Kazakhstan and the Asian Infrastructure Investment Bank (AIIB) Pool Resources to Address Infrastructure Deficit
Kickstarting Sustainable Infrastructure: Kazakhstan and AIIB's Collaborative Strategy
ASTANA - Sosteing private capital is crucial in fillling Asia's trillion-dollar infrastructure financing gap, declared representatives from development banks, investment firms, and government agencies at a panel organized by AIIB and Kazakhstan's Ministry of National Economy on April 29 at the Astana International Financial Centre (AIFC).
For this story, we're ditching the formalities and getting straight to the juice. Here's what went down:
Kazakhstan's Green Vision for its Infrastructure
The session commenced with Konstantin Limitovskiy, a chief investment officer at AIIB, reaffirming Kazakhstan's key significance within the bank's portfolio. He revealed that Kazakhstan, an AIIB founding member, has received approximately $2 billion in investments for seven major public and private projects. From highways that bring communities closer, renewable energy that powers homes, to cutting-edge hospitals, Kazakhstan's strategic location as a major dispersal and trade hub complements AIIB's mission for international connectivity.
Limitovskiy emphasized AIIB's role in projects geared towards Kazakhstan's ambition of achieving carbon neutrality by 2060. "We're backing Kazakhstan with the addition of 420 megawatts of green energy and some exciting wind farm developments," he announced. Moreover, the bank's financing has played a crucial role in the nation's first hospital project that adheres to the public-private partnership (PPP) law.
Railway bypass projects, initiatives to shatter regional connectivity, and efforts to expand access to crucial services are also part of AIIB’s game plan. "Join us at AIIB's 10th annual meeting in Beijing this June and witness the future unfolding," Limitovskiy invited.
Keeping Kazakhstan on the Move: Diversification and Off-budget Funding
Vice Minister of Transport Talgat Lastayev emphasized the country's commitment to creating an advanced transportation network, supported by state development programs through 2030. Kazakhstan has over 4,000 kilometers of roads under reconstruction and construction, costing more than $15 billion. Key focus areas include sustainable infrastructure development, clean energy transition, and the transition to a low-carbon economy, in line with Kazakhstan's national strategy.
Lastayev highlighted priority transport corridor projects, like the Karagandy-Zhezkazgan and Aktobe-Karabutak-Ulgaisyn routes, and shared updates on upcoming co-financing agreements with the World Bank and the European Bank for Reconstruction and Development (EBRD).
Money-Making Sustainability: Diversifying Investment Tools and Partnerships
The conversation progressed to focus on the importance of sustainability in capital markets with Evgeniya Bogdanova, CEO of the Astana Financial Services Authority (AFSA). "It's not only about constructing assets. It's about crafting opportunities," she said. By engaging private capital through the right regulatory frameworks, risk mitigation tools, and market-based incentives that reward sustainability, she stressed the need for long-term investment.
Bogdanova reiterated that relying solely on the public sector to bridge the infrastructure gap is unrealistic. To engage private capital, regulatory certainty, risk mitigation tools, and financial instruments that cater to long-term investor goals are essential.
"Expanding the financial environment for sustainable products and environmental, social, and governance (ESG) instruments is part of AFSA's vision," she affirmed. She praised multilateral development banks like AIIB, crediting their ability to bridge the gap between public development demands and private sector execution.
Fueling the Fire: Mobilizing Private Capital
Asim Rana, AIIB's manager for financial institutions and funds clients, shed light on strategies that AIIB employs to mobilize private capital, a key strategic priority. Beyond direct investments, Rana explained how the bank works with financial intermediaries, like banks and asset managers, to scale impact. He explained AIIB's on-lending facilities, where capital is channeled through local banks for multiple infrastructure projects under strict environmental and social standards.
Recent innovations include the Bayfront collateralized loan obligation (CLO) vehicle that was launched in Singapore and similar initiatives in Hong Kong, which bundle infrastructure loans into tradeable securities. "We created a market that's challenging, but rewarding, in Asia," he said.
