Eurasian Development Bank
||This article includes a list of references, related reading or external links, but its sources remain unclear because it lacks inline citations. (January 2014)|
|Eurasian Development Bank|
|Formation||12 January 2006|
|Type||Regional development bank|
The Eurasian Development Bank (EDB) is a regional development bank established by the Russian Federation and the Republic of Kazakhstan in 2006. The Bank currently has six member states, including Armenia, Belarus, Kyrgyzstan and Tajikistan. Other states and international organisations are able to become members by signing up to the Bank’s founding Agreement.
History and Fuctions
EDB was founded on the initiative of the Presidents of Russia and Kazakhstan formalised by the signing of an International Agreement on 12 January 2006.
The Bank began operating in June 2006 when laws ratifying the Agreement came into force. Armenia and Tajikistan joined EDB in 2009, Belarus in 2010, and Kyrgyzstan in 2011.
The Bank's mission is to facilitate, through its investment activity, the development of market economies, economic growth and the expansion of trade and other economic ties in its member states.
EDB’s charter capital exceeds USD $1.5 billion, a total made up of contributions 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). Any increase in the charter capital is at the discretion of the Bank’s Council.
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 special legal status allowing it certain privileges in its member states, including property and judicial immunity, special tax and customs privileges, and exemptions which protect the Bank from some of the costs and risks associated with changes in the legislation and banking regulations in its member states; and
- has the status of a preferred creditor.
The Bank’s headquarters is located in Almaty, Kazakhstan.
The Bank has the status of an international organisation. In January 2013, the Organisation for Economic Cooperation and Development (OECD) recognised EDB as a multilateral financial institution with risk classification 3 and buyer risk classification SOV/CC0.
EDB has had observer status at:
- the UN General Assembly since 2007,
- EurAsEC since 2008,
- the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG) since 2008, and
- the Trade and Development Board of UNCTAD since 2009.
- a member of the Kazakhstan Stock Exchange (KASE), International Capital Market Association (ICMA) and International Swaps and Derivatives Association (ISDA);
- an institutional member of the World Economic Forum (WEF) (from 2014); and
- a member of the Multilateral Financing Institutions Working Group on Environment (from 2012).
Under EDB’s Strategy for 2013–2017, approved by the EDB Council on 26 June 2013, EDB aims to build on the success it has achieved so far and to enhance its role in furthering the process of integration in the region.
The creation and enhancement of the Customs Union and Single Economic Space pose significant challenges for the Bank, but in addressing such challenges the Bank aims to promote deeper economic cooperation between its member states.
The Bank is focusing its efforts in the following areas:
- financing projects which aim to develop power generation, transport, and municipal infrastructure in its member states;
- promoting energy efficiency by financing projects which optimise the consumption of energy and other resources by business and industry; and
- financing projects which help to forge trade and other economic links and mutual investment that encourage economic integration between the member states.
EDB key performance indicators for 2013–2017
- The Bank will increase its investment portfolio to at least US $10 billion by 2017 by increasing its investment in new projects by at least US $1 billion.
- At least 50% of the Bank’s current investment portfolio should consist of projects with an integration effect including those which:
- include investment from other EDB member states in their financing structure;
- generate trade between EDB member countries through the supply of equipment, materials or finished goods; and
- create new or support existing joint ventures and transnational groups, create or develop common markets or encourage the sharing of applied technology, etc.
- The composition of the current investment portfolio should reflect the Bank’s strategic and sector priorities (the maximum share of projects in specific sectors in the current investment portfolio is given below):
- Transport infrastructure – up to 40%;
- Power generation and energy efficiency – up to 50%;
- Telecommunications infrastructure – up to 20%;
- Municipal and other infrastructure projects – up to 20%;
- Financial sector – up to 20%;
- Other sectors (metals, mining, chemical and mineral fertiliser production, agro-industrial complex, etc.) – up to 50%.
The Bank identifies the priority sectors for each member country according to the needs of their economies and the areas in which they need to become more competitive. Priorities must also take account of the Bank’s resources. Goals must be relevant and achievable for each country with support from the Bank.
The Bank invests in major medium- and long-term projects. As a rule, the minimum cost of the projects that are considered is US $30 million, with a maximum repayment period of 15 years.
