Document of The World Bank...1 12/08/2004 Satisfactory Satisfactory 0.00 2 05/17/2005 Satisfactory Satisfactory 0.00 3 11/17/2005 Moderately Satisfactory Satisfactory 1.25 4 05/16/2006

Document of

The World Bank

Report No: ICR2163

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IDA-39680)

ON A

CREDIT

IN THE AMOUNT OF

SDR 3.5 MILLION

(US$5.0 MILLION EQUIVALENT)

TO THE

ISLAMIC REPUBLIC OF AFGHANISTAN

FOR THE

AFGHANISTAN INVESTMENT GUARANTEE FACILITY

April 5, 2012

Finance and Private Sector Development

Afghanistan

South Asia Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective September 2011)

Currency Unit = Afghani (AFN)

US$ 1.00 = AFN 48.39

FISCAL YEAR

March 21 – March 20

ABBREVIATIONS AND ACRONYMS

ADB Asian Development Bank

AIGF Afghanistan Investment Guarantee Facility

AISA Afghanistan Investment Support Agency

BHF Business Humanitarian Forum Association

BOAD West African Development Bank

BMZ Federal Ministry for Economic Cooperation and Development

CAFEF Conflict Affected and Fragile Economies Facility

CIDA Canadian International Development Agency

DFID Department for International Development

FDI Foreign Direct Investment

GoA Government of Afghanistan

GTZ German Organization for Technical Cooperation

IDA International Development Association

IFC International Finance Corporation

IHFD International Home Finance and Development LLC

MIGA Multilateral Investment Guarantee Agency

NAPCOD New Afghanistan Project for Cotton and Oil Development

NDF National Development Framework

PAD Project Appraisal Document

PDO Project Development Objective

PPD Project Preparation Document

QALP Quality Assessment of Lending Portfolio

SIDA Swedish International Development Cooperation Agency

TSS Transitional Support Strategy

Vice President: Isabel Guerrero

Country Director: Josephine Bassinette

Sector Manager: Ivan Rossignol

Project Team Leader: Guillemette Sidonie Jaffrin

ICR Team Leader: Guillemette Sidonie Jaffrin

ISLAMIC REPUBLIC OF AFGHANISTAN

Investment Guarantee Facility

CONTENTS

Data Sheet

A. Basic Information

B. Key Dates

C. Ratings Summary

D. Sector and ThemeCodes

E. Bank Staff

F. Results Framework Analysis

G. Ratings of Project Performance in ISRs

H. Restructuring

I. Disbursement Graph

1. Project Context, Development Objectives and Design ............................................... 1

2. Key Factors Affecting Implementation and Outcomes .............................................. 4

3. Assessment of Outcomes ............................................................................................ 8

4. Assessment of Risk to Development Outcome ......................................................... 11

5. Assessment of Bank and Borrower Performance ..................................................... 11

6. Lessons Learned ....................................................................................................... 12

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 13

Annex 1. Project Costs and Financing .......................................................................... 15

Annex 2. Outputs by Component ................................................................................. 16

Annex 3. Economic and Financial Analysis ................................................................. 17

Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 18

Annex 5. Beneficiary Survey Results ........................................................................... 20

Annex 6. Stakeholder Workshop Report and Results ................................................... 20

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 21

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 22

Annex 9. List of Supporting Documents ...................................................................... 24

Annex 10. Details of Guarantees ……………………………………………………...25

MAP

i

A. Basic Information

Country: Afghanistan Project Name: Afghanistan Investment

Guarantee Facility

Project ID: P088719 L/C/TF Number(s): IDA-39680

ICR Date: 04/11/2012 ICR Type: Core ICR

Lending Instrument: SIL Borrower: GOVERNMENT OF

AFGHANISTAN

Original Total

Commitment: XDR 3.50M Disbursed Amount: XDR 3.28M

Revised Amount: XDR 3.28M

Environmental Category: C

Implementing Agencies:

Multilateral Investment Guarantee Agency

Cofinanciers and Other External Partners: Department for International Development UK (DFID) Gesellschaft fuer Technische Zusammenarbeit (GTZ)

Asian Development Bank (ADB)

B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 05/13/2004 Effectiveness: 12/17/2004 12/17/2004

Appraisal: 06/29/2004 Restructuring(s):

Approval: 07/29/2004 Mid-term Review:

Closing: 09/30/2009 09/30/2011

C. Ratings Summary

C.1 Performance Rating by ICR

Outcomes: Satisfactory

Risk to Development Outcome: Substantial

Bank Performance: Moderately Satisfactory

Borrower Performance: Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings

Quality at Entry: Moderately Satisfactory Government: Satisfactory

Quality of Supervision: Moderately Satisfactory Implementing

Agency/Agencies: Satisfactory

Overall Bank

Performance: Moderately Satisfactory

Overall Borrower

Performance: Satisfactory

ii

C.3 Quality at Entry and Implementation Performance Indicators

Implementation

Performance Indicators

QAG Assessments

(if any) Rating

Potential Problem Project

at any time (Yes/No): No

Quality at Entry

(QEA): Moderately Satisfactory

Problem Project at any

time (Yes/No): No

Quality of

Supervision (QSA):

Moderately

Unsatisfactory

DO rating before

Closing/Inactive status: Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Non-compulsory pensions and insurance 100 100

Theme Code (as % of total Bank financing)

Conflict prevention and post-conflict reconstruction 50 50

Other financial and private sector development 50 50

E. Bank Staff

Positions At ICR At Approval

Vice President: Isabel M. Guerrero Praful C. Patel

Country Director: Josephine M. Bassinette Alastair J. McKechnie

Sector Manager: Ivan Rossignol Simon C. Bell

Project Team Leader: Guillemette Sidonie Jaffrin Samuel Munzele Maimbo

ICR Team Leader: Guillemette Sidonie Jaffrin

ICR Primary Author: Shiori Onishi

Caroline J. Lambert

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document)

The Investment Guarantee Facility was intended to assist Afghanistan in its

reconstruction efforts by stimulating foreign direct investment through a program of

political risk insurance in an environment where the perception of political risk by

foreign investors was very high. The project was designed to provide a first-loss

mechanism in order to leverage additional political risk cover from the Multilateral

Investment Guarantee Agency (MIGA), which managed the Facility, and other insurers.

iii

By providing political risk insurance, the project intended to stimulate private business

activity and attract foreign private investment in a variety of sectors, including but not

limited to manufacturing, agribusiness, banking, and smaller scale infrastructure projects.

