• Conflict Affected and Fragile States Facility (CAF)
• Environmental and Social Challenges Trust Fund
Two new Facilities:
WBG Donor Forum – Paris – May 19, 2010
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MIGA – Two Examples of New Ways to Expand our Core Business
Creation of a new Facility to encourage investment in post-conflict and fragile states: Offer a wider set of instruments and services
Expansion of an existing pilot Facility: provide technical assistance to existing or potential MIGA clients to help them achieve compliance with MIGA’s environmental and social standards.
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Private investment helps reduce the return to conflict
Economic growth reduces the risk of reverting to conflict
Main driver: job creation Long-term structural employment
requires private sector development Growth rate of private sector is reduced
by risk and lack of investment
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But – Private investment tends to come in several years after aid peaks
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High Demand, Low Capacity for Insuring Projects in Conflict Affected
States Investors, lenders and exporters express interest
in conflict affected states, but risk is often too high and
risk mitigation options are limited: Private insurance market: case by case basis only, short tenors,
high premiums. Public market: many Export Credit Agencies are either off-
cover or offer limited cover (e.g. case by case basis, short term only) for export credit insurance. Limited amounts of investment insurance coverage are available.
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Private PRI in Conflict-affected and Fragile States - Market Failure
Maximumfeasibleprice
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MIGA - Proposed Conflict-affected and Fragile States Facility (CAF)
Allow MIGA to start addressing gaps in the supply of insurance for projects in target countries
Context Promoting sustainable development in post conflict and fragile
states. Influence investment and trade decisions by means of insurance
Facility will be fully donor funded, providing for the insurance products that clients need to invest in and trade with target countries
Facility would harness private sector insurance market to create a public-private partnership (PPP) solution
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Facility is set up as a Public-Private Partnership
Donor
Donor
Investors, exporters
and lenders
Conflict Affected
and Fragile States
Insurance cover
premium
Donor
Private Sector
(PRI Market)
Donors
Investmentand tradeFacility
Excess of Loss Layer($400 million)
First Loss Layer($100 million)
Facility
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Main principles of the Facility
Facilitate projects with positive developmental impact in conflict affected and fragile states
Offer insurance products such as investment insurance, export credit insurance, coverage for local currency financing
All projects insured under the Facility will comply with WBG safeguard policies and fit in the Debt Sustainability Framework
Facility complements WBG and other Development Partners’ activities
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Proposed risk mitigation instruments
Investment insurance for equity or debt: both cross border and local, new and existing War and Civil disturbance, including business interruption Expropriation Currency conversion and transfer Breach of contract Non-honoring of a sovereign financial guarantee
Structured trade credit insurance (pre-export finance) Export credit insurance All instruments to be used both for inward or domestic
flows and for outward trade and investment
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The World Bank Group’s Role in the CAF Facility
Fiduciary responsibility for management of the fund Clients value multilateral participation Attracting Beneficial Investment - screen investors Ensuring respect of debt sustainability ceilings Facility would complement existing programs (Peace and
State-building Fund, governance, investment climate)
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MIGA - Environmental and Social Challenges Trust Fund
Purpose: Provide technical assistance to help MIGA clients achieve compliance with MIGA’s environmental and social performance standards.
Important resource which has received positive feedback from the clients.
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Examples of Technical Assistance Provided through the Trust Fund between 2007 and 2009:
Resettlement in Nigeria
Human Rights in DRC
Communities and Workers’ health and safety in Mozambique
Development of environmental management systems in
Rwanda and Uganda
Artisanal miners in Burkina Faso.