By Anton Usov
This year the European Bank for Reconstruction and Development (EBRD) marks the 30th anniversary of the launch of its operations in Kazakhstan. What began as a small representative office in Almaty, the country’s largest city, has become the biggest continuous banking operation for the EBRD in Central Asia, with almost US$ 10 billion invested through nearly 300 projects to date.
Currently, Kazakhstan is one of the Bank’s most important markets. The EBRD has two main offices in Nur-Sultan and Almaty and a network of smaller offices in Aktobe, Karaganda, Kostanay, Shymkent and Ust-Kamenogorsk.
The Bank’s recently approved country strategy for Kazakhstan aims to boost private-sector competitiveness and connectivity and to strengthen economic governance. The EBRD is also supporting Kazakhstan’s green pathway to carbon neutrality and climate resilience, as well as promoting economic inclusion and gender equality through greater private-sector engagement.
The strategy rests on the Enhanced Partnership Framework Arrangement signed between the Bank and Kazakhstan in 2021. It is helping to boost the resilience, modernisation, digitalisation and regional integration of the national economy.
Deputy Prime Minister, Minister of Finance of Kazakhstan and the EBRD Governor Yerulan Zhamaubayev said: “The EBRD has been a trusted partner of Kazakhstan for three decades delivering finance, expertise and helping attract foreign direct investment. We are grateful for the excellent level cooperation and want it continue for many years to come.”
EBRD Head of Kazakhstan, Huseyin Ozhan said: “The EBRD is very proud to have supported so many important initiatives In Kazakhstan. Thirty years on, this is a very different operation and, working with the authorities, we are helping to making this country greener, more inclusive and more digital. There are many more challenges ahead and we look forward to addressing them together.”
Initially, the EBRD’s activity in Kazakhstan supported the country’s mining and extractive industries, which still play an important role in the national economy. Various projects with the Kazakhstan Electricity Grid Operating Company (KEGOC) improved the reliability and efficiency of electricity transmitted from traditional coal-fired power plants in the north to the rest of the country.
The Bank also supported important initiatives such as the Global Gas Flaring Reduction Partnership, designed to help local oil-producing companies reduce energy wastage and combat damage to the environment.
As Kazakhstan declared an intention to move towards a low-carbon and climate-resilient economy by cutting the use of coal-fired power stations and reducing greenhouse gas emissions by the end of 2030, the EBRD intensified its cooperation with the national gas firm QazaqGaz.
Various financial facilities with QazaqGaz were designed to promote energy efficiency, reduce carbon intensity in the gas sector and increase the use of domestically produced natural gas in order to replace the use of coal across Kazakhstan.
More recently, the EBRD has worked with companies such as ShalkiyaZinc to promote sustainable mining and create new inclusive job opportunities. The Bank’s award-winning project with the Atyrau oil refinery helped upgrade the company’s wastewater treatment facilities, giving the region a major environmental boost.
In line with the ambition to ensure that green financing accounts for more than 50 per cent of EBRD annual business volume by 2025, the Bank has actively supported renewable power generation in Kazakhstan. In fact, half of the country’s installed renewable capacity has been financially supported by the EBRD.
Since 2014, the EBRD, the Clean Technology Fund (CTF) and the Green Climate Fund (GCF) have jointly committed substantial resources to renewable energy generation projects across Kazakhstan. These have included solar plants in Chulakkurgan, Baikonur and Zhangiz-tobe.
The Bank also financed the construction of China’s Risen Energy solar plant in the Karaganda region, Nomad Solar in the Kyzylorda region and the Zadarya solar power plant near the city of Shymkent. The Burnoye solar plants, financed by the EBRD, were the first utility-scale renewable energy projects in Kazakhstan under legislation enabling private investment in the sector.
In parallel, in 2016, the Bank launched an ambitious programme with the CTF and GCF, targeting further advancement of the country’s green agenda by supporting private renewable energy projects through the Kazakhstan Renewables Framework.
The Framework aims to finance €500 million(US$499.85million) of renewable-energy and grid-integration projects, supporting the country’s commitments to cutting emissions under the Paris climate agreement. The facility promotes solar, wind, hydro, biogas, distribution and transmission projects and is helping reduce CO2 emissions by at least 500,000 tonnes per year.
