As competition between development lenders in the CIS heats up, the head of the newly established Eurasian Development Bank (EDB) said this weekend that the joint Russian-Kazakh institution is set for massive expansion in coming years in both lending and geographical reach.
EDB president Igor Finogenov told Emerging Markets in a telephone interview that the bank has big plans for expansion: “Very soon you will have news of new members of the EDB,” he said.
“We have received interest [in membership] from countries outside Eurasia. For example, Armenia has expressed an interest in collaboration with the bank.”
The former Nomos Bank chief also said he expects a surge in EDB lending across the region in the next five years: the bank is looking to expand its loan book to $7 billion in that time from the current $1 billion.
His comments come just days after Russian president Vladimir Putin urged the bank to redouble its efforts to become a formidable player in the region. “All these are positive tendencies, but we have the right to expect more substantial results from this bank in the future,” Putin said.
The Russian leader pledged fresh funding for the bank during talks with Kazakh president Nursultan Nazerbayev on May 10. The EDB was set up in January 2006 by Russia and Kazakhstan to enhance regional co-operation. Analysts suggest Putin is pushing for greater integration in order to secure agreements on energy and water supplies in Central Asia.
Sladana Tepic, credit analyst at Standard & Poor’s which gave the EDB a BBB+ long-term issuer rating - the same as Russia’s sovereign rating – said: “there is willingness to promote the institution as an arm of the Russian government to mobilize capital not just in Russia and Kazakhstan but beyond. So although this is a new institution with a new track record, the bank’s main strength is its political support.”
On the possibility of rivalry with institutions such as the EBRD for project lending, Finogenov said the EDB’s remit extends beyond development programmes to include economic integration.
Finogenov argued that competition with the EBRD was inevitable but stressed its mission is distinct: “EBRD focuses on transitional programs to help develop market economies, we also have the same targets but focus on integration projects to increase trade and investment in this region”.
Olivier Descamps, EBRD business group director for Central Asia dismissed suggestions the EDB poses a threat to the London-based lender: “The needs are big enough that we can all fulfill a role. There are differences in the terms and conditions of all development banks but we can respect each other’s value-added potential”.
Descamps nevertheless admitted that EBRD operations in Eurasia to date have fallen short: “we need to put Eurasia higher on the radar screen than we have been,” he said. But he pointed out the bank has now committed more staff to the field.