It aimed to stimulate the local economy, generate employment, create tax revenues, and

assist in the transfer of modern technologies and business practices from abroad to

Afghanistan.

Revised Project Development Objectives (as approved by original approving authority)

Not Applicable.

(a) PDO Indicator(s)

Indicator Baseline Value

Original Target

Values (from

approval

documents)

Formally

Revised

Target

Values

Actual Value

Achieved at

Completion or

Target Years

Indicator 1 : Amount of foreign direct investment stimulated by AIGF

Value

quantitative or

Qualitative)

No foreign direct

investment stimulated by

AIGF at the time of board

approval

US$80 million US$201.5 million

Date achieved 07/01/2004 12/15/2010 09/30/2011

Comments

(incl. %

achievement)

Indicator 2 : Number of jobs created through investments supported by AIGF

Value

quantitative or

Qualitative)

No jobs generated

through investments

supported by AIGF at the

time of board approval

700 jobs 725 jobs

Date achieved 07/01/2004 12/15/2010 09/30/2011

Comments

(incl. %

achievement)

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target

Values (from

approval

documents)

Formally

Revised

Target Values

Actual Value

Achieved at

Completion or

Target Years

Indicator 1 : Total face value of guarantee issued

Value

(quantitative

or Qualitative)

No guarantee Issued at

the time of board

approval

US$72 million US$159 million

Date achieved 07/01/2004 12/15/2010 09/30/2011

Comments

(incl. %

iv

achievement)

Indicator 2 : Total face value of pipeline

Value

(quantitative

or Qualitative)

No pipeline at the time of

board approval

Face value of

pipeline: US$284

million

US$836 million

Date achieved 07/01/2004 12/15/2010 09/30/2011

Comments

(incl. %

achievement)

G. Ratings of Project Performance in ISRs

No. Date ISR

Archived DO IP

Actual

Disbursements

(USD millions)

1 12/08/2004 Satisfactory Satisfactory 0.00


3 11/17/2005 Moderately Satisfactory Satisfactory 1.25

4 05/16/2006 Moderately Satisfactory Satisfactory 1.25








12 02/13/2011 Satisfactory Moderately Satisfactory 2.50

H. Restructuring (if any)

Not Applicable

v

I. Disbursement Profile

1

1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

Country and sector background: The events of September 11, 2001 resulted in

international military intervention in Afghanistan, which in turn heralded the fall of the

Taliban regime. The Bonn Agreement on Provisional Arrangements in Afghanistan,

signed in December 2001, subsequently laid out a transition process towards a new

constitution and an elected government. The new constitution was adopted in January

2004, and presidential elections took place later in the year.

Following more than two decades of conflict, Afghanistan suffered from food insecurity,

derelict infrastructure, a narrow economic base, depleted human capital and endemic

poverty. The country’s private sector was weak and largely informal, and unemployment

and underemployment remained major issues for the country. One of the poorest

countries in the world, Afghanistan—which was estimated to require up to US$27 billion

for its reconstruction over the following seven years—depended heavily on foreign

assistance and capital.

Rationale for Bank assistance: Early in 2002, the National Development Framework

(NDF) of the Government of Afghanistan (GoA) identified three priorities: (i)

humanitarian assistance, human and social capital, (ii) physical reconstruction and natural

resources, and (iii) private sector development. The scale of the country’s funding needs,

as well as the dearth of employment opportunities and the largely informal economy,

highlighted the need for private sector investment. In March 2003, the World Bank Board

approved the Transitional Support Strategy (TSS), formulated to support the NDF.

Although Afghanistan and its reconstruction offered substantial investment opportunities

for foreign investors, political risk remained a significant hurdle. At the same time,

political risk insurance for projects in Afghanistan was scarce. The country was eligible

for Multilateral Investment Guarantee Agency (MIGA)’s guarantees, but MIGA’s ability

to share risks with other insurers was very limited, as most insurers were unwilling to

operate in the country. The Afghanistan Investment Guarantee Facility (AIGF) was

created to provide first loss political risk insurance and therefore leverage additional

cover from MIGA, Asian Development Bank (ADB), as well as public and private

insurers. The International Development Association (IDA) credit financed the GoA’s

contribution to the Facility, representing an important initiative in the promotion of

private sector development in Afghanistan.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)

The Afghanistan Investment Guarantee Facility was intended to assist Afghanistan in its

reconstruction efforts by stimulating foreign direct investment through a program of

political risk insurance in an environment where the perception of political risk by

foreign investors is very high. The Facility hoped to attract foreign private investment in

a variety of sectors, including but not limited to manufacturing, agribusiness, banking,

2

and smaller scale infrastructure projects, thereby generating employment, creating tax

revenues, and assisting in the transfer of modern technologies and business practices

from abroad to Afghanistan.

When the project was approved in July 2004, outcome indicators were not included in the

Project Preparation Document (PPD) and in the Memorandum and Recommendations of

the President.

Initial indicators were developed in May 2005 and included: (i) disbursements equivalent

to 25% of the value of the IDA contribution towards the issuance of guarantees in

FY2006, and (ii) a pipeline of definitive applications from at least four firms in FY2006.

Key indicators were revised in November 2006 in order to better align with the PDO,

which remained unchanged. New indicators are: (i) amount of foreign direct investment

stimulated by the AIGF, (ii) number of jobs created through investments supported by the

AIGF, (iii) total face value of guarantee issued, and (iv) total face value of pipeline with

definitive application.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and

reasons/justification

The PDO was not revised.

1.4 Main Beneficiaries

The PPD did not identify specific beneficiaries.

1.5 Original Components (as approved)

The creation of the Investment Guarantee Facility was the project’s single component.

The objective of the Facility was to create a leveraging mechanism that would generate

additional political risk cover. Additional insurance was to be provided by MIGA as well

as other public and private insurers mobilized through MIGA’s reinsurance program. In

order to maximize the leverage, the Facility was structured to provide a ―first-loss‖ layer:

the AIGF would cover any claims first, before co-insurers would become liable for

additional amounts not covered by the Facility. This was considered as a critical element

for the project in view of Afghanistan’s high risk environment.

