-nomic Relations and Trade Corporation of fer restriction, expropriation, and war andChina. civil disturbance.


The plant is located in the Economicand Technological Development Zone in TSuzhou city. It will produce technicallyadvanced, cost-effective electronic compo- - 'nents to meet the growing demand for ) electronics in China. The project expects /to reduce the production costs of semi- tconductors, while increasing their power X -5efficiency quality, thus facilitating themanufacturing of low-cost electronic com- .

ponents for cell phones, pagers, and laptop . ®rteo'Vcomputers. , -- -

This project will create approximately T1,300 jobs. Workers will receive on-site -

training in the manufacturing, testing, and /distribution of high-quality semiconduc-tors. Employees will also benefit from sev-eral funds established by the investor that

MIGA insured Motorola for a mobile cellularwill provide medical and housing allow- telephone project that will serve some 235,000ances as well as training. subscribers in India.

The project is consistent with the hostcountry's policy of encouraging foreigninvestment in various electronic products new digital radio-telephone system thatused in the manufacturing sector The proj- provides roaming facilities, or signal com-ect is also expected to generate a signifi- patibility, enabling subscribers to movecant amount of annual export revenues. freely throughout areas using the technol-

ogy. The infrastructure consists of a net-work of base stations controlled by a mo-

+ INDIA bile switching center. The project will use

Motorola, Inc. new telecommunications equipment at the(Modicom Network Private Limited) cell sites and master switch centers and an

interconnection with the existing land lineIn its first project in India, MIGA issued public telephone system.$9.6 million in coverage to Motorola, Inc.of the United States for an investment to The project will significantly improveestablish a mobile cellular network in telecommunications facilities to betterPunjab Province and Karnataka State. serve approximately 235,000 subscribersNIIGA covers the investment against the in the two regions. It will employ morerisks of transfer restriction, expropriation, than 650 Indian nationals and will provideand war and civil disturbance. extensive, ongoing technical, engineering,

and customer service training. All opera-The project involves the design, con- tional material, such as antennas and con-

struction, operation, management, and trol towers, will be procured locally. Cellmaintenance of a mobile cellular network. sites will be rented from local businesses,The network will use the Global System and handsets will be sold or rented throughfor Mobile Communications technology, a retail outlets.


'v PAKISTAN nies. During the construction phase of theSithe Internaitional, Inc. project, approximately $3 million will be(Tapal Energy Limited) expended in the local market. The im-

provements to the area's physical infra-MIGA issued an $8 million guarantee to structure, which will benefit the local com-Sithe International, Inc. of the United munity, include the construction of a newStates for its equity investment in the con- access road.struction and operation of Tapal EnergyLimited, a 126-megawatt power plant in The project will create approximatelySind Province, Pakistan. MIGA's guarantee 65 jobs once it is completed. The local staffcovers the investment against the risk of will receive on-site training in contract ad-war and civil disturbance. In fiscal 1997, ministration, safety and environmentalMIGA had issued $2 million in coverage compliance, plant testing and commission-against expropriation risks to Wartsila ing, fuel supply coordination, and plant dis-Power Development, Inc. of the United patch. The project will also enhance theStates for its equity investment in the country's skills in the design, construction,project. operation, and management of small elec-

tric power plants.

+ PAKISTANHabib Bank AG Zurich EUROPE

AND CENTRAL ASIAMIGA issuecd a guarantee of $3.6 millionto Habib Bank AG Zurich of Switzerland 4 CZECH REPUBLICfor its $4 million investment to expand its El Paso Energy International Companyoperations in Pakistan. The guarantee covers (Energy Center Kladno)the investment against transfer restrictionand expropriation risks. MIGA issued guarantees totaling $30.4

million to El Paso Energy InternationalCompany of the United States to cover its

+ SRI LANKA equity investments in Energy CenterNissho Iwai Corporation Kladno (ECK), a power plant in Kladno,

(Asia Power P'rivate Limited) near Prague. The plant is the first indepen-dent power project in the country and one

MIGA issued a $1.7 million guarantee to of its largest foreign investments. MIGANissho lwai Corporation of Japan for its provided coverage against the risks of trans-$4.1 million investment in the building, fer restriction, expropriation, and war andownership, and operation of a 51 mega- civil disturbance.watt diesel engine power plant in Sri Lanka.MIGA's guarantee covers the risk of war The project consists of the environmen-and civil disturbance. tal and technical upgrading of a coal-fired

thermal and electric power generating plantThe project is expected to help allevi- in the Poldi industrial complex and construc-

ate Sri Lanka's shortage of power, which tion of a new plant near the old facilities.has been widely recognized as a bottleneckto its economic growth. In addition to cre- The environmental and technical up-ating local enmployment, the project will grading component involves installing pol-utilize local suppliers and service compa- lution control equipment to bring ECK's


H~~~~~~~~~~~~~~~~~~~ Q

MVIGA issued guarantees for the first indepenidenzt power plant in the Czech Republic. Thze plant includesinstallation of polluition control equiipment for thze existing facility in the Poldi industrial complex and new coal-burning fluidized bed boilers and steam turbines.

facilities into compliance with new Czech positions) for local residents. El Paso will alsoRepublic emissions standards that are be- undertake extensive training of its employ-ing phased in through 1998. Construction ees in operating practices, accounting andof the new plant consists of installing two financial reporting, management and em-125 megawatt coal-burning fluidized bed ployee relations, and safety procedures.boilers and associated steam turbines, a68 megawatt peaking gas turbine, and a

6 megawatt back-pressure turbine. Once the *~KYRGYZ REPUBLICproject is completed, ECK's net combined Italian Technology & Innovations S.r..electrical capacity will rise from 21 mega- (The Manas Management Company)watts to 343 megawatts. The project willhelp to meet additional demand for gener- MIGA issued $0.9 million in coverage toating capacity from the household sector, Italian Technology & Innovations S.r.l. forespecially during peak periods, and will re- its investment in the construction andplace ob~solescent facilities with urgently operation of an air cargo complex and ca-needed cleaner, more efficient power units. tering center in Bishkek. The guarantee

covers the investment against the risks ofThe project will create more than 200 jobs transfer restriction, expropriation, and war

(ibcluding malufacturing and professional and civil disturbance.


The new facilities will enable Manas In- v ROMANIAtemational Airport to better serve increas- Efes Breweries International, B.V.ing incoming and outgoing traffic and at- (Romanian Efes Brewery S.A.)tract international airlines. The project willintroduce modern technology in transport- MIGA issued a $29.9 million guarantee toing high-value, perishable agricultural items, Efes Breweries International, B.V. of thewhich will have a substantial positive im- Netherlands for its investment in the con-pact on local food suppliers. Local staff will struction and operation of a greenfieldbe trained in all aspects of airport services, brewery in Ploiesti, about 40 miles northincluding cargo management, modern ca- of Bucharest. The guarantee covers the in-tering techniques, and sales and market- vestment against the risk of war and civiling. Continuous on-site training in quality disturbance.control, logistics control, and administra-tion will be made available to staff The project will create an estimated

400 jobs, and staff will be trained in mod-ern manufacturing techniques, sales, mar-

v POLAND keting, management, distribution, andMerurat Beleiligungs Gmbh safety procedures. Romanian businesses(Winkhaus Polska Sp. Z.O.O.) will benefit from the project since Ro-

manian Efes Brewery S.A. (REB) will pro-MIGA issued a $2.5 million guarantee to cure most of its supplies locally. In addi-Mercurat Beteiligungs Gmbh of Germany tion, REB intends to encourage localfor its investment in the expansion of a farmers and cooperatives to plant im-hardware andl fittings production plant in proved strains of barley and to installLeszno. The guarantee covers the risks of adequate storage facilities so that its malttransfer restriction, expropriation, and war requirements can be met entirely fromand civil disturbance. domestic sources.

The expansion will involve the construc-tion of a new building adjacent to the ex- v RUSSIAisting Winkhaus Polska plant and installa- Efes Breweries International, B.V.tion of new machinery and technology. The (Knyaz Rurik-Efes Brewery Z.A.0)plant will increase the production of high-quality door and window hardware. MIGA issued a $29.7 million guarantee to

Efes Breweries International, B.V. of theApproximately 100 local jobs will be Netherlands for its investment in the con-

created by the project. Staff will be trained struction and operation of abrewery in Mos-in all aspects of the production process, cow. The guarantee covers the investmentincluding modern manufacturing tech- against the risks of transfer restriction, ex-niques, sales, marketing, management, and propriation, and war and civil disturbance.distribution. A number of inputs to theproject, such as packaging material, cases, The plant will purchase many of theand pallets, will be procured locally. The inputs, such as bottles, labels, and caps,project is expected to generate a signifi- from local businesses and will provide em-cant amount of annual export revenues and ployment to an estimated 500 Russiantaxes for the government. nationals.


FINANCIAL SECTOR: HEAVY DEMAND IN THE EUROPE AND CENTRAL ASIA REGION

MIGA responded to heavy demand from Azerbaijan Stock Bank will focus on ex-the financial sector by issuing a number port financing to promote the expansionof guarantees for banking projects in the of Azeri trade activities with Turkey.region, including the Agency's first proj-ect to cover an equity investment fund + RUSSIAand its first project in Ukraine. MIGAs Citibank, N.A.current overall portfolio in this sectortotals more than $1 billion, accounting MICA issued a $20 million guarantee tofor the largest share (37 percent) of the Citibank, N.A. for its shareholder loantotal portfolio. The projects covered in to expand its operations in Russia. Thethis region during the fiscal year are de- guarantee covers the loan against the risksscribed below. of transfer restriction and expropriation.

+ AZERBAIJAN v TURKEYKocbank, A.S. Citibank, N.A.(Kocbank Azerbaijan Joint Stock Bank) (Istanbul Central Brunch)MIGA issued a $2.7 million guarantee MIGA issued coverage of $15.3 millionto Kocbank, A.S. of Turkey for its invest- against transfer restriction and expro-ment in the establishment of a commer- priation of funds to Citibank, N.A. forcial bank in Baku. The guarantee covers a $17 million shareholder loan to itsthe investment against the risks of trans- Istanbul branch. The new loan will ben-fer restriction, expropriation, and war efit mainly power, telecommunications,and civil disturbance risks. The Kocbank and transportation projects.

+ RUSSIABanque Nationale de Paris (BNP-Dresdner Bank Z.A.O.)

In its largest guarantee issued to date, MIGA covered a shareholder loan byBanque Nationale de Paris for $90 million against the risks of transfer restrictionand expropriation. The loan will expand BNP's branch bank in St. Petersburgand wvill add to the pool of long-term capital available to companies in thecountry,

MICA's guarantee is reinsured by the Compagnie Franeaise d eAssurance pourle Commerce Exterieur (COFACE), an insurance company that provides ex-port credit and long-term insurance on behalf of the government of France.This was MIGA's first reinsurance agreement with COFACE.


+ TUR]KEY + TURKEYCitibank, N.A. ING Bank, N.Y.(Citilease F:inansal Kiralama, A.S.) (ING Bank Istanbul)MIGA issued a $11.7 million guarantee MIGA issued $20 million in coverageto Citibank for its $13 million invest- for a $22.2 million loan by ING Bank,ment in thie expansion of its newly es- N.V. of the Netherlands to expandtablished leasing company in Turkey, its branch in Istanbul. The guaranteeCitilease Finansal Kiralama,A.S. MIGA's covers the loan against the risks ofguarantee covers the risks of transfer transfer restriction and expropriationrestriction and expropriation of funds. of funds.

Citilease offers financial and operat- 4 UKRAINEing leases and vendor leases to finance Ukrainian Investment Fund Limitedend-users. Most of the new equipment (Ukrainian Investments Limited)and machinery to be leased, which in-cludes construction, medical, textile, and In its first project in the country, MIGAtransportation equipment, will be pro- issued a $30 million guarantee to theduced locally. The funding line will cre- Ukrainian Investment Fund Limitedate increased business opportunities for (Bahamas) for its investment in anlocal enterprises and increase the avail- equity investment fund. The fund willability of medium-term local lease fi- invest in projects that focus on thenancing maturities to small and medium- agribusiness, construction, and infra-size companies. structure sectors and that meet MIGA's

criteria for developmental benefits and+ TURKEY environmental soundness. The project

ABN AMRCI Bank, N.V. (Istanbul Branch) represents the first MIGA guaranteefor venture capital and the first time

ABN AMvRO Bank, N.V. of the Nether- that MIGA has extended coverage forlands received MIGA coverage totaling investments in downstream projects.$24 million for a $26.6 million loan to The guarantee covers the investmentits Istanbul branch. MIGA's guarantee will against the risks of transfer restriction,cover the loan against the risks of trans- expropriation, and war and civil distur-fer restriction and expropriation of funds. bance.

