An Iraqi manufacturing plant has received the country’s first-ever guarantee from the World Bank’s insurance arm Miga since joining the organisation in 2008.

The US$5mn backing will support Sabeel Al Safa manufacturing and water filling company’s Baghdad plant that makes polyethylene terephthalate (PET) preforms; the raw material used to manufacture bottles for the beverage industry.

At the moment, nearly all of Iraq’s PET preforms are imported from neighbouring countries.

“This investment will help Iraq reduce its reliance on imports,” notes Noureddin Ennaboulssi, Miga’s underwriter for the investment.

“Since Iraq became a Miga member in 2008, several investors have expressed interest in political risk coverage, but many of these projects were either delayed or didn’t materialize for various reasons. We issued the guarantee for the PET preform project to meet the investor’s time line for the investment, which was targeted for the third quarter of 2010,” Ennaboulssi goes on to explain to GTR.

The guarantee will back a shareholder loan put forward by Turkey’s Karo Dis Tiscaret ve Sanayi.

Esra Pelitozu, director of Karo, adds: “The fact that we were seeking a Miga guarantee helped significantly in the negotiations with a number of counterparties including the machinery manufacturers, government authorities and raw material suppliers.”
“It showed that the project is serious and reliable.”

While the US$5mn insurance cover is relatively low, it could open the door to further investment into Iraq as Nabil Fawaz, global head for agribusiness, manufacturing and services at Miga, comments: “This is a small project but it represents an important step for both Iraq and Miga. I hope this sends a signal to investors that Iraq is open for business and that we are here to help developmentally-sound investments, both small and large, become a reality.”

GTR asked Miga’s chief financial officer James Bond if there are any plans for larger transactions in the country.

“Yes,” Bond notes, “if appropriate projects requiring Miga support materialise.”