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Central Asia: EBRD Chief Reviews Projects (Part 3)

  • Antoine Blua

Following the 11 September terror attacks and the U.S.-led war in Afghanistan, the five Central Asian states have assumed new strategic importance. That importance was underscored this week with an international economic summit in the Kazakhstan's former capital, Almaty, and high-profile trips to the region by World Bank President James Wolfensohn and Jean Lemierre, the president of the European Bank for Reconstruction and Development. The theme of the Eurasia Economic Summit was "Sustaining Growth in Uncertain Times." At the meeting, the international business community and top leaders discussed ways to improve the investment climate. Ahead of his visit to Central Asia, Lemierre took time out to talk to RFE/RL correspondent Antoine Blua. In this third of a three-part series, Lemierre looks at the bank's priorities and achievements in Kazakhstan, Uzbekistan, Kyrgyzstan, and Tajikistan.

Prague, 11 April 2002 (RFE/RL) -- Jean Lemierre, the president of the European Bank for Reconstruction and Development, says that the economies of Central Asia must develop beyond their traditional dependence on raw materials, like oil and gas.

Lemierre tells RFE/RL that this is particularly true for Kazakhstan, whose economic growth is driven largely by the oil-and-gas industry. "The positive challenge of Kazakhstan is to develop an important services and production industry, parallel to the gas-and-oil sector," Lemierre says.

Lemierre praises what he calls intelligent steps by the Kazakh government to manage the country's oil wealth. The Kazakh government last year established an oil stabilization fund, financed by oil revenues, which is designed to secure future development of the economy.

Lemierre says the EBRD has invested around 800 million euros ($705 million) to date in Kazakhstan, and envisages providing up to 300 million more euros ($264 million) this year. He says the bank will increase its activities in service areas within the oil-and-gas sector -- such as transportation -- as well as in consumer-goods production.

As part of efforts to develop non-energy sectors, the EBRD's operations will focus on promoting small and medium-sized enterprises, known as SMEs. The bank recently approved plans to inject an additional 85 million euros ($75 million) into the Kazakhstan Small Business program, which already totals 90 million euros ($79 million).

Lemierre says the bank is active in financing all kinds of infrastructure projects in Kazakhstan. "We are financing [a number of] infrastructural [projects] -- Atyrau airport, ports which are important infrastructures for the development of economic activities -- as well as municipal infrastructure projects such as central heating, transportation, and water treatment," Lemierre says.

In Uzbekistan, Lemierre says the EBRD has to date invested almost 700 million euros ($616 million) and seeks to provide between 100 million and 200 million more euros ($88 million and $176 million) this year.

Lemierre says in Uzbekistan the bank is concentrating on transportation and telecommunication systems. It affirmed its commitment last year with nearly 100 million euros ($88 million) in loans to upgrade the railways and city heating services.

"We approved a loan for the Uzbek [state] railways for the modernization of their rail transport system, [improving the] communication and management systems, which is absolutely fundamental for a landlocked country. We have financed the municipal heating system of the Andijan district [in the Ferghana valley] with an emphasis on saving energy and reducing pollution," Lemierre says.

Now, Lemierre says, more work needs to be done on the macroeconomic level. He says Uzbekistan must open up its economy more to foreign trade and abandon its "dual-exchange system," which hurts investors.

"This is a debate I had with President [Islam] Karimov. Uzbekistan has a dual-exchange [currency] system that penalizes investment. The investors are very hesitant to invest [in a country] if they are not assured that they will be able to [repatriate their profits] in suitable exchange conditions. And this is an important brake on investment. One can understand the concerns of the Uzbek officials. There are also ways to make step-by-step progress from the current situation," Lemierre says.

As for Kyrgyzstan, where the EBRD has to date invested around 200 million euros ($176 million), Lemierre says the EBRD envisages providing between 20 million and 30 million ($18 million and $26 million) this year. The fundamental objective of EBRD remains developing a dynamic small-business climate.

"We have a clear priority on the financing of medium-sized companies. We do it via loans, and in Kyrgyzstan we also operate with a venture-capital mechanism, in which we put capital in small companies to help them develop. We have many projects of this kind," Lemierre says.

Last week, the bank, together with funding from the United States, Switzerland, and the International Finance Corporation of the World Bank, launched a 15.3 million-euro ($13.5 million) loan facility to help small businesses.

In Tajikistan, Lemierre says the EBRD envisions providing between 20 million and 30 million euros ($18 million and $26 million) this year. In 2001, the bank more than doubled its total investment to almost 40 million euros ($35 million) thanks to the improvement of the internal political situation.

Lemierre outlines the bank's continuing commitment to the country -- particularly in developing medium-sized enterprises -- and emphasizes the need to develop the communications infrastructure in airports and telecommunications:

"To attract investment, you have to improve infrastructures for the reception of investment [and] invest in medium-sized companies in order to create an activity capable to export. Tajikistan has a capacity to export a certain number of products to its neighbors," Lemierre says.

The bank supports the Tajik government's effort to improve communications, Lemierre says, and last October signed two projects to develop critical infrastructure in the civil-aviation and telecommunications industries.

Lemierre points out that the demands made by the Tajik government in term of investment, particularly in a project involving the state telecommunications company Tajiktelecom, show the country is ready to open its economy.

"The situation in Tajikistan has improved [from] two years ago. The Tajik authorities are taking things in hand again and have initiated a process of modernization. I think the decision taken on Tajiktelecom is a good example. If you want to attract investments to Tajikistan, there has to be the capacity to communicate first. The loan provided to Tajiktelecom aims at modernizing the telecommunication company and bringing it to international standards," Lemierre says.

He says, as with the other Central Asian countries, Tajikistan should take advantage of the region's new place in the world and spotlight and implement needed reforms.

(This completes a three-part series of interviews with Lemierre.)

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