In a recent interview with the European Bank for Reconstruction and Development (EBRD), Andi Aranitasi, the new director for Uzbekistan, provided insights into the ongoing changes and developments in the country. The interview, conducted by Daryo’s Tawney Kruger, covered a wide range of topics, including Uzbekistan's 2024-2029 strategy, renewable energy projects, inclusive banking, and the nation's potential as a transit hub.
Renewable Energy in Uzbekistan: Ambitious Targets and EBRD's Role
One of the major areas of focus for Uzbekistan's development is the green transition and the expansion of renewable energy projects. Aranitasi stated, "We have actually done quite a bit in the renewable energy space." He mentioned that the EBRD has been involved in nearly every renewable project in Uzbekistan, with a focus on both solar and wind power and other renewable sources.
"We are present, I believe, in almost every single renewable project that Uzbekistan has tendered out or has, has, has awarded since we started, restarted operations six years ago. That's close to three gigawatts, which is very important also because the country has very ambitious targets. So they have started with an initial target of seven gigawatts for 2030. Last year it was revised to 12. And now very recently, about a month ago by presidential decree, it was revised to 25.”
Aranitasi emphasized that providing funding is relatively straightforward due to the EBRD's robust financial position and international backing. However, their primary focus has been on sector reform and the creation of a sustainable electricity market. This includes efforts to unbundle the electricity sector, the preparation of new electricity laws, and corporate governance support for state-owned energy companies.
Furthermore, the EBRD has collaborated with Uzbek authorities to develop a low-carbon pathway for the electricity sector, aiming to achieve net-zero emissions by 2050, a challenging yet attainable goal.
“ We're providing support in the clean energy transition in the country by having supported the Uzbek authorities in preparing a low carbon pathway for the electricity sector, which aims to get the sector to net zero emissions by 2050.”
The EBRD's financial support is complemented by a solid project finance structure, reliable offtake agreements, incentives for renewable projects, and technical, environmental, and legal guidance, ensuring the sustainability of these endeavors. However, Aranitasi acknowledged the importance of investing in the grid to manage the intermittent nature of renewable energy effectively.
Grid Infrastructure and Integration of Renewables
Regarding the outdated grid infrastructure in Uzbekistan, Aranitasi acknowledged the need for substantial investments. He mentioned that EBRD has financed approximately 350 kilometers of new transmission lines to integrate renewable projects into the grid. Coordination with partners like the Asian Development Bank and IFC is essential to maximize the impact of grid development.
"So this is a very important part. One other which is also important is that you may have noticed the recent renewable projects in Uzbekistan are all being done with the battery storage element. Yes. So this is also something that we believe will have will help smooth out the integration of renewables.”
Uzbekistan as a Transit Hub: Challenges and Opportunities
Concerning Uzbekistan's potential as a transit hub, Aranitasi noted that Uzbekistan's double landlocked status necessitates cooperation with neighboring countries to facilitate efficient cargo transport. Improvements in border crossings and rail infrastructure are crucial, along with a focus on the Trans-Caspian corridor to enhance Uzbekistan's connectivity.
“I think Uzbekistan has a good potential to be a transit hub, and at the moment it is working actively with the surrounding countries to to help realize this. Obviously, it has to do so because it is a double landlocked country, so it needs close cooperation with the surrounding countries in order to present itself as a viable and attractive option, both in terms of cargo transport, whether it's hub or transit.”
Inclusive Banking and Digitalization
The EBRD's commitment to inclusion and digitalization as core strategic priorities was evident in Aranitasi's remarks. He highlighted their approach of incorporating digital elements into transactions, whether direct or intermediated through partner financial institutions.
In the context of inclusion, the EBRD has implemented two significant programs aimed at specific target groups. The Central Asia Women in Business program supports women-led businesses by providing access to finance, technology, and technical advice. Aranitasi also cited Ipakyoli as a key partner in this initiative.
Additionally, the Central Asia Youth in Business program, set to launch in December, will focus on businesses led by young entrepreneurs, further extending their support. Moreover, the EBRD recognizes the importance of micro-borrowers and collaborates with microfinance institutions and non-bank financial institutions to assist those in need of smaller loans.
In the realm of digitalization, the EBRD has made notable investments, such as their support for TVC, Uzbekistan's first digital bank, which has grown rapidly to serve over 2.5 million clients. This digital banking model, offering services from car loans to online payments, represents a successful example, encouraging the emergence of similar digital banks in the country.
Retaining Educated Youth and Attracting Talent
Aranitasi, in response to a question about Uzbekistan's human capital and its potential, highlighted the unique advantage of a young and growing population, stating, "Uzbekistan is one of the rare cases in today's world where you have a young and growing population."
“This is quite good because it offers you a large supply of labor that is available and for businesses to use. I think what is important in terms of human capital, though, is that we need to work closely together, not only EBRD, all of the other multilateral partners and the authorities to make sure that then this labor coming on the market, the human capital, actually has the necessary skills to match what the businesses require.” Aranitasi stated.
He acknowledged the importance of aligning the labor force's skills with business requirements, emphasizing the need for a robust national education system from elementary to university levels. Aranitasi expressed optimism about Uzbekistan's potential for success but acknowledged the challenge of retaining educated youth, noting, "There is often a certain degree of brain drain from developing countries to more developed countries."
Promoting ESG and Corporate Governance
The EBRD's commitment to promoting ESG (Environmental, Social, and Governance) and corporate good governance principles within Uzbekistan's economic and corporate sphere is underscored by its strategic approach.
Aranitasi explained, "I think the ESG and CG components are two components that are more and more present in our operations, and we try to incorporate these both in work with our financial institutions."
This incorporation extends to partner financial institutions and direct projects, aimed at updating policies and systems. He emphasized that the adoption of these principles would lead to "more transparent disclosures" and improved risk management systems. Furthermore, EBRD actively utilizes technical cooperation funds to enlist consultancy support for partner financial institutions and clients in conducting analyses and audits to identify gaps and devise action plans, aligning with international best practices. Aranitasi highlighted their collaboration in preparing a low-carbon pathway for Uzbekistan's electricity sector and assisting with the launch of Uzbekistan's Chapter Zero initiative as tangible steps toward achieving these goals.
Uzbekistan's Strategy: Aligning with EBRD's Priorities
Aranitasi addressed the EBRD's 2024-2029 strategy for Uzbekistan, stating, "At the moment, the strategy is still in the final stages of internal discussion." He emphasized that the new country strategy would align with EBRD's core priorities, including the green transition, digitalization, and inclusion.
"EBRD typically has three big strategic priorities. These are the green transition, digitalization, inclusion, and you would expect to find those aspects in the new country strategy. So there will be a focal point."
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