MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP November 2012

MIGA’s Support to the Middle East and North Africa

MENA

MIGABRIEF

Meeting the Challenge of the TimesToday’s uncertain world has marked effects on prospects for growth for the Middle East and North Africa (MENA). Political changes in the region have captured the world’s attention, and reminded investors in particular of the inherent risks of invest-ing abroad. This is coupled with the finan-cial crisis in the euro zone that is further shrinking available capital.

Yet, the need for investments into MENA that create jobs and opportunity is greater than ever. This is an important moment for multilateral organizations like the Multilateral Investment Guarantee Agency (MIGA) to step up and fill in gaps that the private sector cannot address. Indeed, MIGA’s political risk insurance can be an important risk-mitigation instrument to investors and lenders who may be nervous about maintaining existing investments or have plans to invest in the region that they would rather not put on hold. MIGA can also help banks by optimizing country lim-its management and reducing capital allo-cations for country risk.

To demonstrate its commitment to the region, MIGA, a member of the World Bank Group, has mobilized $1 billion in insurance capacity precisely to retain and encourage foreign direct investment in MENA. The Agency has rolled out a flex-ible plan to target existing and inbound FDI in order to ensure that political risk

insurance market capacity is maintained and to bolster the efforts of national export credit agencies. Since the initiative was launched in 2011, MIGA has supported new and existing investments in Egypt, Jordan, Libya, Morocco, Tunisia, and the West Bank and Gaza.

MIGA is also increasing efforts to reach out to investors, lenders, and govern-ments around the world to make it clear that it is open for business in the region. The Agency is sharing its global experience of managing political risks—in particular by sponsoring conferences in investment capitals that focus on MENA.

Since its inception, MIGA has issued over $1.5 billion in guarantees for more than 30 projects in 14 countries and territories in MENA. These guarantees have covered investments in agriculture, banking, manu-facturing, sanitation services, sewerage systems, oil and gas, telecommunications, transportation, and tourism. In addition, MIGA has issued more than $1 billion in guarantees to MENA-based companies and banks investing in developing coun-tries outside the region.

What We DoMIGA’s mission is to promote foreign direct investment into developing coun-tries to support economic growth, reduce poverty, and improve people’s lives. We do this by providing political risk insurance

(guarantees) against certain noncommer-cial risks to investments in developing countries. We also conduct research and share knowledge as part of our mandate to support foreign direct investment into emerging markets. In collaboration with our World Bank Group colleagues, we work with investors to structure deals in ways that benefit all parties and foster positive relationships with communities where they invest.

INSURING INVESTMENTS r ENSURING OPPORTUNITIES

MIGA insures foreign direct invest-ments against the risks of:r Currency inconvertibility and

transfer restrictionsr Expropriationr War, civil disturbance, terror-

ism, and sabotager Breach of contractr Non-honoring of sovereign

financial obligations

MIGA provides dispute resolution services for guaranteed invest-ments to prevent disruptions to developmentally beneficial projects.

Multilateral InvestmentGuarantee AgencyWorld Bank Group

Multilateral InvestmentGuarantee AgencyWorld Bank Group

Multilateral InvestmentGuarantee AgencyWorld Bank Group

Multilateral InvestmentGuarantee Agency

World Bank Group

Multilateral Investment Guarantee AgencyWorld Bank Group

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MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP November 2012

Types of Coverage

MIGA expropriation coverage protects against discriminatory administrative or legislative actions by governments at both national and sub-national levels that may result in nationalization and confiscation. This coverage also guarantees protection from “creeping expropriation,” a series of acts that eventually result in outright nationalization or confiscation.

MIGA transfer restriction coverage insures policy holders against the possibility that governments would prevent earnings repa-triation. The coverage also protects against the risk of currency inconvertibility. With these guarantees in place, lenders may be willing to reduce borrowing costs, since this mitigates concerns that foreign com-panies might not be able to get their cash out of a country, which would increase the potential for loan default. Even when gov-ernments impose a moratorium on mov-ing currency, as shareholders of MIGA,

they may agree to exclude revenues from projects backed by MIGA guarantees and permit the transfer. This has been the case in a number of moratoriums since 1990.

MIGA coverage for civil disturbance, war, sabotage, or terrorist activity protects against physical damage and prolonged business interruption (lasting 180 days). Coverage extends to situations in which an investor is forced to abandon the project due to war or other political disturbance. In such cases, assets need not be damaged or destroyed for a claim to be made. While border closures or blockades do not cause destruction, they can significantly inter-rupt business activities; MIGA guarantees can cover associated losses. Coverage for temporary business interruption, includ-ing both costs and lost net income, is also available.

