Finance
and insurance package for outbound
Indian investments
Our
Corporate Bureau
18 November 2004
Mumbai:
The Export-Import Bank of India (Exim Bank), Export
Credit Guarantee Corporation of India Ltd (ECGC) and
the World Bank's Multilateral Investment Guarantee Agency
(MIGA) have formed a partnership to provide Indian companies
investing overseas, a package of services that combines
competitively-priced financing with risk coverage.
Under this arrangement, Exim Bank will provide the needed
financing, while ECGC and MIGA will provide insurance
against the risks that are out of investors' control
such as currency inconvertibility and transfer restrictions;
expropriation; war, terrorism and civil disturbance;
and breach of contract.
This would support the overseas expansion of Indian
companies, which seek to invest overseas. According
to T C Venkat Subramanian, CMD, Exim Bank, outbound
foreign direct investment by Indian companies is estimated
at about $1 billion a year. He was addressing a press-cum-corporate
meet to announce the launch of the initiative in Mumbai,
yesterday.
Investors will able to take advantage of all the benefits
of partnership with the World Bank without having to
interact directly with MIGA staff in Washington DC.
Says P K Dash, CMD, ECGC, "The new arrangement
will have a very strong impact on efficiency and turnaround
time. Investors can, for example, work with a primary
contact at ECGC who coordinates the process and eliminates
duplication. Documentation for the non-commercial risk
insurance aspect of the partnership has been standardised
by MIGA and ECGC."
MIGA
and ECGC will work together largely through reinsurance
and co-insurance arrangements. Investors can opt for
either financing or insurance or a combined package
of services. Additionally, investors can interact locally
with ECGC while still benefiting from the World Bank's
involvement.
MIGA's
presence brings the World Bank umbrella of deterrence
against host government actions that might affect project
viability says Luis Dodero, vice-president and general
counsel of MIGA. He said, "MIGA's involvement can
help protect investments, and in the event that disagreements
do occur between investors and host governments, MIGA
can mediate disputes and prevent claims from arising
and disrupting projects."
MIGA
has 164 country members, with Iraq and Mexico being
the sole exceptions. Speaking to domain-b
after the press meet, Dodero disclosed that India has
paid around seven per cent of its MIGA membership fees
of around $30 million.
After
the dispute arising over the Dabhol Power Project, India
seems to be wary of bodies like MIGA. "We had nothing
to do with Dabhol," clarifies Dodero. "It
was an OPIC (Overseas Private Investment Corporation
of the US) project," he adds.
In the event of a dispute, MIGA works through direct
representation with governments with whom investors
may run into a dispute, even seeking the involvement
of the governments from where the investment originated
prior to allowing the dispute to slide to arbitration.
A MIGA membership benefits countries by increasing foreign
investors' confidence over a neutral dispute redressal
mechanism available to them, in the event of commercial
disputes arising out of policy issues or disputes with
governments, where overseas investors could be at a
disadvantage.
"Moreover,
countries realise that when they join MIGA, their own
overseas project investments are safeguarded,"
says Dodero.
Corporate investors can avail coverage from MIGA for
premiums ranging from 30 basis points onwards of new
overseas project investments. The premiums are calculated
on the basis of a variety 
of
political risk factors ranging from political stability
to threats from terrorist action on the one hand to
macro economic stability on the other.
List
of reports on Exim Bank
List
of reports on Export Credit Guarantee Corporation of
India Ltd
List of general reports on banks
List
of general reports on Insurance
