EBRD Provides $9 Million Loan for Transport Company Development

EBRDThe European Bank for Reconstruction and Development (EBRD) will provide a $9 million loan to Kazakhstan’s joint stock company Olzha to promote private investment in the country’s transport industry and to support the business’s development, the EBRD reported on March 28.

Olzha, a nearly 20-year-old company, provides operating leases for freight wagons to corporate clients inside and outside of Kazakhstan. Its fleet of some 1,400 wagons transports mainly liquefied petroleum gas (LPG) and oil products. Olzha will use the new EBRD financing to purchase about 100 freight wagons and a locomotive. A $24.8 million EBRD loan to the company was approved last year, also for the expansion of the company’s fleet as well as for the implementation of international health and safety standards.

“The Bank closely monitors private wagon leasing and freight-forwarding markets and selected Olzha for its prudent business management, transparency and financial robustness,” Askar Namazbayev, principal banker for transport at the EBRD Resident Office in Almaty, told The Astana Times. The bank is planning to expand its private sector portfolio and is considering other wagon leasing companies and other public-private partnerships, he said.

“Both loans target strengthening private sector presence in the railway market, increasing competition and promoting high standards for business practice,” Namazbayev said. “By supporting Olzha to acquire new wagons and a locomotive, the bank directly contributes towards increasing share of the privately held rolling stock in Kazakhstan and increasing participation of the private sector on the operating lease market.”

EBRD officials have said the loan also supports the application of modern business practices in Kazakhstan. As part of the agreement with the bank, Olzha will adopt international occupational health and safety standards and environmental management standards. The adoption of these standards is expected in July 2014, Namazbayev said.

Landlocked Kazakhstan has an extensive railway network with a freight wagon industry dominated by state organisations. Last year’s loan to Olzha was the EBRD’s first private sector transaction in Kazakhstan’s railway industry. The country is currently focused on expanding and diversifying its transport sector and last year adopted a major infrastructure development plan for 2014-2020, which includes the construction of more than 8,000 kilometres of railways and the further integration of the country into international transport systems. The World Bank will help with the development of some of the plan and the country hopes through this work to rank higher in the World Bank’s Logistics Performance Index.

Kazakhstan and the EBRD also both foresee an increase in the country’s oil and gas production, which will increase demand for rail transport.

Since 1993, the EBRD has invested nearly $6.6 billion in Kazakhstan, with just over half its portfolio in the private sector. The bank recently adopted a new strategy for Kazakhstan, focusing on diversifying and supporting the non-resource sector, balancing the state and market’s economic roles, and promoting low-carbon growth and energy efficiency.

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