Azerbaijan, Baku, Nov. 23 / Trend J.Nasibova /
Due to the on-going world economic crisis, the CIS countries have to take measures to enhance the stability of their financial markets, Secretary General of the Banking Association for Central and Eastern Europe (BACEE) Istvan Lengyel stated.
He said the reaction of the European Union and the United States regarding the financial crisis led to a strict regulation being enforced against the banks and less rigid in relation to other financial market participants.
"Today the development of the CIS countries has not reached the level of the West and the development of financial markets should not be restricted. On the contrary it should be encouraged by various means including cooperation within CIS and with other countries, the creation of international alliances and development of cooperation between the exchanges," Lengyel told Trend on Thursday.
In his opinion, promotional measures also include the improvement of legislation.
According to him, by the example of the West one can observe active operation of various funds, including pension funds.
"The pension system is a very important source of project funding including infrastructure projects. Pension funds work operatively when they are involved in projects, but they are not intended as direct investments. In such cases, several participants' funds may act through banks and specialised institutions. Nevertheless, pension funds should not be directly involved for instance, in the construction of roads and bridges as it's outside of their competence," Lengyel said.
In his opinion, it is important that an entity financing large projects in the country has experience of risk management, traditionally these entities are banks. A problem of long term funding exists in Western Europe and the U.S today. There was also a problem causing bank assets transferring into market instruments.
"Today this process has stopped and it is hard to imagine how banks will operate by the same system as before in the future. They were replaced by funds and specialised institutes. In the U.S. private funds invested $180 billion in infrastructure and they are doing an excellent job because they have the experience most importantly, in risk management ,"Lengyel said.
He called the insurance and investment funds as being among other sources of financing. The diversity and support, as well as that of state support are necessary in this issue. The state must create favourable conditions for economic development.
Manager of the Baku Interbank Currency Exchange (BBVB) Farhad Amirbayov said that developing countries have been forming their financial markets taking into account attracting foreign investors for the past 15 years. The concepts are often substituted.
"A person who is involved in various ways in creating an enterprise and expanding its activity can be considered as an investor," he said. "If securities are purchased on the secondary market through exchanges and other professional mediators, these investments are speculative which does not increase the capital of the issuer. The countries need investors rather than speculators."
He said that the most important thing is that the investor must be a resident and pay taxes to his country.
"Raising the capital in the national currency must be more favourable than in foreign currency, so it is necessary to pay special attention to not only trade, but also the calculations," BBVB head.
He believes that the commercial banks will remain the main investors and mediators in the Azerbaijani market for a long time.
"One must act proceeding from these assumptions," he said. "Regarding the risks, commercial banks, small and medium enterprises manage risks best of all."
"In the first case, the hard and successful work of the Azerbaijani Central Bank in cooperation with other banks is the result and in the second case, faults in the management of small companies may lead to a rapid bankruptcy and leaving the market," he said. "Realising this fact disciplines owners of small businesses."
He said the Azerbaijani economy is undergoing a period of transformation from a model of a mono-cultural (oil and gas) economy to that of an economy of investment development. These processes affect all economic entities. New perspectives and as usual, new risks must be widely discussed within various forums, conferences, and community organisations.