Eurasian Development Bank

Eurasian Development Bank
Formation	12 January 2006
Type	regional development bank
Headquarters	Almaty, Kazakhstan
Website	http://www.eabr.org/

The Eurasian Development Bank (EDB) is a regional development bank established by the Russian Federation and the Republic of Kazakhstan in January 2006 to promote economic development and facilitate integration in Eurasia. The Bank currently has six member states, including Armenia, Belarus, Kyrgyzstan and Tajikistan.

Other states and international organisations may become members by joining the Agreement establishing the Bank.

EDB’s charter capital exceeds $1.5 billion, formed with contributions made by its member states (Russia US$1 billion; Kazakhstan US$500 million, Armenia US$100,000, Tajikistan US$500,000, Belarus US$15 million, and Kyrgyzstan US$100,000). The charter capital may be increased on the basis of the decision of the Bank’s Council.

The Bank has the status of an international organisation. In January 2013 the Organisation for Economic Cooperation and Development (OECD) recognised Eurasian Development Bank as a multilateral financial institution.

EDB’s operations are governed by international law. As such the Bank:

• has international legal capacity;
• enjoys the rights of a legal entity in its member states;
• has a special legal status granting certain preferences and privileges in its member states, including property and judicial immunity, tax and customs preferences, and preferences that allow avoiding costs and risks associated with possible changes in the legislation and banking regulations of the member states; and
• has the status of a preferred creditor.

The Bank’s headquarters is located in Almaty, Kazakhstan.

EDB has a branch in St. Petersburg and representative offices in Astana, Bishkek, Dushanbe, Yerevan, Minsk and Moscow. EDB has an observer status with the UN General Assembly since 2007, EurAsEC since 2008, and the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG) since 2008.

Strategy

In accordance with the EDB Strategy for 2011-2013 approved by the Bank’s Council in December 2010, its operations are aimed at creating conditions for sustainable economic growth and deeper integration between its member states and at overcoming the consequences of the global financial and economic crisis in the member states. The Bank has the following strategic objectives:

• Facilitate the growth of mutual trade and mutual investments, by:
  • financing investment projects with an integration effect;
  • providing technical assistance through the Technical Assistance Fund to projects with an integration effect; and
  • conducting research on economic integration through the Centre for Integration Studies.

• Facilitate sustainable economic growth in its member states, help them overcome consequences of the global financial and economic crisis and upgrade and improve the competitiveness of their economies. To this end, EDB provides financing in the following priority areas:
  • infrastructure (transport, power, telecommunications, and municipal facilities);
  • development of production with high added value; and
  • energy efficiency.

• Expand the geography of its operations. This is achieved via:
  • attracting new member states;
  • increasing the volume of operations in Armenia, Belarus, Kyrgyzstan and Tajikistan,  ; and
  • ensuring a diversification of its investment portfolio.

History

EDB was founded on the initiative of the Presidents of Russia and Kazakhstan pursuant to an Inter-state Agreement signed on 12 January 2006.

The Bank commenced its activities in June 2006 following the enactment of the Laws on the ratification of that Agreement by the Presidents of Russia and Kazakhstan. Armenia and Tajikistan joined EDB in 2009, Belarus in 2010, and Kyrgyzstan in 2011.

Activities

Investment Operations

The Bank invests in major effective mid- and long-term projects. As a rule, the minimum value of projects that are admitted for consideration is US $30 million and their maximum payback period is no longer than 15 years.

The completed investment projects include:

• construction of the Tikhvin Freight Car Building Plant in Russia;
• purchase of BelAZ dump trucks to re-equip coal mines of the Siberian Coal Energy Company (SUEK) in Russia;
• construction of an ore mining and processing plant at the Voskhod chromite deposit in Kazakhstan;
• industrial development of the Zarechnoye uranium deposit in Kazakhstan;
• construction of an MDF boards plant in Tomsk Oblast;
• construction of a modern spinning mill in Tajikistan;
• financing of the purchase and transportation of wheat to Armenia;
• purchase of agricultural equipment for Kazakhstan’s grain producers;
• pre-export financing of grain production and development of the production base of Kazakhstan’s largest agricultural holdings;
• utilisation and processing of associated petroleum gas at the Kenlyk field in Kazakhstan; and
• construction of the North Kazakhstan-Aktobe Region interregional electric power transmission line.