MIGA breach of contract coverage pro-tects investors when governments are con-tractual partners. Coverage extends to tar-

iff, regulatory, and credit risks arising from a government’s breach or repudiation of a contract.

MIGA non-honoring of sovereign finan-cial obligations coverage protects against losses resulting from a government’s fail-ure to make a payment when due under an unconditional financial payment obligation or guarantee given in favor of a project that otherwise meets all of MIGA’s nor-mal requirements. It does not require the investor to obtain an arbitral award. This coverage is applicable in situations when a sovereign’s financial payment obligation is unconditional and not subject to defenses.

InsurIng IslamIC fInanCe TransaCTIons

MIGA’s ability to guarantee projects under Islamic financing structures is an impor-tant component of the Agency’s support to the MENA region.

In December 2007 MIGA adapted its stan-dard contract in order to underwrite $427 million in guarantees supporting the con-struction of the Doraleh Container Terminal in Djibouti, which was funded through an Islamic financing structure. The project has had a strong developmental impact: in large part due to the terminal, the strategi-cally located nation is beginning to emerge as a key trade gateway for the member nations of the Common Market for Eastern and Southern Africa.

More recently, in June 2011, MIGA provided $450 million in investment guarantees for the expansion of telecommunications ser-

vices in Indonesia. There, the guarantees back a $450 million Murabaha financing facility underwritten by Deutsche Bank and Saudi British Bank (SABB).

mIga’s WesT Bank and gaza guaranTee TrusT fund

This trust fund, administered by MIGA on behalf of the government of Japan and the Palestinian Authority, aims at encouraging investment in the West Bank and Gaza by providing political risk insurance to both local and foreign investors. The fund is designed to facilitate small and medium-size investments, with a special emphasis on projects with high employment-generat-ing capacity. In fiscal year 2012, the fund backed investments in agribusiness and manufacturing.

In Jericho, the fund is backing the develop-ment of Medjool date palm farms by local investors. Nakheel Palestine for Agricultural Investment has planted palm trees and is harvesting, storing, and packing the dates for supply to local and European markets. In Gaza, the fund is backing the expansion of a company that produces and distrib-utes beverages (carbonated soft drinks, juice, and water).

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP November 2012

mIga In IraQ

Iraq has abundant human and natural resources: a population of about 30 mil-lion, the world’s third-largest oil reserves, considerable gas reserves, and ample water resources. Yet, while it attained the status of a middle-income country in the 1970s, over the past 25 years dictatorship, wars, and sanctions have undermined the country’s institutions and crippled its economy. Now, Iraq’s development needs are stark as it struggles to rebuild.

MIGA recently welcomed Iraq as a mem-ber country and signed its first contract of guarantee supporting an investment there in 2010. The guarantee of $5 million backs a Turkish company’s investment into a Baghdad plant that manufactures the raw material used in beverage bottles.

MIGA’s guarantee covers a shareholder loan by Karo Dis Ticaret ve Sanayi Ltd. of Turkey into Sebeel Al Safa Manufacturing Petrochemicals and Water Filling Company. Issued under MIGA’s Small Investment Program, the guarantee provides coverage against the risks of currency inconvertibility and transfer restriction, expropriation, and war and civil disturbance.

The project is located in an industrial zone some 17 kilometers southeast of the center of Baghdad.

The demand in Iraq for polyethylene tere-phthalate (PET) preforms, such as the ones manufactured by this project, is esti-mated to be more than six billion annually for different bottle sizes. Currently, nearly all of PET preforms are imported from neighboring countries. The factory will pro-vide employment for 46 staff.

While modest, this South-South invest-ment is an important signal to potential investors into Iraq, which needs foreign direct investment to help rebuild, create jobs, reduce reliance on imports, and diver-sify its economy.

SELECTED MIGA PROJECTS IN THE MIDDLE EAST AND NORTH AFRICA

Investor/Guarantee Holder Project Project Location Guarantee Amount ($M)

DP World Djibouti FZCO, Dubai Islamic Bank PJSC, United Arab Emirates; WestLB AG, Germany;Standard Chartered Bank, United Kingdom

Doraleh Container Terminal S.A.R.L.