LATIN AMERICA AND vide increased coverage to investors seek-THE CARIIBBEAN ing to invest in developing countries.

v ARGENTINA MIGA issued $68.7 million in guaran-El Paso Enercly International Company tees to El Paso Energy International Com-(Compaiias Aksociadas Petroleras S.A.) pany for its investment in an integrated oil

and gas exploration project in Argentina.In its efforts to assist the flow of foreign di- MIGA signed its first coinsurance contractrect investment to its developing member with Zurich-American Political Risk forcountries, th.s project broadened MIGA's this project, under which the Agency willcollaboration with private insurers to pro- retain $40.2 million of coverage for its own


- ~~~~burning natural gas to provide an efficient

source of low-cost power.

-~ ARGENTINAMitsubishi International Corporation(Fertiservicios Argentinos, S.A.)

_____ ~ ~ ~ ~ ~ ~ ~ ~ ~~ . ~~ MICA issued $6.0 million in coverage to

Mitsubishi International Corporation, aX S a iwholly owned subsidiary of Mitsubishi

MIG signed itsCorporation of Japan, for its equity invest-ment and loan guarantee for the construc-tion and operation of fertilizer off-loadingfacilities in Argentina. The equity is coy-

vsmered against the risks of expropriation andwar and civil disturbance. In addition tothese risks, the loan guarantee issued to theBank of Tokyo/Mitsubishi Deutscheland iscovered against transfer restriction risk.

MICA signed its first coinsurance contract with Zurich-Amterican The project enterprise will construct,Political Risk, under the Agency's Cooperative Underwriting Program,to cover El Paso's investment in CAPSA. own, and operate the facilities in the towns

of San Lorenzo and Quequen on thenortheastern coast of Argentina. The proj-ect is majority owned by Asociacion de

account. MIGA guarantees cover the in- Cooperativas Argentinas (ACA), a privatevestment against the risks of expropriation cooperative owned by more than 240 Ar-and war and civil disturbance. gentine members.

The investment will he used to restruc- The project will contribute to the mod-ture and expand the activities of Compainias ernization of the agriculture sector in Ar-Asociadas Petroleras S.A. (CAPSA) in gentina. Improved handling services andNeuquen Province. The project will ex- storage facilities will enhance the availabil-pand a gas-fired power plant and build a ity of better-quality agricultural crops atliquid petroleum gas facility. The proj- more competitive prices. Local contractingect is the only thermal power plant in the and engineering services will be used to adaptcountry with captive gas reserves, making the piers and construct and expand storageit the lowest cost thermal plant in the facilities. Most of the equipment will becountry. The financial restructuring will purchased locally on an ongoing basis.allow more favorable terms for existingdebt. The project will train workers in termi-

nal operations and will train an agronomistThe project will have positive develop- in advanced soil and fertilizer analysis. In

mental benefits for western Argentina. It addition, the project will create a programwill increase the availability of a reliable to educate ACA's members in crop pro-source of electricity and will use clean- duction management.


* ARGENTINA including extensive training in health and

Companhia EFrasileira de Projetos e Obras safety procedures. On-site accommodations(Grupo Concesionario del Oeste S.A.) will be provided to employees, and the

company will also participate in the ex-MIGA issued $17.9 million in coverage to pansion and upgrading of medical, educa-Companhia Brasileira de Projetos e Obras tion, and recreation facilities in the region.of Brazil for its equity investment in a tollroad in Buenos Aires. MIGA covered theinvestment against the risks of transfer + ARGENTINArestricution, expropriation, and war and Lloyds Bank Plc.civil disturbance. (Argentina Branch)

MIGA issued a $13.9 million guarantee tov ARGENTINA Lloyds Bank Plc. of the United Kingdom

Minorco, S.A., for its shareholder loan to expand the mort-

(Cerro Vanguardia, S.A.) gage facility of its branch in Argentina. Thefacility will offer 15-year term mortgages

MIGA issued $5 million in coverage to at competitive rates. The guarantee coversMinorco, S.A. of Luxembourg for its $40 the investment against the risks of transfermillion equit:y investment in the develop- restriction, expropriation, and war and civilment and exploration of a new gold and disturbance. The additional availability ofsilver mine in Santa Cruz Province, Argen- mortgage products will increase the abil-tina. MIGA's guarantee covers the invest- ity of Argentines to buy their own homes.ment against the risks of transfer restriction, The facility will on-lend through a networkexpropriaticn, and war and civil distur- of 35 branches in the country.bance.

The project involves the exploitation of + BOLIVIAan open-pit mine, which is expected to Nordic Power Invest ABhave an average annual production of some (ompania Boliviana de Energia200,000 ounces of gold and 2,000 ounces ,lotria, B iAa eof silver. The project will include the con- EI&tricu, S.A.)struction, operation, and maintenance of In its first project in Bolivia, MIGA issuedits own watcr supply facilities and captive a $62.5 million guarantee to Nordic Powergas-fired power generator. In addition, a Invest AB of Sweden for its investment in44 kilomete:r road will be constructed and power generation facilities and transmissionmaintained to facilitate the transportation lines. The guarantee covers the investmentof personnel and equipment, and a pipe- against the risks of transfer restriction andline will be constructed parallel to the road expropriation.to connect the on-site power generatorwith the local network. Other infrastruc- The project also involves the acquisition,ture include construction of on-site hous- financial restructuring, expansion, and mod-ing, workshops, and offices and the upgrad- ernization of the existing power plant ining of an existing air strip. the Zongo Valley.

The project will employ more than 250 Local residents are dependent on thenationals and provide on-the-job training, plant for power supply, and approximately


_______________ The project, located approximately 200l________________e__i_______ kilometers north of Santiago, involves the

expansion of the enterprise from an un-derground to an open-pit mine, which willsignificantly increase ore production from5,500 to 85,000 tons per day. The projectwill create approximately 274 permanentjobs (5,000 during construction) and willhelp to boost the local economy by using

local materials for construction and opera-tion (amounting to approximately $700mil1ion). It will also improve local infra-structure by constructing new roads, a portfac l ty, and a power plant.

COSTA RICAER[ Holdings 11Scotia Mercantile Bunk

MIGA issued a $65.2 million guarantee to cover an investment that (Compafiia Flidroel6ctrica Doha Julia)will be used to acquire, expand, and modernize this power plant inBolivia. In its first power project in Costa Rica,

MIGA issued $11.4 million in coverage to

one-fourth of the population relies on the _ _M_ _

company for their livelihood as perma-nent employees or contracted labor. The -project will create an additional 80 per- g' .j. .manent jobs. The company provides sig- - . . -_

nificant social benefits to the valley resi-dents through the supply of medical andelectrical services and housing, education, , !and medical services to employees andtheir dependents.

~-CHILEMarubeni LP Holding B.V. _

(Minera Los Pelambres)MIGA guaranteed Marubeni LP Holding .

B.V. of the Netherlands for its investmentin a copper and molybdenum mine inChile. The $31 .3 million guarantee covers MIGA has issued coverage for the construction of

.this rtn-of-the-river hydroelectric power plant in thethe investment against the risk of expro- province of Heredia, Costa Rica.priation.


ERI Holdings II and Scotia Mercantile ' PERUBank, for their equity investment and Banco Santander, S.A.loan, respectively, to construct a run- (Praxair Peru, S.A.)of-the-river hydroelectric power plant.The guarantees include coverage against MIGA issued a $10.7 million guarantee tothe risks of transfer restriction and ex- Banco Santander, S.A. for its investmentpropriation. in the construction and operation of an

industrial gas production plant in Pisco.The project, located northeast of San The guarantee covers the investment

Jose in the province of Heredia, will use against transfer restriction and expropria-the waters of the Puerto Viejo River and tion risks.Quebradon Creek to generate an estimatedaverage annual net production of approxi- The facility will produce argon, whichmately 88 gigawatt hours. The project will is used for laboratory equipment and weld-also provide training to employees on stan- ing, in addition to a whole range of indus-dards and procedures in the operation trial gases used in the metals, mining, andand maintenance of the power plant and medical sectors in the production process.turbines. The project is expected to triple Praxair's

production capacity in Peru.

+ PERUMarriott International, Inc. 4 PERUBank of Nova Scotia Banco Santander, S.A.(Inversiones La Rioja S.A.) MIGA issued $15.4 million in coverage

MIGA issued guarantees totaling US$7.2 to Banco Santander, S.A. of Spain for itsmillion in coverage to Marriott Interna- shareholder loan to increase its mortgage-tional, Inc. of the United States and $27 based financing for private housing in Peru.million in coverage to the Bank of Nova The guarantee covers the risk of transferScotia for their investments in the con- restriction and expropriation of funds.struction arad operation of a hotel in Lima.The guarantees include coverage of therisks of tratisfer restriction, expropriation, "DOMINICAN REPUBLICand war and civil disturbance. (itibank, N.A.

The hot;el, a 300-room Marriott Inter- (Dominican Republic Branch)national facility, will be located in the MIGA issued $18 million in guarantees toMiraflores business district and will pro- Citibank, N.A. of the United States for itsvide a convention and meeting place for shareholder loans to its Dominican Repub-business travelers. It is expected that a lic branch. The guarantee covers the invest-majority of the goods and services needed ment against the risks of transfer restrictionfor maintenance and operation of the and expropriation.hotel will be sourced from local businesses.The project will create approximately The project will allow Citibank to ex-350 jobs. Employees will be trained on- tend its loan portfolio in the country,site and at other Marriott hotels in the thereby allowing it to offer more competi-region. tive rates across all the credit products the


bank now offers such as investments, work- v URUGUAYing capital Loans, consumer loans, and me- Banco Santander, S.A.dium-term financing. The bank also plans (Uruguay Branch)to finance projects in the manufacturing,tourism, and transportation sectors. MIGA issued a $38 million guarantee

to cover a shareholder loan by BancoLocal staff will be able to take advan- Santander, S.A. of Spain to expand its

tage of training programs offered in such branch operations in Uruguay. The MIGAareas as marketing, risk management, and guarantee covers the loan against the riskstransaction banking. Many staff will also of transfer restriction and expropriation.have the opportunity to train in other LatinAmerican countries and the United States. The loan will allow Banco Santander to

expand its mortgage-based financing forthe purchase and renovation of private

+ ECUADOR housing and small and medium-size busi-ABN AMRO Bank, N.V. nesses in Uruguay. The project will also

(ABN AMRO Bank Ecuador) increase the maturity of mortgages from10 to 15 years. As a result, the project will

MIGA issued a $10 million guarantee to increase competition among mortgage loanABN AMRO Bank, N.V. for its loan to providers and create incentives to improveexpand its banking operations in Quito efficiency and quality.and Guayaquil. The guarantee covers theinvestment against the risks of transferrestriction and expropriation. The loan MIDDLE EASTwill be used for short- and medium-termfinancings. ABN AMRO Bank Ecuador in- Ten Middle Eastern countries are memberstends to emphasize marketing to the mort- of MIGA. To date, MIGA has issued 12gage market and to power, telecommuni- contracts of guarantee for $120 million incations, and oil and gas projects. coverage for investments in Bahrain, Ku-

wait, and Saudi Arabia. No new guaran-tees were issued in the region during fiscal

v ECUADOR 1998. However, future prospects are good.ING Bunk, N.V. MIGA currently has about 30 applications(Quito Branch) to cover approximately $2 billion in pro-

spective investments in the region's infra-MIGA issued a $10 million guarantee to structure, manufacturing, oil and gas, realcover a shareholder loan from ING Bank, estate, services, telecommunications, andN.V. of the Netherlands to expand its tourism sectors.Quito branch. The MIGA guarantee cov-ers the risks of transfer restriction and ex- During the year, MIGA devoted par-propriation of funds. In fiscal 1996, MIGA ticular attention to the West Bank andhad issued coverage for another share- Gaza. In July 1997, the Palestinian Author-holder loan by ING to expand its Ecuador ity provided funds through a credit frombranch. the International Development Agency


for MIGA's West Bank and Gaza Invest-ment Guarantee Trust Fund. In Novem-ber 1997, MIGA's President, Mr. James D.Wolfensohn, addressed a seminar on Safe-guarding Investment in the West Bank andGaza (see page 10). In April 1998, MIGAstaff visited the Territories to meet withprospective clients. As a result of these ef-forts, MIGA has received 11 applicationsfor coverage of prospective new foreign in-vestments in the infrastructure, manufac-turing, real estate, services, telecommuni-cations, and tourism sectors of the WestBank and Gaza. N


Citibank, N.A.*Citibank Overseas Investment

CorporationMIGA's GARANTEECLIENTS Clovergem AGMIGA S GUARANTEE CLIENTS Coastal Suzhou Power, Ltd.

Coastal Wuxi Power, Ltd.*ABB Kraft A.S. The Coca-Cola Export CorporationABN AMRO Bank, N.V.* Cogen Technologies Saba Power, L.P.AES Corporation Commercial Bank of Greece, S.A.*Agro-Industrial Investment and Companhia Brasileira de Projetos e

Development, S.A.* Obras*Alimenta, S.p.A.* Compafnia Espaniola de Seguros deAmerican Cyanamid Company Credito a la Exportaci6n S.A.Andr& & Cie, S.A.* Conservation Tourism, Ltd.Anglo American Corporation of Continental Grain Company*

South Africa, Ltd. Credit Lyonnais Belgium, S.A.Arcadian Partners, L.P.* Credit SuisseAtlantic Commercial Finance, B.V. Cyprus Climax Metals CompanyAVX Corporation Drummond Company, Inc.AVX Limited* Efes Breweries International B.V.*Banco Espaniol de Credito Efes Sinai Yatirim Ve Ticaret A.S.*Banco Exterior de Espafia, S.A. El Paso Energy International Company*Banco Santander, S.A.* Energy Investors Fund II, L.P.Banesto Banking Corporation Enka Holding Yatirim A.S.Banff Resources Ltd. Enka Insaat ve Sanayi A.S.Banff Resources Ltd. & LaSource Enron CorporationBank of America* ERI Holdings IIBank of America NT & SA Faisal Finance, S.A.BankBoston The First National Bank of Boston*Bank of Boston France Commodities, S.A.*Bank of Nova Scotia* Freeport-McMoran Copper Co., Inc.Banque Belgolaise, S.A. Gate Gourmet Holding, Ltd.Banque Indosuez* General Electric CompanyBanque Nationale de Paris* Generale Bank, S.A.Barclays Bank, Plc. Global Menkul Degerler A.S.Barclays Metals Limited Greenwood Mills, Inc.*Barge Energy, L.L.C. Gribal, S.A.Barlows Tractor International Limited* GSM Gold LimitedBering Netherlands, B.V Guardian Glass Investments, S.A.BOC Holdings Habib Bank A.G. Zurich*British Gas, Plc. Harris Advanced Technology Sdn. Bhd.Bureau de Recherches Geologiques Harsco Bermuda Limited*