As of 1 January 2013, the bank’s current investment portfolio totalled US$3.67 billion and cumulative investment portfolio US$4.59 billion.

EDB has 63 investment projects under implementation, including:

• investment financing for Bogatyr Komir, Kazakhstan’s largest coal producer;
• construction of the third power-generating unit and the reconstruction of the existing facilities at Ekibastuz Power Plant 2 in Kazakhstan;
• construction of the Polotsk hydropower plant in Belarus;
• reconstruction and development of Pulkovo airport in St. Petersburg;
• creation of Sukhoi Superjet 100, a new model of passenger planes, in Russia;
• construction of the Osipovichi Railcar Building Plant in Belarus;
• construction of a new unit at the Abakan combined heat and power (CHP) plant;
• co-financing the construction of the Western High-Speed Diameter toll road in St. Petersburg;
• development of marine freight transport in the Northern Caspian region;
• financing of RAIL 1520’s project to develop the freight transportation market;
• construction of an electric locomotive plant in Kazakhstan;
• provision of a guarantee to Deere Credit Inc. for the loan to purchase agricultural equipment and lease it to Kazakhstan’s agricultural producers;
• construction of Kazakhstan’s new railcar repair plant – the Yeskene Railcar Service Centre;
• financing for the development of Polymetal’s mining projects and the respective infrastructure;
• co-financing of the Acron Group’s investment project to develop a potassium-magnesium salt deposit in Perm Krai through acquiring an interest in the project company;
• financing of projects to construct hotel and business centres in Minsk and Astana;
• purchase of fuel for the Bishkek CHP plant in Kyrgyzstan during heating seasons;
• construction of the Apatity−Kirovsk heat pipeline in Murmansk Region;
• pre-export financing of uranium export supplies from the Zarechnoye deposit in South Kazakhstan Region;
• development of transport infrastructure in the framework of the project to develop the Elga coal deposit in the Sakha (Yakutia) Republic;
• modernisation of Altynalmas’ gold ore mining and processing facilities in Kazakhstan;
• reconstruction of the Kazatomprom sulphuric acid plant in Kazakhstan;
• development of Karatau’s uranium ore extraction and primary treatment facility in South Kazakhstan Region; and
• financing of the project to develop an automated system for the control of fuel and power consumption by locomotives in Kazakhstan.

Bearing in mind that the banking system is the infrastructural and institutional base of the market economy, the Bank is implementing special programmes to provide targeted loan facilities to financial institutions from its member states.

In 2010 EDB launched three programmes to support the financial sectors of its member states: the programme for the support and development of small and medium-sized businesses, the programme for the support of microfinance, and the programme for the development of trade finance instruments and promotion of mutual trade between the member states. In 2011 the Bank approved the programme for the improvement of energy efficiency in its member states.

As of 1 January 2013, EDB’s investment portfolio in the financial sector included US$191 million in the programme for the support and development of small and medium-sized businesses, US$119 million in the programme for the development of trade finance instruments and promotion of mutual trade between the member states, US$7 million in the programme for the support of microfinance, and US$10 million in the programme for the improvement of energy efficiency.

Management of the Ressources of the EurAsEC ACF

The EurAsEC Anti-Crisis Fund (ACF) of US$8.513 billion was established by governments of six countries: Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan. The ACF’s main goals are to assist its member countries in overcoming consequences of the global financial crisis, to ensure their long-term economic and financial stability, and to foster integration (for more information visit http://acf.eabr.org/eng).

In June 2009 the ACF member states appointed EDB the manager of the ACF and signed a respective agreement with the Bank. As the ACF manager, EDB prepares and implements the projects of the Fund.

The fund has two instruments:

• financial credits to support budgets, balances of payments, and national currencies; and
• investment credits for interstate projects.

In 2010-2011 the ACF authorised the provision of financial credits to Tajikistan (US$70 million) and Belarus (US$3 billion). To date US$2.19 billion has been disbursed under these loans.

