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PERSPECTIVES OF THE EURASIAN DEVELOPMENT BANK IN THE EAEC AND THE CIS
VLADIMIR YASINSKIY,
Member of the Executive Board, Head of the Research Department, Eurasian Development Bank, Almaty
All the post-Soviet states have found themselves in a want of large-scale investment to finance key national development projects. Private banks cannot always afford to participate in such projects because of the lack of available credit resources and the protracted time frame of the investment projects under discussion.
But as the international practice shows, the challenging development tasks can be fulfilled with the help from the international and national development institutions that specialize on effective management of the long-term investment initiatives, money allocation among the high priority development projects and control over intended use of the credits rather than profit maximization. As a rule those financial institutions lend money on favorable terms and for long period. Along with that, the lending policy of such banking institution is shaped to cover the expenses and build up reserves for its own development. This leads to specialization of the development banks on such industries as energy and transportation, agriculture, high-tech and innovation.
The Agreement on Establishment of the Eurasian Development Bank (EDB) was signed on January 12, 2006 during the visit of the Russian President to Kazakhstan. The agreement was later ratified by both sides and came into operation on June 15, 2006. The EDB is an international financial institution and any country or international organization can apply for its membership. The Bank’s commitment is to foster the market economy in the member-states, promote development of national economies and enhance multilateral trade relations of its member states through its investment activity. The Bank’s head office is located in Almaty, Kazakhstan, it also has an affiliate office in St. Petersburg and representative offices in Moscow and Astana.
The Bank’s authorized capital stock is US$1,5 billion. As of today, Russia has entirely provided its participatory share of US$1 billion. Kazakhstan’s share is US$500 million; the country has already paid US$404 million and is to fulfill its obligations by the end of 2008.
On a tight schedule the EDB managed to establish its institutional body and concentrated on investment activity. In Kazakhstan it invested US$63 million in a large-scale project of the industrial development of Kazakhstan’s Zarechnoye uranium deposit. The project was implemented as part of the Comprehensive cooperation program between the Russian Federation and the Republic of Kazakhstan in the sphere of peaceful atom. The Bank financed the development of the Voskhod chrome deposit in Kazakhstan’s Aktyubinsk region. Total investment of the project is US$120 million, half of which is afforded by the EDB. Another EDB investment project is the initiative on modernization of the Russian-Kazakh energy producer the Ekibastuz GRES-2 coal-fired power plant, totaling US$93,5 million. At this stage the Bank’s participation in the construction of the third unit is under negotiation. The Bank is involved in syndicated lending of the Russian commercial banks (SlavinvestBank, subsidiary of the Kazakh BTA Bank; Tatfondbank).
In line with its approved development strategy for 2008-2010, the Bank aspires to create an investment portfolio of not less than US$4.5 billion, with over US$1 billion allocated to investment projects in electric power industry (including the Central Asian hydropower industry). By 2010, the EDB hopes to ensure growth of mutual trade between member states by US$1.6 billion per year and growth of mutual investments by member states by US$800 million. In the same time frame, the Bank expects to become one of the three leading international development banks in terms of annual investment volume in each of its member states.
Today the overall value of all the projects under consideration exceeds US$5 billion, and the EDB’s share in all those projects counts beyond US$2 billion. The project portfolio is divided between the economy sectors: the electric power industry - 15,7%, transport and transport infrastructure - 26,2%, petrochemistry - 20,9%, financial sector - 4,8%, public health services - 3%, other - 10,4%.
The list of projects to be implemented in Russia includes construction of a new regional Russian-made plane Sukhoi Superjet 100 by Sukhoi Civil Aircraft (CJSC); construction of the railway carriage plant in Tikhvin, construction of the St. Petersburg’s Western High-Speed Diameter, large petrochemical complex in Tatarstan.
Among the most promising projects in Kazakhstan are construction of the blood fractionation plant, construction of the third unit Ekibastuz GRES-2 power plant and a number of projects in agricultural sector.
The Bank is involved in cooperation with Russian and Kazakh regions to jointly identify the projects that permit to develop infrastructure and foster trans-border cooperation with neighbors. The EDB has agreements with the Republic of Tatarstan, Novosibirsk region, Khanty-Mansy Autonomous District, and the city of Almaty. The EDB considers investment projects in these regions, totaling US$445 million. Agreements between the EDB and St. Petersburg, Nizhny Novgorod region and the Astrakhan region are under preparation.
Established in February 2008 the EDB’s Technical Assistance Fund will contribute to the Bank’s efficiency by financing project, country and industry research work and by supporting the regional integration programs and intergovernmental programs. The following projects can serve a good example:
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“Comparative assessment of the technical and engineering characteristics of the construction projects of the navigation channel between the Caspian sea and the Azov-Balck sea basin”;
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“Elaboration of forecast and proposals for the Russian-Ukrainian cooperation in technology and innovation” (the project is implemented by the Institute of Economic Forecasting of the Russian Academy of Sciences and the Institute of Economics and Forecasting of the National Academy of Sciences of Ukraine);
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“Elaboration of the consolidated information system about goods and services producers in the Eurasian Economic Community (EAEC) member states” (the CIS member states can be included with time);
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“Elaboration of the comprehensive development plan of transit corridors and infrastructure for the EAEC member states”.
Bank’s numerous initiatives in the Eurasian states have facilitated accession talks with potential new members. Today Tajikistan and Belarus are regulating internal formalities to become EDB members. Armenia and Kyrgyzstan are regulating membership issues at the interagency level. The Bank is increasing cooperation with global financial institutions, international and national development institutions of its member states in information sharing, cooperation in the financial markets and joint financing of the large-scale projects.
Turning point in the EDB development as an internationally renowned bank was the granting the Bank observer status with the UN General Assembly in December 2007. This will facilitate further joint efforts of the Bank and the UN special organizational units: UNKTAD, ESCAP, UNDP, FAO and others.
In less than two years that the Bank exists, it has grown into an efficient international banking institution focused on the Eurasian space. The Bank’s credit ratings are equal or even higher than those of its member states. Today the EDB is able to bring into life the most challenging initiatives. The Bank’s projects that are already underway, help increase investment and trade between Russia and Kazakhstan. And as new member states join the Bank’s activity, its potential will boost their economies.
April 30, 2008
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