Oil Fund of Azerbaijan Successfully Fulfills Its Goals SOFAZ Executive Director

Oil Fund of Azerbaijan Successfully Fulfills Its Goals   SOFAZ Executive Director

Trend's Exclusive Interview with Shahmar Movsumov, the Executive Director of the State Oil Fund of Azerbaijan

Question: Seven years has past since the adoption of Rules on State Oil Fund of Azerbaijan. Is it possible to assert that the goals set for SOFAZ has been achieved?

Answer: I can confidently state that the Oil Fund successfully fulfills the tasks set for it. SOFAZ is actively involved in the collection and accumulation of currency reserves from the exploitation of Azerbaijan oil reserves for future generations, defends the economy of the country from negative impact of rapidly growing foreign inlflows and preserves the macroeconomic stability through spending the Fund capital on current social and infrastructure needs.

The funds flowing from the exploitation of oil reserves are accumulated in the Oil Fund and their volume increases year by year. Presently, the amount of currency assets in the Fund amounts to $1.5bln. The Fund's capital is invested in the reliable foreign banks as well as in securities. In this way the economy of the country is protected from impact of big currency inflows, and on the other hand they increase as a result of management of currency reserves of the Fund.

Part of the Fund's capital is directed at important investment projects to ensure dynamic development of the economy. The role of the Fund in financing the state programs and projects of strategic significance boosts year by year.

From 2002 till the end of October 2006 the State Oil Fund has directed over $312mln at financing Azerbaijan's share in the Baku-Tbilisi-Ceyhan pipeline. The Fund transferred more than $941mln to the public budget to provide financing of the state investment projects and social programs.

At the Government meeting held after two weeks as Mr. Ilham Aliyev began to act as the President of Azerbaijan, one of the most significant tasks he set before the government was to liquidate all tent camps in Azerbaijan by the next 5 years. I can confidently say that this task has been fulfilled earlier than the required period and all tent camps will be liquidated by the end of 2007.

I am proud to emphasize that the Oil Fund shares a large part of this success. From 2001 to late October 2006 SOFAZ has allocated $178.5 mln for the resolution of the social problems of refugees and internally displaced people.

Question: How has the Oil Fund fulfilled its responsibilities and what success has been achieved within 3 years after Mr. Ilham Aliyev was elected as the President?

Answer: Presently we witness the large-scale creative work, reforms and positive changes that take place in Azerbaijan. Quite a new stage has begun in the economy of the country. Exploiting the oil resources of our country in co-operation with the foreign companies is increasing year by year due to the National Oil Strategy founded by our national leader His Excellency Heydar Aliyev and due to the positive result of the political and economical doctrine implemented by our honorable President Mr. Ilham Aliyev, over the past three years.

Other significant achievements are the launch of Heydar Aliyev Baku-Tbilisi-Ceyhan main oil export pipeline, which was called as pipeline dream one time and exports oil from Baku every day now and the pipeline that will ensure the exportation of gas from the Shah Deniz field soon. Both projects emphasize formation of the full-fledged transportation system, which will ensure the reliable transit of the hydrocarbon reserves of the country to foreign markets. All these foster the rapid increase of the currency potential of our state.

This year the Oil Fund initiated to finance two large-scale projects within implementation of its budget Construction of the water pipe from Oguz-Gabala zone to Baku city and Reconstruction of Samur-Absheron irrigation system. The water supply of Baku city will further improve. The irrigation system of the country will be reconstructed due to realization of these projects.

Establishing balanced economy and development of the dynamic non-oil sector in parallel with the developed oil sector became new priorities and these goals are accepted as significant strategic targets. All of the above mentioned are the tasks put by the President of Azerbaijan Republic, Mr. Ilham Aliyev, before the Government of the Country. It needs to be properly highlighted that this strategically important steps were taken by the President over the recent years. Directing a year-by-year increase of oil and gas revenues towards the non-oil sector, Long-term strategy on management of the oil and gas revenues was adopted in accordance with the decree of the President dated September 27, 2004, in order to achieve the balanced development of the economy and ensure the efficient management and use of the revenues. Adopting this significant document created a solid ground for effective and expedient use of the oil and gas reserves and directing them towards the development of the non-oil sector.

