Conflict Affected and Fragile States Facility (CAF)

• Conflict Affected and Fragile States Facility (CAF)

• Environmental and Social Challenges Trust Fund

Two new Facilities:

WBG Donor Forum – Paris – May 19, 2010

MULTILATERAL INVESTMENT GUARANTEE AGENCY WORLD BANK GROUP 2

MIGA – Two Examples of New Ways to Expand our Core Business

Creation of a new Facility to encourage investment in post-conflict and fragile states: Offer a wider set of instruments and services

Expansion of an existing pilot Facility: provide technical assistance to existing or potential MIGA clients to help them achieve compliance with MIGA’s environmental and social standards.


Private investment helps reduce the return to conflict

Economic growth reduces the risk of reverting to conflict

Main driver: job creation Long-term structural employment

requires private sector development Growth rate of private sector is reduced

by risk and lack of investment


But – Private investment tends to come in several years after aid peaks


High Demand, Low Capacity for Insuring Projects in Conflict Affected

States Investors, lenders and exporters express interest

in conflict affected states, but risk is often too high and

risk mitigation options are limited: Private insurance market: case by case basis only, short tenors,

high premiums. Public market: many Export Credit Agencies are either off-

cover or offer limited cover (e.g. case by case basis, short term only) for export credit insurance. Limited amounts of investment insurance coverage are available.


Private PRI in Conflict-affected and Fragile States - Market Failure

Maximumfeasibleprice


MIGA - Proposed Conflict-affected and Fragile States Facility (CAF)

Allow MIGA to start addressing gaps in the supply of insurance for projects in target countries

Context Promoting sustainable development in post conflict and fragile

states. Influence investment and trade decisions by means of insurance

Facility will be fully donor funded, providing for the insurance products that clients need to invest in and trade with target countries

Facility would harness private sector insurance market to create a public-private partnership (PPP) solution


Facility is set up as a Public-Private Partnership

Donor

Donor

Investors, exporters

and lenders

Conflict Affected

and Fragile States

Insurance cover

premium

Donor

Private Sector

(PRI Market)

Donors

Investmentand tradeFacility

Excess of Loss Layer($400 million)

First Loss Layer($100 million)

Facility


Main principles of the Facility

Facilitate projects with positive developmental impact in conflict affected and fragile states

Offer insurance products such as investment insurance, export credit insurance, coverage for local currency financing

All projects insured under the Facility will comply with WBG safeguard policies and fit in the Debt Sustainability Framework

Facility complements WBG and other Development Partners’ activities


Proposed risk mitigation instruments

Investment insurance for equity or debt: both cross border and local, new and existing War and Civil disturbance, including business interruption Expropriation Currency conversion and transfer Breach of contract Non-honoring of a sovereign financial guarantee

Structured trade credit insurance (pre-export finance) Export credit insurance All instruments to be used both for inward or domestic

flows and for outward trade and investment


The World Bank Group’s Role in the CAF Facility

Fiduciary responsibility for management of the fund Clients value multilateral participation Attracting Beneficial Investment - screen investors Ensuring respect of debt sustainability ceilings Facility would complement existing programs (Peace and

State-building Fund, governance, investment climate)


MIGA - Environmental and Social Challenges Trust Fund

Purpose: Provide technical assistance to help MIGA clients achieve compliance with MIGA’s environmental and social performance standards.

Important resource which has received positive feedback from the clients.


Examples of Technical Assistance Provided through the Trust Fund between 2007 and 2009:

Resettlement in Nigeria

Human Rights in DRC

Communities and Workers’ health and safety in Mozambique

Development of environmental management systems in

Rwanda and Uganda

Artisanal miners in Burkina Faso.

Conflict Affected and Fragile States Facility (CAF)

Documents

Transcript of Conflict Affected and Fragile States Facility (CAF)