Encouraging FDI in Afghanistan

MIGA provides several tools to assist investors in evaluating and making investments in Afghanistan. In 2005, MIGA will open a field office in Kabul, where investors can meet our representative to learn more about two key facets of the program – political risk insurance and research on sector-specific opportunities.

Political risk insurance. In July 2004, the World Bank approved a credit to Afghanistan for the financing of a political risk insurance program to be administered by MIGA. The Afghanistan Investment Guarantee Facility (AIGF) encourages foreign direct investment (FDI) in Afghanistan by providing political risk insurance with coverage capacity of up to US$60 million. The facility is designed to encourage FDI particularly in smaller projects critical right now to the country’s economic development.

MIGA is one of the few providers of political risk insurance operating in Afghanistan, and is the only global multilateral organization insuring investors against political risks. These risks include currency transfer restriction and inconvertibility, expropriation, breach of contract, and war and civil disturbance. The use of MIGA’s underwriting policies and methodologies ensures that only those projects that are financially viable and have a positive development impact in Afghanistan will be underwritten under the facility. Afghanistan became a member of MIGA in July 2003.

Sector-specific opportunities. MIGA is working with the Afghan Investment Support Agency (AISA) to help encourage investment in four key industries: Logistics & Transportation, Carpets & Textiles, Food & Beverage Processing and Mining. Investment Horizons: Afghanistan, a benchmarking study of existing investors published in April 2005, is available to help investors evaluate the actual operating costs and conditions in each of the four sectors. In addition, MIGA has produced three sector-specific, informational brochures. These brochures highlight key results of the benchmarking study, aspects of the investment climate, sector strengths and potential areas of opportunity, including those suitable for entrepreneurs and smaller companies.

The benchmarking study is part of a larger technical assistance project funded through a grant from the Federal Ministry for Economic Cooperation and Development, Germany (also known as BMZ – Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung). AISA was established in August 2003 with the support of BMZ.