ACTIVITIES OF THE ISLAMIC DEVELOPMENT BANK IN ALBANIA,
AZERBAIJAN, KAZAKHSTAN, KYRGYZ REPUBLIC, TAJIKISTAN
AND TURKMENISTAN
IDB Regional Office in Almaty
67 Alteke-bi Str.
Almaty 480091
Tel: (3272) 938 588
Fax: (3272) 501 303
Email: nzabidin@idb.netel.kz
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TABLE OF CONTENTS
INTRODUCTION .................................................................................................................................... 3
APPROVED OPERATIONS ................................................................................................................... 3
Country distribution.......................................................................................................................... 3
Distribution by modes of financing .................................................................................................. 3
Distribution by sector ....................................................................................................................... 4
COUNTRY ASSISTANCE STRATEGY STUDY (CASS) .................................................................... 5
COOPERATION AMONG OIC COUNTRIES ....................................................................................... 5
COOPERATION WITH DEVELOPMENT FINANCING INSTITUTIONS (incl. Islamic Banks),
REGIONAL AND INTERNATIONAL ORGANIZATIONS ................................................................. 5
Cooperation with National Development Financing Institutions (NDFIs) and Islamic Banks ......... 5
Cooperation with Coordination Group ............................................................................................. 5
Cooperation with International Financial Institutions (IFIs) and Regional Organizations ............... 6
PRIVATE SECTOR PARTICIPATION .................................................................................................. 6
OTHER AREAS OF COOPERATION.................................................................................................... 8
SPECIAL ASSISTANCE OPERATIONS ............................................................................................. 10
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INTRODUCTION
1.
The countries in the region joined the IDB after the collapse of the Soviet
Union. Azerbaijan joined in July 1992, followed by the Kyrgyz Republic in
November 1993, Albania in August 1994, Turkmenistan in November 1994,
Kazakhstan in November 1995 and Tajikistan in November 1996. Following the
approval of the Board of Governors during the 23rd Annual Meeting in November
1998, Albania (Eastern Europe), Azerbaijan (Caucasus) and the Central Asian
Republics of Kazakhstan, Kyrgyzstan, Tajikistan and Turkmenistan formed a country
grouping represented by an Executive Director (ED).
APPROVED OPERATIONS
2.
Total IDB operations approved for the region up to March 2003 (cumulative)
were about US$ 406 million, an increase of about US$ 69 million (18%) compared to
a year ago, comprising the following (inclusive of cancellation):
US Dollars
Ordinary Operations
Projects (46)
Technical Assistance (31)
Trade Financing Operations (2)
Special Assistance Operations (19)
TOTAL (98)
384.018 million
8.034 million
8.000 million
6.292 million
406.344 million
94.5%
2.0%
2.0%
1.5%
100.0%
Country distribution
3.
Distribution of the IDB financing by countries in the region is as follows
(number of operations in brackets):
i)
Albania
ii)
Azerbaijan
iii)
Kazakhstan
iv)
Kyrgyz Republic
v)
Tajikistan
vi)
Turkmenistan
TOTAL
US$ 51.583 million
US$ 81.660 million
US$ 76.275 million
US$ 64.840 million
US$ 63.141 million
US$ 68.845 million
US$ 406.344 million
(15)
(19)
(20)
(16)
(18)
(10)
(98)
Distribution by modes of financing
4.
About 70% of the operations in the region were financed by concessional or
grant financing (including two equity, TAs and Special Assistance projects). The
balance of 30% was financed by non-concessional financing, including line of Import
Trade Financing Operations (ITFO). Apart from the above, it should be noted that:
i)
100% of the IDB financing in Albania and Tajikistan, 78% in
Azerbaijan and 71 % in Kyrgyzstan are either concessional loan or
grant (including Special Assistance projects).
ii)
For Kazakhstan and Turkmenistan, 70 and 63% of the IDB financing
respectively were under non-concessional financing. However, in
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Azerbaijan only 22% of financing was provided under nonconcessional terms.
iii)
Kazakhstan is the first country in the region to benefit from the IDB
line of financing (Instalment sale/leasing and Import Trade Financing
Operations). IDB is processing the line of financing to other countries
as well.
iv)
Two projects have so far being financed by Istisna’a mode of
financing, the first was in Kazakhstan (Karaganda-Astana road) and
the second was in Turkmenistan (Balkan Velayat Water Supply
project).
v)
Equity projects were approved only for Albania.
vi)
The first micro-credit financing for the region was approved for
Tajikistan in June 2002.
