The Multilateral Investment Guarantee Agency (Miga), a member of the World Bank Group, has provided US$1.07mn in investment insurance (guarantees) for a cotton project in northern Afghanistan. The guarantees will protect the investment against the non-commercial risks of currency transfer restriction, expropriation, and war and civil disturbance, including terrorism.

The project, the first investment in Afghanistan to be guaranteed by Miga, will provide technical and financial assistance to cotton growers in northern Afghanistan to increase cotton production and yield, as well as upgrade the region’s capacity for ginning cotton and producing cottonseed oil.

The New Afghanistan Project for Cotton and Oil Development (Napcod) is a joint venture between Dagris, which is majority owned by the French government, and the government of Afghanistan. The Agence Franaise de Developpement is also supporting the investment.

Napcod will produce, collect, and gin cotton, as well as refine the cotton seeds to produce animal feed and high-value oil. In its first season, Napcod has already purchased cotton from more than 4,600 farmers and aims to increase that number to 20,000 by 2008. The project is expected to create around 300 permanent jobs, in addition to stimulating local businesses that supply goods to the cotton industry.

All Napcod’s cotton production is destined for export, which should help improve the country’s balance of payments.

Miga’s coverage marks the first use of the Afghanistan Investment Guarantee Trust Fund (AIGF), a special fund designed to encourage foreign investment into the country. The fund, administered by Miga, is jointly funded by Afghanistan, the World Bank’s International Development Association, the UK, and the Asian Development Bank. Germany is funding administrative costs for the AIGF’s field representative.