Infrastructure is a lengthy asset class, Rana clarified. "It requires patience, but it certainly rewards returns," he stated. Mobilizing private capital for long-term infrastructure projects requires rigorous checks on environmental, social, and credit factors to ensure the project's viability and sustainability.
Kazakhstan's Green Agenda: Challenges and Opportunities
Providing a broader economic context, Akzhol Urazalin, a deputy director of the International Economic Cooperation Department at the Ministry of National Economy, highlighted the nation's steady growth of 4.8% in 2024, driven by agriculture, transportation, and manufacturing.
Kazakhstan's national infrastructure plan, spanning 2029, is valued at approximately $80 billion and includes over 200 projects across energy, transport, digital, and sanitation sectors. "Around 90% of the funding is expected from off-budget sources," he said.
Urazalin also highlighted the importance of public-private partnerships, noting ongoing reforms to improve transparency, tax policy, and institutional frameworks. However, he highlighted challenges like the difficulty in securing long-term financing for the private sector and forging strong legal mechanisms for PPPs. "We're developing and implementing flexible risk-sharing models between the government and private sector, to promote green financing instruments and sustainable investments," he said.
Invest with purpose: Kazakhstan's Development Agenda and the Role of Private SectorZamira Sundetova, SkyBridge Invest CEO, highlighted the private sector's role in long-term infrastructure development. "We're not only managing the funds of our clients, but also facilitating complex infrastructure transactions," she said. Kazakhstan, with its ambition to achieve carbon neutrality by 2060, can count on the private sector to support this goal. She pointed to rising demand for renewable energy and digital infrastructure, particularly in fiber optics and 5G, as evidence.
"Sustainability, financial resilience, and environmental impact are critical factors when selecting a project for the long term," Sundetova concluded, advocating for the establishment of a joint infrastructure investment fund, inspired by the Three Seas Initiative in Europe.
Commercial Banks as Ecosystem Builders
Wang Xianming, a senior executive officer at China Construction Bank's (CCB) Astana branch, emphasized the role of commercial banks in financing infrastructure development. CCB has invested over $1 billion in Kazakhstan since entering the market in 2019, focusing on gas, solar, and wind infrastructure.
"In supporting infrastructure development, commercial banks can primarily serve three roles: financing supporter, risk manager, and ecosystem builder," Wang stated. CCB has developed green finance structures, lowered financing costs through cross-border cooperation, and joint syndicated loans with multilateral banks. Wang underscored the need for closer collaboration among banks, asset managers, insurers, and government entities to establish a diversified financing system.
"This innovative collaboration leverages our robust project evaluation expertise while utilizing the capacities of various financial institutions," he summed up.
Sources:
- Asian Infrastructure Investment Bank (AIIB)
- World Bank Group
- European Bank for Reconstruction and Development (EBRD)
- Central Asia Water and Energy Association
- Caspian Green Energy Corridor project
- AIIB has backed Kazakhstan with the addition of 420 megawatts of green energy and some exciting wind farm developments, supporting the nation's ambition of achieving carbon neutrality by 2060.
- Evgeniya Bogdanova, CEO of the Astana Financial Services Authority (AFSA), stresses the need for long-term investment in infrastructure, emphasizing that it's not only about constructing assets but also about creating opportunities.
- Asim Rana, AIIB's manager for financial institutions and funds clients, explains how the bank works with financial intermediaries, like banks and asset managers, to scale impact through on-lending facilities and innovative instruments like the Bayfront collateralized loan obligation (CLO) vehicle.
- Zamira Sundetova, SkyBridge Invest CEO, points to rising demand for renewable energy and digital infrastructure in Kazakhstan, and advocates for the establishment of a joint infrastructure investment fund, inspired by the Three Seas Initiative in Europe, to support the nation's development agenda and the role of the private sector in achieving carbon neutrality by 2060.
