The overall conclusion to be drawn from the analysis is that the proposal for a multilateral investment insurance agency has little prospect of implementation in the near future. This finding can be substantiated mainly on the following grounds:

– a multilateral guarantee scheme is not a suitable way of meeting the developing countries’ need for a lasting broad additional flow of direct investment. This promotional instrument alone is unlikely to channel resources towards host countries that have hitherto played only a subsidiary role, if any. This requires a longer-term process of successful development that leads to an improvement in investment opportunities;

– most of the national investment insurance schemes are more effective than the World Bank assumes. The regional concentration in various countries, which reflects the motives of investors and profitable investment opportunities, is not a disadvantage per se. Provided there are no country ceilings, restrictive underwriting practices have little effect on either investment in particular countries or major projects. Hence the interest of investors and national insurers in a complementary multilateral facility must be regarded as small. The same applies to co-insurance;

– all important investing countries now have their own overseas investment insurance schemes, which can also cover forms of participation other than the classical direct investment. This considerably narrows the proposed

132– scope for a multilateral agency. Among the capital-ex-porting countries it is probably only a few members that feel a real need for the creation of such a body. However, it is questionable whether their propensity to invest in developing countries and their investment opportunities justify the establishment of a multilateral facility. It would seem simpler to extend the business activities of the Inter-Arab Guarantee Corporation to include non-Arab host countries;

– premiums charged by a multilateral scheme that must first accumulate the necessary reserves and may also have to bear re-insurance costs are likely to be higher than those of national institutions;

– the system of “sponsorship” financing places high and indeterminable burdens on the national investment insurance schemes;

– investment protection agreements are an indispensable part of an effective multilateral guarantee scheme. At the very least, their importance seems to have been underplayed in the World Bank proposal. Furthermore, there are doubts whether the substance and effects of the agreements meet the standard set in the bilateral investment promotion treaties of the Federal Republic of Germany, for example;

– the planned close link between the insurance agency and the World Bank makes sense from the points of view of administration and cost. However, it is unacceptable to many host countries because of the possible intermingling of traditional World Bank activities and guarantee business.