BAKU, Azerbaijan, September 16. The European Bank for Reconstruction and Development (EBRD) will organize a number of events at COP29, Elisabetta Falcetti, EBRD Managing Director for Türkiye and the Caucasus said in an exclusive interview with Trend, as she visited Azerbaijan for the first time.
"The objectives of this visit are firstly, to establish the key relationship vis-à-vis the authorities in Azerbaijan. Second, is to form a view on the country and on what are the key opportunities, but also challenges in doing business here, in particular in supporting the private sector, which is the focus of EBRD. And third is to take stock and understand where we are in the preparation for COP29, because as an international financial institution (IFI), we are going to play an important role in supporting some of the discussions and panels," she said.
Falcetti pointed out that the Bank is organizing a few events around COP29.
"This is an important topic for us because as you know the bank has a very strong ambition on greening the economy not only in Azerbaijan, but as a bank, we have set and achieved quite an ambitious target of first of all financing projects that are aligned with the Paris Agreement, but also invest at least 50 percent of the annual business investment in green finance," she said.
The managing director highlighted that the Bank wants to push this ambition in every country in which it operates.
"Azerbaijan, being the host of COP29, I think will have an important role not only in convening the parties to the agreement, but also in leading by example, by setting more ambitious targets for their decarbonization plans," she added.
Further Falcetti elaborated on the planned events to be held by the EBRD within COP29.
"There is still a work in progress. I cannot give you right now a list of events. There are a number of initiatives that we are promoting through COP. The first, is the hydrogen strategy study. We are engaging with the authorities to support the development of a national hydrogen strategy. We are aiming to present the results of this study at COP29. This is one of the topics that will be discussed at COP more widely among the participating countries. It's very timely that we are engaged in this study and I'm also very curious about the findings, because they will influence our approach and determine whether we will be able to support the development going forward," said the managing director.
She went on to add that the second important piece of work is supporting the Azerbaijani authorities in developing low carbon pathways for the country’s power sector.
"This study is important in light of the fact that one of the objectives of COP29 would be for countries to come up with revised and more ambitious decarbonization targets as part of their revised Nationally Determined Contributions (NDCs). The third topic for COP which is also very important for us, is that we have been supporting the authorities to design and launch the first option auction for solar plant in the country and we expect the government to make an announcement at COP on who is the preferred bidder among those that have been selected to qualify for the second round. We will be interested to know who the winning bidder is to see if we can engage and find support," she explained.
[The Ministry of Energy of Azerbaijan, with the support of the European Bank for Reconstruction and Development (EBRD), has announced the country’s first renewable energy auction for a 100 megawatt solar power plant project in Garadagh].
"Supporting renewables and diversifying away from fossil fuels is a priority for us," Falcetti added.
Middle Corridor
She noted that Middle Corridor's development is a very important topic not only for EBRD, but also other IFIs.
"I think there is a very strong collaboration with other IFIs in the region. Promoting regional integration and connectivity is one of our main objectives and is part also of our strategy. We have been involved in a number of studies where we assessed the potential for Azerbaijan, but also for the countries on along the corridor to benefit from this greater integration. I understand that there are a number of steps that need to be taken also to facilitate a stronger integration, facilitating border crossing and transport. We stand ready to invest and to support," said the managing director.
Falcetti recalled that this year in February the EBRD financed Azerbaijan Caspian Shipping Closed Joint-Stock Company (ASCO) with a 38.7 million euros worth loan.
"This is an example of what EBRD can be doing in order to support these transport corridors. We supported the company buying two new vessels. One is already bought with our first tranche and the second is waiting disbursement. We accompanied this with work on the climate corporate governance at the ASCO level and also on improving their governance. I think it's an example of a very good project that EBRD did to support the corridor. Of course, we will look at the project-by-project basis when opportunities arise. So, we are definitely interested, and this is one of our priorities," she added.
Draft Country Strategy for Azerbaijan for the next five years
"At this stage I need to be a bit general about the content of the next strategy, because we haven't yet published it, but I hope we will be able to publish it soon for a period of public consultation. I would definitely hope that before the end of the year we will publish it. We have received comments from our counterparts and are in the process of addressing those comments. Once we incorporate the comments, we will seek the EBRD board approval, and then we will publish it. I think it shouldn't be a revolutionary strategy in terms of content," said Falcetti.
The managing director highlighted that the existing strategy is focusing on three main themes.
"The first one is about supporting the competitiveness of the economy through innovation and better governance. The second is on green economy, which is, as I said, a key focus. And the third focus is on supporting the resilience, in particular of the financial sector. I think going forward the priorities will not look dramatically different. We will renew them, but I would expect green economy to remain an important topic. Supporting the diversification of the economy away from oil and the competitiveness of these businesses, including small businesses, will be an important topic," she added.
Support for SMEs
"I was really pleased that when I arrived we were able to engage with AcessBank, a partner bank, and with whom we have signed a risk sharing partnership agreement which is an important instrument, because by risk sharing 50 percent of any sort of lending to SMEs by AccessBank, we will be able to have multiplier effects, so increase access to finance for SMEs who want to grow, become more competitive, but and lack funding. For me this is one of the new products that we are deploying here in Azerbaijan. We would like other banks to follow the suit. I definitely hope so, given the process of restructuring of participating banks that we work with in the country," said the managing director.
Falcetti believes that there may be other opportunities to increase the number of financial institutions that the EBRD works with in Azerbaijan to deploy its standard facilities.
"RSF, the risk-sharing facility, is a very effective instrument, because it allows us to reach SMEs at scale rather than doing direct lending to SMEs, which can be costly and time consuming for an IFI like the EBRD. Secondly, we have a strong advisory for small businesses team (ASB team) based here in Azerbaijan. Their role is to work with SMEs on the demand side. RSF tackles the supply of credit to SMEs, the ASB looks at the demand and tries to work with SMEs directly, providing advisory support to strengthen their capacity so that they become eligible customers for banks. As part of our ASB program we have a number of products that we could deploy here, should there be interest and demand, targeting, for example women-led SMEs or youth entrepreneurs. We have the Star Venture program that is already deployed here," she said.
The managing director pointed out that the Bank has a number of instruments and tools that it can deploy to support SMEs.
"But of course, we need to have counterparts that are up to certain minimum requirements in terms of transparency, reporting, having accounts that can be audited and so forth," Falcetti added.
Financing EU-Azerbaijan green corridor
The EBRD managing director also talked about the possibility of financing the Black Sea Energy Cable project.
"It is in very early stages, so the answer depends on the project, the structure, the feasibility, who will be the part of financing, who will be the borrower. We will definitely want to be kept in the loop. We are monitoring the developments, because there are four or five countries involved at this stage. We’ve heard that there was a recent meeting in Bucharest where progress was made on establishing a joint venture. But we are a project-led institution, so we need to know what's the project and whether it fits with EBRD priorities and criteria for engaging," she said.
The managing director noted that she also discussed with the authorities the EBRD's strong engagement in infrastructure, in particular, in the green cities.
"Ganja is our first Azerbaijani green city and we are pleased to see that the Green Cities Action Plan has been developed with the city. We look forward to the implementation of the Green Cities Action Plan (GCAP) and to more follow-up projects to allow this transformation and greening of the city. I trust that we can do more here. I'm looking forward to our future engagement in the country," she concluded.
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