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

. ,. FOR IMMEDIATE RELEASE \1~., I· I. OJ> 11 1: \,_ 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 Release No. 73/7 IFC investment commitment fer 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 Da Afghanistan Bank and Afghan 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 alsn act as a catalyst in the develop- • ment of new industrial proje~ts. IDBA will initially focus its attention to the development of the private sector. An IDA credit of $2 .O milli.on 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 Afghanistan Bank. Af 60 million (about $840,000 equi'l,ale1lt) was provided at the time of establish- ment of IDBA; the remainder will be disbu1.·sed 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 Domestic Private Investment Law 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. • IDBA. Dr. A.J. Nour Ali, a former Minister of Commerce, is the President of The United 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 operations of IDBAo 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 credit to IDB,A at 7~% interest for a period of about 18 years with 3 years of grace. - 0 - •