The GoA funded the Facility through credits from IDA and ADB, which each committed

US$5 million, and a grant of GBP 1 million from the UK’s Department for International

Development (DFID). Contributions were disbursed in tranches into an interest-bearing

trust fund. The US$11.9 million extended to the GoA by IDA, ADB and DFID as GoA’s

contributions to the Facility was expected to translate into a total guarantee amount of

US$71.4 million.

MIGA administered and managed the Facility. As administrator, MIGA was to assess

proposed investments and associated risks, issue contracts of guarantee, collect premiums

and manage the portfolio of contracts on behalf of the Facility. In addition, MIGA was

3

expected to market the Facility and mobilize additional political risk cover from public

and private insurers. Afghan Investment Support Agency (AISA) agreed to work with

MIGA to promote the Facility to potential foreign investors. Modalities were detailed in a

Framework Agreement between the GoA and MIGA.

Guarantees provided by the Facility were to be underwritten following MIGA’s regular

procedures, eligibility criteria and methodologies, and covered the risks of (i) Currency

Transfer Restrictions and Inconvertibility, (ii) Expropriation, (iii) War and Civil

Disturbance, and (iv) Breach of Contract. To tailor the project to Afghanistan’s post-

conflict environment, however, some flexibility was incorporated into the Facility, which

was authorized to support transactions not eligible under MIGA’s regular policies:

(a) Foreign loans financing either local equity investments or imports of critical

capital goods for reconstruction.

(b) Local loans provided in a freely convertible currency by foreign financial

institutions in Afghanistan. The objective was to encourage local lending, which

was non-existent.

For the Facility to support as many projects as possible, the exposure of AIGF under any

guarantee contract was capped at US$2 million per individual project. AIGF’s exposure

for transactions ineligible under MIGA’s regular policies was capped at US$1 million per

project and 30 percent of the capital of the Facility on an aggregate basis. Exemptions to

these rules could be granted if agreed by the GoA, MIGA and the Facility’s participants.

Guarantees were to be priced to risk, in accordance with MIGA’s pricing methodology.

In order to limit the risk of the Facility, guarantee contracts were to have a maximum

duration of seven years.

1.6 Revised Components

Not Applicable.

1.7 Other significant changes

In order to maximize the leverage of the Facility, the ratio between the cover provided by

AIGF and by co-insurers had initially been set at a minimum of 1:5. In other words, for

every dollar of cover provided under the Facility, MIGA was to arrange at least US$5 of

additional insurance for the same investment. Yet, by November 2007, much of the

Facility’s capital remained uncommitted. In order to increase the level of capital

commitment, the Facility was then authorized to cover investments following a 1:1 ratio

if necessary, up to AIGF’s maximum amount of liability set for each project. MIGA,

however, was still committed to generating higher leverage for larger investments that

required additional insurance.

In February 2009—seven months before the project was scheduled to close—the GoA

formally requested that the Facility be extended for another two years. In July 2009, the

Bank agreed to extend the closing date of the credit until September 30, 2011,

4

considering the pipeline of potential projects as well as AIGF’s and MIGA’s performance

and action plan to strengthen marketing.

DFID also agreed to extend the project closing date, and the Amendment of

Memorandum of Understanding was signed between MIGA and DFID in December 2009.

However, ADB declined, taking the view that (i) funds in the Facility were enough to

cover the current and expected guarantees, (ii) the investment pipeline did not justify it,

and (iii) its special funds resources were needed elsewhere. The Facility continued

operating until September 2011 with a reduced capital of US$9.4 million, as the

undisbursed portion of the ADB credit (US$2.5 million) was cancelled in May 2010.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry

The project was prepared as an emergency operation, given Afghanistan’s political and

economic situation, and was delivered within a short period of time. In line with

Operational Policy 8.50 Emergency Recovery Assistance, there was no Project Appraisal

Document (PAD) for this project. Project design was informed by IDA’s and MIGA’s

previous experience with guarantee facilities, most notably in Africa (Regional Trade

Facilitation Project) and Bosnia and Herzegovina (European Union Investment Guarantee

Trust Fund). These projects provided valuable lessons related to the importance of local

market knowledge and private sector contacts, the ―first loss‖ mechanism, the value of

maintaining a local presence particularly during the start-up phase, and the need for

flexibility to support a wider range of investments.

To assess interest in Afghanistan and shape the services offered by the Facility, extensive

consultations were held with private investors—particularly from the Afghan Diaspora—

the financial sector, and political risk insurers. Project design strived to balance what

MIGA could offer and the need for some flexibility based on Afghanistan’s post-conflict

environment and feedback from consultations.

General risks related to the security situation, as well as the investment and lending

environment, were well identified. Implementation risks such as the Afghan authorities’

ability to promote the Facility, on the other hand, were not highlighted.

As noted in section 1.2, key project outcome indicators were not defined at the project

design stage.

2.2 Implementation

Investment Environment: Project implementation suffered from a deteriorating business

environment. The deterioration of security, the weight of the informal economy, poor

governance and the slow pace of reforms, combined with the global financial crisis, led to

a severe decline in foreign investment into Afghanistan. This resulted in declining

interest in the Facility from foreign investors, as reflected in the number of applications.

5

In addition, as further explained below, the difficult business environment weighed on

projects underwritten by the Facility, which contributed to decisions to cancel coverage.

The hopes that foreign investment could flourish in a variety of sectors were not realized.

As in many other post-conflict environments, the telecommunication sector did well,

while other sectors struggled, as illustrated in the AIGF’s portfolio.

Marketing: The Facility also faced marketing challenges. Although promotion alone

cannot create demand from investors, knowledge about the Facility’s services is essential

to facilitate such demand. The project became effective in December 2004, but

implementation was initially slow. A German grant of US$0.6 million through the

German Organization for Technical Cooperation (GTZ) covered the MIGA’s costs of

hiring a consultant based in Kabul to market the Facility and support its operation. The

consultant was recruited by MIGA in May 2005, and started operating in Afghanistan in

September 2005, after initial training in Washington D.C. A lack of clear and commonly

agreed marketing strategy for the Facility and poor supervision of the consultant by

MIGA headquarters who was new to political risk insurance and to Afghanistan,

hampered implementation during the first year. Misunderstandings about the role of the

consultant and his position vis-à-vis AISA affected his ability to interact with the Afghan

authorities.

