World Bank looks to lure investors into conflict-hit states early on

By Lesley Wroughton

WASHINGTON (Reuters) - The World Bank's political risk guarantee agency hopes that with a new insurance facility it can help attract more companies into conflict-hit states early on as the country rebuilds and tries to get people back to work, a senior official said on Monday.

Michel Wormser, chief operating officer for the Multilateral Investment Guarantee Agency (MIGA), said the donor-funded Conflict-Affected and Fragile Economies Facility will enable the agency to provide cover for projects it would normally regard as too risky in countries emerging from war or violence.

Canada has said it will provide $20 million to the facility while two European countries have indicated they stand ready to participate, Wormser said. MIGA is targeting an initial $80 million from donor countries.

Wormser told Reuters the facility would be used in countries where "it would be too onerous on our capital to go, where the risk is too high, and where having a first-loss facility would help us take on additional risk that we would otherwise be unable to take."

Years of conflict or violence has often left these countries' economies in tatters and a population mired in poverty and without work. Foreign investors have usually fled and are reluctant to return until there are signs of political and economic stability.

But Wormser said with political risk cover, investors will be more willing to return early on.

"It is precisely during that window of time that the governments are looking for the creation of jobs and opportunities," he said. "One factor that brings stability to these countries is the existence of jobs and the resumption of normal life, which comes by creating enterprises that bring people back to work."

The World Bank estimates more than 1.5 billion people live in fragile states around the world in places from Afghanistan to Iraq, Libya, Ivory Coast, Egypt, Liberia, Myanmar and Mali that have been hit by some form of conflict.

Some of Africa's fastest growing economies like Angola and Mozambique were once conflict zones and now in the midst of an economic revival.

In the past year, Wormser said MIGA has supported three investments in Ivory Coast, the world's top cocoa grower brought to its knees by a brief civil war in 2011, that generated $2.5 billion in foreign direct investment. Heavy investment in infrastructure renewal and energy production coupled with the expansion of the nascent mining and petroleum sectors are intended to restore the country's status as a regional economic powerhouse.

"It is not helpful to wait for years for the situation to be totally balanced for investors to reengage in a country," Wormser said. "These are countries where the risk is the highest but where investment opportunities can also be the most profitable," he added.

Source: http://news.yahoo.com/world-bank-looks-lure-investors-conflict-hit-states-151226084.html

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