Distribution by sector
5.
In view of the geographical nature of the region and large natural resources,
about 60% of the IDB operations in the region are in the transportation and utilities
sectors. Distribution of ordinary operations by sectors may be seen below:
US Dollars
i)
Transport
ii)
Utilities
iii)
Agriculture
iv)
Social
v)
Others
vi)
Technical assistance
TOTAL
137.398 million
100.047 million
75.893 million
56.480 million
19.700 million
8.033 million
397.559 million
34.5%
25.2%
19.1%
14.2%
5.0%
2.0%
100.0%
6.
The IDB also approved regional projects amounting to US$ 5.672 million,
such as:
i)
ii)
iii)
Equity for International Company for Investment in Central Asian
Republics (January 1997) in the amount of US$ 5.000 million. The
company constructed a shopping complex in Almaty partly financed
by the IDB Group.
TA (grant) for Introduction of Multimodal Transport Operations in
ECO countries (August 1999) the amount of US$ 0.272 million.
Under implementation.
TA (grant) for Feasibility study of Power Interconnection of ECO
countries (May 2000) TA grant US$ 0.400 million.
Under
implementation.
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COUNTRY ASSISTANCE STRATEGY STUDY (CASS)
7.
It is a usual practice for the IDB to undertake CASS every three years with the
objective of reviewing the economic and financial situation, preparing development
plan and strategy of the country, mapping out the IDB strategy for the coming years
and, finally, developing a three-year rolling program in consultation with the
government. Three-year work program, which may be reviewed annually, contains a
list of priority projects, mainly from the Public Investment Program (PIP) of the
government approved by the Cabinet of Ministers and/or Parliament. There are also
private sector projects in work program.
8.
So far, the IDB has undertaken CASS in Kazakhstan (May 1999) and
Azerbaijan (July 2000). On a smaller scale, the IDB has undertaken Portfolio Review
and Policy Dialogue with Turkmenistan (May 2000), Kyrgyz Republic (June 2001
and October 2002) and Kazakhstan (October 2002).
COOPERATION AMONG OIC COUNTRIES
9.
The IDB extends cooperation with the Organization of Islamic Conference
(OIC), its organs and member countries, which are also IDB member countries.
Assistance given by the IDB includes, (i) preparing and presenting a paper on
“Preparing the Ummah for the 21st Century in the Areas of Economic, Trade and
Financing Cooperation among OIC Member Countries” at the 8th OIC Summit in
Tehran in December 1997, (ii) increasing intra-trade (trade among OIC countries)
from 10 to 13% within 3 years through increased level of trade financing operations,
(iii) supporting seminars and training programs for the General Secretariat of OIC,
SESTRCIC, IIT, ICDT, ICCI, etc, (iv) establishing OIC Information System Network
(OICIS-Net), (v) participating in the activities of the Standing Committee for
Economic and Commercial Co-operation of the OIC (COMCEC), etc.
COOPERATION WITH DEVELOPMENT FINANCING INSTITUTIONS (incl. Islamic
Banks), REGIONAL AND INTERNATIONAL ORGANIZATIONS
Cooperation with National Development Financing Institutions (NDFIs) and
Islamic Banks
10.
The IDB maintains close cooperation with captioned institutions by organizing
an annual meeting of NDFIs and Islamic Banks during the IDB Annual Meeting. IDB
also provides lines of financing to these institutions (trade and project financing),
assists in establishment of Islamic banks, provides training to staff of these
institutions and builds their capacity. So far, in the region the IDB has extended a line
of financing to three commercial banks in Kazakhstan (Kazkommertsbank,
BankTuranAlem and Halyk Savings Bank). The IDB provides expert assistance to
several banks including the National Banks of Kazakhstan and Kyrgyz Republic on
Islamic banking.
