Azerbaijan parliament discusses bill on investment funds

Azerbaijan, Baku, June 10 /Trend, I.Khalilova/

Azerbaijan has a competitive advantage for the development of stock market in the region and globally, and therefore, a bill on investment funds has been submitted to the Parliament at the legislative initiative of the Azerbaijani President Ilham Aliyev, Chairman of the State Securities Committee of Azerbaijan Rufat Aslanli said during discussions on the bill at a meeting of the Parliamentary standing committee on economic policy on June 10.

"Investment funds primarily serve to form demand for the stock market and its institutionalization, Aslanli said. As a result of dynamic economic development in the country, sufficient investment opportunities have formed both in the corporate sector and in domestic economy over recent years."

The GDP in the country grew by five times, and GDP per capita by 1.7 times in 2003-2006. During this period, community deposits in the country's banks increased 9.3 times. As of the beginning of May, the deposits grew 32.6 percent in the year during the period of global financial and economic crises.

"This demonstrates the potential of community savings," said Aslanli. On the other hand, high rates of GDP growth also contributed to forming savings in the corporate sector.

"Investment funds, stock markets can not compete with the banking sector, since bank deposits require huge investments and placement of huge funds, said Aslanli. Therefore, investment funds are the most effective means for transforming small investments into huge".

On the other hand, investment funds will expand proposals on the stock market. This year, the placement of securities on the stock market increased several times, particularly in corporate debt tools. Interest rates on them are about 4-5 percent cheaper compared to lending rates.

After the adoption of the first law on investment funds in 1999, investment funds have not been created in Azerbaijan in accordance with the provisions of this law. The main reason for this is that the law envisaged creating investment funds in form of joint stock companies. Experience shows that the investment funds created over the recent years, and generally acting in the world, were created not as a legal entity or joint stock companies, but at the expense of investors and are governed by managers.  

The new law envisages establishing joint-stock share funds, as well as open and closed share funds with an interval share. The activities of investment funds will be licensed by State Securities Committee.

The bill allows opening representative offices of foreign investment funds in Azerbaijan, which will serve the citizens of Azerbaijan outside the jurisdiction of the country. At the same, the mechanisms that regulate the activity of such funds abroad should not be weaker than the mechanisms adopted in Azerbaijan, which is a basic requirement for the protection of the Azerbaijani investors, said Aslanli.

The chairman of the Parliamentary committee on economic policy Ziyad Samadzade said that adopted in 1999, the first law does not provide a dynamic development of the stock market under the current conditions, and therefore, devising a new law, taking into account the global processes, is very important.

The experiences of 30 countries and the EU directives have been studied in devising the bill.
For the international examination of the bill on investment funds, experts have been involved within the technical assistance of First Initiative program.