Technical assistance

The Bank provides financial support for pre-investment and innovation research at the interstate, country and sector levels, aimed at deepening Eurasian integration, strengthening market infrastructure, and promoting sustainable economic growth in its member states. For these purposes, the Bank established a Technical Assistance Fund (TAF)in 2008.

The TAF implements the following programmes:

• The Programme of Technical Assistance as Part of Financing Investment Projects;
• The Regional Integration Studies Programme;
• The Innovative Economy Support Programme; and
• The Programme of Support for Interregional and International Programmes.

The TAF portfolio includes 40 projects for a total of more than US$ 5.5 million.

Research

EDB’s Strategy and Research Department:

• Implements large-scale research and applied projects;
• Holds conferences and roundtables in a regular fashion; and
• Publishes periodic research, sectoral and theme reports, macroeconomic reviews that analyse the problems of and forecasts for the economic development of the region, and information materials that discuss regional integration, operations of development banks, and financing of investment projects in the post-Soviet space.

The processes of deepening and widening of integration in Eurasia triggered by the establishment of the Customs Union and the Single Economic Space by Belarus, Kazakhstan and Russia require comprehensive analysis. With this goal in mind, EDB established the Centre for Integration Studies in 2011. The Centre carries out research, drafts reports, prepares recommendations to the Governments of EDB’s member states. It also hosts round tables and expert meetings on a wide range of issues concerning regional economic integration. The findings of the Centre’s research can be found in a wide array of publications, in particular its series of Reports, the Journal for Eurasian Integration, the Eurasian Integration Yearbook, various papers and monographs. The Centre for Integration Studies leads work on a number of large-scale permanent projects, in particular the System of Indicators of Eurasian Integration, Monitoring of Mutual Investments in the CIS, and the Integration Barometer.

Mobilisation of Financial Resources

EDB works with financial institutions worldwide to raise long-term finance in capital markets, which are the main source of financing for the Bank’s investment activities. The fundraising instruments include:

• Eurobonds under the EMTN programme;
• Bonds in local markets;
• Securities under the ECP programme; and
• Bilateral bank loans.

The Bank has credit ratings from Standard & Poor's (ВВВ/stable), Fitch Ratings (ВВВ/stable), and Moody's Investors Service (А3/stable).

International Cooperation

The EDB member states consistently strive for greater integration in the CIS and EurAsEC, believing that joining forces and strengthening trade and economic co-operation will help each member state face up to the challenges of globalisation and find their rightful place in the world’s division of labour system. The establishment of EDB, based on proposals put forward by the Presidents of Russia and Kazakhstan, is viewed as a major integration project in the financial and economic sphere in the post-Soviet space.

In order to create favourable conditions for its operations in the international arena and in its member states, EDB cooperates with state bodies in the member states, establishes and develops relationships with other international organisations, national and international development institutions, and research and public organisations, unions, and associations.

EDB is paying particular attention to its cooperation with the Eurasian Economic Commission, the EurAsEC and the CIS. The Bank takes part in meetings of Heads of States and Governments of the CIS and EurAsEC countries, the CIS Economic Council and the EurAsEC Integration Committee. It also takes part in the work of bilateral intergovernmental commissions on trade and economic cooperation between its member states.

EDB is developing cooperation with the UN institutions. In 2009 the Bank obtained an observer status as an intergovernmental institution at the United Nations Conference on Trade and Development (UNCTAD). Through its Technical Assistance Fund the Bank is implementing a series of projects with the UN Economic Commission for Europe (UNECE)), with which it signed a Memorandum of Understanding in 2010. In 2011 it has also signed a Memorandum of Understanding with the UN Development Programme to develop cooperation in the framework of infrastructure projects in Central Asia.

Proceeding from its mission and with a view to attaining its strategic objectives, the Bank develops cooperation with other international financial institutions. Its interest to developing relationships with global development institutions, which have accumulated years of experience in facilitating institutional development and reforms in transitional economies, is caused by its desire to use the best practices to create more efficient and powerful anti-crisis measures for stimulating the economies of the EDB and ACF member states and strengthen their cooperation in global markets.

In particular, the Bank has signed:

• the Framework Cooperation Agreement with the World Bank and the Indicative Plan for its Implementation for 2011-2013, which outlines the forms of their with respect to the EurAsEC Anti-Crisis Fund; and
• the Framework Cooperation Agreement with the International Finance Corporation (IFC), which simplifies EDB’s participation in the co-financing of IFC investment projects in emerging markets.

