World Bank Unit Sees Mideast Growth Opportunities
Growing business opportunities in the Middle East have sparked big interest from private investors looking to go into the region, the head of the World Bank's main guarantee agency said on Thursday, reports Reuters.
In an interview with the news agency, Yukiko Omura, executive vice president of the Bank's Multilateral Investment Guarantee Agency (MIGA), said she wants MIGA to play a bigger role in markets like the Middle East, where risks of doing business are perceived to be high, which deters investors. Omura said privatization programs, reforms that increasingly recognize the role of the private sector and recently negotiated free trade agreements, have stoked the interest in the Middle East, mainly from companies and banks in Asia and Europe. Many oil exporting countries in the region, flush with cash from higher oil prices, were looking to expand out of their oil bases and seeking opportunities elsewhere in the region.
Omura said investors had expressed interest during meetings with MIGA in projects in Iraq, which is not a MIGA member but has been in talks about joining. "The business environment, policy reform and increasing opportunities for private investment are making the Middle East an increasingly attractive destination for us," Omura said in a recent interview. "But perceptions of political instability, particularly in certain countries, can inhibit these types of investments and this is where MIGA's guarantees are extremely relevant," she added. MIGA's activities in the Middle East are small compared to other regions. At the end of fiscal year 2005 its gross guarantees exposure in the region was $154 million, or 3 percent of its outstanding portfolio. The agency's biggest guarantees exposure -- $2.3 billion -- is in Europe and Central Asia, including former Soviet states.
With many investors wary of potential risks, Omura has proposed a guarantee facility for countries emerging from conflict in Africa and a program for small businesses. She said countries attracted considerable donor assistance once conflict ends but aid eventually slowed, making private investment critical for reconstruction and growth. As head of the agency since last May, Omura said her biggest challenge was getting MIGA and its products better known among global investors. "I want to try and maximize the value added that MIGA can provide our clients and that is going into riskiest areas where the private sector companies will not go in on their own," she said.
The agency has had its share of controversial projects, including concerns by environmental groups about its backing of the West African oil pipeline in Ghana and the Nam Theun dam project in Communist-run Laos. The World Bank agreed to back the $1.2 billion Nam Theun project in March, after a decade of debate on a project in one of the world's poorest countries. "If there is no positive developmental impact, I will reject any $1 billion project, even if it looks good on our books," said Omura. She said MIGA's involvement ensured high standards of environmental protection, despite criticism of its role. "From that point of view, despite the fact that it is challenging and controversial, we need to be involved in good projects," she added.
Omura said infrastructure, oil and gas, manufacturing and agriculture were high on her list of areas where MIGA should be more involved. Regional investment projects were also increasingly important especially in Africa, she added. In the world's fast-emerging economies like China, Omura said there were opportunities for MIGA in infrastructure development projects in rural areas.
During the 2005 fiscal year, MIGA paid out two claims totaling $1.54 million to investors for losses in Argentina, emerging from a debt crisis, and in Nepal, stricken by unrest. Omura said she was monitoring developments between Buenos Aires and the International Monetary Fund on a new economic program and the country's upcoming parliamentary elections. "I think we should be involved in Latin America a lot more than we have," she said.
IMF reform hopes
Reuters reports the IMF hopes to have proposals regarding potential changes to country influence at the global lender ready by September 2006, a senior IMF official said on Thursday. Attending a meeting of central bankers in the Chilean capital, IMF first deputy managing director Anne Krueger on Thursday said that Asian countries are likely have the strongest argument for increased representation. She said proposals for changes would likely be ready for IMF and World Bank meetings in Singapore next September, although she could not say what form they would take.
MDB's coordinate anti-corruption drive
Reuters reports that international development banks have made progress in fighting corruption in their organizations, the US Senate sponsor of anti-corruption legislation said on Thursday. Bank officials met this week in London and their talks helped efforts to adopt common approaches to transparency and accountability, Sen. Richard Lugar of Indiana said. The London meeting brought together officials of the World Bank, the Asian Development Bank, the African Development Bank, the European Bank on Reconstruction and Development and the Inter-American Development Bank. More than 330 companies have been blacklisted from business with the World Bank but there has been nothing to keep those companies from doing business with other banks. Bank officials have also been working on a common definition of corruption and the issue of whether to publish the list of companies blacklisted for corruption.