Dmitry Pankin gives an interview to “bne IntelliNews” journal
16 May 2016
bne IntelliNews (journal, Great Britain)
The Eurasian Development Bank (EDB), which is tasked with promoting integration within the Russia-led Eurasian Economic Union (EEU) and countries drifting towards it, is marking its 10th anniversary of operations with mixed results. Despite $4.6bn invested in more than 100 projects in the past decade, the bank is struggling to fund projects in the poorer countries it operates in, while mutual trade between the EEU member states is falling.
The bank, set up in 2006 and headquartered in Almaty with regional offices in participating countries, operates in Russia, Kazakhstan, Armenia, Belarus, Kyrgyzstan and Tajikistan, with Russia and Kazakhstan contributing 66% and 33% to its $1.5bn paid-up capital; all but Tajikistan are members of the EEU.
“Shareholders of the EDB have tasked us to give strategic priority to integration projects
with chains of creating valued added for several countries at once. This mostly concerns industry,” Dmitry Pankin, chairman of the bank, explains to bne IntelliNews. “We look at small projects with investments worth $100mn-200mn that are linked to the implementation of major infrastructure projects.”
Despite the cross-border projects to boost trade that the EDB is funding, the low price of commodities and a slowdown in the Russian
economy, caused by Western sanctions and Moscow’s economic self-isolation, have hurt mutual trade within the EEU: Kazakhstan’s
trade with the EEU member states fell by 28.6% to $15.8bn in 2015, Kyrgyzstan’s trade fell by 20.3% to $2.4bn, and Armenia’s by 9% to $1.3bn.
Moreover, the bank, which also attracts capital in the market to fund its projects, is struggling to carry out projects in smaller and poorer member states, Pankin complains. “In Armenia, Kyrgyzstan and Tajikistan it is harder to find investment projects with acceptable risk, from the bank’s point of view, which is why we have to rely on government guarantees [in these countries],” he says.
One problem is that some countries have IMF agreements that stop them from accepting loans with interest rates above a certain level.
“The interest rates on loans approved is 1.5-2.1% for Armenia and 1% for Kyrgyzstan and Tajikistan with an average maturity is 20 years,” he notes. “From bank loans we cannot fund them at such low interest rates because
we ourselves attract funds on money markets at 5-6% per year.”
This, however, doesn’t prevent the bank from funding projects in these countries as it manages the Eurasian Stabilisation and Development Fund (ESDF), a regional financial mechanism with $8.5bn which was set up by Russia and Kazakhstan in 2009 to enable the member countries to obtain funding
on favourable conditions. “In Armenia, Kyrgyzstan, Tajikistan and Belarus the EDB works mainly through this fund. The volume of loans allocated by the ESDF stands at $515mn in Armenia, $285mn in Kyrgyzstan and $110mn in Tajikistan,” he says.
This favourably compares to the bank’s investment portfolio of $7mn in Kyrgyzstan, $29mn in Armenia and $10mn in Tajikistan.
At the same time, the EBD’s activities in Kazakhstan dwarf those in other countries in the region: the bank’s current investment portfolio stands at over $854mn and among other projects it has funded the construction of power lines from the country’s electricity-deficient western regions to power-abundant northern regions.
In addition, like the EBRD, the EBD has been involved in the development of renewable sources of energy in Kazakhstan and has allocated $94mn for the construction of a wind farm in Yereymentau, east of the Kazakh capital, Astana.
In March, Pankin told Russia’s Ria Novosti news agency that the bank could invest $132mn in the Russian carmaker Avtovaz’s planned car assembly plant in Kazakhstan. He then said that the first stage of the $530mn project was estimated at $330mn, of which “$230mn will come from loans, including $132mn is our part”. The rest would be provided by the Development Bank of Kazakhstan.
Apart from this crossborder project, Pankin tells bne IntelliNews that the EDB is considering several other projects such as Kazakh supplies of iron or aluminium ore to Russian companies.
“Perhaps, this is an atypical example for the development bank, but here important for us is precisely an integration factor – a Kazakh
enterprise supplies metal ore to Russian plants,” he explains.
