MANILA, Sept. 24 (Xinhuanet) -- The Asian Development Bank (ADB) Friday said that it would help Afghanistan to stimulate private sector activity and attract foreign direct investment by co-financing an investment guarantee facility.

    The ADB said in a statement that it had approved a loan of 5 million US dollars and a guarantee of 10 million dollars to provide political risk guarantees to eligible investors and financiers.

    "We are very pleased with this cooperative effort among different partners to create an innovative solution to the needs of Afghanistan, leveraging each other's strength and making use ofADB's political risk guarantee instruments in a catalytic and innovative way," says Werner Liepach, ADB's Director of Co-financing Operations.

    Citing an analysis by the World Bank, the ADB said that there is an encouraging potential level of foreign direct investment in Afghanistan, with demand coming from sectors such as energy, telecommunications, Internet services, banking, hotels, housing, food and agribusiness, textile, steel, oil and gas, and mining.

    Although the international community is exerting considerable efforts to support Afghanistan's rebuilding and development, available official flows are not enough to sustain the reconstruction effort, the bank said.

    "A vibrant and active private sector is needed to generate jobsand support long-term economic growth for poverty reduction in Afghanistan. But without insurance against selected political or non-commercial risks for investment projects, many potential investors are reluctant to do business in the country and are taking a wait-and-see attitude," says Veronica John, an ADB SeniorStructured Finance Specialist.

    Private sector development is a key ingredient of ADB's strategy in Afghanistan. ADB projects in support of a private sector-led growth in the country are expected to amount to 53 million dollars by the end of the year.

    At an international conference in Berlin earlier this year, ADBPresident Tadao Chino pledged up to 1 billion dollars in assistance to Afghanistan for 2005-2008. Enditem