Djibouti 427.0

Karo Dis Ticaret ve Sanayi Ltd., Turkey Sebeel Al Safa Manufacturing Petrochemicals and Water Filling Company

Iraq 4.0

Albermarle Corporation, United States Jordan Bromine Company Limited

Jordan 199.8

Fons Mediterrania Capital, F.C.R. de Regimen Simplificado, Spain

JP Industrie, S.A. Morocco 3.5

BNP Paribas, France Passenger-Car Ferry TANIT Tunisia 217.7

Fons Mediterrania Capital, F.C.R. de Regimen Simplificado, Spain

Bitaka S.A. Tunisia 5.1

Palestine Industrial Estate Development Company; Al Mashriq Real Estate Company; The Palestinian Recycling Company; Siraj Palestine Fund West Bank and Gaza

Nakheel Palestine for Agricultural Investment

West Bank and Gaza* 6.5

National Beverage Company, West Bank and Gaza

National Beverage Company - Gaza Branch

West Bank and Gaza* 2.3

* Underwritten through the MIGA-administered West Bank and Gaza Investment Guarantee Trust Fund

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP November 2012

Keeping Developmentally Sound Projects on Trackr Mobilizing sound investments: As

a multilateral development agency, MIGA supports investments that are developmentally sound and meet high social and environmental stan-dards. Governments have a vested interest in the sustainability of invest-ments covered by MIGA.

r Resolving disputes: By demonstrat-ing the investments being supported are developmentally sound, meet high social and environmental standards, and are approved by the host country government authorities as well as by MIGA’s Board, MIGA is in a strong position to help resolve disputes that might arise. MIGA has supported some 700 different projects in its his-tory, and has been able to help resolve disputes that would have led to claims in all but two cases. (MIGA has paid four claims resulting from damage due to war and civil disturbance.) MIGA is able to work effectively with all parties to resolve disputes, keeping projects on track.

r Prompt claims payment: When claims do need to be paid, MIGA is able to pay them promptly, based on a strong balance sheet and a stable stream of operating income.

Improving Terms and Conditions for Investors/Lenders r Accessing funding: MIGA guarantees

help investors obtain project finance from banks.

r Lowering borrowing costs: MIGA-guaranteed loans may help reduce risk-capital ratings of projects, leading to lower borrowing costs.

r Increasing tenors: MIGA can provide insurance coverage for up to 15 years (in some cases 20), thereby increas-ing the tenor of loans available to investors.

r Mobilizing reinsurance capacity: MIGA is able to provide guarantee support for effectively any size proj-ect, through MIGA’s ability to secure reinsurance capacity.

Knowledge and Experiencer MIGA can help clients structure trans-

actions to mitigate risk efficiently.r Clients can benefit from the agency’s

decades of experience, global reach, and knowledge of developing coun-tries.

r MIGA works with clients to imple-ment social and environmental best practices.

r MIGA ensures that appropriate risk solutions are implemented at various stages of the project life cycle.

Research and KnowledgeMIGA shares knowledge on political risk and foreign direct investment as part of its mandate to support foreign direct investment into emerging mar-kets. The annual World Investment and Political Risk report examines the overall trends in political risk perceptions, for-eign investment intentions, and longer-term demand for political risk insur-ance, especially in emerging economies (www.miga.org/wipr).

Technical AssistanceMIGA helps countries define and imple-ment strategies to promote investment through technical assistance services man-aged by the Investment Climate Advisory

Services of the World Bank Group. Through this vehicle, MIGA’s technical assistance is facilitating new investments in some of the most challenging business environments in the world.

ConTaCT

MIGA contacts for the MENA region

Nabil FawazHead, Agribusiness, Manufacturing, and Servicesnfawaz@worldbank.org t. 1.202.473.8437

For the West Bank and Gaza Investment Guarantee Fund

Layali H. AbdeenInvestment Officerlabdeen@worldbank.orgt. +972.2.2366571

For general information

Multilateral Investment Guarantee Agency World Bank Group1818 H Street, NWWashington, DC 20433t. 1.202.458.2538f. 1.202.522.2630migainquiry@worldbank.org

www.miga.org

mIga’s value

As a member of the World Bank Group, MIGA offers a range of

benefits to investors seeking protection and continuity for their

projects in developing markets.

Multilateral InvestmentGuarantee AgencyWorld Bank Group

Multilateral InvestmentGuarantee AgencyWorld Bank Group

Multilateral InvestmentGuarantee AgencyWorld Bank Group

Multilateral InvestmentGuarantee Agency

World Bank Group

Multilateral Investment Guarantee AgencyWorld Bank Group