A new cashmere scouring and disinfection facility is being set up in Afghanistan to help process more fibre for export.

War-torn Afghanistan is the third biggest producer of cashmere wool next to China and Mongolia, but competition from other countries where the sector is more developed has meant that Afghan producers and traders have had to keep their prices low.

Other challenges include the high percentage of waste material in raw cashmere, which increases its weight and therefore transport costs.

The Traitex scouring and disinfection facility in Herat's Fibers and Textiles Industrial Park will process fibre for export. The aim is that local traders will be able to command a higher net price for processed Afghan cashmere, stimulating greater harvesting of cashmere goats and increasing income for local herders.

In addition to the indirect employment of herders, the project will also create 35 permanent jobs in an area with limited opportunities and will provide training to Afghan staff.

An investment by Traitex International of Belgium and Sodintec Finances of Luxembourg, the project is insured to the tune of $2m by the Multilateral Investment Guarantee Agency (MIGA), the political risk insurance arm of the World Bank Group.

"Until now Afghanistan has exported almost all of its cashmere in its raw form, as no significant processing has taken place within the country," said Dominique Godin of Traitex International SA.

"There's great potential for this industry going forward, and we're pleased that MIGA's insurance helped reduce the risk profile of this project so that it can advance."