In accordance with the Long-term strategy on management of the oil and gas revenues, another important decision was made by the President this year, in order to direct the oil and gas revenues towards the development of the non-oil sector and the investments allocated to the renewal of the material and technical base of the enterprises in this sphere. According to the decree of the President dated March 30, 2006, Azerbaijan Investment Company Open Joint-Stock Company has been founded. It was decided SOFAZ to direct money to formation of the statutory capital of the Company.

As described in the decree, the activities of the Company are directed to implementation of long-term investment allocations by purchasing shares and stocks of the joint-stock companies and other commercial organizations functioning in the non-oil sector of the country's economy. In accordance with the 2006 budget of the State Oil Fund confirmed by the Decree of the President of Azerbaijan Republic, it was envisaged to allocate AZN 90 million to formation of the authorized capital of Azerbaijan Investment Company. Formation of the statutory capital of the company was completed within the framework of implementing the Fund budget for the current year.

Founding the Investment Company is an integral part of the investment policy pursued by the State. However, unlike the state investments, a new investment mechanism meeting the new and advanced principles has been applied in the country due to the activities of this Company. On one hand, promoti0ng of the enterprises and implementing the projects will be realized success, the investment policy implemented with regards to the development of the non-oil sector finds its application, and on the other hand, the protection of the proportionality between the property markets of the state and private sector is ensured by directing the state investments towards purchasing the shares of the enterprises in the authorized capital or towards participation share in the projects due to the application of the new mechanism. The activities of the Company in relation with the allocation of the capitals and loans may be an important stimulus for the promotion in the currencies market of the country and development of the corp
orative management forms. The dividends from the shares of the Company in the enterprises will flow as revenues into the State account i.e., in the Fund, which means the additional income source and increase of the Fund.

Question: What work has been done within the framework of an institutional development of the State Oil Fund, which has been implemented at the expense of USTDA since last year and when is the second phase of the project scheduled to commence? Do the international consultants put forward proposals on expansion or alternation of a list of foreign managers on managing the SOFAZ funds? Were their activities ever monitored?

Answer: Agreement over the project on Improvement of Institutional Building of the Oil Fund, was signed in January 2005 between the State Oil Fund and Overture Financial Services LLC and U.S. Trade and Development Agency. The agreement was approved by TDA on April 7, 2005. After the detailed study over the Fund's activities, Overture Financial Services made recommendations on the improvement of its institutional activities, and technical opportunities and assisted in the implementation of several projects.

The scope of technical assistance envisaged by the grant agreement included reviewing and refining current asset and risk management guidelines and policies, building performance measurement capacity and external manager selection and performance evaluation criteria, selection and implementation of portfolio management software, legal advisory (or legal support), preparation of operations procedures of the Fund, as well as training of Fund's personnel.

SOFAZ announced a tender for the selection of a global custodian bank. The Bank of New York became the winner of the open tender for provision of custodial services to SOFAZ. Consultations were provided on specialized software on the registration and shareholding of the SOFAZ assets, within the framework of the project. Work over registration and shareholding of the SOFAZ assets, conduct of definite analysis linked with portfolio enabling to carry out estimation of risks has been commenced.

SOFAZ will more probably set the implementation of the second phase of the project up in the beginning of 2007.

As to the second question, I should note that in 2007 it is planned to increase number of the external managers of SOFAZ. Relevant work in this direction is underway. SOFAZ carries out monitoring of foreign managers activities every month. The report of their activities is included in the reports of financial activities of SOFAZ.

Question: You are also the head of the Commission on Extractive Industry Transparency Initiative (EITI). Could you inform us about results of EITI last conference in Oslo? Do they consider Azerbaijan experience as a positive result?

Answer: As you know, the third international conference at the initiative of the EITI was held in Oslo in October. The forum brought together officials from 50 countries. Representatives from the international NGOs, big extractive companies and international organizations participated at the event. Speakers to the conference appraised Azerbaijan's successes in the application of EITI and called on other countries to use Azerbaijan's experience in this respect.

The conference made a resolution on the establishment of a Board of EITI with respect to ensure international support and coordination of its activities. The participants in the conference states that Azerbaijan occupied a leading place in the application of the EITI and confirmed the membership of the Government of Azerbaijan in the composition of the Board of EITI which united 8 countries. Five of them are the countries which applied the EITI Azerbaijan, Guinea, Gabon, Kyrgyzstan and Nigeria. 3 countries supported this initiative the United States, UK and Germany. Representative of international NGOs, extractive and investment companies will be also represented in the Board.

