In August of 2013, MIGA issued guarantees totaling $0.8 million covering shareholder loans by Traitex International S.A. of Belgium and Sodintec Finances S.A. of Luxembourg to Traitex Industry in Afghanistan. The coverage is for a period of up to 10 years against the risks of transfer restriction, expropriation, and war and civil disturbance. MIGA issued its first contract of guarantee for this project on June 28, 2013.
The project consists of the set up and operation of a cashmere-scouring and disinfection facility in the Fibers and Textiles Industrial Park in Herat to process the fiber for export. Until now Afghanistan has exported almost all of its cashmere in its raw form, as no significant processing has taken place within the country.
The cashmere sector is currently underdeveloped in Afghanistan. This is due in part to the fact that the high percentage of waste material in raw cashmere increases its weight and therefore transport costs. Competition from other countries where the sector is more developed has meant that Afghan producers and traders have had to keep their prices low.
The establishment of Traitex Afghanistan’s scouring and disinfection line in Herat will allow traders to command a higher net price for Afghan cashmere, which could stimulate greater harvesting of cashmere goats and increase income for local herders. The project will also create 35 permanent local jobs in an area with limited employment opportunities and will provide training to Afghan staff.
The project is consistent with MIGA’s strategic priorities of supporting investment into conflict-affected countries and in countries eligible for concessional lending from the International Development Association.
MIGA’s support for this investment is aligned with the World Bank Group’s strategy for Afghanistan, particularly with regard to providing domestic sources of growth and jobs.
The project is underwritten through MIGA’s Small Investment Program.