Sir Suma Chakrabarti, EBRD President
Kazakhstan Foreign Investors Council
Time to return private initiative, know-how and entrepreneurial spirit to agriculture in Kazakhstan, says EBRD President
Mr President, excellencies, ladies and gentlemen,
This is the third time I have co-chaired the Foreign Investors Council with President Nazarbayev in Kazakhstan, and as always it is a pleasure to be here.
One of the reasons I enjoy coming to Kazakhstan is its hospitality and especially the generous and delicious meals. I have personally enjoyed many examples of the local produce: from rice grown in Kyzyl-Orda to apples from Almaty (and Almaty in Kazakh means “father of apples”) and of course bread made of Kazakhstan’s high-quality wheat.
So I am especially pleased that this year's Foreign Investor Council meeting is focusing on agriculture in Kazakhstan.
We at the EBRD we are already increasing our involvement in agriculture and we certainly want to do more to reform the sector and to increase its role in the economy.
Over the past year, we have pursued an innovative model of cooperation in Kazakhstan which makes me optimistic about taking on new challenges.
So before I come to the promises and challenges of agriculture, let me first talk about our strategic partnership with Kazakhstan and its achievements in the last year.
Enhanced Partnership Framework Arrangement
Last May, the EBRD and the Kazakh government signed an Enhanced Partnership Arrangement, to boost reform and also to help channel some of the oil wealth into other sectors.
Other international financial institutions – including the Asian Development Bank, the Islamic Development Bank and World Bank – concluded similar agreements.
The partnership has allowed the EBRD to do much across the board to improve the lives of Kazakh citizens.
As a result, we boosted our annual investment in Kazakhstan by about 80 per cent, to over US $700 million last year. This brings our total financing in Kazakhstan to date to more than US$ 7 billion.
All these projects are tied to reforms.
For example together with the government, we are building in more commercial approaches in the way municipal enterprises do business, and introducing Public Service Contracts, mechanisms that give service providers greater operational independence and make them more transparent.
Only yesterday I signed four loan agreements under the Enhanced Partnership – two to modernise water and wastewater services in the cities of Shymkent and Aktobe, one to double the capacity of the Astana International Airport, and one to support the first large-scale solar plant in Kazakhstan, Burnoye Solar.
In the past year we also prepared the ground for the private sector to start playing a bigger role in the economy via public-private partnerships.
A key piece of legislation, on which we cooperated with the government, was adopted last June and set out a framework for these PPPs.
This legislation enabled us, together with our partners in IFC and the national and local authorities, to create a financing structure for the Almaty ring road, also known as BAKAD. This was the first time a viable structure had been created for public-private partnerships in the whole of Central Asia.
Currently we are looking into how the new national programme, 100 Concrete Steps, can help us to get more involved in re-energising transition in Kazakhstan, in strengthening institutions and further improving the investment climate.
And now let me turn to agriculture, the main topic of this meeting.
Mr President, you come from a family of agricultural workers. You are the son, the grandson and the great-grandson of cattle herders. One of your ancestors – well over a hundred years ago – owned a water mill, which also fed a small irrigation canal. You understand perfectly the bonds that tie a farmer to his land and to his livestock.
Kazakhstan was the bread basket of the Soviet Union, but at a great price. The farmers' bonds to their land were all but destroyed.
Today, it is time to return private initiative, know-how and entrepreneurial spirit to agriculture in Kazakhstan. This will allow the country to play a key role in global food security and diversify its economy at the same time.
The Food Security Challenge and Role for Kazakhstan
Food security and sustainable agriculture are very much at the heart of the global debate, and the EBRD is active in this debate. We launched our Private Sector for Food Security initiative four years ago, in partnership with the UN’s Food and Agriculture Organization.
Only a few weeks ago we held a summit in Barcelona where we analysed how import-reliant Egypt, Tunisia, Morocco and Jordan can improve their often precarious food security situations. More efficiency will help. But that will not be enough. The simple truth is that the world needs more food.
Kazakhstan can play a greater role in global food security if it creates the right conditions for companies to increase production. If companies boost productivity, improve communication with international markets and build up infrastructure, they can produce and sell much more – especially now when there is a gap in regional and international markets created by geopolitical turmoil.
Agriculture is also key for the economy of Kazakhstan itself.
According to my Kazakh friends, Kazakhstan produces the best wheat in the world, and experts confirm this. Your high-quality hard wheat with its high protein content gives you a competitive edge over other exporters in the region, including Ukraine.
You are one of the top 10 wheat exporters and the second-largest wheat flour exporter in the world.
The country achieved this while most agriculture remains controlled by the state. So maybe things are fine as they are?
We know your answer to this question: change IS necessary. New technologies, fresh capital and dynamic entrepreneurs need to come to the sector. A promising industry like agriculture should be generating greater income for Kazakhstan and insuring it against oil price shocks.
This is why Kazakhstan is holding the “year of agriculture”, which includes this discussion.
At times when oil prices are low, the importance of diversifying the economy for Kazakhstan is particularly apparent. And so is the diversification of ownership in the economy.
Rebalancing the economy, allowing private companies to play a more active role, is our shared goal under the Strategic Partnership with you.
International experience suggests that successful agriculture is built by private sector companies, both domestic and foreign.
I mention foreign investment because it brings new technologies and practices.
But there also needs to be a strong domestic private sector to really take Kazakh agriculture to global levels.
Domestic agribusiness companies need to reform from within to attract international financing, including from the EBRD. These domestic companies need to become more transparent, improve their corporate governance and financial management.
And there simply needs to be more of them.
EBRD Activities with Kazakh Agribusiness
Mr President, the EBRD and Kazakhstan are already working together in agriculture.
First of all, we are working to increase financing to the sector.
For example, we provided financing to Louis Dreyfus Commodities to help develop their cotton trading operations in Kazakhstan. We work closely with RG Brands, a local producer of many favourite food brands.
We are working on credit lines to SMEs, including to agriculture companies throughout the country. Thanks to the government’s support, we are about to launch a new programme called Advice to Agribusiness.
Together with the Kazakh government, we introduced the Warehouse Receipts Programme, an innovative model of financing for farmers which allows them to use future harvest as collateral for financing. At the time, Kazakhstan was one of the first countries to adopt this model.
We are also working together to improve global market coordination in grain.
Last year, the government invited us to get Kazakhstan connected to the Agriculture Market Information System, and we are working, in partnership with the FAO, to get the country fully plugged in.
We are also involved in large-scale transport infrastructure projects like roads and rail which are necessary for any sector.
We financed part of the Western Europe-Western China corridor, crucial for grain exports to China. Only two weeks ago, here in Kazakhstan, my colleagues discussed the concept of the New Silk Road economic belt, which can be rich with opportunities.
But in order to really boost agriculture exports, much more needs to be done in storage, transport and trading infrastructure.
Mr President, we know how promising agriculture is, but we also know how challenging it is to reform this particular sector in any country. There are no easy recipes. But Kazakhstan has found ways to turn other big challenges into successes. We are ready to be a committed partner as Kazakhstan takes on this new task.
Thank you very much.