By September 2006, initial shortcomings were rectified: the consultant’s responsibilities

were clarified, he received further training (by MIGA), and his performance was more

closely supervised. However, GTZ declined to provide further funding to extend the

consultant’s contract. MIGA financed the consultant until October 2007 to focus on

training AISA staff to market the Facility. The Facility’s sponsors explored alternative

sources of funding and debated whether a full-time local representative was necessary.

All the donors agreed that a local representative could improve in-country marketing, but

funding remained a constraint. In May 2009, HARAKAT, a DFID-funded facility to

promote private sector development in Afghanistan, indicated an interest in financing the

position. Terms of Reference were drafted by MIGA and a formal application for

HARAKAT funding was prepared. However, in October 2010, as the project closing date

was approaching, the Facility sponsors decided that marketing would be best conducted

from MIGA’s headquarters as well as by AISA’s staff on the ground in Kabul.

AISA, as the national Investment Promotion Agency and the official registrar for every

local and foreign investor wishing to conduct business in the country, had direct contact

with investors and thus was expected to take over the local promotion efforts and refer

interested companies to MIGA. The AIGF was an additional tool for AISA to attract

foreign direct investments (FDI) into Afghanistan by informing investors of the

availability of political risk insurance. Although AISA introduced AIGF in meetings with

investors and during investment promotion events, the Agency’s marketing performance

was not consistent. AISA failed to develop a good understanding of the Facility, in part

due to high staff turnover, and in time active local marketing activities virtually ceased.

In late 2009, MIGA appointed a former AISA staff as a local marketing agent. This,

however, also failed to translate into new business opportunities for the AIGF. It should

6

be noted that political risk insurance is a very specialized and complex product, which is

more difficult to market when brokered by local marketing agents. Similar lessons were

learned when MIGA set up the West African Development Bank (BOAD) guarantee

facility in Togo or the facility for Bosnia and Herzegovina. In the Afghan context, MIGA

could have adapted better to the change of market conditions, and be more proactive in

supporting the marketing of its own product.

As noted above, the Facility was designed to guarantee transactions not typically covered

by MIGA. Yet the flexibility incorporated in the project design never became applicable

in practice in Afghanistan where formal project finance and trade credit have largely

failed to develop.

Guarantee Issuance: In spite of increasingly difficult circumstances, the Facility provided

political risk insurance to five projects, two of which obtained further cover for

expansions. Yet two projects (NAPCOD and BHF) ran into difficulty, and insurance was

later cancelled. Another project (Geo Building Technologies) failed to secure debt

financing and reduced the amount of cover initially obtained to reflect the declining value

of the investment. The details of guarantees are summarized in Tables 1 and 2 below. See

Annex 10 for the details of specific transactions.

Table 1: AIGF and MIGA Exposure as of September 30, 2011

Projects Guarantee AIGF

Exposure

MIGA

Exposure

Total FDI Jobs Issue Date Expiry Date

MTN $156,750,005 $6,000,000 $150,750,005 $193,000,000 600 July 7,

2011

July 6,

2017

BRAC Afghan

Bank I $1,800,000 $300,000 $1,500,000

$6,500,000 120

Sept. 29,

2006

Sept. 28,

2013

BRAC Afghan

Bank II $225,000 $112,500 $112,500

Mar. 31,

2008

Mar. 30,

2014

Geo Building

Technologies $180,000 $90,000 $90,000 $2,000,000 5

Mar. 31,

2008

Mar. 30,

2015

Total $158,955,005 $6,502,500 $152,452,505 $201,500,000 725

7

Table 2: Cancelled AIGF and MIGA Exposure

Projects Guarantee AIGF

Exposure

MIGA

Exposure

Total FDI Jobs Issue Date Expiry Date

NAPCOD $1,269,135 $211,522 $1,057,613 $14,100,000 180 Feb. 24,

2006 Cancelled

MTN $76,500,000 $2,000,000 $74,500,000 $85,000,000 500 June 29,

2007

Cancelled to

issue a new

guarantee

Geo Building

Technologies $1,560,000 $780,000 $780,000 $2,000,000 5

Mar. 31,

2008

Reduced

cover

BHF $429,840 $64,476 $365,364 $1,000,000 20 Sept. 25,

2006 Cancelled

Total

Cancellations $ 79,758,975 $3,055,998 $76,702,977

In April 2011, the AIGF compensated a claim of US$572.95 under the War and Civil

Disturbance cover to the BRAC Afghanistan Bank for physical damage, following an

explosion at the Safi Hotel and shopping center in January 2010. This is so far the only

claim filed under this project.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

As previously mentioned, project outcome indicators were developed after the project

was approved, and were subsequently modified. Intermediate indicators measured the

amount of guarantee issued and the face value of the project pipeline, while project

outcomes were measured by the amount of FDI supported by the Facility and the number

of jobs created.

Although these indicators were appropriate, the project’s outcomes also included

generating taxes for the Afghan authorities and promoting technology transfer, which

were not measured. Given that the Facility together with MIGA issued a guarantee of

US$ 156.75 million for a foreign investment in telecom, the benefits in terms of tax

revenues to the government and technology transfer are substantial.

2.4 Safeguard and Fiduciary Compliance

Safeguards: Under the Bank’s Operational Policy 4.01 Environmental Assessment, this

project was categorized as C: the project was likely to have minimal or no adverse

environmental impacts. The Framework Agreement states that the Facility applies

MIGA's Environmental and Social Safeguard Policies, MIGA's Environmental

Guidelines, and MIGA's Environmental and Social Review Procedures. Each project was

reviewed by MIGA for its social and environment impacts during underwriting due

diligence, and each contract of guarantee in the project carried covenants regarding social

and environmental safeguards.

