1. Briefly tells us about your educational and professional backgrounds.
I was born in Kabul but left the country when I was three and a half years old. My family took me to Germany. There, I studied Business Software Engineering/MIS, with a degree comparable to a bachelor’s degree, and then did my master’s degree in economics. My thesis was studying “Foreign Direct Investments – Risk or Opportunity for Developing Countries?”. It is interesting now to look back, as my conclusion was that it is an opportunity for developing countries - if done right.
While a student in Germany, I worked for a merchandising company of a large private television network, as well as for a newly established online retail platform. Since I have been working in Afghanistan, I have always been focused on private sector development. I was one of the first employees of AISA (Afghan Investment Support Agency), and also worked in the Minister of Commerce and Industries and supported private sector development through projects of the international community such as GIZ and UNDP. I must say I have the highest respect for the important work family members and friends are doing in the area of human and women’s rights, justice, peacebuilding, etc. I do though fervently believe in the vital role private sector and private sector-led growth can play in the rebuilding and reconciliation in Afghanistan.
2. What are the priorities of the IFC in Afghanistan?
We are a member of the World Bank Group (WBG), which means we follow the twin goals of ending extreme property and boosting shared prosperity. For this, the International Finance Corporation or IFC, as the largest global development organization working with the private sector in emerging markets, is promoting economic development by encouraging the growth of the private sector in developing countries. In line with this mandate, our priorities are driven by supporting inclusive growth and ensuring social inclusion through the development of the private sector. It is in line with WBG’s strategy, as spelled out in our country partnership framework for Afghanistan.
IFC’s engagement is focused on the following areas: access to finance; access to energy; public-private partnerships (PPPs); horticulture/agribusiness; investment climate reforms through advisory services; and selective investments in sectors with transformational impact on growth and job creation.
3. What are IFC's major successes in Afghanistan over the past several years?
I think it has been a very exciting time to work for IFC given our focus on development through engagement and helping to grow the private sector. We are not only working on projects now but are also looking to the future. It is what we call “upstream” – identifying the areas where we can work with the private sector and government to help unlock new opportunities for Afghanistan – delivering jobs for the people of the country. We’ve already had success with this approach.
For example, the Mazar gas to power project: in the midst of the “transition” period in 2014, we started with the development of a first-of-its-kind 59-megawatt green-field gas-to-power plant on an independent power producer (IPP) basis. This project was about more than just simply delivering on its aim to boost the country’s domestic electricity generation by up to 30 percent; it also sent an important signal and showed a clear model that internationally bankable deals are possible in Afghanistan. This proof-of-concept project with its bankable structure and project documents serves as a template for other IPPs in the country.
The Mazar IPP is also a good example of the impact of the Bank Group’s de-risking instruments as it leverages a World Bank guarantee against off-taker risk, political risk insurance by MIGA, the Multilateral Guarantee Insurance Agency, and the PSW (the private sector window of the Bank Group) for fragile and low-income countries. In June 2020, after six years of development, IFC committed US$62.30 million (including mobilization). The project will not only boost domestic power supply, but it will also reduce reliance on imports as well as on costly and polluting diesel-generated power.
Building on the lessons learned from Mazar IPP, we are now applying WBG’s “Scaling Solar” approach to support the development of a solar IPP market. The program brings together IFC's transaction advisory and investment work, World Bank guarantees, and MIGA political risk insurance under a single engagement based on a template approach to creating viable markets for solar power. IFC has been mandated by the government of Afghanistan to mobilize privately funded grid-connected solar projects at competitive tariffs rapidly through its Scaling Solar program. The first Scaling Solar project, located in Herat province, will be the largest renewable solar PV plant in the country.
Similarly, we have helped develop Afghanistan’s financial sector and are a shareholder of Afghanistan’s two leading commercial banks. IFC played a key role in setting up the First Microfinance Bank in 2004. I also believe that IFC’s engagement in Afghanistan International Bank (AIB) helped send a positive signal from Afghanistan to the global financial world after the Kabul Bank crisis.
As you know, we also engage through advisory services, supporting our government partners to improve the investment climate. I believe working on credit infrastructure and supporting the central bank, DAB, with the set-up of the public credit bureau and collateral registry to address access to finance, as well as business licensing reforms and the establishment of PriSec, can be listed as successes. However, building on the achievements and continuing working on investment climate reforms is very important.
4. What is your assessment of the current environment for foreign investors in Afghanistan?
Afghanistan has experienced the lowest flow of foreign direct investment, FDI, in the past five years. Due to the deteriorating security and the political uncertainty clouding the future of the country, domestic and foreign investors’ confidence is low. However, we do see a slight increase in the interest of foreign investors in anticipation of a peace settlement. This does not mean they are planning for concrete investment projects but are looking to Afghanistan as a potential new market – under sustainable peace. From the Afghan business community with only limited investments in Afghanistan and/or most of their investments outside, we hear that while peace is an incentive to invest or expand investment in the country, they need an improved business enabling environment – less red tape, corruption, etc. – which is why it is – even under peace (inshallah) – important to continue working on investment climate reforms.
5. Which sectors are most likely to grow in the near future years in Afghanistan?
We are currently preparing the first Country Private Sector Diagnostic (CPSD) for the country, which maps high potential areas and at the same time highlights major cross-cutting constraints. The CPSD is not finalized yet but let me share the priority sectors that we identified for the next five years with you: energy, horticulture, digitalization, logistics, and health. Afghanistan has growth potential in all of these sectors, at the same time some of these sectors address major constraints to private sector, such as energy, logistics, and digitalization. We will work with the government, international partners, and the private sector to enable these areas to flourish and to allow other sectors to leverage the spill-over effects with the aim of generating sustainable jobs for the Afghan people.
More generally, we believe that agriculture and mining can be key sectors for the economy. The agriculture sector is important because of the impact it can have on poverty reduction through job creation, while the mining sector – if done right – has a good potential for revenue creation.
6. What does Afghanistan need to do to attract more investors and investment?
Security and political stability are the two major prerequisites to attract investment to the country. To restore confidence, investors need regulatory certainty and continuation of delivery of private sector friendly regulations and cross-cutting investment climate reform, including firm commitments to tackle corruption.
7. What specific assistance does IFC offer to the investors who want to invest in Afghanistan?
IFC provides financial services - loans, equity, mezzanine, shariah-compliant financing, and blended finance. We are however very flexible and tailor our products to meet the needs of our business clients. When we are considering an investment, we can also offer advisory services, which are beneficial to our potential clients, from support on the financial management side to corporate governance and help on social and environmental aspects of an investment. We have a proactive approach to creating markets and developing bankable projects by getting involved early in a project to seed investment opportunities. So, rather than waiting for a prepared project, we will work with the investors and governments to develop a project and work with our partners and create conditions for transformational investments in strategic sectors that will lead to private sector-led growth.
8. Possible to know about the pipeline of projects that currently IFC is supporting or considering?
We have invested more than USD $300m in Afghanistan, mainly in the telecom and financial sectors. But the numbers also include investments in the energy and hospitality sectors. Our current portfolio stands at around USD $45m. Our investment pipeline going forward includes investments in the renewable energy and higher education sectors.
As mentioned earlier, IFC is engaging upstream – working early in the process to unlock markets, develop clients and projects in priority sectors. Some of the priority sectors which we are working on include agriculture, affordable housing, health, and logistics. We are anticipating that our upstream engagement will lead to more IFC investments in the next years. We are also exploring further engagement in the financial sector.