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WASHINGTON-The Multilateral Investment Guarantee Agency is preparing to write political risk insurance for small and midsize business ventures in the Palestinian autonomous territories of the West Bank and Gaza.
MIGA, a division of the World Bank that provides political risk insurance for companies doing business in developing countries, has signed a deal with the Palestinian Liberation Organization, the latter acting on behalf of the Palestinian Authority, to create a special insurance fund, "a small MIGA," says Luis Dodero, general counsel and vp of MIGA in Washington.
Because the Palestinian territories are not a sovereign state and thus not able to be members of MIGA, the agency cannot provide insurance to the areas through its usual channels, he said. "MIGA can only insure investments in countries which are its members. But as we are part of the World Bank we consider ourselves obliged to help" the Palestinians, he said. Setting up the separate fund enables MIGA to do that.
The plan is to set up a special insurance fund of about $30 million that will be used as the guarantee for political risk insurance in the Palestinian territories. MIGA will administer this fund for a small commission. As a start, the World Bank will loan $10 million to the Palestinian Authority, which will use that as the nucleus of the fund.
Mr. Dodero is seeking contributions to the fund from other countries to bring it to about $30 million. So far, there have been discussions with Sweden, Holland, Jordan and Egypt as potential contributors. Israel also is expected to be a contributor, Mr. Dodero says.
Neither the United States nor the larger European Union members, such as Britain, France and Germany, have indicated they would contribute.
"These countries (the Europeans) are reluctant to contribute because they are already providing aid to the Palestinians on a bilateral basis," Mr. Dodero says.
The political risk insurance will provide cover against any losses due to expropriation of assets by the Palestinian Authority. It also will cover against losses caused by a closures of the border with Israel.
"The definition of war and civil disturbances is wide enough to accommodate border closures," Mr. Dodero said. "But this is a very politically sensitive issue."
The MIGA funds will cover projects that are labor-intensive and environmentally sensitive, Mr. Dodero says, adding that the agency's aim is to promote employment in the territories. A water treatment plant in the area is an example. If the plant is damaged-even if it is by Middle East violence-it will be covered.
About $2 million in insurance cover should be provided per project.