ASTANA – The European Bank for Reconstruction and Development (EBRD) signed four more deals to cooperate on projects in public services and transport on June 3, during EBRD President Sir Suma Chakrabarti’s trip to the Kazakh capital. These are all projects that involve reform, Chakrabarti commented, and really symbolise the nature of EBRD and Kazakhstan’s cooperation.
“These projects are good in their own right,” the EBRD president said in an interview with this newspaper June 4, “but they’re quite symbolic of, I think, reform and change and modernisation, in mindset as well as in reality on the ground.”
The four new projects encompass two 10 million euro loans to modernise water systems in Shymkent and Aktobe, a 70 million euro loan to the first commercial-scale solar plant in Kazakhstan and a 42.5 million euro loan to upgrade the infrastructure of Astana’s airport as well as the country’s air sector tariff system. Put together, these will bring the EBRD’s investment in Kazakhstan this year to some $420 million. Chakrabarti said he’d like to see investment in Kazakhstan reach $1 billion this year. “I think the target’s in sight,” he commented.
They also represent a country strategy tailored to what Kazakhstan is trying to achieve, particularly in terms of diversifying and greening its economy and improving quality of life in the country. The municipal services loans are indicative of the EBRD’s thrust to improve services in the regions, Chakrabarti said. Delivering better public services, he said, is an important step toward doing more difficult institution reform – giving people results they can touch and use every day is an important means of generating the goodwill needed to carry on to more difficult work.
The solar project, a groundbreaking Kazakh-British joint venture that will be co-financed by the Clean Technology Fund, follows the EBRD’s investment in a major wind farm in Kazakhstan last year, and will be one of many green energy projects, Chakrabarti hopes. “We’re pushing forward with the government on renewables generally and I think we’ll do a lot more on energy efficiency as well, going forward, through credit lines, et cetera.”
Since signing the Partnership for Reenergising the Reform Process in Kazakhstan in May 2014, an arrangement designed to boost reform and channel oil wealth into other sectors of the economy, annual investment rose by about 80 percent, Chakrabarti said in his June 4 speech to the Foreign Investors Council in Kazakhstan. “That’s a reflection of the reform process going well here,” he told The Astana Times earlier in the day.
The intensification of work within the country comes at a time of financial turmoil in the region, with the crucial Russian economy hit by sanctions as well as low prices of oil, which serves as the backbone of many regional economies. The EBRD issued lowered growth forecasts for Central Asia just last month.
“I think if anything, [regional financial difficulties] have really speeded up what we’re doing,” said EBRD Country Director Janet Heckman in the June 4 interview. “It’s meant more of an urgency for reform and we’ve seen more of a focus from everyone in Kazakhstan on the reform initiative, on the importance of reform, the importance of bringing more investment, both domestic and foreign, into the country.”
he region has been quite badly hit by the downturn in the Russian economy, Chakrabarti noted, and while lending in Kazakhstan had already increased due to the new partnership agreement, the EBRD has increased its lending to Central Asia in general.
“The critical situation in my view is really the Russian economy, when you talk about this region,” Chakrabarti said. “Sometimes in the West, people aren’t talking enough about that. We all know that the Russian economy is having difficulty, but we aren’t talking about the knock-on, spillover impact into Central Asia enough, in my view.” The situation has currency implications, remittance implications, social and political implications, he noted. “This region does need Russia and the Russian economy to do well. … So I hope, maybe, this will be a spur to some of the reforms [the EBRD office in Russia] is pushing,” particularly in diversifying the Russian economy both sectorally and regionally.
The new Eurasian Economic Union (EAEU) can, over the long term, be a force for economic growth in the region, Chakrabarti said. “I think the impact of a customs union or any union of economies isn’t going to be immediate one way or another – I think it’s going to be a slow impact over time. Clearly, if you look at the European economies, integration over time did help bring institutional change and reform, but it wasn’t as if [countries] transformed overnight. It took time.”