A properly working financial sector is the lifeblood of any economy. The EBRD has therefore been improving institutional capacity and regularly providing funds to partner financial institutions such as Bank CenterCredit and the microfinance organisation KMF. The funds are on-lent to micro, small and medium-sized enterprises (MSMEs), especially in rural areas.
These loans, typically provided in local currency, help MSMEs access much-needed working capital, finance energy-efficiency improvements and invest in climate mitigation and adaptation technologies and services.
The EBRD also launched its Women in Business programme, in partnership with the government of Kazakhstan. The programme provides credit lines, risk-management support and technical assistance to local financial institutions that work with women-led SMEs. In addition, it offers business advisory services, training and mentoring directly to these SMEs.
The Bank pays special attention to the development of local capital markets and to improving the institutional capacity of key stakeholders. For instance, the EBRD was a trusted partner of the government in the establishment of the Astana International Financial Centre (AIFC). It supported the introduction of green financing under the AIFC and helped review the exchange rules for the Astana International Exchange.
The EBRD helped the Kazakhstan Stock Exchange (KASE) to improve liquidity provision systems and increase transparency. These measures helped channel domestic and foreign investment to Kazakhstan, stimulate growth, set new standards of corporate governance and promote green innovation.
Other important initiatives in the country’s financial sector have included:
- the introduction of the Regional Small Business Programme (RSBP), which has offered specialist training on MSME lending to more than 1,400 professionals so far
- the Green Economy Financing Facility in Kazakhstan (KazGEFF), which provides funding and technical support for financial institutions promoting green lending to companies and residents
- legal support for the regulator in order to boost the secondary market for non-performing loans and distressed assets.
Reliable transport and regional connectivity are vital for the ninth-largest country in the world. The EBRD has been supporting the national road operator, KazAvtoZhol, by financing the rehabilitation and upgrade of key roads between various regions of the country and by connecting Kazakhstan with neighbouring countries.
The EBRD has played a major role in organising financing for the construction of the 66-kilometre BAKAD ring road around the city of Almaty and brought the deal to a financial close, making this the largest public-private partnership (PPP) project in both Kazakhstan and Central Asia. It is also the first PPP project in the region to have been structured with the involvement of international advisers and through an open, international competitive process.
In 2021, the EBRD facilitated better regional and international connectivity for air travellers by arranging a loan to develop key infrastructure at Almaty International Airport. The biggest-ever private investment in airport infrastructure in Kazakhstan and the region will help boost operations of the busiest airport in Central Asia.
The Bank has helped the national airline, Air Astana, construct the first aircraft maintenance facility in the country and in the whole of Central Asia. It has also provided the national carrier with liquidity support to boost its resilience, which was affected by the pandemic.
Various financing facilities provided by the EBRD to Kazakhstan’s national railway company, Kazakhstan Temir Zholy (KTZ), helped it improve operational efficiency and introduce energy-saving measures across the railway network. The Bank participated both in Eurobond and local currency bond issues by KTZ.
This latest EBRD investment will help Kazakhstan’s state-owned railway operator restructure its balance sheet and implement a range of crisis-response measures, including the reorganisation of its transit freight operations, to cope with the after-effects of the pandemic and ongoing geopolitical turmoil.
No other financial institution has done more than the EBRD to support the replacement of municipal public transport and street lighting and the reconstruction of services for water, wastewater and heating in Kazakhstan. These projects, together worth more than €530 million, have been implemented in 11 cities, including Aktobe, Kostanay, Kyzylorda, Nur-Sultan, Pavlodar, Shymkent, Taraz and Ust-Kamenogorsk.
Four local municipalities (Almaty, Semey, Shymkent and Ust-Kamenogorsk) have joined the EBRD Green Cities programme – a crucial tool for helping cities set out their sustainable development vision and strategic objectives, in addition to the actions and investments required to address high-priority environmental issues.
To date, the Bank has implemented more than 3,000 advisory projects in the country with local and international experts, helping SMEs improve their performance and find new growth and export opportunities. It has also supported the establishment of the professional business consulting market in Kazakhstan.