Asian Development Bank (ADB) would help stimulate private sector activity and attract foreign direct investment in Afghanistan by co-financing an investment guarantee facility to provide political risk guarantees to investors and financiers, through a loan approved for 5 million dollars and a 10 million dollars guarantee.
The Afghanistan Investment Guarantee Facility (AIGF), to be administered by the World Bank's Multilateral Investment Guarantee Agency (MIGA), targets investment in the small and medium enterprises sector. A MIGA analysis showed an encouraging potential level of foreign direct investment in Afghanistan, with demand coming from sectors such as energy, telecommunications, Internet services, banking, hotels, housing, food and agribusiness, textile, steel, oil and gas, and mining.
The international community was making considerable efforts to support Afghanistan's rebuilding and development - available official flows were not enough to sustain the reconstruction effort. "Limited amounts of political risk insurance were currently available world wide for Afghanistan. Under AIGF, investors may choose any combination of four types of risk coverage - transfer restriction, expropriation, war and civil disturbance, and breach of contract - with the guarantees running up to seven years," the sources in ADB said.
According to them, a 5 million dollars loan from ADB's concessional Asian Development Fund, carrying a 40-year term with a grace period of 10 years, would help finance the AIGF. A further 10 million dollars from ADB's ordinary capital resources would support the supplemental political risk guarantee component of the facility. Other sources of co-financing for the project include up to 10 million dollars from MIGA and a 5 million dollars credit from the International Development Association. About 30 million dollars was expected from other public or private insurers.
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