ABSTRACT
This chapter is concerned with the plans to introduce a multilateral investment guarantee scheme. It examines earlier proposals for setting up multilateral guarantee schemes and the reasons for their failure. In order to assess the potential and limits of the proposed scheme from the economic point of view it is necessary to test the soundness of these premisses before examining questions that would arise upon implementation of a multilateral guarantee facility, particularly by comparison with national schemes. The concept of guarantees is taken to mean the covering of risks by a special institution in connection with direct investment overseas. As in most countries, the granting of guarantees corresponds in purely technical terms to an insurance policy, the terms guarantee and insurance will be used synonymously throughout. Guarantee schemes are mechanisms which provide insurance against at least the political risks involved in investment abroad.
