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BP and EBRD Signed Joint Agreement to Co-operate in Developing Private Business in Azerbaijan

Politics Materials 15 November 2006 17:52 (UTC +04:00)

On November 15, BP on behalf of its co-venturers in Azerbaijan and the European Bank for Reconstruction and Development (EBRD) signed a contribution agreement to jointly support private sector development in Azerbaijan, Trend reports. The agreement is aimed at creating transparent and effective access to commercial finance for local businesses including small and medium size enterprises (SMEs) and micro-enterprises.

Under this agreement, BP and its co-venturers will contribute $5.25 million and EBRD will co-finance operations in an amount at least matching the contribution of BP and its co-venturers. This will cover the three year programme starting in the fourth quarter of 2006 and will be used to provide loans and technical assistance to local businesses and enterprises.

The programme will be implemented by EBRD through separate agreements with a number of local financial institutions. The vehicle for implementation are the EBRD's already established Early Transition Country Non-Bank Microfinance Facility and the EBRD Azerbaijan Micro-Small and Medium Enterprise Facility and the provision of on-lending and technical cooperation funds to well-established, commercial non-bank microfinance institutions and private banks. The selection of both types of institutions and eligible local small and medium size enterprises (SMEs) will be made by using EBRD's and local financing institutions' criteria.

This major joint effort is specifically designed to contribute to the development of broader private enterprise development in Azerbaijan. A strong and transparent enterprise sector is key to the creation of a healthy economy, which is better able to respond to the challenges of managing large inflows of revenue, says Bill Schrader, BP's President in Azerbaijan.

In addition to enhancing access to transparent financing for local businesses we are confident that the project will also lead to a larger number and more varied base of local suppliers, which can be accessed and developed in a sustainable manner by foreign investors such as BP.

BP, together with its co-venturers, is implementing world-class oil and gas development and export projects in the region. These projects present a great opportunity to make a positive difference to the people of Azerbaijan, Georgia and Turkey. As part of their efforts to achieve this, BP and its co-venturers have set an ambitious new target to double the value of contracts placed with locally-owned companies in Azerbaijan within five years. By 2010 BP and its co-venturers aim to bring the total spend with locally-owned companies to over $500 million a year. This target aims to encourage enterprise development throughout Azerbaijan, Georgia and Turkey assisting the countries in diversifying their economies, as well as creating innovative and transparent practices in support of local businesses.

In addition, BP and its co-venturers have committed to spend around $ 25 million per year on regional development and community projects. These include the Regional Development Initiative (RDI), which is an innovative mechanism to provide long-term contribution to sustainable socio-economic development across Azerbaijan, Georgia and Turkey. RDI is designed to help achieve national and international development goals and to that end it will combine the experience, skills and resources of BP and co-venturers with the expertise of development organisations.

In Azerbaijan in 2006, these regional development and community programmes focus on three key themes:

1. Community Investment - focusing on the local communities close to BP-operated projects, the objective is to support long-term socio-economic development, making a tangible difference in the quality of peoples' lives (e.g., economic development, health, education, infrastructure rehabilitation)

2. Enterprise Development - building local business capacity. This includes support for SMEs through technical assistance, access to transparent financing, capacity building, training on business ethics and corporate governance.

3. Effective Governance supporting capacity-building and transparency with particular interest in revenue management.

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