ANNUAL REPORT 2013 - MIGA

migaboardA Council of Governors and a Board of Directors, representing 179 member countries, guide theprograms and activities of MIGA. Each country appoints one governor and one alternate. MIGA’scorporate powers are vested in the Council of Governors, which delegates most of its powers tosupported transformational projects in fragile or conflictaffected countries. This Annual Report demonstrates theconsiderable development impact of MIGA’s support, andits ability to build effective partnerships, both externallyand across the World Bank Group.Several MIGA projects over the past year underscorethe World Bank Group’s strengthened collaboration toachieve our objectives. The outcomes of this collaborationdemonstrate how, together, we can use our considerableexpertise and resources to help countries and otherpartners find creative and integrated solutions todevelopment challenges.MIGA’s support of transformational projects in Côted’Ivoire is particularly noteworthy. This year, the Agency,along with IFC and IDA, supported the Azito thermalpower plant that brings energy capacity to the country.Along with IDA, MIGA also supported the constructionand operation of an offshore oil and gas facility thatwill reduce the country’s energy costs and limit theuse of foreign reserves for energy imports. Thesetransformational projects complemented the Henri KonanBedié toll bridge in Abidjan—the first public-privatepartnership since the end of the civil conflict in 2011—that MIGA supported last year. MIGA’s support for theseinvestments alone has catalyzed over 2 billion in foreigndirect investment, a significant amount for this conflictaffected country.tenure at the helm of MIGA recently came to an end.Her innovative and tireless leadership, coupled with theprofessionalism and commitment of MIGA’s managementand staff, allowed the Agency to achieve extraordinaryresults. I look forward to working with Keiko Honda,Izumi’s successor, to continue MIGA’s strong momentumin the years to come.a Board of 25 directors.Voting power is weighted according to the share of capitaleach director represents. The directors meet regularly at theWorld Bank Group headquarters in Washington, DC, wherethey review and decide on investment projects and overseegeneral management policies.rrrrrrrrrrDirectors also serve on one or more of several standingcommittees:These committees help the Board discharge its oversightresponsibilities through in-depth examinations of policiesand procedures.Audit CommitteeBudget CommitteeCommittee on Development EffectivenessCommittee on Governance and Administrative MattersHuman Resources CommitteeJim Yong KimWorld Bank Group PresidentJune 30, 2013MIGA’s performance this year has made a strongcontribution to helping us reach our goals of endingextreme poverty by 2030 and promoting shared prosperity.I particularly want to thank Izumi Kobayashi, whoseMIGA’s Board of Executive Directors, as of June 30, 201354356767843 MIGA ANNUAL REPORT 202022222323241721212525241: Merza Hasan; 2: Agapito Mendes Dias; 3: Satu Santala; 4: Roberto B. Tan;5: John Whitehead; 6: Marie-Lucie Morin; 7: Shaolin Yang; 8: Gwen Hines; 9:Vadim Grishin; 10: Mukesh N. Prasad; 11: Mansur Muhtar; 12: Piero Cipollone;13: Omar Bougara; 14: Ibrahim M. Alturki (alternate); 15: Gino Alzetta; 16:Hideaki Suzuki; 17: Ingrid-Gabriela Hoven; 18: Denny H. Kalyalya; 19: CésarGuido Forcieri; 20: Juan José Bravo; 21: Sara Aviel (alternate); 22: Hervé deVilleroché; 23: Frank Heemskerk; 24: Jörg Frieden; 25: Sundaran AnnamalaiMIGA ANNUAL REPORT 2013 7

Message from Izumi Kobayashi,The Agency’s sector diversification shows strong gainswith complex projects in infrastructure and extractiveindustries rising to 69 percent of new volume comparedto 60 percent in fiscal year 2012. Underlying these strongbusiness results is the transformational nature of many ofthese projects, which help bring power, transportation, andmore efficient technologies into our developing membercountries, and are particularly important for fragile andconflict-affected economies that have the greatest need forinvestment.MIGA Executive Vice President,2008-2013There are signs the global economy is at aturning point—the real risks we saw in recentyears have receded and the situation is lessThe impact of the projects we support again demonstratesthe powerful role the private sector can play in alleviatingpoverty by mobilizing private capital into sectors withbroad developmental impact, such as infrastructure,agribusiness, and manufacturing. With the private sectorstepping in to provide