et Minieres* Harsco Corporation'BWF Unternehmensbeteiligungen GmbH* Heckett Multiserv InvestmentCadbury Russia Limited CorporationCadbury Schweppes plc. Holding Savana, S.A.*Cambior, Inc. Honeywell, Inc.Cameco Corporation Houston Industries Energy, Inc.Capital Indonesia Power I C.V. Hydra-Co Enterprises, Inc.Caribbean Mercantile Bank Hydro Aluminum, A.S.C.A.S., S.p.A. IBA, B.V.Catalina Lighting, Inc. Illinova Generating Company*The Chase Manhattan Bank Imperial Chemical Industries, Plc.China Capital Development Corporation Impregilo, S.p.A.Chiyoda Corporation* Industrial Development Corporation ofCiments Francais South Africa Limited


ING Bank, N.V.' Placer Dome, Inc.Ingersoll-Rand China, Ltd. Promofin Outremer, S.A.*Interfima, B.V. Puerto Seco, S.A.International Energy Partners, L.P. Purolite International LimitedIntematiorLal Mariculture Partners Radisson Hotels International,International Paper Investments Latin America Inc.Italian Teclnology & Innovations S.r.l. Ratti Technologies S.r.L.Kimberly-Clark Corporation Remetal, S.A.Kocbank, A.S. Ringnes A.S.*Komatsu, Ltd. Rio Algom LimitedKvoerner Energy A.S. Rockfort Power Associates, Inc.LaSource" Rover Exports LimitedLloyds Bank, Plc.* Rover Overseas Holdings LimitedMagma Copper Company R.T.Z. Overseas Holdings LimitedMagma Netherlands, B.V. SASMagma Power Company SAS Service PartnerMarriott International, Inc.* Saudi American BankMarubeni Corporation" Scotia Mercantile BankMarubeni LP Holding, NV. Scudder Latin American Power I-C,McCullagh International, L.P.* L.D.C.McDonald's Corporation Scudder Latin American Trust I-P, L.D.C.*McDonnell Douglas Finance Corporation Secil-Companhia Geral De CalMees Pierson, NV. e Cimento, S.A.*Mercurat Beteiligungs Gmbh. Shinwha Textile Company, Ltd.The Mersey Docks and Harbour Company Sithe International, Inc.MetallgesellschaftAG Sociedade de Empreitadas Adriano, S.A.'Metra Finance Oy AB Societe de Promotion Financiere etMiddenbank Curacao, N.V. d'Investissement, S.A.*Midland Bank, Plc. Societe Generale, S.A.*Midlands Generation (Overseas), Ltd. Societe Internationale de PlantationsMillicom Cellular Holdings S.A.R.L. D'Heveas, S.A.Millicom International Development Standard Chartered Bank Africa, Plc.

Corporation Starlight TelecommunicationsMine Or, S.A. Limited, L.L.C.*Minorco S.A. Statkraft SFMitsubishi International Corporation* Sumitomo CorporationMotorola, Inc.* Sunnen Products CompanyMotorola International Development Tilda Holdings (Africa) Ltd.*

Corporation* Toyota Tsusho CorporationMultiserv International, NV.* UBP Hungary, Inc.*Multiserv Russia, S.A. Ukrainian Investment Funds LimitedNational Grid Company, Plc. UMC Equatorial Guinea CorporationNew World Power Corporation Union Bank of Switzerland*Newmont Gold Company* Union Carbide CorporationNewmont Second Capital Corporation USEC-Precursor, Inc.Newmont Mining Corporation US West International Holdings, Inc.Nissho Iwai Corporation Vaasan Saippua Oy -Vasa Tval AbNon-Fluid Oil International Volvo Truck CorporationNordic Power Invest AB Wartsila Diesel DevelopmentNorsk Hydro A.S. Corporation, Inc.*Ormat International, Inc.* Wartsila Power Development, Inc.'Parmalat, S.p.A. Westvaco CorporationMr. Jari Peltokangas Wilken Group Limited*PepsiCo, Inc Zentraquip AG MPhilips Electronics, N.V.Philip Morris Holland, B.V. Client has multiple contracts with MIGA.

MIGA's GUARANTEE CLIENTS 31

_ a GIM1.1Ab>

Some key milestones achieved this year-Y+ VrBs xinclude the following:

The AFRI-IPA Support Program, pro-

TECHNICAL ASSISTANCE viding field-based assistance to Africaninvestment promotion agencies, was

SERVICES launched in February 1998.

Through technical assistance and legal ser- X MIGA's new Internet initiative, Privati-vices, MIGA assists developing member zationLink, was launched in June 1998.countries to mobilize increased flows ofproductive foreign investment. During fis- Registrations in IPAtuet, MIGA's on-linecal 1998, MIGA carried out 22 activities investment promotion clearinghouse,directly benefiting 70 countries. more than doubled.

IPAnet was selected by the Finiancial

Investment Marketing Services Times as its Website of the Week in April1998.

The Investment Marketing Services De-partment of MIGA provides technical as- To assess the impact of its technical as-sistance in three areas: sistance activities in investment promotion,

MIGA commissioned an external evalua-tr Dissemination of information on in- tion of the services provided by its Invest-

vestment opportunities and business op- ment Marketing Services Department. Theerating conditions in developing mem- results of this evaluation, which were pre-ber countries sented to MIGA's Board at an informal

meeting, were very positive. InterviewsCapacity building for institutions in- with clients, external partners, and Worldvolved in promoting and facilitating for- Bank, IFC, and MIGA colleagues revealedeign investment and a high level of satisfaction with the qual-

ity of products, services, and staff. NotingInvestmentfacilitation activities, the increasing demand from member coun-

tries for capacity building activities, theA primary focus of investment market- evaluation recommended that MIGA in-

ing assistance is the introduction of cut- crease its emphasis on building the capac-ting-edge management and marketing ity of individual member countries to carrytechniques, particularly those that use out their own promotional work in an ef-modern information technology. The pri- fective manner.mary beneficiaries are investment pro-motion agencies (IPAs), including suchnationally mandated promotion institu- Dissemination of Informationtions as boards of investment and invest-ment promotion centers, as well as sectoral MIGA has taken the lead role in usingministries, business associations, cham- modern information technology tools tobers of commerce, and financial interme- promote foreign direct investment in emerg-diaries. ing markets. With the use of the Internet


growing exponentially each year and in- bases contain more than 8,000 documentsternational businesses increasingly relying covering information on more than 160on the Internet as a cost-effective vehicle countries and catalog information resourcesfor information exchange and communi- drawn from 300 sources.cation, it is vital that developing countriesand transiticn economies develop the ca- Now in its third year of operation, IPAnetpacity to use the Internet efficiently to pro- has become a one-stop center for invest-mote investinent opportunities. ment promotion, providing easy desktop

access to information on investment op-

+ IPAnet: MIGA's Internet-based portunities, sources of finance, laws and

Investment F'romotion Network regulations governing investments, andlists of key players in international invest-

IPAnet is an on-line information clearing- ment.house of investment databases, searchabledirectories (hyperlinked to websites of listed As part of its outreach efforts, MIGAorganizations), business news, targeted com- launched an electronic newsletter in 199 7,munications, market intelligence, and other highlighting news and events related tofeatures designed to make global invest- international investment. All registrants inment activity more efficient. IPAnet with e-mail addresses receive the

newsletter automatically. The newsletter isIPAnet now has more than 8,000 regis- published six times a year.

trants from over 170 countries. Its data-

MIGA'S IPAnet GAINS RECOGNITION IN INTERNATIONAL NEWS

i a Ea a a 3

E~~~~~~~~~~~~~~EHIA ASITAC SEVE 33

An investment promotion service

r i v a t i z a t i o n provided by thefl Multilateral Investment Guarantee Agencyof the World Bank Group

Project Opportunities in Emerging Markets

+ PrivatizationLink lect and disseminate relevant information.PrivatizationLink currently contains more

Privatization of state-owned enterprises than 100 company profiles from 25 coun-increasingly draws foreign investment tries.from around the world. However, up-to-date information on investment opportu-nities arising from privatization is often not IPA Capacity Buildingreadily available to investors. There is awidespread need to improve the market- Strengthening the institutional capacity ofing of investment opportunities stemming member countries to attract and retainfrom privatization. foreign direct investment remains a core

objective of MIGAs technical assistanceTo fill this gap, MIGA launched a new program. This assistance takes a variety of

initiative to provide on-line information on forms:privatization to investors through a special-ized window in IPAnet, PrivatizationLink z Training programs and workshops focus-(http://www.privatizationlink.org). This ing on investment promotion skills andsite carries profiles of state-owned enter- best practices in investment promotionprises being privatized, background infor-mation on privatization agencies and their Sector-specific strategy workshops andprograms, and directories of privatization executive training programsagency personnel, consulting firms, andother advisors. Relevant laws and regula- se The AFRI-IPA Support Program.tions pertaining to privatization are also

carried on PrivatizationLink. Additional v Investment Promotion Trainingcountry-specific information on the mar- Programs and Workshopsket environment, business operating con-ditions, tax incentives, and the like are MIGA delivers a wide range of country-available to PrivatizationLink users through specific and regional training programs andIPAnet. workshops for a variety of audiences from

member countries. Intensive country-specificPrivatizationLink provides privatization investment promotion skills training pro-

agencies with a free Internet-based means grams were conducted for two countries:to advertise globally the enterprises in their Mongolia, for participants from the Boardprivatization program. Working closely of Foreign Investment and other invest-with the Africa and Europe and Central ment promotion institutions, and SaudiAsia regions ofthe World Bank, MIGA has Arabia, mainly for participants from theentered into partnerships with the priva- chambers of commerce and various gov-tization agencies in these regions to col- ernment agencies.


Shorter and less-detailed workshops on - Sector-Specific Strategy WorkshopsStrategies and Techniques for Investment and Training ProgramsPromotion were held for Bahrain, theKyrgyz Republic, and Uzbekistan and on a Sector-specific strategy workshops andregional level for participants from about executive training programs help publica dozen transition economies in the Eu- officials and corporate executives in MIGArope and Central Asia region. These sensi- member countries understand the com-tization programs are designed to help par- petition for investment, monitor indus-ticipants improve their understanding of try trends affecting potential investment,foreign investors and their ability to work and understand investor decision-makingwith them. The programs also aim to ex- criteria.pose participants to international best prac-tices in country marketing. More than 180 In July 1997, MIGA conducted a South-investment promotion practitioners and ern African Development Communitygovernment officials benefited from such (SADC) regional strategy workshop forsensitization programs in fiscal 1998. As tourism development for public and pri-in the past, MIGA leveraged the impact of vate sector participants. Approximatelythese prograrns by bringing in international 70 participants from 10 SADC countriespartner organizations: the workshops for attended the workshop, representing gov-Bahrain and the Kyrgyz Republic, for ex- ernment ministries, industry associations,ample, were organized jointly with the and private companies. The workshops ex-United Nations Industrial Development plored government policy issues affectingOrganization (UNIDO) under a long- tourism development and public-privatestanding collaboration policy. The two re- partnerships and strategies for attractinggional sensitization seminars were con- investment, as well as how to evaluate, pre-ducted in collaboration with the World pare, and finance tourism projects.Bank's Economic Development Institute(EDI) under another ongoing collaboration These types of workshops are closelyinitiative. linked to regional and sector-specific in-

vestment facilitation activities.Also on a regional level, MIGA, jointly

with the Istanbul-based Center for Private v- AFRI-IPA Support ProgramSector Development of the Organizationfor Economic Co-operation and Develop- In February 1998, MIGA launched its firstment (OECD), organized the First Annual field-based technical assistance program,Meeting of Chief Executives from Eurasian the AFRI-IPA Support Program. The pro-Investment P'romotion Agencies. Senior ex- gram is designed to provide hands-on tech-ecutives of investment promotion agencies nical assistance to investment promotionfrom 13 Eastern European and Central agencies and sectoral ministries in Sub-Asian countries met in Antalya, Turkey, to Saharan Africa. This initiative will be car-discuss the effective management and or- ried out from field locations in Southern,ganization of their agencies and possibili- West/Central, and East Africa and willties for regional collaboration. The meet- be supported by Washington-based staffing was part of an ongoing program of The program builds on MIGA's work incollaboration with the OECD Center in Africa over the past eight years. All AFRI-Istanbul. IPA Support Program operations will be

TECHNICAL ASSISTANCE SERVICES 35

multicountry, to facilitate the sharing of c. In May 1998, MIGA organized theexperiences among African countries and workshop Enhancing Investment Pro-to alert external institutions and potential motion Capacity in East Africa: A Re-investors to regional opportunities. gional Approach, in collaboration with

the Zanzibar Investment PromotionSeveral activities have already been Agency. Participants included represen-

implemented through the program: tatives from investment promotionagencies, industrial associations, cham-

.-a During September 1997, MIGA orga- bers of commerce, women's entrepre-nized an investment mission to Asia neurial groups, and commercial, invest-by a delegation from the West African ment, and merchant banks based in theEnterprise Network (WAEN) to pro- region.mote investment opportunities in WestAfrica. Delegation members from C6ted'Ivoire, Ghana, Mali, and Nigeria met Investment Facilitationwith representatives of the private sec-tor and business associations in Japan, MIGA supports the efforts of its membersthe Republic of Korea, Malaysia, and to attract potential investors in sectorsSingapore. identified as having strong potential for

growth and development. During fiscalz As a follow-up to that activity, a Korean 1998, investment facilitation activities fo-

business executive was sponsored as the cused mainly on the mining and tourismkeynote speaker at the Third Annual sectors, capitalizing on the excellent net-Regional WAEN Conference in Mali in work of international investors already inDecember 1997. More than 200 busi- place in these two sectors.ness executives from 13 West Africancountries participated in the regional : Mining Programconference, at which a longer-term pro-gram of cooperation between the AFRI- While Africa continues to be a main focusIPA Support Program and WAEN was of MIGA's mining program, MIGA hasdiscussed. Four joint venture possibili- expanded promotion efforts in this sectorties with WAEN members emerged to other regions. MIGA organized its firstfrom this conference. Global Mining Investment Opportunities

