A World Bank Group agency providing insurance, including political risk coverage, in developing countries will open a special office in Seoul as early as September, the Ministry of Knowledge Economy said Monday.

The Korean government and the Washington-based Multilateral Investment Guarantee Agency tentatively agreed to the Seoul opening, which could become a permanent office after three years of operation, officials added.

The MIGA promotes foreign direct investment into developing countries by insuring investors against political risk, advising governments on attracting investment, and mediating disputes between investors and governments.

More specifically, it protects investors against the risks of currency inconvertibility and transfer restriction; expropriation; war, civil disturbance and terrorism; breach of contract; and non-honoring of sovereign financial obligations.

Since its establishment in 1988, the MIGA has offered a combined $21 billion of guarantees to some 600 projects in 100 developing countries.

Aside from the direct provision of guarantees, which is done by the MIGA headquarters, the Seoul office will carry out other key roles.

“The Seoul office will help Korean companies overcome language and location obstacles when they conduct overseas projects such as infrastructure or resource development,” said a ministry official.

According to the ministry, Austria has become a country which uses the MIGA guarantees most frequently after installing a regional office in Vienna in 2004.

“It would be a lot easier for Korean companies to raise funds for overseas projects, while local financial organizations would accumulate more experience in supporting large-scale businesses.”

In Asia, there are four MIGA offices in Singapore, Hong Kong, Beijing and Tokyo, with another 15 countries making efforts to host the office.

Signing the memorandum of understanding at a Seoul hotel on Monday, Michel Wormser, MIGA vice president and chief operating officer, also said the agency’s support to Korean companies will be expanded through the Seoul office.

By Lee Ji-yoon (jylee@heraldcorp.com)