these much-needed investments,host-government efforts are complemented in buildingthe foundation for more productive economic activity thatcreates jobs and growth. Additionally, these investmentsare playing an important role in contributing to economicand social sustainability in surrounding communities.volatile. While high-income countries stillface modest economic growth of about 1.2percent in 2013, developing countries are projected to grow 5.1 percent.This relative growth in developing countries continues tomake them increasingly attractive to foreign investors. Thisis one of the reasons why we have seen growing demandfor our risk-mitigation products, as investors seek returnsin more challenging environments. Against this backdrop,MIGA celebrated its 25th anniversary this year with anotherexcellent performance, issuing 2.8 billion in new guarantees.MIGA’s mandate to catalyze foreign direct investment intodeveloping countries has increased in relevance as part ofthe World Bank Group’s overall mission to end extremepoverty and promote shared prosperity. We recognize theprivate sector has an important role to play in assistingdevelopment. Our challenge is to ensure we facilitate theright investments that create value for the private sector,and are sustainable in order to yield lasting developmentbenefits for host countries. This report highlights ourpositive results this year—both in new business and indevelopment impact from existing projects that haveimproved people’s lives across the globe.8 MIGA ANNUAL REPORT 2013I note our continued efforts to ramp up businessdevelopment, including strengthened outreach to subSaharan Africa and the Middle East and North Africa,as countries seek more ways to attract private financingand investment. Our expanded operations in Asia andour presence in Europe helped contribute to anotheryear of positive business results. We remained focusedon our strategic priority areas: support for investment inthe world’s poorest countries served by the World Bank’sInternational Development Association (IDA), in fragileand conflict-affected environments, in complex projects,and South-South investments. Over three-quarters ofthe projects MIGA backed address at least one strategicpriority area, accounting for 82 percent of new businessvolume.Our business diversification remained strong this pastyear. Regionally, MIGA’s projects in sub-Saharan Africaaccounted for the largest portion of new business volumeat 54 percent, over twice last year’s level of 24 percent,and over four times the fiscal year 2011 level of 12 percent.We also reached out to existing and new external partnersto share knowledge on industry practices and development solutions. This outreach included activities suchas conferences on managing global political risk, seniorexecutive outreach, and visits to projects that we have supported—including a trip I made to Iraq and the PalestinianTerritories, both areas hit by conflict and fragility. We alsoparticipated in the World Bank Group’s groundbreakingmission to Myanmar and together we hope to help reducepoverty and boost growth through energy infrastructuredevelopment and other reforms.needs and streamlining processes to enable more flexibility and responsiveness to our clients. We continued toplace an emphasis on building a diverse and talented staffof professionals. This past year we welcomed four newstaff members under our successful MIGA ProfessionalsProgram.I have come to the end of my tenure at MIGA. I wantto thank the Board of Directors and other partners, aswell as our clients, for their guidance and support inadvancing the work of this important institution. As I leave,I feel confident that MIGA is well-positioned to fulfill ourmandate of facilitating investment that furthers growthand improves people’s lives. I want to thank President JimYong Kim for his leadership. Most of all, I want to expressmy sincere gratitude to MIGA’s management and staff fortheir professionalism and commitment throughout myterm to deliver MIGA’s mission in the countries we serve.It has been my privilege to work with you.Izumi KobayashiJune 30, 2013This past fiscal year we further strengthened our partnerships across the World Bank Group, working on ways toenhance collaboration in our strategic priority areas. In particular, the IFC/MIGA Business Development Partnershiphas matured into a strong business model that has helpedstimulate joint business development and knowledgesharing while providing optimal solutions to our clients.Internally, we remained focused on strengthening ourinformation technology systems to serve anticipatedMIGA ANNUAL REPORT 2013 9

