Financial Times

Government planners, the business community and the World Bank on Thursday (August 3) discussed ways of providing guarantees to local investors to attract investment in conflict areas, even as – on that day – the security situation in Sri Lanka’s conflict-ridden northeast region worsened with heavy fighting between security forces and the LTTE.

This came after the government sought the assistance of the Multi-lateral Investment Guaranty Agency (MIGA) of the World Bank Group in developing and implementing an initiative to make available insurance cover for private investors in these areas.

MIGA is an agency that provides guarantees to foreign investors against political risks but is now exploring the possibility of providing guarantees to certain local private investors in Sri Lanka, the government’s Peace Secretariat (Secretariat for Coordinating the Peace Process - SCOPP) said in a statement. It said the government was making every effort to attract both foreign and local private capital into the conflict affected areas to spread the economic benefits of private investment.

Representatives from MIGA, World Bank, Ministry of Finance and Planning, Board of Investment (BOI), Sri Lanka Export Credit Insurance Corporation (SLECIC), International Finance Corporation (IFC), Federation of Chambers of Commerce and Industry of Sri Lanka, Ceylon Chamber of Commerce, National Chamber of Commerce of Sri Lanka and Sri Lanka First met on Thursday to discuss ways of establishing an Investment Guarantee Facility in Sri Lanka to cover high risk investment in the conflict affected areas.

SCOPP said Dr Srilal Perera, Chief Counsel Operations, Legal Affairs and Claims Group, MIGA provided a detailed exposition of the proposed facility and led the discussion exploring ways in which the guarantee facility could be extended to cover local investments in the conflict affected areas.

“The core element in this proposal is a guarantee Trust Fund funded by the World Bank and other donors and leveraged by insurance capacity from MIGA (to the extent possible by its capital and charter) and other local insurers such as the Sri Lanka Export Credit Insurance Corporation and private insurers.

It is envisaged that the size of the trust fund would be approximately $40 million. The Trust Fund will underwrite the first loss with respect to claims,” the statement added.

SCOPP said it will in co-operation with the BOI assist in further exploring this proposal. Steps will be taken to examine the demand by potential investors for the utilization of such a facility. SCOPP will continue to encourage further discussions on this proposal with relevant State bodies, the private sector and international institutions.

“The proposed Investment Guaranty Facility of MIGA would be an effective mechanism for attracting local, foreign and diaspora investment into Sri Lanka, particularly into conflict affected areas,” it said.