Catalog

Sustaining the Boom
ADB Review [ August 2005 ]

Infrastructure investment in Central Asia needs to be doubled or tripled from the current figure of $1 billion per year to sustain growth, a seminar hears

By Ganeshan Wignaraja, (gwignaraja@adb.org)
Senior Economist

Infrastructure investment in Central Asia needs to increase significantly to around $2 billion–$3 billion per year in 2005–2010 to sustain growth and reduce poverty, the head of ADB’s operations in the subregion told a high-level seminar in Istanbul.

Director General of the Asian Development Bank (ADB)’s East and Central Asia Department Satish Rao said that infrastructure spending, excluding oil and gas, needed to be raised from the present figure of about $1 billion per year.

He was speaking at a seminar on Private Sector Participation in Infrastructure in Central Asia, held on the final day of ADB’s Annual Meeting in Istanbul.

“The region is booming, with the gross domestic product accelerating to 9.2% in 2002–2004, and Soviet era railways, roads, oil pipelines, and telecommunications need urgent modernization to improve Central Asia’s connectivity with international markets,” Mr. Rao said.

“Increasing demand and limited government capacity opens up potential for private sector participation in infrastructure in the region.”

At the seminar, Aidar Arifkhanov, Kazakhstan’s Vice Minister of Finance, highlighted the strong economic performance of Kazakhstan, the region’s largest economy, due to high oil prices, good macroeconomic management, and inflows of foreign direct investment.

He said that private sector participation could usefully complement state investments in infrastructure in Kazakhstan by providing new capital and management expertise.

“Key areas for private sector participation might include energy sector infrastructure, air transport, rail transport, telecommunications, and water supply,” he said.

Lloyd Paxton, Chairman of Air Astana, underlined the importance of publicprivate sector partnerships in air transport in Central Asia. He said that “Air Astana was established as recently as 2001 as a Kazakhstan-British joint venture but has contributed over $30 million to Kazakhstan’s state budget.” This represents a good return on an initial investment of $8.6 million, he said.

Turkey has a special commercial role to play in Central Asia’s infrastructure development, Hilmi Guler, Turkey’s Minister of Energy and Natural Resources, told the seminar, given that it is a country located between the enormous gas reserves of Central Asia and the gas markets of Europe.

“The Baku-Tbilisi-Ceyhan Crude Oil Pipeline and the Bank-Tbilisi-Erzurm Natural Gas Pipeline projects show that the private sector, the state, and development banks can work together in infrastructure development,” he said.

But reducing red tape and other bureaucratic obstacles was essential to small and medium enterprise development and private sector participation in infrastructure in Central Asia, according to Rustom Azimov, Uzbekistan’s Deputy Prime Minister.

He underlined the new opportunities for strategic foreign and local investors in Central Asian infrastructure due to the recently concluded free trade agreement between Kazakhstan and Uzbekistan.

Go back to current issue

Email this to a friend