By Sir Suma Chakrabarti, EBRD President
Central Asia is a very important region for the EBRD. Last year, we invested a record €1.4 billion in the region, including the largest ever project in EBRD history. The EBRD has great experience working the region, and on 18 February in Istanbul we are going to share that experience with investors at the EBRD-Financial Times Central Asia Investment Forum.
The region has seen some of the fastest economic growth in the world. In 2013, Mongolia was the fastest-growing economy globally.
That growth, based on high commodity prices, has slowed down today due to the end of the commodity super-cycle. It has also been hit by slowdown in China and recession in Russia; currency devaluations are causing economic pain.
But there is good news. The region is opening up to new investors; reform processes are under way; and more is known about Central Asia in the world.
New Links: The region, at the heart of Silk Road, is opening up to the world and forging new economic relationships. From Western Europe to China, our newest shareholder, new investors are looking at the region.
Reform: Governments are increasingly realising that they need reforms to diversify and return to high growth. We are supporting investment councils which aim to improve the investment climate, working directly with governments on areas such as PPPs in Kazakhstan, energy sector reform in Tajikistan, extractive sector transparency in Mongolia, public utilities reform in the Kyrgyz Republic, financial sector in Turkmenistan and many others, and stand ready to increase our support to reforms.
Knowledge: The region that didn’t even qualify as a frontier market at the dawn of independence 25 years ago today is a part of the global economy. It now must promote itself better to investors.
It is in Central Asia that we have both the smallest and our largest projects.
Just last year, our financing ranged from microloans to small farmers in the Tajik mountains to help them combat consequences of climate change, to the largest financing package in the history of the EBRD – a syndicated loan of US$ 1.2 billion to Oyu Tolgoi copper deposit in Mongolia.
The region can be challenging, with lack of access to financing and unstable electricity supply among the chief obstacles to doing business, as was shown in a recent EBRD-World Bank survey. But it is also full of great promise. Central Asia’s massive investment needs can be turned into big opportunities.
A lot of these opportunities are appearing from regional links and regional economic integration in all directions - going east to west, and north to south.
Central Asia is currently the focal point of several regional programmes connected with the Silk Road, most famously perhaps China’s Belt and Road initiative. This creates opportunities from China all the way to Europe, via the Caspian region, the Caucasus and Turkey.
I am happy to announce today that we are already in talks with the Beijing-based Asia Infrastructure Investment Bank to co-finance some key road projects in a number of Central Asian countries.
So this is east to west. You can also look from north to south. We are already supporting a key cross-border electricity transmission line, known as CASA 1000, which will bring hydro energy from the Kyrgyz republic and Tajikistan to Afghanistan and Pakistan. There is a traditionally strong economic cooperation with Russia. Investors from India and the Gulf are already present in the region.
There are also opportunities for investors within the countries. We are supporting the first hypermarkets in Central Asia; Carrefour in Kazakhstan just opened last week, and Auchan in Tajikistan is close to completion. We are working with Turkish companies Coca-Cola İçecek and Efes in most countries in Central Asia. (In fact Turkey is such an important investor in the region that we chose Istanbul for the investment forum.) Very recently, Kazakhstan announced a privatisation programme with many prize state-owned assets which has immediately generated investor interest, and we are ready to talk to potential investors.
Natural resources continue being the economic driver in the region, but there are promising secondary industries like clothes manufacturing in the Kyrgyz Republic or cashmere in Mongolia, in which we work through our Small Business Initiative.
Central Asia is also a region with great, as yet unrealised, tourism potential. I love visiting it, and more people should. It is a region where education and hard work are highly valued, and where guests receive a warm welcome.
So what can be done to make sure Central Asia fully benefits from all the opportunities which new economic links are opening up?
Continued structural reforms, predictable business environment, more diversified economies and larger role of the private sector.
Before the Central Asia Investment Forum, we will hold a frank and constructive round table discussion with our governors, key ministers from Kazakhstan, the Kyrgyz Republic, Mongolia, Tajikistan and Turkmenistan, about recent reforms and steps to improve business climate and invite more private sector investment.
A lot needs to be done, but some major steps have already been made. We will continue to make our contribution with investment and support for policy reform, and also by regularly gathering policymakers, investors and experts, as we are doing on 18 February in Istanbul, to shine a light on challenges and opportunities in Central Asia.