CHAPTER 1
Introduction Izumi Kobayashi
It is a pleasure for me to introduce Old Risks-New Solutions, or Is It the Other Way Around?, the sixth volume in the International Political Risk Management Series, and now a World Bank Studies publication. The chapters that follow represent recent viewpoints on political risk management issues, which were presented at the Seventh Biannual MIGA-Georgetown Symposium. The Symposium was hosted by the Multilateral Investment Guarantee Agency and Georgetown University on October 28, 2010. Events like the Multilateral Investment Guarantee Agency (MIGA)Georgetown Symposium demonstrate that there is much to be learned through the sharing of experiences and thinking together about the critical issues that confront our industry as well as new products and ideas.
External Environment In November 2008, the time of the last symposium, our attention was focused on unfolding of the financial crisis. Only two months had passed since the collapse of Lehman Brothers, yet we had already witnessed the beginning of steep decline in foreign direct investment flows not only to the developing countries but all over the world. Investment projects were frozen or cancelled as available credit contracted or disappeared altogether. As new details emerged, it became increasingly unclear just how bad and how far reaching the financial crisis would become. In 2010, from MIGA’s point of view, there were signs that foreign direct investment (FDI) was beginning to recover. Although the credit environment was still tight, with many banks were still holding on their capital as opposed to extending credit, the appetite for investment was beginning grow stronger. However, investors still faced challenges. Established investors felt that their balance sheet was strong enough to warrant the risk of not ensuring the investment while smaller investors were often facing a higher probability of difficulty after the start of project. Many small investors lacked the expertise to
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