Almost all speakers in the conference stated the importance of successful application of Initiative in Azerbaijan. Some countries voiced their intention to join it and use the Azerbaijan experience. The 1st meeting of the Board will take place on 6-7 December, and the delegation representing Azerbaijan is also to attend the meeting, which is held at the UN headquarters in New York.

Question: What role could take the Oil Fund at anti-inflation measures?

Answer: Taking into consideration that professional economists and financers work in the Oil Fund, in order to widely use this potential, the Fund, in co-operation with the Oxford Economics Institute of Great Britain, has prepared the long-term macro-economic model of Azerbaijan with various scenarios and as a result, held a presentation for the governmental agencies responsible for economic management.

The results of the model show that high rates of the economic development will be observed in Azerbaijan in the near future. Keeping the one-digit inflation will be the key term to ensure this development.

Presently, the Fund's role on sterilization of currency inflows amid increase of the impact of the foreign currency flow to the country is very tangible. The negative impact of the foreign currency inflow would be bigger if money from exploitation of oil reserves would not enter the Fund, but fully turn out in circulation. It would certainly result in the establishment of conditions for increase of inflation, speedy consolidation of manat and fall in export-directed economy.

The preservation of the macroeconomic stability and tendency on the development of the oil sector are taken into consideration while spending capital of the State Oil Fund for social and infrastructural projects.

