The European Bank for Reconstruction and Development (EBRD) is lending US$1.2mn to privately held, Tashkent-based Gisad O’zbek, to finance part of the Uzbek textile company’s start-up working capital.

Gisad O’zbek will use locally produced yarn to manufacture about 5,000 tonnes a year of knitted cotton fabric, mostly for export.

Uzbekistan is one of the world’s largest cotton producers. But only about 20-25% of the country’s cotton fibre output is currently processed domestically. Developing the cotton processing industry is a government priority.

The bank’s partners in the deal are Gisad Tekstil Hammaddeleri Sanayi ve Ticaret and its parent company, Gisad Dis Ticaret, the flagship company of Gisad Group, one of Turkey’s leading textile exporters. The relatively low cost of production in Uzbekistan, and the availability of good quality raw material, will provide Gisad Group shareholders with fabric at competitive prices as well as increasing Uzbekistan’s cotton-processing capacity.

“This is Gisad Group’s first step towards realising plans to establish textile production bases in low-cost countries to help shareholders become more competitive. It also gives Gisad Group an opportunity to establish a partnership with the EBRD for future investments,” says Ibrahim Ozdogan, chairman of Gisad Foreign Trade.

The proceeds of the five-year loan will be used for start-up working capital (covering 22% of the total project cost). Hubert Pandza, EBRD business group director for Russia and Central Asia, says that the loan is consistent with the bank’s strategy for Uzbekistan, which stresses export-oriented private sector project finance as a core priority and highlights the importance of the textile sector.