Symposium in conjunction with the 100ths MIGA organized two workshops on anniversary celebration of the Canadian

Working with MIGA to Promote Foreign Institute of Mining, Metallurgy, and Petro-Direct Investment in Africa for senior leum, held May 4-6, 1998, in Montreal.African diplomatic staff in London and The symposium highlighted explorationParis. These seminars were designed to potential and mining investment opportu-provide an overview of investment pro- nities in developing countries and transi-motion best practices and MIGA ser- tion economies. Senior public and privatevices. The first workshop, hosted by the sector leaders from more than 35 coun-Namibia High Commission, was at- tries attended the event, representingtended by 14 participants from 12 coun- emerging markets worldwide. One-on-onetries. The second seminar, cosponsored meetings between project sponsors andby UNIDO, attracted 29 participants potential investors were a vital componentfrom 23 countries. of the symposium. More than 8,000 indus-


Namibia 's booth at MICA's Global MVining Investment Symposium, Montreal, Canada, May 4-6, 1998.

try representatives attended the event, and symposium to explore ways to stimulatemore than 600 international mining inves- investment in mining and to ensure a moretors participated in the symposium. equitable sharing of the benefits of mining

projects across a broader base.Encouraged by the promising results of

regional preparatory executive training pro- . Tourism Programgrams for mining officials conducted dur-ing fiscal 1 996 and 1997 and the first Early in fiscal 1998, MIGA began a reviewMICA mining symposium for Central Asia of foreign direct investment in tourismand the Balkan and Caucasus countries, projects to determine how best to facili-MICA organized a second symposium for tate such investment and to define a strat-countries in this region. The symposium egy for capacity building efforts for relatedon Mining Investment and Business Op- investment promotion institutions. As partportunities in Central Asian, Balkan, and of this review a survey is also being con-Caucasus Countries was held June 17-18, ducted in collaboration with the World Tour-1998, in IstarLbul, in collaboration with the ism Organization to assess the needs of in-OECD and the Turkish International Co- dustry players and the best way for MICAoperation Agency. Following the pioneer- to serve their interests while fostering in-ing Ministerieal-CEO Dialogue instituted by vestment and sustainable development.MIcA at the Fourth Annual African MiningInvestment Symposium in Denver, MICA Close links are also being forged withorganized a similar dialogue at the Istanbul other key players in the tourism sector to

TECHNICAL ASSISTANCE SERVICES 37

ensure that research and industry best prac- through the pooling of expertise and re-tice is reaching client institutions. MIGA sources in order to achieve better coordi-is teaming up with the World Travel and nation of individual country programs.Tourism Council to highlight the "GreenGlobe" environmental program, whichcertifies hotels and resorts meeting high Legal Technical Assistanceenvironmental standards.

In addition to assisting with the formu-MIGA's activities in tourism promotion lation of investment-promotion strate-

in fiscal 1998 included a SADC Region gies, MIGA has been increasingly calledStrategy Workshop for Tourism Develop- on to lend its good offices to mediate dis-ment. MIGA also assisted other agencies putes involving member states and foreignin organizing investment-related activities, investors.such as the Forum for Hotel and ResortDevelopment in the Eastern Caribbean, MIGA is directed by its Convention toheld in Dominica in November 1997 and use its facilities to encourage the settlementorganized by the Eastern Caribbean Invest- of disputes between investors and mem-ment Promotion Service, the Organization ber countries. In keeping with this man-of American States, IFC, the World Bank, date, MIGA staff experienced in resolvingand the U.S. Department of Commerce. conflicts relating to foreign direct invest-Over 250 government officials and repre- ment provided guidance to parties fromsentatives from the private sector attended. several member countries who sought cre-

ative ways to solve difficult situations.Responding to increased environmental MIGA's goal in these cases is to resolve

concerns, MIGA, in partnership with the disputes before they rise to a level that re-Wiorld Bank's Africa Region Environment quires formal arbitration. Several disputesunit, created a program for environmen- were settled in this manner in the past year,tally sustainable tourism development as and several more are advancing towarda mechanism for promoting foreign direct resolution.investment in Africa's tourism sector. Theprogram will result in increased opportu- MIGA developed the legal frameworknities for the financing and development and provided legal advisory services to twoof natural and cultural heritage tourism. regional trust funds to stimulate invest-Program activities include assisting government in developing areas with specialments in the creation of an appropriate needs: Bosnia and Herzegovina and thepolicy and institutional framework to foster West Bank and Gaza. MIGA continues tothe growth of sustainable tourism, develop assist member countries on investment-education and training programs for a wide related matters, including help in negoti-range of skill levels, and stimulate local, re- ating bilateral treaties for the promotiongional, and international investment. and protection of investment, drafting for-

eign investment codes, and conductingThe program seeks to develop a model technical training workshops. MIGA also

for World Bank sectoral assistance in the assists in the creation of national investmentregion. It will draw on the resources of insurance programs in member countries.the World Bank Group, creating synergies M


FINANCIAL STATEMENTS OFTHE MUITILATERAL INVESTMENT GUARANTEE AGENCY

Balance Sheet 40

Statement of Income 41

Statement of Capital and Retained Earnings 41

Statement of Cash Flows 42

Statement of Subscriptions to Capital Stock and Voting Power 43

Notes to Financial Statements 46

Report of Independent Accountants 54

MIGA FINANCIAL STATEMENTS 39

MULTILATERAL INVESTMENT GUARANTEE AGENCY

Balance Sheet

June 30, 1998 and June 30, 1997

1998 1997(thousonds of U.S. dollars)

Assets

CASH ..................................................... S 5,873 $ 7,334

INVESTMENTS - Note A

Obligations of governments and other official entities ........... ........... 61 502 59,306Time deposits and other obligations of banks and

financial institutions . ..................................................... 306,461 131,727

367,963 191,033NONNEGOTIABLE, NONINTEREST-BEARING

DEMAND OBLIGATIONS - Note B .............................................. 99,775 100,218

OTHERASSETS ..................................................... 10,321 4,260

TOTAL ASSETS ..................................................... $ 483,932 $ 302,845

Liabilities, Capital, and Retained EarningsLIABILITIES

Accounts payable and accrued expenses ........................................... $ 8,615 $ 5,830Unearned premiums and commitment fees ............. ....-... .... 12,393 13,265Reserve for claims - Note E ........................................ .............. 220,000 55,192

Total liabilities ................. ..................................... 241,008 74,287

CAPITAL AND RETAINED EARNINGSCapital stock - Note B

Authorized capital (100,000 shares - June 30, 1998 andJune 30, 1997)

Subscribed capital (99,682 shares - June 30, 1998; 98,629shares - June 30, 1997) ..................................................... 1,078,559 1,067,166

Less uncalled portion of subscriptions............ ........................... 862,848 853,733Less amounts due on called subscriptions .................. ................. 731 731

214,980 212,702Payments on account of pending subscriptions ................ ................. 266 266

215,246 212,968Retained Earnings

Accumulated net income ...................................................... 34,081 19,234Cumulative translation adjustments ............................................ (6,403) (3,644)

27,678 15,590Total capital and retained earnings .............................................. 242,924 228,558

CONTINGENT LIABILITIES - Notes C and D ...................................

TOTAL LIABILITIES, CAPITAL, AND RETAINED EARNINGS ........ $ 483,932 $ 302,845

See Notes to Financial Statemenits



Statement cIf IncomeFor the fiscal years ended June 30, 1998and June30, 1997

1998 1997(thousands of 1.S. dollars)

INCOMEPremium income - Note D ...................................... ............... $ 27,637 $ 26,014Premium ceded-Note D ....................................... .............. (4,540) (1,751)

Net premium earned ........................... .......................... 23,097 24,263Income from investments -NoteA .................................................. 13,667 9,981Income from Staff Retirement Plan - Note G .................. ................. 2,698 940Increase in share of net assets held for postretirement

benefit, - Note H ................... .................................. 1,852 -

Fees and commissions ..................... ................................ 1,016 442Miscellaneous income ..................... ................................ 64 28

42,394 35,654Special grant from IBRD - Note B .................................................... 150,000 -

Total irncome ......... 192,394 35,654

EXPENSESProvision for claims - Note E ..................................................... 165,152 21,810Administrative expenses - Notes F, G, and H ................... ................. 12,188 11,329Other expenses ............. ........................................ 207 291

Total expenses ........... .............................. 177,547 33,430

NET INCOME ..................................................... $ 14,847 $ 2,224

Statement cif Capital and Retained EarningsFor the fiscal years ended June 30, 1998and June 30, 1997

1998 1997(thousands of U.S. dollars)

CAPITALBalance at beginning of fiscal year ..................................................... $ 212,968 $ 211,542New subscriptions ..................................................... 2,278 1,645Payments on account of pending subscriptions ................. ................ - (219)

TOTAL CAPITAL ...................................................... $ 215,246 $ 212,968

RETAINED E,ARNINGSAccumulated net income

Balance at beginning of fiscal year ............................................... $ 19,234 $ 17,010Net income for the fiscal year ..................................................... 14,847 2,224

34,081 19,234Cumulative translation adjustments

Balance at beginning of fiscal year ............................................... (3,644) (1,825)Translation adjustments for the fiscal year . .(2,759) (1,819)

(6,403) (3,6443

TOTAL RETAINED EARNINGS ..................................................... $ 27,678 $ 15,590

See Notes to Financial Statements



Statement of Cash FlowsFor the fiscal years ended June 30, 1998

and June30, 1997

1998 1997(thousands of U.S. dollars)

CASH FLOWS FROM OPERATING ACTIVITIES:Net income ..................................................... 14,847 $ 2,224Adjustments to reconcile net income to net cash provided

by operating activities:Provision for claims .......................... ........................... 165 ,152 21,810Accretion of discounts, net ..................................................... (37) (43)(Increase) decrease in other assets ............................................... (5,993) 814Decrease in unearned premiums and commitment fees .............. (829) (115)Increase in accounts payable ..................................................... 2,777 2,359

Net cash provided by operating activities .......................................... 175,917 27,049

CASH FLOWS FROM INVESTING ACTIVITIES:Maturities of investments ..................................................... 22,139,191 14,446,211Purchases of investments ............................... ...................... (22,316,941) (14,474,071)

Net cash used in investing activities .................................................. (177,750) (27,860)

CASH FLOWS FROM FINANCING ACTIVITIES:Capital subscription payments ..................................................... 1,18( 825

EFFECT OF EXCHANGE RATE CHANGES ON CASH ................... (80S) (447)

Net decrease in cash ................. .................................... (1,461) (433)Cash at beginning of fiscal year ..................................................... 7,334 7,767

CASH AT END OF FISCAL YEAR ..................................................... $ 5,873 $ 7,334



MULTILATE.RAL INVESTMENT GUARANTEE AGENCY

Statement of Subscriptions to Capital Stockand Voting PowerJune 30, 1998

Subscriptions (Note B)(thousands of U.S. dollors) Voting Power

Amount Number %Total Amounit Amount Subject of of

Member Shores Subscribed Poid in Due to Call Votes Total

Albania ...... ........ ......... 58 $ 628 $ 126 $ - $ 502 235 0.19Algeria . ..... 649 7,022 1,403 - 5,619 826 0.66Angola ...................... 187 2,023 405 - 1,618 364 0.29Argentina .... < .1,254 13,568 2,714 - 10,854 1,431 1.14Armenia .................. 0..... so 866 173 - 693 257 0.21Austria ................. ...... 775 8,385 1,677 - 6,708 952 0.76Azerbaijan ............... 1........ l5 1,244 249 - 995 292 0.23Bahamas,The ........................ :. 100 1,082 216 - 866 277 0.22Bahrain . ....................... 77 833 167 - 666 254 0.20Bangladesh ........... ............ 340 3,679 736 - 2,943 517 0.41Barbados ................ ....... 68 736 147 - 589 245 0.20

Belarus ....... ................ 233 2,521 504 - 2,017 410 0.33Belgium ..................... .. 2,030 21,965 4,393 - 17,572 2,207 1.76Belize .....................-. 50 541 108 - 433 227 0.18Benin ....................... 61 660 132 - 528 238 0.19Bolivia ........................ 125 1,353 271 - 1,082 302 0.24Bosnia and Hei-zegovina ............ 80 866 173 - 693 257 0.21Botswana .... . 50 541 108 - 433 227 0.18Brazil . ... ..................... 1,479 16,003 3,201 - 12,802 1,656 1.32Bulgaria ..........-...... ... 365 3,949 790 - 3,159 542 0.43Burkina Faso .......................- 61 660 132 - 528 238 0.19Burundi . ....................... 74 801 160 - 641 251 0.20

Cameroon ....................... 107 1,158 232 - 926 284 0.23Canada............... ........ 2,965 32,081 6,416 - 25,665 3,142 2.51CapeVerde . ....................... 50 541 108 - 433 227 0.18Chile ....................... 485 5,248 1,050 - 4,198 662 0.53China ....................... 3,138 33,953 6,791 - 27,162 3,315 2.64Colombia ....... ................ 437 4,728 946 - 3,782 614 0.49Congo, Democratic Republic of ..... 338 3,658 - 731 2,927 515 0.41Congo, Republic of ...................- 65 703 141 - 562 242 0.19Costa Rica ....................... 117 1,266 253 - 1,013 294 0.23C6te d'lvoire ....................... 176 1,904 381 - 1,523 353 0.28Croatia............. .......... 187 2,023 405 - 1,618 364 0.29

Cyprus ....................... 104 1,125 225 - 900 281 0.22Czech Republic ....................... 445 4,815 963 - 3,852 622 0.50Denmark ............ ........... 718 7,769 1,554 - 6,215 895 0.71Dominica ....................... 50 541 108 - 433 227 0.18Dominican Rep ablic ........... ....... 147 1,591 318 - 1,273 324 0.26Ecuador ... , 182 1,969 394 - 1,575 359 0.29Egypt, Arab Republic of ............. 459 4,966 993 - 3,973 636 0.51El Salvador ...................... 122 1,320 264 - 1,056 299 0.24Equatorial Guinea ..................... 50 541 108 - 433 227 0.18Eritrea . ...................... 50 541 108 - 433 227 0.18