Completed investment projects include:
- construction of the Tikhvin Freight Railcar Plant in Russia;
- purchase of BelAZ dump trucks for the modernisation of coal mining at the Siberian Coal Energy Company (SUEK) in Russia;
- construction of a mining and processing plant at the Voskhod chromite deposit in Kazakhstan;
- development of the Zarechnoye uranium deposit in Kazakhstan;
- construction of an MDF plant in Tomsk Oblast;
- construction of a spinning mill in Tajikistan;
- pre-export financing of grain production and funding development of Kazakhstan’s largest agricultural holdings;
- financing the purchase and transportation of wheat to Armenia;
- purchase of agricultural equipment for Kazakhstan’s grain producers;
- utilisation and processing of associated petroleum gas at the Kenlyk field in Kazakhstan;
- construction of the North Kazakhstan-Aktobe Region interregional power transmission line;
- production of the Sukhoi Superjet 100, a new passenger plane, in Russia;
- construction of an electric locomotive plant in Kazakhstan;
- construction of an inter-regional power transmission line and supporting utilisation of the North Kazakhstan-Aktyubinsk Region power line;
- overhaul of facilities at Ekibastuz Power Plant 2 in Kazakhstan; and
- financial sector projects in member states.
As of 1 January, 2014, the Bank’s current investment portfolio totalled around US $3.88 billion and its cumulative investment portfolio US $5.27 billion.
EDB has 71 investment projects under implementation, including:
- construction of a third generating unit and overhaul of 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;
- construction of the Osipovichi Railcar Plant in Belarus;
- construction of a new unit at the Abakan combined heat and power (CHP) plant in Khakassia, Russia;
- 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 RAIL 1520’s project to develop the freight transportation market;
- modernisation of Altynalmas’ gold mining and processing facilities in Kazakhstan;
- financing projects to construct hotel and business centres in Minsk and Astana;
- financing Bogatyr Komir’s large-scale investment in a technical upgrade;
- construction and commissioning of a small section wire mill at the Belarussian Steel Works;
- financing the purchase of agricultural machinery and equipment from EDB member states for leasing to Kazakhstan’s agricultural producers;
- construction of an electric locomotive plant in Kazakhstan;
- provision of a loan guarantee to Deere Credit Inc. allowing it to purchase agricultural equipment for leasing to Kazakhstan’s agricultural producers;
- construction of Kazakhstan’s new railcar repair plant – the Yeskene Railcar Service Centre;
- financing the development of Polymetal’s mining projects and associated infrastructure;
- co-financing Acron Group’s development of a potassium/magnesium salt deposit in Perm Krai by acquiring an interest in the developer;
- purchase of fuel for the Bishkek CHP plant in Kyrgyzstan during the heating season;
- construction of the Apatity−Kirovsk heat pipeline in Murmansk Region;
- pre-export financing of uranium exports from the Zarechnoye deposit in South Kazakhstan Region;
- improving transport infrastructure as part of developing the Elga coal deposit in the Sakha (Yakutia) Republic;
- reconstruction of the Kazatomprom sulphuric acid plant in Kazakhstan;
- development of Karatau’s uranium ore extraction and primary treatment facility in South Kazakhstan Region;
- financing the project to create an automated control system for fuel and power consumption by locomotives in Kazakhstan;
- construction of a 45 MW wind power plant in the town of Yereimentau, Kazakhstan; and
- financing the purchase of assembly kits to build Lada 4x4 passenger cars at the Asia Auto plant in Ust-Kamenogorsk.
In acknowledging that the banking system is the infrastructural and institutional foundation of the market economy, the Bank is implementing special programmes to provide targeted loan facilities to financial institutions in its member states. In 2010, EDB launched three programmes to support the financial sectors of its member states: the programme to support and develop small and medium-sized businesses; the programme to support microfinance; and the programme to develop trade finance instruments and promote mutual trade between the member states. In 2011 the Bank approved a programme to improve energy efficiency in its member states.
As of 1 January 2014, EDB’s investment portfolio in the financial sector included US $102.7 million under its programme to support and develop small and medium-sized businesses; US $145.8 million under its programme to develop trade finance instruments and promote mutual trade between the member states; US $10.5 million under its programme to support microfinance; and US $45.9 million under its programme to improve energy efficiency.