Another example is the Aktobe rail mill which is expected to buy high-tensile steel in Russia to make rails to supply to Kazakh and Russian railway
companies. “We plan to fund their purchases in Russia,” he says.
Source: bne IntelliNews (journal, Great Britain)
The bank, set up in 2006 and headquartered in Almaty with regional offices in participating countries, operates in Russia, Kazakhstan, Armenia, Belarus, Kyrgyzstan and Tajikistan, with Russia and Kazakhstan contributing 66% and 33% to its $1.5bn paid-up capital; all but Tajikistan are members of the EEU.
“Shareholders of the EDB have tasked us to give strategic priority to integration projects
with chains of creating valued added for several countries at once. This mostly concerns industry,” Dmitry Pankin, chairman of the bank, explains to bne IntelliNews. “We look at small projects with investments worth $100mn-200mn that are linked to the implementation of major infrastructure projects.”
Despite the cross-border projects to boost trade that the EDB is funding, the low price of commodities and a slowdown in the Russian
economy, caused by Western sanctions and Moscow’s economic self-isolation, have hurt mutual trade within the EEU: Kazakhstan’s
trade with the EEU member states fell by 28.6% to $15.8bn in 2015, Kyrgyzstan’s trade fell by 20.3% to $2.4bn, and Armenia’s by 9% to $1.3bn.
Moreover, the bank, which also attracts capital in the market to fund its projects, is struggling to carry out projects in smaller and poorer member states, Pankin complains. “In Armenia, Kyrgyzstan and Tajikistan it is harder to find investment projects with acceptable risk, from the bank’s point of view, which is why we have to rely on government guarantees [in these countries],” he says.
One problem is that some countries have IMF agreements that stop them from accepting loans with interest rates above a certain level.
“The interest rates on loans approved is 1.5-2.1% for Armenia and 1% for Kyrgyzstan and Tajikistan with an average maturity is 20 years,” he notes. “From bank loans we cannot fund them at such low interest rates because
we ourselves attract funds on money markets at 5-6% per year.”
This, however, doesn’t prevent the bank from funding projects in these countries as it manages the Eurasian Stabilisation and Development Fund (ESDF), a regional financial mechanism with $8.5bn which was set up by Russia and Kazakhstan in 2009 to enable the member countries to obtain funding
on favourable conditions. “In Armenia, Kyrgyzstan, Tajikistan and Belarus the EDB works mainly through this fund. The volume of loans allocated by the ESDF stands at $515mn in Armenia, $285mn in Kyrgyzstan and $110mn in Tajikistan,” he says.
This favourably compares to the bank’s investment portfolio of $7mn in Kyrgyzstan, $29mn in Armenia and $10mn in Tajikistan.
At the same time, the EBD’s activities in Kazakhstan dwarf those in other countries in the region: the bank’s current investment portfolio stands at over $854mn and among other projects it has funded the construction of power lines from the country’s electricity-deficient western regions to power-abundant northern regions.
In addition, like the EBRD, the EBD has been involved in the development of renewable sources of energy in Kazakhstan and has allocated $94mn for the construction of a wind farm in Yereymentau, east of the Kazakh capital, Astana.
In March, Pankin told Russia’s Ria Novosti news agency that the bank could invest $132mn in the Russian carmaker Avtovaz’s planned car assembly plant in Kazakhstan. He then said that the first stage of the $530mn project was estimated at $330mn, of which “$230mn will come from loans, including $132mn is our part”. The rest would be provided by the Development Bank of Kazakhstan.
Apart from this crossborder project, Pankin tells bne IntelliNews that the EDB is considering several other projects such as Kazakh supplies of iron or aluminium ore to Russian companies.
“Perhaps, this is an atypical example for the development bank, but here important for us is precisely an integration factor – a Kazakh
enterprise supplies metal ore to Russian plants,” he explains.
Another example is the Aktobe rail mill which is expected to buy high-tensile steel in Russia to make rails to supply to Kazakh and Russian railway
companies. “We plan to fund their purchases in Russia,” he says.
Source: bne IntelliNews (journal, Great Britain)