Subscribe to Trend in Google News! Subscribe
Azerbaijan plays its role in global fight against anti-Semitism and support of multiculturalism - UN official
Azerbaijan plays its role in global fight against anti-Semitism and support of multiculturalism - UN official
Azerbaijan is unique Muslim country with large Jewish community - Israeli ambassador
Azerbaijan is unique Muslim country with large Jewish community - Israeli ambassador
Israel's Partner Comms gets fibre deal to connect East and West
Israel's Partner Comms gets fibre deal to connect East and West
Loading Bars
Latest
Azerbaijan talks construction, restoration of roads in liberated areas
Russia records another 88,816 coronavirus cases — crisis center
Uzbekistan shares data on potato imports for 2021
EU shares experience with Azerbaijan in development of agritourism - official
Spirits maker Diageo posts 16% rise in first-half sales
Bank of America raises base pay for top bankers
Uzbekistan places government bonds on currency exchange
Azerbaijan unveils TV & radio coverage of liberated areas
Croatia to possibly take part in demining of Azerbaijani liberated lands
Croatian Ambassador talks impact of COVID-19 on Ionian-Adriatic Pipeline project
Georgian Ambassador to Azerbaijan visits Baku Higher Oil School (PHOTO)
Azerbaijan plays its role in global fight against anti-Semitism and support of multiculturalism - UN official
Agriculture plays key role in Azerbaijani economy's diversification - EU official
Croatia eyes to strengthen co-op with Azerbaijan in food processing industries
Uzbekistan shares data on GDP per capita
Uzbekistan starts implementation of new investment project
Spain's Sabadell reports 161 mlns Q4 net profit helped by TSB
Electrolux books $85 mln tariffs case related charge in Q4
Azerbaijan is unique Muslim country with large Jewish community - Israeli ambassador
Azerbaijan's AccessBank discloses loan portfolio volume for 2021
VTB Bank Azerbaijan reveals net profit for 2021
Uzbekistan looking to increase GDP and industrial production in 2022
Deutsche Bank nearly triples Q4 profit, defying expected loss
President Ilham Aliyev and First Lady Mehriban Aliyeva attend inauguration of newly built Training and Service Complex in Bina settlement (PHOTO)
Croatia provides update on Ionian-Adriatic Pipeline project
Azerbaijan registers increase in volume of loans issued to construction sector
Southern Gas Corridor fulfills both conditions of EU energy security – envoy
Vietnam, Azerbaijan agree to enhance defense ties
Uzbekistan removes restrictions on operation of gas filling stations
Iranian currency rates for January 27
Kazakhstan's oil extracting company to buy accumulators via tender
VTB Bank Azerbaijan’s assets increase in 2021
Kazakh-Chinese oil company extends tender to buy spare parts for pumps
Azerbaijani currency rates for January 27
Azerbaijan names production value of building materials for 2021
Kazakhstan records increase in export of cars
Oil falls as U.S. Fed's pending interest rate hike spooks investors
Most COVID-19 infections in Azerbaijan associated with Omicron strain - expert
Azerbaijan and Georgia play key roles within “One Belt, One Road” initiative – Hualing FIZ CEO (Interview) (VIDEO)
USAID eager to partner with Turkmenistan on low carbon development
India sees 2.86 lakh new Covid cases, 665 more deaths
Turkey ready to host Zelenskyy, Putin to defuse tensions: Erdogan
PM Modi wears cap from Uttarakhand with Brahma Kamal, stole from Manipur on Republic Day
Moderna starts trial for Omicron-specific booster shot
Each dose of Covishield, Covaxin likely to be capped at Rs 275 after getting regular market approval
Frogs regrow amputated legs after treatment with a chemical cocktail
Indian PM Modi pays tributes at National War Memorial ahead of Republic Day celebrations
Omicron generated antibodies effective against all variants of concern in adolescents, adults: ICMR study
Six injured in explosion at сhemical plant in Louisiana
N. Korea fires unidentified projectile toward East Sea: S. Korean military
US to shut down Afghan embassy, strip diplomats of immunity
Magnificent flypast at 73rd Republic Day parade; celebrations scaled down due to Covid scare
Oil breaks $90/bbl for the first time since 2014
Fed keeps rates near zero, says hike likely 'soon'
Heidelberg shooting: German police say attacker got weapons in Austria
India’s first woman Rafale pilot Shivangi Singh takes part in R-Day parade
Steps taken by Armenia, Turkey to normalise relations are good news - EP's Turkey rapporteur
Georgian Parliament Speaker meets NATO Deputy SG
New US ambassador to Turkey presents credentials to President Erdogan
Embassy of India in Baku celebrates Republic Day (PHOTO)
Booster dose of vaccine required to prevent severe course of COVID-19 - Azerbaijani doctor
Azerbaijan discloses number of missing citizens since First Karabakh War
Citizens of two more countries allowed to enter Azerbaijan by air
Health structures in Azerbaijan talk COVID-19 vaccine certificate validity
Uzbekistan reveals total assets and liabilities of its banks for 2021
Uzbek Central Bank notes increase in volume of deposits for 2021
Price indexes of industrial, construction sectors at Uzbek stock exchange fall
Azerbaijan says high infectiousness, short incubation period of Omicron strain lead to infection rate growth
Georgia’s parcel shipping companies talk service tariffs in 2022
Rebalancing India’s Foreign Policy
SOCAR to supply spot pipe gas to Turkey
French ambassador convinced by importance of France-EU-Azerbaijan space co-op
Passengers of all three delayed AZAL flights on Baku-Istanbul route depart to destination airport
Advantages of using modernized floating power units in Kazakh copper project named
Azerbaijan to increase gas supplies to Turkey
Azerbaijan pays special attention to restoration of liberated lands - Permanent Representative to UN
OPEC+ expected to stick to planned March output target increase
Sweden sets new daily COVID-19 case record
Azerbaijan maintains positions in Global Firepower 2022 rating
Israel's Partner Comms gets fibre deal to connect East and West
Turkmen Commodity Exchange discloses data on imports from Azerbaijan
Georgia’s Hualing FIZ works close with Azerbaijani investors - CEO (Exclusive)
Kazakhstan to continue implementing measures to battle inflation
Iran, Azerbaijan negotiating to change truck transportation route to outskirts of Astara city - RMTO
Russia pays priority attention to macroeconomic stability - Vladimir Putin
EU, KfW, AFD to maintain support for Georgia’s energy sector
Azerbaijan shares data on number of vaccinated citizens
Turkmenistan, Afghanistan plan to accelerate work on TAP
Uzbekistan and Pakistan to work on preferential trade agreement
Azerbaijan's credit rating at 'BB+/B' neutral for its Eurobonds - Gazprombank
Azerbaijan confirms 3,192 more COVID-19 cases, 1,259 recoveries
Azerbaijani opposition member spared jail over sex attack on vulnerable woman in UK
Iran announces several economic executive orders
Iran seeks foreign investment for Rasht-Astara Railway Project
10 foreigners among Padma awardees
Uzbek Statistics Committee shares data on imports of electric cars
Road bridge across Astarachay River to be breakthrough in dev't of "North-South" ITC project
Georgia’s commercial banks increase net loans issuance
Kazakhstan cancels launch of methanol & olefin plant in Mangystau
AT&T profit beats estimates on strong streaming growth
All news