Estonia ...................... 65 703 141 - 562 242 0.19Ethiopia . ...................... 70 757 152 - 605 247 0.20Fiji. ... ................... 71 768 154 - 614 248 0.20Finland ...................... 600 6,492 1,299 - 5,193 777 0.62France ................... ... 4,860 52,585 10,517 - 42,068 5,037 4.02Gambia, The ...................... 50 541 108 - 433 227 0.18Georgia .1...................... 1 1,201 239 - 962 288 0.23Germany ...................... 5,071 54,868 10,973 - 43,895 5,248 4.19Ghana ...................... 245 2,651 530 - 2,121 422 0.34Greece ... ................... 280 3,030 606 - 2,424 457 0.36



Statement of Subscriptions to Capital Stockand Voting PowerJune 30, 1998

Subscriptions (Note B)(thousands of U.S. dollars) Voting Power

Amount Number %Total Amount Amount Subject of of

Member Shares Subscribed Paid In Due to Coil Votes Total

Grenada .................... ... 50 $ 541 $ 108 S - $ 433 227 0.18Guatemala ....................... 140 1,515 303 - 1,212 317 0.25Guinea ....................... 91 985 197 - 788 268 0.21Guyana ....................... 84 909 182 - 727 261 0.21Haiti ........... ............ 75 811 162 - 649 252 0.20Honduras ....................... 101 1,093 219 - 874 278 0.22Hungary ....................... 564 6,102 1,220 - 4,882 741 0.59India ....................... 3,048 32,979 6,596 - 26,383 3,225 2.57Indonesia ....................... 1,049 11,350 2,270 - 9,080 1,226 0.98Ireland .......... ............. 369 3,993 798 - 3,195 546 0.44Israel ........................ 474 5,129 1,025 - 4,104 651 0.52

Italy ....................... 2,820 30,512 6,102 - 24,410 2,997 2.39Jamaica ....................... 181 1,958 391 - 1,567 358 0.29Japan ....................... 5,095 55,128 11,026 - 44,102 5,272 4.21Jordan ....................... 97 1,050 210 - 840 274 0.22Kazakhstan ....................... 209 2,261 452 - 1,809 386 0.31Kenya ....................... 172 1,861 372 - 1,489 349 0.28Korea, Republic of ....................... 449 4,858 971 - 3,887 626 0.50Kuwait .......... ............. 930 10,063 2,013 - 8,050 1,107 0.88Kyrgyz Republic ....................... 77 833 167 - 666 254 0.20Lebanon ....................... 142 1,536 307 - 1,229 319 0.25Lesotho ....................... 50 541 108 - 433 227 0.18

Libya ....................... 549 5,940 1,188 - 4,752 726 0.58Lithuania ....................... 106 1,147 229 - 918 283 0.23Luxembourg. ....................... 116 1,255 251 - 1,004 293 0.23Macedonia, Former

Yugoslav Republic of ................ 50 541 108 - 433 227 0.18Madagascar ....................... 100 1,082 216 - 866 277 0.22Malawi .......... ............. 77 833 167 - 666 254 0.20Malaysia ....................... 579 6,265 1,253 - 5,012 756 0.60Mali.............. ......... 81 876 175 - 701 258 0.21Malta............ ........... 75 812 162 - 650 252 0.20Mauritania ....................... 63 682 136 - 546 240 0.19

Mauritius ....................... 87 941 188 - 753 264 0.21Micronesia, Fed. States of ............ 50 541 108 - 433 227 0.18Moldova ....................... 96 1,039 208 - 831 273 0.22Morocco .................... ... 348 3,765 753 - 3,012 525 0.42Mozambique ....................... 97 1,050 210 - 840 274 0.22Narnibia ....................... 107 1,158 232 - 926 284 0.23Nepal ....................... 69 747 149 - 598 246 0.20Netherlands. ....................... 2,169 23,469 4,694 - 18,775 2,346 1.87Nicaragua ..... .................. 102 1,104 221 - 883 279 0.22Nigeria ....................... 844 9,132 1,826 - 7,306 1,021 0.81

Norway ....................... 699 7,563 1,513 - 6,050 876 0.70Oman ....................... 94 1,018 204 - 814 271 0.22Pakistan ....................... 660 7,141 1,428 - 5,713 837 0.67Palau ................. ...... 50 541 108 - 433 227 0.18Panama ....................... 131 1,417 283 - 1,134 308 0.25Papua New Guinea ...................... 96 1,039 208 - 831 273 0.22Paraguay ....................... 80 866 173 - 693 257 0.21Peru ....................... 373 4,036 807 - 3,229 550 0.44Philippines ............... ....... 484 5,237 1,047 - 4,190 661 0.53Poland ...... ................ 764 8,266 1,653 - 6,613 941 0.75



Statement cif Subscriptions to Capital Stockand Voting IlowerJune 30, 1998

Subscriptions (Note B)(thousands of U.S. dollars) Voting Power

Amount Number %Total Amount Amount Subject of of

Member Shares Subscribed Paid in Due to Cl Votes Total

Portugal .......... ............ 382 $ 4,133 $ 827 $ - $ 3,306 559 0.45Qatar.............. ........ 137 1,482 296 - 1,186 314 0.25Romania ......... ............. 555 6,005 1,201 - 4,804 732 0.58Russian Federation ...................... 3,137 33,942 6,788 - 27,154 3,314 2.64St. Lucia . ...................... 50 541 108 - 433 227 0.18St.Vincent and the Grenadines .... 50 541 108 - 433 227 0.18Samoa ... ................... 50 541 108 - 433 227 0.18SaudiArabia ...................... 3,137 33,942 6,788 - 27,154 3,314 2.64Senegal. ...................... 145 1,569 314 - 1,255 322 0.26Seychelles ...................... 50 541 108 - 433 227 0.18Sierra Leone ...................... 75 812 162 - 650 252 0.20

Singapore .................Io... 154 1,666 333 - 1,333 331 0.26Slovak Republic ...................... 222 2,402 480 - 1,922 399 0.32Slovenia ................. ..... 102 1,104 221 - 883 279 0.22SouthAfrica ...................... 943 10,203 2,041 8,162 1,120 0.89Spain ....................... 1,285 13,904 2,781 - 11,123 1,462 1.17Sri Lanka . ...................... 271 2,932 586 - 2,346 448 0.36Sudan ................ ...... 206 2,229 446 - 1,783 383 0.31Swaziland ...... ................ 58 628 126 - 502 235 0.19Sweden ............... 1.... . . 1049 11,350 2,270 - 9,080 1,226 0.98Switzerland ...................... 1,500 16,230 3,246 - 12,984 1,677 1.34Tanzania ...................... 141 1,526 305 - 1,221 318 0.25

Togo ...................... 77 833 167 - 666 254 0.20Trinidad and Tobago ............ i....... 203 2,196 439 - 1,757 380 0.30Tunisia ...................... 156 1,688 338 - 1,350 333 0.27Turkey ...................... 462 4,999 1,000 - 3,999 639 0.51Turkmenistan ...................... 66 714 143 - 571 243 0.19Uganda ................. ..... 132 1,428 286 - 1,142 309 0.25Ukraine ...................... 764 8,266 1,653 - 6,613 941 0.75United Arab Erriirates ................. 372 4,025 805 - 3,220 549 0.44United Kingdom ...................... 4,860 52,585 10,517 - 42,068 5,037 4.02United States ....... 20,519 222,016 44,404 - 177,612 20,696 16.51Uruguay ....... 202 2,186 438 - 1,748 379 0.30

Uzbekistan ....... 175 1,894 380 - 1,514 352 0.28Vanuatu ........ .. 50 541 108 - 433 227 0.18Venezuela ....... 1,427 15,440 3,088 - 12,352 1,604 1.28Vietnam ....... 220 2,380 476 - 1,904 397 0.32Yemen, Republic of ...... . 155 1,677 335 - 1,342 332 0.26Zambia ....... 318 3,441 688 - 2,753 495 0.39Zimbabwe ....... 236 2,553 511 - 2,042 413 0.33

Total-June 30, 1998a .................... 99,682 $1,078,559 $214,980 $731 $862,848 125,347 100.00

Total-June 30, 1997 ............ 98,629 $1,067,166 $212,702 $731 $853,733 123,586

Note: Amounts aggregating the equivalent of $266,000 have been received from (i) a country that has signed and/or ratified the Convention and is in the process of completing its membership requirements: Latvia $79,000; and(ii) a country in the process of succession to membership: Federal Republic of Yugoslavia (Serbia and Montenegro)$187,000.

a. May differ firom the sum of individual figures shown because of rounding.




Notes to Financial Statements

PURPOSE

The Multilateral Investment Guarantee Agency (MIGA), established on April 12, 1988, is a

member of the World Bank Group, which also includes the International Bank for Recon-struction and Development (IBRD), the International Finance Corporation (IFC), and the

International Development Association (IDA). MIGA's activities are closely coordinated withand complement the overall development objectives of the other World Bank institutions.

MIGA is designed to help developing countries attract productive foreign investment byboth private investors and commercially operated public sector companies. Its facilities in-clude guarantees or insurance against noncommercial risks and a program of advisory servicesand technical assistance to support member countries' efforts to attract and retain foreign

direct investment.

SUMMARY OF SIGNIFICANT ACCOUNTING AND RELATED POLICIES

MIGA's financial statements have been prepared in conformity with International Account-ing Standards and with generally accepted accounting principles in the United States. Thepolicy adopted is that considered most appropriate to the circumstances of MIGA havingregard 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 Stan-dards and generally accepted accounting principles in the United States requires manage-ment to make estimates and assumptions that affect the amounts reported in the financialstatements. Actual results could differ from those estimates. The following summary of poli-cies adopted by MIGA is provided to assist readers in the interpretation of these financialstatements.

Translation of Currencies

MIGA's financial statements are expressed in terms of United States dollars solely for thepurpose of summarizing MIGA's financial position and the results of its operations for theconvenience of its members and other interested parties.

MIGA is an international organization that may conduct its operations in the currencies ofall its members. MIGA's resources are derived from its capital and retained earnings in itsmembers' currencies. MIGA strives to minimize exchange rate risks in a multicurrency envi-ronment. As such, MIGA attempts to match its contingent obligations in any one currencywith assets in the same currency on a pro-rata basis.

Accordingly, MIGA may periodically undertake currency conversions on a pro-rata basis tomatch the currencies underlying its reserves with those of the outstanding contingencies.The purpose of these conversions will be to minimize currency exposure that may occurthrough operations. Otherwise, MIGA will not convert one currency into another except forsmall 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. Incomeand expenses are generally translated at an average of the market rates of exchange in effectduring each month. Translation adjustments are charged or credited to retained earnings.



Notes to Fin(incial Statements

Valuation of (apital Stock

Under the MIGA Convention, all payments from members subscribing to the capital stock

of MIGA 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 $1.082 for one SDR. The Convention further states that 10 per-

cent of the members' shares be paid in cash, in freely convertible currencies, except thatdeveloping member countries may pay up to a quarter of the 10 percent in their own cur-rencies. In addition, another 10 percent of the members' shares shall be paid in the form ofnonnegotiable, noninterest-bearing promissory notes. The notes are denominated in freely

convertible currencies and are due on demand to meet MIGA's obligations. The policiesrelating two translation of currencies as described above also apply to the cash and the prom-

issory notes paid in.

Investments

Managernent has both the ability and intent to hold all investments to maturity. Accordingly,MIGA's investment holdings are carried at cost or amortized cost.

Revenue RecognitionRevenue from premium payments for direct insurance and reinsurance contracts assumedand ceded is recognized on a pro-rata basis over the contract period. Revenue from com-mitmeni: fees, which are fees paid by investors to reserve for a limited period of time guaran-tee capacity for future use, is recognized on a pro-rata basis over the commitment period.

Reserve for Claims

The reserve for claims provides for potential losses inherent in guarantee operations basedupon an estimation of the net present value of future premium income as compared to thenet present value of future losses related to guarantee operations. MIGA has not incurredany losses to date and accordingly has computed expected future losses by reference to (i) theloss experiences of other insurers engaged in similar underwriting, (ii) the composition andvolume of outstanding guarantee contracts, and (iii) the worldwide economic and politicalenvironment. This reserve is available to absorb future losses related to outstanding guaran-tees and is increased by provisions charged to expense and decreased by claims settlements.

During the period ended June 30, 1997, MIGA utilized the net premium accumulationmethod of provisioning. The principal feature of this methodology is that general reservesare accu mulated annually for each contract until expiry or cancellation. The rate of accumu-lation was set annually at the level that was estimated to be sufficient to pay claims inaggregate during the period ending on the expiry date of the last expiring contract.

Against the background of the increased complexity and continuing growth of its portfolio,MIGA has decided that fiscal 1998 would be an appropriate time to move to a risk basedprovisicning methodology (see Note E).

The level of provision in fiscal 1998 and prior years has been based on management's evalua-tion of potential losses that may result from (i) risks that are inherent but unidentifiable at thetime of reporting; (ii) unusually large concentrations of exposure to individual risks, countries,or guarantee contracts; and (iii) an ongoing assessment of MIGA's expected recovery rates.Unlike the net premium accumulation basis of provisioning, however, the new methodologyestablishes sufficient general claims reserves at the end of each year to cover all of the esti-mated fature losses arising from contracts outstanding at that time on a net present value basis;future provisions are then established to reflect changes in MIGA's outstanding portfolio.




Financial Statements Presentation

Certain amounts in the 1997 financial statements have been reclassified to conform to the1998 presentation.

NOTE A: INVESTMENTS

The investment portfolio was denominated primarily in United States dollars with instru-ments in nondollar currencies representing 8.2 percent (15.3 percent - June 30,1997) of theportfolio. Held-to-maturity securities at June 30, 1998 and June 30, 1997 were as follows(in thousands of U.S. dollars):

Gross Gross EstimatedAmortized Unrealized Unrealized Fair

Cost Gains Losses Value

At June 30,1998Government Obligations $ 61,502 $ 158 $ 5 $ 61,655Time Deposits 306,461 _ - 306,461

Total $ 367,963 $ 158 $ 5 $ 368,116

At June 30, 1997Government Obligations $ 59,306 $ 94 $ 40 $ 59,360Time Deposits 131,727 - - 131,727

Total $ 191,033 $ 94 $ 40 $ 191,087

The expected maturities of investments at June 30, 1998 were as follows (in thousands ofU.S. dollars):

EstimatedAmortized Fair

cost Value

Due in one year or less $ 337,990 $ 338,092Due after one year through two years 27,479 27,529Due after two years through three years 2,494 2,495Total $ 367,963 $ 368,116

NOTE B: CAPITAL STOCK

At June 30, 1998, MIGA's authorized capitai stock comprised 100,000 shares, of which99,682 (98,629 - June 30, 1997) shares had been subscribed. Each share has a par value ofSDR10,000, valued at the rate of $1.082 per SDR. Of the subscribed capital, $214,980,000($212,702,000 - June 30, 1997) has been paid in; $731,000 ($731,000 - June 30, 1997) isdue and the remaining $862,848,000 ($853,733,000 - June 30, 1997) is subject to call byMIGA when required to meet its obligations. Of the amounts paid in, at June 30, 1998,$99,775,000 ($100,218,000 - June 30, 1997) is in the form of nonnegotiable, noninterest-bearing demand obligations (promissory notes).