Cooperation with Coordination Group
11.
The IDB maintains an active relationship with other members of the
Coordination Group, namely Saudi Fund for Development (SFD), Arab Fund for
Economic and Social Development, Abu Dhabi Fund for Development, OPEC Fund
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for International Development, Kuwait Fund for Arab Economic Development and
Arab Bank for Economic Development in Africa, mainly through co-financing of
projects. In the CIS countries, the IDB and the governments of respective countries,
hosted Round Table Meetings in Turkmenistan (November. 1998), Kyrgyz Republic
(June 1999), Kazakhstan (October 1999), Azerbaijan (April 2000) and Tajikistan
(June 2000). These meetings resulted in a number of projects financed by the Group
in the region, among them were:
-
Alyat-Gazi Muhammad Road - Kuwait Fund (Azerbaijan);
Durres Hospital - OPEC Fund (Albania);
Karaganda-Astana Road - Saudi Fund (Kazakhstan);
220 KV Transmission line - Kuwait Fund (Kyrgyz Republic)
Republican Center for Cardiovascular and Thoracic Surgery –
OPEC Fund (Tajikistan);
Mary-Tedjen Road- Kuwait Fund (Turkmenistan)
Diagnostic Centers- OPEC Fund (Turkmenistan);
Osh Airport - Kuwait Fund (Kyrgyz Republic);
Shagon-Zigar Road - Saudi Fund and Kuwait Fund (Tajikistan)
and
Balkan Velayat Rural Water Supply - OPEC Fund
(Turkmenistan).
Cooperation with International Financial Institutions (IFIs) and Regional
Organizations
12.
The IDB maintains close relations with IFIs operating in the region, such as
the World Bank, the Asian Development Bank, the European Bank for Reconstruction
and Development, mainly through co-financing of projects. The IDB also works
closely with the UN agencies, FAO, IFAD, UNCTAD, WTO, OIM, ECO, etc. The
following projects have been co-financed with IFIs:
i)
ii)
iii)
iv)
v)
vi)
Mingechaur Hydro Power in Azerbaijan (EBRD);
Bishkek-Osh Road in Kyrgyz Republic (ADB);
Power Rehabilitation in Tajikistan (ADB);
Introduction of Multimodal Transport Operations in ECO Region
(UNCTAD & ECO);
Rural Water Supply project in Kazakhstan (ADB).
Dushanbe Water Supply in Tajikistan (World Bank)
PRIVATE SECTOR PARTICIPATION
13.
Aware of the importance of meeting the diversified needs of member
countries, the IDB has established a number of complementary institutions. Most of
these entities are to cater for enhancing cooperation among member countries,
particularly in trade and private sector development, all according to the Shariah
principles. Currently the IDB Group and related entities comprise the following:
i)
Import Trade Financing Operations (ITFO), established in 1977 to
finance imports of raw materials, intermediate and capital goods. So
far, in the CIS countries, the IDB has extended two (2) lines of ITFO to
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ii)
iii)
iv)
v)
vi)
vii)
Kazkommertsbank and BankTuranAlem, both in Kazakhstan in 2000
and 2001(US$ 8 million).
Export Financing Scheme (EFS), established in 1986 to facilitate the
exports of non-traditional goods by member countries to other OIC and
OECD countries. None of the countries in the region is a member of
EFS. However, Kazakhstan has indicated its interest to join.
Islamic Banks’ Portfolio (IBP), established in 1988, an independent
fund in association with other 20 Islamic banks and financial
institutions to finance trade and undertake leasing and equity
operations.
IBP has approved one project in Kazakhstan for
construction of shopping center (US$ 2 million).
Unit Investment Fund (UIF), established in 1990 as a trust fund to
contribute to economic development of member countries through
pooling of institutional investors’ savings and later investing in
productive projects through trade and project financing.
