Privatization of several major state-owned companies planned in Azerbaijan

Business Materials 14 November 2018 17:04 (UTC +04:00)

Baku, Azerbaijan, Nov. 14

By Matanat Nasibova - Trend:

In the coming years, the task of privatizing major companies, such as Azerbaijan’s state oil company SOCAR, Azersu, Azerbaijan Railways, will be topical in Azerbaijan, Sabit Bagirov, chairman of the Fund of Assistance to Development of Entrepreneurship and Market Economy, told Trend Nov. 14.

“Initially, this process involves the transformation of these companies into joint-stock companies, transition to corporate governance mechanisms and the sale of a part of shares to the relevant interested investors,” Bagirov said.

He said that the de-nationalization of these state structures will make it possible to ensure their further growth to a significant degree.

“I think that this can happen over the next three years and the implementation of this task will undoubtedly depend on whether it remains the priority of the state,” he noted. “Nevertheless, it will be possible to implement it no sooner than in three years, because a serious audit of assets and a lot of preparatory work in this direction is required.”

Today in Azerbaijan, the share of the private sector in business is above the state one and this is an indicator of the development of small and medium-sized businesses and the process of establishing sustainable business climate in the country, he added.

He noted that the level of entrepreneurship in Azerbaijan has been formed at a fairly good level, and very important steps are being taken in this direction.

“In recent years, new institutions have been created, a number of presidential decrees and several laws have been adopted to support the development of entrepreneurship, that is, the process is underway, and there is reason to believe that it will ultimately yield the expected positive result,” said Bagirov.

The strategic “road map” on the prospects of the national economy, approved by Azerbaijani President Ilham Aliyev in December 2016, covers privatization and reforms related to state companies. In accordance with the road map, a new law “On the privatization of state property” is being prepared in Azerbaijan.

This law aims to reduce public expenditures by replacing the role of the government as a governing body with the role of the regulator. That is, the government should regulate the markets by adopting new laws and rules, while private sector participants should manage companies. Also under this law, the government will support companies that privatized state-owned enterprises as part of the first and second state privatization programs.

In general, as part of the “roadmap”, two factors will be given special attention during privatization: first, the decision to privatize or keep a company in state ownership should be made in view of improving its activity and increasing profitability. Secondly, the advantage should be given to companies in the Azerbaijani districts, the operation of which can make significant contribution to the socio-economic development of this region.

Another interesting point concerns the state-owned oil and gas companies and capital markets. For example, the “roadmap” notes the benefits of financing these companies through the capital market. In this context, the government may consider issuing securities (bonds or shares) by state oil and gas companies. At the same time, an initial public offering may affect not the entire company, but a part of its functions - retail sale of fuel or polymer production, for example.

The document covers three periods: until 2020, until 2025 and after 2025.