Notes to FiInancial Statements

As recommended by the Development Committee during the 1998 Annual Meeting, MIGA'scapital stock is expected to be increased by $850,000,000, of which $150,000,000 will bepaid in cash and $700,000,000 will be callable capital. The balance of the package was agrant of $150,000,000 made by the World Bank. The grant was accepted by the MIGABoard of Directors on April 18, 1998. The grant is accounted for as income and is a part ofMIGAs; reserves; as such, it is available to pay claims and is included in the calculation ofMIGA's risk-to-assets ratio. On March 31, 1998, the MIGA Board of Directors submitted aproposal to the Council of Governors that the capital stock of MIGA shall be increased bySDR 785,590,000, divided into 78,559 shares, each having a par value of SDR 10,000. Allpayment obligations shall be settled on the basis of the value of the SDR in terms of UnitedStates collars at the rate of $1 082 for one SDR.

NOTE C: GUAIANTEE PROGRAM AND CONTINGENT LIABILITIES

Guarantee Prograrn. MIGA offers guarantees or insurance against loss caused by noncom-mercial risks (political risk insurance) to eligible investors on qualified investments in devel-oping member countries. MIGA insures investments for up to 20 years against four differentcategories of risk: currency transfer, expropriation, war and civil disturbance, and breach ofcontract. Currency transfer protects the investor from inconvertibility of local currency re-turns and proceeds from the liquidation of the investment project into foreign exchange fortransfer outside the host country. Expropriation protects the investor against partial or totalloss of the insured investment as a result of acts by the host government that may reduce oreliminate ownership of, control over, or rights to the insured investment. War and civil dis-turbance protects the investor against losses from damage to, or the destruction or disappear-ance of, tangible assets caused by politically motivated acts of war or civil disturbance in thehost country. Breach of contract protects the investor against the impossibility to obtain orto enforce an arbitral or judicial decision recognizing the breach of an obligation by the hostgovernment. Investors may insure projects for any combination of the four types of coverage.MIGA guarantees, other than those issued as reinsurance, cannot be terminated unilaterallyby the guarantee holder within the first three years from the date of issuance. Premium ratesapplicable to issued contracts are fixed for five years. Payments against all claims under aguarantee 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 aggre-gate amount of contingent liabilities that may be assumed by MIGA is 350 percent of thesum of MIGA's unimpaired subscribed capital and its reserves plus such portion of the insur-ance ceded by MIGA through contracts of reinsurance as the Board of Directors may deter-mine. Accordingly, at June 30,1998, the maximum level of guarantees outstanding may notexceed $5,214,527,000.

Contingent Liability. The maximum amount of contingent liability of MIGA under guaran-tees issued and outstanding at June 30, 1998 totaled $2,861,793,000 ($2,498,863,000 -June 3(0, 1997). The maximum amount of contingent liability is MIGA's maximum expo-sure to insurance claims, which includes "standby" coverage for which MIGA is committedbut not currently at risk. At June 30, 1998, MIGA's estimate of its actual exposure to insur-ance claims exclusive of standby coverage is $1,678,540,000 ($1,634,664,000 - June 30,1997). At June 30, 1998, approximately 57 percent of the contingent liability representsguarantees issued that will expire on or after June 30, 2008.

The composition of the contingent liability including "current" and "standby" coverage underguarantees issued and outstanding by host country and by guarantee currency is summarizedon the following page:




Guarantee Currency (thousands of U.S. dollars)

U.S. Deutsche French Japanese PoundsHost Country Dollars Marks Francs Yen Sterling TotalRussian Federation $ 305,748 $ $ $ $ S 305,748Argentina 236,102 236,102Peru 213,796 213,796Brazil 194,973 194,973Pakistan 139,180 19,804 881 9,956 169,821Turkey 141,981 141,981China 129,174 1,958 131,132Jamaica 104,000 104,000Colombia 93,000 93,000Indonesia 80,401 80,401Papua New Guinea 74,920 74,920Venezuela 68,500 68,500Kyrgyz Republic 64,650 64,650Costa Rica 64,483 64,483Bolivia 62,500 62,500Bangladesh 59,202 59,202Uganda 53,976 53,976Ecuador 52,000 52,000Kuwait 50,000 50,000Mali 50,000 50,000Slovak Republic 19,786 23,674 43,460Mozambique 40,000 40,000Uruguay 38,000 38,000Philippines 37,500 37,500Romania 35,226 35,226Nepal 32,827 32,827Chile 31,264 31,264Guyana 30,600 30,600Czech Republic 30,390 30,390Ukraine 30,000 30,000Honduras 25,920 25,920Poland 21,825 2,502 24,327Equatorial Guinea 24,000 24,000Uzbekistan 20,406 20,406Azerbaijan 19,224 19,224Dominican Republic 18,000 18,000Kazakhstan 17,933 17,933Guatemala 12,939 12,939South Africa 12,300 12,300Algeria 10,000 10,000El Salvador 9,900 9,900India 9,600 9,600Sri Lanka 7,086 7,086Guinea 6,036 6,036Bulgaria 1,868 3,292 5,160Paraguay 5,000 5,000Kenya 4,700 4,700Cape Verde 2,400 2,400Angola 2,310 2,310Georgia 2,134 2,134Madagascar 1,663 1,663Tanzania 303 _ 303Total $2,798,063 $47,938 $1,663 $ 881 $ 13,248 $2,861,793

a. May differ from the sum of individual figures shown because of rounding.



Notes to Finandal Statements

As of June 30, 1998, additional guarantee capacity amounting to $14,500,000 has beencommitted ($10,000,000 - June 30, 1997).

Claib Activity. As of June 30, 1998, MIGA has not been notified of any claims.

NOTE D: REINSURANCE

Although MIGA obtains quota-share and facultative reinsurance to augment its underwritingcapacity and to protect portions of its insurance portfolio, it remains responsible to the insuredclient for the entire amount of the insurance contract. Of the $2,861,793,000 outstandingcontingent liability (gross exposure) as at June 30, 1998 ($2,498,863,000 - June 30, 1997),$636,330,000 was ceded through contracts of reinsurance ($279,897,000 - June 30, 1997).Net exposure amounted to $2,225,463,000 as at June 30, 1998 ($2,218,966,000 - June 30,1997).

MIGA can also provide both public (official) and private insurers with facultative reinsur-ance. As of June 30, 1998, total insurance assumed by MIGA, primarily with official invest-ment insurers, amounted to $113,481,000 ($136,204,000 - June 30, 1997)1.

Premiums relating to direct, assumed, and ceded contracts for the fiscal years ended June 30,1998 and June 30, 1997 were as follows (in thousands of U.S. dollars):

1998 1997

Premiums writtenDirect $ 26,653 $ 25,354Assumed 2,237 2,555Ceded (6,187) (2,635)

Premiums earnedDirect $ 25,387 $ 23,434Assumed 2,250 2,580Ceded (4,540) (1,751)

NOTE E: RESERVE FOR CLAIMS

In fiscal 1998, MIGA changed the basis for establishing reserve for claims by adopting a riskbased methodology in place of the former net premium income accumulation methodologies.On the basis of the new risk based methodology, MIGA's reserve for claims as of June 30,1998 amounted to $220,000,000 and, accordingly, a provision of $165,152,000 after trans-lation adjustments was charged to the income account. The magnitude of the provisionreflects the change in methodology rather than any significant change in the underlyingquality of MIGA's portfolio. If the risk based methodology had been used for fiscal 1997,the reserve for claims as at June 30, 1997 would have been $196,000,000 as compared to$55,192,000 under the net premium accumulation methodology.




NOTE F: ADMINISTRATIVE EXPENSES

Administrative expenses for the fiscal years ended June 30, 1998 and June 30, 1997 con-sisted of the following components (in thousands of U.S. dollars):

1998 1997

Administrative expenses $ 12,188 $ 12,086Pension contribution - (757)

Total $ 12,188 $ 11,329

The IBRD charges MIGA an annual Service and Support Fee which, for the fiscal year endedJune 30, 1998, amounted to $740,000 ($717,000 - June 30, 1997).

NOTE G: STAFF RETIREMENT PLAN

The World Bank Group has a defined benefit retirement plan (Plan) covering substantiallyall of MIGA's staff. The Plan also covers substantially all the staff of IBRD and IFC. Underthe Plan, benefits are based on the years of contributory service and the highest three-yearaverage of pensionable remuneration as defined in the Plan, with the staff contributing afixed percentage of pensionable remuneration and the World Bank Group contributing theremainder of the actuarially determined cost of future Plan benefits. The actuarial presentvalues of Plan obligations throughout the fiscal year are determined at the beginning of thefiscal year by the Plan's actuary. MIGA's total contribution to the plan is based on the aggre-gate funding method. All contributions to the Plan and all other assets and income held forthe purposes of the Plan are held separately from the other assets and income of the WorldBank Group and can be used only for the benefit of the participants in the Plan and theirbeneficiaries, until all liabilities to them have been paid or provided for. Plan assets consistprimarily of equity and fixed income securities, with small holdings of cash, real estate, andother investments.

As a result of the reevaluation of the economic assumptions underlying the World BankGroup's pension expense methodology during fiscal 1997 and changes in the Staff Retire-ment Plan assets at their fair value, MIGA recorded a pension income of $2,698,000 for thefiscal year ended June 30, 1998 ($940,000 - June 30, 1997).

For the fiscal year ended June 30, 1998, there were no cash contributions made to the Planby the World Bank Group. For the year ended June 30, 1997, the World Bank Group's cashcontribution for all participants in the Plan was $94 million, of which $757,000 was attrib-utable to MIGA and is included in the prepaid pension cost of $1.7 million at June 30,1997.

Effective July 1, 1997, management fees incurred in respect of the Plan will be chargedagainst the respective Plan assets. Management fees paid to IBRD in respect of the Plan forthe fiscal year ended June 30, 1997 were $271,000.

NOTE H: RETIRED STAFF BENEFITS PLAN

IBRD provides other postretirement benefits for eligible active and retiredWorld Bank Groupstaff, including MIGA. These benefits can be grouped under two major types-health careand life insurance benefit and the pensions administered outside of the Staff RetirementPlan (discussed in Note G). IBRD has designated assets to fund these liabilities.




During the fiscal year ended June 30, 1998, the World Bank Group reviewed the status ofthe postretirement benefits and determined that the net assets and liabilities did not qualifyfor off-balance-sheet accounting. Consequently, at June 30, 1998, the assets and liabilitieswere recorded on IBRD's balance sheet.

MIGA has included a receivable from IBRD in Other Assets relating to its share of thesepostretirement benefits net assets. This resulted in MIGA recognizing $1,852,000 of incomein the fiscal year ended June 30,1998, of which $1,212,000 related to periods ended June 30,1997 and has been included in Increase in Share of Net Assets held for PostretirementBenefits i.n the Income Statement. The receivable from IBRD totaled $2,001,000 at June 30,1998.

During the fiscal year ended June 30, 1998, IBRD reduced the health care cost rates used incalculating the funded status of these benefits plans at June 30, 1998 after completing a five-year-experience study, which resulted in a reduced accrued liability of the plans at June 30,1998. For the fiscal year ended June 30, 1998, MIGAs allocation of the reduction in accruedliability was $529,000, which was also included in Increase in Share of Net Assets held forPostretirement Benefits in the Income Statement.

NOTE i: ESTIMATED FAIR VALUES

The estirnated fair values of MIGA's cash and nonnegotiable, noninterest-bearing demandobligations are assumed to approximate their carrying values. The estimated fair value ofMIGA's investments shown in Note B is based on market quotations. The estimated fairvalues are only indicative of individual financial instruments' values and should not be con-sidered an indication of MIGA's fair value.


Report of Independent Accountants

Deloitte ToucheTohmat;u

(International Firm)1900 M Street NWWashington, DC

President and Board of GovernorsMultilateral Investment Guarantee Agency

We have audited the accompanying balance sheet of the Multilateral Investment Guar-antee Agency, including the statement of subscriptions to capital stock and voting power,as of June 30, 1998, and the related statements of income and cash flows for the yearthen ended. These financial statements are included in the annual report on pages 40to 53. These financial statements are the responsibility of the Multilateral InvestmentGuarantee Agency's management. Our responsibility is to express an opinion on thesefinancial statements based on our audit. The financial statements of the Multilateral In-vestment Guarantee Agency for the year ended June 30, 1997 were audited by otherauditors whose report, dated July 28, 1997 expressed an unqualified opinion on thosestatements and included an explanatory paragraph that described the methodology usedin 1997 for determining the reserve for claims as discussed in the Notes to the financialstatements.

We conducted our audit in accordance with International Standards on Auditing andgenerally accepted auditing standards in the United States of America. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial state-ments. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements present fairly, in all material respects, the finan-cial position of the Multilateral Investment Guarantee Agency as of June 30, 1998 andthe results of its operations and its cash flows for the year then ended in conformity withInternational Accounting Standards and generally accepted accounting principles in the

United States of America.

July 29, 1998


APPENDIXIES

Governors and Alternates 56

Directors and Alternates: Voting Power 59

Signatories to MIGA's Convention 61

Fiscal 1999 Budget 62

APPENDIXES 55


Governors and Alternates

June 30, 1998

Member Governor Alternate

Albania ..... .......... Shkelqim Cani ....... ............. Fatos IbrahimiAlgeria ..... .......... Abdelkrim Harchaoui ............. ....... Ali HamdiAngola ..... .......... Emmanuel Moreira Carneiro .................... Sebastiao Bastos LavradorArgentina ............... Roque Benjamin Fernandez .................... Pedro PouArmenia ...... ......... Armen R. Darbinian ........... ......... Garnik NanagulyanAustria ............... Rudolf Edlinger .................... Hans-Dietmar SchweisgutAzerbaijan ....... ........ Elman Siradjogly Rustamov .................... Fuad N. AkhundovBahamas, The ......... ...... William C. Allen . .................... Ruth MillarBahrain ..... .......... Ibrahim Abdul Karim ............ ........ Zakaria Ahmed HejresBangladesh ....... ........ Shah A.M.S. Kibria ......... ........... Mahbub Kabir

