January 04, 2014 00:00 By Khine Kyaw The Nation Yangon
Insurance against political risks from World Bank unit
Myanmar’s membership in the Multilateral Investment Guarantee Agency will be of great benefit to local businesspeople as well as foreign investors working in the country, according to its officials.
MIGA, an arm of the World Bank Group offering political-risk insurance and credit enhancement, announced late last month that Myanmar had fulfilled all of the requirements to become its 180th member.
“MIGA will now be able to support investments made by foreign investors.
More specifically, for a frontier country like Myanmar, the perception of risk tends to be high, especially non-commercial risks such as war and civil disturbance and currency inconvertability.
These are the risks MIGA could help investors to mitigate through the use of MIGA guarantees,” Kevin Lu, the agency’s regional director for Asia and the Pacific, said in an exclusive interview with The Nation.
Myanmar’s membership in MIGA means that direct foreign investment into the country is eligible for the agency’s guarantees. These protect investments against the risks of transfer restriction, expropriation, breach of contract, non-honouring of financial obligations, and war and civil disturbance.
Investors from Myanmar going into other MIGA member countries may also receive coverage.
“If Myanmar investors venture into another country where they are not comfortable with these non-commercial risks, MIGA could issue guarantees to benefit Myanmar investors,” Lu said.
MIGA support could encourage more foreign interests to consider investing in Myanmar’s banking sector, he said.
“Foreign banks could also utilise MIGA guarantees to secure their funding to set up subsidiaries in Myanmar.”
Locally owned private banks including the country’s largest, Kanbawza Bank, welcomed Myanmar’s membership in MIGA.
“I think this is good for the country overall,” said Than Than Win, deputy general manager at KBZ Bank.
Keiko Honda, MIGA executive vice president, also welcomed Myanmar as a member at a critical time in the country’s history.
“We are eager to support investments in sectors such as energy, telecom, and agribusiness. Investments that create jobs and provide critical infrastructure will help Myanmar realise the benefits of its historic transition,” she said.
In October, Honda had outlined MIGA’s goals.
Improvement of lives
“Our focus is on markets where we can make the greatest difference to improve people’s lives. As Myanmar continues down its historic path of openness, we are committed to helping the country achieve its development objectives – through leveraging private investments, especially in energy, telecoms and agriculture,” she said at that time.
The MIGA Convention was signed by the Myanmar government in Washington, DC, in October during the World Bank’s annual meetings, which was the key step towards becoming a MIGA member country. Since then, the administration of President Thein Sein has fulfilled all outstanding membership requirements, leading to its confirmation as a member.
On December 17, Myanmar officially became the 180th member of MIGA. MIGA aims to promote foreign direct investment into developing countries to support economic growth, reduce poverty, and improve people’s lives.
Among its member states, 155 are developing countries, and 27 are in the Asia-Pacific region.