Sir Suma Chakrabarti, President of the European Bank for Reconstruction and Development (EBRD), in an exclusive interview with The Astana Times, spoke about the diverse portfolio of Europe’s major transnational lender, its work with the Kazakh government to pursue green economy projects, promote regional development and support small and medium-sized businesses.
What EBRD projects did you discuss with President Nursultan Nazarbayev in Davos ?
We spoke aboutthe achievements of 2013, highlighting the European Bank for Reconstruction and Development’s $450 million of investments in Kazakhstan last year, over half of which have a green economy element. I commented that we are keen to increase this figure in 2014.Kazakhstan has the potential to be one of EBRD’s biggest markets.
President Nazarbayev said that Kazakhstan is focusing attention on the development of small and medium-sized enterprises (SMEs) and would like to intensify cooperation with the Bank in this sector. TheEBRD and the Kazakhgovernment are already working to support SMEs. The government has provided donor funding to the EBRD’s Small Business Support programme, which provides advisory services to enterprises throughout the country.
At our meeting, President Nazarbayev also noted that the National Bank of Kazakhstan may benefit from EBRD advice on dealing with non-performing loans in the Kazakh banking sector.
We also discussed significant work that is underway to develop local currency and capital marketsin Kazakhstan. In addition, President Nazarbayev and Ireviewed recent EBRD projects, in particular,thosewith Kazakh municipalities. Among these projects arepublic transport investments in Almaty and Kyzylorda, as well as investments in wastemanagement, water and wastewater servicesand district heating.
How would you assess the Bank’s cooperation with Kazakhstan generally?
We are proud of our work in Kazakhstan. Last year, the EBRD celebrated 20 years of successful activity in the country. In that time, Kazakhstan has been transformed to some extent with the help of international organisations such as the EBRD, but mainly through the hard work and determination of the Kazakh people. After two decades in Kazakhstan, we remain ready to work as partners with the Kazakh authorities and the private sector, to share our knowledge of sustainable growth and invest in changing lives.To date, we have invested about $6.4 billion across various sectors of the Kazakh economy, mainly in the private sector, and we hope to further increase our annual investment.
What are some green economy projects the EBRD is financing? What growth areas are likely to fuel the green economy as it grows?
The green economy is a broad idea based on a model of sustainable economic development that improvesthewell-being of people while reducing environmental risks. This idea of sustainable development is aligned with the EBRD’s mandate and with our new strategies adopted at the end of last year–the Energy Strategy and the new Country Strategy for Kazakhstan. Transition to a greener economy is a unique opportunity for the country to develop new industries, create jobs, foster regional development and diversify the economy.
All of the key green economy projects that the EBRD is working on aim to improve the energy efficiency of Kazakhstan’s infrastructure, both public and private, or to introduce clean energy sources. We are active in the newly-developing renewables sector (biogas, hydro, solar and wind), as well as in supporting energy efficiency in the transport and power sectors and in municipal infrastructure. All of these projects will help operators to save energy costs while improving the quality of life for Kazakh citizens.
A large proportion of our green economy investments have been in the power sector. In Kazakhstan,this sector is characterised by a rapid increasein demand and an ageing, inefficient infrastructure. We have already financed a number of renewable energy, energy efficiency and infrastructure modernisation projects, for example, energy efficiency improvements with Central Asian Electric Power Corporation (CAEPCO) and Kazakhstan Electricity Grid Operating Company (KEGOC), and the modernisation of the Shardara hydropower plant. In addition, we are currently working on a project to finance the first large wind farm in Kazakhstan.
What percentage of green economy projects are in the private sector?
Two examples of highly effective private sector projects areenergy efficiency improvements at CAEPCO and the modernisation of wastewater facilities by the Shymkent water company. Both EBRD projects employed pioneering energy-efficient technologies and are recognised as being successful.For example, the Shymkent wastewater project, which involves the production of biogas from wastewater, was named as Environment Project of the Year by the American Chamber of Commerce in Almaty.
What significant projects is the EBRD funding in Kazakhstan’s regions and rural areas?
