Private investors involved in telecommunication and Information Communication Technologies (ICT) projects around the world know there are significant and unique risks associated with these types of investments in emerging markets—relating, among other things, to regulatory concerns, licensing, and frequency allocations. MIGA’s investment guarantees mitigate the non-commercial risks associated with investment in ICT projects, enhancing the deal structure and protecting the bottom-line potential.
Recently operators and investors in the market have expressed some concern with risks related to license non-renewal or cancellation. This is an area where a MIGA guarantee can prove valuable through expropriation or breach of contract coverage (depending on the nature of the licensing arrangement). Another challenge for telecom projects—whose revenues come in local currency—is the ability to convert and transfer earnings outside the country in order to pay dividends or service hard-currency debt.
Driven by rapid technological change and the lower cost of communications, as well as expansion of internet usage and backbone connectivity, global demand for ICT continues to grow. While the rate of growth in higher-income countries has leveled off, reflecting higher penetration rates and a maturing market base, growth in middle and lower-income countries remains high. Foreign and regional investors are being increasingly drawn into emerging markets in search of growth opportunities, but doing business in these countries is challenging because of political risks.
MIGA’s vision is to capitalize on the development power of ICT by supporting business opportunities that contribute to reducing the “digital divide” and increasing the “digital dividend”, and as a result stimulate economic growth.
Over the past ten years, MIGA has issued 38 guarantee contracts in 19 host countries and for about $1.3 billion in the telecom sector. This has contributed to support about $ 6 billion in FDI flows over the period.
No comments:
Post a Comment