migamanagement teamMessage from Keiko Honda,MIGA Executive Vice PresidentI am pleased to transmit MIGA’s 2013 AnnualReport, which highlights the Agency’sstrong performance over the past year.This is a very exciting time to be joining the World BankGroup and sharing in the noble purpose of ending extremepoverty and promoting shared prosperity.Izumi KobayashiExecutive Vice PresidentMichel WormserVice President andChief Operating OfficerAna-Mita BetancourtDirector and GeneralCounsel, Legal Affairs andClaimsKevin W. LuRegional Director,Asia PacificEdith P. QuintrellDirector, OperationsLakshmi Shyam-SunderDirector andChief Financial Officer,Finance and RiskManagementRavi VishChief Economist andDirector, Economics andSustainabilityMarcus S. D. WilliamsChief, Strategy,Communications andPartnershipsWe are committed to working with our clients and development partners to deliver the solutions that will help usachieve these goals. MIGA’s risk-mitigation instrumentscan play an essential role in mobilizing the financing necessary to deliver transformational infrastructure projects,build job-generating enterprises, and provide access tofinance.I look forward to working with our Board, our partners, andstaff to meet these goals. I am honored to contribute tothis important work.Keiko HondaJuly 15, 201310 MIGA ANNUAL REPORT 2013MIGA ANNUAL REPORT 2013 11

Development ImpactThere are signs that global economic activity is slowly picking up.These signs are supported by low interest rates, increased globalliquidity, improved global financial conditions, the acceleratinggrowth of global trade, and stronger domestic demand.The World Bank’s outlook for the globaleconomic environment is predictingglobal growth to come in at a relativelyweak 2.2 percent in 2013. It will graduallystrengthen to 3.0 percent and 3.3 percentin 2014 and 2015. Importantly, accordingto the World Bank, the global economyForeign Direct InvestmentTrendsIn this still somewhat fragile globalenvironment, foreign direct investment(FDI) inflows to developing countriesdeclined by an estimated 4.5 percent in2012 to reach 670 billion. A rebound isanticipated for 2013, when FDI inflowsinto developing countries are forecastto bounce back to 719 billion. Flows todeveloping countries continue to accountfor a substantial share of global FDI: theyreached 45 percent of inflows in 2012.Of particular interest, FDI outflowsfrom developing countries reached anew record in 2012—an estimated 238billion—continuing the upward trendof recent years. They are forecast to be 275 billion in 2013. About a quarter ofthe outward FDI stock of developingcountries goes into other developingcountries (“South-South” investment).These South-South flows are outpacingtraditional investment as a source ofnew FDI, as investors in Europe and theUnited States have felt the brunt of therecent economic slowdown and the crisisin the euro zone.is transitioning into what is likely to be asmoother and less volatile period.Although acute risks in high-incomecountries are down, more modestdownside risks linger as theseeconomies continue to adjust. A slowacceleration in growth is expected in thenext several years. In the meantime, asthe developed world progresses towardrecovery, developing economies remainthe primary drivers of global growth—though we note that they are expandingmore slowly than last year.12 MIGA ANNUAL REPORT 2013With respect to investor sentiment, therelative growth in developing countriescontinues to make these economiesincreasingly attractive to foreigninvestors. According to a 2012 EconomistIntelligence Unit survey commissionedby MIGA for our annual World Investmentand Political Risk report, investors remainoptimistic about their prospects indeveloping countries. In fact, more thanhalf of the survey’s respondents expectedto increase their investments there in theshort term.MIGA ANNUAL REPORT 2013 13

