Afghanistan took the final step to secure its membership in the Multilateral Investment Guarantee Agency (Miga) with its subscription to the agency’s capital base.
The move marks a critical step forward in the country’s efforts to rebuild in the wake of two decades of conflict. The membership allows Miga to provide political risk insurance for investments going into and out of Afghanistan , as well as to help the country develop its ability to attract investment. Miga provides coverage against the risks of transfer restriction, expropriation, breach of contract, and war and civil disturbance (including terrorism).
After 23 years of conflict, the Afghan people are working to restore peace and prosperity. But daunting challenges remain: 70% of the population is malnourished, and only 23% have access to safe water, 12% to adequate sanitation, and just 6% to electricity. More than 70% of schools need repairs, as do most of the country’s primary roads. Reconstruction alone is expected to cost about US$15bn over the next decade, underscoring the need for private sector help in meeting the challenge.
There are many areas in need of urgent attention, particularly basic infrastructure, says Afghan finance minister Ashraf Ghani. Investment priorities are primarily in the power, roads, telecommunications, industry, and tourism sectors. Agriculture, too, which has suffered due to an extended drought, is an area that stands to benefit from investment.
Since its inception, Miga has supported 56 projects with guarantees worth nearly US$1.5bn in 16 conflict-affected countries. This represents 13% of the agency’s gross portfolio. “Miga can bridge the gap between investors’ concerns and a country’s desire to attract good investors to help reconstruct the economy,” says Motomichi Ikawa, Miga’s executive vice-president. “We have a healthy pipeline of inquiries from investors who are interested in doing business in Afghanistan, but are concerned about the safety of their investments.”
Miga is setting up a guarantee trust fund for Afghanistan with donor and other outside funding. “This will allow us to more fully deploy our guarantee products in Afghanistan, as well as increase our flexibility in the types of deals and transactions we’ll be able to support,” says Ikawa.
“We are pleased to become a member of Miga. We look forward to a fruitful relationship that will help us attract and retain more foreign investment, promote economic growth, and ultimately benefit the people of our country,” says Ghani.