World Bank Group to help S'pore firms in planning expansion abroad

SINGAPORE - Singapore firms wanting to venture overseas can now harness the World Bank Group's full suite of services to assist them in their internationalisation plans.

The World Bank and its member agencies, the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (Miga), have established their offices here as part of what Michel Wormser, vice-president and chief operating officer of Miga, calls a "special partnership with Singapore".

According to Kevin Lu, Miga's Singapore-based Asia-Pacific regional director, the World Bank group aims to "provide additional comfort for Singapore companies looking at expansion abroad, especially those going to frontier markets, such as Myanmar, Mongolia and Vietnam in the region, or Africa, Latin America and elsewhere".

He said the group and its member agencies do a lot of work with financial institutions, including local banks, international banks based here, project finance entities such as the recently established Clifford Capital, as well as Singapore-listed firms such as Olam and Hyflux.

"The idea is that as they expand to those frontier markets, that is where the returns are, Miga is there to assist them and to manage the political risk, which is usually beyond their commercial considerations," Mr Lu said.

He added that in emerging markets, infrastructure development is a high priority, and private enterprises therefore need to understand the role of public finance in such projects and how a government intends to spend in these areas.

Mr Lu said firms seeking infrastructure projects abroad typically have three main concerns: Are there opportunities, can money be made out of these projects, and are there risks associated with them that should not be taken?

The World Bank, he explained, works with governments on the project development area "to prioritise these projects, make them bankable and put them on the market, so that investors can look at it".

Given the high degree of information asymmetry in emerging markets, the IFC can help with investment structuring dissemination, while Miga can help with political risk insurance where there is downside risk in the project, he said.

"The World Bank, IFC and Miga all play different roles in that spectrum and Miga's role particularly is to provide credit enhancement for this financing to go forward," Mr Lu said.

In Singapore, one of the World Bank Group's partners is International Enterprise (IE) Singapore, said Mr Wormser.

"We are partnering with IE Singapore not only in terms of giving them support in thinking about political risk insurance, but from their side and their knowledge of the local market, they have been able to direct or orient several of their investors towards Miga, which can then support these investors when they go to other countries," he said.

This partnership is timely, IE Singapore reckons, as local companies capitalise on opportunities in promising markets. In the past year alone, it has worked with Singapore-based companies on over 200 projects mostly in overseas markets, such as China and South-east Asia, and as more firms move into relatively untapped markets such as Africa.

"In these markets, Singapore companies may encounter inherent risks that come with operating in the emerging markets. These include regime change as seen during the Arab Spring and turmoil in West Africa," said Terence Seow, assistant chief executive officer of IE Singapore. "In countries such as Indonesia and Vietnam, companies are predominantly dealing with state-owned enterprises and as a result are exposed to sovereign or sub-sovereign risks."

Yesterday, Miga launched its 2012 World Investment and Political Risk report, which found that political risk was the most significant medium-term constraint faced by foreign investors in new markets, though most did not have plans to shelve their investments.