1. WORLD BANK GROUP MULTILATERAL INVESTMENT GUARANTEE AGENCY Mobilizing the Private Sector for Public Education: The Role MIGA Can Play Frank J. Lysy Chief Economist, MIGA June 8, 2007

2. WORLD BANK GROUP MULTILATERAL INVESTMENT GUARANTEE AGENCY 2 What MIGA Does Member of World Bank Group MIGA has its own balance sheet Small: Only 100 staff now Sells Political Risk Insurance to Private Foreign Investors

3. WORLD BANK GROUP MULTILATERAL INVESTMENT GUARANTEE AGENCY 3 MIGAs PRI Covers Transfer and Convertibility Expropriation Breach of Contract War & Civil Disturbance Investor can choose any one, or up to all four Pays premium based on risk (to MIGA)

4. WORLD BANK GROUP MULTILATERAL INVESTMENT GUARANTEE AGENCY 4 Why We Need Better Schools

5. WORLD BANK GROUP MULTILATERAL INVESTMENT GUARANTEE AGENCY 5 Traditional Private Projects Sale in a competitive market, by competing suppliers Hence: –Price as measure of value at margin –Private cost at margin generally approximates social cost (other than for externalities and subsidies) PPPs very different Must confirm to be of social value

6. WORLD BANK GROUP MULTILATERAL INVESTMENT GUARANTEE AGENCY 6 PPPs: Must Meet Four Tests Does the PPP structure make sense? Was the PPP contract or concession awarded appropriately? Is there a positive social return (ERR)? Is there adequate fiscal space?

7. WORLD BANK GROUP MULTILATERAL INVESTMENT GUARANTEE AGENCY 7 Gabon Vocational Education Private firm would design curriculum, rehab buildings, install computers, and manage for six years Some student fees, but also govt support Negotiated contract, with alternative suppliers considered Reasonable ERR likely Structure reasonable, although not ideal

8. WORLD BANK GROUP MULTILATERAL INVESTMENT GUARANTEE AGENCY 8 Gabon: Vocational Education Project Manager Banks Management Contract $4.6m Over 6 yrs Performance Bond $0.7m After 3 yrs Principal & Interest on 10 year loan $56.3m Gabon National Agency for Vocational Education Counter-Guarantee of Ministry of Finance

9. WORLD BANK GROUP MULTILATERAL INVESTMENT GUARANTEE AGENCY 9 Thank you! Frank Lysy FLysy@worldbank.org For more information visit www.miga.org