Bills Digest No. 9 1997-98
Multilateral Investment Guarantee Agency Bill 1996
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
Multilateral Investment Guarantee Agency Bill 1996
Date Introduced: 11 December 1996
House: House of Representatives
Portfolio: Treasury
Commencement: Royal Assent
To allow appropriations from the Consolidated Revenue Fund for payments
required to be made under the Convention establishing the Multilateral
Investment Guarantee Agency (MIGA).
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.
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.
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
|
