Kazakhstan, a beautiful country located at the crossroads of East and West, is currently undertaking ambitious reforms toward becoming a diversified and truly market-oriented economy. Sandwiched between two major powers — Russia and China — Kazakhstan is trying to find its own way, navigating its course amidst huge geopolitical tensions. One of the biggest current opportunities for Kazakhstan lies in expanding its partnership with Europe. Europe is trying to diversify away from trade with Russia and has expressed a strong interest in Kazakhstan’s critical minerals and oil and gas resources. Europe is also ready to assist with building critical infrastructure for connecting Kazakhstan with the European market. The Middle Corridor which aims to connect China to Europe, will link Kazakhstan, Azerbaijan, Georgia and the Caspian Sea. It can bring numerous benefits to Kazakhstan as this largest Central Asian country is looking to diversify trade routes and partners. A vital partner in Kazakhstan’s growing relationship with Europe is the European Investment Bank (EIB).
The EIB describes itself as “the lending arm of the European Union” as well as “one of the biggest multilateral financial institutions in the world and one of the largest providers of climate finance.” Daryo's Assel Nussupova spoke with European Investment Bank Vice-President Teresa Czerwińska to gain her insights on the strengths and challenges faced by Kazakhstan and the important work the EIB is doing in the country.
Q: What challenges does Kazakhstan currently face and how can your organisation help the country to overcome them?
A: Since the start of this century, Kazakhstan has witnessed impressive economic growth. While this has partly been due to the extraction of mineral resources, it has also been driven by the first generation of market-oriented reforms, and strong flow of foreign direct investment.
As the long-term financing institution of the European Union, the European Investment Bank (EIB) is ready to play a significant role in helping Kazakhstan to better face future challenges. The Bank has already supported operations addressing climate change and the development of a competitive and environmentally friendly private sector, capable of applying modern green technologies across various sectors of activity. We are currently working on operations on energy efficiency and renewable energy as well as regional connectivity. We are also in contact with GIZ (Germany’s Association for International Cooperation) to implement the development of energy efficiency programmes under Felicity Kazakhstan, including projects improving energy efficiency in residential buildings.
We are exploring operations related to the Global Gateway (including broadband infrastructure expansion in the Southern Caucasus — a regional project closely aligned with the Global Gateway priorities) and the Middle Corridor (such as support for selected critical infrastructure along the corridor).
Q: What areas do you believe are priorities that need to be addressed? (Infrastructure? Diversification of the industrial base? Diversification of transportation links? Education? Healthcare?)
A: All these areas are essential for the successful economic and social development of the country. The EIB is actively supporting EU public and private sector priorities in Kazakhstan and other countries in Central Asia, as set out in the 2019 EU strategy on Central Asia and more recently in line with the EU Global Gateway strategy.
Within this framework, the EIB supports projects fostering sustainable connectivity and the transition to a sustainable, climate-neutral growth model. On sustainable connectivity, the EIB focuses on operations related to the Middle Corridor that are closely aligned with the European Global Gateway strategy and that complement the substantial EIB support already provided on the East-West corridor in the Southern Caucasus.
EIB climate action is generally focused on supporting green infrastructure projects like energy efficiency, renewable energy, energy transmission, water supply and sanitation, as well as on making it easier for local small businesses to access finance.
Q: What role will your Bank play in assisting Kazakhstan in deriving maximum benefit from the transportation corridor?
A: The EIB is working towards reaching the long-term objective of making the Trans-Caspian Transport Corridors a smart, fast and modern multimodal route linking Europe and Central Asia that is also competitive, sustainable and reliable. These investments are necessary to strengthen trade and competition and to diversify transport routes between Europe and Central Asia. Increased economic interdependence will be beneficial for peace and prosperity in Kazakhstan and the Central Asian region as a whole.
At the EU-Central Asia Investor Forum at the end of January 2024, EIB Global signed memorandums of understanding for project co-financing with the Republic of Kazakhstan and the Development Bank of Kazakhstan amounting to €820mn. This is expected to mobilise a total of €1.6bn for connectivity projects in Kazakhstan. Similar memorandums were signed by EIB Global with the Kyrgyz Republic and the Republic of Uzbekistan, bringing total planned support for European Union-Central Asia transport connectivity projects to €3bn. This is a key milestone in the implementation of the Global Gateway strategies.