Islamic Corporation for the Insurance of Investment and Export
Credits (ICIEC), an affiliated organ of the IDB, established in 1994 to
provide protection to exporters against commercial and noncommercial risks. Kazakhstan is the first country in the region to join
ICIEC.
The IDB Infrastructure Fund, operational in late 2000, is the first
private investment vehicle to focus on infrastructure development,
mainly in power, telecommunication, transportation, energy, natural
resources, petrochemical, water and other infrastructure-related
sectors. The principal sponsor is the IDB that has committed
US$ 250 million and lead sponsor (Dar AL-Maal Al-Islam Trust) has
committed US$ 200 million. Emerging Markets Partnership has been
appointed as Principal Adviser. Operated out of Bahrain.
The Islamic Corporation for the Development of Private Sector
(ICD), operational since 2000, is an independent international financial
organization with the primary objective to provide a wide range of
financial products and services to cater for the needs of the private
sector, enhance private capital flow among member countries and offer
advisory services to the governments. All countries in the region have
signed and ratified the Articles of Agreement establishing the ICD.
The first ICD mission was mounted in July 2002 to Kazakhstan,
Kyrgyz Republic and Tajikistan. Several projects have been identified.
Private Sector Development
14.
The IDB has given a great emphasis to development of the private sector in
member countries. At the initial stage of its establishment, the IDB participated in
equity of many unlisted companies in 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. The IDB also provides line of financing to several
National Development Financing Institutions (NDFIs) in member countries to
promote SMEs.
15.
Over the years, the IDB, through various windows, established several entities,
specially to cater for development of private sector, such as:
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i)
ii)
iii)
iv)
v)
vi)
vii)
Import trade financing operations (ITFO);
Export Financing Scheme (EFS);
Islamic Banks’ Portfolio (IBP);
Unit Investment Fund (UIF);
Islamic Corporation for Insurance of Investment and Export Credits
(ICIEC);
IDB Infrastructure Fund; and
Islamic Corporation for the Development of Private Sector (ICD).
16.
However, IDB’s participation in private sector in the region remains rather
small. So far, the IDB’s participation was limited to the following operations:
i)
ii)
iii)
iv)
v)
vi)
Arab-Albanian Islamic Bank, Albania (equity) – 1993;
Albanian International Company for Investment and Development
(equity) – 1993;
International Company for Investment in Central Asia, Kazakhstan
(equity) – 1998;
Line of project financing (Instalment sale/Leasing) to three banks,
Kazakhstan – 2000;
Line of Import Trade financing to Kazkommertbank, Kazakhstan –
2000; and
Line of Import Trade financing to BankTuranAlem, Kazakhstan –
2001.
17.
Other private sector initiatives by the IDB in the region include promotion of
trade and investment among member countries through the following initiatives:
i)
ii)
iii)
iv)
v)
vi)
vii)
viii)
Regional investment seminar, covering Azerbaijan, Kazakhstan,
Kyrgyz Republic and Turkmenistan (1996).
Counter trade in the CIS (1999) in Kazakhstan.
Meetings of Islamic Chambers of Commerce (1999-2003).
First Islamic Trade Fair in Jeddah, KSA (March 2001).
Trade Fair by Islamic Chambers of Commerce in Sharjah, UAE
(December 2002).
Proposed Investment Conference in Tajikistan and Trade Exhibition
(Sept/Oct 2003).
Proposed Investment Conference in Uzbekistan (Sept/Oct 2003).
Proposed Trade Exhibition in Kazakhstan (September 2003).
OTHER AREAS OF COOPERATION
Technical Cooperation and Training and Research
18.
