Crossroads Asia

EBRD Approves First New Projects for Uzbekistan Since 2007

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Crossroads Asia

EBRD Approves First New Projects for Uzbekistan Since 2007

After a decade-long gap, the European bank is returning to financing new projects in Uzbekistan.

EBRD Approves First New Projects for Uzbekistan Since 2007

Five months after the European Bank for Reconstruction and Development (EBRD) signaled it was preparing to return to working actively with Uzbekistan after a decade, the bank has approved its first new projects for the country, with several more in various stages of approval.

On October 18, the EBRD’s board of directors approved a financing package of up to $100 million to the National Bank for Foreign Economic Activity of the Republic of Uzbekistan (aka the National Bank of Uzbekistan, NBU) to enable the bank to increase the availability of funding to private micro, small, and medium-sized enterprises (MSME) and enable the NBU to support import and export operations via a trade facilitation program (TFP).

The loan will be split between these two aims, with up to $70 million for the MSME portion and $30 million for trade finance activities. According the EBRD, the MSME loan “will enable NBU to increase the availability of medium-term funding for private MSMEs in Uzbekistan, which remain underserved” while the TFP will be able to not only support import and export transactions but also “further develop its correspondent banking services and strengthen its trade finance product range.” Moreover, the TFP will allow NBU to “join the EBRD TFP network of over 800 Confirming Banks and to receive advanced trade finance trainings.”

After more than a decade absence from Uzbekistan, the EBRD moved to reengage earlier this year, encouraged by the change in tone that came with a change in leadership in Tashkent.

A delegation visited the country in February, paving the way for EBRD President Suma Chakrabarti to make a momentous three-day visit to Uzbekistan in March.

As I noted at the time, “with nearly €11.6 billion ($12.3 billion) committed to projects in the region, the EBRD is one of Central Asia’s largest investors. According to the bank, it has invested €894 million in Uzbekistan but at present only has a €8 million portfolio in the country.”

That portfolio is set to grow.

Looking at the EBRD website, the gap in engagement is stark. The last project completed in Uzbekistan was in late 2007, a $5 million loan to Hamkor Bank.

After a decade gap, there are now five projects whose documents have been posted. As of October 19, one is board approved (the $100 million financing package outlined above); two more have passed final review and are pending board approval; two more project concepts have been posted.

The two pending projects are aimed at the agribusiness and manufacturing sectors. One, for $10 million, is to finance the construction of a warehouse facility in Samarkand for Agromir Juice, a juice and vegetable paste producer based in Uzbekistan. The second project pending board approval is for $17.6 million to support the construction of a new generics pharmaceutical production facility. $11.2 million of the financing package will come from the EBRD and $6.4 from the project’s sponsor, Jurabek Laboratories, Uzbekistan’s largest pharmaceutical manufacturer and owner of the borrower, Mutabar Medical Standart LLC.

At the conclusion of his visit to Uzbekistan, EBRD President Chakrabarti signed an agreement with Uzbek authorities to explore ways to increase the bank’s investment activities in the the country. These projects are the fruit of that visit.

Following the visit, Chakrabarti said, “I am delighted that the EBRD is re-engaging with Uzbekistan.” He noted great interest on both sides in re-engaging and dubbed it a “new beginning in EBRD-Uzbek relations.”