In the new film “Arbitrage” the character played by Richard Gere thought he had made a highly profitable mining investment in an Eastern European country with a “friendly” government. But suddenly things are not working the way they were supposed to. He cannot access the returns from his investment —the government will not let him take them out of the country.
It was all about connectivity in the just-concluded World Economic Forum for East Asia that took place in Bangkok last week. Participants pondered many questions related to how we could make this region more connected, in terms of trade, tourism, investments, and even value.
In a session on infrastructure financing, IFC Vice President Karin Finkelston spoke eloquently about the need to mobilize financing for many developing countries in Asia and what IFC has been doing in terms of both investing and advising governments to prepare bankable projects. When Professor Joe Stiglitz on the same panel raised his proposal to establish an ASEAN development bank, it received mixed feedback from the fellow panelists.
This week, the World Bank Group’s Investment Climate Department hosted a stimulating discussion on the effectiveness of Investment Promotion Agencies (IPAs). The panel discussion coincided with the launch of the Investment Climate Department’s report on IPAs across the globe. MIGA co-sponsored the report and pioneered its methodology.
First, the bad news. This report makes for quite depressing reading for this startling finding: overall, the responsiveness of investment promotion intermediaries to investor inquiries is low, with 80% of IPAs not responding to sector-specific investor inquiries. This means that 80% of these organizations did not return a phone call or email from a foreign direct investment (FDI) “mystery shopper.” This translates to missed investment opportunities that are particularly needed now as the competition for FDI is so fierce.
Having spent some of my formative years on the African continent, I can attest to the fact that the frequency of power blackouts desensitized citizenry to the point that power outages were neither a cause of despair nor excitement but just another mundane facet of everyday life. Power outages remain common phenomena throughout most of sub-Saharan Africa owing to various reasons such as low capacity output, over-reliance on volatile sources of energy, outdated machinery, mismatched pricing, energy theft, low collection rates, among other reasons. Over 30 countries in the continent have suffered power shortages in recent years, with detrimental economic effects including lost revenues, typically ranging between 1 and 4 percent of GDP.
A few weeks ago, I attended the launch ceremony of the new Palestine Capital Growth Fund, a subsidiary of the multibillion-dollar, Dubai-based private equity fund Abraaj. I found that many people questioned why Abraaj would operate in the Palestinian Territories. Some would even describe such a move as a pure act of social responsibility. But it is not.
Imagine a conversation. “So, your company is expanding its operations in country x, but I hear there is a lot of frustration among young people about unemployment. Are you worried about the possibility of political upheaval?” And the investor responds, “We’re not very worried about any instability. The current government has been in power for decades and we’re very well connected, so if there are any problems, we’ll be protected.” Without naming names, we can think about how this approach to risk management may have failed investors as of late, but such reversals of fortune predate the days of Twitter and Facebook – take the fall of the Suharto regime in Indonesia. At MIGA’s recent discussion titled “Best Laid Plans? How Ignoring Political Economy Affects Development Outcomes and Increases Risk", this attitude toward risk was aptly labeled “risk myopia.”
Last week, MIGA hosted a panel discussion on the role of the private sector in sustainable growth as part of the World Bank Group’s Sustainable Development Network Forum 2012. Taking the initiative as an agency of the World Bank Group that encourages investment by the private sector, MIGA brought this angle to the more general sustainable growth discussion.
Keynote speaker Jeffrey Leonard from the Global Environment Fund opened citing the World Bank President’s remarks on sustainable development that were right on the money – outlining an urgent need for attention to the matter, noting that resources must be made available – yes, good, onward! The catch? They were attributed to a president who left office 25 years ago (Tom Clausen).
- The World Region
- Private Sector Development
- Sustainable Development
- public-private partnerships
- Multilateral Investment Guarantee Agency
- Mary Boomgard
- Marsh USA
- Mahlette Betre
- Julie Martin
- Jeffrey Leonard
- Global Environment Fund
- Equator Principles
- Deniz Baharoglu
- David Vidal
- Conservation International
- Conference Board
- Carbon Finance
- Benoit Bosquet
Today in Singapore, MIGA and IE Singapore co-hosted a seminar:"Managing Global Political Risks: Old Risks, New Moment."
After the welcome speech by IE's Assistant CEO Terence Seow, Michel Wormser, MIGA's Vice President and COO, delivered the keynote speech, which touched upon the current global economic turbulence, potential investment opportunities for Asian investors, the perception of risks, and what role the World Bank Group can play in facilitating private capital into productive projects. Michel noted that—while he understands that many Asian companies tend to invest in nearby countries—there are also plentiful of opportunities in Africa and Latin America.
The World Economic Forum launched its seventh Global Risks report before this year’s annual meeting in Davos. The top risk this year, among the 50 most pressing risks based on a survey of 400 top business leaders, is income inequality and its associated economic and political risks. The report aptly summarized this risk as the “risk of dystopia.”
It’s been almost a year since Tunisian street vendor Mohamed Bouazizi set himself on fire, sparking a wave of protests in his country and ensuing events that led to what we now refer to as the “Arab Spring”. Today, these events were remembered, and the future of the region debated, during a seminar MIGA co-hosted with the Financial Times in London on Managing Global Political Risk: Old Risks, New Moment.
Tunisia’s Minister of Finance Jalloul Ayed spoke passionately, eloquently, and with tremendous insight about the challenges and opportunities facing his country, noting many look to Tunisia as setting the pace and showing the way. “So far so good”, he noted, adding “democracy is now hopefully part of our political tradition.” But there is a daunting road ahead, dealing with the priorities, creating jobs for the hundreds of thousands of unemployed youth, encouraging much-needed investment. His biggest concern? “We cannot lose focus; we have to reform and get the job done.”