Bills Digest No. 9   1997-98 Multilateral Investment Guarantee Agency Bill 1996


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WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History

Multilateral Investment Guarantee Agency Bill 1996

Date Introduced: 11 December 1996
House: House of Representatives
Portfolio: Treasury
Commencement: Royal Assent

Purpose

To allow appropriations from the Consolidated Revenue Fund for payments required to be made under the Convention establishing the Multilateral Investment Guarantee Agency (MIGA).

Background

The Multilateral Investment Guarantee Agency Bill provides for appropriations and the issue of securities authorised by the Treasurer in order to fulfil the requirements for Australia's membership of MIGA.

MIGA was established by an international convention on 12 May 1988 as one of the World Bank group of financial institutions designed to encourage the flow of investment to member countries and, in particular, to developing member countries. It was created on the premise that investors were inhibited by fears of non-commercial risks and lack of local knowledge and technical assistance from directly investing in projects in developing countries. The functions of MIGA include to issue guarantees, including coinsurance and reinsurance, against non-commercial risks in respect of investments in a member country which flow from other member countries.

MIGA offers protection against:

  • losses arising from an inability to convert local currency investment returns into foreign exchange for transfer out of the country, but does not protect against currency devaluation;
  • partial or total loss resulting from acts by the host government which may reduce or eliminate ownership of, control over, or rights to the insured investment, but does not insure against bonafide non-discriminatory measures taken by the host government in the exercise of legitimate regulatory measures;
  • losses arising from the investor's inability to obtain or enforce a decision or award against a host country that has repudiated or breached an investment contract;
  • losses from, damage to, or the destruction or disappearance of, tangible assets caused by politically motivated acts of war or civil disturbance in the host country, including revolution, insurrection, terrorism and sabotage.

MIGA's investment marketing services focus on promoting investment in developing and transitional economies, disseminating information on investment opportunities and providing a range of technical assistance and legal advice. These services complement the programs and activities of other donor institutions, including the World Bank and the International Finance Corporation (IFC), the private sector lending arm of the World Bank. MIGA has also participated with the United Nations Industrial Development Organisation and with corporate sponsors in investment promotion, technical assistance and funding support.

Since its inception, MIGA's board of directors has considered 215 projects. Forty developing countries have benefited and more than $US15 billion of direct foreign investment has been generated from investment guarantees issued by MIGA [International Economic Division, Treasury, briefing paper].

There are 128 developing country members of MIGA, and 21 industrialised countries who are members or who have signed the Convention including the United States, Japan, Germany France, Italy, Canada, New Zealand and the United Kingdom.

The justification for Australia joining MIGA is that membership not only encourages the objective of economic growth, part of the rationale for our policy of overseas aid, but also facilitates commercial opportunities for Australian businesses operating in developing countries.

In its report to the previous government, Australia, the World Bank and the International Monetary Fund, the Parliament's Joint Standing Committee on Foreign Affairs, Defence and Trade recommended that Australia join MIGA because the benefits of membership outweighed the costs.

The Treasurer, Mr Peter Costello, Australia's World Bank governor, signed the MIGA convention on behalf of Australia in Washington on 30 September 1996. Under the MIGA Convention Australia has been allocated 1 713 shares at a total cost of $US18 534 660. Of this amount ten percent will be paid in cash to MIGA in a once-only payment, with a further ten percent covered by a promissory note. The remainder of the cost, $US14 827 728 will be at call. The promissory note and the amount at call will be contingent liabilities for Australia, but are subject to call by MIGA only in the event that these amounts are needed to meet its obligations.

Main Provisions

Clause 4 provides that money may be paid out of the Consolidated Revenue Fund for payments required to be made under the Convention establishing MIGA or redeeming a security.

Clause 5 will allow, where MIGA accepts, contributions to be in the form of promissory notes or other securities. The securities will not bear interest.

The text of the Convention establishing MIGA is contained in Schedule 1 of the Bill.

Contact Officer and Copyright Details

Ian Ireland and Colette Ormonde
8 August 1997
Bills Digest Service
Information and Research Services

This Digest does not have any official legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.

IRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1997

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1997.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 12 August 1997


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