Since 2010, EDB has been a contributor to the Macquarie Renaissance Infrastructure Fund (MRIF). The MRIF totals US $630 million, in which EDB’s investment is US $102 million. The Fund’s other investors include the International Finance Corporation, European Bank for Reconstruction and Development, Russian State Bank for Development and Foreign Economic Affairs (Vnesheconombank), Kazakhstan’s Кazyna Capital Management, Macquarie Capital Group and Renaissance Capital. MRIF is intended to support the implementation of infrastructure projects in CIS countries, including in priority regions of these countries. MRIF focuses on investing in projects in the power generation sector (including generation, distribution and heat networks), transport and communication (including toll roads, railway and accompanying infrastructure, sea ports, airports and car parks) and the utilities sector (including water, gas supply, sewage, and social infrastructure).
According to the Bank’s own estimates, based on business plans and financial models for each project and the current status of commodity markets, the Bank’s investment portfolio as of 31 December 2013 could potentially generate mutual trade flows totalling US $2.2 billion per year. Projects in which the Bank has invested since its start up have also generated additional mutual investment of US $1.6 billion. EDB-supported projects have a significant social and economic impact: they are able to generate on average about US $4.3 billion per year of additional gross output in relevant sectors of its member state economies. The Bank’s investment portfolio also has a multiplier effect since the projects supported encourage additional production and output in associated industries. It has been calculated that, in the long term, projects supported by the Bank –as long as they continue to be operated directly - will be able to generate US $5.2 billion of additional output in member state economies.
Managing the EurAsEC Anti-Crisis Fund
Main article: EurAsEC Anti-Crisis Fund
The EurAsEC Anti-Crisis Fund (ACF) totalling US $8.513 billion was established by the governments of six countries: Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan. The ACF’s main goals are to help its member countries mitigate the negative effects 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/e).
In June 2009, the ACF member states appointed EDB the manager of the ACF. As the ACF manager, EDB prepares and implements the Fund’s programme.
The fund has two instruments at its disposal:
- financial credits to support budgets, balances of payments, and national currencies; and
- investment credits for international projects.
In 2010-2011, the ACF authorised financial credit for Tajikistan (US$70 million) and Belarus (US$3 billion). To date US $2.63 billion has been disbursed under these loans. As of 31 December 2013, six investment projects totalling US $308 million were in the pipeline.
In 2008, the Bank established a Technical Assistance Fund (TAF) to provide financial support for pre-investment and innovation research at the international, national and sector levels, aimed at deepening Eurasian integration, strengthening market infrastructure and promoting sustainable economic growth in its member states.
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 49 projects and has a total value of more than US $6.2 million.
EDB’s Strategy and Research Department:
- Implements large-scale research and applied projects;
- Holds regular conferences and round tables; and
- Publishes research, sector-specific and specialist reports and macroeconomic reviews providing analysing and forecasts relating to the economic development of the region. Materials published by the Bank discuss regional integration, the operations of other development banks and the financing of investment projects in the post-Soviet space.
The deepening and widening of integration in Eurasia made possible by the establishment of the Customs Union and the Single Economic Space by Belarus, Kazakhstan and Russia are processes that require comprehensive analysis. EDB established the Centre for Integration Studies in 2011 to provide this analysis. The Centre carries out research and drafts reports and recommendations for EDB’s member-state Governments. It also hosts round tables and expert group meetings on a wide range of issues concerning regional economic integration. The results of the Centre’s work can be found in a number 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 mobilise 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 EDB member states consistently strive for greater integration in the CIS and EurAsEC, believing that joining forces and strengthening trade and economic links 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 the best possible operating environment in the international arena and in its member states, EDB cooperates with state bodies in its member states, and is developing its links with other international organisations, national and international development institutions, research and public organisations, unions and associations.
EDB is particularly committed to its collaboration with the Eurasian Economic Commission (EEC), the EurAsEC and the CIS. The Bank attends meetings of the Heads of State and Governments of the CIS and EurAsEC countries, the CIS Economic Council and the EurAsEC Integration Committee. It also participates in the work being done by bilateral inter-governmental commissions to facilitate trade and economic cooperation between its member states. In 2013, the Bank signed a Memorandum of Cooperation with the EEC.