Barbados ...... ......... Owen S. Arthur ....... ............. Erskine R. GriffithBelarus ..... .......... Gennady V. Novitsky . .................... Vladimir N. ShimovBelgium ..... .......... Jean-Jacques Viseur ......... ........... Gregoire BrouhnsBelize ..... .......... Manuel Esquivel ..... ............... Keith A. ArnoldBenin ..... .......... Albert Tevoedjre ....... ............. Felix AdimiBolivia ..... .......... Edgar Millares Ardaya ............. ....... Miguel Lopez BakovicBosnia and Herzegovina ........... Mirsad Kurtovic ....... ............. Drago BilandzijaBotswana ...... ......... Ponatshego H.K. Kedikilwe .................... Taufila NyamadzaboBrazil ..... .......... Pedro Sampaio Malan ............ ........ Gustavo Henrique de Barroso FrancoBulgaria ..... .......... Muravei Radev ....... ............. Martin Zaimov

Burkina Faso ........ ....... Lamoussa Salif Kabore ............. ....... Patrice NikiemaBurundi ...... ......... Astere Girukwigomba ............. ....... Evariste MinaniCameroon ...... ......... Justin Ndioro ...... .............. Daniel Njankouo LamereCanada ..... .......... Paul Martin ...... .............. Huguette LabelleCape Verde ......... ...... Antonio Gualberto do Rosario ................... Jose Ulisses Correia e SilvaChile .... ........... Eduardo Aninat ......... ........... Joaquin VialChina ..... .......... Xiang Huaicheng ....... ............. Jin LiqunColombia ...... ......... Antonio J. Urdinola ......... ........... Cecilia LopezCongo, Democratic

Republic of ......... ...... Fernand Tala-Ngai ........ ............ Jean-Claude Masangu MulongoCongo, Republic of ............... Paul Kaya ......... ........... Alexandre Mbaloula

Costa Rica ....... ........ Leonel Baruch ...... .............. Eduardo Lizano FaitC6te d'lvoire ............... Daniel Kablan Duncan .................... N'Goran NiamienCroatia. ..... .......... Nenad Porges ...... .............. Josip KulisicCyprus ..... .......... Christodoulos Christodoulou .................... George V. HadjianastassiouCzech Republic ............. .. Ivan Pilip .................... Pavel KysilkaDenmark ...... ......... Poul Nielson ...... .............. Ellen Margrethe LojDominica ...... ......... Julius C. Timothy ........ ............ Cary A. HarrisDominican Republic ............... Hector Manuel Valdez Albizu ........ ........... Luis Manuel Piantini M.Ecuador ..... .......... Marco Flores ................ .... Galo Perez GranjaEgypt, Arab Republic of ........... Atef Mohamed Ebeid ............. ....... Yousef Boutros Ghali

El Salvador . ............... Manuel Enrique Hinds ............. ....... Gino BetaglioEquatorial Guinea ............... Antonio Nve Ngu ........ ............ Miguel Abia BiteoEritrea ..... .......... Gebreselassie Yosief .......... .......... (vacant)Estonia ............... Mart Opmann .................... Agu LellepEthiopia ...... ......... Sufian Ahmed ...... .............. Tadesse HaileFiji .... ........... James Ah Koy ...... .............. Savenaca NarubeFinland ..... .......... Sauli Niinisto ...... .............. Inga-Maria GroehnFrance ..... .......... Dominique Strauss-Kahn .................... Jean LemierreGambia, The ........ ....... Famara L. Jatta . ................... Yusupha A. Kah




June 30, 1998


Georgia ..... ......... Mikhail Chkuaseli ....... ................ Vladimer PapavaGermany. .............. Carl-Dieter Spranger ....................... Juergen StarkGhana .... .......... Richard Kwame Peprah ....................... Victor SelormeyGreece . .............. Yannos Papantoniou ....................... Christos PachtasGrenada ..... ......... Keith Mitchell ....................... Brian FrancisGuatemala ...... ........ Juan Mauricio Wurmser Ordonez .............. Jose Alejandro Arevalo AlburezGuinea .............. Elh. Th. Mamadou Cellou Diallo ............... Cellou Dalein DialloGuyana ..... ......... Bharrat Jagdeo ......... .............. Michael Shree ChandHaiti .... .......... Fred Joseph ....... ................ Fritz JeanHonduras ..... ......... Gabriela Nunez de Reyes ....................... Emin Barjum Mahomar

Hungary. .............. Peter Medgyessy . ....................... Gusztav BagerIndia .... .......... Yashwant Sinha ......... .............. Montek Singh AhluwaliaIndonesia ..... ......... Bambang Subianto ......... .............. Sjahril SabirinIreland. .............. Charlie McCreevy ....................... Paddy MullarkeyIsrael .... .......... Jacob A. Frenkel ......... .............. Ben-Zion ZilberfarbItaly .... .......... Antonio Fazio .... ................... Mario DraghiJamaica. .............. Omar Lloyd Davies ............. .......... Wesley HughesJapan .... .......... Hikaru Matsunaga ........... .......... I. Koichi HaraguchiJordan .... .......... Rima Khalaf Hunaidi ....................... Mohammad SmadiKazakhstan ...... ........ Sauat M. Mynbaev ....................... Yerzhan A. Utembayev

Kenya .... .......... Simeon Nyachae .......... ............. Margaret ChemengichKorea, Republic of .............. Kyu Sung Lee ..... .................. Chol-Hwan ChonKuwait .... .......... Ali Salem Al-Ali Al-Sabah ....................... Ali Abdulrehman Rashaid Al-BaderKyrgyz Republic .............. Talaybek J. Koichumanov ....................... Urkaly T. IsaevLebanon ..... ......... Yassine Jaber ........ ............... Youssef ChoucairLesotho ..... ......... Leketekete Victor Ketso ....................... Molelekeng E. RapolakiLibya .... .......... Mohamed A. Bait Elmal ....................... Bashir Ali KhallatLithuania ..... ......... Algirdas G. Semeta ................... ... Jonas NiauraLuxembourg .............. Luc Frieden ....... ................ Jean GuillMacedonia, fornerYugoslav Repuiblic of .............. Taki Fiti.............. ......... Zlatka Popovska

Madagascar ........ ...... Pierrot J, Rajaonarivelo ....................... Constant HoraceMalawi .............. Cassim Chilumpha ....................... Ted A. KalebeMalaysia . .............. Anwar bin Ibrahim . ....................... Aris OthmanMali ............ .. Ahmed El Madani Diallo ....................... Aboubacar Alhousseyni ToureMalta .... .......... Leo Brincat ....... ................ Joseph P. PortelliMauritania ...... ........ Camara Ali Gueladio ....................... Sidi Mohamed Ould BakhaMauritius . .............. Rundheersing Bheenick ....................... Dharam Dev ManrajMicronesia, Federated

States of ..... ......... John Ehsa ...... ................. Sebastian L. AnefalMoldova ..... ......... Anatol Arapu ................... .... Andrei CheptineMorocco. ........ ...... Fathallah Oualalou ............. .......... Abdeltif Loudyi

Mozambique . .............. Tomaz Augusto Salomao ....................... Adriano Afonso MaleianeNamibia ..... ......... Hanno Rumpf ........ ............... Paul Walter HartmannNepal ........... Ram Sharan Mahat .Ram Binod BhattaraiNetherlands ...... Gerrit Zalm .Johannes Pieter PronkNicaragua ...... Esteban Duque Estrada .Mario De FrancoNigeria ...... Anthony A. Ani .Mohammed M. SadaNorway ....... Hilde Frafjord Johnson .Leiv LundeOman...... Ahmed Bin Abdulnabi Macki .Mohammed bin Nasser Al-Khasibi

GOVERNORS AND ALTERNATES 57



June 30, 1998


Pakistan ........ ..... Hafiz A. Pasha. .......................... Javed Ahmed NoelPalau ............. Tommy Remengesau, Jr .......................... Elbuchel SadangPanama .... ......... Guillermo 0. Chapman, Jr ......................... Miguel HerasPapua New Guinea ............. Iairo Lasaro ......... ................. Morea VeleParaguay ..... ........ Miguel Angel Maidana Zayas ..................... Jose Ernesto Buttner LimprichPeru .... ......... Jorge Baca Campodonico .......................... Alfredo Jalilie AwaparaPhilippines ..... ........ Salvador Enriquez, Jr .......................... Rizalino S. NavarroPoland .... ......... Jacek Tomorowicz .......................... Krzysztof WybieralskiPortugal .... ......... Antonio de Sousa Franco .......................... Fernando Teixeira dos SantosQatar. ............. Youssef Husssain Kamal .......................... Abdullah Bin Khalid Al-Attiyah

Romania ..... ........ Daniel Daianu .......................... Vladimir SoareRussian Federation ............. Victor Khristenko ................ .......... Yevgeni YasinSt. Lucia ..... ........ Kenny D. Anthony .................. ........ Bemard La CorbiniereSt. Vincent and

the Grenadines ............. James F. Mitchell .......................... Maurice EdwardsSamoa .... ......... Tuilaepa S. Malielegaoi .......................... Epa TuiotiSaudi Arabia . ............ Ibrahim A. Al-Assaf .......................... Jobarah Al-SuraisrySenegal .... ......... Mamadou Lamine Loum .......................... Papa Salla MboupSeychelles ............. Bertrand Rassool .............. ............ Vilner CalixteSierra Leone ....... ...... James O.C. Jonah ............... ........... (vacant)Singapore ...... ....... Richard Hu Tsu Tau. .......................... Khaw Boon Wan

Slovak Republic ......... .... Sergej Kozlik .......... ................ Vladimir MasarSlovenia .... ......... Mitja Gaspari .......... ................ Irena SodinSouth Africa ...... ....... Trevor Andrew Manuel .......................... Christian Lodewyk StalsSpain ... .......... Rodrigo de Rato Figaredo ................ ......... Jose Manuel Fernandez NorniellaSri Lanka ..... ........ Chandrika Bandaranaika Kumaratunga ...... Dixon NilaweeraSudan .... ......... Abdel Wahab Osman .......................... Izzedin Ibrahim HassanSwaziland ..... ........ Noreen N. Maphalala .......................... Ephraim Mandla HlopheSweden ............. Erik Asbrink . .......................... Pierre SchoriSwitzerland . ............ Nicolas Imboden ...... .................... Luciano LavizzariTanzania ..... ........ Nassoro Malocho ...... .................... Raphael 0. Mollel

Togo .... ......... Kwassi Klutse ... ....................... Kossi AssimaidouTrinidad and Tobago ............. Brian Kuei Tung .......................... Kamal MankoeTunisia .... ......... Mohamed Ghannouchi .......................... Abdelhamid TrikiTurkey .... ......... Yener Dincmen ............ .............. Cuneyt SelTurkmenistan ...... ....... Hudaiberdv A. Orazov .......................... Ovez AgaevUganda .... ......... Gerald M. Ssendaula .......................... Emmanuel Tumusiime-MutebileUkraine .... ......... Sergiy L. Tigipko .......... ................ Roman ShpekUnited Arab Emirates ............. Mohamed K. Khirbash .......................... Jamal Nasser LootahUnited Kingdom .......... ... Clare Short ......... ............. ... Gordon BrownUnited States ......... .... Robert E. Rubin ............. ............. (vacant)

Uruguay ............. Luis Mosca .......................... Ariel DavrieuxUzbekistan ... .......... Makhmudjon A. Askarov .......................... Saidakbar AbdurakhimovVanuatu ............. Sela Molisa. .......................... Andrew KausiamaVenezuela ..... ........ Freddy Rojas Parra . .......................... Teodoro PetkoffVietnam .... ......... Nguyen Tan Dung . ......................... Le Duc ThuyYemen, Republic of ............. Ahmed M. Sofan ............. ........... _. Jaffer HamedZambia .... ......... Edith Zewelani Nawakwi .......................... Benjamin MweeneZimbabwe ..... ........ Herbert M. Murenva .......................... Charles Tawonerera Kuwaza



Directors and Alternates: Voting Power

June 30, 1998T~~~~~ - : T- - - - - - - -e

Total % ofDirector Alternate (asting votes of votes total

ELECTED BY THE VOTES OF THE FIVE LARGEST SHAREHOLDERS:

Jan Piercy Michael Marek United States 20,696 16.91Satoru Miyamura Kiwamu Inoue Japan 5,272 4.31Helmut Schaffer Eckhardt Biskup Germany 5,248 4.29Jean-Claude Milleron Olivier Bourges' France 5,037 4.12Gus O'Donnell MylesWickstead United Kingdom 5,037 4.12LiYong ZhaoXiaoyu China 3,315 2.71

ELECTED BY THE VOTES OF OTHER SHAREHOLDERS:

Joaquim R. Carvalho Godfrey Gaoseb Angola, Botswana, Eritrea, Ethiopia, 7,453 6.09(Mozambique) (Namibia) The Gambia, Kenya, Lesotho,

Malawi, Mozambique, Namibia,Nigeria, Seychelles, Sierra Leone,South Africa, Sudan, Swaziland,Tanzania, Uganda, Zambia,Zimbabwe

Pieter Stek Mihai N. Tanasescu Armenia, Bosnia and Herzegovina, 7,159 5.85(Netherlands': (Romania) Bulgaria, Croatia, Cyprus, Georgia,

Israel, Macedonia (former YugoslavRepublic of), Moldova, Netherlands,Romania, Ukraine

Luc Hubloue Namik Dagalp Belarus, Belgium, Czech Republic, 5,976 4.88(Belgium) (Turkey) Hungary, Kazakhstan, Luxembourg,

Slovak Republic, Slovenia, Turkey

Leonard Good Alan David Slusher The Bahamas, Barbados, Belize, 5,964 4.87(Canada) (Belize) Canada, Dorninica, Grenada, Guyana,

Ireland, Jamaica, St. Lucia,St. Vincent and the Grenadines

Enzo Del Bufalo Inigo Fernandez de Mesa Costa Rica, El Salvador, Guatemala, 4,533 3.70(Venezuela) (Spain) Honduras, Nicaragua, Spain,

Venezuela

Franco Passacantando Helena Cordeiro Albania, Greece, Italy, Malta, 4,500 3.68(Italy) (Portugal) Portugal

Khalid M. AI-Saad Mohamed Kamel Amr Bahrain, Egypt (Arab Republic of), 4,468 3.65(Kuwait) (Arab Republic Jordan, Kuwait, Lebanon, Libya,

of Egypt) Oman, United Arab Emirates,Yemen (Republic of)

llkka Niemi Frode Neergaard Denmark, Estonia, Finland, 4,299 3.51(Finland) (Denmark) Lithuania, Norway, Sweden

Ali Bourhane Luc-Abdi Aden Benin, Burkina Faso, Cameroon, 4,207 3.44(Comoros) (Djibouti) Cape Verde, Congo (Democratic

Republic of), Congo (Republic of),C6te d'Ivoire, Equatorial Guinea,Guinea, Madagascar, Mali, Mauritania,Mauritius, Senegal, Togo

Surendra Singh Syed Ahmed Bangladesh, India, Sri Lanka 4,190 3.42(India) (Bangladesh)

Matthias Meger Jerzy Hylewski Azerbaijan, Kyrgyz Republic, 3,759 3.07(Switzerland) (Poland) Poland, Switzerland, Turkmenistan,

Uzbekistan

Juanita D. Atnatong Murilo Portugal Brazil, Colombia, Ecuador, 3,670 3.00(Philippines) (Brazil) Philippines, Trinidad and Tobago

DIRECTORS AND ALTERNATES: VOTING POWER 59


Directors and Alternates: Voting Power

June 30, 1998

Total % ofDirector Alternate Casting votes of votes total

Juan Cariaga Valeriano Garcia Argentina, Bolivia, Chile, Paraguay, 3,581 2.93(Bolivia) (Argentina) Peru, Uruguay

Khalid H. Alyahya Khaled AI-Aboodi Saudi Arabia 3,314 2.71(Saudi Arabia) (Saudi Arabia)

Andrei Bugrov Eugene Miagkov Russian Federation 3,314 2.71(Russian Federation) (Russian Federation)

Kacim Brachemi Inaamul Haque Algeria, Ghana, Morocco, Pakistan, 2,943 2.40(Algeria) (Pakistan) Tunisia

Jannes Hutagalung Sun Vithespongse Fiji, Indonesia, Malaysia, Nepal, 2,873 2.35(Indonesia) (Thailand) Vietnam

Young-Hoi Lee Christopher Y. Legg Korea (Republic of), Micronesia 1,580 1.29(Republic of Korea) (Australia) (Federated States of), Papua New

Guinea, Samoa, Vanuatu

In addition to the directors and alternates shown in the foregoing list, the following alsoserved after June 30, 1997:

End of period End of periodDirector of service Alternate of service

Marc-Antoine Autheman November 30,1997 Ibrahim M. Al-Mofleh August 6, 1997(France) (Saudi Arabia)

Jean-Daniel Gerber October 31, 1997 Winston Cox October 31, 1997(Switzerland) (Barbados)

Ruth Jacoby August 4, 1997 Mohamed W Hosny July 21, 1997(Sweden) (Arab Republic

of Egypt)

Atsuo Nishihara June 14,1998 Mioara lonescu August 31, 1997(Japan) (Romania)

Abdul Karim Lodhi March 23, 1998(Pakistan)

Julio Nogues April 30, 1998(Argentina)

David Stanton September 16, 1997(United Kingdom)

Jan Sulmicki December 9, 1997(Poland)

Jorgen Varder March31, 1998(Denmark)

Erika Wagenh6fer March 31, 1998(Germany)

Note: Austria (952 votes), Burundi (251 votes), Dominican Republic (324 votes), Haiti (252 votes), Palau(227 votes), Panama (308 votes), Qatar (314 votes), and Singapore (331 votes) became members after the1996 Regular Election of Directors.

a. To be succeeded by Jean Pesme (France) effective July 1, 1998.



Signatories ti) MIGA's Convention

June 30, 1998

Albania * Georgia * Panama *Algeria * Germany * Papua New Guinea *

Angola * Ghana * Paraguay *Argentina * Greece Peru *Armenia * Grenada * PhilippinesAustralia Guatemala * Poland *

