An Introduction To The Eurasian Development Bank

While much attention has been given China’s development of the Asian Infrastructure Investment Bank  (AIIB ), another financial institution providing loans for Silk Road projects is the Eurasian Development Bank  (EDB).

This bank was originally founded in 2006 by Russia and Kazakhstan, and currently has four other member states, being  Armenia, Belarus, Kyrgyzstan and Tajikistan. Its stated 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 – policies which are directly in tune with China’s OBOR initiative. The interesting point about the EDB is that is geographical spread borders with China to the East, and to the European Union to the West. This means that its financing capabilities can have a huge impact on the development of trade routes between Europe and Asia.

The Bank’s capital currently amounts to USD7 billion, including USD1.5 billion of paid-in capital and USD$5.5 billion of callable capital, while its headquarters are located in Almaty, Kazakhstan. The EDB also has branches in St.Petersburg,and representative offices in Astana, Bishkek, Dushanbe, Minsk, Moscow and Yerevan.

The Bank is focusing its efforts in the following areas:

  • Financing development projects in power generation, transport, and municipal infrastructure in its member states;
  • Promoting energy efficiency by financing projects which optimize the consumption of energy and other resources by business and industry;
  • Financing projects which help to forge trade and other economic links and mutual investment that encourage economic integration between the member states.

The EDB current investment portfolio is expected to reach at least USD4.7 billion by the end of 2017

The intended investment portfolio has been divided into various sectors as shown below. (the percentage provided is the maximum share of the sector in the current investment portfolio)

  • 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 EDB 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. The Bank invests in large, effective mid- and long-term projects. The minimum project volume taken into consideration is, as a rule, US$30 million, with a maximum tenure of 15 years.

While the EDB may at this moment be a relatively small player, this has been due in part to restructuring of loans and its financing structures due to the development of the Eurasian Economic Union, which has altered tax codes through much of the region the EDB purports to serve. Nonetheless, with the EAEU beginning to make a significant impact, and especially so should free trade deals with China and India be signed, the relevance of the EDB may become more apparent over time.

Tags: aiib, china, edb, eurasian development bank, silk road
Posted in Asia, Banking, Banking