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ADB and Kazakhstan to sign $2.75bn SME package

04/05/2014 | Paolo Danese

The ADB will today sign a co-financing agreement with the Kazakh government that will strong focus on SMEs and private sector development, Emerging Markets can reveal

The Asian Development Bank and the Kazakhstan government will sign off on a $2.75bn partnership and co-financing arrangement today, Emerging Markets can reveal.

The new deal would enlarge the scope of co-operation between the regional bank and the Central Asian government. “We expect very shortly to sign a very important partnership framework and co-financing arrangement with the government. This would further the collaboration that we have,” said Klaus Gerhaeusser, director general of Central and West Asia at the ADB.

The co-financing agreement will be in areas of mutual interest, Gerhaeusser added, but in line with the ADB country strategy. The programme is set to focus on creating opportunities for small and medium enterprises (SMEs) as well as boosting Kazakhstan’s banking sector.

“The government has a very strong focus on SMEs and private sector development,” said Gerhaeusser. “Industrial development is part of the [country’s] diversification. The financial sector still has some issues here in Kazakhstan, so [we are] tackling the banking system.”

The general director did not confirm the amount but said that it would be “quite sizeable” and would be in addition to the country agreements already in place, which are around $1.6bn.

The new co-operation and co-financing arrangement will respond to the pressing items on the reform agenda. “President [Nursultan] Nazarbayev has a very strong focus on getting employment generation in SME activities,” said Gerhaeusser.

The co-operation with Kazakhstan, on the back of a 2012 agreement, revolves primarily around energy, for example on district heating projects. Other areas of involvement include transport infrastructure, such as the creation of transport corridors.

According to the Kazakh foreign minister, Erlan Idrisov, the broader co-operation with the ADB will help the country achieve its goal of joining the world’s top 30 economies by mid-century.

He said recently that water, energy, poverty reduction and business development were all high on the country’s priority list and that Kazakhstan was looking to “grow its support for the ADB”.

The existing partnership between Kazakhstan and the ADB dates back to the period following the country’s independence in 1991. The collaboration has so far touched on a number of areas including agriculture, finance and education. The agreement has recently operated within the framework of the Central Asia Regional Economic Cooperation Programme.

The signing comes after last week’s announcement by the World Bank of a $100m loan agreement to improve the country’s water irrigation systems.

That programme is meant to further the Kazakh government’s green economy agenda and is set to last until 2021. Almaty, Kyzylorda, South Kazakhstan and Zhambyl areas will be the primary focus of the modernisation initiative.

Gerhaeusser confirmed that the ADB was “not directly involved” in the irrigation project.

Last December the ADB announced the second tranche of up to $500m to support SME lending in the country. According to ADB data, overall lending to Kazakhstan so far has been $3.2bn as of December 2013.

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