First of all, we have offices in seven cities in Kazakhstan –in Almaty, Astana, Ust-Kamenogorsk, Kostanai, Aktobe, Aksai and Shymkent. In all these cities, our Small Business Support team works with small businesses. More generally our strategy in the country highlights regional involvement, and we are actively looking to support projects in the regions. Our pipeline for municipal and environmentalinfrastructure includes 10 projects in the regions of Kazakhstan, outside of the two main cities. We are working with the Ministry of Regional Development and the Ministry of Environment and Water Resources on framework agreements for investments in the areas of solid waste management, water and district heating. In addition, we are investing inurban public transport and municipal lighting. In December 2013,the EBRD signed an agreement with the akimat of Kyzylorda region to finance 100 environmentally-friendly compressed natural gas buses. We also invest in the energy sector – a loan to CAEPCO, extended in 2013, will finance electricity networks upgrades in Pavlodar and Petropavlovsk.
The EBRD’s new strategy for Kazakhstan includes supporting policies aimed at commercialising public enterprises. What are some public enterprises in Kazakhstan that would benefit from being commercialised?
The utilities that the EBRD works with,such as those which providedistrict heating, water, wastewater services and public transport,would all benefit from commercialisation. We aim to improve the operational and financial viability of these enterprises to ensure that they are sustainable and attractive to the private sector.
What long-term benefits is the Great Almaty Ring Road expected to bring the country?
The EBRD envisages this as a pilot project for public-private partnerships (PPPs) in Kazakhstan. We are working with the Ministry of Transport and the International Finance Corporation to pilot this as an example of a truly viable PPP and to help develop related legislation. In the long term,the project will assist in making the whole sector attractive to mainstream foreign investors. The Almaty Ring Road is integral to the development of Kazakhstan’s logistical network.
What support does the EBRD provide to SMEs in Kazakhstan (with an emphasis on regional development)?
Small and medium-sized enterprises in Kazakhstan still face many challenges, from geographical location to red tape. But we aim to support the country’s many talented entrepreneurs through financing and consulting work. In 2013, we provided 15 billion tenge (US$81.3 million at current exchange rate) to Kazakh SMEs through a loan to Sberbank, the Kazakh subsidiary of SBR. Sberbank will on-lend the money to small businesses. We cooperate with microcredit institutions such as Arnur Credit or KazMicroFinance, and through our own donor-funded Small Business Support (SBS) unit.
The SBS programmehas helped over 1,000 Kazakh firms to modernise by subsidising consultancy projects for SMEs and is now supported by grant funds from the Kazakh government. When the original grant agreement was reached, it was the first commitment to donor financing by a host government in any EBRD country of operations. Now, the SBS programme is implemented in all parts of Kazakhstanvia the EBRD’s seven offices, together with government agencies that support SMEs. The latter include theDAMU Entrepreneurship Development Fund, which is part of the national Business Road Map 2020 Programme.
What is the EBRD’s involvement in the ground-breaking scheme for carbon emissions trading?
The EBRD has been assisting Kazakhstan in establishing carbon pricing, which is a cornerstone for building a green economy. In 2010, the Bank sponsored a study of carbon market options for Kazakhstan. We were pleased to see that in 2013 Kazakhstan established an emissions trading scheme, whichit has begun to implement. The Bank is providing the Ministry of Environment and Water Resources with ongoing support for carbon market capacity building through its Preparedness for Emissions Trading in the EBRD Region (PETER) initiative.
We are also ready to help ourKazakh clients preparefor participation in thecarbon market. Weare able do this by investing in emissions reduction projects, as well as by providing technical assistance for the monitoring of greenhouse gas emissions. The EBRD also offerstraining in the management of carbon trading activities and in developing low-carbon growth strategies for firms. Furthermore, the Bank is a strong promoter of international involvement in Kazakh’s carbon market. It seeksto coordinate its activities with other donors assisting the development of the Kazakh carbon market, such as the World Bank, the Asian Development Bank, USAID, Germany and Norway.