EDB also works in collaboration with UN institutions. In 2009, the Bank was granted observer status 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 UN Economic Commission for Europe (UNECE), with which it signed a Memorandum of Understanding in 2010. In 2011, the Bank also signed a Memorandum of Understanding with the UN Development Programme to extend cooperation on infrastructure projects in Central Asia. In 2013, the Bank also signed a Memorandum of Understanding with the UN Economic and Social Commission for Asia and the Pacific (ESCAP).
In accordance with its mission and strategic goals, the Bank is developing closer relationships with other international financial institutions and global development institutions, which have decades of experience in facilitating institutional development and reforms in transitional economies. In so doing the Bank is motivated by its desire to employ best global practice in creating the most effective anti-crisis measures in order to stimulate the economies of EDB and ACF member states and strengthen their participation 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 terms of their cooperation with respect to the EurAsEC Anti-Crisis Fund;
- 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; and
- the Framework Agreement with Asian Development Bank (ADB) on joint financing of investment projects.
EDB is pursuing dialogue with the International Monetary Fund to coordinate the initiatives of these two institutions in particular countries and the reform of international financial architecture, and with the European Bank for Reconstruction and Development (EBRD) on improving corporate governance.
The Bank is also developing links with the Shanghai Cooperation Organisation (SCO) under the auspices of the SCO Interbank Association, with which it signed a partnership memorandum in 2008. The Chairman of the EDB Management Board attends events at the summits of the heads of the SCO member states during 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 goals is to expand the geography of its operations. To achieve this, the Bank is working proactively to attract new member states.
In all its activities, EDB upholds the principles of social and environmental responsibility and strives to improve the efficient use of natural resources, environmental protection, and sustainable socioeconomic development generally.
In all its activities, and especially in assessing its investment projects, the Bank takes a comprehensive approach to the resolution of environmental and social issues. The Bank’s efforts to mitigate and remedy adverse environmental and social impacts informed the Bank’s Environmental and Social Responsibility Policy which was adopted by the Management Board in 2012.
The Bank will only extend finance to projects which do not significantly degrade the environment or the social wellbeing and living conditions of local people. The Bank’s investments should indeed improve living standards, employment and social security. Improving the efficient 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 the projects it supports and to ensure that they 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 alcohol 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 Environment.
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 highest overall management body. Each member state of the Bank appoints one authorised representative to the Council and a deputy become the Council members. The Council meets when required, and at least twice a year.
The members of the Bank’s Council are:
- from Armenia: David Sarkisyan, Minister of Finance of the Republic of Armenia (Plenipotentiary); Iosif Isayan, Deputy Minister of Energy and Natural Resources of the Republic of Armenia;
- from Belarus: Andrei Kharkovets, Minister of Finance of the Republic of Belarus(Plenipotentiary); Nikolai Snopkov, Minister of Economy of the Republic of Belarus;
- from Kazakhstan: Bahyt Sultanov, Deputy Prime Minister, 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 Kyrgyz Republic: Olga Vladimirovna Lavrova, Minister of Finance of the Kyrgyz Republic (Plenipotentiary); Temir Sariyev, Minister of Economy and Antimonopoly Policy of the Kyrgyz Republic;
- from Russian Federation: Anton G. Siluanov, Minister of Finance of the Russian Federation (Plenipotentiary, Chairman of the Council); Dmitriy Pankin, Deputy Minister of Finance of the Russian Federation; and
- from Tajikistan: Abdusalom Kurbonov, 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;
The Bank’s Management Board is a permanent executive authority. Its activities are governed by the Bank’s Council.
The Chairman of EDB's Management Board is Igor Valentinovich Finogenov IV.
- "Company Overview of Eurasian Development Bank". Bloomberg BusinessWeek. Retrieved 25 March 2014.
- "Company Overview of Asian Development Bank - Olga Vladimirovna Lavrova". Bloomberg NewsWeek. Retrieved 25 March 2014.
- EDB’s official website
- EurAsEC Anti-crisis Fund’s website
- Eurasian Economic Integration journal
- Eurasian Integration Yearbook
- EDB’s sectoral reports