EDB is developing dialogue with the International Monetary Fund on the coordination of work of these two institutions in certain countries and on the reform of the international financial architecture, and with the European Bank for Reconstruction and Development (EBRD) on the improvement of corporate governance.

It is also developing links with the Shanghai Cooperation Organisation (SCO) in the framework of the SCO Interbank Association, with which it signed a partnership memorandum in 2008. The Chairman of the EDB Management Board takes part in the events arranged at the summits of the heads of the SCO member states and in meetings of the SCO Interbank Association’s Council. The Bank’s representatives also take part in the SCO business forums.

One of EDB’s strategic objectives is to expand the geography of its operations. To this end the Bank is working proactively to attract new member states.

Environmental and social responsibility

In its operations EDB pursues the principles of social and environmental responsibility and strives for the improvement of the efficiency of use of natural resources, environmental protection, and sustainable socioeconomic development on the whole.

In its operations and, in the first place, in its investment projects the Bank uses a comprehensive approach to the resolution of environmental and social tasks. These efforts are aimed at mitigating and repairing adverse environmental and social effects and they have led to the adoption by the Bank’s Management Board of the Environmental and Social Responsibility Policy in 2012.

The Bank provides finance for the projects that do not deteriorate significantly the environment or the social or living conditions of people. Its investments are intended to improve the living standards, employment and social security. Improving the efficiency of use of natural resources is also a very important objective.

The Bank strives to avoid or mitigate the adverse environmental or social effects of projects and to ensure that the projects it supports contribute to the sustainable development of its member states.

The Bank does not finance activities involving forced or child labour, the manufacture or distribution of tobacco or alcoholic products, gambling, the manufacture of or trade in weapons and ammunition and other activities prohibited by the laws of its member states or international conventions on the protection of biodiversity and cultural heritage, as well as other types of activities restricted by resolutions of the Management Board and/or the Bank’s Council.

In 2012 the Bank joined the Multilateral Financial Institutions Working Group on the Environment.

Management

The Bank’s management comprises the Bank’s Council, the Management Board, and the Chairman of the Management Board.

The Bank’s Council is its supreme body that performs its overall management. Each member state of the Bank appoints one authorised representative and his or her deputy to the Council, which become the Council members. The Council meets on an as needed basis, but not less than twice a year.

The members of the Bank’s Council are:

• from Russia: Anton Siluanov, Minister of Finance of the Russian Federation (Plenipotentiary, Chairman of the Council); Sergey Storchak, Deputy Minister of Finance of the Russian Federation;

• from Kazakhstan: Bolat Zhamishev, Minister of Finance of the Republic of Kazakhstan (Plenipotentiary); Albert Rau, First Vice Minister of Industry and New Technologies of the Republic of Kazakhstan;

• from Armenia: Vache Gabrielyan, Minister of Finance of the Republic of Armenia (Plenipotentiary); Iosif Isayan, Deputy Minister of Energy and Natural Resources of the Republic of Armenia;

• from Tajikistan: Safarali Najimiddinov, Minister of Finance of the Republic of Tajikistan (Plenipotentiary); Shuhratjon Rakhmatboev, First Deputy Chairman of the State Committee for Investments and State Property Management of the Republic of Tajikistan;

• from Belarus: Andrei Kharkovets, Minister of Finance of the Republic of Belarus(Plenipotentiary); Nikolai Snopkov, Minister of Economy of the Republic of Belarus;

• from Kyrgyzstan: Olga Lavrova, Minister of Finance of the Kyrgyz Republic (Plenipotentiary); Temir Sariyev, Minister of Economy and Antimonopoly Policy of the Kyrgyz Republic.

The Bank’s Management Board is a permanent collective executive authority. Its activities are governed by the Bank’s Council.

The Chairman of the EDB's Management Board is Igor Finogenov.

References

• EDB’s official website
• EurAsEC Anti-crisis Fund’s website
• Eurasian Economic Integration journal
• Eurasian Integration Yearbook
• EDB’s sectoral reports

See also

Multilateral development bank