Overcoming Challenges in the Multilateral Investment Guarantee Agency's Risk Insurance Coverage to Private Water Investors: Corruption and Consumer Risks

By Okaru-Bisant, Valentina | South Dakota Law Review, Summer 2012 | Go to article overview

Overcoming Challenges in the Multilateral Investment Guarantee Agency's Risk Insurance Coverage to Private Water Investors: Corruption and Consumer Risks


Okaru-Bisant, Valentina, South Dakota Law Review


I. SUMMARY

This paper discusses the ongoing controversial problems about how to make the World Bank Group more responsive to corruption in its financed investments and how to reduce corruption and consumer conflicts resulting in failed water supply privatization investments in developing countries. The negative health and economic impacts of such failed investments on poor consumers in developing nations increases the urgency for resolving the problems. There are no accurate statistics on the financial losses to private investors from corruption and consumer conflicts in global water projects. But it is undisputed that the amount (however great or small), threatens the economic existence of private investors and are sufficient to deter them from participating in the delivery of such services in Africa. (1) The World Bank estimates that corporations pay $1 trillion in bribes to foreign officials, annually. (2) According to Transparency International, in Africa alone, $148 billion is paid annually in bribes. (3) The existence of such corruption and consumer conflicts as demonstrated in three high profile water investment dispute cases (The Kingdom of Lesotho v. Acres International and Masupha Ephraim Sole, Aguas del Tunari v. Bolivia and Biwater v. Tanzania) increase the urgency for reforming the World Bank's Multilateral Investment Guarantee Agency's ("MIGA" or "the agency") risk insurance and mediatory role and its Center for Settlement of Investment Disputes' mediatory function.

Accordingly, this paper proposes innovative ways to overcome deficiencies in the scope and contents of MIGA's guarantee program, particularly: 1) absence of corruption and consumer conflicts risk insurance and 2) absence of development based due diligence and risk assessment ("DDRA") strategies. These deficiencies stifle the agency's ability to encourage private participation in the African water supply services sector because honest, but risk averse corporations, are reluctant to invest in those countries that are bedeviled with corruption and consumer conflicts. But the proposal comes with opposition from some experts. Contrary to opponents of corruption risk insurance who assert that providing such insurance coverage will promote the vice and sanction bad behavior, MIGA providing the coverage will reduce corruption and consumer conflict. But as a precondition to providing risk insurance coverage to investors, MIGA must develop and implement DDRA strategies. Similarly, MIGA should also require that investors seeking its risk insurance guarantee for water supply investments, develop and implement such strategies as a precondition to receiving insurance coverage. MIGA should also develop an accountability and punitive system, including increasing insurance premiums and maintaining a database of blacklisted corporate guarantee holders that are found guilty of corruption and disregarding consumer participation. Consequently, the threats of incurring social and economic costs of engaging in corrupt practices and disregarding consumer voices will incentivize the companies to avoid corruption and respect consumer interests. Similarly, MIGA will also have an incentive to avoid providing risk insurance coverage to corrupt companies. The aforementioned requirements are critical to creating a level playing field that companies desire, including encouraging sound corporate governance, government accountability, and due regard to poor consumer voices/needs in water investments.

II. BACKGROUND AND INTRODUCTION

A. GLOBAL CRISIS, REDUCE TAX BURDENS, AND THE WORLD BANK GROUP LEADING ROLE

Given the current global financial crisis, both economic aid suppliers (4) and aid recipients are facing internal financial crisis and pressures in their respective nations. Therefore these economic aid suppliers and recipients are seeking ways to best deal with foreign aid and private investment promotion concerns. Particularly, they seek ways that reduce tax burdens on taxpayers in aid supplier nations while producing real positive results on the ground in recipient nations. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Overcoming Challenges in the Multilateral Investment Guarantee Agency's Risk Insurance Coverage to Private Water Investors: Corruption and Consumer Risks
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.