The role and place of the Russian-Kyrgyz Development Fund (RKDF) in the national economy will be rethought. Artem Novikov, Chairman of the Board of the RKDF, spoke about this in an interview. During the conversation, he also answered other questions regarding the work of the fund in the past 2021 and the coming 2022, and shared his vision for the further development of trade and economic cooperation between Russia and Kyrgyzstan.

Artem Eduardovich, what was 2021 like for the Russian-Kyrgyz Development Fund? Was it successful, and if the answer is yes, how is success measured?

Artem Novikov: The past year was not easy. After the well-known post-election events of October 2020, funding for the RKDF was suspended. At the same time, questions arose about the need to modernize the structure, its new role in the country's economy.

Full-fledged work resumed in July 2021, so in fact, it is possible to evaluate the activities of the fund only for six months. I can say that over this period of time we have exceeded the set plans - we "closed" the year with good results both in terms of finances and in terms of the number of approved applications received for consideration - 23 in the amount of more than 80 million dollars.

Another and probably the most important indicator is the condition of the Fund's borrowers. Most of them improved their performance in 2021. For example, tax payments and product exports increased by seven and six percent, respectively. It is especially noteworthy that their deliveries to Russia increased by 20 percent compared to 2020, and the number of people employed at their enterprises increased by 1,700 people.

In total, the fund's portfolio currently contains more than 40 new project proposals that could potentially be approved, totaling about $140 million.

2021 was also successful for the fund in terms of the implementation of large-scale Russian-Kyrgyz events. First, we held a business forum in Issyk-Kul, in which representatives of 70 Russian companies took part. At the forum, among other things, export contracts were signed. The RKDF, in turn, entered into agreements with Roseximbank with a total limit of 30 and with the EDB for 50 million dollars, under which applicants can receive financing in Russian rubles.

Then, in November, a business mission of more than 60 Russian companies took place in Bishkek. As part of this event, the fund signed constituent documents with Natspromleasing, one of the largest operators in the Russian Federation, specializing in targeted support of the industry in the field of machine tool building, equipment, as well as the modernization of production and sales support.

As a result, a leasing company has been created and is already operating in the territory of the Kyrgyz Republic, which, in two months of its existence, has collected a portfolio of applications in the amount of $200 million.

How effective are such Russian-Kyrgyz business events for the economy of the republic?

Artem Novikov: This is a very interesting format of cooperation. We manage to bring together leading equipment manufacturers, suppliers and buyers of products from both the Russian and Kyrgyz side, to find new forms of interaction between them and export directions. In general, this both strengthens bilateral economic cooperation between our countries and contributes to the growth of the economy of the Kyrgyz Republic. If it weren't for such events, for example, we would not have been able to promptly work out the issue of creating a leasing company and it would have been much more difficult to consult with Russian financial institutions.

In the future, we will definitely continue the practice of holding large joint business forums. The next mission, I hope, will take place in the spring of 2022.

Critics of such events say that such meetings do not bring concrete results. Like, they got together, talked and left. What would you say to them?

Artem Novikov: Any big job starts small. If people do not first meet and discuss the details, then what further steps can we talk about? During all the events held in 2021, specific documents were signed.

For example, an agreement on the supply of equipment for the construction of a poultry farm in the Kyrgyz Republic with a capacity of 20,000 tons of poultry meat. This project is already being actively implemented - a land plot for the construction of the facility has been determined, all necessary technological studies have been carried out, and a business plan has been developed. Isn't this a concrete result - a real production worth 20 million dollars, aimed at import substitution of important products in the republic?

Or an agreement on the establishment of a so-called project office in the Kyrgyz Republic. The structure will help local entrepreneurs to form project applications so that they have the opportunity to attract funding not only from the RKDF, but also from other financial institutions, including within the EAEU.These and other, as you said, specific results in one way or another stimulate the development of the economy of the republic - they create enterprises in the country, increase its export potential, which positively affects the well-being of the Kyrgyz people.

Do Russian companies wishing to work in Kyrgyzstan apply to the RKDF?

Artem Novikov: Most of the applications that are considered by the Fund, one way or another connected with the Russian component. This is either export or supply of equipment and raw materials for production. We have three key goals - promoting the development of the economy of the Kyrgyz Republic, strengthening bilateral trade and economic cooperation and adapting the economy of the republic to the requirements of the EAEU. Any project that comes to the fund, we consider through the prism of these goals.

During the entire existence of the RKDF, there has never been information about the participation of the fund in any charity events. Why?

Artem Novikov: The basic principles of project financing by the fund, laid down in the founding documents, are urgency, payment and repayment. We are not authorized to fund charities. But if we talk about business projects, if necessary, we help applicants to conduct marketing research, market analysis, prepare a business plan, develop financial models and hire consultants, attract management who will help improve financial performance and quality of work. All this is done on a grant basis.

