EBRD president hopes for Silk Road boost to central Asia

Q: The European Bank for Reconstruction and Development [EBRD] invested a record €1.4bn in central Asia in 2015, despite an ongoing capital flight from the region. What are the opportunities that you see where others are mostly seeing mounting risks?

A: Clearly central Asia has been hit in number of ways. Falling oil prices have obviously hit countries such as Kazakhstan and Turkmenistan. In terms of the Russian economy slowing down, all of [the countries of central Asia] have been hit. The good news is that many of them recognised they have got to start reforming their economies more quickly.

Q: Efforts to better diversify their economies fell short of initial expectations, though. How much room is left for these countries to reform their economies in the current, deteriorating macro-economic circumstances?

A: This is undoubtedly a problem, [as it is] in the West: crisis brings with it opportunities, but challenges too. It is difficult to diversify an economy if you are enjoying windfall revenues all the time. Take Russia, where discussions about diversification have been taking place for many years, but only recently [has the country become] serious about what can it do [beyond oil and gas]. The same is happening in Kazakhstan and Turkmenistan too, where for many years they avoided structural reforms, but now have become very serious about that. Better later than never, after all.

Q: The whole Eurasian region gained a new global spotlight as it is part of China’s One Belt, One Road trade initiative [now renames the Belt and Road initiative]. How do you see this vision panning out in the years to come?

A: We need this Belt and Road initiative because trading costs are very high in central Asia at the moment. Infrastructure development in Belt and Road countries are important to reduce import/export costs throughout the region. We are supporting the initiative through bilateral channels with the countries involved, or through Chinese institutions such as the Silk Road Fund, or through Chinese banks and companies.

A second channel is partnering with the Asian Infrastructure Investment Bank [AIIB], and we are pretty confident we will have at least two road projects co-financed with the AIIB up within nine months. The overall advantage of having China as a new EBRD member is that the government wants Chinese banks and companies to engage more with the EBRD.

Q: Looking forward, you announced a €900m package to address the Syrian refugee crisis in Turkey and neighbouring countries. Are you willing to increase your footprint in the Middle East?

A: It depends on how much interest we receive from countries in the region. I also expect Lebanon to become a member and a country of operation by this summer. We started operations in the region in September 2012 and we already have a portfolio of €3.5bn, and an extremely strong pipeline of projects. Our business model has proven very workable in countries that have never been communist countries.

Q: Russia was the EBRD's largest recipient of investment, but no new projects were financed there in 2015. How do you see things developing in the country?

A: Our shareholders will have to decide on sanctions first. At a European level there will be a review in July, so by the summer we will have a clearer picture.

Q: What are your investment targets for 2016?

A: Last year was an exceptional one, a lot of things came through just right, such as the Oyu Tolgoi mine deal in Mongolia. This year we will keep investment more in the range of €8bn to €8.5bn [in 2015 the figure was €9.4bn].