Announcement of Two Million Dollars Credit and Two Lakh Fifty Thousand Dollars IFC Investment Commitment for Industry in Afghanistan on April 30, 1973

International Finance Corporation International Development Association 1818 H STREET, N.W .. WASHINGTON, D.C. 20433. U.S.A. TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No. 73/26 Subject: $2.0 million credit and $250,000 IFC Press Rele~se No. 73/7 IFC investment commitment for April 30, 1973 industry in Afghanistan The International Development Association (IDA) and the International Finance Corporation (IFC), two affiliates of the World Bank, are joining the D~ Afgi"1anistau Bauk aud .AfglH:ii1 and foreign investors in financing a new develop- ment finance company to foster industrial development in Afghanistan. The Industrial Development Bank of Afghanistan (IDBA), the new company, was established on March 3, 1973. It will provide medium- and long-term loans and equity capital for industry. It will also act as a catalyst in the develop- • ment of new industrial projects. the development of the private sector. IDBA will initially focus its attention to An IDA credit of $2.0 million will provide the foreign exchange required by IDBA during its first two years of operations. IFC participates with $250,000 equivalent along with investors in Afghanistan and abroad in providing equity capital of Af 240 million ($3.4 million equivalent). Sixty per cent of IDBA's capital is now held by investors in Afghanistan and 40% will be held by IFC, Chase Manhattan Bank, First National City Bank, Industrial Bank of Japan, National Westminster Bank and Credit Lyonnais. IDBA' s domestic resources will be supplemented by a loan of Af 560 mil- lion ($7.8 million equivalent) from the government-owned Da Afgha11istan Bank. Af 60 million (about $840,000 equivalent) was provided at the time of establish- ment of IDBA; the remainder will be disbursed by the Afghanistan Bank in five • equal annual installments. IDBA will pay an interest rate of 2% on this loan, and each tranche is to be repaid over 20 years, including 10 years of grace. /more IDA P.R. No. 73/26 -- Afghanistan -- industry IFC P.R. No. 73/7 - 2 - Manufacturing and handicrafts together account for about 11% of • Afghanistan's gross domestic product and provide employment to some 250,000 persons. For a country of nearly 15 million, the manufacturing sector makes a relatively modest contribution to GDP. Both the Government and private entrepreneurs have, however, been active in the industrial sector. The enactment of a Foreign and Dowcstic Private Investment La:-w in 1967 has created an atmosphere further conducive to private industrial investment. Industrial development, however, has been inhibited by the lack of an institutional source of long-term capital. IDBA.has been established to fill this gap. • Dr. A.J. Nour Ali, a former Minister of Commerce, is the President of IDBA. The Ut1ited Nations Development Programme is financing three interna- tionally recruited experts to serve IDBA for the next few years, after which trained Afghan nationals will take over the oper~tions of IDBA. The IDA credit to the Government of Afghanistan is for a term of 50 years, including a 10-year grace period. It will be interest-free except for a service charge of 3/4 of 1% to cover IDA's administrative expenses. The Government will onlend the proceeds of the credi.t t.o IDBA at 7!,;% interest for a period of about 18 years with 3 years of grace. - 0 - •