How do you assess the level of bilateral trade and economic cooperation between the Russian Federation and the Kyrgyz Republic? Has the potential of such interaction between our countries been 100 percent unleashed? Or do we still have some way to go?

Artem Novikov: Of course, there is something to strive for. There are enough areas in which we can build up cooperation at a faster pace. These are, for example, cooperation in the energy sector, the possibility of increasing supplies of light industry and agricultural products to the Russian Federation. The main thing to understand is that the economy of the Kyrgyz Republic is no longer re-export. Therefore, the country needs to "leave" in its own production and export under the brand "Made in the Kyrgyz Republic".

One of the points of the National Development Program of Kyrgyzstan until 2026 is the implementation of large-scale projects based on the so-called "green" agenda. How do you feel about this current global trend today? What can the RKDF do to support the "green" economy in the country?

Artem Novikov: All countries, within the framework of the Paris climate agreement, one way or another include the "green" agenda in their national economic programs and action plans. Including our republic. There are enough environmental problems in the Kyrgyz Republic. This is the accelerated melting of glaciers, and the lack of water resources, and the smog that occurs in cities in the winter. The Russian-Kyrgyz Development Fund cannot stand aside when the countrying to solve these problems.

The gradual transfer of the republican economy to a "green" track is one of the goals of the National Development Program for the next five years. In this regard, the RKDF will actively cooperate with the UN Green Climate Fund and other institutions that provide "green" financing. We have already discussed with our partners a possible issue of "green" bonds. In addition, we have a cooperation agreement with the Astana International Financial Center, which is also actively involved in this agenda. I can assure you that the RKDF will support and develop the direction that is in demand all over the world today.

Energy shortage in the republic is increasingly negatively affecting the lives of ordinary Kyrgyzstanis. What role can the foundation play in addressing this pressing issue?

Artem Novikov: Currently, the RKDF is already considering several projects related to the energy sector. There are already successful experiences. We financed the construction of the Tegirmentinskaya small hydroelectric power station with a capacity of three megawatts. The station, for the construction of which 140 million soms were allocated from the fund, has been operating for five years.

Other projects include Leilek small hydroelectric power plants in Batken region with a capacity of six megawatts, Bala-Saruu in Talas region (25 megawatts). We are consulting with the Eurasian Development Bank on the Kulanak HPP in the Naryn region (100 megawatts).

The government of the Kyrgyz Republic today, more than ever before, understands the relevance of this topic. As part of the implementation of the decisions of the President of the country, amendments were made to the regulatory framework that regulates the purchase of electricity by the state from small hydroelectric power plants, from private producers. The demand for electricity increases by 4-6% every year, but the capacities are not growing at the same pace.

Key question

What changes await the work of the Russian-Kyrgyz Development Fund in 2022? Artem Novikov: We have big plans for this year. We are trying to rethink the role and place of the fund in the structure of the national economy. The fund should not remain exclusively a classic lending institution. This should be a structure that creates opportunities for attracting competencies, innovations, capital and becomes their conductor on the territory of the Kyrgyz Republic. Now we are preparing a strategy for the fund's work for the next five years, we are revising the credit policy of the RKDF. We intend to engage in the development of the leasing services market, the stock market, we will encourage borrowing companies to issue their own bonds in order to attract capital from the population.

The priority is the issues of import substitution. One of the key tasks is the import substitution of poultry meat, chicken eggs, meat and dairy products, building materials. We are trying to consolidate the efforts of all development institutions in the country, for which we have already held consultations with the Cabinet of Ministers. Currently, work is underway to create a coordinating council, within which large projects will be considered and the sources of their financing will be determined.

We have very good communications with the government. The fund's council includes two key ministers of the economic bloc - the minister of economy and commerce and the minister of finance. This allows us to adjust the plans of the RKDF and correlate them with the economic policy of the government and the possibilities of the republican budget.

By the way

The main sectors of investment projects submitted for consideration to the fund in 2021 were light industry, production and processing of agricultural products, production of medicines, infrastructure and hydropower.

According to the RKDF, the total revenue of the fund's borrowers in 2021 amounted to 46.3 billion soms (about eight percent of the country's GDP), export volume - $170.4 million. The total tax deductions are 4.4 billion soms.

"The Fund is not only engaged in concessional lending, but also works for the future. So that borrowers do not experience difficulties due to fluctuations in the dollar exchange rate against the som, the RKDF has created opportunities for financing projects in Russian rubles. The line from the Eurasian Development Bank is 3 ,7, from the Russian Export Bank - 2.2 billion rubles," the fund said.

Since 2015, the RKDF has financed 3,140 projects in the amount of $407.9 million. The Fund has become the largest institutional investor in the territory of the Kyrgyz Republic with an active presence in the regions of the republic.

"In 2022, based on the accumulated experience, the RCRF plans to strengthen its position in the republic as an international development institution. Its main missions are to promote economic cooperation between Kyrgyzstan and Russia, modernize and develop the economy of the Kyrgyz Republic for integration purposes," they noted in the fund.

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