KfW gives people in crisis-ridden countries prospects for the future

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The FINANCIAL — KfW business area Entwicklungsbank, and its subsidiary DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH, support fragile states in their reconstruction and development.


KfW has financed development programmes with EUR 182 million on behalf of the Federal Government in Afghanistan alone; DEG is primarily supporting the development of the private sector there. According to KFW, in 2012, after around 20 years on behalf of its main client the Federal Ministry for Economic Cooperation and Development (BMZ), KfW will resume official German Financial Cooperation with Somalia and, among other things, will support food security and reconstruction programmes in that country. Up to EUR 94 million has been earmarked for these programmes.


Both finance institutions committed some EUR 5.8 billion for projects and programmes around the world in 2011 (Previous year: EUR 5.7 billion), exceeding even the record result of 2010 by a slight margin.
The commitments not only serve to meet the overarching objective of protecting the climate and the environment but also aim to reduce poverty and improve people's quality of life.

This result was presented by Dr Norbert Kloppenburg, Member of the Executive Board of KfW, and Bruno Wenn, Chairman of the Board of Management of DEG, at the press conference held today in Frankfurt to present the Annual Report 2011 on Financial Cooperation with Developing Countries entitled "Development in fragile states: Overcoming crises, creating prospects". The report illustrates the particular challenges that KfW is facing in its work in so-called "fragile" states such as Afghanistan, Iraq, Pakistan, the Palestinian Territories or Liberia. On the one hand, measures must be taken fast so that people can see signs of progress. On the other hand, the longer-term development of the state institutions, a functioning private sector and infrastructure must be initiated.

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"A large portion of poor people around the world live in crisis-prone fragile states that have no rule of law and where the police and justice systems are very weak. Only if the population swiftly obtains access to water and electricity, roads, hospitals and schools to live a normal life can a peace and stabilisation process be established and the transition from a fragile to a stable state be successful", said Dr Kloppenburg. In 2011 alone KfW committed more than EUR 900 million for Financial Cooperation projects and programmes in so-called "fragile" states. This represents 20 per cent of commitments made under German Financial Cooperation during that period. In 2011 DEG committed EUR 275 million for investments in the private sector in high-risk countries such as Kenya, Bangladesh and Iraq.

DEG Board of Management Chairman Wenn explained the role of DEG in fragile states: "We are partners of brave private enterprises that are willing to invest in high-risk markets. Our clients make important contributions to the development of fragile states. Today roads, power plants, telecommunications networks and container terminals are increasingly being built and operated by private enterprises. With these activities private enterprises are supporting the efforts of governments and international donors to develop the infrastructure."


Development cooperation activities help to stabilise fragile states and, in this way, to improve global security. For example, in Afghanistan schools, bridges and markets were built. In the Palestinian Territories a fund for the development of municipal infrastructure for schools, roads and parks was supported and the countries in the Horn of Africa received some EUR 81.5 million in food aid.

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In Afghanistan DEG has made available a loan guarantee fund to support small and medium-sized enterprises that otherwise have no access to loans. In Iraq it has supported the mobile telecommunications company Zain with a long-term loan of USD 35 million to set up the mobile telephone network.

In 2011 KfW committed EUR 874 million alone for projects in crisis-prone Sub-Saharan Africa . "Besides emergency relief and infrastructure investments, for our neighbouring continent good governance and private sector operations are the be-all and end-all of the stabilisation process", said Dr Kloppenburg.

"In addition, we want to deliberately promote the development of the private sector in North Africa, too, in order to contribute to economic growth and create better prospects for the young population there", DEG Board of Management Chairman Wenn added. Among other activities, DEG has financed the acquisition of an industrial site and the construction of a production hall for a film manufacturing plant. This is directly creating about 100 jobs.

In 2011 KfW committed more than EUR 4.5 billion on behalf of the Federal Government (previous year: EUR 4.5 billion). Overall, it provided EUR 2.6 billion (previous year: EUR 2.8 billion) of the sum invested in developing and industrialising countries from funds of its own. This is more than half of all commitments. With its activities it is making an important contribution to increasing Official Development Aid (ODA). Seventy-nine per cent of the commitments made in 2011 count as ODA (previous year: 75%).



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