Finance mobilization by Kazakhstan and AIIB to address infrastructure shortfall
Hustling for Money: Closing the Asian Infrastructure Chasm Through Private Capital
ASTANA — To fill the trillions in infrastructure financing gap plaguing Asia, influencers from development banks, investment firms, and government agencies convened for a discussion at the Astana International Financial Centre (AIFC), jointly organized by the Asian Infrastructure Investment Bank (AIIB) and Kazakhstan's Ministry of National Economy on April 29.
Here's what went down at the lively meet-up.
Kazakhstan's Game Plan for Infrastructure Advancement
The event kicked off with Konstantin Limitovskiy, AIIB's chief investment officer, confirming Kazakhstan's key role in the bank's portfolio. Limitovskiy highlighted significant investments made in the country—over $2 billion across seven flagship projects—which have led to improved transportation networks, renewable energy sources, and modernized healthcare facilities.
"We're here to foster international connectivity, and Kazakhstan, with its strategic position, is a perfect fit," said Limitovskiy.
He emphasized AIIB's commitment to supporting Kazakhstan's goal of carbon neutrality by 2060 with initiatives such as adding 420 megawatts of green energy, development of wind farms, and funding for the country's first hospital under its PPP law.
Transportation priorities, off-budget funding, and sustainable infrastructure were also key government priorities on the table. Vice Minister of Transport Talgat Lastayev shared Kazakhstan's ambition for a modern, highly developed transport network, backed by extensive state programs extending through 2030. He highlighted key transport corridor projects, such as the Karagandy-Zhezkazgan and Aktobe-Karabutak-Ulgaisyn routes.
Attracting Private Capital like a Pro
Transitioning the conversation to the private sector, Evgeniya Bogdanova, the CEO of the Astana Financial Services Authority (AFSA), underlined the importance of sustainability in attracting private capital.
"We can't just build assets—we need to generate opportunities. Engaging private capital requires smart regulation, risk mitigation, and market-based incentives that reward sustainability," Bogdanova stated.
Bogdanova stressed that the public sector alone cannot bridge the gap. To involve private capital, the regulatory environment needs to provide certainty, risk mitigation tools, and financial instruments that cater to long-term investors' objectives. She noted that AFSA is boosting the financial environment for sustainable products and environmental, social, and governance (ESG) instruments.
Bogdanova further highlighted the indispensable role that multilateral development banks like AIIB play in filling the infrastructure gap by bridging public development needs with private sector execution.
Pumping Up Private Capital
Asim Rana, AIIB's manager for financial institutions and funds clients, offered insights into the bank's strategies for mobilizing private capital, which he identified as a top priority. Rana explained that AIIB collaborates with financial intermediaries such as banks and asset managers to scale impact. He pointed out partnerships like on-lending facilities, which channel capital through local banks to fund various infrastructure projects under strict environmental and social standards.
Rana mentioned the creation of Bayfront, a collateralized loan obligation (CLO) vehicle launched in Singapore, and similar initiatives in Hong Kong, which bundle infrastructure loans into tradeable securities. This strategy creates a market for securities, making it easier to recycle capital and increase liquidity in the sector.
Making infrastructure projects commercially viable is crucial to garnering institutional investors, according to Rana. "Patience is necessary, but returns are a must for infrastructure projects," he noted.
He also pointed out that mobilizing private capital for long-term infrastructure projects necessitates thorough assessments of environmental, social, and credit factors to demonstrate a project's viability and sustainability.
Kazakhstan's Economic Outlook and Obstacles
With a broader economic perspective, Akzhol Urazalin, a deputy director at the Ministry of National Economy, noted Kazakhstan's consistent growth of 4.8% in 2024, driven by agriculture, transportation, and manufacturing. Urazalin shared that Kazakhstan's national infrastructure plan, spanning 2029, is valued at approximately $80 billion and includes over 200 projects across the energy, transport, digital, and sanitation sectors.
"90% of the funding is anticipated from off-budget sources," Urazalin stated. He also highlighted the importance of PPPs, noting ongoing reforms to enhance transparency, tax policy, and institutional frameworks. However, he expressed concerns about the challenges posed by long-term financing for the private sector and developing robust legal mechanisms for PPPs.
"We're trying to develop and implement flexible risk-sharing models between the government and the private sector, to promote the use of green financial instruments," Urazalin said.
Infrastructure Development: Lean, Green, and Clean
Zamira Sundetova, SkyBridge Invest CEO, offered insight into the role of asset managers in long-term infrastructure development from a private sector viewpoint.
"Beyond managing assets on behalf of our clients, we facilitate complex infrastructure transactions," Sundetova explained during the panel. "Our government has pledged carbon neutrality by 2060, and we're doing our part to help achieve this goal," she added.
Sundetova also emphasized the growing interest in renewable energy and digital infrastructure, particularly fiber optics and 5G. "Sustainability, financial resilience, and environmental impact are top priorities when selecting a project for long-term investment," Sundetova stated.
She suggested that Kazakhstan consider establishing a joint infrastructure investment fund to mirror initiatives like the Three Seas Initiative in Europe.
Banks as Ecosystem Builders
Wrapping up, Wang Xianming, a senior executive officer at China Construction Bank's (CCB) Astana branch, underlined the bank's investments in Kazakhstan, totaling $1 billion since 2019, with a focus on gas, solar, and wind infrastructure.
"Commercial banks can operate in three primary roles: financial supporter, risk manager, and ecosystem builder," Wang said. He highlighted the bank's efforts to develop green finance structures, reduce financing costs through cross-border cooperation, and syndicate loans in partnership with multilateral banks. He emphasized the importance of greater collaboration among banks, asset managers, insurers, and government entities to create diverse financing systems.
"Our work is not just about individual project evaluation but also collaborates with other financial institutions to maximize impact," Wang stated.
Remember, hustling for private capital is crucial in bridging the infrastructure financing gap in Asia, as seen in Kazakhstan's strategy. Strategies encompass encouraging PPPs, investing in renewable energy, mobilizing institutional investors, developing innovative financing mechanisms, promoting cross-stakeholder coordination, and standardizing markets. Together, these approaches help nations like Kazakhstan better connect with the global community while advocating sustainable development within their borders.
- The Asian Infrastructure Investment Bank (AIIB) has committed to supporting Kazakhstan's goal of carbon neutrality by 2060, with initiatives such as adding 420 megawatts of green energy, development of wind farms, and funding for the country's first hospital under its PPP law, demonstrating AIIB's role in adding finance for sustainable business.
- In order to attract private capital, it is crucial to generate opportunities through smart regulation, risk mitigation, and market-based incentives that reward sustainability, as emphasized by Evgeniya Bogdanova, the CEO of the Astana Financial Services Authority (AFSA).
- To bridge the infrastructure gap, multilateral development banks like AIIB play an indispensable role in filling the public development needs with private sector execution, as highlighted by Asim Rana, AIIB's manager for financial institutions and funds clients.
