Private Investment has played a vital role in the development of the South of Sri Lanka and it is hoped that it will contribute to the development of the conflict affected areas of the country. The Government is making every effort to attract both foreign and local private capital into the conflict affected areas to spread the economic benefits of private investment. The Government has sought the assistance of the Multi-lateral Investment Guaranty Agency (MIGA) of the World Bank Group in developing and implementing an initiative to make available insurance cover for private investors in these areas. MIGA is a World Bank Group agency that provides guarantees to foreign investors against political risks and is now exploring the possibility of providing guarantees to certain local private investors in Sri Lanka.

The Secretariat for Coordinating the Peace Process (SCOPP) hosted a Meeting on August 3, 2006 in Colombo to discuss the details of establishing an Investment Guarantee Facility in Sri Lanka to cover high risk investment in the conflict affected areas.

Representatives from MIGA, World Bank, Ministry of Finance and Planning, Board of Investment (BOI), Sri Lanka Export Credit Insurance Corporation (SLECIC), International Finance Corporation (IFC), Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL), Ceylon Chamber of Commerce, National Chamber of Commerce of Sri Lanka and Sri Lanka First were in attendance.

Dr Srilal Perera, Chief Counsel Operations, Legal Affairs and Claims Group, MIGA provided a detailed exposition of the proposed facility and led the discussion exploring ways in which the guarantee facility could be extended to cover local investments in the conflict affected areas.

The core element in this proposal is a guarantee Trust Fund funded by the World Bank and other donors and leveraged by insurance capacity from MIGA (to the extent possible by its capital and charter) and other local insurers such as the Sri Lanka Export Credit Insurance Corporation ( SLECIC) and private insurers. It is envisaged that the size of the Trust Fund would be approximately US $ 40 Million. The Trust Fund will underwrite the first loss with respect to claims.

SCOPP, in co–operation with the BOI will assist in further exploring this proposal. Steps will be taken to examine the demand by potential investors for the utilization of such a facility. SCOPP will continue to encourage further discussions on this proposal with relevant State bodies, the private sector and international institutions.

The proposed Investment Guaranty Facility of MIGA would be an effective mechanism for attracting local, foreign and diaspora investment into Sri Lanka, particularly into conflict affected areas.