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 KAZAKHSTAN International Business Magazine №2, 2003
 Activities of the Islamic Development Bank in Central Asia
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Activities of the Islamic Development Bank in Central Asia
 
The Islamic Development Bank was established in pursuance of the Declaration of Intent issued by the Conference of Finance Ministers of Muslim Countries held in Jeddah, Kingdom of Saudi Arabia in December 1973. The Bank officially started its operations on October 20, 1975. The present membership of the Bank consists of 54 countries. The countries of Central Asian region joined IDB after the collapse of former Soviet Union, in particular, Kazakhstan in November 1995. The present Kazakhstani participation in share capital of IDB is 2.5 million Islamic Dinar (ID)*.
*IDB's currency – The Islamic Dinar, is equivalent to the value of one Special Drawing (SDR) of the International Monetary fund
 
The Bank has following long-term purposes:
• to foster the economic development and social progress of member countries and Muslim communities in non-member countries;
• to encourage solidarity and mutual cooperation between IDB member countries;
• to promote development of Islamic economy, financial and banking systems.
 
The Bank has regional offices in Rabat, Morocco, Kuala Lumpur, Malaysia, and Almaty, Kazakhstan.
 
Projects financing
 
By the beginning of March 2003, Islamic Development Bank approved projects for the amount more than US$420 million in Central Asian region, including Albania. Among them investment projects account for 94.6%, technical assistance, trade-financial operations and special assistance operations – 5.4%.
 
Notice that 100% of the operations in Albania and Tajikistan were financed by concessional or grant financing, 78% in Azerbaijan, 71% in Kyrgyzstan, and only 30% in Kazakhstan. Conditions of concessional financing require 25 years for period of repayment of the debt and minimum expenses coverage for loan administration. Kazakhstan was given grants for financing of feasibility studies of projects in transportation-communication sector. Total IDB operations approved for our republic up to March 31, 2003 were about US$75.488 million.
 
For the first time in regional practice, installment sale/leasing and istisna’a (Karaganda-Astana road) modes of financing were introduced in Kazakhstan. This mode of financing requires middle-term repayment in 10-15 years with 5-6% mark-up.
 
Taking into consideration the geographical location of Central Asia and its mission in the region, Islamic Development Bank allocated most of its financing into transportation complex. IDB offered grant amounting US$0.272 million for multimodal transportations in ECO (Economic Cooperation Organization) countries, which is being implementing at the moment. Present financing of IDB Group are Alyat-Gazi Muhammad Road in Azerbaijan, Mary-Tejen Road in Turkmenistan, Shagon-Zigar Road in Tajikistan, and Bishkek-Osh in Kyrgyzstan.
 
Implementation of projects for construction of Almaty – Gulshad Road and Karaganda – Astana started in 2000 in Kazakhstan. Islamic Development Bank is planning to invest 43% of total financing into development of transportation sector of Kazakhstan.
 
Small and medium enterprise support is basically held through loans of commercial banks of the countries in the region. For example, in 2000 Kazkommertsbank, BankTuranAlem and Halyk Savings Bank received lines of financing for support of small and medium businesses in the republic. About 31% in IDB loans portfolio in Kazakhstan are financing projects of commercial banks.
 
The same year new project of line of financing for Kazkommertsbank was approved, and in 2002 the same line was offered to BankTuranAlem. Total value of these projects is US$8 million. These lines are implemented for financing import of raw materials, semi-finished goods and needs of production.
 
Projects in healthcare field contain 15% of IDB loan portfolio in Kazakhstan. The Syzganov surgery center project in Almaty is completed. Similar projects are being implemented in Albania – hospital in Durres, in Tajikistan – Emergency surgical care hospital, in Turkmenistan – diagnostic centers.
 
In March 2003 IDB approved new rural water supply project in Karaganda oblast, which is being co-financed with Asian Development Bank. In Turkmenistan the Bank is implementing similar project in rural area of Balkan velayat (region), and in Tajikistan – Dushanbe water supply project.
 
Private sector development
 
The IDB has given a great emphasis to development of the private sector; in Strategic Program of the Bank its development is determined as one of the most important fields and should be supported by such IDB Group institutions as Islamic Corporation for the Development of Private Sector (ICD), Assets Management Department (AMD), and also Islamic Corporation for Insurance of Investment and Export Credits (ICIEC). These organizations are interested in cooperation with national and international organizations for possible joint financing of large projects in telecommunications, energy, petroleum and transportation fields.
 
However, IDB’s participation in private sector in the region remains rather small. The Bank participated in equity of some companies in IDB member countries with the view to boost their growth until such time they are listed at stock exchange, after which shares will be sold to the local investors. Since 1993 IDB’s participating in Arab-Albanian Islamic Bank, Albania and Albanian International Company for Investment and Development. IDB’s first project in private sector of Kazakhstan is establishment in January 1997 International Company for Investment in Central Asia, IDB’s share in which is US$5 million.
 
Technical assistance program
 
One of the main tasks in Program of technical collaboration is human resource development in IDB member countries. To enhance professional skills of officials in the countries in the region, the IDB provides (i) training in various aspects of development, (ii) experts to advise member countries in various fields of administration and development, (iii) assistance in the establishment of Islamic banks and also (iv) organize seminars/workshop through the efforts of Technical Cooperation Office (TCO) and Islamic Research and Training Institute (IRTI).
 
For example, in April 2001 IDB held Seminar on Anti-Dumping in Kuala Lumpur, Malaysia, in June 2002 Course on Human Resources Management in Baku, Azerbaijan, and also Course on Solid Waste Management in Karachi, Pakistan. In 2002 IDB offered technical assistance in organizing the second Seminar on Regional Conference on Nuclear Science and its Application in various fields of economy.
 
IDB organized Seminar on Microcrediting for Women in Rural Areas in Kazakhstan (April 2002). At the beginning of 2003 IDB law experts from Bank Negara Malaysia was invited to National bank of Kazakhstan for sharing experience on Islamic banking. Besides that IDB organized Course on Islamic Banking in Turkey for Kazakhstani financiers.
 
Central Asian countries are in special need for consultations on accessing WTO. The Bank organizes seminars and consultations on accession into WTO, and also courses on trade policy for representatives of IDB member countries’ governments, including Kazakhstan. Islamic Development Bank is offering support of the project “Assistance to Kazakhstan in accession to WTO”.
 
New IDB projects in the region
 
International Center of Biosaline Agriculture (ICBA) undertook two missions in 2002 to the Central Asian countries. Being land-locked, several countries are affected by salinity problems and ICBA is expected to develop a special program to be submitted to the governments of the countries in the region. A memorandum of Understanding was signed with the Academy of Sciences of Kazakhstan for collaboration in the area of salinity problems.
 
IDB keeps close relations with international and regional financial institutions, including World Bank, Asian Development Bank, European Bank for Reconstruction and Development, and also with UN organizations, and development agencies for future strengthening of business contacts and widening joint efforts in economic and social development of the region.
 
28th Annual Meeting of the IDB Group will take place on 2-3 September 2003 in Almaty, Republic of Kazakhstan. This will be the first meeting in a Central Asian country among all meetings of IDB Group. Using this opportunity the Government of Kazakhstan is planning to organize International Trade-Industrial Fair and show export opportunities of Kazakhstan and IDB member countries.
 


Table of contents
Railways Need Investments  Yerlan Atamkulov, Nigmatzhan Isingarin 
ASTEL is Number One!  Vladimir Breusov 
Kazakhstan in the System of Eurasian Transport Corridors  Kubat Rakhimov, Alexander Sobyanin, Alexander Maly 
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