Fiduciary Compliance: MIGA was chosen as the implementing agency with the sole

authority to issue guarantees from the Facility, and responsible for the fiduciary aspects

8

of the Facility’s operation. The Development Credit Agreement requires MIGA to submit

annual audit reports to IDA on the operations, resources and expenditures related to the

project. The Bank waived the submission of audit reports from year to year, because there

were no guarantee claims until April 2011. Only one independent audit was undertaken in

December 2009, covering the period from August 4, 2004 to December 31, 2009. Semi-

annual unaudited financial monitoring reports were submitted by MIGA regularly, and

were reviewed by the Bank.

2.5 Post-completion Operation/Next Phase

MIGA continues to administer ongoing operations after the closing date. As of January

30, 2012, four guarantees remain active, and the total exposure of the Facility stands at

US$6.5 million, as presented in Table 1 above.

To support FDI in conflict-affected and fragile countries, MIGA is considering a new

program called Conflict Affected and Fragile Economies Facility (CAFEF) to be

financed by development partners. Afghanistan will have access to the new Facility. In

the design of CAFEF, MIGA incorporated lessons drawn from previous operations,

especially AIGF. CAFEF is structured similarly to the AIGF, i.e. the facility will take a

first loss cover on a covered transaction. The intent of the CAFEF is, like in the AIGF, to

use the first loss layer as catalyst to increase underwriting of political risk insurance from

MIGA and other insurers for a particular investment in a conflict-affected country or

fragile state. A number of development partners have expressed an interest to finance the

Facility (DFID, CIDA, SIDA, AusAID, and BMZ), but CAFEF has not yet been formally

approved by MIGA’s Board of Directors.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

Objectives: Provision of political risk insurance remains critical for foreign investors in

today’s context, as Afghanistan acutely needs FDI for private sector development and

economic growth. Yet, as Table 3 shows, FDI into Afghanistan has plummeted since

2008. As of 2010, it was less than half of the FDI in 2004 when the project started, and

one fourth of its peak in 2008.

Table 3: Foreign Direct Investment Flow to Afghanistan (US$ million)

2004 2005 2006 2007 2008 2009 2010

186 271 238 243 300 185 76

Source: Inward and outward foreign direct investment flows, UNCTADStat

The project objective remains relevant, but the deteriorating security situation has

significantly reduced investors’ confidence and critically affected FDI inflows in

Afghanistan. Foreign transactions today are mainly short term and trade related.

9

Design: According to the Quality Assessment of Lending Portfolio (QALP) conducted in

May 2010, the project was well prepared and designed, following MIGA’s established

procedures. Given the financial management concerns and capacity constraints within the

government ministries, the selection of MIGA as the implementing agency was a creative

and pragmatic approach, as well as an effective measure to mitigate financial

management risk.

In terms of guarantee products, some of the Facility’s sponsors argued that the Facility’s

services should have been extended to cover local equity investments, and local investors

actually expressed interest in political risk insurance. It is however unclear how MIGA

could have properly assessed the associated risks and managed the legal as well as

logistical implications of covering local investments.

Allowing the Facility to guarantee transactions not covered under MIGA’s regular

policies was premised on expectations that Afghanistan’s financial sector would develop.

Yet, the flexibility of the Facility design by offering cover for local loans and export

credit proved ill suited to the Afghan environment, where formal project finance and

trade credit have remained embryonic.

The time and efforts spent processing the claim for BRAC Afghanistan Bank were

disproportionate compared to the small amount that was paid out. The claim was only the

sixth claim payment that MIGA had made since its inception in 1988. As the AIGF was

administered under MIGA’s Operational Regulations, MIGA’s Executive Vice President

was responsible for decisions on claims. However, given the relative infrequency of such

events, MIGA sought concurrence from the President of the Bank. A deductible or

similar system to filter small claims could have been developed for the Facility.

Implementation: MIGA was the implementing agency of the Facility. Due to the

Facility’s slow start-up, opportunities for guarantee transactions in 2005 might have been

missed. The lack of local representative and the limited ability of AISA to market the

Facility hampered the promotion of AIGF in country. The project sponsors also

expressed some frustration with MIGA’s marketing of the Facility. Yet, MIGA’s efforts

to promote services in Afghanistan were remarkable relative to its resources and efforts

deployed in other member countries. MIGA has 18 underwriters who also act as the

Agency’s business development officers covering 175 countries.

3.2 Achievement of Project Development Objectives

Despite declining FDI flow and Afghanistan’s deteriorating investment climate, the

AIGF met its key outcome targets of stimulating foreign investment and creating

employment opportunities.

As Table 1 shows, the total amount of FDI facilitated by the Facility and MIGA exceeded

the target of US$80 million by a wide margin, reaching US$201.5 million as of

September 2011. The Facility also exceeded its job target. Total face value of guarantees

issued by AIGF and MIGA excluding cancellations was US$159 million, compared with

the target of US$72 million.

10

The target for the total face value of project pipeline at U$284 million was met and

surpassed. The face value of projects in the pipeline based on submission of preliminary

applications reached US$836 million by September 2011. However, most of the

applications did not translate into guarantees, and it is difficult to estimate how many of

these applications are for active investment projects. This is comparable to MIGA’s

business in other countries, as few applications ever turn into guarantee contracts. In

addition, although investors initially showed interest in AIGF, the Facility’s services

were deemed expensive, particularly when compared to national insurers, which can

subsidize premiums. The deteriorating security situation, compounded by the 2008 global

financial crisis, also significantly reduced investors’ appetite in Afghanistan.

Key indicators and results are summarized in Annex 2.

Although the project met its key outcome targets, some of the project sponsors appeared

disappointed by the fact that a single guarantee contract for a foreign investor in telecom

dominates the AIGF/MIGA portfolio for Afghanistan. This may be due to unrealistic

expectations about the role of political risk insurance, which supports but does not

generate foreign investment, particularly in a context of deteriorating security and

business uncertainty. As the business environment deteriorated, the type of foreign

investors still interested in Afghanistan were more likely to have high risk tolerance and

therefore unlikely to have any interest in political risk insurance. In addition, investors

from Afghanistan neighboring countries—a significant source of FDI—are not traditional

buyers of political risk insurance. This investor profile, together with the prevailing

political and security trajectory, increased the challenges of promoting political risk

insurance in Afghanistan, unlike in other countries recovering from conflict, such as

Bosnia and Herzegovina. Yet AIGF and MIGA have underwritten more political risk

cover for investments in Afghanistan than any other national insurer.