Keeping the goal of promoting transport projects in mind, the EIB is going beyond the provision of co-financing on favourable terms to share its long-term, global expertise in this sector with its partners in Central Asia. The Bank has financed many transport projects across the world — in the past decade, EIB transport lending averaged €11 billion per year, roughly 18% of its overall lending.
Q: What are your views on Kazakhstan’s efforts to diversify its economy and improve transportation routes to Europe (for example, recent developments in terms of directing oil and gas supplies to European markets)?
A: The diversification of economic and energy resources and transport routes are important both for Kazakhstan and the European Union. In this regard, the EIB is looking for opportunities to engage with the private sector in Kazakhstan, while supporting their link to more green activities and practices as far as possible. We are aware that the evolution of the Russia-Ukraine war is a key determining factor for the creditworthiness of Central Asian countries, including Kazakhstan, as the war is expected to last a long time. The region is likely to suffer major losses in income due to economic dependence and the export of natural resources. However, it is also important to ensure that Kazakhstan does not become a channel enabling Russia to avoid sanctions placed on its oil and gas supplies in many countries.
Improving transport connectivity between the European Union and Kazakhstan has enormous potential as it will facilitate trade and economic cooperation and will foster stability. It also has the potential to promote infrastructure development, stimulate investments and diversify supply chains, benefiting both the European Union and Kazakhstan.
To support diversification, EIB Global is also part of regional Team Europe initiatives to promote digitalisation and connectivity, and water, energy and climate projects.
Q: In your work as Vice-President of the EIB in charge of Central Asia, what are the strengths and resources of Kazakhstan that you try to highlight to EU interests?
A: Its strategic geopolitical location between Asia and Europe is very important for all of us. An illustration of this is the January 2024 decision by Kazakh Transport Minister Marat Karabayev to offer the management of Kazakhstan’s Caspian Sea ports of Aktau and Kuryk and 22 airports to European investors to create strong transit infrastructure links between Asia and Europe.
In addition, Kazakhstan is rich in raw materials like industrial metals and minerals. This is a very important asset that has a significant role in the development of trade and Kazakhstan’s economy.
EIB operations in Kazakhstan implement the priorities of the EU agenda in Central Asia and are closely aligned with the Global Gateway and connectivity priorities. In Kazakhstan and other Central Asian countries, these operations have a particular focus on multiple infrastructure and economic sectors such as energy efficiency, renewable energy, water management and improved access to finance for small businesses.
Q: Can you describe in detail some significant projects your Bank has undertaken in Kazakhstan in recent years? What are the outcomes of these projects and how many people do they involve? What is the total amount of funds which the Bank has invested thus far in these projects?
A: Since the EIB began operating in Kazakhstan in 2013, its activities in the country have focused on supporting the development of the local private sector by making it easier for local small businesses to access finance while giving them an incentive to adopt more sustainable and environmentally friendly practices. To date, the EIB has signed loans amounting to €489mn in Kazakhstan. EIB lending operations aim to facilitate access to micro-loans and agricultural sector finance, as well as to offer support to businesses affected by the COVID-19 crisis.
In addition, the EIB has provided a local currency loan in Kazakhstan — the first time it has done so in Central Asia. This eliminates currency risks, a factor that remains essential for the EIB to engage with and support the local private sector.
The aforementioned memorandums of understanding are good examples of our future cooperation, which cover the EIB’s €1.5bn commitment to European Union-Central Asia transport corridors. We hope that the respective financing contracts with Kazakhstan’s Ministry of Transport and the Development Bank will be signed by the end of this year.
There is great potential in Kazakhstan-European Union cooperation, and the European Investment Bank is looking forward to supporting projects in the country that help improve the quality of life of its people and strengthen its competitiveness and economic and social development. The European Union can act as a model for ensuring peace and prosperity in Central Asia for the benefit of all.
By Assel Nussupova
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