On September 23, 2010, MIGA issued a guarantee of $5.0 million to Karo Dis Ticaret ve Sanayi Ltd. of Turkey covering their shareholder loan to the Sebeel Al Safa Manufacturing Petrochemicals and Water Filling Company in Iraq. The coverage is for a period of five years against the risks of transfer restriction, expropriation, and war and civil disturbance.
The project involves the establishment of a manufacturing plant in the Baghdad area to produce polyethylene terephthalate (PET) preforms. PET performs are the raw material used to manufacture bottles for the beverage industry. The first machine will produce preforms for half-liter water bottles. The general demand in Iraq for preforms is estimated to be more than six billion annually for different bottle sizes. Currently, nearly all of PET preforms are imported from neighboring countries.
This project will have a positive and significant development impact for Iraq. The economy is currently heavily dependent on the oil and gas extractive sectors and the government is making efforts to diversify, including through attracting foreign direct investment into other sectors. This South-South investment can provide an important signal to other potential investors into Iraq and into Baghdad specifically. The project will demonstrate the available returns from supplying the large and growing domestic market in Iraq, and help aid the continued progress towards stability and economic growth. The factory will provide employment for 46 staff, almost all of whom will be recruited locally.
The project is aligned with the World Bank Group’s Interim Strategy Note for Iraq, which includes supporting policies and institutions that promote broad-based, private-sector-led growth with the goal of revitalizing the private sector and facilitating job creation. It is also aligned with MIGA’s commitment to supporting South-South investments as well as investments in conflict-affected countries. The project was underwritten through MIGA’s small investment program.