EBRD Baku office head: Azerbaijan's economy demonstrate stability (Interview)

Business Materials 20 February 2010 14:10 (UTC +04:00)

Azerbaijan, Baku, Feb. 20 / Trend N.Ismayilova /

In 2009, the European Bank for Reconstruction and Development (EBRD) has invested over $230 million in the Azerbaijani economy. In 2010, EBRD will continue to actively support the country's non-oil sector. EBRD President Thomas Mirow is expected to pay his first visit to Baku in March. He is expected to discuss prospects for further cooperation with Azerbaijan with the government. EBRD Baku Office Head Francis Delaey spoke more detailed about the above issues in his interview with Trend .

Trend : How does EBRD estimate the results of its activity in Azerbaijan in 2009? What is the role of these projects for the economy of the country and how effective they were?

Delaey: To-date EBRD has financed 103 projects for an aggregate amount of $1.4 billion (not including regional projects and trade facilitation projects). In 2009 EBRD invested a total of $232 million in 9 projects one of which is particularly noteworthy. Last September we provided a €120 million loan to Garadagh Cement. The loan - our largest loan in the non-oil sector of Azerbaijan to-date - will implement state-of-the-art dry process cement production technology, significantly reducing energy consumption and CO2 emission. The other projects in 2009 were in the financial sector. 

On top of that we also worked closely with Azerenerji (the state-owned power utility) to generate carbon credits under the Clean Development Mechanism (CDM) established by the Kyoto Protocol. In July 2009 Azerenerji signed an Emission Reduction Purchase Agreement (ERPA) to sell carbon credits generated by the rehabilitation of the Azdres Thermal Power Plant financed by EBRD. The project is expected to reduce CO2 emissions by three million ton annually. This is a landmark deal which involved the development of a new CDM methodology for power plant rehabilitation projects. The methodology, which was developed with EBRD's assistance, is now applied worldwide.

Q: It's known that in 2009 EBRD has financed it's the largest project in non oil sector (Garadagh Cement). Should we expect the further large investment in non oil sector of the country?    - Has the EBRD decided on the financing of the projects in Azerbaijan in 2010? Which spheres do they cover? [This question has been consolidated with the next one].

A: EBRD will continue to support the development of Azerbaijan's non-oil economy. Our current pipeline for 2010 consists of ten projects for approximately US$ 160 million. In the first quarter of 2010, EBRD aims to sign a US$120 million loan agreement with AzMeCo to build a methanol production plant. This project will help diversify the utilization of the country's gas reserves and add value to this key natural asset. In addition we are considering a number of investments in the telecom, agribusiness and retail sectors.

Q: As far as we know currently the bank develops the new strategy for Azerbaijan. Which areas are the most priority today and which ones will be included in this strategy? When will the planning of the strategy be completed and what will be the terms? 

A: EBRD reviews its country strategies every three years in a complex process which includes consultations with the government, the business community and civil society. The new strategy for Azerbaijan will be submitted for approval to EBRD's board of directors in September 2010 and will cover the period until September 2013. We will continue to support the economic development of the country through diversification and modernization.

Q: The visit of EBRD president Thomas Mirow to Azerbaijan is expected in March. What is the main purpose of his visit? Is it expected the signing of the credit contracts within this visit?

A: President Thomas Mirow will visit Azerbaijan March 16, 2010. He will have meetings with President Ilham Aliyev and various ministers to discuss EBRD's activities in Azerbaijan and explore further areas of cooperation. This will be his first visit to Azerbaijan and the Caucasus as EBRD's president. It will underline our strong commitment to the region where we have significantly boosted our investments and activities in recent years. The visit will also be a signal that EBRD is standing by the countries of the region in these challenging times.

Q: How do you estimate the economic situation in Azerbaijan? How stable was it during the world crisis? Which reforms implemented by the government of Azerbaijan will be rational in post crisis period?

A: Azerbaijan's economy displayed remarkable resilience in 2009 with GDP growth reaching 9.3%. Azerbaijan has been less affected than others by the global financial crisis in part because it is not as integrated in the world economy. The government also mitigated the impact of the global financial crisis by offering support to banks and maintaining its commitment to infrastructure projects. Nevertheless the sharp drop in oil revenues in 2009 underscore Azerbaijan's vulnerability to energy shocks and the risks inherent to the dependency on commodity exports. To achieve long-term sustainable growth Azerbaijan therefore needs to continue its efforts to develop its non-oil economy by promoting, among others, access to finance for entrepreneurs, rule of law and cross-border trade.

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