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Mineral Resource Tenders and Mining Infrastructure Projects Guiding PrinciplesNumerous recent changes in the mining industry have led governments to an increased interest in the tender process as a means of awarding mineral rights. High demand and high mineral prices driven by rapid economic growth in countries such as Brazil, China, and India, and the emergence of new global companies in these countries, have resulted in increased competition to obtain access to mineral resources worldwide. The two parts of this paper, the guidance/good practices and the case study, are presented together even though they do not directly draw on each other's conclusions. Both examine guiding principles and good practices for governments to use in attracting mineral investments. Although it is noted by the authors that the Aynak tender was not a perfect process, occurring as it did in a difficult environment with a deficient in-country capacity and myriad investment challenges, it is a relevant example of what is involved and what must be considered by a government in the process and content of a tender. The paper is expected to motivate long-term strategic thinking among decision makers in mineral-rich countries on ways to begin mine development with the end in mind. Its intention is not to prescribe a set of actions, but rather to inform possible ways of maximizing the local content from mining projects which will need to be adjusted in each unique case.
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World Investment and Political Risk 2011The mission of the Multilateral Investment Guarantee Agency (MIGA) is to promote foreign direct investment (FDI) into developing countries to support economic growth, reduce poverty, and improve people's lives. As part of this mandate, the agency seeks to foster a better understanding of investors' perceptions of political risk as they relate to FDI, as well as the role of the political risk insurance (PRI) industry in mitigating these risks. Today's economic turbulence and fragility in developed countries are again posing challenges for the global economy. Developing countries are feeling the impact through multiple channels, including through the flows of FDI and private capital. Having rebounded sharply in 2010, FDI flows to developing countries continued to increase in 2011, but are expected to moderate going forward. The report highlights once again the salience of political risk as an important concern for multinational enterprises that seek to invest in developing countries. This is also reflected in the increased issuance of new political risk insurance in 2010, a trend that seems to be continuing in 2011, helped by a growing awareness of insurance as a risk-mitigation tool. This year the report also pays special attention to the FDI picture in the Middle East and North Africa region in light of the Arab Spring, as well as the reaction of multinational enterprises to these developments. This year's report puts a spotlight on expropriation, a political risk with a long and recurring history, and examines motivations of host-country governments in deciding whether to expropriate. The report also highlights the role of political or economic shocks in triggering expropriations. It finds that investor disputes are more likely to be resolved by democratically elected governments rather than non-democratic regimes. This suggests that the propensity to expropriate is significantly higher in countries with non-democratic regimes, a finding that should be of interest to investors who are more concerned about political stability than about regime type and political institutions. Research conducted for this report, including the MIGA- Economist Intelligence Unit (EIU) survey and discussions with London-based private sector PRI underwriters and brokers, showed that the views of investors and PRI providers regarding regime type and expropriation risk differ slightly. Underwriters and brokers did not find the empirical results surprising and agreed that these results support their overall underwriting views.
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World Investment and Political Risk 2011The mission of the Multilateral Investment Guarantee Agency (MIGA) is to promote foreign direct investment (FDI) into developing countries to support economic growth, reduce poverty, and improve people's lives. As part of this mandate, the agency seeks to foster a better understanding of investors' perceptions of political risk as they relate to FDI, as well as the role of the political risk insurance (PRI) industry in mitigating these risks. Today's economic turbulence and fragility in developed countries are again posing challenges for the global economy. Developing countries are feeling the impact through multiple channels, including through the flows of FDI and private capital. Having rebounded sharply in 2010, FDI flows to developing countries continued to increase in 2011, but are expected to moderate going forward. The report highlights once again the salience of political risk as an important concern for multinational enterprises that seek to invest in developing countries. This is also reflected in the increased issuance of new political risk insurance in 2010, a trend that seems to be continuing in 2011, helped by a growing awareness of insurance as a risk-mitigation tool. This year the report also pays special attention to the FDI picture in the Middle East and North Africa region in light of the Arab Spring, as well as the reaction of multinational enterprises to these developments. This year's report puts a spotlight on expropriation, a political risk with a long and recurring history, and examines motivations of host-country governments in deciding whether to expropriate. The report also highlights the role of political or economic shocks in triggering expropriations. It finds that investor disputes are more likely to be resolved by democratically elected governments rather than non-democratic regimes. This suggests that the propensity to expropriate is significantly higher in countries with non-democratic regimes, a finding that should be of interest to investors who are more concerned about political stability than about regime type and political institutions. Research conducted for this report, including the MIGA- Economist Intelligence Unit (EIU) survey and discussions with London-based private sector PRI underwriters and brokers, showed that the views of investors and PRI providers regarding regime type and expropriation risk differ slightly. Underwriters and brokers did not find the empirical results surprising and agreed that these results support their overall underwriting views.