MIGA’s RoleMIGA’s insurance against noncommercial risks indeveloping countries is a powerful tool for many investorsand lenders as they enter these markets. In many cases,MIGA guarantees help them address hesitations that mayaffect the decision to move forward with an investment,particularly in countries perceived as high-risk. Indeed,the presence of MIGA guarantees can often make thedifference between a go and a no-go decision for someinvestments. Increasingly, MIGA guarantees are alsobeing used as a credit-enhancement tool that helps clientssecure financing with better terms and longer tenors.MIGA promotes the flow of FDI into developing countriesin service of our mission: supporting economic growth,reducing poverty, and improving people’s lives. With ourWorld Bank Group colleagues, we work with investors tostructure projects in ways that benefit all parties and fosterpositive relationships with local communities. MIGA’scollaboration with the World Bank and the InternationalFinance Corporation (IFC) has borne fruit in several highlydevelopmental projects including the Bujagali hydropowerdam in Uganda commissioned this year and the Azitothermal power plant expansion in Côte d’Ivoire (see box 1).At a broader level, MIGA’s collaboration across the WorldBank Group ensures that the Agency’s support to anyinvestment is consistent with the Group’s strategy for thehost country. Our ability to leverage the Group’s expertiseon environmental and social standards is often a significant value to our clients and to the development impactof the investments we insure.This year, MIGA is pleased to celebrate our 25th anniversary(see box 3). This milestone is a good occasion to reflecton our achievements up until now and oportunities forthe next 25 years. Since our inception we have issued 30 billion in guarantees for projects in a wide variety ofsectors, covering all regions of the world. Going forward,we will continue to focus on insuring projects where wehave the most impact, especially those that are in line withour strategic priorities detailed next.Strategic FocusFour strategic priorities guide MIGA’s work. These priorities have been shaped by the World Bank Group’smission to end extreme poverty and promote sharedprosperity, the development needs of MIGA’s membercountries, and the need for the Agency to focus on itscomparative advantage and complement other insurers.MIGA’s first priority is encouraging FDI into the world’spoorest countries. In fiscal year 2013, 74 percent of ourguarantee volume fell into this category. Examples thataddress this priority include MIGA’s support to powergeneration in Uganda and Bangladesh, a commercialbamboo plantation in Nicaragua (see box 2), customs14 MIGA ANNUAL REPORT 2013inspection services in Madagascar and Niger, and severalagribusiness investments in Zambia.Our strategic focus on conflict-affected and fragileeconomies underlines MIGA’s key role in these countries’rebuilding efforts, particularly during the crucial periodof transition as they seek to establish stability after yearsof turmoil. This focus also points to MIGA’s ability toguarantee projects where other insurers may be off-cover.Three transformational projects in Côte d’Ivoire—detailedlater in this report—show how MIGA is prepared toact as a catalyst for private sector investment verysoon after conflict wanes. Also this year, our supportto manufacturing projects in the West Bank and Gazademonstrates the Agency’s commitment to this priorityarea. Projects in conflict-affected and fragile countries andterritories represented 41 percent of MIGA’s new volumethis year.MIGA received approval from our Board of Directorsthis fiscal year to create a Conflict-Affected and FragileEconomies Facility to even further deepen the Agency’ssupport to this priority area. In addition to MIGAguarantees, the facility will use donor contributionsand guarantees to provide an initial loss layer to insureinvestment projects in difficult contexts. The facility waslaunched in June, together with the governments ofCanada and Sweden, which committed funding in supportof this initiative. Discussions are advanced with otherpotential donors to support the facility.Another priority area where we have a distinct competitiveadvantage is complex projects. This year, in additionto issuing guarantees for oil and gas as well as powergeneration investments in Côte d’Ivoire, MIGA supportedpower generation in Angola. These complex projects areoften transformational for countries and may increasinglyinclude the participation of several parts of the World BankGroup. In these cases, MIGA guarantees can complementIFC financing and the World Bank’s lending and guaranteeinstruments to bring the full suite of products to bearso that these projects can be realized. MIGA’s supportto complex projects accounted for 69 percent of 2013’svolume.As South-South investment

4 MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 5 the World Bank group is a major source of financial and technical assistance to developing countries around the world. Its member institutions work together and complement each other’s activities to achieve their shared goals of ending extreme poverty and promoting shared