Austria * Guinea * PortugalAzerbaijan * Guinea-Bissau Qatar *Bahamas, The * Guyana * RomaniaBahrain * Haiti * Russian FederationBangladesh * Honduras * Rwanda **

Barbados * Hungary * Samoa *

Belarus * India * Saudi Arabia *Belgium * Indonesia * Senegal *Belize * Ireland * Seychelles *Benin * Israel * Sierra Leone *Bolivia * Italy * Singapore *Bosnia and Herzegovina * Jamaica * Slovak Republic *

Botswana Japan * Slovenia *Brazil * Jordan * Solomon IslandsBulgaria * Kazakhstan * South Africa *Burkina Faso ' Kenya * Spain *Burundi * Korea, Republic of * Sri Lanka *Cambodia Kuwait * St. Kitts and Nevis

Cameroon * Kyrgyz Republic t St. Lucia *Canada * Latvia ** St. Vincent and the Grenadines *

Cape Verde* Lebanon* Sudan *Central African Republic Lesotho * SurinameChad Libya * Swaziland *Chile * Lithuania * Sweden *

China Luxembourg * Switzerland *Colombia * Macedonia, FYR of * Syrian Arab RepublicCongo, Democratic Republic of * Madagascar * Tajikistan **

Congo, Republic of * Malawi * Tanzania *Costa Rica * Malaysia * ThailandCote d'Ivoire * Mali * Togo*

Croatia * Malta * Trinidad and Tobago *Cyprus * Mauritania Tunisia *Czech Republic' Mauritius * Turkey *Denmark * Micronesia, Fed. States of Turkmenistan *Dominica * Moldova * Uganda *Dominican Republic * Mongolia ** Ukraine '

Ecuador * Morocco UnitedArab Emirates *

Egypt, Arab Rep ablic of Mozambique * United Kingdom'El Salvador * Namibia * United States *Equatorial Guinea Nepal * Uruguay*Eritrea Netherlands Uzbekistan *

Estonia Nicaragua Vanuatu *

Ethiopia Niger VenezuelaFiji * Nigeria Vietnam *Finland * Norway Yemen, Republic oftFrance Oman * Yugoslavia, Federal Republic of"Gabon Pakistan (Serbia and Montenegro)Gambia, The Palau* Zambia *

Zimbabwe

Member country.** Country that has ratified the Convention but not yet completed membership requirements.

SIGNATORIES TO MIGA's CONVENTION 61


Fiscal 1999 Budget

(thousands of US. dollars)

Income:Net premium and commitment fees earned ...................................... .................................. $ 30,400

Investment income ........................................................................- 21,000

Miscellaneous income ...... ....................................... . ......................... 150

Total income ........................................................................ 51,550

Expenditure by organizational unit:Office of Central Administration . ........................................................................ 4,318

Guarantees ......... ................................................. . ............ 7,031

Investment M ark-eting Services ........................................................................ 3,164

Legal and claims ........................................................................ 1,840

Total expenditures . .......................................... . ........................... 16,353

Net income before provisioning .................................................. $ 35,197

Expenditure by category:Discretionary costs:

Staff costs ................................................. . ................... . $ 6,135

Operational travel ........................................................................ 1,010

Representation ........................................................................ 98

Consultant fees ........................................................................ 1,103

Contractual services .............. .............................. ............................ 1,024

IFC services ........................................................................- 281

Marketing and publications . ........................................................................ 337

Direct communications ........................................................................ 170

Internal computing .3......................................... .......................... 33

Furniture and equipment ........................................................................ 539

Miscellaneous. .... .................................................................... 155

Subtotal ............................................... . ....................... 10,885

Other direct costs:

Staff benefits ..................................................................... 2,995

Office occupancy ............................................. ..... .................. 909

IBRD service and support fee . ..................................................................... 891

Overhead. ..................................................................... 173

Subtotal ................................................................. 4,968

General contingency ............................................................................. 500

Total budget ..... $ 16,353

Note: The fiscal 1999 budget svas approved by the Directors in accorclance with MIGA's bylaws.


BUSINESS PROFILE

This business profile summarizes the growth of MIGA's membership since the Agency'screation, and the evolution of its guarantees program and investment marketing servicesduring the past five fiscal years.

I. Country Membership 64

II. Beneficiary Host Countries 64

III. Techr.ical Assistance Activities in the Area ofInvestment Promotion 65

IV. Leveraging Guarantee Capacity: Facilitated Foreign Investment 65

V. Guarantee Portfolio Outstanding by Host Region 66(A) Gross Exposure 66(B) Number of Contracts Issued 66

VI. Diffusing Foreign Direct Investment Flows 67(A) Top 10 Countries Receiving Foreign Direct Investment 67(B) MIGA Guarantees Issued in 26 IDA-Eligible Countries 67

VII. Preliminary Applications for Guarantees by Host Region 68

VIII. Inforrnation Dissemination Tools 68

BUSINESS PROFILE 63

1. COUNTRY MEMBERSHIPMIGA is an independent agency of the World Bank Group, with its own country membership andcapital base. However, World Bank membership is a prerequisite for MIGA membership; othermembership requirements include signature and ratification of the MIGA Convention and pay-ment of a capital subscription.

MIGA has witnessed a steady increase in country membership, which now stands at 145 coun-tries (20 industrial and 125 developing in fiscal 1998). Countries that completed their member-ship requirements during the year are Austria, Burundi, Palau, and Singapore. An additional 17countries are in the process of fulfilling membership requirements (see meinber list otn page 2).

Number of Countries180

160 EE

140

120

100

80

60

40

20

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Fiscal Year

MembersIn Process of Completing Membership

11. BENEFICIARY HOST COUNTRIESMIGA provides guarantees and technical assistance in support of investments in developing coun-tries and transition economies. The number of countries that have benefited from either or both ofthese services has grown substantially during the past five years.

Number of Countries140

Guarantees120 MM Guarantees & Technical Assistance

Technical Assistance100

80

60

40

20

0 1993 1994 1995 1996 1997 1998Fiscal Year


III. TECHNIGCL ASSISTANCE ACTIVITIES IN THE AREA OFINVESTMENT PROMOTION

MIGA's program of technical assistance for investment promotion focuses on three primary areas:dissemination of information on investment opportunities and business operating conditions indeveloping member countries, capacity building of institutions involved in the promotion andfacilitation of Foreign investment, and investment facilitation activities. Over the past six years,MIGA has executed more than 138 such technical assistance activities directly benefiting 134countries.

Cummlative Number of Activities140

1 _Irfrmation Dissemination120 IFA Capacity Building

Promotion Activities100 1 T3ial Adivities

80

60

40

20

0 M99S 1994 1995 1996 1997 1998Fiscal Year

IV. LEVERAGING GUARANTEE CAPACITY: FACILITATED FOREIGN INVESTMENTMIGA has issued a total of 348 guarantee contracts covering investments in 62 developing coun-tries and transition economies, involving investors from 29 member countries. A measure of MIGA'sdevelopment impact is the fact that the total estimated foreign direct investment facilitated (about$25 billion) is eight times the level of its gross exposure outstanding.

In Millions of U.S. Dollars30,000

215,000 1 Gross Exposure25,000 or} Foreign_Dired InvestmentI

20,000

15,000

10,000

5,000

1993 1994 1995 1996 1997 1998Fiscal Year

BUSINESS PROFILE 65

V. GUARANTEE PORTFOLIO OUTSTANDING BY HOST REGION(A) Gross ExposureMIGA's guarantee portfolio has increased from $745 million in fiscal 1993 to $2.9 billion in fiscal1998. In close correlation with the overall global foreign direct investment flows, Latin Americaand the Caribbean accounts for the largest share of the portfolio, and Asia witnessed a drop in itsshare from previous levels.

Europe & Middle EastCentral Asia 2% rp

Asia 30% 33 %0 Asia 21 % Cetral Asia

Afrkca 7%

Africa I Iln Latin America AfricaatYn America& the Caribbean & the Caribbean

26% 44%

Total = $745 milion I Total $2,862 million

Fiscal 1993 Fiscal 1998

(B) Number of Contracts IssuedThe proportion of MIGA contracts issued for investments in Latin America and the Caribbeanpartially reflects the more complex infrastructure and power projects covered by MIGA involvingmultiple equity investors and commercial banks. In Africa and Asia, MIGA insures mainlv smalland medium-size agribusiness, manufacturing, and telecommunications investmoents.

Europe & Europe &Central Asia Central Asia

Asia 36% Asia 25%20

Africa 15% fd y- Latin America LtnAmerica

Africa & the Caribbean the Caribbean26% 40%

Tiotal= 60 contracts i Total 227 contracts I

Fiscal 1993 fiscal 1998


VI. DIFFUSING FOREIGN DIRECT (B) MIGA Guarantees Issued inINVESTMENT FLOWS 26 IDA-Eligible Countries'

(A) Top 10 (oumtries Receiving During fiscal 1998, MIGA covered new proj-ects in 13 IDA-eligible member countries.

Foreign Direct Investment Overall, MIGA guarantees have facilitated in-

MIGA attempts to encourage foreign direct investments in 26 IDA-eligible member countries,vestment (FDI) n countries where investors are and total issued coverage in these countries isless likely to expand their operations without approximately $1.0 billion. Guarantees out-the backing of an international institution. A standing in 22 IDA-eligible countries in fiscalgood measure of this effort is a comparison 1998 total $800 million, which represents morebetween the recipients of MIGA-guaranteed than 28 percent of MIGA's current guaranteesinvestments ancl global flows. The top 10 FDI portfolio.recipient countries account for 72 percent oftotal FDI flows to developing countries. In con- MIGA guarantees outstanding*

trast, MIGA's exposure in these countries (8 out (as of June 30, 1998)of the 10 countries have received MIGA guar- Millions of Percentage ofantees) shows that they represent only 27 per- County donlars portfolio

cent of the Agency's portfolio at the end offiscal 1998. Pakistan 169.8 5.9

China 131.1 4.6

Kyrgyz Republic 64.7 2.3MIGA guarantees outstanding Bolivia 62.5 2.2

in the top 10 countries Bangladesh 59.2 2.1receiving FDI Uganda 54.0 1.9

(as of June30, 1998) Mali 50.0 1.8Millions of Percentage of Mozamique 40.0 1.4

Country" dollars portfolio Nepal 32.8 1.2

China 131.1 4.6 Guyana 30.6 1.1Brazil 195.0 6.8 Honduras 25.9 0.9Mexico - - Equatorial Guinea 24.0 0.8Indonesia 80.4 2.8 Azerbaijan 19.2 0.7Poland 24.3 0.9 India 9.6 0.3

Malaysia - - Sri Lanka 7.1 0.3Argentina 236.1 8.3 Guinea 6.0 0.2Chile 31.3 1.1 Kenya 4.7 0.2India 9.6 0.3 Cape Verde 2.4 0.1Venezuela 68.5 2.4 Angola 2.3 0.1

TOTAL $776.3 27.2 Georgia 2.1 0.1Madagascar 1.7 0.1

- No guarantees. Tanzania 0.3 0.01*Source. World Bank, Global Development Finance, 1998.

TOTAL $800.0 28.31

*In addition, MIGA guarantees covered investments ofabout $200 million in Caneroon, Egypt, Ghana, andVietnam.

1 The International Development Association (IDA) is

theWorld Bank Group's concessional lending facility, whichconcentrates its activities on very poor countries.

BUSINESS PROFILE 67

VIl. PRELIMINARY APPLICATIONS FOR GUARANTEES BY HOST REGIONMIGA has about 1,200 active Preliminary Applications for coverage of prospective investments in85 developing countries and transition economies.

Preliminary Applications are free of charge. A copy of the application form can be accessed fromMIGA's website (http://Nvww.miga.org/miggu/prelim.htm). In fiscal 1997, MIGA introduced anapplication fee to process Definitive Applications for Guarantees.2

Number of Applications400 -

| FY93 FY98350 -

300-

250-

200-

150

50-

0Africa & Latin America Europe & Asia

Middle East & the Caribbean Central Asia & Pacific

2. A Definitive Application for Guarantee is sent to the prospective investor along with a Notice of Registratiun, followingacceptance of the Preliminary Application. It provides MIGA wvith the detailed information and supporting doiumenta-tion required for review and prep3ration of a Contract of Guarantee.

VIII. INFORMATION DISSEMINATION TOOLSMIGA has taken a leading role in using modern information technology tools to promote foreigndirect investment in emerging markets. With use of the Internet growing exponentially each year,and international business increasingly relying on it for information exchange and communication,it is vital that developing and transition economies develop the capacity to use the Internet effec-tively to promote investment opportunities. Over the past three years, MIGA has launched twoInternet-based tools for use by its member countries: IPAizet, an on-line information clearinghousefor FDI-related information, and PrivatizationLink, a specialized window within IPAoiet that focuseson privatization issues and opportunities.

N p~~~~r i va t i z a t i o n

Project Opportunities in Emerging Markets

http://www.ipanet.net http://wwiv.privatizationlink.org


A Member of the World Bank Group

0 ..r I2Aebratiml

AI11iher%arn ill 199S

The Miultilateral Investmienit (Guarairntee Agevnc (iG A) x\ as cstahli'hh d on Api il I 21988, as the newxest membher origalii/ltioll of th( \\ or U 1nll (, r it It Itsp rpo'c is to

encour-age the flow ot foreigin diirect insestilment to its de\ se oio nm obel Oilt ries fol

ec.onomic development. Its primarl nallns of I a ilitating il\ cstillment is thronclil tim pvl o\ i'iol

of investment guarantees again,st the nisks ot tui m \iws ti nstfer C 1 0e1rpiatioln aI)d wa and

civil diStll-b ti. ( p)o)liti1.lI risis")

This site is best viev\\ ed \\ ith \N.tsc.lipc N\ igi'toi 3 A) or 0 latce \ver'sionl.

You are invited to send c-milail comn.e nts a Jd iiqtiics ibooit techni-l aispects of this site to)

Please address inquiries concernin" \lI(, \s G iiarat.. It Ohgimil to tlhe respecti\v

at - d ! questions concerninig NIICN is *.ti.. it NLIrkCetill Sr-\ vices to the I espeti\ e

C'~mght~ 110 \1,1jt.'-d,-^" ,> "t ...... t ''- r. 'r\Iigl�l->m l\w litl,,1

____~in. -

HOW TO CONTACT MIGA

Telephone/Facsimile:Guarantees Department (202) 473-6167

(202) 522-2630 (fax)

Investment MarketingServices Department (202) 473-0394

(202) 522-2650 (fax)

Address:For mailing For visits

MIGA MIGA1818 H Street, N.W ] 800 G Street, N.W., Suite 1200Washington, D.C. 20433 Washington, D.C. 20433U.S.A. U.S.A.

For information via the Internet:MIGA Home Page: http://www.miga.orgIPAniet Home Page: http://wwNwipanet.netPrivatizationLink Home Page: http://www.privatizationlink.orgWorld Bank Home Page: http://www.wor1dbank.org

C 1998 Multilateral Investment Guarantee Agency

Manufactured in the United States of AmericaAll rights reserved

Book and Cover Design: May EidiMIGA

ISBN 0-8213-4133-2

® Printed on recycled paper

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