3.3 Efficiency

As of June 30, 2011, the project generated US$953,000 as premium and interest income,

while expenses accrued under this Facility were US$131,000, which were paid to MIGA

as administrative and audit fees. In addition, the Facility reimbursed US$572.94 for the

guarantee claim by BRAC.

As discussed in Section 3.2, the project met all the PDO indicators. Thus, the project

achieved its objective efficiently.

3.4 Justification of Overall Outcome Rating

Rating: Satisfactory. As discussed above, all the key outcome indicators have been

achieved, thus the project’s overall outcome rating is Satisfactory.

3.5 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

11

Not Applicable.

(b) Institutional Change/Strengthening

As MIGA was the implementing agency, the project did not directly lead to institutional

change and strengthening in the country. However, AISA committed to providing

dedicated staff to market the facility in the country. The MIGA consultant provided

training to AISA personnel in marketing, but they were unable to focus on the Facility

due to other assignments. Moreover, the various AISA operational staff that were trained

and tasked with the marketing efforts in the country later left AISA, and they were never

replaced. This resulted in limited capacity building relating to political risk insurance.

(c) Other Unintended Outcomes and Impacts (positive or negative)

Not Applicable.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

No beneficiary survey was conducted.

4. Assessment of Risk to Development Outcome

Rating: Substantial. QALP2 assessment of the project pointed out that one of the

significant risks in this project is potential claims on existing contracts due to the

deteriorating security situation and political uncertainty. Four guarantees remain active as

of January 2012, and the AIGFs total exposure amounts to US$6.5 million. Although the

project was closed, the risk of potential claim remains until the expiry of the last

guarantee in July 2017.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at Entry

Rating: Moderately Satisfactory. As this project was an emergency operation, the PPD

was prepared within a very short period of time. A joint IDA/MIGA team carried out

project preparation and the project design was informed by MIGA’s previous experience

with guarantee facilities, most notably in Africa (Regional Trade Facilitation Project) and

Bosnia and Herzegovina (European Union Investment Guarantee Trust Fund). These

projects provided valuable lessons related to the importance of local market knowledge

and private sector contacts, the ―first loss‖ mechanism, the value of maintaining a local

presence particularly during the start-up phase, and the need for flexibility to support a

wider range of investments.

(b) Quality of Supervision

Rating: Moderately Satisfactory. With MIGA being the implementing agency for the

Facility, the World Bank project team in Kabul supported MIGA’s work by monitoring

12

progress toward achieving project outcome targets, as well as coordinating with the GoA

and other Kabul-based donors. The supervision mission was conducted and project status

reported regularly every half year throughout the project implementation period.

However, coordination between the Kabul-based Bank team and MIGA was inadequate

in terms of securing MIGA’s inputs to project supervision and undertaking timely actions

to address the challenges encountered by the project.

(c) Justification of Rating for Overall Bank Performance

Rating: Moderately Satisfactory. Based on the above, overall Bank Performance is

moderately satisfactory.

5.2 Borrower Performance

(a) Government Performance

Rating: Satisfactory. The GoA explicitly requested this operation to attract FDI and

enhance private sector development and readily accepted MIGA being the implementing

agency under a Framework Agreement with MIGA. The GoA maintained its commitment

to the project throughout the project period and was supportive to MIGA’s underwriting

operations in Afghanistan. When MIGA requested the increase of AIGF insurance

coverage for MTN in July 2011, the GoA readily agreed.

(b) Implementing Agency or Agencies Performance

Rating: Satisfactory. Overall, MIGA’s performance as the implementing agency for the

Facility is rated Satisfactory despite shortcomings in marketing the Facility.

The marketing activities of the AIGF in the first three years yielded good results under a

better investment and security outlook, creating a number of pipeline projects and

guarantees. Nonetheless, after the AIGF’s consultant left in October 2007, there was no

physical presence in Afghanistan, and MIGA headquarters mainly took care of operation

and marketing. This, added to AISA’s inability to effectively market the Facility, led to

the very limited marketing activities in Afghanistan. Nevertheless, MIGA continued

promoting the Facility by attending and/or participating in Afghanistan investment

forums, as well as marketing it through its website, printed material, and presentations on

business development missions and at various forums aimed at attracting private sector

investments in conflict, post-conflict, and fragile states.

(c) Justification of Rating for Overall Borrower Performance

Rating: Satisfactory.

6. Lessons Learned

Three main lessons emerge from the project: (i) country risk, (ii) flexibility in insurance

products, and (iii) field representation for marketing.

Country Risk: Afghanistan’s environment is challenging for FDI, in particular the

worsening security environment and governance. Availability of political risk guarantee

is not enough to mitigate the concerns of foreign investors. Without minimum peace and

security, long-term investments are difficult to attract.

13

Flexibility in Insurance Products: Political risk is a major constraint for foreign investors

who are interested in the country; thus providing political risk guarantee is highly

relevant for promoting FDI and enhancing private sector development. However, the

Facility only focused on cross-border political risk insurance and local loans by foreign

financial institutions. It could not cover local investments and short-term operations,

which might have had more demand. According to the Insurance Need Assessment

Survey conducted by AISA in June 2009, 76% of investors suggested that insurance be

extended to local investors as well.

Field Representation for Marketing: The AIGF marketing activities would have been

further improved by hiring a local marketing representative, familiar with local

investment and business environment as well as political risk insurance products. The

previous operation of MIGA in Bosnia and Herzegovina highlighted the importance of

having a full-time representative working on the ground to increase awareness and liaise

with investors on a continuing basis; once a special representative was placed in-country,

there was a steady flow of inquiries from foreign investors for guarantees. In addition,

local representative can help MIGA staff in headquarters to better understand the risks

involved in the country since more detailed information can be provided. This greatly

helps in the management of risks in a high-risk environment.

MIGA has incorporated some of these lessons in the proposed CAFEF, in particular: (i)

locating a field marketing staff focused on the program in Africa, and a coordinator

dedicated to CAFEF management and donor relations, and (ii) forming partnerships with

donors, export credit agencies, and private insurance companies and banks as well as

with the World Bank and International Finance Corporation (IFC).