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
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through the efforts of Technical Cooperation Office (TCO) and Islamic Research and
Training Institute (IRTI). So far the following initiatives have been and would be
undertaken:
i)
Course on Sustainable Development in Baku in Russian language
(February 2000).
ii)
Course on Top Quality Management in Pakistan (April 2000).
iii)
Visit to Egypt for two Kyrgyz officials on WTO matters (July 2000).
iv)
Two high officials from Kazakhstan (Deputy Minister of Finance and
Deputy Minister of Transport) visited Malaysia to learn about
Malaysia’s experience in Multimedia Super Corridor project (August
2000).
v)
International Forum on Religion and Culture in Central Asia
(September 2000).
vi)
Two high officials from Turkmenistan (two Directors from the State
Bank for Foreign Economic Relations) visited Malaysia to learn
Malaysia’s recovery from the financial crisis in mid-1997 (October
2000).
vii)
Expert (from Turkey) assisted in Capacity Building for the Ministry of
Finance of Azerbaijan (October 2000).
viii) Seminar on Microcrediting for women in Kyrgyzstan (2001).
ix)
Expert for the establishment of Islamic Window in BankTuranAlem,
Kazakhstan (2001)
x)
Course on Solid Waste Management in Karachi (January 2001).
x)
IDB Information Workshop: This was held in Astana and Almaty
(Kazakhstan) for both public and private sectors (May 2000).
Documents (in Russian language) were distributed during the
workshop.
xi)
Seminar on Anti-Dumping in Kuala Lumpur (April 2001).
xii)
Course on Human Resources Management in Baku, Azerbaijan (July
2002).
xiii) Course on IDB Modes of Financing, Almaty Kazakhstan (March
2002).
xiv) Seminars on IDB Policies and Procedures in Azerbaijan, Kazakhstan
and Turkmenistan (February - March 2002).
xv)
Seminar on Microcrediting for Women in Rural Areas in Astana,
Kazakhstan (April 2002).
xvi) Course on Computer Product Design in GIK, Pakistan (May 2002).
xvii) Seminar on Regional Conference on Nuclear Science and its
Application, Kazakhstan (September 2002).
xviii) Course on Islamic Banking in Turkey for Kazakhstan and Tajikistan
(2002).
xix) Familiarization visits to the IDB HQ for relevant staff in Kazakhstan,
Tajikistan and Kyrgyz Republic (2000 - 2002).
xx)
Course on Environmental Impact Assessment of Development project,
Baku (Dec 2002)
xxi) Provision of experts from Bank Negara Malaysia for National banks of
Kazakhstan and Kyrgyz Republic on Islamic banking (Feb 2003).
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Accession to WTO
19.
The Bank (through Cooperation Office) assists members countries in the
region in facilitating their participation in inter-governmental consultation (Oct. 2001)
and identifies suitable consultants to advise on accession into WTO (Sept 2002). The
Bank also conducted several consultation meetings of OIC member countries and
several courses on WTO which participants from the countries in the region have
attended.
International Center of Biosaline Agriculture (ICBA)
20.
Two missions were undertaken by ICBA in 2002 to the countries in the region
to identify areas of cooperation. Being land-locked, several countries are affected by
saline problems and ICBA is expected to develop special program to be submitted to
the governments of the countries in the region. Soon an MOU will be signed with the
Institute of Science Kazakhstan for collaboration in the area of salinity problems.
SPECIAL ASSISTANCE OPERATIONS
21.
During 2000-2003, the IDB has been implementing Special Assistance
projects in the region, such as (these projects were approved before the countries join
the IDB):
i)
ii)
iii)
iv)
v)
vi)
Kazakhstan:
Islamic Institute in Almaty
Iqra University and Islamic Institute projects
Kyrgyz Republic:
Islamic Institute in Bishkek;
Quranic Schools in Talas;
Renovation of Quranic School in Jenje-Jer; and
Purchase of Islamic and Arabic books.
Tajikistan:
Relief assistance to Afghan refugees;
Termezi University.
Uzbekistan:
Medical equipment and Ambulances for Ministry of Health;
and
Imam Al-Bukhary Islamic Institute in Samarkand.
Kolkodash and Mir Arab Islamic Institute.
Maahad Islamic Institute Tashkent
Crimea: Islamic Center in Simferopol and several Quranic Schools in
Ukraine.
Chechnya: Provision of relief assistance.
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For further inquiry please contact:
IDB Regional Office Almaty
67, Aiteke-bi Str.
Almaty 480091, Republic of Kazakhstan
Tel: 3272-938588
Fax: 3272-501303
E-Mail: nzabidin@idb.netel.kz
March 2003