Minister: Azerbaijan should assess issue of increasing stake in ECOBANK

Business Materials 3 June 2012 08:06 (UTC +04:00)

Azerbaijan, Baku, June 1 / Trend I.Khalilova /

A further increase of Azerbaijan's share in the capital of ECOBANK will depend on its importance for the economy. Azerbaijan has decided to join the bank's shareholders with a three per cent stake.

"Initially, it's necessary to purchase a share in the ECOBANK and then see what it will give us," Minister of Finance Samir Sharifov told Trend on Friday.

Today, he said, Azerbaijan participates in the capital of quite a large number of international banks.

"If we're going to borrow from these banks, then there is a need to increase our share in the capital," the minister said. "We have recently pursued a very cautious policy on foreign borrowing. In the case of ECOBANK, if the question does not apply to borrowing from this bank, you have to weigh the pros and cons for Azerbaijan to join the international organisation."

At this stage there is a decision to purchase a three per cent stake in ECOBANK and it is necessary to implement it, Sharifov said.

Azerbaijan is planning to allocate 9.7 million SDR (exchange rate is 1.55 USD/SDR) to pay its share in the capital of the bank. Some 2.5 million manat (about $3.2 million) has already been laid aside for this purpose.

"We would like Azerbaijan to be a shareholder of ECOBANK with greater equity and offered the package at 10-12 per cent," ECOBANK deputy director of the department for foreign relations Tuncay Melektosun told Trend previously.

The Bank for Development and Trade of the Economic Cooperation Organisation with an authorised capital of 300 million SDR (about $465.2 million) and an announced capital of one billion SDR (about $1.55 billion) was founded by Iran, Pakistan and Turkey in 2005. The bank's headquarters is in Istanbul.

One ECO-unit corresponds to one SDR.

The minimum fee for the stake is two million ECO-units (about $3.058 million), which is 0.34 per cent of the total capital, while the maximum allowable contribution for the purchase of 15 per cent will be 87 million ECO-units (about $133.031 million).

"With a 15 per cent equity participation, the country has the right to appoint a representative to the board of directors of the bank. Participants having a share of less than 15 per cent may nominate a common representative," Melektosun said earlier.

The Central Bank or the relevant ministry represents member countries at the ECO-Bank.

ECOBANK President Hussein Gazavi does not rule out the participation of ECOBANK in major international and regional projects in energy.

"Energy, particularly the oil sector, is one of the areas where the bank is able to cover. However, we must take into account the financial possibilities of ECOBANK," Gazavi told Trend during his visit to Baku in early May.

He also stressed that the bank can take the initiative to create a kind of co-financing scheme and try to attract other financial partners to back certain energy projects. The Bank's operations are not limited to participation in various sectors of the economy.

Gazavi said the bank's portfolio is diversified with 60 per cent of loans granted by ECOBANK, allocated to development of projects whilst the rest is available in trade.

The entry of Azerbaijan into ECOBANK, according to Gazavi, also creates an opportunity to obtain loans by Azerbaijani banks in ECOBANK.

By the end of the year the bank expects the entry of shareholders of the two countries, Azerbaijan and Afghanistan.

The Organisation for Economic Cooperation was founded by Iran, Pakistan and Turkey in 1985. In 1993 it was granted observer status at the UN and a year later at the Organisation of the Islamic conference (now, Organisation of the Islamic cooperation).

The IX summit of the organisation whose members are Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Uzbekistan, Tajikistan, Turkey and Turkmenistan was held in May 2006 in Baku and the X Summit in 2009 in Tehran.