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies

None

(b) Cofinanciers

The ADB published its Completion Report on the AIGF in December 2011. The ADB

has indicated that the achievement of the project’s outcome was successful, by

stimulating FDI and creating jobs through political risk guarantees despite the

deteriorating security situation and the global financial crisis. Implementation

arrangements were partly satisfactory; although the ADB’s active involvement was

sought in the later stage, coordination between the ADB and MIGA was intermittent

during the initial phase of implementation mainly due to staff changes.

DFID also issued its Project Closure Report in December 2011. The report mentioned

that, although the overall outcomes of the project were positive, the first phase of the

Facility (2004-2009) was more successful than the second phase (2009-2011). It has also

indicated that, while the project achieved the initial target in stimulating FDI through

political risk guarantees, FDI in Afghanistan fell significantly over the life of the project.

14

Therefore, a link between underwriting political risk guarantees and increasing FDI

appears to be weak, particularly in terms of investment risk in conflict-affected countries.

The details are provided in Annex 8.

(c) Other partners and stakeholders

None

15

Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Components Appraisal Estimate

(USD millions)

Actual/Latest

Estimate (USD

millions)

Percentage of

Appraisal

Investment Guarantee Facility 11.9 9.4 75%

Consulting related to marketing of

Facility and Training AISA 0.6 0.6 100%

Total Project Costs 12.5 10.0 80%

(b) Financing

Source of Funds

Appraisal

Estimate

(USD millions)

Actual/Latest

Estimate

(USD millions)

Percentage of

Appraisal

Asian Development Bank 5.00 2.50 50%

Department for International

Development 1.90 1.90 100%

German Organization for Technical

Cooperation 0.60 0.60 100%

International Development

Association (IDA) 5.00 5.00 100%

16

Annex 2. Outputs by Component

Table: Project Outcomes and Key Performance Indicators

Project Outcome Indicators

Baseline

Value

(Project

inception)

End-of-

Project Target

Value

Value Achieved

(September 2011)

1. Amount of foreign direct investment

stimulated by AIGF

No foreign

direct

investment

stimulated by

AIGF at the

time of board

approval

US$80 million US$201.5 million

2. Number of jobs created through

investments supported by AIGF

No jobs

generated

through

investments

supported by

AIGF at the

time of board

approval

700 jobs 725 jobs

Intermediate Outcome Indicators

1. Total face value of guarantee issued No guarantee

Issued at the

time of board

approval

US$72 million

US$159 million

2. Total face value of pipeline No pipeline at

the time of

board

approval

Face value of

pipeline:

US$284

million

US$836 million

17

Annex 3. Economic and Financial Analysis

(Not Applicable)

18

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit

Lending

Manoj Agrawal Consultant SARFM

Anton Dobronogov Senior Economist AFTP2

Emily Harwit Whewell Consultant CAFAF

Shawkat M.Q. Hasan Senior Procurement Specialist AFTPC

Monique Koning Operations Team Manager - MIGA MIGOP

Samuel Munzele Maimbo Lead Financial Sector Speciali AFTFE

Vikram Raghavan Senior Counsel LEGES

Supervision/ICR

Manoj Agrawal Consultant SARFM

Nazir Ahmad Research Analyst SASFP

Anton Dobronogov Senior Economist AFTP2

Nabil Fawaz Sector Leader MIGOP

Shawkat M.Q. Hasan Senior Procurement Specialist AFTPC

Monique Koning Operations Team Manager - MIGA MIGOP

Sheila Braka Musiime Senior Counsel LEGOP

Asha Narayan Financial Management Specialis SARFM

Richard George Andrew Nash Counsel LEGJR

Kyoo-Won Oh Underwriter MIGOP

Kenneth O. Okpara Sr Financial Management Specia SARFM

Srilal Mohan Perera Chief Counsel MIGLC

Vikram Raghavan Senior Counsel LEGES

Mustafizul Hye Shakir Consultant SASFP

Michael R. Silverman Consultant INTSC

Paul Edwin Sisk Lead Financial Management Spec SARFM

Thomas A. Vis Senior Risk Management Officer AFTFW

19

(b) Staff Time and Cost

Stage of Project Cycle

Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including

travel and consultant costs)

Lending

FY04 5 16.82

FY05 6 28.56

FY06 0.00

FY07 0.00

FY08 0.00

Total: 11 45.38

Supervision/ICR

FY04 0.00

FY05 3 17.08

FY06 4 23.27

FY07 1 13.29

FY08 11 48.14

FY09 20 0.00

Total: 39 101.78

20

Annex 5. Beneficiary Survey Results

(Not Applicable)

Annex 6. Stakeholder Workshop Report and Results

(Not Applicable)

21

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR

Clause D of Schedule 3 in Development Credit Agreement requires MIGA, as the

administrator and operator of the Facility, to provide a comprehensive evaluation report

after the project close. However, it has been agreed between MIGA and the Bank to

merge MIGA's evaluation with the Bank’s ICR. MIGA has provided the Bank with the

project information and insights on the AIGF during the process of writing the ICR.

22

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders

1. ADB Completion Report

(i) Project Design

At appraisal, project design and formulation were highly relevant to the development

objectives of Afghanistan as well as the ADB’s country strategy and program (2002-

2004) that supported capacity building, policy and institutional frameworks, and

infrastructure for private sector development.

In September 2009, when the ADB completed the project, the project design was relevant,

because the Facility offered political risk guarantee cover for noncommercial risks, and it

could not address issues such as deteriorating security situation, and international and

regional banks withdrawing from Afghanistan due to growing aversion to risk after the

global financial crisis. In addition, the project could not address AISA’s inability to

enhance FDI or promote political risk guarantee, MIGA’s limited marketing to investors

outside of Washington D.C., and local investors’ lack of interest in political risk

guarantee.

(ii) Project Outcome

The achievement of the project’s outcome was successful, by stimulating FDI and

creating jobs through political risk guarantees despite the deteriorating security situation

and the global financial crisis. Substantial leverage was made for the AIGF, as MIGA

provided second loss cover, particularly for the MTN’s investment.

(iii)Disbursements

The first disbursement from the ADB was made in May 2009, which is 50 months after

loan became effective. The delay was caused by lack of coordination between the ADB

and MIGA, and the lack of investment projects that needed political risk guarantees.

(iv) Implementation

Implementation arrangements were partly satisfactory. Although the ADB’s active

involvement was sought in the later stage, coordination between the ADB and MIGA was

intermittent during the initial phase of implementation mainly due to staff changes.

(v) Sustainability

The project sustainability is less likely. On the contrary to what had hoped at appraisal,

instability in Afghanistan has caused a decreased amount of FDI inflow and the

withdrawal of international banks to support FDI; thus, there are weaker prospects in

terms of further investments supported.

(vi) Overall Assessment

Overall, the project is rated successful.

23

2. DFID Completion Report

Although the overall outcomes of the project were positive, the first phase of the Facility

(2004-2009) was more successful than the second phase (2009-2011). At the first stage of

the project, the AIGF played an important role in attracting investors through political

risk insurance. However, in the second phase, the MIGA/AIGF did not adapt its

marketing under less conductive market, and the huge pipeline was not materialized

except the last guarantee underwritten for MTN in 2011.

The project achieved the initial target in stimulating FDI through political risk guarantees.

However, FDI in Afghanistan fell significantly over the life of the project. Therefore, a

link between underwriting political risk guarantees and increasing FDI appears to be

weak, particularly in terms of investment risk in conflict-affected countries.

Lack of country presence limited the partner’s responsiveness to the Afghan context and

to DFID. Marketing strategy, suitability of the products to a conflict-affected country like

Afghanistan, and on-the-ground staff dedicated to the country should be particularly

addressed in any similar facility.

24

Annex 9. List of Supporting Documents

1. ―Project Preparation Document for a Proposed Credit in the Amount of SDR 3.5

Million (US$5.0 Million Equivalent) to the Islamic Republic of Afghanistan for an

Investment Guarantee Facility Established as a Trust Fund between the Islamic

Republic of Afghanistan and the Multilateral Investment Guarantee Agency as

Administrator of the Trust Fund‖, July 29,2004.

2. ―Memorandum and Recommendation of the President of the International

Development Association and the Multilateral Investment Guarantee Agency to The

Executive Directors of the International Development Association and Directors of

the Multilateral Investment Guarantee Agency on a Proposed Credit of SDR 3.5

Million (US$5.0 Million Equivalent) to the Islamic Republic of Afghanistan for an

Investment Guarantee Facility Established as a Trust Fund and Proposed Framework

Agreement Between the Islamic Republic of Afghanistan and the Multilateral

Investment Guarantee Agency as Administrator of the Trust Fund‖, July 29, 2004.

3. ―Afghanistan Investment Guarantee Facility: Framework Agreement between the

Government of the Islamic Republic of Afghanistan and Multilateral Investment

Guarantee Agency, as Administrator of the Afghanistan Investment Guarantee

Facility‖, August 4, 2004.

4. ―Development Credit Agreement between Islamic Republic of Afghanistan and

International Development Association‖, August 4, 2004.

5. ―Descriptive Analysis of Insurance Need Assessment Survey in Afghanistan‖, AISA,

June 2009.

6. ―Afghanistan Investment Guarantee Facility Trust Fund Administered by Multilateral

Investment Guarantee Agency, Financial Statement and Independent Auditors’

Report‖, December 31, 2009.

7. ―The Second Quality Assessment of Lending Portfolio (QALP-2)‖, May 2010.

8. Supervision missions’ aide-memoires, back-to-office reports and Implementation

Status and Results reports.

9. ―Completion Report: Afghanistan Investment Guarantee Facility Project‖, Asian

Development Bank, December 2011.

10. ―Project Closure Report for the Afghanistan Investment Guarantee Facility‖,

Department for International Development, December 2011.

25

Annex 10. Details of Guarantees

In February 2006, or 14 months after the project became effective, a first guarantee was

issued to Dagris (majority-owned by the French government) for its equity investment

into a cotton ginning and cottonseed oil production project. By the end of that year,

another two guarantees totaling US$2.23 million were covering equity investments in

BRAC Afghanistan Bank—a financial institution focusing on loans to small and medium

companies—and Baz International Pharmaceutical Company Ltd (BIPC). In addition, a

guarantee of US$76.5 million was issued to MTN (Areeba) Afghanistan in June 2007 for

its investment in a mobile phone network. The US$2 million underwritten by AIGF for

the MTN project provided substantial leverage, as MIGA, besides providing significant

extra cover, also reinsured a portion of its exposure in the project with four additional

insurers that would otherwise not have provided seven-year tenors in Afghanistan.

Subsequently, two more guarantees were issued in 2008 for an additional investment in

BRAC Afghanistan Bank and for a project sponsored by International Home Finance and

Development LLC (IHFD) to manufacture ―green‖ bricks and lease brick-making

machines.

From 2007 onwards, however, the security situation in Afghanistan worsened

significantly. Foreign investment plummeted, which resulted in diminished interest in the

Facility, and fewer applications were submitted to MIGA. In addition, some of the

investments covered by the Facility struggled because of the deteriorating security

situation and difficult business environment. Business Humanitarian Forum Association

(BHP), investor of BIPC, cancelled its guarantee in 2007, as it failed to find a technical

partner to manufacture pharmaceutical products in Afghanistan. In addition, NAPCOD

struggled to enforce its contracts with local farmers, who sold their harvest to other

buyers, and competed with another cotton ginning factory that operated illegally in the

region, which brought its operations to a standstill. Dagris’ new shareholders cancelled

the guarantee in 2008. Having failed to obtain loans to finance its project, IHFD

cancelled a part of its guarantee for Geo Building Technologies in 2009. Technical

difficulties further hampered the project, and the outstanding cover was reduced to reflect

the diminishing value of the equity investment. BRAC Bank, which struggled with bad

loans and increasing minimum capital requirements, was in the process of being sold as

the AIGF project closed.

In July 2011, a new guarantee of US$156.75 million was issued to MTN to cover the

expansion of its mobile network, replacing the earlier guarantee of US$76.5 million.

AIGF underwrote US$6 million of the guarantee after it obtained an approval from the

GoA and DFID to exceed the limit of US$2 million per project, and significant leverage

was obtained through MIGA’s additional cover and reinsurance with other providers. As

a result, the AIGF committed most of its capital, with the near full drawdown of IDA

resources.

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PROVINCE BOUNDARIES

INTERNATIONAL BOUNDARIES

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.